Recent debates about the respective roles of free market and government regulation in pay determination brought to mind the story of a company I worked with several years ago.
This company was a highly entrepreneurial, fast growing and profitable niche healthcare provider. A large portion of their workforce served in one role - a role both central and critical to their core service. Let's call this job Certified Healthcare Technician (or CHT). At the time that I was involved with them, this company was at the forefront of a boom of sorts in this particular medical niche. Because of this boom and the limited supply of CHTs in their particular specialty, attracting and retaining talent in this important role was becoming very difficult. In addition, this company had particularly rigorous performance standards for its CHTs, standards that they believed to be critical to the company's success. This posed a challenge for recruiting and retention, because CHTs had the choice of working in other, less demanding environments for nearly the same wages.
After deliberation, management landed on a unique, two-tiered compensation strategy: Compensation for CHTs would be positioned at the 100th percentile of the local market, while compensation for all other company jobs would be positioned just above market median (50th percentile). Note to the statistically inclined: we had a number of discussions about what, exactly, constitutes the 100th percentile; but essentially what management agreed to was a commitment to be the highest payer in the local market. Period. If someone brought in verifiable evidence that another local employer was paying more for the position, they agreed to either match or exceed it.
This was made completely transparent to the entire workforce. Senior management's message, in rolling out the new philosophy and program, boiled down to this: Filling this role with qualified, high performing employees is critical to our mission. If we aren't sufficiently staffed in this position, we cannot open our doors for business. Want to be paid at this level? Fantastic! We offer full tuition reimbursement for the 18 month certification program - please see Human Resources about enrolling today!
My take? I thought this was a solid and smart move on the company's part, built on a strong business case and executed in an honest and transparent way. Like any other strategy, naturally, it would have to be examined annually in order to see whether it still fit and to adjust it as the situation demanded.
Interesting twist, though - and here's what made me think about it. The CHT population at that time was predominantly female. My recollection puts it somewhere in the neighborhood of a 70%/30% gender ratio.
What if the CHT was a male-dominated job; for conversation's sake, let's say with a gender ratio of 99%/1%? Would I feel differently about the wisdom and fairness of that compensation strategy and the pay differentials it created? Would you?
Could this strategy be construed as discriminatory, particularly in light of "possibly soon to come" pay fairness legislation? Certainly there were other jobs at this employer that were "comparable" to the CHT in education and experience requirements, in level of decision making and problem solving, etc.
I'd like to say no... What's your take?
Anne you've raised a very valid point. I don't necessarily agree with the current legislation, but I do understand some of what has driven the legislation. I have seen pay decisions made because a higher-up liked someone better than another person, sometimes because of their gender.
So perhaps the better legislation would be compensation policy transparency. If decisions had to be justified to the larger workforce, like in your example, it would likely keep the decisions more in the realm of business necessity rather than personal preferences. Then we could still have market-based pay driven by business needs without the worries about inequity due to bias.
Posted by: Darcy | January 22, 2009 at 08:22 AM
Even if proven discriminatory in favor of women, your case would not be ILLEGAL discrimination. But I don't see your example as discrimination even though it's female-dominated, because it is has a valid business necessity reason and is open to all.
The policy structure you described is more generous for the CertHealthTech job, but "matching the highest rate in the peer position" is a relative thing. If CertHealthTech incumbents in the outside market are paid less than any other position at the company, then maybe being paid "only" at the median (50th percentile) would be still be a lot higher in absolute amount than the highest (100th %ile) in a low-paying job classification.
What you describe is uncommon only in its extreme application and in its transparency. Most employers target different percentiles (or make different market sample selections) for different job families. Your favored comparison groups tend to vary between jobs. That essentially creates the same situation you presented, although it is typically only clearly understood by the compensation specialists who engineered the matching protocols. On the other hand, I've given cities reports detailing the precise market percentile target used for each municipal position's target rate; those were publicly disclosed and were never difficult to justify. When you go transparent, you make sure your stuff is bulletproof. Sunshine cures most ills.
Posted by: E James (Jim) Brennan | January 22, 2009 at 05:50 PM