How To Solve Pay Equity: More Important Than You Realize

March 11, 2023 00:34:32
How To Solve Pay Equity: More Important Than You Realize
The Josh Bersin Company
How To Solve Pay Equity: More Important Than You Realize

Mar 11 2023 | 00:34:32

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Show Notes

This week I'm focusing on three things:  First a quick discussion of the SVB banking crisis and what's going on; Second a further discussion about why Generative AI is so disruptive to HR; and Third, and most important, a deep discussion about Pay Equity. This coming week is Equal Pay Day where we symbolically celebrate closing the pay gap between men and women. Well the bigger topic is pay equity, and we are launching a major new research study which describes the state of pay equity, the impact of pay equity, and the best practices in pay equity. You can get the overview materials starting on Tuesday and in this podcast I interviewed Kathi Enderes, our SVP who led this research. Additional Resources After years in decline, is the gender pay gap opening up? Why The Gender Pay Gap Is Stuck The Role Of Generative AI And Large Language Models in HR New MIT Research Shows Spectacular Increase In White Collar Productivity From ChatGPT What’s Going on With Silicon Valley Bank?
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Episode Transcript

Speaker 1 00:00:06 Hello everyone. Today I'm gonna cover three topics, Silicon Valley Bank. Briefly, I wanna update you on generative ai. I'm gonna continue to educate everybody as fast as I can, as I learn more. And then the big topic is really about pay equity. We're introducing a very, very groundbreaking study on this, and I wanna celebrate equal payday, which is this Tuesday, and explain to you what's going on. And then I'm gonna play an interview I had with Kathy Andis who did the research. So first of all, whether you're watching the press or not, a pretty significant bank was shut down on Friday after only 24 hours of activity. Silicon Valley Bank is among the top 20 banks in the United States. And essentially what happened to them, it's the same thing that's happening to virtually every tech company and many other companies, is they got a little bit drunk on the 15 years of zero interest rates created massive amounts of business in the tech industry and the VC market, and a lot of the well-healed entrepreneurs in Silicon Valley. Speaker 1 00:01:07 In fact, their revenue grew by 81% during 2021. So you, you can imagine what that was. That was all sorts of investment money and startups and CEOs and other people going public, putting their money in the bank. And then they took all that cash and they bought low interest rate long-term bonds, which is a huge risk. I know they're smarter than this, so I don't even know this happened. Realized that as soon as the interest rates went up, they lost more than a billion dollars on their books, almost 2 billion as I read it, and went out to the market and said, stay calm. We're gonna issue more stock. And as soon as you say, stay calm, as the CEO of a bank, everybody takes their money out <laugh>. So as that's essentially what happened, and the only reason it's really relevant is two, number one, this is the second largest bank failure ever in the United States. Speaker 1 00:02:00 The last time this happened, we ended up with the 2008 meltdown. So there could be a contagion that comes from this. But the second is that many of the tech companies and entrepreneurs and startups that we rely on in HR still do come from Silicon Valley, and they have their money in svb. And guess what happens? They can't make payroll because for those of you that run payroll, no, the, the payroll has to be done in cash. So you have to have large amounts of cash available. You can't put it into equities, you could put it into very short term bonds, but you've gotta get 'em out to pay the payroll. And that's not F D I C insured. So the only way to prevent that is to spread your cash into dozens of banks, each of which are insured for 250,000, and then aggregated every two weeks when you run your payroll, which nobody wants to do. Speaker 1 00:02:50 So I would pay attention to that. I don't know what it's gonna mean to people in financial services or other companies yet, but it could be kind of the beginning of a little more chaos in the financial markets. The second topic briefly is generative ai. And I am talking to some of the smartest people in this. I have a call with open AI coming up this week, and many of you have reached out to me and I want to talk to all of you. So we're scheduling calls with all of the vendors we work with. And this week I put out a pretty long article on some of the potential applications of generative AI in hr. It's a massively transformational and disruptive technology because generative ai, if you read the Stephen Wolfrem article on it, which is very, very detailed, but some of you with statistics backgrounds are gonna get a kick out of it if you realize that what this is is a very sophisticated neural network that can analyze tokens or textual data. Speaker 1 00:03:48 And most of the decisions we make in HR are based on English language, textual data. Human beings cannot be quantified. We can't quantify in numbers the horsepower or capability of a human being. So we are always making judgment decisions along the lines of something like, this person is highly skilled at this particular domain because I worked with him or her at this company and I saw them do this and that, and achieve this level of output and teach other