A Response to “Why Companies Attempts to Close the Gender Pay Gap Often Fail”

Last week, HBR published ‘Why Companies Attempts to Close the Gender Pay Gap Often Fail’ (https://hbr.org/2019/01/why-companies-attempts-to-close-the-gender-pay-gap-often-fail). We wanted to take the opportunity to comment on the academic but not entirely practical advice in the article.

Their article is a cerebral take, written by academics, on how to solve the pay gap in corporations. As the former co-founder of now-publicly traded company, and former assistant general counsel at Starbucks who spent the better part of a decade on its pay equity initiative, companies can do better.

The advice given is not practical advice for most companies who have to be competitive in the talent market. Here is what this article recommends:

  1. “Minimizing the overall increase in the wage bill” (those of us from corporations hear this as “minimize the merit pool,” and it inspires groans)
  2. Capping raises to individual employees percentage terms (what company doesn’t cap merit increases?)
  3. “Avoiding large differences with the external job market” (“we pay market value,” says every corporation)
  4. Maintaining pay differences across job groups and “incentivize performance” (well, yeah)

(Never mind that #s 3 and 1 may be inconsistent. In a hot market when wages inflate, how does a company both minimize differences with the external market — keep up with the free agent market — and minimize the overall merit pool?)

The advice component to give more to educated employees is thoughtful and but of waning relevance in today’s job market. For one, while education is related to starting pay generally and pay over time, its relevance to actual job performance is less so, and in some companies hotly debated. (Otherwise, PhDs would be running companies everywhere.) Second, and perhaps more importantly, the reality is many companies do not have education in their data for all employees. That data may live on job applications, but it very regularly never makes its way into a company’s HRIS.

For those who really want to move the needle for pay equality in corporate America, here’s the must haves:

Executive Engagement

Any effort to eradicate pay disparity in the workplace must involve executive commitment. If a Board of Directors or CEO is not genuinely dedicated to an effort, any of us with substantial experience in Corporate America know it does not happen, or does not happen well. This is the mother of all best practices.

Transparency

The journey to pay equity must be transparent. Trust and transparency are two sides of the same coin. When leadership is not transparent about its effort to tackle pay differences, it misses out on a tremendous opportunity to build trust, especially among female employees. Far too many companies keep their efforts buried deep in confidentiality and privilege, advised by their lawyers that the alternative is a litigation risk. That misses the mark. Most women aren’t looking to sue their employer. They just want equal pay for equal work. And even if a company admits to a pay gap — the reality is nearly all companies have one, somewhere — the honest effort to solve the problem engenders good will and creates accountability.

Commitment Beyond ‘One and Done’

The journey is not “one and done,” and requires ongoing commitment. If “one and done” pay efforts worked there would be no lingering pay gap (queue the recent study that found the pay gap would be resolved in 20 decades). Companies serious about pay initiatives know that maintaining the delicate balance they worked to achieve requires vigilance over time.

Closing the gap for some underpaid employees is the right thing to do, but unless companies undertake efforts to identify the underlying policies, practices and manager behaviors that led to those disparities to begin with, those gaps will reappear quickly and regularly

These are some of the reasons we left Starbucks to join a software startup focused on eradicating pay disparities. It was the first time we saw something tangible that could not only solve the problem, but help companies maintain fairness over time.

Many thanks,

Maria Colacurcio, ceo, Syndio Solutions, maria.colacurcio@synd.io

Rob Porcarelli, chief legal officer, Syndio Solutions, rob.porcarelli@synd.io