Why Eliminating Salary Negotiations Won't Help Women
April 10, 2015
Ellen Pao's lawsuit against venture capital firm Kleiner Perkins Caufield & Byers alleging gender discrimination has been the talk of the business world this week. The case highlights both the perceived reluctance to promote women within tech companies and the industry’s underlying pay gap.
Studies show that just one in four technology workers are female, those women make 13 percent less then men and are less likely to get promoted than their male counterparts. Because of those numbers and despite losing her case, Pao is continuing her fight for gender equality in her new role as interim CEO of Reddit. There she has instituted a new policy: new hires are no longer allowed to negotiate their salaries.
That’s right, from now on, the policy at Reddit is essentially “take it or leave it.” Why? Pao’s explanation, via The Wall Street Journal:
“Men negotiate harder than women do and sometimes women get penalized when they do negotiate. So as part of our recruiting process we don’t negotiate with candidates. We come up with an offer that we think is fair. If you want more equity, we’ll let you swap a little bit of your cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation.”
Pao’s intentions are noble but this policy won’t necessarily help women, because:
1. Pao’s move doesn’t end negotiating, it just changes it
Okay, so where does this figure come from that cannot be negotiated? Presumably from the candidates’ years of experience, the salary they were making before or what they asked for. But isn’t that part of a negotiation, in its own way?
For example, when someone asks you what you made at your last job, do you tell the truth? Do you add an extra 5 percent? And how much do you ask for, if they ask you how much you want?
Even years of experience can be debated. Using myself as an example, the job I had before this one was a marketing job that involved a lot of writing. When I applied, I had no marketing experience, but six years writing experience.
How many years of experience did I have? Six? Zero? Three?
So this move doesn’t really eliminate negotiating, it just changes it a little.
2. Negotiating is a critical skill for new hires to have
Here’s another thing: whether you hire a man or a woman, you want them to be a good negotiator. Nearly every position within a company requires some negotiating, whether it be to get more funding for a project or for a boss to go along with a new idea.
So, yes, not many people love negotiating. But it’s a part of life, and certainly a part of business, so it’s something your people are better off being good at.
3. Women can negotiate as well as any man
I disagree with Pao’s statement that women can’t negotiate or they are somehow innately worse at it than men. If by some reason they aren’t (which, again, I just don’t believe), then making them do less of it isn’t going to help when it is so critical in so many other areas of business.
Natalie Reynolds, the director of advantageSpring, agrees. Here’s what she told The Guardian about that very issue:
“If the research tells us women don’t like to negotiate, let’s give them the tools, techniques and confidence to know how to do it well. If the assumption is that women don’t negotiate hard enough, give them the insight and ability to plan effectively, present well-structured proposals and explore and develop alternatives.”
4. Allowing negotiating shows you trust your employees
Trusting your employees goes a long way to their overall happiness and productivity, and that should include trusting a hiring manager and a recruiter to negotiate with a candidate. Sure, a company will give a particular hiring manager a budget for a new hire, but they should have the freedom to negotiate within that, so long as the salary remains under budget.
Perhaps for an exceptional candidate, a hiring manager could request a larger budget, and the smart move would probably be to say yes – it is worth spending a little extra for someone spectacular. But, fundamentally, a policy that strips all negotiating power from a hiring manager is one that sends a message of mistrust, even if that message is unintentional.
5. Most importantly, it ensures you don’t miss out on top talent
Let’s say you have a really good candidate and you make an offer. They respond that they just got a competing offer from another company that’s higher. Is that it? Do you just walk away and lose out on that person?
Or what if the candidate asks for 10 percent more? Maybe you aren’t willing to pay that. But maybe you are. Experts believe that getting a great person can be worth five or six times what an average person is worth, making that 10 percent seem pretty irrelevant.
Bottom line, any policy that takes trust away from employees and could prevent you from getting the best people is a dangerous policy. There’s no question the gender gap needs to be addressed, but this is not the long-term solution people are hoping for.
To receive blog posts like this one straight in your inbox, subscribe to the blog newsletter.