people how to do it. That is not a series of numbers, that's a series of statements, and we can get that information and make sense of it with generative ai. I'm not arguing against IO psychology or assessment or any of the social sciences that we use in HR at all. They're all great, but this one's even better in many respects. And even better than that, it learns from the questions you ask it. Speaker 1 00:04:48 So the statistical underpinnings of generative AI are not fixed. So as you use it and ask it more questions, it changes the roles and weights of different factors and get smarter. So this is very, very, very transformational. And there are going to be more announcements this week. I'm not gonna leak any of them that are gonna blow your mind on this. So I don't think you can ignore it in hr. If you're an HR tech person, you've gotta get to know it. If you're a general HR person, you should become familiar with it. We're gonna put more courses together in the academy. We actually have one on AI now, and, uh, lots and lots of things out there to read about it. And I will be publishing a big article later in the week on some of the announcements that are coming late next week. Speaker 1 00:05:32 But the third big topic for the podcast is pay equity. And we have done, it's been almost a year we've been working on this, we've done an exhaustive study of pay equity. Kathy Andis led the research and we talked to a bunch of vendors. We talked to lots and lots of companies. We've interviewed companies that really understand this. And you're gonna hear all about it in Kathy's interview that I'm about to start. But the simple story as you read about it on an article coming out this week, is that this is a very big important new business practice. This is not simply a bunch of laws passed by 42 states on pay transparency. It's a new way of thinking about the way you pay people and the pay practices. And as I tried to explain in the article this morning, and you'll hear a little bit about from Kathy, it has a massive, massive impact on your employment brand and your engagement and your retention and your company performance. Speaker 1 00:06:30 And it's not something that can be fixed once, it's a new way of thinking about pay and it's new way of thinking about pay practices. And of course, the social drivers and the d e I drivers for this are very important because the labor market is so competitive that people will move or just quietly quit if they feel like they're poorly paid or unfairly paid. And the big story that I took away from all this research is not only this enormously interesting new business practice, but the fact that when people feel that they are unfairly paid, everything else is up to question, I don't trust the company. I don't trust my manager, I don't trust the leadership. Why am I working here? Maybe I should look around. Obviously people don't appreciate me, et cetera, et cetera, et cetera. And according to McKenzie, who ha has studied this as have other companies, McKinsey believes that women's inequity is a 12 trillion drag on the global economy. Speaker 1 00:07:28 Another study I just read said that women's pay inequity and other inequities is a 7 trillion drag on the economy. So lots and lots of opportunity here for us to improve productivity, to improve employee engagement, to improve your employment brand, and just feel better about work and our jobs as leaders and as hr. So let's listen to my conversation with Kathy and I encourage you to read the research, the synopsis of it. And a infographic is gonna be available to non-members and for corporate members. You're gonna get access to the definitive guide with lots of specifics on how to do this. Have a great week. Well, Kathy, maybe let's start with the general concept of why is pay equity an issue and why did we even start doing this research? Yeah, Speaker 2 00:08:16 You know, uh, Josh pay equity is actually not a new issue at all. It's been in the US It's, we've been on a journey for about half a century on trying to make pay equity work. In 1963, Kennedy passed the Equal Pay Act. And in the meantime, since then, of course, all 50 states have passed various laws and like legislations to address inequities in pay. So that's basically what the equal Pay Act and pay equity is all about, making sure that equal pay for equal work happens. And it sounds very simple, but it's actually very, very complicated. And the reason why it's been such a big topic, I think in the last maybe year or two or a few things, one of them is really, really big lawsuit. So for example, Google had a massive settlement of 118 million in, um, June, 2022, I think for pay inequities, basically paying women inequitably compared to men. Speaker 2 00:09:11 And of course that like really, really big lawsuit makes CFOs and CEOs scared about that. So their legal risk, their reputation risk, the financial risk. And a lot of, a lot of CEOs, uh, according to our study and why we did this study, a lot of CEOs see this as a big component and a critical component of their strategy of their p first strategy, their business strategy. Uh, so there's a lot of commitment to it, but it's very, very hard to do. And that's why we actually try to understand why is the seemingly not a lot of progress in pay equity, what's behind that? How do you get it done and how can you just get better at this? So we wanted to study both what's behind all of these lack of progress or the lack of progress in p pay equity, and then also how you can actually get it right. So that's what we want try to set out to stick Speaker 1 00:10:00 To the great sounds like it's a really important project. So given the awareness of the problem and the history of this, where are companies today on this topic? Cuz I think you've found that they're pretty naive and immature. Speaker 2 00:10:14 Uh, very, very naive. Immature is exactly the right way to say that. Yeah. In fact, this was the study by far where organizations are least mature when we compare it to any other areas that we had studied. 