Episode 28: The Role of People Analytics in Gender Pay Analysis (Interview with Dr. Zara Nanu, CEO at Gapsquare)
The case for diversity and inclusion in the workplace is compelling, not just because it is the right thing to do, but because numerous studies suggest it can drive better business performance too. It is disappointing therefore, that progress as confirmed by McKinsey's women in the workplace 2019 study remains slow, not just in gender, but in all areas of diversity and inclusion. A statistic that really emphasises the challenge ahead comes from the World Economic Forum, which estimates that the global pay gap between men and women will take 202 years to close.
Our guest on today's episode is Dr. Zara Nanu, and she brings data science to the art of developing productive, engaged, and diverse teams and improving decision making when it comes to people.
You can listen below or by visiting the podcast website here.
In our conversation Zara and I discuss:
Why the topic of gender and fair pay is increasing in importance
The role of people analytics and data science, as well as some of the challenges involved in data collection when it comes to gender and fair pay
We talk about some of the examples of organisations who are leading the way when it comes to gender and fair pay and the wider diversity and inclusion space,
As with all our guests we look into the crystal ball and ponder what the role of HR will be in 2025
This episode is a must listen for anyone in an HR leadership or people analytics role, as well as HR and business professionals interested in how people data can drive business outcomes and support initiatives around gender and equal pay as well as the wider diversity and inclusion area.
Support for this podcast is brought to you by Gapsquare, to learn more visit www.gapsquare.com/accelerate.
Interview Transcript
David Green: Today I am delighted to welcome Zara Nanu, CEO and co-founder of Gapsquare to the Digital HR Leaders podcast. Zara, it's great to have you on the show.
Zara Nanu: Thanks, David.
David Green: Can you provide listeners with a quick introduction to you and your background?
Zara Nanu: So I run a company called Gapsquare, and we set up Gapsquare four years ago when the World Economic Forum released a report where they said globally the gender pay gap, the difference in pay between men and women, is 60% and it will take 217 years to close that gap.
David Green: It's not too long then...
Zara Nanu: No… So at the same time, the World Economic Forum, was releasing reports saying that by 2030 most of us will be in self driving cars and we will be watching people go off to Mars by 2030 how healthcare will be happening at home, because we'll have so many tech devices and innovation, and at the same time, we'll be somehow still 200 years away from achieving pay parity. So that's when we thought is there a way in which we can actually look at using technology and data and analytics to help accelerate that progress in a similar way that we accelerate everything else in our lives?
So we've set up Gapsquare with a view of developing tech to help accelerate progress and achieve pay parity much faster.
David Green: Great, that's a great introduction. And you're an expert obviously on this topic, and those of pay transparency and gender and ethnicity, pay gap analysis. So, for the benefit of the listeners, what do we mean by fair pay?
Zara Nanu: So initially we started by looking just at the gender pay gap, but then we saw how much more encompassing issues around pay equality are within a company. So now we started to look broader at fair pay to include things like, the gender pay, ethnicity pay gaps, executive pay even, I think it was at the beginning of January, the third day into January, top executives in the UK already have received much more than the average pay for the entire year for most of the workers in the UK. So it's executive pay, it's living wage, a fair wage, and overall ensuring that people get remunerated and compensated fairly for the work and the passion and the drive that they put within their workplaces.
David Green: I was hearing this morning actually, executives can earn in about 39 hours what their average worker earns in a whole year. So there's definitely a problem that needs fixing and it's getting, certainly from an executive pay perspective, it's getting wider, isn't it?
Zara Nanu: Yes, absolutely. And interestingly enough January, this year is the first month when companies that are publicly trading in the UK have to report on the executive pay alongside other kinds of reporting requirements. So we're going to see more and more attention being paid to that executive pay and how it compares to average employees.
David Green: Good, I'll be watching that with interest.
So why is the topic of gender and fair pay, increasing in importance?
