The reasons for the gender pay gap in the United States, and globally, are varied and complex. Promoting internal pay equity strengthens your organization and prepares it for sustained success in today’s global market. When the drivers of pay disparity are broken down for analysis, a bridge to overcoming the gender gap within an organization can be designed. This article highlights three concrete steps an organization can take to reduce the gender pay gap. Each of these steps is a direct response to a known driver of gender-based pay disparity. Each has additional organizational value, such as improved talent retention generally. Are you ready to work on bridging the gap? Then let’s get to work.
Context. The gender pay gap is generally expressed as an average of the difference between compensation paid to men and compensation paid to women. Governments, advocacy groups, economists and many other interested organizations measure the gender pay gap in various ways. The U.S. Department of Labor relies on census data when reporting that women who worked full-time, year-round in 2014 earned, on average, 79 percent of men’s median annual earnings. Regardless of which metric is used, there is no reasonable basis for disputing the existence of the gender pay gap. It exists.
Moving beyond existence of the pay gap, the analysis typically turns to its drivers in the first instance, and those that cause its perpetuation. These drivers do not all implicate or evidence a discriminatory intent. All of the following can be blamed for contributing to the pay gap: choice of occupation; differing historical-societal values placed on certain occupations; work experience; compensation history; union membership; organizational secrecy regarding compensation; corporate inertia and gender-based differences in negotiation style. Thus, recognizing the existence of a pay gap generally, and specifically within an organization, and taking steps to address any perceived internal inequity, does not equate to an admission of discriminatory, illegal or wrongful conduct.
Three concrete steps. Short of abrupt and unfair redistribution of an organization’s revenue along gender (or other protected class) lines, what can be done? What concrete steps can be taken, however small, that over time are likely to increase the median compensation of full-time women working within any particular organization without reducing or capping the compensation of men? By focusing on three of the common drivers, the following practical steps emerge.
- Modify your hiring process. The key driver addressed here is the perpetuation of the pay gap when compensation is set based on a worker’s pay history. The underlying issue is tangible in nature. If female workers in a particular field—engineering, for example—have historically been paid less than male counterparts, then recruiting an engineer by offering start pay at some percent more than current compensation will perpetuate the gender-based disparity. Various U.S. states and cities, and other countries, have new laws prohibiting employers from making pre-offer inquiries into pay history.
The suggested steps are as concrete as the issue is tangible. Change your standard application by deleting questions regarding pay history. And train hiring managers to wait to ask candidates about compensation history until an offer is made. Learn how to set compensation based on market analysis and internal needs, not on the candidate’s compensation history. Doing so will demonstrate clarity within the organization about how a particular position or skill set is valued in comparison to generally available market information. This compensation confidence will yield a closer connection between motivated applicants and the organization’s needs.
The benefits of this step transcend gender-based pay inequity. Consider the 50-plus worker seeking change or new opportunities following involuntarily displacement, who’s willing to take a substantial reduction in pay. When asked to provide pay history, the hiring manager may view the likely reduction in pay negatively. The organization may wonder if the candidate will remain happy long-term. The recruiter may disqualify the candidate as “overqualified.” In the absence of pay history information, these limiting views disappear.
These simple modifications are powerful gap-closers placing the employer in compliance with current and trending legal requirements.
- Improve your leave and flex policies. Lack of organizational support for women with caregiver responsibilities, particularly those leaving work to start a family, is a major area of vulnerability. Many women drop out of the labor force once they have children, temporarily or permanently, creating more unemployed mothers than fathers. According to statistics published by the U.S. Department of Labor, in 2013 the rate of unemployment for mothers with children under 18 was 7.3 percent, compared to 4.9 percent for fathers.