95% of companies that we serve and we serve, about 500 of them are 24 management and HR practices and conversation practices and strategies. 95% of them are just struggling basically with pay equity. So it's a really hard thing to get right, and organizations are just not like, they're really not very far ahead with this at all. So most companies are seeing this either trying to ignore the topic altogether, so basically trying to forget about it, and then maybe some kind of legal issue or some new law, some compliance issue comes around or some, some other risk comes around and then they awake to it, they wake up to it to it, and then they do something about it. Speaker 2 00:11:08 Or they just see it as kind of a one-off project where they just trying to understand other, any pay, pay inequities and then just piecemeal addressing issues. But then of course, a year later, when you look at it again, the same kind of issues have crapped up again because you haven't kept up with just basically looking at your business in a holistic way. Because every time you hire somebody, every time you promote somebody, every time you give somebody a learning opportunity, every time you place somebody in a project, it has the potential to create inequities. And at the end of the day, then also as the last piece of the puzzle pay inequities. Speaker 1 00:11:42 So I have a lot of questions to ask you about this <laugh> <laugh>, but let's start with the basic one. What does a basic pay equity analysis do? How, what, what is involved? Like do we just look, look at everybody's pay and let's look at men versus women and determine the difference? Because what, everybody's at a different level. Different level? Yeah. Like tenure, different level of span of control and so forth. What, what does a project like this look like? Speaker 2 00:12:04 Yeah, so there's really big difference between what you just described is a pay gap analysis. So this is literal me just saying, okay, comparing what men make men, men make to what women make, or what different ethnic ethnicities make or different age groups make, just literally just straight comparison and very easy to do, of course can't be useful maybe for benchmarking, but if doesn't really tell you if there's equal pay for equal work because you in factor the equal work into it, right? It could be that all the men have the senior level jobs and all the women have the junior level jobs. Yeah. So then of course, men will always make more than women in this case, right? Or vice versa. And you didn't factor in location and you didn't factor in skills levels and you didn't factor in like what groups are comparable, what can job groups are comparable, what seniority, what span of control they have, if their manager level, for example, all of these kind of different factors need to be factored in a pay equity analysis. Speaker 2 00:13:01 So pay equity analysis is actually pretty complicated to do because first you're gonna decide which groups are similar and they call, we call that similarly situated employee groups. Mm-hmm. <affirmative>. So you say basically, which groups, uh, which employees can we bundle into one group together because they do similar work? And that could be job families, but in reality, sometimes it's broader than job families. So for example, similar situated groups could be the job groups and the maybe marketing groups or something like that. Probably sales is a different group because they have a very different job, a different compensation structure and all of that. So you, you gotta decide what groups are similar, what job groups are similar to, to compare to each other. And then, uh, you gotta do pretty sophisticated statistical analysis. So you gotta think about doing regressions for example, because you're gotta see what things are correlated to each other. Speaker 2 00:13:52 And you want certain things to be correlated to each other, but you don't want, for example, gender to be correlated to pay, because that would be a not defensible differentiator if you want, you don't wanna say, well, because they're women, they're paid more or less, right? You want experience level, for example, to be correlated with higher pay. If somebody's more experienced should get higher pay. If somebody is maybe different locations could be correlated with pay, because you live in San Francisco, you probably get paid more than when you live in Kansas City because the cost of living is high and all of that. So there's correlations help you determine if they are valid correlation or they're not valid correlations. So you gotta do this statistical analysis. You gotta think also about how you factor out basically the things that are explainable. So for example, we talked with a, a manufacturing company, they told us, we didn't really think about that. Speaker 2 00:14:43 The manufacturing leads for different warehouses have very different spans of control. One of the warehouses has 500 people and the other one, one has 5,000 people. And they didn't think about that when they did the first round of analysis. And then they brought managers in