Zara Nanu: Well, initially we started because of the World Economic forum report and because of the need to look at this issue, why on an ethical side of things, but then the more we looked into it, the more we saw that businesses are equally interested in things around acquiring and retaining top talent, there's things around regulation that's being introduced around the world in regards to fair pay, gender pay, ethnicity pay, as well as the overall demand within companies to actually get to grips with this and understand what is happening within their companies.
David Green: Perfect. So, let's look at those three areas in a bit more detail.
Starting off with talent.
Zara Nanu: Yeah. So, so in terms of talent, we were having a look at some interesting reports from Glassdoor, but also in conversations with our customers around talent retention and talent acquisition and in terms of talent retention, 52% of employees are likely to leave a job if they find out that they're being paid unfairly and if they could be paid more fairly somewhere else, or if other of their colleagues, compared to their colleagues or compared to other kinds of people in other departments in the organisation, they feel that they're not being paid fairly, and Glassdoor is really opening that door for everyone to be able to see that data.
All of those 52% of employees who would leave, a large majority are in senior roles, so that is a major problem for companies, and they're increasingly coming up against that and having to take decisions on how to ensure more fair pay and retain that talent.
In terms of regulation, countries around the world are introducing legislation around reporting on the gender pay gap. For instance, in the UK, there's legislation that requires companies with over 250 employees to report on their gender pay gap on an annual basis. The US has legislation in different States in the US around equal pay, but also, ethnicity and gender pay reporting for companies that provide services or products to the federal government, so now they're having to look into that. France has the most stringent legislation that they've introduced last year around the gender pay gap where they plan to start penalising companies if they have a gender pay gap that is higher than 9%. Germany has legislation. So overall the world is moving towards legislating or regulating this space a bit more, so this is an added pressure for companies to start looking into fair pay and understanding what the pay differences are within their companies. And while they do that there's research from Gartner that shows that a lot of these companies are not sure that what they're doing is the right thing, and if what they're doing will generate results.
And we have a very clear example of this, from Salesforce where Mark Benioff has commissioned an equal pay, gender pay analysis a few years ago, with a view of proving that there is no gender pay gap in Salesforce. And then the data came back showing that there is a gender pay gap in Salesforce, and he needed about $3 million to close the gap. So he's convinced everyone to put that 3 million in and close the gap, proudly flying the flag of closing the gender pay gap only so that a year later when they look at the data again, they were 1 million short of closing the gender pay gap. Because within that space, people have moved in and out of the company, they've moved into different roles. So that highlights how the approach that you take is not always the one that would work. So it highlights why there's demand for companies to understand better how they can address this that is in a way that's cost effective in a way that will keep employees satisfied and also will keep them compliant with legislation.
David Green: And interesting what you said around the talent part, actually, they can actually make the difference for companies to retain really important talent. Whether they're senior or scare skills, for example, it can actually make the difference whether they could hire and retain.
Zara Nanu: Absolutely. Pay still continues to be on the agenda when it comes to attracting top talent.
Yes. We have increasingly younger generations that are Millennials and Generation X and all other latter letters of the alphabet that are really interested in vision and passion, and the drive of the company and the ethics of the company, but pay still is part of that and pay fairness actually is an even bigger part of that.
David Green: It says a lot about a company if they don't have fair pay really doesn't it? So what are the business objectives that gender and equal pay feed into?
Zara Nanu: So from our conversation with businesses, really the objectives are twofold. One is companies that are more diverse and are more inclusive and more likely to have higher returns compared to their competitors. There's research from McKinsey, but also Harvard in terms of productivity increase, increase in share price growth for companies that have a higher proportion of women within their top quartiles than they currently do. There's higher returns for companies that are more ethnically diverse in terms of returns on investment, in terms of share price growth, market acquisition, and market growth.
There's also the other side of developing products and services that are fit for the wider population because if you think around gender, then we have 51% of the population is women and if a company wants to develop products and services that are fit for everyone, they want to make sure that within their teams they have a diverse representation that will think about everything in an all rounded kind of manner.
