Return-to-office fights draw the headlines, yet the quieter crisis is engagement. Only one in five employees worldwide report being engaged, down to 20 percent in 2025, with the global economy forfeiting an estimated 9 percent of GDP in lost productivity, roughly 10 trillion dollars (Gallup, 2025). Manager engagement has slumped too, from 27 to 22 percent in a year and nine points since 2022 (Gallup, 2025). In that context, many leaders reach for pay transparency as a motivator and a fairness fix. It can be both, but design matters. Dumping the salary spreadsheet on Slack risks turning work into a status contest.
The strongest field evidence offers a sharper rule: reveal upward pay, not side-by-side. That takes on new urgency as organizations experiment with fewer layers and more autonomy.
What comparisons actually do
A natural field experiment inside a large commercial bank shows how salary information changes behaviour. Employees systematically underestimate what their bosses make, by 14.1 percent on average, with an average absolute error of 28 percent. By contrast, their guesses about peers are tighter, with an average absolute error of 11.5 percent and no systematic bias (Cullen and Perez-Truglia, 2022). When workers learn that their manager earns more than they thought, they work more. A 10 percent upward revision in the perceived salary of the boss increases hours worked in the next 90 days by about 1.5 percent, a clean, administratively measured response (Cullen and Perez-Truglia, 2022). The same study reports the other side of the ledger. Information about peers’ pay has demotivating effects. The lesson is simple but often ignored. Upward comparisons can energize, horizontal ones can corrode.
That logic suggests a hierarchy-sensitive approach to transparency. Show people what progress looks like and what it pays. Do not invite side-by-side scorekeeping.
The twist when you flatten
What if you are removing bosses altogether? Self-managing organizations decentralize authority in formal, systematic ways and eliminate the manager–subordinate relationship as the default unit of control (Lee and Edmondson, 2017). The research synthesis is careful on trade-offs. Traditional managerial hierarchy performs well when the work is stable and known, yet it tends to inhibit complex cross-boundary problem solving and can harden status differences that stunt development (Lee and Edmondson, 2017). Flattening can help learning and adaptability, but it also removes the most salient vertical reference point for pay: the boss. If managers vanish, so does the upward comparator that, in the bank experiment, spurred effort.
The practical challenge is to preserve the motivational signal of upward pay without reimposing a managerial caste. That is a design job, not a memo. It means making the path visible even as you keep the org light.
Designing transparency for trajectory, not rivalry
Three moves can align pay transparency with a flatter structure while heeding the evidence on comparisons.
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Publish role ladders and pay bands, not peer lists. The core principle from the bank study is to make upward information salient. Replace the manager as the unit of upward comparison with transparent role archetypes and criteria that spell out what greater scope and contribution look like and what they pay. The disclosure should emphasise trajectories and thresholds rather than who in the room earns what (Cullen and Perez-Truglia, 2022). In a manager-light setting, the relevant “up” could be project lead, steward, or governance role. The point is the path, not the neighbour.
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Codify criteria as a learning system. Open pay only works if people can safely ask why and how to advance. Team psychological safety, defined as the shared belief that the team is safe for interpersonal risk taking, is associated with learning behaviours that in turn relate to performance (Edmondson, 1999). Frame pay and progression forums as joint problem solving. Invite questions about criteria. Respond with specifics. When learning mediates performance, transparency becomes an engine for skill development rather than a trigger for comparison.
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Limit horizontal granularity, raise vertical clarity. The evidence warns against fine-grained peer comparisons. Keep peer pay data aggregated to bands or anonymised distributions. In contrast, make the steps between roles, the competencies required, and the pay consequences explicit. Where stewardship or elected roles carry premiums, publish them. This preserves the energising upward signal the bank experiment observed, without feeding side-by-side rivalry (Cullen and Perez-Truglia, 2022).
These choices also lighten the cognitive load on stretched managers. With engagement among managers down to 22 percent in 2025, and a nine-point slide since 2022, removing discretionary opacity from pay can reduce friction and clarify coaching conversations (Gallup, 2025). In firms moving toward self-management, the same clarity reduces the need for gatekeeping by title.
The governance you need when titles fade
Flattening does not mean absence of structure. The research on self-managing organizations stresses that authority is redistributed through formal mechanisms, not wishful thinking (Lee and Edmondson, 2017). Pay transparency should mirror that formality. Treat role definitions, evaluation rubrics, and pay bands as living governance artefacts that teams can propose to amend through a clear process. The content will vary by context. The discipline is constant: make the criteria public, make the process tractable, and make exceptions rare and explained.
Two cautions follow from the evidence base. First, do not infer universal causality from a single firm. The field experiment on salary comparisons comes from one multi-billion-dollar bank in Southeast Asia, albeit with strong experimental design and administrative measures (Cullen and Perez-Truglia, 2022). The comparative pattern, vertical motivates while horizontal demotivates, is the design signal to heed, not a one-size-fits-all prescription. Second, do not confuse voice with safety. Announcing open pay without building psychological safety invites performative agreement and private resentment. The link between safety, learning behaviours, and performance is empirical, even if measured in one manufacturing company’s teams, so treat it as a mechanism to cultivate, not an HR slogan (Edmondson, 1999).
The payoff is not abstract. With disengagement imposing a GDP-scale tax, any intervention that reliably nudges effort and learning is worth operational attention (Gallup, 2025). Pay transparency can do that, but only if it points up a credible path. Leaders chasing fairness by publishing everyone’s number risk eroding the very effort they hope to win. Leaders who design transparency around roles, criteria, and psychologically safe discussion give people what they need most in a flatter firm: a reason to try for the next rung, and a clear way to get there.
Sources
- Cullen and Perez-Truglia (2022). How Much Does Your Boss Make? The Effects of Salary Comparisons, Journal of Political Economy. A natural field experiment shows employees underestimate boss pay and that upward pay information increases effort, while peer comparisons demotivate. https://doi.org/10.1086/717891
- Lee and Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing, Research in Organizational Behavior. Synthesizes evidence on how SMOs decentralize authority and the trade-offs of hierarchy versus flatter designs, grounding the article's design implications. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams, Administrative Science Quarterly. Field evidence that team psychological safety supports learning behaviours linked to performance, underpinning how to run transparent pay discussions. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent, an estimated 9 percent GDP productivity cost, and a sharp drop in manager engagement, establishing the urgency for better incentive design. https://www.gallup.com/workplace/659610/state-global-workplace.aspx