Got a gender pay gap? It’s hurting your business.

Fix it and feel the benefits.

Closing the gender pay gap isn’t just the right thing to do, it makes perfect business sense too.

In this article, I dive into the surprising factors behind the gap (spoiler: personality has a huge impact), share what you can do to fix it (with actionable steps based on Red Badger learnings), and outline the benefits you’ll unlock (productivity, creativity, and more).

What’s the size and shape of the gap?

Let’s dive into the data

According to the Government Equalities Office’s Mandatory Gender Pay Gap Reporting for 2018/1⁹¹, of 10,814 companies and public bodies in Britain, 78% of reported median gender pay gaps favoured men compared to 14% that favoured women. 9% of employers reported a median gender pay gap of exactly 0%.

88% of the companies reported a mean gender pay gap that favoured men, with 11% favouring women. 1% of employers reported a mean gender pay gap of exactly 0%.

Of the 9,583 companies who reported in both 2017/18 and 2018/19, 48% of them reported a median gender pay gap that narrowed over the 12 month period. 44% reported that it had widened.

So what do the numbers mean? The figures show little improvement year on year. This could be down to complexity, with changes taking time to show up in the stats. But it’s also been reported that companies are seriously struggling to know how to make positive change. On top of that, other countries’ data also reveals this is a global issue.

NOTE: Take a look at this article for a definition of median and mean gender pay gaps.

Why does the gender pay gap exist?

Some surprising factors are at play.

All of the empirical data shows that women and men’s average intelligence is identical. So, of course, intelligence isn’t behind the gender pay gap. Many other reasons are suggested, including discrimination. But, perhaps surprisingly, studies² have shown that personality has a larger impact. Enter the Five Factor Model of Personality Structure.

The Five-Factor Model originated from work in the 1930s, was advanced by researchers Ernest Tupes and Raymond Christal in 1961, and became widely accepted amongst academic audiences in the 80s.

It breaks personality down into five key components:

• Extroversion vs Introversion
• Agreeableness vs Antagonism
• Conscientiousness vs Lack of Direction
• Neuroticism vs Emotional Stability
• Openness to Experience vs Closedness to Experience

Studies show that personality predicts earnings for both men and women. For example, in men, a one-standard-deviation increase in non-agreeableness raises the hourly salary of workers by an average of 4%-6%. In comparison, a one-standard-deviation change in IQ for men results in up to a 17% increase in hourly wage. But when you package personality into a bundle of traits, personality has the same impact on men’s pay as cognitive ability.

When we start to look at the differences between the genders, women are much more likely than men to be agreeable, neurotic, extroverted and open. And it’s agreeableness and neuroticism where we see by far the largest difference.

When you link that to pay, the overall findings show that 16% of the gender pay gap is due to personality traits versus 13% which comes down to labour market rewards and penalties — discrimination, in other words. So personality has more of an impact on the gender pay gap than discrimination.

The 16% I just mentioned is driven by one major factor, and that’s agreeableness. Who knew agreeableness could be so problematic? It’s deeply unfair but nevertheless true that people who are friendly, compassionate and altruistic get paid less.

How does this come to pass? The value ‘agreeable people’ place on interpersonal relationships prevents them from demanding the rewards that create better outcomes for themselves. This impacts women the most as they’re more likely to be agreeable. Meanwhile, men receive rewards for being non-agreeable.

Why are men rewarded for non-agreeable behaviours? It comes down to labour market sorting, discrimination, and bargaining.

Let’s take a closer look at all three factors:

Labour market sorting

Non-agreeable workers, primarily men, more often select into occupations where being non-agreeable is required and rewarded as a productive trait. This is apparent across many industries, including my industry — technology.

Discrimination

The market rewards men and women who conform to traditional gender roles and it punishes those who deviate. Agreeable men and non-agreeable women are punished for being perceived as too feminine and too masculine, respectively. We’ve all heard of the non-agreeable man being classed as ambitious vs the non-agreeable woman being classed as bolshy or bossy. Fortunately for men, they’re much more likely to be non-agreeable and are rewarded accordingly.

