I recently attended a compensation conference and there was a great speaker, Elizabeth Borges of Github, who covered the topic of pay disparity from new angles. She discussed some of the root causes of gender inequity from the perspective of psychology (among other things.) During the Q&A the audience members discussed some of their companies' challenges and successes. It was good to see that many companies were taking active roles in addressing historic inequity, but disappointing that most still had issues with avoiding inequity in the future.
This article is about a specific issue related to that discussion. I love when a company takes a chance on a talented up-and-comer. This is especially true when the promotion or new hire is someone who is breaking ground in their career or breaking barriers in diversity or gender equity. That’s a pretty banal statement since my guess is that nearly everyone reading this feels much the same way. But, these hires come with compensation issues that most companies seem not to have solved. Fixing these issues may be a big piece to fixing the disparity pay growth over careers.
It’s inspiring when someone has the courage to take on an aspirational role. These are the people who take their first role in leadership or take on a role in a new department or industry. Due to their inexperience, they are often paid less than a more experienced candidate. Where a more "fully qualified" individual may be paid in the 50th percentile or higher, the aspirational candidate may be brought in with lower pay and be told there is “room to grow.”
The range of pay for most senior positions looks much like it did many years ago. The lowest level people get paid 10-20% less than the midpoint and the best get paid 10-20% above the midpoint. In an era of 3% annual increases, and budgets that may allow only 7% increases to great performers, we have a growing issue that needs to be addressed. How does the aspirational hire who outperforms catch up with the top end of their peers who may be performing fine, but not spectacularly? It turns out that many companies have no defined approach for this.
When the range for annual increases was wider, it was easier to catch someone up. (Most companies still didn’t do it, but it was theoretically possible.) With our current tight budgets, traditional approaches will simply compound pay disparity over time. Without a holistic plan, even our best efforts to fix pay disparity issues will not be successful. It is great that so many companies are performing pay audits and adjusting pay. It is even better that more people are feeling brave enough to take the leap of an aspirational job change.
How we continue the support of these aspirational individuals will help determine if we are correcting pay equity issues, or simply patching them up to be addressed again in five or six years. I know some of you have already addressed this issue. It’s time to share your approach with the other HR and pay professionals who have not yet had the chance to create a plan. Please take a moment and add your thoughts in the comment section.
Dan Walter is a CECP and CEP and works as Managing Consultant for FutureSense. He is passionately committed to aligning pay with company strategy and culture and is considered a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on Performance-Based Equity Compensation that Dan refers to as informative written Ambien. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.