David Green: It seems so obvious, doesn't it? But so why are companies so slow to respond to this? Is it because most boards are made up of a bunch of white men in their 50's trying to try tackle diversity and not really knowing where to start?
Zara Nanu: Well, I think that is a catch 22 kind of question because the boards are what they are because of the lack of women coming through the pipeline into top executive roles.
And I think it's a legacy that we've inherited, and we just need to find a way to accelerate that progress and ensure that we facilitate for women to come through and for ethnic minorities to come through into more senior roles and make their way into boards. And on the board question, it's an interesting one because I was recently in California and California has introduced legislation that requires boards to have a certain composition that is ethnically and gender diverse.
So that is pushing companies even further into thinking how they're going to diversify what they do within the company so that they can ensure that they have the talent that they can then put on those boards.
David Green: And we're seeing that in some of the Nordic countries as well who have kind of led the way around that, haven't they? Around legislating for diversity within it at board level.
Zara Nanu: Yeah. Yeah.
David Green: That's pretty good. So can you provide an example of an organisation who are managing the topics of fair pay and gender and equal pay well, and demonstrating this in business outcomes?
Zara Nanu: So the key companies that are looking into this as the companies that I would say are doing better at this, are the companies who are being more transparent about this. When for instance, in the UK, legislation came in around the gender pay gap. It was inevitable that more than half of the companies in the UK, were going to show a gender pay gap, and it's going to continue to show a gender pay gap for the next decade at least, because we're talking about quite significant gaps for some organisations. But it's being transparent about those gaps and being transparent about how they're going to address those gaps, that's going to have the most impact. So for instance, we've seen companies like Nestle and they were previously, on one of your podcasts talking about how they are looking internally at using data and understanding where the gender pay gap is stemming from. But also we recently gave an award to Diageo for producing the best gender pay gap report of last year and the way they look at the gaps and how they address the gaps and how they're being transparent about them and how they're communicating them to their employees. We've spoken to so many companies where they have had no communication with their employees around the gender pay gap, and that is one of the biggest pitfalls because the problem is not about having the gap, the problem is how are you addressing that gap? How are you finding out why does your company have that gap?
David Green: Yeah. Is it a problem when we are recruiting people or is it a problem when we are promoting people all that sort of stuff.
Zara Nanu: And each company will be different? We see a lot of companies that come from engineering and tech backgrounds where the problem is around recruitment and then it stems into a career progression, and then we see a lot of other companies that are female dominated, for instance, they have more than 50% of the workforce is women. But then they have significant issues with career progression and a lot of the departments and teams and led by men.
So it's about understanding where exactly in each company is that glass ceiling. Why is it there? And what can we do with data to help smash it and create more equality and fairness for everyone.
David Green: And I guess the very fact that companies are now having to report on this, those who have to, if we look at the UK, those with 250 people or more employees are all now having to report at least that’s something its forcing companies to at least look at the issue and understand where they are. And hopefully then, as you said, being transparent and communicating that within the organisation and then doing something about it.
Zara Nanu: Yeah and legislation is still very new. This year is going to be only the third year when companies report their numbers, a lot of companies are still kind of starting to understand what it is they're reporting on. It's going to take a while, but employees and the younger generations coming into the workforce are increasingly taking note of that data and looking at it and we see reports from Hays for instance, or other recruitment companies in the UK that are showing over 70% of new recruits are interested in finding out what's happening with the diversity and inclusion policy within a company before they take on a job with that company. So it's a big priority issue for the workforce and companies are kind of trying to marry up their culture with their data, with their vision of where they want to go and how they want to attract and retain top talent to make it all come together.
David Green: Yeah. So what is the role of data and people analytics?
You've touched on it a little bit there. What does the role of data and people analytics in the fair pay and gender pay gap analysis?
