Workforce Analytics: Career Equity is essential to eliminate the Gender Pay Gap

Haig R. Nalbantian, the dean of Workforce Science, discusses how to address career opportunity and the gender pay gap as part of a Sustaining Foundation for Diversity, Equity, and Inclusion.

Prometheus: What is more important Career Equity or Pay Equity?

Haig: “Career equity” is even more important than pay equity when it comes to the ability of organizations to achieve full equity in their workforce. Organizations may get their “adjusted pay gaps” — that is pay differences that remain after accounting for other factors that legitimately influence pay — down to less than 1% but will generally still have sizeable gaps in the average or median pay of women compared to men. This is because of differences in where women and men sit in terms of career levels, roles, occupations.

So, understanding what is happening to women from a career equity perspective is critically important. While organizations need to maintain their commitment to pay equity and continuously monitor where they are, they come to understand that the bigger challenge is in addressing inequities in career opportunity and advancement. Dealing with those rises on their DEI agenda.

On that score, the fact that raw promotion rates appear to be equalizing among our When Women Thrive study participants does not mean organizations have, in fact, achieved equity in promotion. To gauge equity you need to examine promotion probabilities for similarly situated women and men. That is, you need to estimate those probabilities on an “all else being equal” basis. And here’s the reality we see when we do such work with client organizations. In most organizations, if you’re a woman, all else being equal, the likelihood that you get promoted in any year remains significantly lower than that of comparable men.

The differences are quite sizeable, characteristically above 10%, sometimes 20 to 30% in some organizations. And such differences are observed even though women in these very same organizations generally are more likely to receive high performance ratings. If women generally receive higher ratings, you would expect to see their raw promotion rates even higher than men’s, all else being equal. So, we need to be circumspect about interpreting parity in the raw rates as a signal we’ve reached the desired end goal. Not necessarily.

A core lesson from our modeling work is that we need to focus on what can we do to ensure that women and people of color are being positioned to succeed at work, that they’re in the right roles, they’re reporting to the right people, they’re in the right part of the business, among other things. The reality is that their career progress is not just about what they bring and how they perform as individuals. It’s about where they sit in the organization and whether they’re gaining access to those same opportunities that accelerate progress for their male and white colleagues.

Armed with this information, we need to remove those obstacles that are holding them back. Maybe your talent model has become outdated, and you’re overvaluing certain roles relative to others. So now you need to concentrate on ensuring that people in certain other roles that are gaining in importance are being valued sufficiently. Put top leaders at the head of those other roles, train people more in those other roles, ensure that your diverse talent is able to access those other roles and yes, compensate people effectively in those other roles, so they don’t leave. It opens up all sorts of strategic career opportunities.

My advice to leaders and practitioners is to ground your DEI strategy in the business. Don’t permit it to become a numbers game divorced from the underlying talent requirements of the business. Make it part and parcel of your efforts to ensure you have the right talent to meet your business objectives. When DEI is linked directly to business value, the embrace of leaders and employees is better assured, and the journey becomes a collective one that all stakeholders want to be part of.

Prometheus: What other factors or management practices are important for career equity?

Haig: Relationships within the organization are essential. As I noted above, we often find that “situational” factors — who employees report to, what part of the business they’re in and the attributes of their team — are especially important in predicting who will advance and who will not. They can have a big impact on promotion probability, in some instances almost doubling the probability compared to those not so favorably situated.

Who you report to is very significant, for example, if he or she is a high-performing supervisor. That’s a result that is quite generalizable from our work. Team size can be an important factor too. For example, in a global insurance company with whom we worked, we found that employees in small teams were 82% less likely to get promoted, all else being equal. The problem: women and especially people of color were more likely to be in small teams. That creates a systemic challenge.

