Good morning,
CFOs, we have some bad news for you: Your people think they aren’t being paid enough.
“What our data showed was such a high percentage of people, even if they are paid above market, believe that they’re not,” Scott Torrey, CEO of PayScale, told me about the company’s new report. “And so, if you’re not counterbalancing that narrative, [employees] are looking for those that they believe will pay them more. This issue about retention is becoming a super significant one.”
PayScale, a private company that offers a compensation platform as well as software, data, and services to employers, released its Fair Pay Impact Report on July 20. About 57% of employees surveyed —who are actually paid at market value—believe they are paid below market value. And 42% of employees who are paid above market value, said they are paid below market. The data is based on 383,609 responses to Payscale’s online salary survey taken between May 2017 and May 2021.
Ineffective pay communication and transparency impacts retention, Torrey says. Respondents were asked to rate their company’s pay transparency practices on a scale of 1-5. Employees who rated their employer as a 1 were 183% more likely to look for new opportunities elsewhere than those who gave their organization a score of 5, according to the report.
“But the companies that are being thoughtful are the ones that are being very prescriptive about their strategy, very clear about their policies,” he says. “And we’re beginning to see the ones that are being more transparent are attracting more talent.” Employees who gave their company a pay transparency score of 4 or 5 were over 65% less likely to look for a new job, compared to companies with a pay transparency of score of 1. But, overall, 78% of respondents gave their organization a transparency score of 3 or below.
On PayScale’s website, an individual can enter information about their experience, skills, job, and location to calculate their market value. “Our goal is to democratize that data,” Torrey says. About 8 million people visit the website every month, he says. Employees’ actions are telling employers, “You don’t just get to tell me what I’m worth because the market tells me what I’m worth,” he says.
Supervisors need to address pay transparency, Torrey says. “Talking about it at a company level is one thing,” he says. “But the real heart of this is, in many cases, the manager to the employee.” And that should be “a super healthy conversation” about the job, skillsets and market value along with advice on how to increase their value, he says. Managers should be trained to deliver these messages in the same way they are trained to do effective recruiting or coaching, Torrey says.
Another major factor is organizations need to rely on accurate data to determine the market value for positions, which may fall under the umbrella of a CFO, he says.
“The really important thing for CFOs is to make sure that they are crystal clear on the source of their data, and they can stand behind that data with real confidence that it is reflecting the realities of the market,” Torrey says. “Because if they’re off, their whole strategy is wrong.”
As for PayScale itself? The company practices what it preaches, Torrey says. “All of our communication, all of our social media, all of our messaging is around this topic,” he says. “So, we have a particularly informed employee base.”
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
****
Fortune’s CFO Collaborative in partnership with Workday, “The Promise and Pressure of ESG Measures,” takes place on Wednesday, August 11. The event, created just for CFOs, will feature Brian T. Moynihan, chairman and CEO, Bank of America; Claus Aagaard, CFO, Mars Inc.; Ann Dennison, CFO, Nasdaq; Giulia Siccardo, associate partner, McKinsey & Company; and Emma Stewart, sustainability officer, Netflix. CFOs can join their peers in learning more about embracing ESG while attracting new investors and cutting borrowing costs and operating expenses. CFOs can apply here. For more information, email CFOCollaborative@Fortune.com.
Big deal
Trustworthy A.I. Innovation and Investments, a report released on July 20 by The Deloitte A.I. Institute and the U.S. Chamber of Commerce's Technology Engagement Center, examines how public policies can advance the "responsible development" of artificial intelligence. Regarding the workplace, respondents said A.I. benefits employees by creating new occupations, improving job safety, supporting automation, and possibly increasing wages as a result of higher-value work. The data is based on a survey of 250 employees working at companies operating or based in the U.S. Almost half of the respondents held C-level or equivalent leadership roles, according to the report.
Courtesy of Deloitte A.I. Institute
Going deeper
Industry Top Trends Midyear 2021: Resilience, Recovery, Risk, a new report released by S&P Global Ratings, examines how the pandemic recovery is taking shape, including ratings changes in the first half of the year, and COVID-19 heat maps to assess growth prospects. The data is based on assessments of more than 5,000 rated corporate and infrastructure entities, according to the report.
Leaderboard
Joyce Bell was named CFO at TeamSnap, a sports management and communication software company. Bell previously served as CFO at PrismHR and Brand Networks. She is a founding steering committee member of the CFO Leadership Council.
Kevin Manion was named CFO at NewAge, Inc., a direct-to-consumer organic and healthy products company. Before joining NewAge, Manion was the CFO at Calavo Growers, a fresh food company. He was previously CFO for Nestle USA's pet food, ice cream and water businesses, and CFO and general counsel at Bolthouse Farms.
Overheard
"Essentially, if you could get rid of the racial employment gap, get rid of the non-childcare gender gap, and just get the education and age gaps back to the levels they've been at in the relatively recent past, then that gets you 28 million additional workers."
—J.W. Mason, an economist with the Roosevelt Institute, on a new report that questions whether there is a lack of workers in the U.S., as reported by Fortune.
