Transparency is a requirement to achieving pay equity

Nike’s recent announcement that it will raise salaries for more than 7,000 of its employees (around 10% of its workforce) grabbed headlines everywhere from the HuffPost to The Wall Street Journal.

The changes, which include a new bonus structure, are designed to address pay equity concerns and a “boy’s club” culture which recently led several top male executives to resign. According to company spokeswoman Sandra Carreon-John, these changes will “support a culture in which employees feel included and empowered.”

This is certainly big, headline-worthy news. But the cultural changes touted by Carreon-John don’t just happen through a one-off pay rise. To truly address pay equity, organisations need to have a plan to implement change and get real about facing up to one of the most uncomfortable elements of achieving and sustaining equity: pay transparency.

The transparency movement

Traditionally, reward structures have been tightly held by HR, while employees have been encouraged (and often obliged) to observe the taboo about talking about pay. But it’s these practices that have allowed pay inequality, driven by discrimination, to become ingrained in organisational cultures.

More recently, the shackles of secrecy have begun to loosen. In the age of #metoo, there is growing public debate about the effects of gender discrimination and individuals are beginning to realise the power of sharing salary information. The BBC provides a high profile example of “the multiplier effect of solidarity” as described by Carrie Gracie to The New Yorker.

While less sensational, growing external scrutiny from websites like Glassdoor is also prompting change with more companies actively choosing to disclose their pay practices. Social media management company Buffer has one of the most radical approaches, publicly publishing all salaries as well as their salary formula. When they first implemented transparency, the company found that the number of applications not only went up, but the quality of candidates improved.

Buffer’s anecdotal experience is now being backed up by a number of studies showing that pay transparency has a raft of benefits, from more effective collaboration between colleagues to increased performance. And of course, helping to address concerns about pay equity.

But discomfort levels remain high

While the case for pay transparency is growing, many organisations still shy away from more open communication on pay strategies and policies. This is even more pronounced when it comes to facing issues around pay equity head on.

Our own polling revealed that about half of companies bundle gender pay equity increases and communications with other annual/ongoing pay increases. Around a quarter of companies communicated that the raise was related to a broader equity analysis (but didn’t specifically link it to gender). A miniscule 1% let employees know an increase was the result of a gender pay equity initiative.

An added complication is that most companies don’t even have a set definition of what pay equity (and inequity) means. This leaves equity initiatives open to criticism on the basis that the concept is subjective and risks perpetuating existing biases. Practically, the lack of definition creates challenges for implementation, particularly about how to decide whether certain employees get pay equity adjustment.

Planning for transparency

There are a variety of reasons for this reluctance to communicate transparently on pay equity, from concerns about reputation to fear of the potential costs of pay remediation. But there are ways to manage these concerns.

Korn Ferry’s EQUAL pay equity evaluation process, which stands for Establish parameters, Quantify gaps, Understand drivers, Action planning, and Lead change, emphasises the importance of planning communication, including risk management, in the action planning stage.

Transparency starts here, with a robust discussion and agreement on what pay equity is, as well as honest consideration of how to implement change and the timeframe for doing so. Nike went with the big bang approach, but this isn’t the only way.

Commitment to achieving pay equity means embracing transparency like never before. It’s not necessarily going to be comfortable, but the cultural rewards - including greater employee commitment and performance - are there for the taking.