By Lindsey Galloway
For years, women were told if they negotiated better, projected confidence, or just ''leaned in,'' they could bridge the gender pay gap. But not dissimilar to asking individuals to pull themselves up by their bootstraps when it comes to escaping poverty or combatting racial injustice, focusing on the injured party to fix the problem is in Martin Luther King’s words ''a cruel jest.'' The pay gap hasn't materially budged in more than 15 years — and it's hardly for a lack of trying from women who want to get paid their fair share. On average, women earned 83 cents for every man's dollar in 2020, with that gap widening for women of color. The disparity grows as women ascend the executive ranks.
According to recent research, director-level women make 71% of what a man makes in an equivalent position, and just 55% of what a man makes in VP roles. Women in the C-Suite of S&P 500 earned 75% of what their male counterparts made in 2020, which is the widest pay gap since 2012.
Researchers found even at the same level of organizational hierarchy, men are given larger teams than women which typically results in higher compensation. This is due to women not being promoted based on potential, while men are. These inequities snowball over time, as women then face higher hurdles when asking to manage larger teams or earn more later in their careers.
At today's pace, it will take 267 years for women to reach parity in both economic participation and opportunity, according to the World Economic Forum. Yet, if we relied less on individuals needing to overcome bias and more on companies instituting fair policies, then we'd be able to fix the pay gap instantly.
Taking an Unbiased Look at Bias
All too often, companies eschew conducting an internal gender compensation analysis, worried about what they may find under the covers. But data provides an objective starting place for any company — especially one that promotes equity and inclusion.
''Many companies and leaders don't want to believe they have a pay gap within their organizations so they will put blinders on for fear of learning that a gap exists,''says Erika Finlay, Head of Social Impact at Unbounce. ''But even Unbounce, a company deeply committed to diversity, equity, and inclusion, had a gender pay gap. The only way to know for sure is by conducting an analysis.''
Though leaders might be initially surprised about what they find, data brings more transparency to the wider team and provides a framework for taking action toward equity sooner rather than later. Companies also shouldn't be afraid to start looking at other self-identifying factors that could potentially affect pay beyond gender.
''Sexual orientation, race, disability, caregiver status, newcomers and more play a significant part in the pay gaps we see today,'' Finlay says. If a culture of trust can be cultivated within an organization, employees will feel more comfortable self-disclosing demographic data that can help identify and close any potential gaps.
''Organizations need to remember they can change and course-correct at any time,'' said Michelle Yu, an HR Consultant and former SoftBank HR Executive. ''There's no need to wait for a catalyst or ulterior motive to make change.''
Total Compensation Transparency
Research shows that setting compensation around an applicant's pay history leads to long-term wage disparities for women and people of color who are systematically paid less than their white peers. With just 21 states and 21 local jurisdictions passing laws to ban the salary history question, it's on corporate leaders to ensure that hiring managers within their organization are abolishing this question.
In addition to the disparity in base salary, women are vastly undercompensated in equity as well. Research has found the average value for company-owned shares held by women was $26,000, while those held by men were valued at nearly $105,000. Women also have been shown to receive 15 to 30 percent less equity than men at both startups and large publicly traded companies. This was why women executives experienced the widest gender pay gap in 2020 in eight years.
When speaking about transparency, companies therefore need to be clear about their full compensation packages, not just around base pay, says Kathryn Valentine, founder of Worthmore Negotiations. ''A lack of transparency hurts diverse groups the most because [they] don't have as much access to information as those traditionally in power.''
The Performance Rating Penalty
Compensation is now often tied to performance, but there's gender bias in rating as well. For instance, Valentine recently worked with an executive whose company instituted a numerical one-to-five self-rating scale as part of the team's annual reviews. The executive soon realized all the women in her team rated themselves much lower than the men did, which unfairly penalized them. ''Women tend to undervalue their impact, whereas men tend to overvalue theirs,'' says Valentine. ''The executive used this data to ask that the numerical scale be removed from the self-evaluation, reducing the bias that had been built within the process.''
An evaluator's gender bias all too often creeps into performance ratings too. One recent study found that managers evaluate the same behaviors differently depending on if they're performed by a woman or a man. Women in male-dominated professions still receive backlash for acting like men, while receiving higher ratings for being ''likable''— regardless of the manager's gender. To avoid these types of biases that financially penalize women, the company must support calibration sessions across the organization to course-correct subconscious bias at the individual and team level.
A Benefit to the Bottom Line
No company can afford to wait 100-plus years to get to pay equity. In fact, it's become a business imperative to get there as soon as possible. According to recent research by Accenture, companies that better support workers financially and emotionally (based on a ''Net Better Off''score) double the impact on work outcomes like trust, job satisfaction, and believing their company is a great place to work. Their research also shows that in places where employees feel more equal, they're less afraid to fail — leading to more innovation.
''Not only is it the right thing to do, but when companies have fair, equitable practices they're healthier, more productive businesses overall,''says Finlay. By pushing for gender pay parity, leaders can ensure that they're not just negotiating for themselves, but creating a fairer future for all.
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