If your company released a document with everyone’s compensation, would you be shocked by what you saw? The prospect of compensation transparency can be a powerful litmus test for equal pay in the workplace. When comp planning is fair and unbiased, employees across the board should feel good about how salary and equity is allocated and how that ties in to their experience, roles, level, and function.
However, despite decades-long advocacy for equal pay in the workplace, many companies would not pass this test today. In 2020, men in the technology industry still earn 22% more than women. White employees earn 44% more than Black employees and 33% more than Hispanic employees.
Addressing this problem isn’t rocket science. Companies simply need to track how much employees are being paid, identify where inequalities exist, and adjust compensation accordingly. So why hasn’t more progress been made?
The answer is data, or lack thereof. Without insight into how much every employee is earning, and identifiable trends across demographics, it’s easy to carry on with inconsistent compensation policies, or worse, ignore the problem altogether. Here’s how company leaders can use data to finally close the gap.
Build a system for tracking real-time workforce data
Every month, I take a holistic look at my company’s workforce. I see where hiring needs to be a priority, where diversity needs to be improved, and where compensation for each employee stands.
This level of visibility isn’t the norm for most companies, but we’ve made a concerted effort to measure everything since day one. Comparing salary and equity data alongside gender, ethnicity, location, time in position, and even Myers-Briggs personality traits, gives us the full story on where we stand on workplace equality.
To create a system for tracking real-time workforce data, throw out your Excel spreadsheet and find a tool that automates the process. While manual tracking was doable in the early days, it becomes impossible when you’re hiring, promoting, and losing employees on a weekly or even daily basis. This is even more difficult when business demands stretch your attention in many different directions.
A real-time tracking system will also enable leadership teams to fix inequalities as they emerge, instead of waiting for an annual compensation audit to act. This is better for employees, and less costly for organizations who won’t have to correct dozens of salary discrepancies all at once.
Arm DEI leaders with wage data
Diversity, equality and inclusion (DEI) leaders are in high demand, with a 71% increase in roles over the past five years. But according to many DEI leaders, they’re being set up to fail from the start.
Lofty expectations and limited executive buy-in are parts of the problem, but many point to a more basic issue: data access. They’re expected to champion diversity and equality for the organization but aren’t allowed to see the compensation data they need to identify and solve for inequalities.
Companies often use privacy as an excuse to justify withholding data, but it really boils down to trust. Just like companies have to trust HR leaders to keep sensitive employee data confidential, DEI leaders should be trusted to access the salary and equity data they need to do their jobs.
Empowering People leaders to take action on wage equality can foster collaboration and alignment on compensation and hiring plans. It also spreads the burden of responsibility throughout your leadership team, making it everyone’s role to address existing gaps.
Lead with salary transparency
Countless studies will tell you that men are more likely than women to negotiate their salaries, which contributes to wage inequality. That’s why at ChartHop we share fixed salary and equity ranges for each role from the jump.
Using market rate data as a benchmark, we create salary bands for every role. Each band has an equity and base-pay trade off that lets candidates optimize for the compensation they care about most, while still ensuring equal pay relative to role.
When we’re ready to make an offer, we’re transparent with the candidate and the hiring manager about how we arrived at the number. This can be scary for companies desperate to hire, but we’ve found that candidates respect and appreciate the process.
Of course, some candidates value equity and salary differently, and companies can account for this without introducing inequalities. The key is to create a fixed formula for calculating the anticipated value of an equity allocation and align that with how much that person’s salary will increase or decrease.
Add checks and balances to performance reviews
Data-driven approaches can also benefit orgs’ performance review process. Performance reviews are an important time for companies to gather feedback, address performance concerns, and reward employees for their hard work. But it is also a likely time for wage inequalities to creep in.
Before any raises or promotions are finalized, your DEI and HR team should conduct calibration sessions. Incorporating their feedback on manager’s evaluations helps root out bias before it goes into place.
Analyzing performance data can lead to some tough questions, like why are nine out of 10 promotions being given to white employees? Or why did men receive an average 7 percent salary increase when women only averaged 3 percent? Calibration ensures inequalities are uncovered before they go into effect.
To avoid pay discrepancies in the future, HR and DEI teams can work with functional leaders to set objective criteria for evaluations. Tying evaluations to KPIs, OKRs, and other key metrics can help make the process more consistent.
Ultimately, performance reviews need to be evaluated holistically and can’t always be distilled to quantitative metrics. That’s why bringing senior leadership into the review process can foster a more objective and equitable process.
Leveraging data for wage equality
Data has the power to spark action and help companies make informed and inclusive decisions. It can also enable HR and People leaders to identify inequalities and to align employees at all levels toward plans to address them.
Armed with data and a willingness to spur real change, I firmly believe we can achieve equal pay for all.
Ian White is the founder, CEO, and CTO of ChartHop, the world’s first organizational management platform built to help companies plan for the future.