Author Archives: David Weaver

How to Pay Salespeople What They Deserve (Without Going Bankrupt)

by | | Compensation, Human Resources

I read a study a few years back that alerted the world to something everyone already knew:

Sales employees are more motivated by compensation than all other employees.

Knock me over with a feather, that’s a shock! Of course, there are other factors that motivate a company’s sales force, but let’s be honest: money drives salespeople. However, a sales employee compensation plan requires more than just a pocketful of cash. Motivating salespeople requires you to look at a multitude of factors to insure you’re motivating them enough to increase sales.

Consider the following 6 factors when developing or reviewing your organization’s sales compensation program:

1. Eligibility

I’m sure you’ve seen it before: every employee who has the faintest involvement in the sales process wants to be included in the sales compensation plan. People assume salespeople make the big bucks, so everyone wants a piece of the pie. And you know something? They’re right: there is a lot of money at stake in the sales process.

Your duty is to remain disciplined with the sales compensation plan: only include jobs with direct customer interaction and influence to persuade customers to purchase products and services.

Note: sales support jobs can be part of an incentive plan, just not the sales plan.

2. Total Cash Compensation

Use credible compensation surveys to determine the target total cash compensation for each level of the sales force. The majority of sales reps are compensated with a combination of base salary and commission, or base salary plus incentive bonus. If your organization is like most, you should target total cash compensation at the median of the market to be competitive.

3. Base Salary/Variable Pay Mix

The unique role of each sales job will assist you in identifying the appropriate mix of pay. For example:

  • Sales positions prospecting new business tend to have a lower base salary and a higher variable pay percentage (e.g., 70% base/30% commission).
  • Positions focused on customer retention and growth have a higher base and smaller percentage of incentive compensation (e.g., 85% base/15% incentive).

4. Performance Metrics

To give the salesperson a clear message of what type of performance is expected of them, use no more than three performance metrics. Good examples include:

  • Revenue
  • Sales volume
  • Profit
  • Market share
  • Product mix
  • Margin
  • Retention
  • Customer input

A few sales administration objectives, such as submitting timely sales reports, forecasts, or expenses, can help balance out these performance objectives.

5. Quotas

This is where many sales plans fall into a slump. With the help of your finance department, set quotas based on sales forecasts for the entire year. Use credible data so these quotas are challenging yet attainable. If there’s a downturn in business, don’t be tempted to lower the sales quotas: find other ways to change the plan, such as adjusting thresholds to keep the sales force motivated.

6. Payout Timing

The most common payout period is quarterly. Monthly and annual payout periods are also popular, but in the end, payout timing usually depends on the length of your sales cycle. Shorter sales cycles use a monthly payout period while longer cycles utilize an annual payout model.

Sales compensation plans need to motivate the sales force to higher levels of performance through sound plan design, competitive total cash compensation, the appropriate mix of pay, clear performance measures, and attainable quotas. If you consider the 6 factors of sales compensation, you’ll have happy salespeople. And happy salespeople means a healthy company.

I’d like to hear your opinion on sales compensation plans. Feel free to comment below to share your thoughts.

https://paymattersbook.com/

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

HR Professionals: Are You the CFO of Labor Cost?

by | | Compensation, Human Resources

I’m not your boss. I’m not even your coworker or your employee. Right now, I’m your job promotion fairy, and if you’re an HR professional, I hereby grant you a promotion.

You are now the CFO of Labor Cost.

Congratulations, you’ve earned it. Since salaries are the largest cost item in most organizations, it’s extremely important HR professionals manage the process of salary planning effectively. So it’s only right that I bring you into the C-suite. Why?

You’re Handling Big Money

Assume, for example, your company employs 250 people with an average salary of $50,000. That means you manage a $12.5 million dollar payroll. If your total salary increases (including merit, general, promotional, and market adjustments) equals 4.0%, then go ahead and add another $500,000 to your fixed expenses.

These are big numbers requiring sound compensation methodologies and tools to control costs while still delivering competitive pay.

Sound intimidating? That’s why you’re the CFO of Labor Cost: because you’re up for the challenge.

You can effectively manage those large sums of money by utilizing salary planning and following these 7 steps:

  1. Understand Your Organization’s Compensation Strategy—A formal compensation strategy endorsed by top management will guide your salary increase budget process. Know whether the strategy is to lead, lag, or match the market.
  2. Know Where You Stand in the Competitive Marketplace—After completing a competitive market pay analysis, you’ll know where you stand against the market. Use this information to help determine your salary increase budget.
  3. Review Results from Compensation Planning or Salary Budget Surveys—Participate and obtain results from a few reliable salary increase surveys, such as CHRG’s Salary Planning Survey. These surveys give actual results for the most recent year, including what’s budgeted for the upcoming year for many types of increases, organized by sales revenue and industry type.
  4. Determine the Size of the Salary Increase Budget—Each year salary increase budgets should be developed based on several factors, including the organization’s financial results, competitive pay position, employee turnover rates, cost-of-living, and group performance (broken down by business units, divisions, departments, or job functions).
  5. Link Merit Increases to Performance and Position in Salary Range—Using a performance-based approach allows you to deliver more merit dollars to high performers who are paid low in the salary range and to slow down merit increases for low performers who are highly paid.
  6. Determine How the Salary Budget Is to Be Allocated—Distribute the salary increase dollars based on all of the data you’ve collected to this point. As an example: let’s say some departments or functional areas (such as Human Resources) displayed outstanding group performance over the past year, but collectively the employees are paid below that performance level. In this scenario, you may differentiate the budget percentages based on performance and business need.
  7. Assist Managers in Planning Increases for Each Employee—Give managers tools that can help them plan merit, promotional, and market equity increases for each employee. Providing managers with software that empowers them to plan individual increases and allows them to review their overall spending and performance rating distribution will result in a more equitable way to deliver pay increases.

Since salary increase planning is such a critical business process, you may want to consider tying it to your organization’s financial budget planning cycle. There’s no better way to be a business partner with the management team than to play a significant role in the financial management of your organization’s resources. Integrating a formal salary plan with the overall organizational budget gives credibility and helps you bring value to your organization.

By the way, that promotional increase for your new CFO of Labor Cost role should be very generous—you deserve it.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

https://paymattersbook.com/

© 2021 David Weaver. All rights reserved.

What Determines an Employee’s Pay: the Person or the Position?

by | | Compensation, Human Resources

While most organizations use some form of job evaluation to determine the worth of jobs, there are many factors to consider when valuing work. There are internal factors such as being fair and consistent with how employees are compensated. Therefore, organizations typically use the following techniques to measure a job’s value:

  • Perform a job analysis to collect information about jobs in the organization.
  • Develop job descriptions that describe the work being performed.
  • Place the jobs into a structure or hierarchy based on job content, skills required, and contribution to the organization.

Equally important are the external factors, namely measuring the marketplace to determine the market value of each job. To pay competitively in the marketplace organizations use salary surveys to market price their jobs. Using credible market data is crucial in attracting and retaining good employees.

Using internal job evaluation and external market pricing helps organizations determine what to pay for the job…

But what impact does the person have on his or her pay?

Focusing on the person means looking at the individual worth of each employee. To place a value on an employee’s performance, there are several key factors to consider:

  • Performance of the employee against the standards for the job
  • Contribution to the organization
  • Skills and competencies
  • Potential
  • Length of service

In short, the answer to the question is that most organizations pay for both the job and the person. It’s most likely impossible to separate the two because in many ways the person makes the job.

https://paymattersbook.com/

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

© 2021 David Weaver. All rights reserved.

The Surprising Benefits (and Dangers) of Performance Ranking Your Employees

by | | Compensation, Human Resources

Imagine you’re sitting in a dark room with the shades drawn.

No, you’re not about to turn on Netflix or take a nap. You’re at work—and you’re not alone. You, as an HR professional, and several managers in your organization are participating in your annual tradition:

Performance Ranking.

You’re determining every employee’s value relative to their performance and relative to their coworkers.

I must tell you: having been in rooms like that—with employee names on the projector screen, the room dark, and the blinds drawn so employees can’t sneak a preview of their fate—it’s a brutal process.

But it’s enticing to people. It gives the illusion of objectivity and order. As a form of rewarding employees, performance ranking is more of a curse than a blessing…

Here’s why.

Separating the Wheat from the Chaff

Approximately 25% of Fortune 500 companies sit in that dark room and are required to utilize relative performance ranking. The other 75% use the traditional approach to performance management: comparing employee performance to the agreed-upon goals and objectives of the job.

Relative performance ranking systems tend to become popular when the economy is down and organizations are looking to identify lower performers for reductions in force and when they must reward and retain top performers.

I believe the 75% of companies who use the traditional approach are better off than the rank ordering companies.

Simply put, relative performance ranking is a process by which employees in similar jobs (or in the same department) are compared against each other to determine their individual performance ratings.

Organizations looking to improve business results through a more rigorous performance management process may consider whether they should implement relative performance ranking. But in order to choose wisely, we must discuss the three different types of relative performance rankings:

  • Forced Performance Distribution
  • Stack Ranking
  • Quartile Ranking

Forced Performance Distribution

This is a ranking approach where managers must meet pre-determined percentages of employee ratings. For example, 10% of employees must be rated as top performers, 80% need to be rated as meeting expectations, and 10% need improvement.

For this system to work, managers in a ranking group are held accountable for achieving this forced distribution. In order to meet the pre-established distribution, the department or business unit must be large enough, so the employee sample size is significant (in the range of 50-100 employees).

Stack Ranking

In this process employees are ranked from highest to lowest performer and are stacked on top of each other to determine a distribution of ratings across the organization. An organization with 3 ratings might then rate the top third in the stack as Exceeds Expectations, the middle third as Meets Expectations, and the bottom third as Needs Improvement.

