'Damn Right You Have to Do It More Than Once a Year': Achieving Pay Equity Through Smart Pay Analysis

By Matthew Kosinski

By now you know the statistics like the back of your hand. According to Pew Research Center, women make 85 percent of what men make, black people make 75 percent of what white people make, and Hispanic people make about 70 percent of what white people make.

Racial and gender pay gaps are widely acknowledged and roundly condemned, but little progress has been made in closing them over the past few years. For example, a March 2019 analysis from Pew notes the gender pay gap "has narrowed since 1980, but it has remained relatively stable over the past 15 years or so."

It's not from lack of trying, according to Maria Colacurcio, CEO of Syndio, a software company that produces tools designed to help organizations understand and address the underlying behaviors and policies that contribute to their pay gaps.

"We take the approach of assuming best intent, and we've seen so many of our clients really struggling with how to address pay inequality," Colacurcio says. "We've never come across a client company that was really rubbing their hands together and saying, 'How can I game the system?' The fact is there is not a lot of education out there right now about the right way to do a pay analysis."

According to Colacurcio, most companies rely on an outdated, inapt, and prohibitively expensive approach to addressing their pay gaps. "The way most companies do it today — the only option they're often given — is that they go to their outside counsel, who contracts an economist, who goes through a lengthy and expensive process to produce a huge, 150-page crosstab report that gets dropped on the company's desk," Colacurcio explains.

This inefficient and costly process is not in a company's best financial or operational interests. It also fundamentally misunderstands the nature of pay gap analysis: It's not a onetime thing, but an ongoing process that must be repeated regularly to ensure the company is maintaining pay equity as it evolves.

"We want people to know there is a right way and a wrong way to do pay equity analysis," Colacurcio says. That's why Syndio worked with the National Women's Law Center (NWLC), a nonprofit dedicated to gender justice, to draft a set of pay equity standards any company can follow.

Already adopted by Syndio clients and leading organizations like Slack, NerdWallet, and Match Group, Syndio's standards outline a three-pronged approach to achieving pay equity.

• Companies have a responsibility to ensure fair pay for their employees.

• Commit to a cadence of ongoing analyses that are appropriate based on the size of the employer.

• Evaluate starting pay to ensure pay equity from day one.

• Identify underlying policies, practices, and behaviors that need to be changed to ensure pay equity.

Pay analysis can't be a one and done initiative. As companies change over time — and all lasting organizations do — they must continuously check in to ensure that pay gaps are still narrowing. Even if a company manages to vanquish its pay gaps, executives need to stay vigilant. Something like acquiring a new organization could make those gaps reappear.

"If your company is always buying other companies, you probably should be doing [pay analysis] a lot," Colacurcio notes.

For example, much has been written about the recent lawsuit brought against Oracle by former employees alleging significant gender pay disparities at the company. Three of the six named plaintiffs in the lawsuit joined Oracle when the organization acquired PeopleSoft in 2004. Central to the litigation is Oracle’s practice of using new hires’ prior salaries to determine compensation (a practice since outlawed in California). Colacurcio wonders if Oracle may have been able to get out ahead of the issue and address it much earlier — with much less public backlash and employee anger — if it had performed a pay analysis when it first acquired PeopleSoft.

• Set appropriate groups. No gerrymandering.

• Identify any population excluded from the analysis or populations that are not analyzed due to small group size or very few / no gender or race comparators.

• Use parametric and non-parametric tests.

• Analyze all elements of compensation (bonuses, stock options, etc.).

One very common mistake organizations make in pay analysis is looking only at base pay. In reality, they need to account for the total compensation package, which includes a variety of elements beyond simple salary. Perhaps even more problematic is the tendency to exclude certain groups from a pay analysis because they are too small to be analyzed.

"It's usually not done with ill intent but ignorance," Colacurcio says. "When we worked with Fatima [Graves, president and CEO of the NWLC], she said there are methodologies you should be applying to these small groups. You should always be using multivariate regression in your analysisas a whole, and if the group is too small, you should do cohort analysis."

If, during a pay analysis, an organization sees it is excluding a significant number of people because certain groupings are too small, Colacurcio says that's a red flag. Disaggregating your way to 100 percent pay equity is unfortunately not entirely unheard of.

"Maybe you should go back and look again and try to do it in a different way," she says. "Maybe aggregate to make [the groups] a bit bigger. If you can't do it, you should explain it. If the group is too small, then you should disclose how many people were left out."

Another methodological issue is that many organizations only discuss mean and median earnings. While pay gaps in mean and median earnings do suggest the existence of a problem, it's actually a different problem than statistically significant pay disparities between people who work in similar roles.

"Mean and median pay is an advancement-of-women or 'distribution' issue," Colacurcio says. "[These gaps mean] you don't have enough women in the higher ranks. That's a different issue from looking at statistically significant pay disparities. Make sure you differentiate the 'gender pay gap' from the 'pay equity' gap. The former is about distribution and advancement, while the latter measures whether those doing similar work receive equal pay."

• Set an aspirational goal of 100 percent pay equity and measure against that goal.

• Resolve unexplained pay disparities.

• Consider sharing a topline summary of results internally with leadership, the board of directors, and/or employees.

Transparency is absolutely key to any effort to close the pay gap. It's also the biggest hurdle when it comes to getting companies to adopt Syndio's standards. While Syndio's clients that have signed on were already practicing transparency, many organizations that might otherwise endorse the standards hesitate to embrace this particular component.

"We hear two things all the time: 'We can't commit to being transparent until we know whether we have a good story to tell,' and, 'If we announce [ourpay analysis results] this year, we have to announce it every year.' You're damn right you do!" Colacurcio says. "That's the great part about it: You announce it once, and now you're accountable."

A lot of companies worry that going public about their pay gaps may make them easy targets, but Colacurcio says the opposite usually happens: Employees like to see that the company is aware of the problem and taking steps to address it. "They just want to know you're working on it, you're paying attention to it, you're actually doing analyses, and you're willing to talk about it," she says.

Colacurcio points to Payscale's recent "2019 Compensation Best Practices Report," which notes that pay transparency can be a strong driver of recruitment and retention: "Because most employers are not yet sharing much pay-related information with employees or job candidates, you can distinguish your organization as an employer of choice by being more open about pay than others in your market."

Colacurcio also uses the example of Citigroup’s recent decision to share its median pay gap at a global level, becoming the first US company to do so. "Everyone thought they would get hammered, but the sentiment was actually neutral to positive," she says. "People were like, 'Great. They have a 29 percent gap, but they are committed to working on it. I'm glad they were open and honest about it.'"

Colacurcio encourages organizations to stop focusing on the “boogeymen” of pay transparency and start thinking about the positives.

“It's going to engender trust, it's going to retain your talent, and it's going to improve your brand, quite frankly," she says.