Wage Bargaining

Non-agreeable personalities result in men tending to be better at salary negotiation. There are multiple studies on this but it’s covered brilliantly in the 2003 book Women Don’t Ask: Negotiation and the Gender Divide³. The authors, Babcock and Laschever, argue that women shy away from negotiations and assert that, if women do start negotiating, they tend to ask for less than men do in their opening offer. Women also tend to concede faster. For line managers, it’s easier to say yes when asked. Thus men are more likely to be rewarded with a pay rise. As the saying goes, “Don’t ask, don’t get”.

Some of the studies I’ve read simply lay out the facts, without gesturing towards possible solutions. Other studies suggest that, in order to secure higher pay, women should consider changing their behaviour to be more assertive — a facet of extroversion. In other words, such studies encourage women to exhibit more ‘masculine’ traits that won’t be penalised by gender stereotypes.

Women are penalised for being non-agreeable as this is interpreted as a break from the gender norm. However, women can be very successful by being assertive (a trait that belongs to the extroversion group rather than the agreeableness group in the Five Factor Model) if they can regulate their behaviour. The research⁴ shows that women get more promotions when they are able to show ‘masculine’ traits — assertiveness, confidence and aggressiveness — but are also able to be self-aware, switching the traits on and off when needed. Being able to regulate those ‘masculine’ traits makes them even more successful than non-agreeable men.

Many clinical psychologists provide assertiveness training to women to help their careers. I have a problem with this for three reasons. Firstly, as I’ve already mentioned, women who demonstrate non-agreeable behaviours can, in fact, be penalised for these. They’re labelled bossy, while men are deemed ambitious. (Or, society demands that they do a tonne of behavioural and emotional gymnastics to regulate their non-agreeableness and assertiveness, as we’ve seen.) So, while personality factors play a leading role in creating the gender pay gap, so do culture’s discriminatory assumptions about what a trait means for a woman vs a man.

Secondly, drives to instil assertiveness in women are bad for the industry as they strip extremely valuable ‘feminine’ behaviours (women score higher in social sensitivity — the ability to accept and perceive others’ thinking, mood, and behaviour) from businesses by encouraging women to exhibit more ‘masculine’ behaviours. This reduces the collective intelligence of teams (more on this in a moment).

Thirdly, and crucially, it should not be the responsibility of women to change their behaviour. Not all women are going to have access to assertiveness training or even be aware of it. We should talk about the speed of change here, too. Change to a pervasive problem across many industries will be slow, and minimal if the answer is for women to alter their behaviours, one woman at a time.

The gap is bad for business.

Leaders need to step up.

The responsibility lies not with individual women, but with leaders. It’s on them to implement policies that ensure a woman’s level of agreeableness doesn’t correlate to her pay.

And — to be clear — I’m talking about leaders of all genders. The gender pay gap hurts women the most, but it also impacts everyone. This is not simply a ‘women’s issue’. It’s a collective problem that must be solved collectively. Historically, most male leaders have failed to take note and take action.

Leaders of all kinds need to step up for two key reasons. Firstly, because it’s the right thing to do. As leaders, we carry ethical and social responsibility. Secondly, eradicating the gender pay gap makes business sense. Why? Because the gap limits — and harms — companies by impacting the bottom line performance of teams and individuals, especially in cognitive, creative and collaborative fields of work.

Let’s look at the altruistic imperative first. It’s increasingly critical that companies do the right thing when it comes to purpose, ethics and social responsibility. Included in this is fairness regarding equality, diversity and inclusion. And, of course, this is one of the territories in which the gender pay gap sits.

The tech industry is trending towards more companies being purpose-driven. Evidencing this, a recent announcement by the U.S. Business Roundtable aimed to redefine the purpose of a corporation to serve society as a whole, creating value for employees and customers, and taking responsibility for serving the local community, not just creating shareholder value.

As more young people start their careers, and the competition for talent intensifies, the industry needs — more than ever — to be purposeful and invest in people, rather than simply seeing them as assets. Businesses need to think about how they can elevate everyone’s careers. Treating people fairly and paying them for their value is the right thing to do.

Social good also makes business sense. Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of the Business Roundtable says: “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.” This move isn’t because CEOs of the largest corporations have suddenly grown a conscience. They are fully aware that purpose, ethics and social responsibility are vital to attracting today’s younger talent as these aspects have become much more important to the younger generations.

Doing the right thing will fuel your business’s performance. In order to improve the efficacy of your company, teams, and individual employees, you need to unlock employee potential, creativity and motivation. When it comes to teams, collective intelligence is a significant factor. And when it comes to individuals, personal motivation counts.

