PayPal CEO Dan Schulman on exactly how the company closed its pay gap

Schulman said when the consultants they hired identified the $3 million number, he faced some push-back from executives in HR and finance, who suggested it would make more sense to spread the cost out over a couple of quarters. But the CEO insisted on making the change immediately. “Truly in the great scheme of things,” he says, “it’s incredibly small.”

PayPal’s HR team worked with two outside consultancies to create a process to evaluate pay and performance to make sure the company is rewarding based on merit, without bias.

“It wasn’t going to be practical just to do this once,” says the company’s Chief Business Affairs Officer Louise Pentland, who has collaborated with Schulman on equal pay since she joined PayPal before the spin-off. “You have to do this multiple times, because equal pay isn’t a static moment, it’s a continuum.”

Here’s how it works: Managers establish a band of pay based on the type of role — there are 13 job categories across the company — and location. They examine the market for employees’ skills and their level of experience. How much employees are paid within that band depends on performance, which managers are asked to rate by answering a series of very detailed questions designed to eliminate bias.

The evaluation includes a dozen categories, including whether employees have met specific performance targets and applied skills such as strategy, vision, communication and collaboration. Managers rank employees performance across those categories on a scale ranging from “developing” to distinguished.”

“We don’t leave it to chance, and we don’t leave it to individual managers to pick their favorite people,” says Pentland. “You take away the…subjectivity.”

In the final phase, the HR team works with outside consultants to review pay and promotions across the company by gender and ethnicity and make adjustments. “It’s ensuring that you’ve got the guardrails in place,” she says. “You’ve got managers trained so that those unconscious bias behaviors don’t creep in, and then you’ve got third party assessment double checking, auditing almost those decisions that are made .”

One of the managers who’s been implementing this intensive pay process over the past four years is M.J. Austin, PayPal’s Senior Director of Technical Product Management. She’s a parent who returned to the workforce after taking time off with her young twins, since then she’s been promoted five times in 10 years. She was surprised to find that even she had unconscious biases.

“It doesn’t matter who you are and what your gender is,” says Austin. “That unconscious bias does show up. It shows up when you look at the salary that you’ve paid different employees and you say, ‘Wow why is this 2 percent less each year for say an employee who is female versus male?,’ and then you realize that going through this, there is just this natural unconscious bias that happens.”

Austin says that performing the in-depth review process for each of her employees doesn’t actually generate any more work.

“It actually makes it a lot simpler, because it’s very clear what the objective framework says, and how to evaluate your employees,” she says. “From a management perspective, it’s like following step 1, 2, 3, and getting that done.” Austin says it’s helped her communication with her employees about their performance, and reduced the need for them to ask for promotions, when it’s on the table three times a year.