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!
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