Collective Intelligence

Anita Wooley, Associate Professor of Organizational Behavior at Carnegie Mellon, has proven that having diverse teams in which multiple genders and cultures are represented is more important than intelligence when it comes to improving productivity and creativity. These findings are presented in her seminal 2010 work Evidence for a Collective Intelligence Factor in the Performance of Human Groups.⁵ Wooley names this phenomenon ‘collective intelligence’ (the ‘c-factor’) and differentiates it from general intelligence (the ‘g-factor’).

Wooley’s 2010 paper, and subsequent studies prove that by doing a group version of an IQ test, you can predict how teams will perform in the future. Having more women than men in a team (but not exclusively women) results in a higher c-factor, as does ethnic diversity and cognitive diversity.

Teams cannot achieve their highest levels of collective intelligence unless they have at least moderate diversity across all of these factors. Teams comprised of diverse employees provide the best results.

Personal motivation

When it comes to the individual, you have to look at what personally motivates your employees. In his famous book Drive, Dan Pink proves that pay and bonuses that are tied to personal performance have a negative impact on motivation for those in cognitive or creative jobs. Extrinsic motivators just don’t work.

Instead, you have to focus on intrinsic motivators. The key three are autonomy, mastery and purpose. However, for intrinsic motivators to work, you have to take money off of the table. The intrinsic motivators only work if people feel they are paid fairly. If they feel like they’re paid unfairly, then providing them with autonomy, mastery and purpose is futile.

It pays to loop personality back into the equation here. If you value the quality of asking for a pay rise and don’t give pay rises to those that don’t ask, you’re at risk of discriminating against women because women are more likely to be agreeable.

This could result in your company having a large percentage of your very talented (female) employees feeling like they’re paid unfairly, thus being less motivated and doing poorer work than they’re capable of. So even if you don’t care about doing the right thing (which you should) not having policies in place to counter agreeableness being a factor in people’s pay will hit the quality of your company’s output. And that’ll take its toll on your revenue and profit.

It makes good business sense to set your company up to do the right thing, be purpose-driven, treat all employees fairly and have equal opportunities for all. An important part of this is to have policies in place around pay that allow you to attract and motivate a diverse group of employees, so you can improve your company’s performance and bottom line.

Change is possible.

Here’s what you do.

This is Red Badger’s gender pay gap data. We’ve still got work to do to get these numbers down to zero, but our figures are industry-leading.

As I’ve learned, there’s a lot you can do to ensure you’re paying people fairly and are avoiding a large gender pay gap.

Here are four tips to get you started:

Break down gender stereotypes around childcare

Women’s careers are often halted when they become mothers. This can impact their whole career. For many women, this even impacts the amount of pension that they get to draw when they retire.⁶

To counter this, parental leave should be genderless. Give employees the option to share time off between two primary caregivers after the birth of their baby or adoption of a child. Regardless of their gender, sexual orientation, age, ethnicity, or other characteristics, you should entitle them to take out enhanced parental leave at any time within the first year of their baby’s life or within the first year after adoption.

A shift in mindset is needed. ‘Time off’ on maternity or paternity leave should be seen as a key part of an individual’s development. Put policies in place for both men and women away on parental leave to be included in any pay reviews. After all, they’ll have picked up and developed a whole host of new, valuable skills during this period.

Make sure your leadership is balanced

To close your gender pay gap, you need a balanced leadership team. Evidence shows that having an evenly balanced gender split at leadership level will help ensure your gender pay gap is tackled effectively.

Unbalanced leadership is a pervasive issue across the industry. In 2018, there were more Chief Executives called Dave in charge of FTSE 100 companies than there were women. There were nine Daves, seven women, five people from ethnic minority backgrounds, and four Steves. You don’t have to be a statistician to see that when you add the Daves and Steves together they outnumber the sum of women and people from ethnic minority backgrounds. It’s laughable but not funny.

NOTE: Take a closer look at this data in The Guardian.

The article states: “The Guardian analysis of the data shows that in companies where women are fairly or slightly overrepresented in the top pay band, the median gender pay gap shrinks relative to the composition of the company as a whole.”

If either gender is overrepresented in leadership, the average outcome is that it favours that gender regarding pay. So a healthy balance at leadership is key.

Be transparent about pay

Ensure that salary bands, role definitions and expectations of each role at each level are clearly publicised. You want to give employees the opportunity to interrogate and challenge where they sit in the salary bands within the context of what is expected of them and the value they bring.

At all times, you as a company also want to be able to justify where someone sits and the value they bring. You should be comfortable about having honest conversations and invite debate with any employee about the value they contribute and their corresponding pay. As research professor Brené Brown asserts: “Clear is kind. Unclear is unkind.”⁷

Continuously audit your processes

If you want to stop agreeableness being a factor in people’s pay, you need to continuously audit the processes through which pay rises are requested and rewarded. As part of this, you need to ensure that a pay rise can’t be issued by just one person.

When software engineers write code we make sure the developer who wrote the code cannot also merge it. This supports quality. You must have a code review. To ensure pay is fair, you should follow a similar process. This will help ensure emotion is removed from decisions as far as possible and, instead, encourage decision-makers to focus in on the value of the employee.

At Red Badger, we have an annual pay review system. It’s split into three stages:

1. External benchmarking: We make sure our salary bands are consistent with the market.
2. Pay rise recommendations: Managers put forward their recommended pay rises for each employee.
3. Calibration: All the recommended pay rises, from across all departments, are reviewed by multiple heads of department.

The third and final step is the most important. We want to avoid a person being paid a certain amount because one leader is more generous than another. So, as a group, the reviewers calibrate what’s fair across the full cohort of employees. Any pay rises outside of the annual pay review (such as via a promotion) get the same treatment.

Consistency is key to ensuring fairness. It’s important to have someone who attends all of the calibration meetings, to ensure what’s discussed is consistent and all employees are paid fairly.

Standing your ground helps to drive fairness, too. If someone who’s currently paid fairly insists on a pay rise, review their request. But be prepared to reject their request and refuse to budge, even if they threaten to leave. You don’t want to put a worth on personality traits (yep, you’ve guessed it — non-agreeable ones) that reward people asking for a pay rise.

And all this doesn’t demand you to be stingy. Rather, you should focus on being proactive in making sure everyone is always paid fairly.

It’s not easy.

But it’s worth it.

Some of these initiatives might sound cumbersome, or even counter-productive. But they work. It’s a lot of effort, but it’s totally worth it to ensure people are paid their value.

If you successfully implement what I’ve outlined, the results will speak for themselves.

You’ll unlock:

• An ingrained culture of fairness
• Pay that’s free from discrimination
• Pay that’s not impacted by agreeable or non-agreeable character traits

Pay should not be at the forefront of your employees’ minds. Everyone should be happy and impressed that they’re paid fairly, with pay therefore ceasing to be an everyday issue. Once you’ve achieved this ‘brilliant basic’, you can focus on building diverse teams, giving them intrinsic motivators to get excited about, and providing them with a great environment in which to work and grow.

Ultimately, the gender pay gap exists because historically business has been run by a patriarchal leadership that’s evolved behaviours which reward men more than women. All of the evidence and data shows that it’s time for a change.

If every company develops meaningful policies around equality, diversity and inclusion and eradicates their gender pay gap, our businesses will be healthier, our teams will do better work, our talent pool will flourish, and our industry will be stronger. Are you in?

References

1. Government Equalities Office’s — Mandatory Gender Pay Gap Reporting
2. Mueller, Gerrit, and Erik Plug. “Estimating the Effect of Personality on Male and Female Earnings.” Industrial and Labor Relations Review, 2006, vol. 60, no. 1, pp. 3–22.
3. Linda Babcock and Sara Laschevar “Women Don’t Ask: Negotiation and the Gender Divide.” 2003, STU — Student edition ed., Princeton University Press
4. Olivia A. O’Neill, Charles A. O’Reilly III — Reducing the backlash effect: Self‐monitoring and women’s promotions — Journal of Occupational and Organisational Psychology — December 2011, Volume 84, Issue 4, pp. 825–832
5. Anita Williams Woolley, Christopher F. Chabris, Alex Pentland, Nada Hashmi, Thomas W. Malone — Evidence for a Collective Intelligence Factor in the Performance of Human Groups — Science, 29 Oct 2010: Vol. 330, Issue 6004, pp. 686–688
6. OECD — Pensions at a Glance 2015
7. Brené Brown, “Dare to Lead.” 2018, Random House