Zara Nanu: So it's a big role actually, because it's a role that can, it's people who can look at the data holistically, data within the company, data that comes from finance, that comes from HR, the cost of payroll, put it all together and try and understand and decompose that gender pay gap and understand where exactly it stems from. And interestingly enough, we've seen across a lot of companies in the UK, but also outside, key themes emerging across all industries and the themes around recruitment and the way we recruit people and the way we recruit talent. It's things around, caring responsibilities that people get to have at certain ages, that is having an impact on the gender pay gap and age, and its occupational segregation still because we still live in a society where we still think about certain occupations as being fit for men and certain occupations as being more fit for women.
And actually the role of people on analytics is significant because they can help companies rethink why it is that we still do this and how we can shift into a direction where we're being more creative about how we recruit, how we promote, and how we move people around into different departments. We've seen for instance how a lot of companies have made significant progress in terms of the innovation and productivity when they've moved people from the marketing department into the tech department and people from the tech department into HR. To kind of bring more creativity and a new thinking into that department, and so that we can start thinking more about using data outside the box.
David Green: And you referred obviously to Nestle as an example obviously Jordan was on the podcast last year. And I think there are other people analytics teams, you know, cause obviously you came to a workshop that we did at Insight222 a few weeks before Christmas and the interest level around this topic is very high with people analytics teams.
Zara Nanu: Absolutely and it was actually not only last year, it was last decade.
David Green: It was last decade. Wow. I'm starting to feel old now.
Zara Nanu: It was interesting because when we had the conversations with people analytics teams that you brought together in Amsterdam and we ran that short poll around how big of an issue is this for your company right now? Or it will be in the next six months, or not of interest at all? More than 75% said that this is an issue either right now or in the immediate six months. So it is something that companies are increasingly having to look into and some of the teams we were talking to in Amsterdam were saying that they were already being tasked with that, and they're already having to look into it. And when you don't necessarily come from a background of equality and diversity and understanding things like gender bias around data, then it's really difficult to kind of piece it all together but as analysts that data speaks and data tells us a lot of things that we sometimes try to deny or we sometimes have stereotypes around.
David Green: We can start to connect the dots a little bit with, there's the reporting and then we can start connecting it to the stuff where we can actually have an impact and make changes.
Zara Nanu: Yes, absolutely and it's about looking at data that comes from different points and trying to understand how it relates to one another. So if you look at reward and compensation data, but also look at performance and look at how long the person has been in the company and training and skills, then it all can start coming together, and pointing clearly into steps that can help facilitate quicker returns and can help the company make progress.
David Green: Now, one thing that became very clear in the workshop is actually this is a far more complex topic than I certainly initially thought and what are some of the typical issues that companies, particularly larger companies, face when they're collecting data for gender and for fair pay analysis?
Zara Nanu: So there's a lot of intricacies around data.
First of all, because the larger the company, the more likely the data comes from different points. The key thing is that HR data and payroll data already come from most of the times from different points and then if you try to add into that finance data and performance data, and for instance sales results and outcomes data, if you're looking at sales teams, then it becomes even more complex. And it’s a kind of rubbish in rubbish out situation and you need to make sure that you know what you're looking for when you start pulling all that data together so that you can make the most of it. But data cleaning and data augmentation is a big thing. We work with a lot of companies that are for instance, groups and they have grown with acquisitions and mergers so they have a lot of different parts of the organisation that have completed different systems where they have completely different grade levels, and job levels to other parts of their organisation and then how do you really begin to compare those?
David Green: Yeah and you can get other things, can't you?
Where people haven't been promoted so it looks like they're paid more than some of their counterparts where there's actually a barrier maybe from females being promoted.
Zara Nanu: Yes, absolutely and it sometimes comes down to people just having to sit down and look at after pay reviews, ideally before pay reviews, but oftentimes it happens after pay reviews when they look and they say, well how come these people have had a pay increase at the end of the year when they haven't been promoted and moved up into the next job level and we have other people whose pay hasn't shifted. So that's when a lot of the questioning happens and, a lot of the answers can lead to significant change.
