My Approach to Pay Equity as a Manager
Over the years, I have had more impact on people’s job titles, responsibilities, and–importantly–their salaries. I take that responsibility as a profound opportunity to advocate for equality. Here is what I have grown to learn about the subject.
What is “fair” when it comes to compensation?
Whenever I have done corporate training on “pay bands”–the wide range of pay available for the same job–it is explained as necessary to account for all the factors. Those factors include the employee:
- Years of experience (20 years in industry vs 2 years in industry)
- Location (expensive city vs inexpensive town)
- Performance (top performer vs average performer)
- Fit (how much the team wants to hire them)
By this logic, someone hired to be a senior product manager would make more money if they have PM roles on their resume and live in an expensive city like San Francisco. They will make even more if they appear to be high performers in social forms like Twitter. Suppose they also nail the interview and negotiate effectively. In that case, they will get a higher offer than other Sr Product Managers on the team who had other roles recently, live in a tier-2 or 3 city, and didn’t sell their past performance as effectively during the interview.
While this is the standard path toward compensation, it perpetuates easily refuted arguments for why these warrant higher pay. For instance:
- Years of experience assume someone is somehow more valuable for being in an industry for longer. If that’s the case, it will follow that I should hire them for a higher-authority position (Principal PM instead of Sr). If they don’t warrant a higher position, why should they be paid more for years in the industry?
- Location–at least for remote work–is not a factor of value to the team and the company. Why should someone be paid less for their expertise if they live in Lincoln, Nebraska? Because it’s less expensive there? What happens when I move from SF to Lincoln–do you pay me less?
- Performance–before someone works on the team–is primarily based on an availability bias. People with public praise sure seem to be higher performers. If public visibility is key to the role (like DevRel), then more visibility should be seen in a higher position in the company. If visibility is not vital to the work, are you sure you’re paying more for the right reasons? If performance is self-assessed, aren’t you going to fall victim to the Dunning–Kruger effect?
- Side note: one of the gotchas of managing teams of high performers is that you can’t always bump everyone’s pay on the same cycle. It’s essential, in this case, to track why someone is getting a pay bump first and be sure to get back to equal pay in the next cycle.
- Fit is the ultimately unconscious bias feedback loop. Hiring for fit leaves us subject to in-group and out-group thinking–the natural tendency to feel more comfortable around people with similar backgrounds to ourselves–leaving us primed for racial and gender bias.
- Side note: shift any conversation about “culture fit” to someone “brings new perspective” to the company.
Equity is equal pay for equal work
I had to find a different principle for pay, given how debunked the common pay metrics are for me. I focus on the work to be done: pay equally for the same work. There was an influential government bill in the US called “equal pay for equal work,” and it rings true. When we pay equally for a given role, we start down a path toward fair wages. If compensation is different between people, that should be codified in their roles and responsibilities. Yes, someone could get a higher-paying position based on the same biases, but it’s a lot easier to see when we start to classify work differently. It’s a start toward equity, not an end.
Steps I take toward pay equity
The exploration above leads to my own goals of managing in a corporate world. The following are my heuristics for pay equity.
I want to:
- Pay people equal salary for equal work.
- Pay people for the role they’re doing, even if they’re “growing into it.”
- Pay people more for bringing unique, additive perspectives to a homogeneous team.
The constraints I know I have to work within:
- I make pay inequity known. I hold myself to raising this concern to the HR or People team wherever I work, and I bring it up whenever possible. I advocate for this to no longer be an issue.
- That said, I often cannot fix pay inequity in one move. I have to admit that I make one-at-a-time improvements while advocating for system-level changes in the organizations.
- I understand that addressing one pay equity gap will often highlight a new one. I have to accept an unknown issue may be visible as I fix the previous problem. I don’t get stuck in the indecision of which case to fix because I need to address all of the pay gaps on my team.
There is also a helpful reframing that makes this point clear to others:
How much salary would we offer if we had to rehire today?
Does someone make less than that now? Why is that okay?
Research when thinking of pay equity (to date)
These ideas are not uniquely mine but instead informed by hours of reading and discussion. Here are some highlights from that work of learning.
The principle of equal pay for equal work is evaluated on equal skill, effort, responsibility, conditions.
My lesson from that:
- Skill: if someone is just as talented at a role, time in the role is of limited value when evaluating pay.
- Effort: this is the exertion needed to do the role well. This depends on the role definition for me – is it equally as taxing or simpler/more complex? Are the timelines tighter or looser? These are reasonable factors to include in a pay scale.
5 Things You Need To Know About Pay Equity (gartner.com) mentions “Perceptions matter, and perceptions are often skewed.”
- Take increasingly iterative steps towards transparency between teams and peers (within policy but pushing policy toward transparency). It’s the only way to overcome the difference between reality and perception of why people are eligible for the pay they receive.
Payscale mentions reviewing job descriptions, adjusting ranges & grades per role, and formulas.
- Range penetration = (Salary – Range Minimum) / (Range Maximum – Range Minimum)
- Compa-ratio = Salary / Range Midpoint
- We are at the will of our job codes and those pay ranges in large organizations. I need to know these systems, and I should be offering opinions on what they should be, not just using that system.
The Questions You Should Be Asking about Pay Equity (upenn.edu) has some decisive points.
- “The goals of compensation are internal equity and external competitiveness. The leadership issue is how to balance these two often competing forces.”
- Banning negotiation doesn’t fix it. “The trouble with a ‘take it or leave it policy’ is that you need transparency in terms of who is making what salary. If you take away agency, you’ve got to do something to balance that out.”
How to Identify — and Fix — Pay Inequality at Your Company (hbr.org) has a wise warning: meritocracy as a principle needs follow through.
- “Paradoxically, research demonstrates that organizations that emphasize meritocracy as a core value actually are worse when it comes to pay equity because they don’t scrutinize or monitor their behavior.”