On Equal Pay Day, the news couldn’t be better. While the shift is small, growing data suggests that the gender pay gap in the United States is shrinking for some women. I talked to compensation experts as well as executives from Starbucks, McAfee and Credit Karma to find out how they and other industry leaders are making equal pay and role-based compensation a new reality.
Finally, some good news. Multiple sources are reporting that though small, there is a slight tightening of the pay gap in the United States. In other words, the gender pay gap is actually shrinking for some women in the workforce. A new report released by PayScale, a cloud compensation company, shows that for their crowdsourced data, the average uncontrolled pay gap is decreasing from from $0.26 in 2015 to $0.21 in 2018. Pew Research also found a similar trend in their ongoing analysis of U.S. Census Data, specifically for women between 24 and 35 years of age. Pew found that the wage gap was $0.15 for all working women, age 16 and above, and $0.11 for women just starting their careers in the workforce. Hired, a two-sided job searching platform for the tech industry, also found “glimmers of progress” in their latest annual report on equal pay, where a 1% shift was detected.
Lydia Frank, Vice President of Content Strategy for PayScale, is cautiously optimistic about signs of pay progress. “It takes a lot to change the pay gap ratio because the number of people included in those calculations are so large,” she said. Frank said that she would not be surprised if there were minor fluctuations of a few cents every year. “But I do feel hopeful because in our post #metoo world, there’s just more people demanding accountability and calling out bad behavior.” Frank noted that paying attention to the real drivers of the pay gap are key, and that new horizons in establishing equal pay are emerging that go beyond just increasing compensation. While many people talk about demanding more salary to close the gap, a more effective strategy includes examining career trajectories and promotion of women and people of color into management and executive ranks. “It’s less about ‘pay me more’ and more about ‘promote me more ,’” Frank said.
Yet regardless of tactics, these findings – of the potential trend that the pay gap may finally be shrinking – could not come on a better day. Today is Equal Pay Day, the day that represents roughly the average number of days women in the United States have to work to make the equivalent salary of a White male counterpart. Since women on average make $0.80 for every dollar that their male coworkers make, women find themselves working until in April to get to parity. The day moves further out into the year if you are a mother ($0.71) or a Black ($0.61), Native ($0.58) or Latinx ($0.53) woman, according to the National Women’s Law Center. Let’s be clear: Equal Pay Day is an anti-holiday. It’s purpose is to remind us that even as things are changing in the world, we still have work to do to make sure women’s labor is equally valued. In fact, the World Economic Forum projected in 2018 that it might take as long as 202 years to close the global pay gap, which is down from 217 years, their prediction in 2017.
Forward-thinking corporations are not willing to wait another two hundred years. Many have taken direct action to level set pay while also fine tuning internal policies around succession planning and promotion. I talked to executives from Starbucks, McAfee, Credit Karma and Buffer. In each case, a few hallmarks of corporate leadership stand out. Leading organizations are committed to expressing their cultural and corporate values through how they implement their compensation and benefits. They have support from their C-suite and board to fully implement equitable changes. They clarify promotion process and in some cases, they make sure employees have access to equity as a part of compensation. Most importantly, they are committed to transparency, even when the numbers are not flattering.
Zulima Espinel is Vice President of Global Public Policy at Starbucks, and she mentioned that as Starbucks opened it’s 30,000 store, the weight of that influence is top of mind. She also mentioned that as a corporation with a global footprint, there is a desire to examine and drive positive changes for equal pay around the world as soon as possible. Espinel and others withing Starbucks have been working to find ways to “create a unified approach to how we look at pay equity across markets, and allow markets to support those with the best practices that make sense for that market. There’s been a recognition by our partners that this is a global, complex issue, and we’re trying to figure out how to make changes at scale,” she said. In terms of pay practices, Espinel mentioned that in Starbucks China, as in the United States, there is no cap on promotion in terms of pay.