into basically the analysis and said, it doesn't look quite right. And they said right away, well, you didn't think about the different like, uh, spans of control, of course make this 5,000 people person job. Mm-hmm. <affirmative> the warehouse manager much harder than the 500 like warehouse levels. So you get a really, like, and usually you do a lot of analysis, a lot of times you, you run it and then you look at it and you run it again and you bring managers, business people in basically because they really understand the work and the skills and what could be factors that could differentiate pay levels, what could be valued factors, and what should not be a defensible factors or valued factors. So it's a lot of iteration there and what companies found out when you try to do this first in-house or without technology, it's kind of really hard to do. So that's where specialized technology comes into because there's technology out there that are really specialized to do exactly those scenarios and those modeling situations and all of that. And you can feed that from the HR s for example. And so they do all these analysis for you and you don't have to do them yourself. There's a lot that could go wrong, Speaker 1 00:16:01 Basically. Let me, let me try to summarize this. I I, I love this stuff because it's so interesting and so scientific. So you take all, so you create these similarity groups, throw all the count, all the various employee profile data and the conversation data into this big computer. Yes. And it says, pay seems to be correlated with this, this, this, and this. Right? And you suddenly find up, oh my god, black people are making 13% less than white people Yes. With exactly separate from the other correlations. We gotta fix that. And then all of a sudden you have all these things you have to fix. Is that a sort of a summary? That's Speaker 2 00:16:36 Exactly right. That's exactly right. Yeah. You, there's all these things that you're gonna fix and you're gotta fix them, right? Because now you know, you can't say, well, I'll just ignore it. So once you know it, you gotta fix it. And that's where a big problem You got it. Exactly. And that's where the big problem actually comes in, that a lot of companies don't set any budget aside for doing all the fixing. And uh, that's a big problem, right? Because then you say, well, how would that, Speaker 1 00:16:58 What do you do about the people that are overpaid? You take their money away. I mean, let's get into the solution. But before we get into the solutions, I wanna ask you a couple more questions about the process. Yeah. So you hire a vendor, or you buy a tool, you do this project with the help of the vendor, I assume, come up with these shocking findings. You run them by the business leaders Yep. And they tell you about the 500 person versus the 5,000 person that's right. In control. Exactly. Exactly. And then I assume there's a lot of yelling and screaming <laugh> where people say, well, of course these people need more money because of blah, blah, blah. Right? Right. There must be a lot of debating. Of course, of course. Yeah. Just out of curious, before we get into the solutions, I've always wondered about tenure. So my career, I worked for two companies for a long time, one company for a medium amount of time, and my pay was in most cases wasn't very high, and it was held back by poor performance management ratings or other things that happened early in my career. And I knew I would never catch up to these other people. How do you deal with that, the sort of the history of somebody's pay? Speaker 2 00:18:01 Actually, that's great question because that's where these salary history laws came in that you, in California and many other places, Delaware, Massachusetts, other places, you, you can't ask somebody for their salary history. So you cannot legally ask somebody when they apply for a job, well, what are you making now? You can ask them, what do you expect to be paid? Which might be a like roundabout way to get to their salary, but that was exactly why people, why these laws got introduced to say, banning basically, recruiters are hiring managers when they're interviewing a candidate to say, what are you making now? Because then you perpetuate all the battery history. So in, in other words, when you already come in lower paid, Speaker 1 00:18:42 So you can't, you can't ask that, but yes. But once the company's been running for 20 or 30 years, this is, this is already in place. That's Speaker 2 00:18:50 Already in Speaker 1 00:18:50 Place. Um, is that a legitimate, I suppose that comes up as a correlation, which I'm sure it does. What do companies do about that? They just say 10 matters here, and so therefore we're gonna pay you based on tenure, and that's the end of it. Speaker 2 00:19:02 Well, usually a lot of times actually more tenured employees get paid less because whenever you make a switch, right? You, Speaker 1 00:19:09 You get, oh, cause they haven't been outta your job market, complet, they haven't been out, they've fall behind, they've Speaker 2 00:19:14 Fallen behind. Because every time you, as you know, right? Every time you switch jobs, get a much bigger salary pump, you get a 10%. Uh, so this is Speaker 1 00:19:20 A constantly changing problem. So every time you're hiring somebody new in, you've just messed up with the equity. Right? Speaker 2 00:19:26 That's exactly right. And and the best companies, Microsoft, for example, they look before they even extend an offer to anybody, they look if they're introducing another salary or pay inequity