Perpetuating Disparate Pay as Managers

At the conclusion of the 2018 Hitachi Global Women's Summit in Singapore, I was inspired by the group of men and women passionate about change. One of the workshops centered around the discussion topic of unconscious bias and how we could learn, unlearn, and relearn best practice. I wanted to share how, as a manager, I do my part in self-checking unconscious bias and demonstrate how influencing change starts with yourself.

During the hiring process, managers often times have a substantial influence on the outcome of the final offer. In the role of Compensation, I am often asked whether managers are able to "go against recommendation" in which case my answer is always "yes". Compensation acts as an in-house consultant, with knowledge of market data and the industry, to help the business make informed decisions. But ultimately Compensation only provides guidelines and guardrails that can be exceeded (or not met) as the cost / expense comes from the Business.

To remain fair in a way that is both respected and supported, my advice to managers can be consolidated into 3 overarching best practices to follow:

1. Have a target offer (compensation and level) in mind BEFORE you meet candidates. Be more specific than just a range for compensation, a target amount to be exact. Then stick to it. Compensation is intended to compensate for the role, not the person. However, if there are funds available, there should be flexibility on short-term incentives or sign on incentives to compensate for individual qualifications. More often than not, if the candidate is the right fit (neither unqualified nor overqualified), the original offer should stand. As the adoptive trend is showing, current compensation has little to nothing to do with an initial offer. Similarly, I would argue that previous role or title has little to do with qualifications, considering how each company may have its own job architecture, structure, nomenclatures, and hierarchy. Often times I find we as managers do not have a clear idea of our own expectations and therefore when presented with a particularly vocal candidate or overly qualified candidate, we are willing to overpay or inflate our original gut target offer because by then we have fallen in love with the person's potential. This results in a less objective outcome and perhaps a gap between candidates who can or cannot "negotiate", are less likely to try, or simply don't.
2. Do not humor counter offers. Whether that be at time of hire or at the time of an exit, do not make frequent exceptions from your target. You have probably heard it before but "common exceptions are no longer exceptions, they are the norm". A candidate should always try to negotiate. It is at this time candidates have the most "leverage" and the least "risk" - but outside of the flexible limit you decided upon in best practice #1, exceptions should rarely occur. Exceptions outside of your target offer tend not to be grounded in merit, but rather, emotion and subjectivity. And if studies show there are particular types of people that tend not to negotiate, then you perpetuate a disparity of pay for a group of individuals. In addition, you may be undermining the rest of your talent when you seemingly "reward" new hires or those who were willing to leave a team. The age old dilemma with today's competitive environment is how to catch up existing internal equity when new hires today with maybe less experience are being made offers of pay above the team. This leads me to my final piece of advice.
3. Be transparent. People talk. I try to remind myself to communicate and act in private in a way that I would feel comfortable and confident having published or on display to my employer and employees. I think the positives of transparency are multiplied when you consider increased time savings, elevated morale, heightened communication, and the augmented long term retention gains as a product of it all.

Each of these best practices focuses on creating trust and setting expectations to external parties and internal members. It's OK to be tough, as long as you are fair and consistent. In my experience, communicating accurate expectations and targets is the most beneficial standard you can set for your company - it lets everyone understand where they stand so they can take ownership of their influence and impact to development (compensation and level).

I want to end on the acknowledgement that discussing strategy in concept is much easier than execution when implementing change. When leadership is aligned on these best practices, it enables the business to succeed in fair pay. Thank you to @Nakahata-san and @Levent Arabaci for paving the way.