Totally Rewarding Chats | Ep. 12: How Do Organizations Tackle Pay Equity Today?

Addressing Pay Equity and Transparency

In this conversation, Tom Mcmullen, a client partner at Korn Ferry, discusses the topics of pay equity and pay transparency. He explains that pay equity is about creating a level playing field for individuals, while pay transparency is about providing information on salary ranges to applicants and employees.

Tom highlights the importance of reducing pay gaps for gender, race, and other protected groups, and how societal pressure has led to regulatory changes in this area. He also emphasizes the need for organizations to have clear frameworks and policies in place to address pay equity issues and communicate them effectively to employees.

In this episode:

• Host, Sean Luitjens, General Manager of Compensation Benchmarks, Visier

• Guest, Tom Mcmullen, Sr. Client Partner and Rewards Expertise Leader, Korn Ferry Hay Group

Episode transcript:

Sean Luitjens
All right, here we are. I am lucky enough to have Tom McMullen with us today. Tom is at Corn Ferry. How it goes?

Tom Mcmullen
Hey, Sean, good to be with you. It's going well.

Sean Luitjens
Good. All right. So instead of me butchering things, usually the way I have this do is have you do your elevator pitch of your career and you take however many, you know, stories you need in your elevator, which may, depending on how long you've been around, be taller than some others. I'll just leave it at that.

Tom Mcmullen
All right, we'll see if it's taller than a duplex. All right, so I'm a client partner at Korn Ferry. I've been with Korn Ferry since they acquired the organization I was with, Hay Group, a combination of those two firms for a few decades. I started as a reward consultant ever since I got out of college. I was in practitioner roles for a few years. Worked for a

big quick service restaurant chain and a healthcare organization, followed a boss up to Hay Group in Cincinnati, worked in a couple of different cities. I tend to help clients, usually larger clients across a range of industry sectors in broad -based rewards, reward strategy, base variable pay design, performance management, linkages, and such. I also lead our US pay equity practice.

Sean Luitjens (01:23.182)
Okay. That's not too many stories. And I'll put the plug in. I'll put the plug in. Tom's pretty kicking. So Tom, over the years, has come up in multiple places. So we've crossed paths all in good ways. And so I'm pretty stoked today to get some of your insights. Before we get to the serious stuff, I ask everyone, because in theory, people have lives outside of work. What do you do for fun or like to do outside of work?

Tom Mcmullen (01:26.839)
No, no, it's, you gotta, you gotta abbreviate it. Let's see. I like to travel. I'm now in the process of trying to draw down my frequent fire miles. So I like to do that. I'm a big music fan. So during the pandemic, I kind of broaden my range of musical genres. So that's good. So go to some shows. And we've got two young adult kids, one still in college, one's out. So we like visiting with them too.

Sean Luitjens (02:19.95)
Okay, that's kind of the box I have that says I'm not a robot. So that's not a great sure. Although I think AI is going further and further. Pretty soon I could be duped pretty easy. So let's dive in. So basically picking on all your expertise around pay equity and transparency. I've got a couple of questions I want to jam on with you, but if you could help level set and just, I've kind of been asking this of a couple of people, define what you see as pay equity versus pay transparency.

Tom Mcmullen (02:25.097)
I'm sorry.

Sean Luitjens (02:48.11)
It'll also help me stay even on the discussion.

Tom Mcmullen (02:52.055)
Yeah, they're definitely related. I think they're strong first cousins. I typically say pay equity is around reducing or having more of a level playing field for individuals, no matter what their background is. So a lot of the pay equity laws in the US started, I'd say,

2016, 2018, when a lot of the US states, seeing that they probably wouldn't get action at a federal level, started tightening up what state pay equity meant. So a lot of characteristics were broadening the statute of limitations to bring a suit, more burden of proof on employers rather than employees, new definitions of what protected classes are.