with that. Uh, so they'll checking every single time before they, they go out and, and offer a job. Is that gonna cause an issue for anybody else in the company? Because they'll, they wanna avoid that. Speaker 1 00:19:49 Let me talk with you about that for a minute. Yeah. So that's an important philosophical thing. I know in our company, because we're not very big, we don't hire people that are out of salary range because it, we know it'll mess it up, but a lot of these big tech companies, or even investment banks, they'll look for superstars that are making three or four times as much money as somebody else and they wanna hire them. Correct. Is that good or bad? Speaker 2 00:20:10 Well, they wanna hire them. And the most equitable companies, they can't just hire them for, for that Speaker 1 00:20:16 Money, just prevent it from doing Speaker 2 00:20:17 That. Yeah. They're just prevented from doing it. You just can't, basically can't Speaker 1 00:20:20 Do it. So those, so those, um, yeah. You know, types of people have to go elsewhere. Speaker 2 00:20:24 Yeah. They have to go elsewhere or they maybe, maybe they join for other things like then money, right? Because if you think about Microsoft, they don't pay, for example, people exorbitant salaries, like other tech companies, they don't pay them 10 times as much as like other software developers, for example, at Google or something, they get 10 times more sometimes than somebody else in, in another software developer in another company. And Microsoft doesn't do that. But they're a great company, right? They're very well respected, they're great on the resumes. Speaker 1 00:20:52 So this pay equity, uh, crusade sweeps across business in some sense, employers will have a little more power over highly skilled employees to negotiate with them and say, I don't really care if you wanna make that much money. We simply don't pay that much for this role here. That's Speaker 2 00:21:08 Right. Yeah. That's exactly right. And that's what the, the most equitable, the 5% of these, uh, of all the companies that we studied, those that are good at pay equity, they do that. They don't allow hiring manager, the manager to just offer whatever they want. It say, well, this person either has to come for that salary or they can't, can't come at all because we can't afford to make that. Speaker 1 00:21:29 Okay. So switch, let's gears to something else that I think is even more interesting, the impact of this. Yeah. So I know one of the things you discovered through our various methodologies is the financial human capital and innovation impact of pay equity Yeah. Versus other things. Tell us what you learned about how important this is. Speaker 2 00:21:48 Yeah, it's, it's really, really important. In fact, when we, uh, when we studied employee experience, we found out that pay pay equity is actually 13 times more impactful than, um, paying people a lot of money. 13 times more. 13, 13 times more. Speaker 1 00:22:06 One, three. Speaker 2 00:22:07 Yeah. One three. So it's 13 times more impactful than paying people a lot of money. So that's a lot of impact, right? Same thing. It has a huge impact on health and wellbeing. In our healthy organization study, we found out pay equity, paying people fair and equitably is actually the number one most impactful practice of all the ones. And it doesn't even seem like a wellbeing practice, but yet people are just healthier and less stressed and all of that if you don't have to wonder if you're paid Speaker 1 00:22:35 Fairly. Can I stop you on that? Yeah. I wanna, I wanna make that point. So a year ago, or whenever it was, we did this study of the healthy organization. Yeah. We looked at all these factors and the thing that popped out the top was pay equity. Yeah. And I remember you and Janet and I looked at that and said, that can't be right, Speaker 2 00:22:51 <laugh>. Yeah, I know, I know. But it's, it's Speaker 1 00:22:53 True. And you know, and the interpretation that I had before we had done this pay equity study was, well, maybe when people aren't paid fairly, they feel like everything else is unfair in the company too. That's correct. And so suddenly the whole company feels like a big political mess and people are just generally unsettled by their place in the company. Is that sort of the interpretation? Speaker 2 00:23:14 Yeah, I think that that makes a lot of sense. And it could also be if they feel they're underpaid overall because, um, pay equity is not just internal, it's also external. Right? So if they feel they're overall underpaid, they might not be able to make end meet ends meet, and they might be just financially stressed. And if you're financially stressed, if you can't make, if you're thinking about can I make my mortgage? Can I send my children to school? Well then you probably can't do your like, can't be. Speaker 1 00:23:39 Well, it seems to me, I mean, I remember I've worked in, you know, you come into work and every day you're sitting next to somebody who know makes a lot, lot more money than you and you, it sort of grates on you for after a while of, Speaker 2 00:23:48 Of course. And you can't Absolutely. And you can't, you probably don't wanna work with that person very much. Right. You can't really collaborate with them because you are resentful. Of course. Yeah. And, and then of course it's not healthy. But then also you can't do great work. And so then it gets worse and worse because maybe they are performance suffers. Right? So, Speaker 1 00:24:05 So let's talk about performance. So the big study coming after this of course, is our