A renewed focus on the wage gap is prompting business leaders to look for gaps in pay equity. But rather than applying a Band-Aid approach that will require organizations to revisit the issue in a year or two, businesses should adopt an analytical perspective to remove barriers to pay equity for both the short-term and long-term.
Introduction
The statistics on the difference between pay for men and women are striking: The found the gender wage gap in 2016 was 20 percent. This gap is a problem in every occupation, and women earn less than men at every educational level. According to the National Committee on Pay Equity, the gap is even more pronounced for women of color and for older women.
A renewed focus on the wage gap has prompted organizations to examine their models of compensation, including how pay breaks down across different demographic lines. While looking at pay equity gaps, an organization analyzes a host of data on employee demographics, performance and compensation to uncover the key factors that drive pay. This helps to differentiate legitimate factors for pay from illegitimate ones within the organization. An analysis of this type looks at rich cross-sectional data set that has the power to find long-term solutions to the pay equity issues within an organization.
When leaders discover pay gaps in their organization, they often focus on short-term remediation techniques that provide the most immediate impact They may examine a certain business group or look at gaps across a certain position, then focus on the cost of equalizing pay in that narrow context. unfortunately, they often find the need to revisit the issue a year or two later because their steps have failed to solve the systemic issues causing inequality across the organization.
Organizational leaders must instead commit to removing barriers to pay equity, rather than simply fixing inequity when they identify it. They must adopt an analytical perspective and ask the right questions to solve this issue in the long term as well as the short term. They must use sophisticated analytics techniques to dig into the people analytics at their organizations to determine where the choke points are when it comes to pay inequity and how to correct them. Finally, CEOs and CHROs must work together to build on the insights from pay equity studies to improve their broader Diversity & Inclusion (D&l) approach.
This white paper will look at three steps to take to break down systemic barriers and move toward pay equality over the long term.
While looking at pay equity gaps, an organization analyzes a host of data on employee demographics, performance and compensation to uncover the key factors that drive pay.
Start with Easy Fixes
When companies examine what it takes to equalize pay, they often find some easy-to-correct issues. In many cases the data is easy to access and work with, so these problems tend to stand out. Some early steps to take include:
Leveling roles and salary structures.
Organizations that find they have pay gaps often learn the gaps are smaller than they expected once they compare men and women in the same job groups and at the same pay grades through leveling roles and salaries. Overly broad definitions may Indicate gaps that don't exist While overly specific definitions may not identify real gaps, so leveling established job descriptions based on categories, levels, functions and job families can provide balance between specificity and flexibility.
Establishing equitable starting salaries.
In some cases starting salaries can explain as much as half of the difference in pay between men and women. Aligning starting salaries to external and internal benchmarks based on established market data, rather than relying on candidate input, can reduce the risks associated with differences in pay and make your initial offers more competitive.
Creating a bias-free performance-management system.
If specific demographic groups are consistently found to be "underperforming," plaintiffs attorneys or government agencies will sooner or later want to know why. Clear expectations for rewards and performance help reduce the perception of bias.
Calculating how leave of absence policies affect compensation.
Leaves of absence can disrupt bonuses, promotions, annual merit raises and other policies in ways that are hard to justify. Establishing a consistent approach to how policies translate into compensation will help equalize compensation in these areas.
Training managers to avoid bias.
While hard to quantify, and often very isolated, biases do exist Ongoing diversity training and leadership coaching can help alleviate some of the inherent biases.
Keep in mind that these changes go only so far — and in fact are things your organization should be doing anyway, at least annually. Once you've made these adjustments you're ready to drive long-term transformation.
Widen Your View
To start addressing systemic issues that can affect pay, examine the entire employee life cycle...
Looking at pay equity in isolation will help you address short-term gaps, but a wider perspective that encompasses your entire talent strategy will help you remove barriers to addressing systemic, long-term issues. Correcting pay equity by simply equalizing pay may bolster your reputation and protect you from a lawsuit here or there, but you'll find yourself substantially behind the market in five to seven years, stuck with a workforce you can no longer change because the market has evolved.