We saw some states rolling out, you know, banning the compensation history question during applicant interviews. Now we're seeing some of the salary range transparency pieces coming out. So all some mandatory reporting on pay equity at the state level. So I think all of this is intended to reduce pay gaps for.

individuals and groups. So gender, race, other protected groups. I think that's the main intent on pay equity and what some of these laws are. But laws don't happen in a vacuum. They're a result of societal pressure, right? So things like Me Too movement, George Floyd, some of the media reports of differences in wages between Hollywood actors and actresses, the men's and the women's soccer teams and so forth. So...

That societal pressure, I think, has put pressure on the regulatory environment, which is hitting business now. But I think a lot of CEOs and business leaders see that this is also the right thing to do, that to have better organization performance, you need better engaged employees. Employees are more engaged if they feel that they've been treated equitably.

Companies with more diverse leadership groups, or studies show that they tend to be more effective, and so on and so on. So there's good internal reasons in addition to the external factors that are causing this. I would say the pay transparency stuff is an extension of that, right? So I think pay transparency, primarily within what we're seeing in the US on the salary ranges, is again, an attempt to level the playing field.

that one of the key reasons for internal equity issues is employees, individuals being brought in at different hiring rates. So if the hiring rates are known upfront, that should theoretically kind of converge any variation that may be due to discretionary factors. So I think that is the intent is to level the playing field. It's like going in, can you imagine buying a new car?

if you didn't know what the sticker price is. To me, this is a very comparable analogy. Now people are willing to, hey, I'm willing to bid on being an applicant for this job, but I want to know kind of what the ballpark range is. Right now, a lot of applicants don't have that. And is that right? I think for a more efficient labor market, you probably should know what the price of the car and the price of the job is, right? So that'll...

save up a lot of wasted time from applicants applying and from managers finding a great candidate only to find out that their salary expectations were much higher than what the job was paying. So I think transparency in general is a good thing, but I think it's also a painful thing for a lot of organizations to deal with, to get that set up.

Sean Luitjens (06:51.438)
I think we can talk maybe for another day, but I think, you know, to me, the external piece is pretty easy. The internal piece is the one that I think is a little trickier in the communication, right? So at what point do you basically show where everyone else in your department's making how much, even if they're just dots on the grid, that piece of transparency, because you're getting a small piece of the transparency of the external, because you have some semblance of what the new person makes. But actually, you know, my gosh, they make more than me. That job is posted significantly higher than what I make and actually how do I compare to my peers.

Tom Mcmullen (07:24.567)
Yeah, and the term pay transparency can mean very, there's not a universal definition, right? So some people will immediately say, well, wait a minute, does that mean Tom's going to know how much Sean makes? No, but I think when people hear that, a lot of people jump to that conclusion. No, it would be chaos if everybody in our organization knew what everybody else makes. I mean, that is the case in governmental organizations, state universities and the like, but in most, I would say in...

98 % of private companies, that's not the case. So we're not talking about that. We're talking about a range of opportunities. A side of the bar, does this job pay 80 to 120 ,000, or is it 200 to 240 ,000? It's that order of magnitude. But I think it does raise questions on having some explanation about why is this job

have a higher hiring rate than that job and being able to explain that to people or in all of these laws that are passed, it's not just, I think the initial intent was to have a level playing field for applicants, but all of these states, New York, California, Washington, and the like, these laws also apply to people already inside the organization. So, you're posting it both for the external audience and the internal audience.

And if you're posting an 80 to 120 thousand dollar range and I'm making eighty five thousand and I've been an outstanding rated employee for five years. Hey, boss, why am I paid so low in range? Why can somebody earn up to one hundred and twenty when you're only paying me eighty five? Is the boss able to answer that question? I mean, does the boss even know where to start to answer that question? And I'm sad to say in a lot of organizations.

They're not equipped to answer those questions. And I see a lot of organizations scrambling to go there now to shore up their... You can't communicate anything until you have something to communicate, right? So if everything's, let's make a deal and we trust our managers to make the right hiring decisions, that's a slipperier slope than having more codified principles and frameworks that are known and understood in the organization.

Sean Luitjens (09:50.478)
So let me kind of pivot then and say, since you've worked with so many clients and have that unique perspective, which is why I want you on, however you want to tackle this, kind of give me the good, the bad, and even the ugly on how you're seeing organizations both identify the issue, talk about a solution, and then potentially remediate.

Tom Mcmullen (10:14.679)
Yeah. So I think the good around pay equity is that there's clearly momentum on this, right? So I think companies really started getting serious about this maybe eight to 10 years ago. And we're seeing organizations that have gone through a couple of cycles of taking a look, you know, a good structured look at pay equity outcomes and remediating issues as they need to. So.

great traction, especially over the last 10 years or so. But our data, other data sources suggest that there's only about two thirds of the organizations out there that have taken action. So there's still a sizable chunk of companies out there that have not really done anything formal. What we have found is that the larger companies, the multinationals, the publicly held organizations are further ahead of that curve. So they've got a higher percentage than two thirds that are there.

The ones that are a bit behind the eight ball tend to be the smaller mid -sized companies, privately held, family -owned companies that they're still either not there or they're starting to kind of chip away at it. I think the other thing I would say that's been good happening is that for the companies looking at pay equity, I would say when this started, the...

initial focus was on doing a statistical assessment. Do we have statistically significant differences in pay between gender groups, between race groups in this country? Outside the US, the focus is primarily on gender, just because race and ethnicity groups are not consistently defined. And in a lot of countries, that data on race and ethnicity is not even tracked in the HRS. If it is tracked, a lot of times it's volunteer reporting. So,

being able to analyze that is more than challenging. But I think the broadening of the remit, going beyond the statistical look and looking at what we would call more pay drivers analysis is we've seen that trend happening. So in addition to looking at the outcome of pay, well, if we've done these analyses and we've historically seen the same gender or race group tracking less than the peer group, why is that? Do we have differences in performance rating distributions? Is our talent flow different? Is our rate of intake of these employees or exits of these employees or rate of promotion different? And why might they be different? We're encouraging, we're starting to see more organizations taking a look at off -cycle increases, where things are a bit more fuzzier, more discretion.

Who's eligible for promotion? So the rates of promotions, the amount of promotions, exception increases, off -cycle increases. Who's getting the counter offers? So all of those, the slush money buckets that exist in organizations, a lot of companies don't have a disciplined look at looking at that. So we're starting to see them turn that corner and taking a more comprehensive approach to other aspects of pay management.

rather than just looking at the aggregate base salary, the aggregate total cash amounts, we're looking at the drivers of that and different components of that. And then where there are maybe loose guidelines, we see a lot of focus on promotion guidelines, hiring guidelines, is we're seeing organizations get a little bit more structured in that, providing more boundaries or...

providing the right balance between freedom and framework to make those decisions. So I'd say that's all good. I think, yeah.

Sean Luitjens (14:03.214)
Do you think just real quick, when you said two thirds are tackling this, if you bifurcate that into kind of two parts and you alluded to some of it, are they tackling it just from kind of in -role pay equity, I'll call it, or are two thirds, are those same two thirds also tackling the opportunity equity, which you hinted around promotions and other areas, are those two separate buckets in your mind?

Tom Mcmullen (14:29.783)
I would say yes, but they're strongly related. And it's interesting. The focus on US pay equity has been primarily around the like for like pay analysis, right? So looking at multivariate regression, you know, if we can look at two people that are similarly situated, do we have difference in the pay outcomes between the male and the female groups or between, you know, the race and the ethnic groups? That has been...

the focus within the US, say for the last 10 years. The focus that we're seeing in Europe is more on the employment equity side. They will call that a gender pay gap analysis, but at the end of the day, that is more, so it's essentially like in the UK mandatory pay gap reporting. Any UK company that has over 250 employees is required to report median base cash,

median bonuses between males and females. That's putting all males in a group, all females in a group, and comparing the difference. That is not a like for like analysis. That is an aggregated analysis that is more of a function on representation in job levels than where the US is focused. So although both are quote pay gap analyses, one is much more in Europe, it's more about what can be done.

to get more representation of females in higher paying jobs. Or, you know, not just females, but it's typically the males are advantaged. But it's really about, you know, how can a disadvantaged group close that gap? And it's usually about, you know, better development opportunities, better, you know, better feeder talent pools, rather than just pay management. It's really kind of career and talent acquisition and talent management.

processes that get you there.

Sean Luitjens (16:28.142)
Okay. And so that's a lot of good actually. And I'm kind of stoked we spent that much time on good. To be honest. So I don't know if you want to put bad and ugly in the same group, but you know how, you know, the not as good.

Tom Mcmullen (16:40.727)
Yeah, yeah, yeah, but...

Okay, the not as good. So, you know, what about this 30 to 35 %? What's the if pay equity is a good thing? Why aren't they there? Right? So we asked that question. We said, look, you know, what's stopping you from from going there from from dipping your toes in a pay equity analysis? What we hear anecdotally from our clients and we did a study on this with World War a couple of years ago. It's the fear of the cost that is the number one thing on in the eyes of the executive.

I'd rather keep my head in the sand because I'm afraid, you know, hey, it's all I can do to afford a 3 % increase to payroll every year. What if this thing's another 3 %? You know, I just can't go there. So I'd rather not know or, you know, until I'm forced to do so by law, I'm not gonna go there. So I see that mentality a lot.

Sean Luitjens (17:34.51)
Yeah, I think the ostrich mode to me, I've kind of ranked these orders of, I know I have a problem when I'm fixing it, that's the best. And until there's legal ramifications, ostrich mode actually is in second place behind or ahead of, I know I have a problem, I just don't want to fix it. You know, like I'm admitting I have a problem, I'm just not going to address it for whatever reason. Ostrich mode looks better. I don't know, and I don't have to yet.

Tom Mcmullen (18:04.599)
Yeah, it's like, you know, delaying going to your doctor for a physical. Is that, you know, short term? Yeah, that's good. Long term is it's not so good. But I think for those organizations that are doing pay equity, I mean, there are still a lot of organizations out there. I'd say they tend to be smaller to midsize organizations that are doing very simple pay equity analysis. They're not using regressions or they're kind of looking, hey, you know, how do our.

Sean Luitjens (18:14.19)
Yeah.

Tom Mcmullen (18:32.727)
males versus females paid, you know, maybe we'll reduce that down on a grade basis. Maybe we'll look at R &D grade four jobs, males versus females. So they're getting it down, but they're not looking at a lot of variables simultaneously. What I've found when we followed organizations, it's important to look at that data that way, because that's the way most people say, hey, do we kind of have an issue or not? It gives you good indications where you might have an issue.

But organizations that use those simple high level differences as a basis for pay remediation, I find that they're invariably paying too much. So if you have, say, a 5 % delta between males and females, say, in your R &D group in a business unit, and the only things you're looking at are function and grade level, and then looking at pay there and make, if you're missing time in company, time in job, performance,

maybe geography, you are likely overpaying for that because when you can include additional relevant variables, those pay differentials typically go down. So it's looking at it on a simple basis is better than nothing, but it's not as good as what it could be or should be and you're likely over-remediating.

Sean Luitjens (19:54.19)
So do you think the legal piece, and this is a little bit different from where we're going, this is the piece I'm kind of interested in as we go forward. So the EU directive is more straight stats. I know the French allow the multivariate regression, but if you just put it in the US and talk about what you're talking about, will the legal precedents allow multivariate regression to be a defense mechanism? It's not there yet, we're not there yet, but if you think about it, what you're basically saying is yeah,

I was supposed to stay within 5 % or whatever it is, and I'm not, but here's why. And will anyone care that here's why?

And so, you know, and the other piece is obviously, you know, I know you're a big, one of the things that was, you know, get your perspective is multivariate regression. So I know you're a big proponent of it. I'm starting to see that. And so I know a lot of people on the other side are like, well, that's too complex. It's not needed. So, so between all those things and then why are there other reasons for multivariate? I think the one being you're going to over -remediate is the obvious one.

Tom Mcmullen (21:02.071)
Yeah, over -remediating, being able to know if you have a statistically significant difference. You get that with multivariate regressions and just the ability to handle multiple variable, multiple relevant variables simultaneously. You can't get that with simple descriptives. The fact that even though there is not a, you know, an operating system or an absolute playbook that the court system looks at, most courts have...

Some have said, you know, multiple multivariate regressions are a gold standard. You know, they are the highest standard. It's not to say that the courts are mandating it or the courts will automatically dismiss a simple statistical exercise. I mean, there's still a lot of latitude for organizations out there. My view is doing some analysis rather than no analysis is a good is a great first step. And then if you want to tighten up your analysis, I think moving from some basic

descriptive statistics and to the extent that you can nest them and boil them down, that's better than looking at just high level median comparisons and then using a multivariate regression is better than that. And I think better than that is using multivariate regression in addition to other things like talent flow analysis, performance rating distribution. I mean, there's all kinds of goodies that you can supplement, but.

Again, the courts haven't mandated, thou shalt do it this way. Not all organizations aspire to be a best in class analytic organizations. Some say, hey, I just want to stay out of jail, or I want to be compliant with the laws of the land. That would require something less than the high end of what we've described. So.

Sean Luitjens (22:49.518)
Well, I guess I'd push back. I mean, to stay out of jail, if courts allow as legal precedents multivariate regression, there are going to be types of companies who, to your point, stay out of jail, not get fined. That actually, because you've got long tenured people in the same role over long periods of time, that's going to allow you to defend your position fairly well.

And so I don't know, I think there'll be two factions. There'll be those who want to do it right for all the right reasons. And they're just good humans and others that use this because actually just the way their business runs and the industry they're in, it's going to help them defend why they have it.

Otherwise, you're going to have the opposite problem, actually. Long-tenured people in the same role asking why someone who's been there two years and is female is getting paid the same when it's an experience-based thing. So I think both are driving at that in a good way. I think it's a good thing that people kind of go there.

Tom Mcmullen (23:45.367)
Yeah, well, they have to go there. It's interesting. What I've been finding over the last couple of years is quite often we get pulled in to an organization where, you know, HR, the executives, the board wants to know if there's any statistically significant differences between gender or race groups. So then once we get into the organization and start talking to the people on the ground and HR and in the business,

What do you think their number one internal equity concern is?

Sean Luitjens (24:18.126)
Yes, it's probably gender. Is that not?

Tom Mcmullen (24:21.463)
It's what you previously described. It's, hey, since the pandemic, we've been hiring in these hot shots that are much younger than some of these great performers that are 10, 15 years older, and we're leapfrogging them in pay. That's what we're seeing most business leaders concerned about is the compression with all this kind of hyper hiring activity that we did that is now kind of narrowing or again, leapfrogging these folks.

Sean Luitjens (24:52.238)
of pay equity aside, that's always been the issue, right? The internal, whatever world at work number you use, all of those guys all buoy around 4%. And changing jobs is a 10 % average. And so you just, you do that math and there's always going to be this issue. And I think this just, you know, makes it, makes it bigger over time.

Tom Mcmullen (25:10.647)
Yeah, and at the end this is really about internal equity, right? So, you know, we should do the if we see kind of pay anomalies whether it's by gender or race or you know age or how long you've been here We want to fix that so what we're hearing in addition to the gender and the race which kind of gets us in the door We're increasingly hearing

It's about how long these people have been here and how long good performers have been here. And if some of these people are paid much lower than where they should be relative to the norms, we need to correct that too. It may be somebody not in a disadvantaged group. Say if the organization had one group, say Hispanics paid 4% statistically.

significant difference, 4 % lower than the peer group. But then if there was a white female that was a significant outlier, most organizations would want to invest remediation in both cases. That, hey, we need to invest in bringing our Hispanic group as a whole closer to where there's no statistically significant difference. We want to close that minus four gap to something less to where it doesn't get statistically significant.

And if we've got anybody, I don't care what gender, what race they are, that is a significant outlier, and then we work with them to define what that means, is that we also want to kind of get them to a better place than where they are now, and do it in a systematic way.

Sean Luitjens (26:43.374)
So knowing, and maybe you found one, but I haven't found one yet, where companies remediate by paying the ones up higher less. It's a money add. What are the obstacles? So other than, you know, money is the obvious one, right? This is how you solve a problem. So what are the obstacles keeping people from getting where they're going? So let's assume we highlight these things, we do all our analysis, we found the problems. What's keeping, is it the front end of the process keeping people from getting there?

Or is it now that I know I have a problem, how do I?

Tom Mcmullen (27:16.631)
Yeah, again, I think it's the obstacles after fear of cost. I think there is a there can be a mindset with the executive team that, hey, you know, we we pride ourselves in giving our leaders a high degree of autonomy and discretion in making their decisions. I don't necessarily want to put a heavy governance structure of HR or anybody else telling my leaders how they should be paying people.

I think the pendulum definitely is swinging more towards this balance between freedom and framework. And the right spot is ultimately, what's the size of the playground that we can provide our hiring managers to get the right talent in the door? What is the right amount of variable discretion, but doesn't get us in hot water from either a legal or employee relations perspective or optics? If these...

pay rates hit the front page of my company newsletter that people won't be in a revolt situation. So I think it's.

Sean Luitjens (28:22.446)
Come on, what's the quote? You gotta throw up. The quote I steal from you all the time. I've now made it. I use it all the time.

Tom Mcmullen (28:30.391)
I think I know what unbridled management discretion is the as the enemy of pay equity. Yeah, absolutely. The two big that's number one. So organizations that give kind of a blank check to their organization and that this can be manifested in different ways. You know, weak to no HR governance, not not much written down in terms of policies or frameworks. You know, is there a promotion guideline? Do we have hiring guidelines? You know, these are kind of blank checks, right? Whether they're by design, that's just how we've happened.

So, you know, I think it's this perfect storm of having better clarified frameworks, making those transparent, and then, you know, kind of at least a trust but verify approach that we're kind of following our own medicine. And I think that the other thing I would say is the whole job leveling process, a lot of tough internal equity issues are result of this high level of discretion or maybe lack of

proactive management on the job leveling side as well. So making sure that house is in order and your governance house and your frameworks and your policies house, this all goes to getting that right balance between freedom and framework.

Sean Luitjens (29:44.654)
Well, and I think, I mean, a little bit self -serving, you know, we're on the tech side and what I've been kind of preaching to people is we can put that framework in deciles, 5 % by pay for performance, create that guidance and framework. And then managers can have to go outside that discretion and we can do it a check to see if, you know, there's people outliers based on whatever that's all fine. And that's great. Cause we can build really cool stuff, but you have to have the job leveling.

piece done, are you comparing apples to apples? Is your data good or did you change, you know, did you change systems three years ago and everyone's longest tenure is three years? Well, now when you run your regression analysis, like actually it's not going to be a good number set if you're not, you know, and with pay equity in my mind.

the goal should be comparing not just apples versus oranges. It's not apples to apples. It's not even green apples to red apples. It's got to be like max to max and not max to gallows. Like you got to get it pretty tight down at the bottom with the data. And then I think the thing that's changed in my mind is we used to be dictated and what you could do with regret all this stuff.

by the technology and that's why people had kind of poor frameworks. Well, I can't push this out because how much Excel can I push out in 90 spreadsheets? Now the opposite is there. I think the opposite is you create a really good framework that can be put in place, but you have to think it through now and the ramifications of your framework and you can't blame that technology couldn't let us get there.

Tom Mcmullen (31:14.039)
I think you nailed it, Sean. I mean, we're sitting at a point where we've got the best technology that we've ever had. We've got more data than we've ever had. And I think the right answer is to embed these rule sets into a technology tool. It's just, I don't know how you argue against that. So if a manager want, you know, if I've got a budget of 4%, but I want to give Joe a 12 % increase, I might be able to do that if I can live within my means.

But maybe I shouldn't do that if Joe's already pretty darn well paid. And I mean, we're already seeing clients that have taken the modeling tools that they've used to assess internal equity to begin with and starting to embed them in hiring decisions. So, hey, I've got these characteristics for this incoming employee. Let me pop them into a model and then let me compare that expected value to what the business is thinking about in terms of an offer.

And is it sitting within a reasonable tolerance band? We're seeing organizations do the same thing with promotions and salary increases as well, right? So in addition to managers living within their means of that 4 % budget, I think we're seeing organizations providing some boundaries on individual decisions based on their attributes. And again, then there's the question on is this a control or a guideline?

and I think organizations will vary in that spectrum, you should at least kind of flash it in yellow if I want to give that person a 12 % when maybe I shouldn't. But, you know, in the day...

Sean Luitjens (32:49.454)
Well, you can do that now. So that's the cool part is you can set the framework, you can give management discretion, and then you can run reports to basically say, you know, this female was a four under midpoint and we gave them this increase and Sean is obviously a poor performer and overpaid, why'd he get a bigger increase? And you can flag those now. So the manager has discretion to do that.

But I also think human nature, when you create those frameworks, people will be like, I don't know if I want to put in that box why I gave Sean more money. Like it'll start to please itself more than I think people think.

Tom Mcmullen (33:29.687)
Yeah, and I think HR needs to, before we put all these decision rules in technology, all these decision rules need to be agreed in principle by the executive team. So rather, well, hey Joe, I tried to give you the 12%, but the system wouldn't let me, right? Well, let's say HR wouldn't let me. No, it's our leadership team wouldn't let me, and they've had the opportunity to vet this and run these scenarios.

Sean Luitjens (33:49.006)
Yeah. Yeah. Yes. Yes.

Tom Mcmullen (33:58.615)
This is a leadership decision, not a technology or a nature.

Sean Luitjens (34:01.038)
Well, the last piece of that, you know, kind of winding down on this before kind of the auto-magical question is, you know, how important, because I know I have my piece of it, is we can solve the technology, put the framework, create the guidances, allow you to do all this, but the communication.

to what you just leaned into. You know, how do companies, is that a stumbling block for companies? Because otherwise they'll just say it's HR's fault or I can't do it. How do you basically create that discussion or how do companies, is it a hurdle for companies to put this in place? Because I now have to have the discussion that says, Sean, you're paid over median, you're, you know, all these things are in place. That's why your increase is less than someone else's increase.

Tom Mcmullen (34:45.879)
People spend a good chunk of their life at work and we should treat people with respect and the adults that they are at work. And I think that question, an appropriate answer to that question is treating people with respect and as adults. So yes, I think we need to have that discussion. Are a lot of organizations there? No. And if there was one...

If I could wave my magic wand and change one thing about rewards in general, it would be about this communications and transparency space. And this has been an issue not just because of things like sirene's transparency. We did a study with World at Work, I think it was 20, 25 years ago, one of our first studies. We said we polled probably at least 700 total rewards leaders. And we said, what is the number one differentiator for success?

or lack thereof in your rewards program. Communications, number one. Things haven't changed much over the past couple decades, which is a bit confounding that communications is something entirely under the control of the organization, right? So, I mean, if we want to be real transparent, a little bit transparent or totally opaque, that's our choice. We're not being forced by anybody, right? So for this to be...

It makes sense to be like the number one differentiator, but I'm still a bit shocked that more companies haven't cracked the code and made inroads on this.

Sean Luitjens (36:19.246)
I guess I'd debate, I wouldn't debate that it's the number one issue. I think they used to be able to hide behind, we have other issues, technology and frameworks and data and other stuff. So obviously we can't communicate it well.

But, you know, I perpetually say, you know, humans are statistically highly predictable and individually amazingly unique. And so everything falls on a bell curve when you say we need to do, do this communication, but that's the, you know, I also joke, I've never been a practitioner because that job sucks. That's the part of the job that sucks. And, you know, giving somebody a lot of money, it's why I think peanut butter's like the thing, the peanut butter spread for merit. It's easy to go into everybody and say, Hey, management or HR said we get four percent, you all get four percent, which only perpetuates any pay equity issues.

