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The real gap: fixing the gender pay divide

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The persistent gender pay gap is real, but focusing on reward puts the spotlight on the wrong problem.

What is the real issue?

A lack of opportunity, especially at the highest levels of organisations, is the real root cause. 

The truth of the gender pay gap is eye-opening. Comparing pay between the genders overall shows men earning nearly one-fifth (17.6%) more than women, in line with other studies. However, new and extensive international research by Korn Ferry Hay Group, using a database of more than 8 million people in 33 countries, analysed differences in a “like-for-like” comparison—meaning, pay for men and women in the same jobs, same functions, and same companies. This comparison reveals a different picture: The true gender pay gap shrinks to just 1.6% in favour of men.

Call to action

The caution here, however, is not to see the dramatically smaller gender pay gap as evidence that we’ve ‘cracked’ the equal pay challenge. Rather, it is a call to action to understand the nature of the real problem— a disproportionate lack of opportunities for women and under-representation of female talent in high-paying industries, senior functions, and leadership positions. Closing the gender pay gap is about equal access to recruitment, development, and promotions to empower more women to move into the senior-most levels of organisations.

The Korn Ferry Hay Group study focused on numerous countries such as the UK, Germany, Australia, and South Africa. While the gender pay gaps varied from country to country, the same trend was evident in every case. The “headline” rate of overall gender pay comparisons (ranging roughly from 15% to 30%) narrowed dramatically with successive comparisons at: the same level; same level and company; and same level, company, and function. The true gender gap ranged from 0.1% in Russia and 0.8% in the UK, to 3.3% in South Africa and 3.8% in Czech Republic, all in favour of men.

The analysis did not look at the U.S. gender pay gap because such data are not collected in the United States, nor in Canada or China. Nonetheless, from what we know about the dearth of women in senior leadership in Corporate America, the study findings are consistent with workplace issues for women in the U.S. For example, women account for 45 percent of the work force in S&P 500 companies; yet they occupy 25 percent of executive/senior-level and manager positions and only 4 percent of CEO positions at S&P 500 companies.

Across multiple industries, Korn Ferry Hay Group data show that women make up 40% of the workforce for clerical jobs, but account for only 27% of management and 17%  of executive-level positions. This analysis proves that women are still vastly underrepresented in the best-paying areas of the employment market—the senior-most roles, at the best-paying companies, and in the highest-paying industries where men predominate.

The problem globally is not just seniority. There is a lack of women at every level in the highest-paying industries (for example, oil & gas, technology, and life sciences). Men dominate in highly paid functions and sectors, holdings 85% of technical jobs in 11 of the world’s largest tech companies. Even in lower-paying sectors where women dominate, such as hospitality and tourism, men still hold the vast majority of management and executive roles, which are the highest-paid jobs in any industry.

Closing the gap

The solution is providing more opportunities for women to move into high-paying industries and roles. Taking bolder steps to advance women isn’t just good practice from a diversity and inclusion perspective. There is a compelling business case to be made; greater diversity fosters more innovative, productive, and profitable businesses; a more equitable society; and a healthier global economy. Fortune’s World’s Most Admired Companies do many of these things and their efforts pay off. Our research has shown that the top 50 of the World’s Most Admired Companies have achieved more than five times as much shareholder value as the S&P 500.

In every organisation, change starts at the top with commitment by senior leaders to examine, rethink, and change recruitment, development, promotion, and reward processes, to ensure that they recognise female as well as male strengths. For example, a study issued in March 2016 by Korn Ferry Hay Group of 55,000 professionals across 90 countries showed women scoring higher than men in nearly all emotional intelligence competencies.

Along with opening more opportunities for women, companies must ensure more female talent gets into the talent pipeline and stays there. Organisations may do their best to eliminate bias in recruitment processes, but there can be gaps between theory and practice. One way is to ensure objective selection criteria are used, such as “name blind” processes.

Companies also need to foster cultures in which women want to stay and progress their careers. In addition, reward strategies should be examined for fairness, such as how they link pay to performance. Are measures bias-free? Some innovative organisations use performance metrics to recognise influencers (often women) who are often at the heart of internal networks.

Though the gender pay gap may no longer look as dramatic on a “like for like” basis, organisations cannot declare victory on gender diversity in the workplace. This is not merely a matter of money, but of opportunity to ensure that doors are open and career tracks are in place to allow the best of female and male talent to rise—to the benefit of a diverse organisation that is positioned to accelerate its performance

Mark Thompson

By Mark Thompson

Mark is the head of reward consulting at the Korn Ferry Hay Group.

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