The Development Habit

Career Advice for Succeeding in Corporate America

Promotions & Compensation

Strategies for Getting Equal Pay for Equal Work

Sadly, it’s not new news that women are paid less than men on average. Despite the fact that women receive more college and graduate degrees than men, women are paid 80% of what men make. Even more alarming: in occupations that are predominately made up of women, women earn 66% of what their male counterparts earn.  You can see the size of the pay gap by industry here and by geography, race and ethnicity here.

While it’s important to know the facts, I try to focus on how to change the situation. There are proven methods for equalizing compensation.  While I wish that the burden was not on women to level the playing field, hoping that corporate america grows out of this problem over time is not moving the needle.  And it’s clear that addressing the pay gap is worth it, it can equate to $800,000 of additional compensation earned over a lifetime (see additional data here.)

If you’re on the employee side of the compensation equation…

One of the best ways to ensure you get paid fairly for your work is to work in an organization with a diverse leadership team.  The most common form of bias is similarity bias. This is a bias that everyone suffers from and causes each of us to assume that people who are similar to us are up to 30% better than people who are different. If the leadership team of a company is diverse, than each person will have a different similarity bias and hopefully the diversity of opinions mitigates the bias effect.  Similarity bias will play a bigger role in homogenous leadership groups where everyone shares the same bias.

If you are not at an organization with a diverse leadership team (which is likely given that there are more CEOs in the Fortune 500 named John than are female) there are still a number of things you can do to maximize compensation.

One way to reduce the role bias may play in your compensation is to find a role where success is objectively defined.  The more success is based on things like revenue generated, costs contained, number of people who completed a training, and so on, the less room there is for bias to come into performance evaluation.  That said, there still may be negotiating to be done to quantify how much you should be paid for that success if there is not a standard plan in place.

In their book, Women Don’t Ask, Sara Laschever and Linda Babcock provide an excellent summary of the research on women and negotiation.  It turns out that while women are excellent negotiators when they negotiate on behalf of others, they are less successful in negotiating for themselves.  Generally speaking, this is true regardless of training and experience; the research tested groups of women with MBAs, groups with JDs, and women who had received advanced negotiation training.

Research suggests that the only reliable way for women to negotiate to equal pay is when women have benchmark information.  When women know how much someone else is paid for the same job, they will negotiate to earn the same amount themselves. While men fair better in negotiations, benchmark information is helpful to me as well.  While it can be awkward to discuss compensation with other people, it’s worth it.  As you plan to negotiate your salary, consider doing the following:

  • See what benchmark data you can find online.  Websites like Salary.com, Glassdoor, and others listed here and here are all good places to investigate.
  • Check with your college and/or graduate school career centers to see if they have alumni benchmark compensation data they can share.  If the career center doesn’t have it, check the alumni center.  Schools often track the compensation trajectories of their graduates and may be willing to share information when it’s not tied to a specific individual.
  • Talk to your friends.  It amazes me that women will know every detail of their close friends’ lives, but they don’t know how much money anyone else makes.  Don’t be afraid to talk to your friends about how much they earn; men are not.  In workshops I have given around the world, when I ask audiences who knows detailed information about how much their best friends are paid, men almost always raise their hands and women rarely do.  And since women don’t earn as much as men, make sure to talk to both female and male friends.
  • Talk to friends of friends in the industry you are working in.  If your friends do not work in your industry or would not provide relevant compensation benchmarks, ask around to see if friends of friends might be willing to help.  

If you’re the boss

If you are the boss, then you likely have more tools to influence equal pay for equal work.  One of the fastest ways to ensure the end of gender pay gap is to follow Marc Benioff’s example and review all comparable positions to ensure that the compensation is equal by role.  In some states like California, that’s not only a good way to end the gender pay gap but a good way to prevent your company from getting sued given the law stating there must be equivalent pay for equivalent work.  

Sometimes driving that kind of change overnight can be hard.  If you don’t control the compensation budget, you may not be able to increase compensation enough to equalize salaries in a single year.  In these cases, setting up a plan for how to equalize over time is a good first step.  If you get questions about how your are structuring compensation changes, consider that an opening to respectfully explain that you’re working to achieve compensation equality.

