Introduction
In today’s diverse work environments, addressing unconscious bias in compensation has become a critical priority for organizations striving for fairness and equality. To start, let’s define what unconscious bias means. Unconscious bias refers to our subconscious assumptions and beliefs that result in our brain making learned mental short-cuts that impacts how we perceive and respond to people. For example, affinity bias is when we show preference for people who are similar to us (i.e., people with whom we share a common attribute, such as physical appearance, hobbies, or educational background).
Our unconscious biases, which are often deeply ingrained, can affect compensation decisions and perpetuate wage gaps, especially for marginalized groups. This article discusses the impact of unconscious bias on compensation strategies and presents strategies to reduce these biases effectively.
Understanding Unconscious Bias
- Instant activation: Unconscious biases can be triggered within a fraction of a second, leading to snap judgments and decisions that may not align with our stated beliefs.
- Discrepancies between beliefs and actions: Unconscious biases can exist even when they go against our conscious beliefs and values, influencing our decision-making subconsciously.
- Internal and external bias: Unconscious biases can be directed not only towards others but also against members of our own group, leading to self-discrimination.
Reducing Unconscious Bias in Compensation
Practice Introspection
The first step in reducing unconscious bias is self-awareness. All individuals naturally possess biases, but acknowledging their presence empowers us to challenge and overcome them. During the compensation process, HR professionals and decision-makers must reflect on their own biases and be vigilant when they may affect their judgment.
Explore Multiple Points of View
Stepping into the shoes of others can cultivate empathy and broaden our perspectives. By understanding diverse viewpoints, we can enhance our decision-making processes and ensure fair and equitable compensation practices. Encouraging open dialogues and diverse perspectives within the organization can also help dismantle unconscious biases.
Focus on the Role, Not the Person
To prevent biases from influencing compensation decisions, focus solely on the skill, responsibilities and requirements of the role. Consider base salary offerings on a candidate’s relevant skills and knowledge rather than personal characteristics. Prioritize the use of objective data and benchmarking to establish starting salaries.
Strategies for Mitigating Unconscious Bias in Compensation
- Be Fair from Day One
Starting salaries are crucial in setting the trajectory for an employee’s future compensation. To prevent biases from affecting this initial stage, organizations should establish equitable compensation strategies from the beginning. Avoid salary negotiations that may lead to disparities based on negotiation skills and ensure that offers are based on benchmarking data and skills.
- Conduct the Right Audits and Analyses
Regular pay equity analyses are essential to identify and correct instances of bias in compensation. Employers should conduct yearly pay equity analyses, comparing similar roles while accounting for relevant factors like experience and certifications. Performance review audits are equally crucial, ensuring that compensation decisions are not influenced by biases within the review process. It is also important to review all processes in which compensation decisions are made. This includes what biases could be occurring upon hiring, promotions, merit and ad-hoc pay decisions. A thoughtful process can help mitigate biases before they occur and avoid inequities in the first place.
- Ensure Diversity and Equity at Every Level
A diverse and inclusive workforce at all levels is vital to combat unconscious bias effectively. Companies must prioritize diversity initiatives, promoting a culture that values and embraces differences. A diverse leadership team can help establish more equitable compensation strategies and create a more inclusive work environment and practices for all employees.
- Shift Towards Pay Transparency
Transparency in pay practices can foster accountability and minimize bias in compensation decisions. We are also seeing legislative shifts in this direction with British Columbia Pay Transparency coming into effect November 2023 and requirements already in place for the majority of the U.S. and Europe. Companies can take gradual steps towards pay transparency, such as including pay ranges in job postings and sharing salary bands with employees. Narrower salary bands can also help reduce pay gaps stemming from unconscious biases.
Conclusion
Unconscious bias in compensation is a significant challenge that organizations must address proactively. By understanding the nature of biases and implementing the strategies mentioned above, organizations can create a fair and inclusive work environment where employees are rewarded based on their merits and contributions rather than personal characteristics. Addressing unconscious bias in compensation is essential for building a more equitable and progressive organization.
To stay updated on the latest developments and learn more about compensation strategies, follow Laura Gale and White & Gale Consulting Inc. on LinkedIn.
References:
How to Eliminate Bias In Your Compensation Strategy. (Lattice).
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