big total reward study, which is also very interesting. Yeah. But I think the counter to this whole philosophy is we wanna pay for performance and if somebody hits it out of the park, we want 'em to make five times as much money than everybody else, you know, like a baseball player. Yeah. Does this research refute that in some way? Speaker 2 00:24:30 It doesn't really because, um, paid performance, if you determine performance ratings and performance overall in a fair and equitable way, and that's a big if, and you can absolutely, that's a, a valid differentiator, right? You could say, well, if I'm very sure that this person is like 10 times performing higher than the other person in sales, for example, it's very clear, right? You can say this person made 200% of their quota and the other per percent may person made 80% of their quota. Or you could say, our pay philosophy says you get paid like five times more when you make that much more of your quota, you can execute on that. And it's not unfair, but I think the problem is performance usually, other than in sales, it's not very easy to determine. So the whole bias in performance management of course then comes in into that Speaker 1 00:25:18 Discussion. So now you, you've got the issue of performance manage Speaker 2 00:25:21 Management, performance management biases, and then you say, well, how do you really know if they, these are high, high performers, high performance, high performers, or something like that? And are you really mitigating those biases? So that's why. So Speaker 1 00:25:34 The pay equity analysis, it sounds like might be the symptom of a problem with the performance management system too. Speaker 2 00:25:41 Exactly. Exactly. That's exactly right. Or with your hiring process, right? Because you might have had bias in the hiring or you might have a bias in when you gave, for example, certain people the better career opportunities, right? The better development opportunities, the better projects or something like that. The bias in all these talent processes and actually in every business decision will factor eventually will manifest itself in pay. Speaker 1 00:26:07 You know, what occurred to me when I was reading the research and talking with you about it over the last few months, is that in some ways the pay equity project is a project to discuss what equity and fairness really means. That's exactly for the company. Speaker 2 00:26:20 That's Speaker 1 00:26:21 Exactly right. In general <laugh>. Yeah. What do we reward around here? What do we consider valuable? What do we consider not valuable or not important to differentiate, which gets into diversity and inclusion and belonging and performance, right? Um, all at the same time. Speaker 2 00:26:38 That's exactly right. Yeah. And as a matter of fact, actually, the the best companies, those 5% of companies don't see pay equity as a project at all. They see this as something that's always there, basically like considerations for pay equity, but really equity are constantly part of any kind of business decision. In fact, that's one of the compensation leaders from a very large consulting company told us that. She said, every single business decision that we make, we look at from a pay equity lens, every business decision. Yeah. Every, every single business decision. Because even when you think about what your locations you open or something like that, I mean, Speaker 1 00:27:14 That's right. That affects Speaker 2 00:27:15 It. Yeah. That affects it too. So every single business decision is a pay equity decision. So you gotta think about it from that lens. Speaker 1 00:27:22 Well, a couple more small questions and then we'll, we'll wrap up. So one of the things that's really big right now, I just had a bunch of calls on this, is internal mobility companies trying to do much better job of moving people around. Sure. What do you believe the strategy should be for someone who's in a fairly low paid role and then they take a project or a job in a fairly high paid role relative to pay equity? What should happen? Well, Speaker 2 00:27:47 Uh, what should happen, but most companies do, don't do that. They should really, uh, companies should really reward people based on projects as well as just the job, the overall, the job they do. So in other words, if they take 20% of their time is basically spent, let's just make that up on this high vol higher value project or highly rewarded project. They need to reward people for that, the person for that in addition to their regular salary. But that's a hard thing to do, right? It's very, gets very messy on all of that. But in reality, I think that's what should should happen. Speaker 1 00:28:20 So if you move into a new role at the end of the, the next performance period, you should be adjusted to be equal. Yeah, Speaker 2 00:28:27 Absolutely. Absolutely. Yeah. And adjusted up. And by the way, some companies even adjust people, uh, when you think about not just projects, but locations. For example, one company we talked with, they, they said, we actually adjust people down when they moved to a lower cost location mm-hmm. <affirmative> as well. Which I, I think now in, especially with hybrid work and remote work, it's kind of an interesting thing to do because usually you are always saying, oh, we grandfather people in and they move from New York to, to Minneapolis or Atlanta, and we don't take that pay away. But some, some say actually we reduce their pay because now they have a lower cost of living. Yeah. So why wouldn't they be red reduced down? Because otherwise you have the person that's now in Atlanta making a lot more than the other people in Atlanta. And how is that fair? Just because they lived in, in New York before, right? <laugh>? Speaker 1 00:29:16 So you found, so you found, I believe you remind me what percentage of companies are good at this? 5%. Speaker 2 00:29:21 5%. 