Kathie Lingle's Work-Life Blog

Money Matters

June 15, 2007 - The Sunday Money column by Daniel Gross in the business section of the June 10 New York Times takes an intriguing look at some potential sources of the growing disparity between incomes in this country. Several economists are cited, all of whom agree that the top 1% of American earners are increasing their wealth at a handsome clip while the remaining 99% are not. To me, the most surprising contributor among the several described (which include the decline of unions, government wage and tax policy, globalization, and free trade) might reside in the corporate performance management systems that have become widespread over the past decade. The proportion of jobs with a pay-for-performance component rose to 40% in the 1990s from about 30% in the late 1970s, according to a research paper by three co-authors described in the article. The practice is even more concentrated among Fortune 500 companies and the self-employed, whose pay by definition is performance-based, so the statistics cited above are grossly underestimated. The authors of the research paper conclude that this rise in pay based on performance accounts for 25% of the growth in wage inequality among male workers from 1976 to 1993. No mention is made of the well-known inequity of pay between men and women in the aggregate.

Of course, discriminating among employees in the distribution of corporate spoils based on performance is a widely touted best practice and has its share of beneficial outcomes.

But this discussion of the roots of income inequity reminds me of a profound but little-publicized reality about one unintended consequence of formal performance management systems I myself have experienced first-hand, a phenomenon that was later explained to me by the experts at Catalyst when I was a work-life practitioner at the turn of this century.  When all is said and done (quite literally in this situation), women tend to be evaluated on what they produce (past performance), while men get more credit for their potential (future performance). This isn’t necessarily done consciously or deliberately, but the impact can be profound. It contributes to the frustrating situation that women (and men who don’t rank at the top of the heap) not infrequently describe, whereby co-workers who have no more experience or education than they do (today, often less of both, since women predominate among college graduates and middle to upper management ranks) are given the nod to take on the next big challenge. Because leadership always needs someone to take the risk of doing something new and untried, given the escalating pace of change, they go with someone they believe to have the most potential, more often a man. 

How do the researchers at Catalyst know about this past/future weighting of men’s vs. women’s potential, by the way? They analyze the quantity, quality and content of written performance appraisals done by the same supervisor for both men and women, compare the outcome rankings between genders, and monitor job assignments, promotions and recommendations for development opportunities over time, to look for the emergence of differential patterns. So, take note. There can be more than one form of inequity in play when it comes to something that we all take for granted, like the performance appraisal. You can put money on it.  

The opinions expressed are solely those of the author and do not necessarily represent those of WorldatWork and its affiliate, Alliance for Work-Life Progress (AWLP).