Past, Present, and Future Approach to Pay Equity

One of the first challenges that we decided to take on at Holistic was the concept of pay equity. In fact, when we initially conceived of the company, it was going to primarily be a technology that would allow us to analyze pay equity and solve for those issues in the workplace. It was only later, after further discussion, that we realized that, ahem, holistically, everything was related, and we are best served by looking at the entirety of the employee experience. However, pay equity was then and remains now the single issue in the workplace that demands the most exploration and effort. Being able to conduct thorough pay equity analyses for our companies is something that we are very focused upon, and Holistic has developed a proprietary method to measure pay equity in the workplace. The way that we do this, broadly speaking, is by looking at it from a three lens perspective: past, present, and future.

This makes sense when you think about it. In order to rectify a wrong or an equity, you need to figure out where things stand right now, look back in time to fix any wrongdoing, and then most importantly, make sure that you are set up for the future.

Let’s talk about each of these:

Present

The easiest and most effective way to address equity is in the present. This is a double edge sword. While it does provide a level of accessibility for folks to start to get involved in these types of conversations and fixing these issues, it also gives people an out. Too many organizations achieve some sort of present-state pay equity, although I have my doubts about how credible it really is -- and then declare themselves finished and move on and they don’t really solve the root of the problem. This is how you end up with scenarios like when Salesforce had to redo the process a couple of years they after they did it the first time. Current state pay equity is actually fairly difficult to discern.

I’ll give you a great example. At 1871, we have two receptionists, both of whom came to us from the same program (Skills for Chicagoland‘s Future), both at a similar experience and starting pretty close to one another in terms of time. One was a man, one was a woman. And while I can tell you exactly how much they made, it was difficult for me to tell you if they were paid equitably. So if it’s this difficult to discern for two people in the same position with the same experience, how hard is it to compare the director level female employee with an MBA who works three days a week and is killing it versus man who is 10 years younger than her and one level below her who has been there for six years but whose performance is lagging. It’s impossible to do without a computer.

And so the first step of any sort of pay equity analysis it is to take a present state analysis of the situation and determine any areas of inequity. At Holistic we look at dozens of different measurements, based off of age, experience, gender, race, department – anything we can get our hands on – with the idea being that you have to take this multi-faceted horizontal view of the situation if you really hope to understand if you’re creating equity. What we are looking for is not individual instances of one person making $5000 a year more than another person. What we are looking for his systemic issues -- men at every level being paid higher; a widening pay gap as people move through the organization; an over-emphasis on things like experience or past salary or performance in the job.

Once we recognize the present landscape, we can take some concerted action. First, we want to put in place clear and consistent salary bands that empower the managers and the decision-makers to make clean decisions about compensation. And second, we want to make sure that nobody within the organization is being over or under compensated significantly. By looking across the organization we can get to a position of pay equity that is a good baseline for efforts. In some cases, this requires salary adjustments. We try to never have a scenario where the salary is adjusted down; more on this later.

Past

The next thing we look at is the past. Many pay equity issues start because somebody realizes that they’ve been underpaid for a period of time, and the company or the individual or somebody wants to make amends for the situation. What our technology allows us to do is to determine a total level of remuneration necessary -- based off a host of factors -- to bring folks that we have identified as underpaid back to a level where they have been compensated appropriately. Bear in mind -- in an ideal situation, we’d build a time machine and go back and correct the wrong before it manifested itself. That is not, however, possible, and so we do the next best thing, which is to help a company understand if and when it should remunerate an employee.

Here’s an example: Let’s say you have a female director level employee, and it’s been determined that she’s underpaid right now. It stands to reason that she has probably been underpaid through the last two years of her employment with the company. Holistic uses a number of factors -- starting salary, actual salary, the average salary for her level, her performance, bonuses, and many more -- to determine an estimation of how much she has been under-compensated. Then, the company has some choices.

They can:

Do nothing (not advisable)

Remunerate her one time for the missed pay

Remunerate her over a period of time to catch up

Remunerate her in a different fashion (bonus, equity, that sort of thing)

The point is that you’ll have some choices as to how to catch up and that you’ll actually be able to say that you did catch up. Handled correctly, this can be a tremendous employee retention activity -- you can take someone who would and should otherwise be upset and make them pretty satisfied with the outcome, all things considered.

Future

How are you going to make sure that the equities stay in place? How are you going to make sure that you don’t see new problems crop up, or that you have a plan to keep tabs of everything? The only way is to measure consistently.

To ensure pay equity on an ongoing basis, it is simply not something that can be measured once in a while -- otherwise, you run the risk of discovering past and present inequities. It has to be measured on an ongoing basis -- monthly or at a minimum quarterly, with a robust system that allows you to really understand how and why things are happening, what is changing (or not changing), and how things can evolve going forward.

Holistic measures every angle that we can -- equity across all levels, all functions, gender-based, race-based, age-based, etc. We are looking, again, for trends and areas of concern.

So that’s the basics of how this is evaluated -- past, present, and future. It’s a complicated question, and a critical one, but it’s necessary to ensure fairness and to create a landscape that lends itself to organizational success.




Tom Alexander