Espinel also mentioned organizational changes that Starbucks is committed to making. She mentioned that the gender ratio of the entire company is about 67% women and 45% are employees of color. When it comes to senior leadership, 40% of executives are women and 13% are people of color. Espinel noted that while these figures might be better than many corporate averages in the United States, there is still work to do. Starbucks set a new goal of reaching gender parity in senior leadership positions by 2020. This is in addition to Starbucks’s established paid parental leave and tuition reimbursement, two programs that reduce barriers for women and parents in ways that go beyond just compensation changes.
Starbucks joins more than 100 companies and corporations that signed the White House Equal Pay Pledge under the Obama administration, and continues to inspire corporations across industries. Count McAfee, a leading cybersecurity software company, as one of those corporations inspired by Starbucks’s work. Chatelle Lynch is the Chief Human Resources Officer for McAfee, and Lynch has steered the company through enormous staffing growth and changes in the last few years. What has been inspiring for her is that there was never a need to launch an internal persuasion campaign on equal pay. In fact, part of her executive recruitment has been to bring in executives who support equal pay and other equitable corporate values. Lynch also mentioned that support came from the very top – McAfee’s CEO Chris Young. “Our CEO wants diversity as a business level metric against bookings and revenue and all those things that we grade our performance on,” Lynch said. The same holds true for McAfee’s board of directors.
Lynch noted that transparency has been key to adjusting their compensation policies. “At McAfee, we defined pay parity as fair and equal pay for employees in the same job level and location.” They also control for factors such as performance, tenure, and experience. Lynch said that the employee reaction has been overwhelmingly positive. “It’s important to know that I can at anytime talk to our employees and look them in the eyes and say, we pay men and women equally at McAfee,“ Lynch said. As of April 1, Lynch mentioned that McAfee has leveled salaries across the organization, and will continue to monitor and make adjustments on a quarterly basis, going forward.
Credit Karma, the online personal finance platform, also shifted to role-based compensation last year. Colleen McCreary is Chief People Officer at the company, and as a 20-year veteran of the tech industry, she has helped many tech companies grow and scale. Having a smart people strategy has been a part of that track record of success. “I’ve been passionate about tying people’s understanding of how they’re paid to their actual work, and want to make sure that people understand that connection,“ McCreary said. With a heavy use of data, McCreary started to evaluate Credit Karma’s compensation and promotion policies. Initially, she saw a lack of clarity on the promotion process and how bonus decisions would get made. She notes that this was not a glaring problem, but that she knew that the organization would benefit from increased transparency. “If we know that we have nine people who are all doing the same software engineer job, who do exactly the same thing, why aren’t we paying them exactly the same?” McCreary said. So she got rid of the bonus structure, in part to support the new role-based compensation and equity structure.
The equity piece as a part of total compensation is important to McCreary, as she noted that it’s a company-wide motivator. She also eliminated salary negotiation in job interviews, again switching to full transparency on compensation by role. The results were positive. McCreary say acceptance rates for job offers went up and attrition went down, an important trends for a company that now tops out at more than 1,000 employees.
Compensation is an emotional topic for everyone. McCreary’s advice to other executives who are changing policies around pay is to stay in touch with as many employees as possible. “We did a monthly town hall where we walked everybody through the changes, including why we did the changes, and showed what the data was that led us to do these changes. We had a real conversation about how compensation works,” McCreary said. She also created a Slack channel where any employee could ask her a question and her answers would be visible to everyone. Like McAfee and many other companies, McCreary said that the employee reactions to these types of compensation changes has been largely positive.
Ultimately, it comes down to authentic alignment with organizational values. McCreary notes that Credit Karma’s values of helpfulness, ownership, progress and empathy are connected to equitable policies around compensation, and even extend to how Credit Karma’s 85 million members might see the company. “We should be living those values,” McCreary said. Compensation and promotion policies are an important place to show that authentic commitment.