Nike’s Pay Equity Audit Leads to Raises for Thousands of Employees

Nike’s Pay Equity Audit Leads to Raises for Thousands of Employees

Following an internal review of its pay practices, Nike is raising wages for more than 7,000 of its employees worldwide, the New York Times reported on Monday, in order to equalize compensation among employees in the same roles:

Nike cast the pay changes as part of its effort to maintain a corporate culture “in which employees feel included and empowered,” according to an internal memo sent to staff on Monday. The New York Times reviewed a copy. The company, which is based in Beaverton, Ore., said the changes would affect about 10 percent of its 74,000 employees worldwide. … Nike also announced changes in how it will calculate employee bonuses, which were based on a combination of corporate, team and individual performance. They will now be determined mainly by the company’s results.

Nike reviews pay every year, the memo noted, but conducted what it called a “deeper analysis” this year as part of its investigation into alleged problems that were driving many women to quit. Addressing the discrepancies found in this audit will be expensive for Nike, but one thing most companies don’t realize about pay equity is that this cost of closing pay gaps increases each year, so it will never be cheaper for Nike (or any company) to correct this problem than it is today. Pay gaps don’t have a “one-and-done” solution, however, so it’s important for organizations to continue scrutinizing pay practices from year to year to spot the re-emergence of these gaps and take proactive steps to ensure that their pay practices remain equitable. (CEB Total Rewards Leadership Council members can read our entire landmark 2017 study on pay equity here.)

The change Nike is making to its bonus calculations is also notable, as it reflects the growing understanding of how variable compensation such as bonuses contributes to pay gaps. This “bonus gap” occurs when more men than women (or more white than non-white employees) are promoted to the high-level positions that make them eligible for bonuses, or when unconscious bias affects the performance judgments managers make in awarding them. The significance of the bonus gap was illustrated in the gender pay gap reports UK employers were required to publish earlier this year: Financial firms in particular found that their bonus gaps, in some cases amounting to over 60 percent, were bigger factors in their overall gender pay gaps than differences in base pay.

Talent Daily Debates: Are Everlane’s ‘Passion Days’ Effective Cultural Onboarding?

Talent Daily Debates: Are Everlane’s ‘Passion Days’ Effective Cultural Onboarding?

Smart executives know that an organization’s culture drives top-line growth, but it can be difficult and time-consuming for new hires to learn the ins and outs of the culture as they get up to speed. Companies are constantly searching for more innovative and effective ways for their new employees to learn the culture. For example, l’Oreal released its Fit Culture App for new hires last year, which uses “texts, videos, employee testimonials, … quizzes, games and real-life missions” to “give each and every employee, from the moment they arrive, the keys to succeed in full alignment with company values such as multiculturalism, diversity and inclusion.”

More recently, Quartz’s Leah Fessler profiled the onboarding program at the ethical clothing company Everlane, which sets the cultural tone from day one by making every new employee’s first day a “Passion Day”:

“It’s called a passion day,” says Michael Preysman, CEO of the direct-to-consumer clothing startup, which hit $100 million in revenue in 2016. Every Everlane employee starts their new job with a passion day, on which they’re given $100 to spend doing something they love. … There are no limits on what the cash can be spent on, so long as it’s outside of the office and legal. And while they’re not warned ahead of time, every employee has to share how they spent their cash upon being introduced to the entire company the following week. …

Passion days are an extension of an already hyper-individualized hiring process. Everyone who applies to Everlane has to complete a project, regardless of their seniority, to evaluate their skills. “One of our core values is to hire people who are entrepreneurial thinkers—people who are creative and passionate,” Preysman says.

Some of our expert researchers at CEB, now Gartner, had different points of view on whether Everlane’s Passion Day program is an idea worth emulating. Here’s what they had to say:

Andrea Kropp, Research Director: It’s great to see companies putting action and money behind their culture initiatives, especially when the culture they are striving for is very different from the norm. The vast majority of new hires have worked somewhere else before, even if just part-time or in a family business, so they’ve already been exposed to someone else’s culture. If you know your culture is dramatically different, you need something attention-grabbing to show new hires that you are serious and not just paying lip service to the idea of being different.

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How ‘Flexibility Bias’ Can Hinder the Pursuit of Work-Life Balance

How ‘Flexibility Bias’ Can Hinder the Pursuit of Work-Life Balance

As HR leaders know all too well, it’s one thing to give employees a benefit, and quite another to actually get them to use it. This problem often arises around paid leave and flexibility: An organization will offer ample paid vacation, parental leave, and flexible work options, only to find that employees don’t take full advantage of these options, often because their managers, their peers, or the company culture discourages them. Even if the organization’s policy is generous, employees may fear that using their leave entitlement or working flexibly will make them look less dedicated, cause them to miss out on prestigious assignments, or otherwise hold them back in their careers.

Sociologists Lindsey Trimble O’Connor and Erin Cech examined this phenomenon, which they call “flexibility bias,” in two new studies, the findings of which they detailed at the Harvard Business Review last week:

We show that when employees see workplace flexibility bias in their organizations, they are less happy professionally and are more likely to say they will quit their jobs in the near future. Importantly, the effects of this bias aren’t limited to working mothers. Even men who don’t have kids and who have never taken family leave or worked flexibly are harmed when they see flexibility bias in their workplaces.

We also find that perceiving bias against people who work flexibly not only impacts work attitudes but also follows employees home. It increases their experiences with work-life spillover, minor health problems, and depressive symptoms, as well as leads to more absenteeism at work and worse self-rated health and sleep. These effects occur for working moms, dads, and childless women and men alike. The effect holds across age groups and racial and ethnic categories as well. …

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Boards (and CHROs) Have a Role in Fighting Sexual Harassment and Cultures of Impunity

Boards (and CHROs) Have a Role in Fighting Sexual Harassment and Cultures of Impunity

Workplace sexual harassment may be committed by individuals, but if and when harassers feel able to freely engage in misconduct without fear of being caught or punished, that’s a problem for the whole organization. Specifically, it speaks to a culture challenge; the organization may have policies in place designed to prevent and stamp out sexual harassment, but victims don’t feel secure in reporting because the culture discourages it. Because of that, senior leaders may not find out about a harassment problem as early as they could.

But if culture is part of the problem of sexual harassment, it is also a part of the solution—and a growing concern among directors and shareholders. In a recent blog post at the MIT Sloan Management Review, Patricia H. Lenkov, founder and president of Agility Executive Search LLC, and Denise Kuprionis, founder and president of The Governance Solutions Group, discussed some of the steps boards can take to actively manage culture so as to mitigate the extensive legal, financial, and reputational risks associated with sexual harassment. They offer up some questions directors should be asking in their dialogue with management about the organization’s policies and practices:

How do our current policies measure up to best practices?

Too often, the board does not read company policies or require human resources leadership to review policies and procedures annually to gauge the effectiveness of the reporting process. Directors may think this level of review is “stepping on management’s toes.” However, the board must determine whether the company’s current policies and procedures related to preventing workplace sexual harassment and discrimination are adequate. Asking HR how these policies are communicated and to define “best practices” is not crossing the management/board line. Directors should weigh in on whether the CEO and the management team are communicating the right message.

Do employees trust and use our procedures for reporting harassment?

While there are many methods and procedures organizations use for employees to report harassment or complaints, hotline calls to a company’s dedicated ethics line are a good example. Board directors sometimes utter a sigh of relief when they hear there have not been any hotline calls at their organization, but it’s a common misconception that few calls to the ethics line equates to a “good” company culture. In an open and trusting culture there are many calls — calls for how to handle a matter, calls for clarification, and, yes, some calls that report a potential problem. Informed directors ask how many calls are received in a given time period and require that calls be categorized. …

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Alphabet Shareholders Vote Down Proposal to Tie Executive Pay to Diversity

Alphabet Shareholders Vote Down Proposal to Tie Executive Pay to Diversity

Investors in Alphabet Inc., the parent company of Google, voted down all proposed resolutions at on Wednesday’s shareholder meeting, including one that would have made the compensation of senior executives partly dependent on the company making progress toward specific diversity and inclusion goals. The proposal was opposed by Alphabet management, Reuters reported on Wednesday, which sank the resolution as insiders have effective voting control of the company. Google co-founders Larry Page and Sergey Brin hold supervoting shares in Alphabet that enable them to defeat any shareholder resolution they don’t approve of. Google insists that its existing commitments to diversity are sufficient:

Eileen Naughton, who leads Google’s HR operations, said the company remains committed to an internal goal to reach “market supply” representation of women and minorities by 2020, which could help bring hiring in line with the diversity of the candidate pool.

Another resolution aimed at getting Google to provide investors more information about its efforts to moderate user-generated content on the platforms it owns, including YouTube, was also voted down on Wednesday.

The proposal related to diversity was put forward by the activist investment fund Zevin Asset Management and supported by a group of Google employees who have expressed concern about how committed the company really is to being an inclusive environment for everyone who works there. One of those employees, engineer Irene Knapp, addressed Wednesday’s shareholder meeting with a statement that stressed the urgency of addressing ongoing problems in Google’s culture:

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Integrating Disparate Cultures Can Be a Major Obstacle in Mergers and Acquisitions

Integrating Disparate Cultures Can Be a Major Obstacle in Mergers and Acquisitions

Whole Foods Under Amazon is a fascinating recent case study (conducted by Harvard Business School professors Dennis Campbell and Tatiana Sandino and co-written with James Barnett and Christine Snively) which considers the cultural challenges inherent in the acquisition the e-commerce giant agreed with the high-end supermarket chain last year. Historically, the two companies had very different approaches to business, the authors tell Michael Blanding at HBS Working Knowledge, with Amazon focused on driving costs down through data-driven supply chain efficiency and Whole Foods’ decentralized model, in contrast, allowing for a distinctive personal touch from store to store, which in turn justified a higher price point. In the case study, based on secondhand reports in the media of how the acquisition is working out, Campbell and Sandino speculate on how culture clash could be making the integration of these companies more challenging:

The question that Campbell and Sandino ask in their case is: Given the pressures Amazon was facing to turn around Whole Foods’ slide, should they have approached the acquisition differently? While there are no easy answers, Campbell says that part of the issue is realizing the limits of standardization, even for a company that has perfected data-driven management.

“It’s not totally clear that data will be a perfect substitute for human judgment,” he says. “That might work in a digital platform, where you have tons of data on customer history you can use to drive a recommendation engine, but in a store environment, there is a lot of learning that takes place from employees interacting with customers that can be very localized and specific.”

Whole Foods is still in its early days as an Amazon property, so it’s too soon to say with any certainty how prepared Amazon was for this culture conflict and how well they are handling it, especially without having an inside view of the acquisition. However, we do know from our research at CEB, now Gartner, that culture fit is a huge concern for CEOs when thinking about mergers and acquisitions and discussing the topic with investors. Our research shows that 20 percent of the time, when CEOs bring up culture on earnings calls, they are doing so in the context of M&A. CEOs leading through M&A are increasingly under pressure to provide details on how they are integrating two distinct cultures to satisfy investors’ concerns. (CEB Corporate Leadership Council Members can learn more in our Inside View on Discussing Corporate Culture with the Street.)

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Qualtrics’ Experience Benefit Illustrates the Power of Innovative Rewards

Qualtrics’ Experience Benefit Illustrates the Power of Innovative Rewards

Qualtrics, a customer and employee experience management company based in Provo, Utah, introduced a new bonus scheme in January that focuses on its own employees’ experiences. The new perk, which replaced the company’s $1,000 Christmas bonus, offers employees $1,500 expressly to fund meaningful experiences for themselves and their families. SHRM’s Kathy Gurchiek takes an extensive look at this “experience bonus” and how Qualtrics employees are using it:

At Qualtrics, a full-time employee who has worked at least one year at any of its 14 offices—regardless of one’s job performance rating or review—may submit a form outlining the experience he or she has planned. Qualtrics deposits the money into the employee’s account for that purpose.

“We’re not going to judge and say ‘you should do this or that.’ … We want you to do what’s meaningful for you, and we want to empower you to do something [special],” said [Mike Maughan, head of global insights at Qualtrics], who used his bonus to visit his parents who had moved to Melbourne, Australia. Unused bonus money does not accumulate, as the company wants to encourage employees to savor life.

Qualtrics employees, 80 percent of whom are millennials, have used their bonuses in a variety of ways: diving with sharks, hiking the Great Wall of China, seeing Hamilton from the third row, or launching a charity to raise money for an orphanage in Kenya. The original idea behind the benefit, Maugham said, was to exemplify the company’s culture of wanting the best for its employees, but it has also paid off as a recruiting and retention tool.

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