Equal Pay Day: A Call for Stretch Leadership

On April 12, Equal Pay Day, Glassdoor, an online job marketplace, is convening a roundtable at The TimesCenter with Hillary Clinton and leading experts to advance pay transparency. The goal is to advance the discussion, move beyond “the same conversation,” and spark new pathways for gender equality.

 Progress in pay equity has been frustratingly slow. Although the pay gap between men and women generally narrowed between the 1970s and 1990s, change has largely stalled and the gap has remained between 76 and 79 cents since 2001. Even more frustrating is how much of the gap is unexplained. Researchers running statistical analysis on wage data can control for personal characteristics such as job title, education, and experience and still find that 33 percent of the wage gap goes “unexplained” or likely due to unconscious gender bias. Recent analysis by Glassdoor, an online job marketplace, shows that 54 percent of the wage gap is due to women and men being in jobs with different levels of wages (higher salary jobs for men, lower wage jobs for women). Gender bias is likely a culprit here as well, explaining why women continue to be excluded, or deterred, from the highest paying jobs.

As Clayman Institute director, Shelley J. Correll, explains, “Bias is an error in decision making.” Managers want to make the best people decisions to move their businesses forward, but stereotypes can color our standards and lead to sub-optimal people decisions. Thus, bias acts like a bug in the system. So advancing pay equity requires debugging our people processes to promote equal pay and equal access throughout our organizations.

Managers matter

Managers at all levels in an organization are critical change agents for gender equality and pay equity. Managers write performance evaluations. Managers recommend performance bonuses. And managers put people up for the best assignments.

Much of the analysis of pay equity looks at base salary. But as MIT researcher Emilio Castilla discovered, fair pay practices must also look at merit bonuses. In his research Castilla discovered that even when salary increases were linked to performance rankings, bonuses were more arbitrary in nature. In other words, when managers were given discretion in awarding bonuses, race and gender bias crept into the system. As a result, women and people of color were given lower bonuses for the same performance rating. The solution? Link merit-based compensation to performance ratings to limit bias in the award process.

Digging deeper, Castilla warns that this solution does not address whether women and men are getting fair evaluations of their performance. Thus, the second action middle managers can take is to block bias in their evaluations.

The Clayman Institute conducts research to understand how bias works in systems like performance management, in order to provide and evaluate solutions for mangers to block bias. A recent project surveyed managers at a tech company asking if they thought promotion criteria were objective. In response, only 24 percent of men and 16 percent of women agreed. Thus, per Castilla’s warning, work is needed in the evaluation process.

Managers in the research project delved into the frameworks described in our guidelines for blocking bias in evaluations. Establishing criteria in advance of writing performance reviews, for example, helps limit bias. Indeed, the managers in the study chose as their solution, to first clarify the criteria used to assess leadership and then benchmark as a team in advance of writing the reviews. In doing so, managers reported feeling that their ratings were more calibrated, and thus, more fair.

As the research by Glassdoor illuminated, one of the largest pay gaps occurs in the C-suite–both in terms of equal pay and equal access. Managers can help here as well. They can allocate the best assignments fairly to men and women.

Many efforts to promote women focus on training and/or mentorship. Instead, according to INSEAD leadership expert Herminia Ibarra, companies should focus on the 70-20-10 rule: 70 percent of a manager’s learning and development should come from on-the-job learning through stretch assignments, with only 20 percent and 10 percent from mentoring and classroom learning, respectively.

By monitoring and tracking key assignments, change can happen. By first providing fair evaluations of employee performance, managers can thoughtfully offer stretch assignments to the women on their team and reduce the pay gap through equal pay and equal access.

But will they ask?

California’s new bill, SB 358, provides safeguards to employees who share salary data. This important legislation represents a step toward transparency and arguably, opening the door to negotiations by people who are not paid on par with equal counterparts. Yet research shows that women, even highly educated women with MBAs, are less likely than men to negotiate a first job offer.

So, even if salary data is available, the question remains: Will women negotiate for higher wages.

The answer is not straightforward. Women’s hesitation is based on rationale assumptions. Research shows that women can indeed be penalized for initiating a negotiation; in other words, negotiating can be interpreted as a violation of acceptable social norms women. Thus, bias can also color salary negotiations.

Managers can help here, too. They can set the stage for all employees to have equal access to salary increases, not just those employees who negotiate. By being transparent in how salary increases are allocated, and making salary discussions open and transparent, managers can work with all employees to provide fair and equal access to wage increases.

“When Women Succeed, America Succeeds”

Women’s salaries are important to today’s families. Today more households than ever have a woman as the primary or equal breadwinner. Women’s salaries are critical for working families. Pay equity, therefore, is not only a woman’s issue, but also a family issue, and in fact, an American issue.

Equal pay is an important step in unleashing women’s economic potential, but it’s not the end point. We need to ensure everyone, from CEOs to middle managers and women wage earners, to find common ground in creating fair and inclusive workplaces. We will know that our work is done when women earn equal pay for equal work and when they also earn an equal share of the highest paying jobs and leadership positions in society.

In addition to Secretary Clinton, the Equal Pay Day roundtable participants will include: Olympic Gold Medalist Megan Rapione, Glassdoor CEO Robert Hohman, Make it Work Co-founder Tracy Sturdivant, Gap SVP Dan Henkle, and Lori Nishiura Mackenzie, Executive Director of the Clayman Institute for Gender Research at Stanford University.