But that's easy. I don't have to go tell somebody that you're not doing a great job and you're already overpaid in a nicer way. And so you're getting a small increase. Like that's the part I think is just the human part of human resources is why I would argue that's hard. But now it's becoming front and center because they can't hide because of equity and transparent. It's forcing this issue to come out.

Tom Mcmullen (37:29.879)
Yeah, on the peanut butter pro, I once had a boss said, hey, the best compensation programs aren't the ones that maximize employee satisfaction. They're the ones that minimize employee dissatisfaction, right? So that kind of plays to the peanut butter analogy. But I mean, you'll love this statistic. So I think it was a couple of years ago, World at Work, they do their compensation programs and practices survey.

Sean Luitjens (37:44.206)
Yeah.

Tom Mcmullen (37:55.671)
And they said that 80 % of companies say that a majority of their employees do not understand the organization's compensation philosophy. Maybe the reason why that is, is because only 60 % of companies have a documented compensation philosophy. So even the high level, this is what we are about pay, only a slight majority haven't documented. Now, again, I think bigger multinationals, public accounts are in a better spot.

But that's appalling. And then the other thing is, before the mandated salary range transparency laws, only 40 % of organizations let employees know what their own salary ranges. So if the law doesn't require me to tell you what your range is, a lot of organizations don't go there because it's, if you're not forced, it's just easier to not poke the bear, not to go there. And it provides a lot of organizations more flexibility.

Hey, you know, let me post a job, see what I get. Maybe I'll make the job a VP, a director or manager based on the talent. Well, now you kind of can't do that as much because you got to post the job as something and then see what you get, right? I'll go back to the loose and inconsistent reward frameworks. You can, it makes a lot of sense not to be transparent if, if you have a lot of management discretion, right? So on the one hand, you say, well, our, our view is to provide our leaders autonomy.

So, but if you do that, you can't be transparent in as transparent in your reward philosophies and your reward practices and principles. But at the end of the day, if pay is an important part of the employee -employee relationship and we as employees spend a lot of our time, a lot of our life, doesn't the organization kind of have some accountability, some stewardship at least to provide us what the rationale is on this stuff?

Sean Luitjens (39:55.054)
You would hope that's the piece. So any last words of advice or anything before I let you off the hook?

Tom Mcmullen (40:02.967)
I would say, you know, if you're an organization leader, your employees will give you credit and leader credibility will go up if you are proactive in this space, proactive in pay equity, proactive in pay transparency. Leaders and organizations get no credit if they're forced to do something by regulation. The regulations are coming down the track. And like what we saw with the banning of the compensation history question during interviews, I think 22, 25 states may have passed that law, but it's in effect the law, the practice of the land and not the law of the land. I see the same thing going here with salary rate of transparency. More and more states are getting on board.

All of the states aren't going to do this, but if you're competing across all 50 states, you will likely need to, highly likely need to post your salary ranges across all 50 states because some organizations, IBM, Microsoft, Starbucks, I think American Express, Deloitte are already there. So if I'm weighing two offers and one's transparent in the range and the other one isn't, I'm probably predisposed to the one who's transparent. So again, I think if you haven't done anything, the time is now to prep and get ready for this because it's coming soon to a theater near you.

Sean Luitjens (41:32.59)
Okay. Well, thanks for those that are, you know, that tuned in or whatever you want to call it. We'll have Tom's information there. He's easy to find on LinkedIn as well. Thanks so much for coming by. I mean, I could spend an hour talking. It's always good to jam out. And weirdly enough, we didn't spend like 20 minutes talking about regression methodology, which we would have, you know, yeah, that'll put everyone to sleep. Yeah. Awesome. Thanks. Okay.

Tom Mcmullen (41:44.311)
Yeah, it was great. Well, let's do that next time. See if anybody tunes in. All right, good seeing you, Sean.