Beyond Pay Transparency: Creating Workplace Equity

“Workplace equity is no longer a once-a-year project – employers are embedding it throughout the employee lifecycle,” according to a new Syndio survey.

Why it matters: The most effective organizations are using pay transparency as an opportunity to holistically review talent practices for bias and enable a more diverse and equitable workforce. Syndio offers insights into how leading companies are succeeding in this regard.

Four key takeaways of the survey include:

1. Prevent inequitable outcomes by proactively disrupting the root causes of disparities.

• Root cause #1: Manager discretion in performance management.
  
  
  1. The facts. Performance evaluations are completed solely by an employee’s immediate manager in over two-thirds of large companies.
     
     
  2. Managers have influence on decisions made throughout the employee lifecycle including: pay increases (82%), promotions (80%), performance improvement plans (76%), bonus awards (65%), high-visibility projects (61%), and nominations for development (52%).
     
     
• Root cause #2: Lack of formal ratings to assess employee potential.
  
  
  1. The facts. Formal ratings are common for performance (83%), but not for potential. Organizations that struggle with developing diverse pipelines are twice as likely to lack process for evaluating potential.
     
     
  2. Downstream impact. The study found that women, on average, receive higher performance ratings than men but are awarded lower potential ratings which results in women being 13% less likely to be promoted than male counterparts.
     
     
  3. Lack of a formal succession planning process also contributes to less equitable workplaces. The study indicated that companies with a succession plan are 51% more likely to effectively develop diverse talent.
     
     
• Possible Solutions:
  
  1. Analyze the distribution of performance ratings by identity groups and the correlation with pay increases to ensure the “pay for performance” model is working as intended.
     
     
  2. Create a systematic, quantitative method for assessing potential.
     
     
  3. Consider succession planning and how it supports diversity.

2. Effective pay equity programs a) examine data more regularly and b) conduct more thorough pay evaluations across c) a wider range of compensation types.  

• The facts. 50% of respondents conduct pay equity analyses annually and 36% complete them more frequently.  “Mature” companies are 51% more likely to build diverse teams. 
  
  
• Best practices of mature pay equity programs.
  
  1. Analyze more than just base pay to find “hidden gaps.” Reviewing long-term incentives may uncover inequities, since LTI recipients are a more senior (and possibly less diverse) population.
     
     
  2. Establish a budget for pay adjustments to address inequities. 94% of mature pay equity programs have a remediation budget.

3. Measure equity throughout the employee life cycle. Every stage has the potential to cause pay disparities and other forms of inequality.

• The facts. The most effective organizations analyze group-based differences across multiple facets including hiring outcomes (78%), employee engagement (67%), attrition/retention (63%), performance assessments (64%) and potential assessments (55%).
  
  
• The use of data is crucial - 85% of respondents indicated they see room for improvement in how well their company measures success of equity initiatives.

4. Increase transparency and broaden the collection of demographic data. Transparency increases accountability for diversity goals and fosters employee confidence.

• The facts. Less mature organizations are 45% more likely to restrict demographic data from business leaders and 2.7 times more likely to only share with the C-suite.
  
  
• Beyond gender and ethnicity, employers are collecting data on veteran status (67%), disability (63%) and nonbinary gender (42%).   

The big picture. Pay transparency regulations continue to grow – at the state level in the U.S. and across the globe. Developing a proactive and robust pay analysis program will better position employers if and when disclosures are required, but developing an equitable workforce also creates a strategic competitive advantage.