Organizations often start digging into issues such as pay equity to manage pressure from a compliance perspective. But that's a reactive approach. While reviewing pay equity from a compliance perspective is critical for some organizations, understanding the value of fairness, transparency and equity in the workplace helps an organization build a stronger employer brand and to more effectively attract and retain talent and respond to employees' needs.
Pay equity is not just a compliance requirement but has its roots deep in the broader diversity and inclusion agenda and the talent strategy within the organization. Organizations have collected a wealth of employee information over the years, and have a strong ability to analyze their data to develop specific strategies and programs that will help identify the bottlenecks that cause problems like pay equity to arise in the first place and find longer-term solutions to addressing the root cause of such problems.
To start addressing systemic issues that can affect pay, examine the entire employee life cycle and consider the following questions carefully. A deep dive into the organizational data at every step can help uncover critical issues that will help develop an effective inclusion strategy within the organization, eliminating problems such as pay' equity. Each is important, but applying them together within the context of the employee life cycle, rather than focusing on one or is key toward shifting to a long-term perspective.
Do we have a workforce representation problem?
Lending a critical eye to the workforce demographics of your organization can help you spot specific locations, levels or roles where there might be representation issues. A critical analysis of the historical data can uncover trends and reasons for such issues. Working closely with the talent-acquisition team, talent-management team, line managers and business unit leaders to proactively address representation goals can help improve the organizational demographics in the long run.
Is our talent-attraction strategy in line with labor market conditions?
Look at your hiring process and determine whether there's bias within it. A representation analysis of your talent pipeline can help you find numbers that indicate a systemic bias, such as looking only in certain geographic areas or in certain universities based on your own location. A critical analysis of the historical talent pipeline can help identity and differentiate effective patterns from ineffective ones, such as whether you're hiring for the right talent in the right market or whether your total-rewards programs match up with the roles you're hiring for. A combination of internal organization data and external labor market data can help identify hot spots for talent and refine the talent-acquisition strategy to minimize talent gaps within the organization and reduce representation inequities.
Is our onboarding inclusive?
Onboarding plays a large role in how your new employees feel when they join your organization and can determine how engaged employees will be after they settle into the role. It's a critical time that lays the groundwork for whether they feel like they belong in your organization, and whether they feel supported when they bring their authentic selves to work. Clarity about expectations for the roles they are in should be inclusive, consistent and transparent; now is the time for the work you've done on removing barriers to equity to become realized.
How diverse and deep is our talent pipeline?
A supportive, enabling environment that focuses on continuous learning will tell your employees whether you believe they have a future with your organization. understand the link between the depth of the talent pipeline across different diversity groups and diversity goals; identify the effectiveness of your development budget and its ROI in nurturing the talent; spot opportunities for developing bespoke programs addressing the different employee segments to cater to their specific requirements. Who IS getting trained and developed? What roles are they encouraged to strive for? Where are there gaps in career growth and development?
Are we rewarding our employees appropriately?
Pay, performance and promotions must reward the behaviors, goals and achievements that the organization wants to foster. An analysis of pay-for-performance metrics data will help uncover any issues with recognizing performance versus payouts across different employee segments. This can lend insights in organizations where the bonus policies are reliant on manager discretion as opposed to a formula-based approach.
Are we engaging everyone at the organization?
Pay considered to be one of the key drivers that require attention in an employee engagement survey. Making sure that pay practices are fair, transparent and equitable within a organization can help drive the engagement levels within the organization. Reviewing the link between engagement outcomes and pay equity can provide valuable insights.
Are we retaining talent and minimizing regrettable loss?
Understanding the key drivers that result in attrition across various employee segments can be a powerful tool to effectively manage the attrition risk. Studying the pay equity attributes across factors such as employee segments, job functions, and locations as a part of the attrition analysis can offer insights to better understand the link between pay equity and attrition risk among different employee groups.
