Return-to-office fights and inflation have a common subtext: people are scrutinizing what work is worth. Boards push for productivity. Employees push for fairness. Many firms default to a slogan, full transparency, then act surprised when it stirs resentment instead of effort. The problem is not transparency per se. It is which comparisons you light up.
What the best field evidence actually says
A rare natural field experiment inside a large commercial bank tested how salary information changes behavior. Employees systematically misjudged what their managers made, underestimating the boss’s pay by 14.1 percent on average, with a mean absolute error of 28 percent. By contrast, they were far closer on peer salaries, with an 11.5 percent mean absolute error and no systematic bias (Cullen and Perez-Truglia, 2022). When workers learned that their manager earned more than they thought, they worked harder. A 10 percent increase in perceived boss pay raised hours worked in the following 90 days by 1.5 percent, an elasticity of 0.150. The same study found the mirror image horizontally. Discovering that peers earned more tended to demotivate, lowering effort and morale (Cullen and Perez-Truglia, 2022). The authors’ design, which combined administrative records, incentivized surveys, and randomized information provision, supports a causal read, with one important caveat: the sample is one bank in Southeast Asia, so leaders should apply the mechanism with judgment.
The lesson is sharper than most pay debates allow. Transparency is not inherently good or bad. It changes where people look. Upward comparisons tap aspiration and perceived mobility. Lateral comparisons invite status contests. If you publish a spreadsheet of colleague-by-colleague pay, do not be surprised if output stalls.
Flattened structures face a different transparency math
Self-managing organizations, by definition, remove the formal boss–subordinate relationship and decentralize authority in systematic ways across the company (Lee and Edmondson, 2017). Hierarchy is well suited to reliable execution in stable settings, yet it can dampen cross-boundary problem solving and reinforce status gaps that stunt development. Many firms now borrow elements of this playbook, from team-level authority to elected leads. That shift alters how pay transparency lands. If there is no clear “boss” to serve as the upward anchor, horizontal comparisons loom larger. The motivational channel that Cullen and Perez-Truglia observed may weaken precisely where firms flatten the most. Without careful design, radical transparency in a flat structure can amplify the demotivating peer-effect while missing the beneficial managerial benchmark (Cullen and Perez-Truglia, 2022; Lee and Edmondson, 2017).
This matters because engagement is fragile. Only 20 percent of employees worldwide report being engaged, the lowest since 2020, with an estimated 9 percent of global GDP lost to disengagement. Manager engagement has dropped sharply too, falling from 27 percent to 22 percent in a single year. Best-practice organizations manage to engage 79 percent of their managers, proof that design, not fate, drives the gap (Gallup, 2025). If transparency choices compound lateral status anxiety, they risk pushing already thin engagement lower.
Transparency without safety is a scoreboard, not a system
Teams learn and perform when members feel safe to speak up, question, and admit mistakes. That is the core finding from a field study of 51 teams in a manufacturing company, where psychological safety predicted learning behavior, which in turn mediated better performance. Team efficacy alone did not explain learning once safety was accounted for (Edmondson, 1999). Translating that to pay: when salary data arrives without context or voice, it becomes a status scoreboard. People nurse grievances in private. Learning stalls in public.
The fix is not secrecy. It is pairing transparency with mechanisms that protect participation. Publish principles and ranges, then invite questions. Ensure people understand the criteria that move someone from one band to the next. Give teams structured forums to surface anomalies without punishment. Psychological safety is the enabling condition that turns pay information into development fuel rather than social threat (Edmondson, 1999).
A practical playbook for 2025
The strongest evidence points to a simple hierarchy of transparency. Make upward benchmarks and progression paths highly visible. Treat lateral detail with restraint and context.
- Reveal role-based pay bands, including bands for managerial levels above a given role. This reduces the common underestimation of boss pay, which in the field experiment increased effort when corrected (Cullen and Perez-Truglia, 2022).
- Publish clear, skill-based criteria for moving up a band. In flatter structures, where formal bosses are scarce, codified progression reduces the risk that peer comparison is the only signal people see (Lee and Edmondson, 2017).
- Share distributional information across peers at the level of ranges and quartiles, not named individual salaries. This addresses fairness concerns while damping the demotivating effect of direct lateral comparisons highlighted in the experiment (Cullen and Perez-Truglia, 2022).
- Train managers and team leads to explain the system and host candid Q&A. With manager engagement down and best-practice gaps so wide, capability at the point of contact is the leverage that moves culture, not another memo (Gallup, 2025).
- Build psychological safety into pay conversations. Use retrospectives and facilitated sessions where people can query decisions without penalty. The learning-performance linkage depends on perceived safety, not on charisma or generic optimism (Edmondson, 1999).
Leaders in self-managing settings face an added twist. Without formal bosses, choose visible role archetypes as upward anchors. Senior experts, rotating stewards, or elected product owners can serve as the comparative reference that channels aspiration. That preserves the motivational upside from vertical transparency even as formal hierarchy recedes (Lee and Edmondson, 2017).
The practical implication is plain. If you want transparency to pay off, decide which comparisons you intend to create. Use upward visibility and clear progression to spur effort. Use carefully framed lateral data to police fairness without turning teams into status arenas. And wherever your org sits on the hierarchy-to-heterarchy spectrum, design the conversation so people can engage it safely. In a world where only one in five employees feels engaged, that design choice is not cosmetic. It is the work (Gallup, 2025).
Sources
- Cullen and Perez-Truglia (2022). How Much Does Your Boss Make? The Effects of Salary Comparisons. A randomized field experiment shows that correcting underestimates of boss pay increases effort, while peer pay comparisons tend to demotivate. https://doi.org/10.1086/717891
- Lee and Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Defines self-managing organizations and explains how reducing formal hierarchy changes motivation and coordination challenges. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. Finds that psychological safety predicts learning behavior which mediates performance, implying transparency must be paired with safe dialogue to improve outcomes. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent, large productivity losses, and steep declines in manager engagement, underscoring the stakes of getting pay transparency design right. https://www.gallup.com/workplace/659610/state-global-workplace.aspx