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Strong Female Lead

A Definitive Strategy To Eliminate the Gender Pay Gap

Could radical transparency finally eliminate the gender wage gap? It's worked at these four companies.

[Photo: Flickr user frankieleon]

$11,607.

That’s about how much 47% of the workforce loses each year in earnings because the gender wage gap persists.

Women represent nearly half (47%) of the labor force in this country and 40% of them work in management, professional, and related jobs. Yet according to the most recent data from the U.S. Census, an average American woman who works at least 35 hours a week earned 77.1% of what her male counterpart took home.

That number has remained pretty consistent for almost 15 years—despite the raft of protests and organizations that continue to push the issue into the spotlight and advocate for change. More than 50 years have passed since the Equal Pay Act was signed into law and one estimate from the Institute for Women’s Policy Research indicates it could take until 2056 to actually get parity.

While some say the blame for inequality lies with women stepping off the career track and companies that reward individuals who logged more hours on a traditional work schedule, and while the debate on the causes and solutions rages on, a few companies have solved the problem by taking a bold step: they have made all salaries transparent.

Building In Transparency From The Start

Transparency is a core tenet at data analytics startup SumAll. It’s what’s helped the four-year old company grow at a rapid clip, according to its cofounder and CEO Dane Atkinson. He says SumAll has realized 1000% growth each year of operation and has amassed 350,000 clients.

What’s more impressive to Atkinson is a number that most people won’t ever see. It’s SumAll’s staff retention rate.

At just 10%, Atkinson asserts, "We have lower turnover than the industry average which is 30%-50%." He says no one leave the company because they feel like someone lied to them about salaries which Atkinson believes is the reason for "a big hunk of turnover."

Atkinson also believes that SumAll’s baked in transparency eliminates any question of unfair pay regardless of gender. He says that when companies don’t disclose wage information to staff, compensation can rely on, "If you kiss your boss’s ass better" which makes for a toxic culture. "The people who are highest paid are the least productive and most afraid," he contends.

In four years of operation, Atkinson says he’s never encountered an employee who balked at having their wages made public. Rather, he says, "One thing that’s surprising is how much it becomes background."

Yet for customer experience manager Mahssa Mostajabi, "Knowing SumAll is transparent and therefore suffers no wage gap was a huge reason for me to join up."

Creating A Formula

Buffer’s management rocked the startup world when the company decided to publish their salaries. But they didn’t stop there. In effort to make good on its commitment to make nearly everything they do as open as possible, Buffer published the formulas they use to calculate every team member’s salary. The formula starts with a base amount for the position then adds a set amount for seniority, experience and location.

This has the net effect of making sure female staff is paid as much as the male employees, but it goes beyond that, according to Buffer’s CMO Leo Widrich. "It's that this isn't even a discussion point—it's not at all on the agenda to talk about whether women or men should be paid the same. That's true equality I believe."

Unpacking this a bit further, Widrich posits, "One of the most relieving things about making salaries transparent at Buffer was that we haven’t had a single salary negotiation happen."

This is beneficial, he says, because so many initiatives aim to teach women to be more forthcoming and negotiate harder. "As someone watching from the sidelines, this discussion seems to have arisen, because men tend to often be more aggressive and negotiate harder and partially because of that, end up with higher salaries," he says. "Telling women to be more aggressive like men are doesn't seem like a great solution, at least that's what I'm imagining if I was a woman." 

Everyone Gets the Same Salary

Another way to attack salary inequity is taking transparency to a whole other level. At Baltimore-based software startup Figure53, founder Chris Ashworth originally calculated salaries based on his belief in "asking them what they want, then offer a little more."

As the company grew and kept adding staff and clients, that equation became a little more tricky. So he decided to let the staff vote on what they believed would be fair compensation. That happened after instituting a flat pay structure. Yes, that means the founder gets paid as much as anyone else—and everyone knows it.

The pay structure has been in place for almost two years and the staff has doubled to twelve people. Ashworth says salaries are augmented with periodic bonuses that are calculated according to the amount of time the person has worked here. "For example: 2014 was a healthy year for us, so I set aside a portion of money for end-of-year bonuses and ran a small script to calculate the percentage of time each person had invested in the company to that point. The bonus pool was then split according to that calculation," he explains.

Lola Pierson, who handles sales, admin, and user community management say the flat, transparent pay structure is a relief. "Salary transparency and equity are one of the many things that we do here that make Figure 53 feel like an inclusive and welcoming work environment," Pierson asserts, especially because none of the women are primarily programmers, generally the highest paid members on any staff. "Because we have equal salaries we aren't in a situation where the women in the office happen to make less, but we can point to another reason and say that it's fair because it's based in the expectations of the market," she adds.

Cricket Arrison, a producer at Figure53, is a veteran of a variety of jobs from politics to manual labor to tech. Lack of transparency about salaries is the reason Arrison says she has no idea if she was paid less than a male in the same role, yet she strongly suspects that was the case.

Arrison also points out that a level pay scale also eliminates the fraught process of negotiation. Adding proof to the theory posited by Buffer’s Leo Widrich, Arrison cites a recent study that found only 7% of women negotiate salary, while 57% of men did. Arrison contends negotiating becomes a double-bind for women, "you either don't negotiate, which puts you at a disadvantage compared to men, or you negotiate," which sometimes penalizes women for trying to get higher compensation.

Figure53’s founder Chris Ashworth maintains that that paying employees the exact same salary isn’t a perfect antidote. "One big drawback to our current system is that it does not account for positions in the company that would be appropriate to pay at a different base salary," he observes. There is no distinction for a true entry-level position where it would be unfair to pay someone the same base salary as a senior designer or developer, for example. "We also do not currently account for the cost of living in different locations, which may or may not be fair; it’s hard to say," he notes. "If we continue to grow we will likely need to refine our current system, at least to account for different levels of experience or different levels of responsibility," Ashworth admits, "But for now I’d say it still works nicely."

Using Data To Guide Transparency

Radical transparency isn’t a one-size-fits-all solution. But other solutions can work to achieve parity. Xactly found one by combing through its own data.

The cloud-based sales compensation and incentive software provider recently aggregated and anonymously analyzed sales performance data across its customer base to examine any pay discrepancies between men and women. The results indicated that female sales people meet their quotas 3% more often than their male counterparts, but are paid less.

That prompted Xactly’s founder and CEO Christopher Cabrera dig in to the data for his own salespeople. "We pay based on experience, not on gender," Cabrera explains, so two people with the same background in the same role are compensated equally. "It is easy to have parity when is clear that the job is what it is, for instance certain sales roles are paid the same based on performance," says Cabrera. When jobs involve more complex responsibilities, he says education, experience and professional background are factored in.

That said, the audit revealed that a small number of reps—both male and female—were being paid unfairly.

Desta Buchowski-Price, Xactly’s VP of product management and education, presented these findings to her boss. She says, "As a mother of two girls, my hope is that they have every opportunity to be treated equally, and that every business leader has the courage to find the data and make the decision to correct gender inequity."

Cabrera fixed the problem. Most CEOs would have left the issue there, but Buchowski-Price says that not only did he even have to lower an employee's pay, he made the imbalance public.

"That risk paid off," Cabrera explains, "Employees—both male and female—noted how proud they are to work for a company that cares enough to admit their mistakes and take responsibility to fix them." The bottom line, he says, "Merit, not manhood, should be the determining factor on pay," and regular periodic reviews of salaries help achieve equity.

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