It seems like such a feel-good, modern idea: Allow everyone in a company to know what everyone else in the company is paid.

Such pay transparency has many proponents, who argue that it can help motivate employees, close the gender pay gap, and attract new talent by providing a clear picture of how achievement in the company is rewarded.

But it can also have the opposite effect, demoralizing employees and driving valuable talent away, especially when it isn’t clear why some people are paid more than others.

So for organizations considering where to go with pay transparency, it’s important to understand why total transparency works in some situations—and can be a disaster in others.

Some easy choices

Let’s dispense with what I consider the easy decisions first.