Salary negotiations: It’s a (white) man’s game …or is it?
Each year, a day is set aside to remind everyone that women still earn less than men despite legislation prohibiting discrimination in the workplace. International Equal Pay Day was launched based on the assumption that if you draw enough attention to a morally indefensible problem, companies and organisations will do the decent thing and fix it. That was in 1996. When comparing the median salary between men and women, a 2021 report from Payscale reports that women in the US earn 82 cents for every dollar men make. This 18% difference is the raw gender pay gap. At current rates, it will only close in 2059. Too late for almost all women reading this. Lest you think this is exclusively an American problem, globally, women earn on average just 68% of what men are paid for the same work, and just 40% on average in countries with the least gender parity, according to the World Economic Forum.
While the gender and racial pay gap is generally acknowledged at lower levels within organisations and among lower-paying jobs, it rarely surfaces at executive level, where the assumption is that talent will win out. If you can state your case cogently and confidently, you’re halfway there, suggesting that what women really lack are the skills to negotiate equal pay.
Damned if you do; damned if you don’t
Research however suggests that the higher a woman rises through a company’s ranks, the more backlash she faces if she negotiates her salary assertively - a phenomenon contributing to the wide gender gap in the C-suite. A Harvard Business School (HBS) article notes that when Professor Julian Zlatev and colleagues analysed data from more than 2,500 negotiators, evidence was that women who felt empowered at the negotiation table were more likely to reach worse deals or no deal at all.
AltoPartner associate, Carly Rose DiGiovanni of Storbeck Search, part of the Diversified Search Group / AltoPartners USA, points out that the challenge of bias also faces candidates who are Black, Indigenous or People of Colour. This is borne out by 2018 research which found that if you’re black, racial bias can lessen the offer you end up receiving. “Racially-biased job evaluators see black job-seekers as less deserving of higher monetary awards and take issue when the black job seekers ask for more,” Morela Hernandez, an associate professor at the University of Virginia, told CNBC. This is supported by Payscale’s DEI report, which found that even when controlled for factors such as education, experience and occupation, most men and women of colour still earn less than white men, indicating racial bias in the workplace persists.
Time to scrap salary negotiations?
To eliminate the persistent disadvantage that DEI candidates have at the bargaining table, some players have mooted a ban on salary negotiations in favour of radical transparency around pay and salary structures, putting the onus on companies to remove the secrecy that often surrounds compensation.
Monika Bak, Senior Consultant Accord ECE /AltoPartners Poland, says that when it comes to choosing to be assertive or not, it should not be up to candidates to try and level the playing fields. Board and company culture should change instead. This stance is echoed by Katie Brunt of Fowler Fox & Co / AltoPartners Hong Kong, who says diversity, equity and inclusion candidates should not be grappling with these challenges: “This is a company issue. Ensuring adequate DEI representation at board level and salary banding for roles and ranks so that people in the organisation can see if they fit (or do not fit) within the salary for their roles will go a long way to closing the gap.”
Sonal Agrawal, Global Chair of AltoPartners, and managing partner of Accord India / AltoPartners India advises that the first step is for management to be aware of gaps. “Pay is generally opaque and presented in aggregated form to them. This would require asking relevant questions and may require a pay gap audit. The role of the board / CEO is paramount in setting the agenda and the tone for the rest of the organisation. The commitment to equity needs to be from the top, and vocal and visible,” she says.
Agrawal says pay inequity is often linked with general systemic bias, and a more holistic approach that includes training may be required to sensitise managers to the issues: “The company should set out targets to improve any inequities, recognising that does not happen overnight and that different companies and industries may be starting in different places.”
How systemic inequality will hurt your bottom line
While gender and racial pay gaps may be the norm, it’s the exceptions that tend to get noticed. Highly skilled DEI candidates are in such high demand that client companies often need to pay “above market” to attract highly qualified candidates, says Kevin Kelly of Diversified Search / AltoPartners USA. Karen Cook of Search Partners International / AltoPartners South Africa agrees that negotiation is based on supply and demand. When the talent pool is small due to the systemic inequality that has produced very few DEI candidates with C-suite and board-level skills sets, it can lead to excessively high expectations on behalf of candidates and clients.
“As with all negotiation, closing the candidate low and the client high results in a win-win for both parties: the ability to do this hinges on a readjustment and realignment of expectations on both sides. Thorough research and a wide enough pool of talent to choose from will temper the need to offer excessively high packages to onboard the right candidates. Generally, when clients understand the value that the individual brings to the table, price becomes a moot point, irrespective of bias.”
Let’s talk money
Agreed, says Joo-Lee Aw, Managing Partner The People At Work / AltoPartners Shanghai and Singapore, who points out that salary packages are tied to many factors: “It’s never some magic number for any one position.” In this sense, all compensation discussions require preparation, including homework about what the role pays in industry and in that particular company, adds Agrawal. “This can be through direct questions – for example, what is the current range of pay for this role at your company – to informal checks through sources and even sites like Glassdoor. Candidates should be prepared to reframe the compensation discussion in terms of outcomes and deliverables, rather than tenure and levels,” she says.
Not all research is equal, of course, says Aw. “Candidates tend to ask friends or personal contacts who themselves may provide numbers derived from third- or fourth-hand sources which are almost always inflated as it tends to be about status, not value-add.”
The most critical research project then is the one conducted on oneself: “As in all negotiations, candidates need to ably demonstrate their ability to perform the role and value-add to the organisation,” says Agrawal.
For women, in particular, the research needs to include a focus on the things that they can deliver. Birgitte Olrik, Partner at Peoplement / AltoPartners Denmark, says that women executives are often too modest. “They ask for less than the actual market prices for a position. They are very often more focused on the one or two competencies in a position that they do not fulfil, rather than all the other competencies they can deliver. This is perhaps less a question of self-confidence — and more a socialisation factor. Male executives rarely admit that they cannot meet all the criteria for a position — they just go for it and take more chances. The answer is not, however, in training women to take more chances, but in getting companies to acknowledge these differences and adjust their interviewing scoring accordingly.”
Although, says Lucia Zatloukalová, Accord ECE / AltoPartners Czech Republic, one area that needs more and better focus is ensuring that women returning from extended periods of parental leave are not prejudiced, both in terms of promotion and remuneration: “The main burden of care in most societies still falls on women. Over time, earning even a few percentage points lower than their male peers or partners can impact on a lifetime of earnings and pension contributions, prejudicing women’s ability to provide for themselves in retirement.”
How Executive Search Consultants can Help
Ensuring that job descriptions are gender-neutral and articulate a commitment to DEI. That includes a pledge to encourage firms to pay a fair wage, irrespective of background.
Reframing salary discussions to focus on value-add and desired outcomes. Some consultants advocate presenting candidates without compensation information (within the agreed range) to reduce bias.
Focusing on a candidate’s market value rather than a percentage pay increase. If a candidate has always been underpaid, a standard 20% pay increase will still mean they are underpaid.
Providing accurate benchmarking and up-to-date market intelligence.
Setting realistic expectations for clients and candidates.
Being the impartial voice of reason if discussions reach an impasse.
For more advice from AltoPartners’ specialists in the art and science of salary negotiations, read our last article here