David Green: I guess it can give a false impression sometimes the company might and the executives say well we don't have a problem with gender pay because actually our females are paid very highly, but actually it's because they are at the top of the grade that they can get to and they've been there and there's a problem with promotion.
Zara Nanu: Absolutely, and the interesting thing is that when you look at the gender pay gap, for instance or ethnicity pay gap there's two figures you can look at it and that is the mean and the median, and when you look at the mean, that can easily be skewed by promoting a few women into more senior roles and then the organisation could be like, well we've shifted 5% from last year to this year. But actually, within the wider span of the organisation, nothing has really happened, which is why the office for national statistics recommends that the median is taken as a more of an indicator of the kind of the situation within the company.
David Green: So how does Gapsquare help organisations confront the challenges that we've discussed so far?
Zara Nanu: Well, it's an interesting question. So initially we set up the company because we wanted to help develop a piece of tech, a piece of software that helps companies keep this issue within their own company because no one understands your company better than the people who work for the company and take decisions within the company.
So, we wanted to build a platform that helps them understand key issues around their data, but then they can, interpret those within the context of their own culture and within the context of their plans and the history of the organisation, but also the future plans for growth. So we help address a few issues through our platform and that's issues around data and understanding what kind of data you need in order to have a better understanding of the gaps within your company and how you can create more fair pay, issues around ethics and data and controlling and preventing for the fact that organisations historically have data that will show a more male dominated world.
So if we just use analysis to look at current data the way it is, then it will show us that men are more likely to belong in more senior roles and women are more likely to belong in lower paid roles, in support, jobs. So, we factor in for things like that as well as we bring in a diversity and inclusion expertise to help explain some of the results.
Because sometimes as a data analyst or as someone in HR, you look at the data and you think, well, what does this mean? Yeah, I can see that it's 25% but what does that actually mean? So we bring in a lot of academic expertise around diversity and inclusion to provide a narrative that explains exactly why these numbers look like that, so that the person in charge can take more informed decisions and may even accelerate this agenda much faster. But ultimately the point was to facilitate a platform that makes, all of this data understandable in a business language and make sense to someone who is taking business decisions. At the end of the day, the company is there to ensure that they are profitable and are building, products and services suitable for the market, so they want to make sure that any decisions around talent and any decisions around recruitment match with what they do.
David Green: So you can help organisations do the regulatory reporting in the jurisdictions that they operate in? And then actually do the deeper analysis to actually understand what can we do to actually not just improve the reporting, but what can we do that actually helps us with our pre business results improving employee experience? Make ourselves more attractive perhaps, so people that are looking at Glassdoor and other sources before they...
Zara Nanu: Absolutely. And so it becomes kind of two fold, you look at the data for regulatory compliance and that just keeps you operational. So that's for operations. You do that, you comply you tick a box, but we go much further in that we help companies understand their data and what it tells them in the context of diversity and inclusion and what it tells them in the context of their workforce so that they can take more informed decisions and create change. So this is where the key actions are going to come from because they're actions that we see develop through our platform that are helping organisations, create faster change, narrow the gender pay gaps, attract more talent, and actually being more mindful and careful about how career progression happens within specific departments.
David Green: Great. Have you got a couple of examples of how clients have used Gapsquare and some of the benefits that they've enjoyed?
Zara Nanu: So we've seen over the past four years, we've seen a lot of companies use Gapsquare and we're delighted that over 90% are being able to show year on year decrease in their gender pay gap, which is showing that it's all going on the right track.
And I think it's interesting that we've also seen there's two sides to progress. So there's short term progress and there's more long term progress. So when we look at the short term progress, for instance, there was a large organisation that had about 50,000 employees and they were saying, we want to look at all of our allowances and how they relate to people's performance and how we pay them, and when we pay them.