At every step of the employee life cycle, critical analysis of historical employee data can lead to valuable fact-based insights that remediate the workforce representation challenges in the long term. Taking these specific and measurable steps toward creating a more inclusive culture within the organization will create a higher degree of transparency and fairness and also address pay equity problems in the long term.
A deep dive into the organizational data at every step can help uncover critical issues that will help develop an effective inclusion strategy within the organization, eliminating problems such as pay equity.
Apply Analytics to the Entire Employee Cycle
While addressing these long-term solutions, it can be tempting to take action as soon as possible. But this is how biases are introduced in the first place: by acting Without knowledge. Always start With understanding your organizational data and build a valid set of hypotheses. If leaders want to remove barriers to equity across an organization, they must embrace a data-driven solution, communicate the importance of it to all levels of employees and ensure that everyone is part of creating a more inclusive culture.
Using data and analytics will get long-term, sustainable and meaningful changes that eliminate risk and create the kind of organization that will meet tomorrow's business challenges by improving D&l initiatives across the board. To get the most out of the process, follow these steps:
Start with the right set of hypotheses.
It's vital to ask the right questions and build a strong set of hypotheses to test the data. Having a strong understanding of your organizational data will help you build the right hypothesis framework. Test your hypotheses with key business and HR leaders before embarking on the analytical journey.
Set realistic goals.
Specific, realistic goals based on your context, industry and geographies of operation will help lead to success. These goals hold leaders accountable, but only if they're sustainable. Different functions in an organization face different challenges; tor example, pay gaps tend to be more pronounced in customer- facing jobs, so think about the target and prepare to allocate resources to where they're needed.
Align business outcomes.
The CHRO must partner with the CEO on growth strategy for the company, aligning human capital and financial capital. Any partners you work with must also be aware of short- and long-term business goals.
Set your baseline.
Qualitative and quantitative surveys can provide a measurable and trackable baseline that will build context. You probably already have gathered a great deal of data related to talent management. use these fact-based insights for all people decisions.
Use descriptive modeling.
Identify the choke points and specific challenges at each phase of the employee life cycle. For example, digging into the reasons why employees in certain job groups or locations leave your company at a higher rate than others can deliver insights over time about the challenges they may feel they face at your organization, and analyzing why certain behaviors are rewarded can highlight policies that introduce bias.
Apply predictive and prescriptive analytics.
Create predictive models to identify specific HR practices, such as performance management or retention efforts, that will have the greatest impact on future at your organization. Take advantage of machine-learning tools, which will help determine what works best for your organization
Addressing inequality is not a top-down issue or simply an HR function. It's something the organization as a whole must address, and requires full commitment from the CEO and leadership team. Policies are policies, but if policies aren't executed your needle won't move.
While reviewing pay equity from a compliance perspective is critical, understanding the value of fairness, transparency and equity in the workplace helps an organization build a stronger employer brand and to more effectively attract and retain talent and respond to employees' needs.
Conclusion
There are plenty of perspectives that address the challenge of the pay gap, but most are reactive, short-term solutions. A comprehensive, data-driven analysis of the very foundations of your talent strategy can highlight the barriers that stand between your employees and equality at our organization. Business leaders must broaden their view of pay to encompass diversity and inclusion as a whole, so they can build a workforce that attracts, retains and rewards the kinds of employees they need in order to meet the business challenges of the future.
Key Takeaways
- Start with easy-to-correct issues
This might include establishing equitable starting salaries, creating a bias-free performance management system and leveling roles and salary structures. Once the low hanging fruit adjustments are made, you're ready to drive long-term transformation.
- Address systemic issues that can affect pay
Examine the entire employee life cycle. A deep dive into the organizational data at every step can help uncover critical issues that will help develop an effective inclusion strategy within the organization, eliminating problems such as pay equity.
- Resist the temptation to take impulsive action
This is how biases are introduced in the first place. Always start with understanding your organizational data and build a valid set of hypotheses.
