How Performance Management Drives Pay Equity

Over the past several years, companies have embraced numerous pay equity initiatives, focusing on inequities in the workplace.  According to a recent survey, [1]  WorldatWork examined whether companies were expanding the reach of their pay equity initiatives beyond traditional indicators contributing to workplace inequities, such as “workforce representation, benefits programming, and culture.”

Regarding pay equity among surveyed companies, WorldatWork found that 79 percent conducted regular gender pay gap analyses while 71 percent conducted regular “broad pay equity analyses.”[2] Eighty-eight percent focused on (or anticipated a focus on) recruiting practices, and 82 percent focused on diversity and inclusion initiatives. 

Interestingly, 69 percent of companies surveyed stated that they are examining performance management practices on an ongoing basis, making it apparent that these practices impact pay equity—whether directly or indirectly—in the workplace. If you reverse this statistic, then almost “[o]ne-third of organizations are not looking at performance management practices in the context of pay equity, despite the often subjective nature of these programs.”[3]

Moving forward, to achieve pay equity, “performance management programs will have to adhere to updated frameworks in order to be bias-free.”[4] As such, this is an excellent time for companies to review their current policies and procedures to see if changes or updates should be made.

The Impact of Performance Management Programs in Today’s Workplace.

Numerous studies show that performance management programs need an immediate upgrade to promote positive outcomes and excellence in today’s workplace effectively.  For example, according to the Harvard Business Review,[5] many leaders and managers give subjective performance feedback, focusing on what needs to be improved, not on what the employee is doing well in their given circumstances.

For example, a manager may tell an employee that her approaches to projects are ineffective simply because her methods differ from those of the manager.[6]  Additionally, focusing on an employee’s shortcomings impairs learning as opposed to promoting it.[7] “Learning rests on what we’re doing well, not on what we’re doing poorly. [Additionally] we learn most when someone else pays attention to what’s working within us and asks us to cultivate it intelligently.”[8] As such, “[o]rganizations should base compensation on the reality of performance — not the perception of performance — to ensure that all employees have an opportunity for equitable and fair pay.”[9]

Further, for many employees, annual performance reviews have become dreaded events, according to Gallup, as they are measured subjectively, with the top-scoring employees getting raises of bonuses while the bottom tier gets fired or demoted.[10] In examining performance metrics, companies must “compare, rank and rate their employees based on the expectations of the department or team but ideally prioritize the employees and their individual strengths and goals,”[11] including evaluating those employees based on work schedule, such as part-time, full-time, or an alternative schedule.

By shifting this more subjective performance management approach to one that’s more objective, the company will identify certain biases within its procedures, shedding light on necessary change.

Steps to Implement Equitable Performance Management Programs

To continue improving pay equity and transparency, employers must expand their initiatives beyond traditional metrics, considering potential biases within performance management. Having robust performance management policies and procedures in place is a definite first step.

When revising your current program, or implementing a new one, here are some best practices to consider when developing performance management policies and procedures:

• Create norms around flexibility.[12] Leaders and managers must assure employees that their work performance will not be negatively impacted by where, when, or how many hours they work. Additionally, this policy will result in higher retention rates, as working women demand flexible schedules, giving them better control of their lives.[13]
• Revise or update performance reviews. [14] As we move into a post-pandemic world, managers may need to reassess performance criteria and objectives to see if they are still realistic and attainable. By revising goals, expectations, and project scopes, employers can better communicate expectations to employees—whether working full-time, part-time, or from home, ultimately leading to higher productivity.
• Focus on minimizing gender bias within your performance management program. [15] For example, “[t]o mitigate the biases that women are up against, companies need to make sure that employees are aware of them.”[16] To improve awareness, companies can implement bias training programs, including training in unconscious bias.
• Measure outcomes for both “promotions and raises by gender—as well as the breakdown of layoffs and furloughs by gender—to make sure women and men are being treated fairly.”[17]

As companies start tackling opportunities in a post-COVID workplace, this is an excellent time to re-evaluate performance management policies and procedures. By re-examining expectations and outcomes, employers can eliminate unconscious bias within their performance programs, making them fair and transparent—a benefit to all employees.

Sources

[1] [2] [3] [4] “WorldatWork Pay Equity Survey Results: Signs Gender Pay Gap and Broad Pay Equity Analyses are Becoming Standard Practice,” WorldatWork, October 7, 2019. https://www.globenewswire.com/news-release/2019/10/07/1925715/0/en/WorldatWork-Pay-Equity-Survey-Results.html

[5] [6] [7] [8] [9] Buckingham, Marcus and Ashely Goodall, “The Feedback Fallacy,” Harvard Business Review, March – April 2019. https://hbr.org/2019/03/the-feedback-fallacy

[10] [11]“Women in America:  Work and Life Well-Lived,” Gallup, Inc., 2018. https://www.gallup.com/workplace/238070/women-america-work-life-lived-insights-business-leaders.aspx

[12] “Women in the Workplace- 2020,” McKinsey & Company and Lean In, 2020. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace.

[13] “Women in America:  Work and Life Well-Lived,” Gallup, Inc., 2018. https://www.gallup.com/workplace/238070/women-america-work-life-lived-insights-business-leaders.aspx

[14] [15] [16] [17] “Women in the Workplace- 2020,” McKinsey & Company and Lean In, 2020. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace.