Hourly employees make up over 50 percent of the total US employee population and a critical segment of the workforce at many organizations. While employee engagement efforts typically focus primarily on salaried employees who are perceived as having more of a long-term commitment to the organization, hourly employee engagement and loyalty are growing concerns for HR leaders in today’s tight labor markets. According to recent Gartner research, hourly workers are more engaged in their jobs when they are satisfied with their employer’s diversity and inclusion efforts.
In the past year, we’ve seen many large companies launch new initiatives to better engage and retain their hourly employees, whether through education benefits or opportunities to work with local nonprofit organizations. HR leaders have also seen improvement of hourly employee engagement when these employees have positive perceptions of their organization’s D&I activities, our research finds. In fact, when hourly employees are satisfied with D&I, they exhibit almost twice the discretionary effort and almost three times the intent to stay compared to those who are not satisfied. However, only about half of hourly employees are currently involved with D&I efforts and HR leaders are uncertain how to use D&I to engage this population.
Our D&I research team has uncovered three ways HR leaders can leverage hourly employee engagement in D&I to make a positive impact on the organization:
Integrate D&I in Current Processes
HR leaders should integrate D&I efforts into pre-existing engagement initiatives, such as team meetings, to ensure that cultural values and behaviors are articulated and implemented consistently throughout the organization. This approach addresses a key challenge hourly employees face when connecting to D&I at their organizations: They do not feel included on their teams. By building hourly employee inclusion into existing processes, organizations can improve team performance without creating additional structures for HR to manage.
Employees today are more likely than ever to demand transparency about compensation practices at their organization. Total rewards leaders agree that pay transparency would benefit the organization in numerous ways. Yet even though everyone seems to be on board, organizations are slower to adopt this practice than you might expect. In our latest research at Gartner, 60 percent of the organizations we surveyed said they had not yet acted on pay transparency at all, while only 14 percent had fully realized it.
So why aren’t we making faster progress toward an outcome all stakeholders agree is the right thing to do? In a session at Gartner’s ReimagineHR event in London last Thursday, Advisory Leader Ania Krasniewska armed the total rewards leaders in attendance with strategies for surmounting obstacles to pay transparency and getting senior leaders and line managers at their organizations on board. Here are some of the most common reasons why organizations shy away from pay transparency, along with some counterarguments HR leaders can use to win over a skeptical CEO:
“It’s just a trend.”
The pressure organizations are facing today to be more transparent about their compensation practices comes from several directions: Millennial employees expect more transparency than previous generations did, employees have more access to (often inaccurate) pay information from outside sources like Glassdoor or PayScale, and governments and the media are advocating transparency as a means of driving pay equity. For an executive wary of pay transparency, it may be tempting to reason that these trends will eventually pass, but there is good reason to believe otherwise.
While Millennials and Gen Z are the employee cohorts most commonly associated with demands for pay transparency, they’re not the only employees who want it. Like other Millennial-driven trends in the workplace today, the younger generation of employees is simply more vocal in demanding things that in fact, employees of all ages would like. Their attitudes also influence their parents, neighbors, and older colleagues. Millennials aren’t the only ones using Glassdoor: Many of the employees who use these external sources to compare their salaries with those of their peers are in senior positions at their organizations. Furthermore, Millennials aren’t going away; they are already the largest segment of the workforce and Gen Z will eventually be even bigger. Gambling that these generations will stop caring about pay transparency later on is a very risky bet.
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.
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.
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. …
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. …
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: