No room for haggling

Reddit CEO bans salary negotiations
By Liz Bernier
|Canadian HR Reporter|Last Updated: 06/15/2015

It’s an unpleasant fact but a persistent one — women consistently tend to earn less than men. In fact, women earn about 24 per cent less, according to a global average calculated by the U.N. Women Report released this year. Over her lifetime, the average woman will earn just one-half of what a male counterpart earns.


Ellen Pao, interim CEO of Reddit — and the former plaintiff in a high-profile Silicon Valley gender discrimination lawsuit — wants to change that. She made the bold move of banning salary negotiations for new employees, in an effort to create greater pay equity. 


Pao’s reasoning is that a significant body of research shows men tend to negotiate much more aggressively than women — one potential factor behind the wage gap. 


“Men negotiate harder than women do and sometimes women get penalized when they do negotiate. So, as part of our recruiting process, we don’t negotiate with candidates,” Pao told the Wall Street Journal. 


“We come up with an offer that we think is fair. If you want more equity, we’ll let you swap a little bit of your cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation. We ask people what they think about diversity, and we did weed people out because of that.”


Pao deserves credit for attempting a new solution to an age-old problem, said Katie Donovan, salary and career negotiation consultant and founder of Equal Pay Negotiations in Boston. 


“There’s definitely a need to try new things that haven’t been tried before because (the gender pay gap) has stuck around the same percentage for around a decade now… but not knowing how they decide on the actual offer is the question mark.” 


Pay equity continues to be an issue, said Robert Levasseur, principal and senior consultant at McDowall Associates in Toronto. 

“Legislatures have been trying to deal with pay equity issues for probably 30 years now, and there really hasn’t been that much progress.”


Is negotiation necessary? 

Banning negotiation outright may seem like a novel idea, but it’s not one Sophie Fleming agrees with. 


“Negotiation is a natural market force and in a competitive environment where organizations are fighting for talent, to ban salary negotiations, I don’t think is the right approach to engaging talent. I think equity is really the responsibility of the organization and it starts with organizations having really sound approaches to grade their salary structures that provide guidelines around what we pay for certain job levels, and then having sound salary administration policies to address things like what’s the hiring rate and what’s the promotion rate and how salary progresses through ranges,” said Fleming, senior consultant at Hay Group in Toronto.


“It lies with the organization to have the discipline to negotiate fairly within the guidelines they have established.” 

Some organizations have more of a deal-making culture than others, said Fleming. 


“But, the reality is, taking negotiation away or banning negotiation, I think, will take away the organization’s ability to really attract and retain their top talent,” she said. “Employees who are strong negotiators… organizations want to seek them out and there’s nothing wrong with that. I’m a woman and I’ve always negotiated my pay and I would still want to be able to do that whenever I get recruited.” 


It’s unclear whether doing away with negotiations will accomplish anything for the average employee, said Levasseur. 


“(Pao) is speaking very much as a senior executive. When senior executives are hired, they usually walk in with their team of lawyers and the company walks in with their team of lawyers, and it turns into a real negotiation. When regular folks like you and me apply for a job, they usually tell you what the salary scale is and where they want to start you. You could probably ask for a couple of percentage points more but there really isn’t that much room to move. So I really don’t get what she’s driving at other than her own situation — she’s the CEO of a major U.S. company… that’s not your average employee,” he said. 


The best way to get at pay equity is to have more women in jobs that are male-dominated, he said.


“Wage discrimination is probably going to start disappearing when there isn’t a preconceived notion of whether a job is ‘for men’ or ‘for women.’” 


Inherited pay gaps

Perhaps a more pressing concern is eliminating the reliance on an employee’s past salary to inform the current one, said Donovan. 


“(Employers should) make sure the way the original offers are made takes away other biases that have been put into the hiring process over the years. So, for instance, not knowing where a future employee comes from and their particular history in hiring — you don’t know whether anyone has been a person who’s been on the other side of a gender bias or a racial bias and then paid inappropriately because of that,” she said. “If you use at all previous salary — which is very common in the hiring process — as part of the decision-making process on what to offer them or even whether to give them the job, you’re going to perpetuate and compound the unequal pay that has previously been put upon them.”


Looking at jobs where women consistently are making less is a biased question to ask — so just get rid of it, said Donovan. 


“Make your decision on what you’re going to offer an employee based on their actual experience and education, and their ability to do the job,” she said. “The other one is, in advertising the job, to actually put a minimum or range of what the job would pay, so that they are informed.”


Secrecy versus transparency 

Another critical issue is the element of secrecy that shrouds compensation practices, said Donovan. 


“We’re consumers of our jobs, so why don’t we have some kind of openness on what the pricing is?” she said. “It doesn’t mean you have to be transparent on every single person’s pay, it just means you’re not going to fire someone (or otherwise discipline them) because they shared their pay.”


There’s very little transparency around salaries, said Levasseur. 


“If you’re going to join a unionized environment, they plop the collective agreement down in front of you and you know exactly where you stand. Well, you don’t in a non-bargaining situation. And the irony is that senior executives, their compensation in large public companies is publicly available yet, lower down, it’s all confidential. So it makes the whole process very secretive,” he said. “Maybe more disclosure of salary grade and so on might be helpful.” 


That would also remove the potential for dishonesty on the employer’s side, said Donovan. 


“When women do negotiate, they’re lied to more than men… and one of the most common mistruths is that, ‘You’re already paid the most at that job.’ Well, if the company has pay secrecy, it’s virtually impossible to find out if that is wrong.” 

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