And what we didn't realise is that they have over 1000 types of allowances, but there you go, they had over 1000 types of allowances and they wanted to see the relationship between those allowances and gender and performance and all the others, and they had a kind of a gut feel about which allowances are skewed to favour men more than women.
And when they ran the data through, actually it was interesting that those were not the ones, that there were other allowances, more subtle allowances that were having a much bigger impact on the overall gender pay gap. So a simple restructuring of those allowances in their rewards and compensation led to very quick, short term impact so they could make those changes. Boom. You can actually see it on paper in terms of what the gaps look like and then we're talking about a more long term impact because when you start seeing the issues, there are issues around recruitment or there are issues around career progression that take a longer kind of approach to change.
But equally, we've seen those companies take a more careful approach to how they view talent acquisition and talent retention and change their recruitment practices, change the way they advertise their roles and how they take people on onboard. And interestingly enough, we've had to do the same thing because as a company who goes around and says current recruitment practices are biased and lead to the character organisational structures that we have. We need to adopt change ourselves. So that's been an interesting time for us.
David Green: Well, that's good. You've got to practice what you preach. So what's next on the fair pay agenda or wider diversity and inclusion agenda? Because obviously it's a really important topic for organisations. You look at any list of HR trends out there, diversity and inclusion is always one of the top trends. You know? But what's next? Where is that field going?
Zara Nanu: So there's one word to describe it, and that's intersectionality.
And that's the way we view all of the diversity and inclusion elements in what current research shows, for instance, that ethnicity pay gaps are higher than gender pay gaps, but when you juxtapose ethnicity to gender that becomes significantly bigger. So, it's about helping companies understand how all of the diversity and inclusion elements come together in their organisation.
How are they making the most of their talent? How they can build more diverse and inclusive teams by understanding how they operate currently, and where they want to get to in the future. So it's bringing all of them together. And the UK is introducing ethnicity pay reporting regulations this year. So it will be an interesting time because that data will push for companies to start looking across intersectionality.
David Green: As you said you're bringing those two data sets together and start to analyse is it even worse ethnicity with the female or the gender part as well.
Zara Nanu: Yes absolutely, for instance we've been working with greater London authority and London Met police and both of them have been looking at ethnicity data already and ethnicity and gender, and their reports are publicly available to look at them and get a feel for how companies are addressing these issues in London.
David Green: Right. We'll be interested to see how that pans out as the decade goes forward. I can't believe we're in the 2020s now. So that leads onto the question that we've asked everyone on the show to date.
What do you think the role of the HR function will be in 2025, which is scarily only five years away?
Zara Nanu: I think an increasing role in building trust. An increasing role in building trust between employees and the company and company and the employees, where it becomes more transparent and more open. And we've started by talking about Glassdoor and I can't emphasise enough how big of an impact Glassdoor is having on pushing that relationship to become more transparent.
If we want to build trust and if we want to build companies that make the most of their employees and have a sustainable workforce that trusts the company and is loyal to the company and helps the company grow and still be around by 2025.
David Green: Yeah, and it's interesting you saying that because I think about a year ago Accenture published some research at Davos, the world economic forum, and it was all around the currency of trust and how that they, I think it was 500 of the biggest organisations in the world could unlock a combined value of $3 trillion if they were able to promote trust, and unlock the power of the people data that they've got. So yeah, I think trust is definitely something that we'll see, hopefully see more of, and at least in the workplace anyway, in this decade.
So Zara thank you very much for being a guest on the show. Please can you let listeners know how they can keep in touch with you and follow you on social media and also find out more about Gapsquare?
Zara Nanu: Yeah. Thank you David. Thanks for having me. And listeners can get in touch by finding us online, Gapsquare.com, equally on Twitter as Gapsquare, or dropping us an email on hello@gapsquare.com
David Green: Great. Zara, thank you very much.
Zara Nanu: Thank you.