Pay gap, or promotions gap?

Apr 01, 2017
Michele Connolly looks at the data behind the headlines about the gender pay gap and explains why reporting on such issues will force companies to act.

The title of this article is an interesting one; it highlights from the outset that the issues underlying diversity and inclusion in the workplace are multifaceted. Likewise, the solutions are not necessarily always obvious.

Take the issue of the gender pay gap. A report published last month indicated that, in 2015, Ireland had a 14.8% difference in median pay between men and women. That figure has declined steadily from 19.7% in 2000. However, statistics show it hit a low of 8.3% in 2012 before rising to 15.2% in 2014.

Does this mean that a significant number of companies pay male counterparts more for doing the same job as women? Not necessarily. The statistics reflect an average salary across each gender in an organisation. To get a true picture, you must go behind the headlines and compare the results at different grades of staff, with different working arrangements and across different levels of experience.

Take a typical director grade in practice. The reality is that there are still probably more men in that grade who have been in that position longer, who have more experience and therefore – on average – get paid more. There also tends to be a greater proportion of women in support grades in our organisations, which tend to command lower salaries.

On an average basis, a higher number of women in lower paying support grades plays against a higher number of men in more senior, higher paid roles. The resulting statistic will show this simply as a pay gap.

So yes, there is a pay gap. That is not discrimination; rather it is reflective of the fact that we have not yet succeeded in achieving better gender balance at more senior levels in our organisations. The real focus should be on how to address that issue.

Gender pay gap reporting is coming

Gender pay will feature in the UK media more and more as it introduces mandatory reporting on the gender pay gap for all companies with over 250 staff from 1 April 2017. The UK is following a growing trend across Europe, with many other countries boasting similar provisions.

The resultant statistics are likely to show that, in headline terms, there is a pay gap. But when you adjust for some of the factors referred to above, such as experience, grades and working hours, the gap narrows considerably. One organisation that voluntarily reported its gender pay gap in the UK reduced the pay gap from mid-teens to less than 3% when adjusted for differing levels of experience.

Consider the adage: “what gets measured gets managed”. This principle can apply equally to business situations. It can mean that simply examining an activity in turn changes the activity by forcing you to pay attention to it. It can also mean that producing measurements about the activity gives you a handle on it, a way to improve it.

Knowing that they might ultimately have to report statistics should therefore cause organisations to examine their data sooner rather than later, analyse the differences and consider what they can do to improve the gender balance in senior leadership levels in the first place.

What about the promotion question?

Confidence is key to leadership and driving forward for advancement. Yet it is something that, on average, women struggle with throughout their careers more than men do.

KPMG undertook a study to explore the qualities and experiences that contribute to women’s leadership and advancement in the workplace. The findings revealed that there is no shortage of ambition among the women surveyed. Six out of 10 aspired to be a senior leader of a company or an organisation, yet more than half agreed that they are more cautious in taking steps towards leadership roles. The results reveal a critical disconnect: women want to lead, but something is holding them back. Were the women encouraged to lead as children? Did they have a role model? Were they offered appropriate support and development opportunities in the workplace? Such factors play a possible role in whether a woman moves up the career ladder into a senior leadership role.

There is plenty of research on the approach taken by males and females in pushing for promotion or a pay rise. Of the women surveyed by KPMG, over 75% did not feel confident in asking for access to senior leadership, a promotion or pursuing a job opportunity beyond their experience. Their male counterparts are unlikely to be as hesitant. There is an oft-cited example of two people looking at promotion criteria for a new role. The male candidate will look at the 10 items, believe he meets the criteria in three or four and go for the job. The female candidate will do likewise, believe she meets eight to nine criteria and not apply as she doesn’t meet all 10.

It is not a case of one approach being better than the other. The average female brain simply works differently and approaches such matters in a different manner. However, the reality is that most performance appraisal or promotion systems are traditionally designed to target more male-dominated traits. It is therefore (unconsciously, in many instances) not a level playing field.

Iris Bohnet, a behavioural economist at Harvard University, in research for her book entitled What Works – Gender Equality by Design, has found that “companies that use potential, in addition to performance, as a way to evaluate employees are more likely to be gender-biased. We generally find that leadership is associated with men, and potential has something to do with career advancement and climbing up the career ladder. We don’t necessarily associate career and leadership with women”.

