Topics:   Corporate Governance,Featured,Strategy

Topics:   Corporate Governance,Featured,Strategy

November 17, 2022

Cracking the Code to Real Progress in Sustainable Pay and Career Equity

November 17, 2022

The movement to achieve gender and racial equity in the workplace has gained considerable steam in recent years and in many organizations diversity, equity, and inclusion (DE&I) has become a core business priority with the view that it will help deliver stronger business performance over the long term.

Despite this focus, there is a stark reality: while there has been significant progress in recent years—particularly around pay equity—women and minorities still face persistent and sizeable obstacles to their ability to succeed at work. Data reveal that women and people of color face persistent and systemic unexplained disparities in pay and promotion probability. For example, an analysis of  20 different companies that collectively had more than 700,000 employees reveals that women are frequently less likely to be promoted, even as they are consistently more likely to receive high performance ratings. Black employees were significantly less likely to receive a high performance rating compared to otherwise comparable white colleagues, and black employees or nonwhite employees were less likely to be promoted.

It’s clear that career equity remains elusive for the majority of employees. This raises questions about the underlying drivers and the critical areas for oversight to achieve and sustain pay and career equity. Often, attention is focused on “unexplained differences” in pay and career progression that affect women and people of color (i.e., statistical differences that remain even after accounting for legitimate factors). These raise concerns about legal risks and can reflect elements such as unconscious bias that can be very elusive to address.

However, statistical analyses of client workforce data across employers reveal remarkable commonality in the explained differences (those that statistically predict differences) concerning equity in career outcomes and pay and the prime sources of disparity affecting women and minorities, irrespective of company size or sector. It seems the challenges associated with DE&I are so strong and ingrained that they overwhelm the unique strategic, operational, and cultural contexts of individual employers.

Our research has identified five explained differences that consistently drive differences in career progress and pay and where organizations can take distinct actions within talent planning to systematically remove hurdles.

  1. Performance ratings: There are large, pervasive, and persistent disparities in performance ratings for people of color, especially black employees, which affect nearly all other outcomes at work, such as pay, advancement, and retention. Organizations should undertake an objective assessment of situational or circumstantial influences on performance evaluations and ratings that are removed from actual employee contribution and often work to the disadvantage of diverse talent.
  2. Critical roles: There is an underrepresentation of women and people of color in all important supervisor positions and other so-called “accelerator” roles. These roles are highly predictive of career advancement and pay, and barriers to opportunities to work in these roles early in careers are a major impediment to the ability to thrive at work. Organizations should do an empirical assessment to identify accelerator roles that tend to feed accession into higher levels and ensure more diverse access to these roles.
  3. Internal mobility: Many employers rely on leadership development models that emphasize internal mobility as the means to develop essential experience for leadership capability. However, this can systematically impede the progress of women who may have increased family obligations that limit their ability to change jobs, locations, or business units precisely at the point in their careers where such opportunities abound. Organizations can identify factors in their success profile that are working systematically against specific demographic groups and identify a range of avenues for leadership development.
  4. Reporting lines: Supervisors have a major influence on what ultimately happens to their reports from a performance and career perspective. There are inadequate opportunities for women and people of color to report to the right managers—for example, top performers and higher-level supervisors—and work in the right teams such as favored groups in parts of the business to which investment dollars are flowing. Organizations can track the roles and job families gaining the highest currency in the organization and consider who gets those roles and how.
  5. Flexible work arrangements (FWA): FWA, such as family leave, remote work, and part-time employment, all too often are career killers and severely undermine career advancement, ratings, and pay. This is especially hazardous for women who historically have been overrepresented among those employees with FWA. As organizations work to find the right model for hybrid working arrangements, it is important to consider who is making use of FWA and ensure the organizational culture and practices are more accepting and supportive of flexible work, reducing risk and negative consequences.

The clear finding from the research is that all too often, women and people of color are simply not being positioned to succeed in the same way as their male and white colleagues. The problem isn’t who they are or what they do. It’s more about where they sit in the organization from a business and operational standpoint.

Employers who are serious about DE&I need to address this underlying reality and take stock of their current performance. It is extremely helpful to deploy advanced analytics to identify and quantify disparities in pay and career advancement, as well as their sources, and eliminate barriers to the ability of women and people of color to succeed.

Board support of refocused efforts and oversight of an organization’s DE&I as well as environmental, social, and governance programs can help ensure organizations are focusing on key areas and barriers. It is also important for the board to champion transparency and tracking of metrics to ensure accountability for real progress.

Haig R. Nalbantian is senior partner and coleader of the Workforce Sciences Institute at Mercer.


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