I am amazed how Q&A can canvas a range of snap-shot views on issues and leave these views, some of which are ill-informed and extreme, hanging.  On 26th Feb 2018, one of these was the gender pay equality.

In October 2017 the Channel 9 – Lisa Wilkinson case raised the important issues of gender equality and pay equality, however, the real issue of “human capital management” procedures, processes and audits was largely been overlooked.  With the quantitative methodology and systems available today this situation should never occur and the way it has unfolded is a true debacle – a complete failure, especially because of bad planning and organization.  It was not unexpected that this high profile “flash in the pan”, gone from sight within a month and what has changed?

The issues of gender pay is not new – 65 years ago we had the International Labor Organisation (ILO) Equal Remuneration Convention, No. 100, that was adopted on 29 June 1951 by the General Conference of the International Labour Organisation at its thirty-fourth session.  Last year, 2017, “ILO, UN Women and OECD, the Equal Pay International Coalition (EPIC).  By 2030, achieve full and productive employment and decent work for all women and men, including young people and persons with disabilities and equal pay for work of equal value.” (Launched of EPIC in Asia Pacific was Feb 2018).  What happened to Convention No 100 and the many other papers and resolutions.  It would be interesting to see how many of these organisations have a fair pay system, we suspect at least one is still using an incremental pay system – this is not equal pay for equal work.  In 2009/2010 the Australia Productivity Commission (APC) Review of Executive and Board Remuneration hearings addressed the issues of quantifying position contribution to the organisation (putting science into Human Resources) and therefore quantifying the base salary component of remuneration.  The processes and tools to quantify contribution and value have been available for around 20 years.

In the Ch 9 Lisa Wilkinson case the NSW Premier Gladys Berejiklian and Federal Opposition leader Bill Shorten allowed themselves to become caught up in the media frenzy, but were blinded by the gender aspects and not the real issues.  Despite Australia supporting the ILO Convention 100 and recognising equal pay for equal work, Governments and many private sector organisations in Australia still utilise incremental pay approaches to base pay (not equal pay for equal work) and there is often a lack of accountability and reward for true contribution.

While I do not expect Q&A to debate the entire Organisational and HR principles or even conclusively address the gender pay equality there needs to be a degree of focus when ill-informed and extremes of views are thrown out and in this case there are conventions and programs but more importantly there are professional approaches to management of human resources regardless of gender, disability etc.  Would we manage or even discuss any other asset management like Q&A addresses the gender equality issue?

In modern organisational and HR asset management, remuneration is made up of the following three (3) elements:

  1. Base salary for a fully competent person delivering on the expectations
  2. Performance pay i.e. at risk, variable pay linked to contribution above normal expectations
  3. Legal and business-based benefits as well as adjustments and “perks” – business based.

There have been a number of very public pay bomb shells recently including Ex-TAFE SA boss, Wesfarmers new CEO, Rob Scott with his reduced $2.5 million in fixed pay, plus up to $7.5 million for meeting certain targets and then Lisa Wilkinson who has walked away from Channel 9 over package issues, just to mention a few.  These remuneration decisions have largely been around the demands and desires of the individuals rather than how the position contributes to the core business and strategies of the organisation and then finding a person with the competence and attributes to deliver.  Provided the base salary addresses the competence and business “base” expectations then the performance pay is related directly to the outcome of achievements above and beyond expectations i.e. performance reward above and beyond the corporate normal expectations (probably the “budget” figures).  Over the years we have seen the concept of performance reward increase but not necessarily the alignment of the payments to the contribution to the organisation.  Unless this strategic alignment is incorporated into the remuneration procedures then the contribution will not be measured properly and performance pay will revert back to a subjective “bonus” which does not necessarily help the organisation and probably not the individual themselves in the long run.

In an interview with the Wall Street Journal (6th October ‘17) The Reserve Bank of Australia board member Ian Harper said “The thing that is causing an issue for us [the RBA board] is slow growth in wages, which is feeding into slow growth in household income.” … “If you start to lose that momentum, that might be the basis of some sort of policy action.”  It is a shame that the RBA does not take this opportunity to promote improved productivity and the opportunity for performance reward.  Yes, base salaries are likely to move very slowly over the next few years but this is an ideal opportunity to push greater productivity and greater reward for achievement above and beyond.  This additional “consumption” money would then be directly linked to productivity.