The reality is that in many organizations women and people of color are less likely to be positioned in career enabling situations. And that explains a lot of the poor results around their career advancement. In face of that reality, I believe that good management practice requires:

1. That leaders understand what, in fact, most drives career advancement in their organizations and,

2. If those success profiles do indeed reflect drivers of business success as well, they then work to ensure that their up-and-coming women and people of color are getting the opportunities to have that success profile work for them as well. I call that “proactive career management.” My experience in this area strongly suggests this approach is critical for securing career equity at work.

Prometheus: Say more about the impact of supervisors?

Haig: What happens to your supervisor says a lot about what may happen to you. So, as noted above, if your supervisor gets a high rating, it generally increases the likelihood that you will be promoted. It also enhances the probability that you will get a high rating too. If your supervisor sits at a higher career level than those who supervise your peers, often you are more likely to be highly rated and receive a promotion as well. And, if your supervisor turns over, it’s often the case that your turnover probability increases too. These are not universal relationships. But I see them so frequently in our client work that I have to call them out.

Who your supervisor is and what your supervisor does can matter in some even more surprising ways. For example, in a large retail company, we found that supervisors impacted employee saving and investment choices in their 401k plan as well as other employee financial and health benefits, including insurance purchases and investments in the employee stock purchase plan.

This company was concerned that employees were not saving enough and investing well enough to be able to retire successfully under their retirement plan. They asked us to help them empirically assess what drove such decisions. Interestingly, our statistical models showed that the savings and investment behaviors of supervisors were among the stronger and most consistent influences of the choices made by their direct reports.

The choices of employees’ peers had a significant effect as well. This was an eye-opener for company leaders. They understood that more targeted information sharing, through supervisory channels, as opposed to their typical policy broadcasts could be a more effective way to get employees to change their savings and investment choices and improve their financial wellness.

Prometheus: Any parting words on where we are with Corporate efforts around Pay and Career Equity?

Haig: You know, when the pandemic first hit, I was anxious that our clients might pull back from the work we were doing with them in the areas of pay equity and DEI strategy. After all, there was a lot of uncertainty about the future, and many were dealing with body blows to their businesses. Would they put their efforts on the back burner as many companies did in the financial crisis of 2008–2009?

I have to say the responses of clients have been very heartening. Not a single one of my clients pulled back on any of the work or on the investments they would make pursuant to the findings of our work. If anything, they have increased their commitments to achieving pay equity and strengthening the diversity of their leadership and workforces generally. And our work in this area continues to surge, pay equity in quite dramatic fashion, but career equity quite substantially as well.

Why has this happened? No question, events in the broader society pressing for greater social justice is having an effect on corporate leaders. Whether because of pressure or because of illumination, the mindset has shifted, and DEI has become a genuine corporate priority. But I think the bigger force at work is recognition of the business value of securing a more diverse workforce.

Just as many firms have come to have a new appreciation of the huge value of their front-line workers, they are increasingly moved by an understanding of how much better they can be as an organization and how much better they can do if they eliminate prevailing disparities. They understand that unexplained disparities prevent them from harnessing the full value of their increasingly diverse workforces.

Analytics holds up the mirror to the reality within organizations. Seeing their organizations through the lens of analytics can be very sobering for company leaders. But more often than not, coming to grips with the reality actually motivates them to action. What leader wants to “own” inequity? What’s more, the analytical results demystify the challenge of DEI and identify pathways towards addressing the issues surfaced. I may be too much the optimist, but I am generally encouraged by what I am seeing among our clients. I feel major progress is at hand.

And think about it: if the major employers actually set about to fix themselves, the prospects for the larger society will be much brighter.

Haig R. Nalbantian, Senior Partner and co-founder/co-leader of Mercer Workforce Sciences Institute bridges the world of data analytics and creative forecasting as companies plan for the future. Haig has been instrumental in developing a “new science” of human capital management — “Workforce Sciences.” He and the Mercer team analyze workforce and business performance data to measure and identify where businesses derive value from their human capital and determine which management practices effectively increase this value.