Finally, one of the other areas that can be tricky about evaluating equal pay for equal work is that no two people are alike.  One person might have more experience, another might be more more productive and a third an untrained rising star.  How do you decide if the roles are really equivalent? Even more difficult to address: how do you fairly compensate people with similar roles but different performance levels.  Here are some guidelines for thinking through these situations:

  • It’s okay to pay experienced people more than less experienced people, but people with the same level of experience should have equal opportunities to earn equal compensation.
  • Try to keep base salaries for similar work the same.  Bonuses are where performance differences can be rewarded.  There should never be an expectation that someone who underperforms is paid the same as someone who over-performs. 
  • Determine compensation using quantifiable performance metrics where ever possible.  The more objective performance metrics are, the more difficult it is for bias to creep into compensation.
  • If the job requires subjective performance criteria, be thoughtful about the evaluation; try to get external input and try to find a colleague who is different from you to balance your personal bias.

Job changes and the gender pay gap

A large state university commissioned a study to investigate why their female professors were paid less than their male professors.  While the study was not published for public review, the results showed that one of the major reasons why men were paid more is that they were less loyal.  Men were more likely to take a call from a recruiter for another university, and they were more likely to go interview and get a competing offer.  Often times these men did not end up leaving the university, but they did use those job offers to increase their compensation by threatening to go if the university did not match the compensation rate being offered for the new job.

Interestingly, the study showed that women were less likely to entertain offers to go elsewhere.  The study did not look into why men are more likely to entertain offers to leave; perhaps they are more loyal? Perhaps women in their child rearing years are less likely to leave because they are overwhelmed with work and children already or the thought of uprooting their families to move seems more traumatic.  Whatever the reason, there are some good learnings for everyone:

  • If you want to optimize your compensation, it may be worth taking the time to entertain other offers.  That said, you should also be careful with this approach.  Managers who know their team members are looking to leave may not choose those people for longer term or important roles.
  • Be careful to check how the compensation for newly hired team members compares to the compensation for existing employees.  An employee that has already proved capable and valuable to the organization is likely worth more than a new hire who is still unproven, so compensation should be adjusted accordingly.  If employees have to leave to earn market rate, your company is unlikely to be destined for continued success.

In summary

The current gender pay gap hurts everyone; women have less incentive to stay in their careers and it suggests that women’s contributions are worth less.  Research done by McKinsey & Company, Catalyst, and other respected organizations shows that companies that achieve good levels of diversity are more successful and generate shareholder return.  Closing the pay gap does not mean that anything needs to be taken away from men.  Rather, closing the pay gap is the rising tide that floats all boats.  Diversity means better results, and better results mean more compensation and promotion opportunities for everyone.

Here’s hoping that you all go out there and negotiate this pay gap away in our lifetimes!

Use Your Year End Review to Maximize Compensation

How much time did you spend planning your last week-long vacation? It probably took you at least several hours.  How long did you spend planning for your last year-end review? If you are like most people, you probably spent less than an hour.  You know where I am going with this; unless you work on commission or you are your own boss, your year-end review should be a priority.  For most people working in corporate america, reviews drive compensation and promotions.

Your review is an important opportunity to remind your manager how great you are, how much she should want to retain and promote you, and what information she needs to get you a sizable bonus and a raise.  This post will walk you through how to make the most of your year-end review.

Create a list of what you did over the year

The first step in having a great review is to put together a summary of your accomplishments.  Ideally, you have been noting important milestones, accomplishments and contributions throughout the year. If not, then this could be a great New Year’s Resolution for the coming year but there is no need to despair.  There are a number of ways you can gather the information for your list:

  • Review your calendar.  You likely had meetings and time allotted to the most important things you did this year.  Go through month by month and jot down the work associated with how you spent your time.  It’s easy to forget what you did in January when November rolls around.
  • Review your professional goals for the year.  Many companies have employees write out their goals for the year.  If you have yours written down, assess what work you have done against each goal throughout the year
  • Scan electronic and paper files.  Whether you keep key documents on paper or electronically, go through your key documents files and email folders to identify key accomplishments for the year.
  • Consider your volunteer and extra-curricular contributions within your company.  Even though your leadership of volunteer activities or your organization of company fun events may not be in  your job description, if you are helping to build a company’s culture and facilitating relationship building, that is of value to your employer.  While these activities alone may not earn you a promotion, they may make a difference if you’re one of several contenders for a promotion.
  • If you’re a manager, document your team’s accomplishments.  Have your direct reports complete this exercise for you.  It will help them and it will help you; their accomplishments are your accomplishments.  In fact, part of my motivation in writing this post is so I can share parts of it with my direct reports.

As you are compiling your list, think carefully about the work for which you take credit.  At a Wall Street Journal event the other night, I heard the CEO of McKinsey & Company say, “In all my years, I have never had a man say that he had areas for improvement in his self assessment, but women will often list a number of areas for improvement.” On average, women tend to be more self-depreciating and less likely to claim credit for work than their male counter-parts.  Knowing this information, encourage yourself to be bolder about what you list in your accomplishments.  You lead your team, so their accomplishments are your accomplishments. There is no need to be shy; even when you push yourself outside your comfort zone, you are probably still very far away from being inappropriate.

Summarize your accomplishments

Once you have a list of contributions for the year, it’s time to write up the summary.  Think of this like writing a resume; you want to be execution and results driven.  If there is one lesson I took away from my decade in consulting, it is that you should not underestimate the impact of a polished and professional looking presentation.  When you give your manager a well written summary, the impression that you give is that you are organized and in command of the facts.

I suggest organizing your year-end summary one of two ways.  If you have specific goals for the year or a compensation plan that outlines how your bonus will be considered, put together a presentation that addresses each goal or compensation plan element in sequence.  There should be an executive summary on the first page that outlines each goal and the high level result followed by a detailed discussion of each element in an appendix page behind the executive summary.  For example, if the goal is satisfactory audit outcomes and you achieved this, the summary point would be “Achieved successful audit outcomes in all audits.”  Then, there might be a detailed page behind that listing all the audits, their dates, and the findings.

While it takes additional time to create detailed pages describing the specifics behind high level outcomes, it’s important. It adds credibility to what you did and helps your manager remember all your contributions which in turn makes it easier for her to defend why you deserve more compensation and responsibility.  It’s important to include numbers and metrics where ever possible.

Once you have finished going through each element of your goals or compensation plan, review your list of accomplishments. Were they all covered and included? If any were not covered, create another category on the summary page and write up those accomplishments there.  If you need a title for those activities, something like “Additional Contributions” or “Other Key Accomplishments” are good catch-all phrases.

If you do not have a clear set of objectives or compensation plan elements for your role, review your accomplishments list and group them into categories (trying not to have more than 5-7 categories maximum.) Once you have created your categories, use the same summary and appendix format defined above. I have created a template you can download here.

As you think about how to write up the summary and details about each accomplishment, make sure you are using “action” words. In my post about writing a strong resume, I included a links to several good lists of action words.  In your year-end reviews, your contribution descriptions should all start with action words. Also similar to writing a resume, quantify your work and your results as much as possible. Here are some questions to ask yourself as you quantify your results:

  • What did your work accomplish? If people were impacted, how many and in what time frame? How long did you work take to accomplish?
  • What changed financially in your business as a result of your work or work you contributed to? Financial metrics include things like sales, revenue, costs, profit, and balance sheet items.  Sometimes noting the lack of change can be important.  For example, if you grew revenue without increases costs that is a great story. Did metrics increase or decrease? Was work done more efficiently? By how much?
  • How did core internal or operating metrics at your company change or not change based on your work? Operating metrics include a wide variety of numbers, and there are some good lists of Key Performance Indicators (KPIs) to consider here and here.  Did metrics increase or decrease? By how much? 

If possible, it’s great to have someone you trust at work review your summary before sharing it with you manager.  Your colleague may be able to help you refine and strengthen your contributions summary. If there’s no one you can share the summary with at work, consider if a colleague outside of your company could be helpful.  Sometimes you have to go it alone, but take a few minutes to consider who could help.