Productivity and contribution has to start at the top and packages that are fixed or partially fixed regardless of performance destroy the concept of accountability and pay for contribution.  In my opinion it is a pity that the Government, Reserve Bank, Unions are not taking the opportunity to improve productivity (which will include new technology, like it did in the 1990’s, but greater) and develop the concepts for rewarding for contribution above and beyond the norm.

Modern approaches to human capital management focus on developing the right strategically driven structures, now and into the future, and designing the most efficient contributing elements (positions).  These quantifiable position descriptions are complete with outcomes, performance measures and competence which provides the precise size and value of the position.  This process must be completed before any consideration is given to appointing a person to the position.  The HCM systems that provide size and value for the position also value the applicants or incumbents fit against the designated position and report on any capability/competence gaps.  These systems should remove most, if not all, bias as they are quantifiable.  These systems provide current value and gap as well as an assessment of the potential to develop into the future position – growth based succession planning.  While these quantifiable approaches may not completely remove the “unconscious bias” they will go a long way towards it.

Senator the Hon Zed Seselja, Assistant Minister for Science, Jobs and Innovation stated on Q&A that he wanted the Liberal party to address the gender in balance using the Liberals approach – we hope this will incorporate a level of “science”.  An article “Unconscious bias is keeping women out of senior roles — can we get around it?” originally posted in The Conversation March 8, 2017 by Melissa Wheeler and Victor Sojo, from University of Melbourne, provides suggested ways of addressing the unconscious bias; “Gender targets, de-identifying CVs and structured interviews are but a few of the strategies that can help eliminate such bias in recruiting employees.”  I believe gender (or other) targets can be applied simply by saying “after going through a normal quantitative selection process, if the preferred candidate is not a [targeted group] then consider the second and possible third most preferred candidate provided:

  1. The initial gap and development is not too great (pre-determined) and,
  2. They have the potential to develop, then offer it to the No 2 or No. 3 if they are in the target grouping”.

The development plan, for any gaps, needs to be part of the letter of offer and the base salary offered aligned to the competency possessed, regardless of the gender or minority group.  The October 2017 HRM magazine article More Than Meets the Eye by Amanda Woodard reports on Stan Grant’s presentation where he says “For inclusion and diversity to work, it requires leaders to take action.  Someone has to intervene.  No one achieves success by just being talented.”  This article addresses the processes for equality at the “potential employee – organisational interface” but does not addressed the macro issue of inclusion and diversity that Stan refers to.  However, I believe that given the opportunity, success is how one applies the competence they have as well as the potential and willingness to develop.  A major issue we see is poor or undefined “contributing elements” and sticking with traditional and often out-dated “job descriptions”.  My experience with organisations such as the First People Disability Forum and the NDIS, indicate that the scope for re-defining traditional “jobs” into outcome-based position descriptions that suit the needs and competence required on the ground will lead to more people achieving success, especially in the more remote areas.

When organisations go to so much trouble to purchase physical assets like tools and equipment or vehicles and machinery why are our procedures for the most important asset “our people” handled so poorly and often at the expense of the well-being of the organisation?  With a sound rolling Strategic Plan in place we should know what capabilities we need and the value of the contribution of those elements in the current and future structures i.e. base contribution as well as an understanding of the potential to perform at and above the norm.  This needs to be in place before we consider assessing any applicant or incumbent.

I think we all know that wages are likely to remain flat for some time and certainly the Reserve Bank of Australia board member Ian Harper recognises this as reported in the Wall Street Journal interview on 6th Oct 2017.  While we want consumption to continue to grow, now is an opportunity to put more focus on productivity and performance reward i.e. reward for contribution above and beyond normal expectations.  The need for greater productivity is well recognised by business and certainly in 2010 the Australia Productivity Commission report on remuneration (after the GFC) emphasised the need for productivity and reward alignment.  However, despite the procedures and tools being available these “organisational and human resource” debacles continue to occur (even Barnaby Joyce).  We believe these productivity issues are wider spread in Australia than most people realise.  Even if services are outsourced by governments, it is essential that productivity is define. Recently 4 Corners have highlighted issues with TAFE level training, displaced children in residential care, elderly persons care just to mention a few outsources.   So, when will we learn from the past and address a more scientific approach to organisational and human resource management to address issues like gender equality and the productivity positioning of Australian?

Max Underhill

Maxumise Consulting Pty Ltd

Mobile: +61 0407998516

Email: max@maxumise.com

27th February 2018