What can progressively minded organizations do? Revisit your leave and flex time policies. Consider providing paid parental leave—to be made available to both mothers and fathers—so that workers ready to start a family can absorb the economic impact. An employee receiving a pay check for several months on parental leave is much more likely to return to work, particularly if the paid leave benefit is contingent upon return-to-work. Once these workers are back, supportive flex time with no stigma attached allows parents to take needed time from work to balance caregiver and employment responsibilities. Practices that embrace the use of technology, such as videoconferencing and internal social media outlets, may also allow employees to remain engaged with their employer and co-workers while attending to other obligations. Subsidized childcare has equivalent benefits.
Such improvements to workplace culture create a more connected, engaged workforce that may increase the employers return on investment for employees—typically women—who might be inclined to leave the work force. By keeping women employed more and longer, the work history driver for gender pay inequity is addressed. And the gap shrinks.
- Update your performance management practices. Performance management is a complex human resources topic. The annual performance review is often viewed as dying, yet also lauded as a critical component of compensation analysis. In most organizations, the annual review process is the critical link to compensation increases, bonus targets, promotions, and the negative corollaries of poor performance. It stands to reason that if there is implicit bias or intentional gender-based discriminatory practices lurking in your review process, those are contributing to the gender pay gap.
One of the major concerns about gender-based challenges in typical performance management is that feedback to female workers, on whole, is less specific and constructive in nature. Constructive feedback should identify areas for growth and improvement that the employee can specifically focus on to address potential roadblocks for compensation increases and promotions. If the research is accurate that women receive vague feedback more frequently than men, the organization is missing the opportunity to improve the performance of women on par with that of men.
For example, vague feedback to a female sales employee is unhelpful: “Your customer communications are sometimes not on point.” Instead, she could be told: “Your customer communications sometimes start with more friendly chat than the customer wants. Try cutting to the chase right away, deliver any bad news up front without sugar-coating, then follow the customer’s lead if they want to chat about sports or weather.” Such feedback is constructive, and useful, and performance can improve.
In addition to training on appropriate review techniques, there are two performance management techniques to consider as updates to your process. These techniques will yield more consistently specific feedback. First, include 360 reviews to the extent feasible. By obtaining feedback about an employee from subordinates to coworkers to outsiders such as vendors and customers, a complete picture will emerge and the vague nature of feedback dissipates. When done well, 360 reviews are, admittedly, expensive and time-consuming. Yet the return on investment may justify the initial expenditure. Second, identify final-stage evaluators who can level-set all employee reviews across a segment of your workforce. Some bosses are easy graders, others tough graders, and some resist grading altogether. By adding a final set of reviewing eyes, gender-based differences in feedback, whether intentional or not, are more likely to come to light.
As with the other concrete steps, making these changes will provide strong operational improvements in addition to addressing a known driver of pay inequity. All workers will benefit from specific, level-set feedback. Performance management improvements will positively impact employee engagement, retention, and even recruiting initiatives. Meanwhile the same improvements are working to close the gap.
What about pay audits? By now you’re wondering why the concept of a voluntary pay audit was not identified as one of the three concrete steps. A pay audit is a laudable project, with great utility for identifying areas for further analysis. But for purposes of this article, a pay audit is not a concrete, gap-closing step on par with the other ideas provided. Why is that? Three reasons:
First, a pay audit analyzes existing conditions. It may lead to other actions, but by itself is not a concrete step in changing the workplace. Second, a pay audit is a substantial undertaking in terms of budget, approvals, and executive leadership buy-in. In many organizations, the steps discussed above may not require the same level of approval or buy-in. Finally, there is always some risk that a reasonably objective pay audit may reveal areas where corrective measures should be taken. If no such corrective actions are taken, the existence of the audit could be harmful from human resource and legal perspectives.
In short, the focus of this article, and a great starting point for many organizations, is the “small” nature of the concrete steps identified here. Small in the sense of finding dollars and approvals, and getting leadership buy-in. Big in the sense of working, very effectively, to bridge the gap.
James F. Glunt is a labor, employment & benefits partner in the Pittsburgh office of Reed Smith.