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The Future of Work

Why Salary Transparency Didn't Eliminate The Gender Wage Gap At This Startup

Even with Buffer's commitment to full disclosure, the company found it was still paying women less than men. Here's why.

Why Salary Transparency Didn't Eliminate The Gender Wage Gap At This Startup
[Photo: Flickr user liz west]

Salary transparency is a great equalizer in theory; when everyone knows what everyone else is making, it’s hard for wage gaps to exist. In practice, it’s a bit more complicated and doesn’t always work as intended.

Last February, Fast Company reported how four companies used slightly different versions of this strategy to ensure that no one among their respective staffs was being paid unfairly.

One of the companies was Buffer. The social media startup has always been dedicated to "radical transparency," not only internally, but externally as well. So it published everyone’s salary (from the CEO on down) as well as the formula used to calculate those wages. According to the founders, the move was aimed at facilitating trust, a key ingredient for an agile organization. They said disclosure could help other founders figure out their own compensation structure, not to mention that transparency led to feedback and increased productivity.

More importantly last year, cofounder Leo Widrich told us, "One of the most relieving things about making salaries transparent at Buffer was that we haven’t had a single salary negotiation happen." Widrich noted that this helped the more reticent (usually women) by not creating an environment where the most aggressive earns the biggest paycheck.

Sounds like a perfect solution, right? Not exactly. In the interest of continued radical transparency, Hailley Griffis, Buffer’s PR crafter, tells Fast Company that they analyzed the numbers last month and discovered a wage gap between the male and female staff of about $10,000. The average salary for a man at Buffer is $98,705 (excluding both founders), while the average salary for a woman is $89,205.

Griffis points out, "Although we’ve tried to remove bias from all elements of our salary formula, it’s possible there’s still bias in the ‘experience’ portion of our formula." The calculation, she says, takes into account the role, location, experience (intermediate, advanced, master), choice of additional salary or equity, and loyalty (how long they’ve been at Buffer).

When the analysis was done, Buffer had 80 employees, 30% of whom are women, 70% men. "More women (58.3% of all women) are set at the lower experience level of intermediate, whereas more men (61.4% of all men) are set at a higher experience level, advanced," says Griffis. Additionally, Buffer has more men in development roles, which are higher paying positions. More men have been at the company longer.

The "Loyalty" Bonus

Research from McKinsey and LeanIn.org found that contrary to popular belief, women don’t opt out of the workforce more than men. Their departures are about the same, or less, than men’s. For those who rise to leadership, their loyalty for the company is stronger. Senior vice presidents who are female are 20% less likely to leave than their male counterparts at the same level. Get women to the C-suite, and they are about half as likely to leave.

While Griffis admits that Buffer doesn’t have a "full picture" of employees’ churn rate, she has a hunch that more men are getting the loyalty bonus because fewer women have been hired in the past. In 2014, only 13% of new hires were women and that number only ticked up to 24% in 2015, she says. (As of this February, it’s 50/50).

"I believe this is called diversity debt," she says, noting that it also means that in addition to receiving Buffer's 5% yearly loyalty bonus, more men are potentially accruing the skills and background to move into higher experience brackets.

The Experience Debt

"Salary commensurate with experience" is a pretty standard phrase in job listings, especially when the employer doesn’t want to reveal a salary range. At Buffer, Griffis says experience means "how skilled a person is at the role they’re coming into at Buffer," although that varies a lot depending on the role itself. The experience level gets set by the hiring manager or through quick conversation between the applicant and Buffer's leadership when they make an offer. 

She says that for some, it’s how long they’ve been in the industry, and for others it can also be how advanced a person is in their craft. "We realize that’s a little vague," she says "which is why we’re working hard to make 'experience' more clear and defined right now."

Griffis also observes how this could have created potential bias.

Of the 24 women on the team, the majority (58.3%) are at intermediate, 37.5% are at advanced, and only 4.1% are at master level. Among Buffer’s male staff of 57 men, only 35% are intermediate, 61.4% are advanced, and 3.5% are at master level.

The Negotiation Conundrum

"Often, new teammates can end up in a lower experience level for their 45-day contractor period, with the idea that there will be a larger discussion when they join Buffer full time around whether they might better fit into a different experience level," she explains. "This feels like it could easily create a system where those who are bold enough to revisit the topic might gain from that conversation," Griffis admits, "whereas those who are more reticent to raise the issue could receive less as a result."

Which is exactly the scenario Widrich said Buffer was trying to avoid through transparency.

Griffis says they still consider the salary formula the antidote to negotiation, "assuming the experience level was set correctly," she points out. Make a mistake, even a small one, and combine it with a reticent applicant who doesn’t advocate for a review, and there could be a wage gap right there.

The Departmental Debate

The same McKinsey study indicated that because there are fewer women in positions that directly impact a company's bottom line, they therefore have a harder time moving into executive roles. It’s easy to see how this plays out at Buffer in the wage question as well.

More women are on the "happiness" team (customer service), which Griffis maintains is integral to Buffer’s business model. On the development team, there are more men. This has resulted in a pay inequity for both genders. On the happiness team women average $75,064, while the men earn $70,875. In development, the average salary for a woman is $103,269, and the men earn $111,744.

The Next Solution

Buffer’s more than aware of the pay disparity and its diversity debt. Griffis says that to address both, Buffer is actively trying to hire more women for higher paying roles, like development, and making sure that women are moving up in their experience levels.

She says that because the analysis revealed the preponderance of women were at the "intermediate" experience level, Buffer wants to make sure it has explicit, clearly defined descriptions for each level per role, and instructions on how to move from one level to the next, and into leadership roles.

In the past, Buffer’s experimented with self-management, allowing leaders to emerge naturally. Griffis says, "This practice can be subjective and highly susceptible to bias; who I see as a leader may be different than your perception based on our work and life experiences, background, communication style, and so much more."

To tackle this, any new internal roles or advancement opportunities will be open to anyone in the team—-regardless of area. Says Griffis: "This feels like the best way to curb the possibility of bias and also understand what team members want for their career path at Buffer."

We’ll update you on their progress as we learn more.

Related: Here's What Rachael Ray Thinks About the Gender Wage Gap

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