In parts one and two of this series, we discussed common misconceptions surrounding DEI and how to weave diversity, equity, and inclusion principles into your organizational documentation, systems, and processes. But creating an equitable workplace isn't a one-and-done project. Maintaining a fair compensation program requires ongoing diligence and adaptation.

While diversity, equity, and inclusion are interconnected concepts, the focus of compensation is most closely tied to equity and the inclusive participation in those pay programs at all levels of the organization. Equity in compensation means establishing fair, objective, and bias-free policies and practices for pay and rewards. By meticulously auditing pay gaps, benchmarking to market, and governing rewards programs, organizations can achieve pay equity across all demographics. In turn, pay equity lays the foundation for greater inclusion, as employees feel valued and experience equal opportunities regardless of identity and background. When the system is fair, inclusion and employee opportunities flourish.

Here are some best practices for administering and governing your compensation programs to support your DEI strategy over time:

Conduct Regular Pay Equity Reviews 

While an initial analysis is critical for establishing a baseline, pay gaps can slowly creep back in if not monitored. Set a cadence (annually or biannually) for analyzing your pay data with a focus on gender, race/ethnicity, age, and other relevant demographics. Look at both base pay and total compensation, including equity, incentives, and bonuses. Be sure to review target pay levels as well as actual pay delivered. If gaps exist, investigate the root causes and develop action plans to address them.

Review Job Architecture and Leveling

As roles evolve over time, inconsistencies can develop. We don't always hire perfectly in conjunction with the growth of our organization, so people might take on tasks outside of their role or even begin doing a job that hasn't been formally created yet. Every 2-3 years, review your roles' job content and their placement in your job architecture to realign them to the organizational strategy and make sure they are properly documented and assigned to the correct pay range and level. This involves an assessment of the job in regard to market competitiveness as well as internal equity considerations.

At these reviews, it's a good idea to see if your organization would benefit from an architecture restructuring or if there are jobs that need to be moved. These adjustments keep your employees feeling like the organization is being responsive to market movements as well as the evolution of the demands of the job.

Audit Performance Ratings

Biases can influence performance ratings, impacting merit increases and promotions. Routinely analyze ratings data to uncover trends, including any notable differences across gender, race, age, etc. If found, provide managers with training and calibration best practices to mitigate bias in appraisals.

Beyond the ratings, it is appropriate to assess the processes, workflow, and technologies that are being used in the performance management program. A meaningful audit will consider each of these components to ensure no perverse biases exist.

Use Market Data

Market pay amounts shift, so staying current is key for equitable external alignment. Revisit your market pricing of jobs at least every other year using reputable survey data. Adjust pay ranges accordingly, ensuring equitable placement of the jobs with comparable value.

In some events, you may not be able to meet market pay. When you can't hire at median market pay, you may need to get creative and make some adjustments to the way you do work your job description, or your total compensation target.

With pay transparency laws becoming more prevalent in the U.S. and around the world, the days of keeping your pay ranges a secret are gone, which can be a challenge if you're struggling to meet market pay.

The exercise involves assessing the job with market data and then the employee's placement in the job's updated pay range. During these reviews, be sure to set aside a budget for wage rate adjustments for employees impacted by these structural shifts.

Review Incentive Plans and Payouts 

Assess incentive plans and bonus payouts for potential disparities across employee groups. Ensure targets and quotas are realistic and attainable. Analyze factors impacting goal achievement to remove roadblocks and optimize earnings potential. Modify plans and metrics as needed to support equal opportunities. 

Are there structural elements that are leading to significant underperformance or overperformance in one demographic or another? It's important to dig a little deeper and see if there are underlying problems with any particular metrics, geographies, or leadership discretion that lead to unbalanced outcomes.

Stay Current on Regulations

Regularly check federal, state, and local laws related to pay equity and compensation reporting. Update policies and practices to adhere to changing requirements. Being proactive helps avoid reactive scrambling and damages if found non-compliant.

Train Your Governance Committee 

If you have a governance committee or team, train them on leading practices for equitable pay governance. Provide resources on mitigating bias, conducting analyses, designing inclusive rewards, and using compensation to enhance DEI. Investing in governance will ensure greater visibility of potential organizational vulnerabilities.

Allow Open Dialogue

Create channels for employees to safely voice pay concerns and have constructive conversations. Surfacing issues early allows for investigation and correction before problems escalate. Be clear about how pay decisions are made.

This starts with ensuring leadership is comfortable having pay conversations as well as an understanding of how the organization rewards its employees philosophically.

Document Decisions

Require managers to provide written justification for individual compensation recommendations, particularly any outliers. Well-documented decisions demonstrate your pay process is equitable and objective vs. arbitrary.

Documented processes and pay programs aid in this cultural expectation of clarity. Ensuring that the documentation is used and valued also helps to overcome the perception of added administrative burden and busy work.

Review at Turnover

When an employee leaves, examine their pay relative to peers to diagnose potential inequities to be addressed in the future. Doing so ensures pay gaps don't perpetuate as new hires enter at potentially inequitable rates.

Additionally, exit interviews are a useful tool to ensure compensation or perceived inequities are not a problem in the organization.

Tackling pay equity is an ongoing exercise requiring dedicated resources and commitment from leadership. While challenging, a fair and equitable compensation program allows you to actualize your DEI strategy through tangible practices that demonstrate the worth and belonging of all employees. By continuously reviewing and refining your pay policies and data, you uphold inclusion as an evergreen organizational value.

To learn more about building fairness into your sales compensation programs, download the Sales Compensation Fairness Checklist:

https://salescompguy.activehosted.com/f/15