Opportunity transparency at work: What can it do for you?

When it comes to the pursuit of equity in the workplace, a new chapter is being written in the form of fresh employment legislation. These laws aim to achieve transparency regarding career progression opportunities, expanding on the principles of pay transparency laws. The new “promotion transparency” laws aim to show a company’s process in selecting individuals for advancement. They will do this by requiring employers to disclose information about aspects related to promotion, such as available opportunities, compensation or benefits offered, and the criteria for decision-making.

Think of it like this: If pay transparency laws were about letting everyone know the score in a game, promotion transparency laws are about showing how players are chosen to play in the first place. At their core, these laws aim to bring more equity to the workplace by shining a light on how individuals are selected. This combined pay and promotion transparency approach falls under the broader term “opportunity transparency.” The intent is to establish a level playing field where every employee understands the pathways to success and progression in their careers, including the financial rewards associated with it.

A 2022 study by McKinsey and LeanIn shows the importance of such transparency. It found that for every 100 men promoted from entry-level to management, only 87 women and 82 women of color were similarly advanced. This disparity highlights the continued underrepresentation of women and minorities in leadership and higher-paying roles, an issue these laws are intended to fix.

Two states in particular, Illinois and Colorado, are leading this movement. The Illinois law, which builds on the Equal Pay Act and is set to take effect in 2025, requires certain businesses to let their current workforce know about all opportunities for promotion within 14 days of their external listing. Colorado’s existing law obliges employers to notify all employees about opportunities for career advancement, and there are substantial fines for non-compliance.

As New Jersey and Washington DC consider adopting similar laws, their potential to reinforce workplace equity or introduce new challenges is becoming increasingly significant. The unfolding impact of these laws will be a key factor in shaping the future work environment and the pursuit of equity.

How equity can promote diversity of thought

Anita Lettink, a partner at Strategic Management Centre and author of Equal Pay for Equal Work believes these new laws are important. “[Opportunity transparency] is about giving candidates and employees more insights into what you can expect from your employer in terms of basic pay, benefits compensation, and promotion opportunities,” she says, adding that US laws tend to focus on salary transparency, though workplace equity is equally important.

Lettink is critical of the common practice, particularly when it comes to recruiting for leadership roles, of using personal connections and the informal ‘shoulder tap’ approach rather than promoting on merit. “Being held back by others’ assumptions based on characteristics unrelated to work performance is a significant barrier to individuals fulfilling their potential,” she says. Transparency is intended to increase diversity at all company levels, which has knock-on effects. “Diversity of thought positively influences innovation and revenue,” she says.

Workplace equity makes for happier organizations

Lettink says workplace transparency can help in attracting and retaining talent, particularly the younger generation. “If you are able to provide pay transparency in combination with workplace equity, you’re making a big step towards the inclusive workplace that many people find attractive to work for,” she says. “It’s as simple as that.” This approach can draw top talent to an organization and significantly enhance employees’ sense of fairness and trust in their organization, thereby boosting job satisfaction and fostering loyalty.

This type of environment promotes clear communication and fair treatment, and nurtures employees’ personal and professional development, she adds. “It’s the whole culture of the company,” Lettink says, adding that this, in turn, strengthens employee engagement and dedication to their workplace.

Lettink points out that true equity of opportunity starts well before a job is even listed. “It’s about guiding people on the steps they need to take to move up to the next level and offering the support they need to get there, which essentially creates a personalized growth path for each individual,” she says. For example, a lack of financial expertise in budgeting highlights a skill gap that needs addressing, a common scenario in career development. Employers should engage in early career conversations with employees, identifying their aspirations and the specific skills required to achieve them, whether financial knowledge, management skills, or team building, according to Lettink.

Fears around opportunity transparency laws

Team dynamics may suffer

However, some critics argue that such laws pose challenges for employers, potentially harming team dynamics and reducing the competitiveness of small businesses. While intended to establish a fairer environment, workplace transparency laws can present challenges for employees, according to Jim Stroud, editor at SourceCon, a leading resource for recruitment professionals and HR specialists. “They can unintentionally foster a competitive, even hostile, work environment,” he says

This issue is especially pronounced for teams as distinguishing individual contributions can be difficult. “In group projects, we tend to overestimate our [own] contributions. It’s human nature. This leads to discontent and competition among those who feel under-rewarded compared to their peers,” he says. He warns that these laws might unintentionally amplify such natural tendencies, creating a Hunger Games dynamic that compromises collaborative teamwork and fosters a divided workplace where personal competiveness takes precedence over collective effort.

Small businesses struggle to compete

Stroud also notes that these laws inadvertently place small businesses at a competitive disadvantage, hurting their employees. “Small businesses cannot pay the same salaries and compensation packages as large corporations, so several businesses may go out of business or get acquired by larger enterprises,” he says. This limits career and salary growth for employees in small firms.

Stroud also highlights broader consequences. “Less competition means less innovation – and that’s bad for everyone,” he says, pointing to a potential decline in diversity and innovation. This, coupled with the financial challenges small businesses face in recruitment, could result in a less vibrant and diverse corporate landscape, affecting employees’ choices and bargaining power in the job market.

The key to implementing these ideas effectively

To address this challenge, Stroud advises companies to communicate openly the diverse factors that influence promotions and pay disparities, such as tenure, coworker evaluations, upskilling, leadership potential, and the direct impact on the company’s bottom line. “If there is data to validate the decision, it would help prove that it was based on merit, and not a quota, or an ambiguous ‘gut feeling,’ or anything else that might be judged unfair,” says Stroud. Such clarity in communication can enable employees to better understand and accept organizational decisions.

The effectiveness of new policies or approaches aimed at promoting workplace equity largely depends on a company’s commitment to cultural transformation, according to Lettink. “The law is never going to change the culture in a company,” she says. While laws are important, she adds, real change occurs when companies go beyond legal compliance and proactively work towards fostering a culture that genuinely supports workplace equity and transparency.

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