Share your summary with your manager in advance of year end

There’s a concept in negotiation called “anchoring” which essentially means that wherever a negotiation starts “anchors” the discussion. If you tell your boss that you believe you did an outstanding job this year and present a summary to support that claim, your year-end review is anchored high and your manager has to talk it down if they disagree. 

Of course, if you have not done a great job this year than anchoring high may not be a great idea; it would show a lack of self awareness and may backfire.  However, women in particular often anchor too low because they want to appear modest and respectful of the broader team’s collective effort.  Corporate America overall has shown that it will pay you less if it thinks you will accept it.  Save the modesty for your personal life.  If you have done a great job, anchor high and ask for a raise twice as high as you think you should receive. The worst case is that you get told no, and the best case is a pay raise that will compound over time.  A $6,000 raise in a given year would be worth $420,000 if you retired 30 years later and invested the raise each year.  That is a quarter of a million dollars difference from one year’s pay increase.

Use the concept of anchoring and review your accomplishments with your boss in advance of the year end review process.  This is helpful because of an important fact many people do not seem to realize: unless your manager owns your company, she likely does not have the final say over compensation. Your summary of accomplishments is something your boss can use to justify your bonus, compensation increase, and/or promotion to other people. Having a succinct and self-explanatory summary of your accomplishments helps tip the odds in your favor. If you don’t provide it for your boss, you are hoping that your boss knows your story well enough or has enough time to do that work themselves.  Your career advancement is too important to leave up to chance or in the hands of others.

Answers to common questions 

What if my performance this year was not good?
My first response to this question is to wonder if your performance really is poor given the data. Sometimes we can be our own worst critics and in reality you are doing a fantastic job. However, if the data objectively shows that you failed to deliver against your key goals, proactively addressing the situation is a good idea.  Spend time identifying what went wrong and document what you plan to do differently going forward to improve results in the coming year. Talking about what you have learned is also a helpful way to emphasize that you won’t repeat your poor performance in the future. One year, I missed a sales growth metric.  In looking at the goal, I realized that it has been set based on the prior year’s results but that the prior year had included a one-time anomaly.  I was able to document that if you removed the anomaly, the current year’s growth was an improvement year over year which helped the year end conversation.  While I still missed the goal, I was paying attention and looking at the problem.  It also helped me avoid that problem going forward; I now proactively watch for anomalies that may unfairly influence goals.

What if my manager disagrees with my summary?
If you manager disagrees with your summary, than that is important information to know.  In the moment that you are discussing your summary with your manager, hear her out and don’t get defensive.  Repeat what she said back to her without judgement.  You should use phrases like, “I understand you are saying [insert her point].” Thank your manager and ask her for time to consider her feedback before discussing things further. This gives you critical time to digest her feedback before you engage with her.  Once you have a moment to yourself, ask yourself if the feedback feels true to you.  If you can, discuss the feedback with a trusted colleague to get a third party’s perspective. If the feedback is fair, when you next talk to your boss you can discuss how to address her feedback in the future.   If you disagree, prepare for a follow up discussion where you state your case as calmly and rationally as possible. If that gets you nowhere, consider appealing to your bosses’ boss or a colleague of your boss. At some point, if you company does not see the value you believe you are bringing to the organization, than this job may not be the right fit.  It’s always good to figure that out sooner rather than later.

I work in a small organization with several other people.  How do I think about performance reviews in this context?
It is always important to document what you are doing, be it in a small or large organization.  However, if there are only one or two people in the office it may make sense to share your summary with everyone in the office to get their input.  It might also make sense to suggest this exercise to everyone and have everyone share their summaries as a group so you can collectively decide what the implications should be for the coming year.

In summary

While it does require an investment of time, writing up a year end summary of what you have achieved is worth it.  If you have best practices to share that aren’t included in this post, please add them below.  If you have other questions not addressed in this post, please ask them in the comments section below and I will try to share them.  In the meantime, good luck with your review!