5%. Speaker 1 00:29:23 Okay. So, so 95% of the people listening to this podcast probably don't know how to do this at all. Yeah, Speaker 2 00:29:29 <laugh>. It's exactly Speaker 1 00:29:30 Right. So, so maybe the last wrap up, give us your experience. I know this is all in the research and everything, by the way, for people listening to the podcast. If you join our corporate membership, you can get the, the research and you can join the JBA and take the courses on this and you can talk to Kathy. But anyway, tell us what, what, what, what generally in a, in a couple minutes, how do you do this? What, what should companies do? Speaker 2 00:29:53 Yeah. Companies actually shouldn't start with the pay equity audit, right? That's like the, like that's kind of a middle piece of starting, like starting with something that's not starting at the beginning. So companies should really start with thinking about their philosophy and their strategy about it. So they really should think about why do we care about pay equity? Who owns it? Who is working on it and who's sponsoring it? And what's the budget around it too? Do, do we have set some budgets aside? So you gotta think about first about your philosophy or strategy about it. And that includes your pay strategy, but then also your overall people strategy, your business strategy as well. And then you can think about what jobs you have and how you group them and the analytics and all of that. But then you also have to think, as we talked about before, about all your talent processes. So how do you avoid to be at the same place again when you did all these adjustments and then a year later you look and you have the same kind of issues again. How do you think about your recruiting, your mobility as we just talked about your skills? So Speaker 1 00:30:51 This is systemic capabil using our language. Exactly. Speaker 2 00:30:54 It's systemic, it's exactly right. It's not a pay problem, it's really an overall equity problem and an overall people and business problem. Exactly. And then the most impactful thing, actually the most important thing, but also the thing that companies struggle most with is change in communication. Only 15% of organizations are good at this, but it's the most impactful of these areas. It's much more impactful than doing these analytics. Of course, you gotta do them right? Otherwise you don't know why you have issues. But if you don't tell people about it, if people don't understand that you're doing this, if, if leaders are not Speaker 1 00:31:28 Board with it, no. And I would assume understanding the principles of equity and why we pay people what we do is, that's Speaker 2 00:31:33 Exactly right. Exactly. Understanding exactly your paid philosophy, your pay, uh practices, your pay strategy, and the principles, e equity as well. And, uh, training managers on it and lead us on it because people will respond much better to their leader explaining this to them than HR just telling them, oh, I'm not telling it all. In fact, when we interviewed, um, a very large transportation company, they did all these great pay equity work and they did all these adjustments and all that, and they, they told me all about how did it date it, and it sounded great. And I said, well, how did the employees respond to that? And they said, well, we haven't told them we're doing this <laugh>. And so, cause if the employees don't know this, and so they bury any adjustments just in regular merit increases or just like annual increases or something like that. And so of course people don't know you're doing this. They'll never get credit from employees. They still think, Speaker 1 00:32:26 So you shouldn't just bury this in the next review cycle. You should tell people's, we're we're fixing inequities Speaker 2 00:32:32 Constantly here. You should, you should do that. And train managers on how to have these conversations too. And Schneider Electric, for example, has this part of their management development program where they say, we embed this into a management development program to be for managers to be really proficient about talking about pay, talking about pay equity, talking about equity with their team members, because people will probably have questions. And if you can answer these questions, Kenneth, you'll, you'll lose the credibility of this actually being a, a thing that the organization really values and pays, pays attention to. Speaker 1 00:33:05 Kathy, I cannot thank you enough. This is such a big important topic. Thank you for doing this and working on this. And I know over the next coming months you're gonna be communicating this out there in the world and talking about how this relates to people's sustainability and other things. Congratulations on, on completing this and really unlocking like just a gigantic secret of running a great company. Thank you. Speaker 2 00:33:30 Well, thank you so much, Josh. It's been a pleasure and, and I learned a lot and I think it's just one of the most impactful things that organizations can do too. Great equity in the organization, but they're also in the environment and communities as well. So I think really, really exciting. Speaker 1 00:33:45 Thank Speaker 0 00:33:46 You.

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