What can we do to effect change?

Many organisations are starting to tackle these differences by introducing unconscious bias training. This was first put forward as a concept by psychologists at Harvard University, the University of Virginia and the University of Washington who created ‘Project Implicit’ to develop hidden bias tests – also called implicit association tests, or IATs, in the academic world – to measure unconscious bias. IAT measures attitudes and beliefs that people may be unwilling or unable to report, which would indicate that most of us are pre-programmed to associate certain roles and traits as either male or female. For example, you may believe that women and men should be equally associated with science, but your automatic associations could show that you (like many others) associate men with science more than you associate women with science.

Unconscious bias training simply seeks to raise participants’ awareness of these inherent biases in our thinking so we can start to challenge ourselves more and apply a gender lens (as opposed to positive discrimination) in how we approach performance appraisal, salary reviews, promotion discussions and job allocations to ensure they are appropriately gender balanced.

Another key component in the toolkit for addressing gender diversity is mentoring. Whether you are a man or woman, having someone more senior in the organisation looking out for you, acting as a sounding board and being an advocate for you is invaluable in helping you develop the skills necessary to push for advancement to more senior leadership roles.

So how do you get a mentor? The same KPMG study quoted above highlighted that nine in 10 women said they do not feel confident in asking for a sponsor and eight out of 10 lack confidence in seeking mentors. Implementing formal mentoring programmes and leadership development programmes aimed specifically at high-potential women in an organisation is an invaluable step on the road to changing the gender balance of an organisation.

Is the gender balance improving?

The number of females in management roles and at senior leadership levels in organisations is slowly but steadily increasing. The 30% Club’s recent Women in Management study with Dublin City University found that women now hold 40% of positions at the lowest level of management surveyed (three steps down from CEO) and 17% of CEO positions. The statistics do vary by sector and organisation size, with women more likely to feature in leadership roles in areas such as HR and marketing, and less so in finance, sales, operations or IT. Other recent statistics show that in 2015, Ireland had on average 18% female board representation. That is up from 10% 10 years ago and 16% in 2014. These findings are in line with a 2016 McKinsey study on women in the workplace.

In 2011, the EU proposed that it would introduce legislation requiring all publicly quoted companies to have 40% representation of women on their boards by 2020. While the council of ministers has failed to get all member states to agree to enact the legislation, it has had an impact. In 2010, when the European Commission first put the issue of women in leadership positions high on the political agenda, only 11.9% of board members of the largest publicly listed companies in the EU were women. This rose significantly to over 21% in 2015.

In the UK, the 2011 Davies review recommended that the FTSE 100 leading companies should have at least 25% female representation on their boards. Some investment managers are now mandating this among their investee companies and publicly saying they will vote against board appointments that do not contribute to meeting this objective. 26% of board positions in FTSE100 firms and 20.4% in FTSE250 firms are held by women. There are now no all-male boards in the FTSE100 firms and just 15 all-male boards in the FTSE250 firms.

Like the gender pay reporting, a policy initiative is causing organisations to take notice and act. However, there is still a very long way to go if we are to achieve gender balance.

As a profession, what else can we do?

We know that work/life balance is an increasingly key factor in career choices – at all levels and for both sexes. Initiatives such as intelligent working arrangements, ramp up and ramp down in career planning, and greater maternity supports all play a key role here.

Space is too short to delve properly into this area on this occasion other than to say that most of us now work in a very mobile fashion. Does it matter whether we are sitting at a desk, on a train or in our own homes? Should the measure instead not be the quality of the output rather than the location from which it is delivered? However, it does challenge the status quo of the presenteeism concept that still pervades in many areas.

As a country, we have made a lot of progress in the past few years. Yes, there is more to do. But by reporting and commenting on the issues, organisations are starting to put in place positive strategies to effect change.

We are realising that not only is it the right thing to do, but it makes good business sense too.

Michele Connolly FCA is Head of Corporate Finance at KPMG Ireland and a member of the Institute’s new Diversity Committee.