Modern Performance Management Practices and the Gender Pay Gap

Despite gender parity in education and an accelerated movement of women into the workforce, the gender pay gap persists. Most prior research focuses on the impact of human capital and occupation characteristics on wage inequalities across organizations and occupations; however, recent evidence suggests that pay inequity within organizations causes a large share of the gender pay gap. Accordingly, we take an organizational design perspective and propose that the design of the performance management system at the organizational level plays a key role in explaining the gender pay gap at the employee level. More specifically, we explore whether performance evaluation practices targeted at increasing the accuracy of performance ratings and mitigating performance evaluation biases, i.e., calibration committees, forced distribution systems, and multi-rater systems, act as a buffer for or accelerator of the gender pay gap within organizational ranks. Our unique dataset comprises both survey data of organization-level performance management practices and archival data of individual-level compensation and personnel data of the employees working in these companies. Using this unique dataset, we find evidence that the degree to which male and female employees are compensated differently for comparable jobs is associated with the degree of discretion individual supervisors have in the rating process, and the information sources used to evaluate the performance of individual employees.