Quartile Ranking

This system works in a similar manner to the Forced Performance Distribution however it requires placing 25% of employees into one of 4 ratings. The top quarter of employees would be rated as Outstanding, the next quarter rated as Above Expectations, the following 25% as Meeting Expectations, and the lowest rating would be Needs Improvement or Requires Development.

The Blessings of Relative Ranking

Despite the points against relative ranking systems, there are perfectly valid reasons why some companies my use it:

  • Raising the Bar—One of the biggest advantages of any relative ranking process is that managers have the opportunity to meet and discuss the performance of their top employees on topics such as rewards, retention, career development, and succession planning. As such, ranking works best in a high-performance organizational culture that raises the bar for performance each year and expects constantly improving results.
  • Feedback—The honest feedback managers give to employees regarding their performance as a result of ranking meetings can be motivating, and it tends to reinforce an organization’s results-oriented culture.
  • Little Inflation—A forced distribution approach eliminates the tendency of managers to inflate ratings because they must have a pre-determined percentage of employees at each performance level. Lenient managers (the ones who tend to give high ratings) are brought in line with a normal performance distribution and managers that are hard graders are encouraged to recognize the top performers in their group.
  • Consistency—The ranking meeting helps managers to be more consistent across the organization in identifying and dealing with top performers and poor performers alike.
  • Fair Pay—In a pay for performance culture, the ranking system helps managers distribute pay increases, bonuses, and stock options more fairly based on a thorough evaluation method.

The Curses of Relative Ranking

  • Infighting—The most significant negative aspect of performance ranking is that it breaks down teamwork and morale. In this system, the performance of the individual is more important than the team. Employees know they’ll be compared to one another in ranking sessions, so the workplace can become very competitive. If that environment doesn’t fit your culture, that may spell trouble for your company.
  • Legal Ramifications—Not surprisingly, some organizations that have implemented relative ranking have faced legal ramifications. After giving inflated ratings to employees for many years, they’ve had discrimination lawsuits filed against them. These lawsuits were primarily from long-term employees who had been given above average or average performance reviews in the past and, due to a new ranking system, have received lower ratings.
  • Feeling the Churn—Some organizations use forced distribution of performance as a lifeboat drill to constantly drive out low performers. The constant churn of employees being driven out of the organization leads to high involuntary turnover and a higher cost of hiring and training new employees.

In the final analysis, you may not want to implement relative performance ranking if the organization does taut a high-performance culture already. And before you get any wise ideas, adding ranking to the performance management process won’t necessarily make your organization a high-performance company. In fact, it may undermine the performance tools you currently have in place.

However, if you’re interested in integrating performance ranking with other existing processes, such as identifying high potential employees, training and development opportunities, succession planning, and total rewards determination, then the blessings may outweigh the curses.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

https://paymattersbook.com/

© 2021 David Weaver. All rights reserved.

The HR Professional’s Guide to Determining Promotional Increases

by | | Compensation, Human Resources

Salary increases are just like our relatives.

Merit increases are the close relatives you see regularly, and promotional increases are the distant cousin you only see every few years.

You like the distant cousin, they’re flashy and fun every time you see them, but you want to learn more about them.

There’s a reason everyone loves promotional increases: career advancement is one of the most important motivators for employees. In the employee engagement surveys we administer, a lack of steps in the career ladder is a major source of employee frustration. Even more disappointing, if employees do get promoted, and the rewards don’t seem to live up to their expectations, you can all but guarantee they won’t be around much longer.

Now, that doesn’t mean you go around promoting people gratuitously. No.

A promotion requires a significant increase in duties and responsibilities resulting in a grade, job title and salary change. The scope and complexity of the employee’s job must increase enough to warrant a salary increase, as well as a higher-level position, one recognized in the external market as paying more and seen internally as contributing more value to the organization.

Since most promoted employees are high performers, and retaining key talent is important, we need to pay attention to how we reward our promoted employees.

How can you make sure that distant cousin, promotional increase, only comes around at the right times, just when you’re ready to see them?

Determining a Promotional Increase

Once you’ve decided to promote an employee, you have to determine how much to increase their salary. Most organizations have salary ranges or salary bands. If this is the case in your organization, first look at where the promoted employee’s current salary is positioned in their new promoted range. Then we need to make a few considerations:

  • If their salary falls below the minimum of the new range, then the increase must be large enough to move their salary into the new range.
  • Caution: I don’t recommend bringing their salary to the absolute minimum of the new range. The salary should penetrate far enough into the salary range, so it doesn’t fall below the minimum if ranges are increased the following year.
  • Deliver an increase percentage that places the new salary appropriately, based on anticipated performance in the new job, and where current job holders in the same range are paid.
  • To achieve correct salary placement, promotional increases typically average between 7% and 12% for a one grade level promotion.
  • If you currently use a fixed percentage for all promotions, such as 8%, consider using a range of percentages. Each promotion is different, and a range gives flexibility to address various issues.
  • If an employee is receiving a two-grade promotion, you’ll likely need to double the average promotional increase range to accommodate the multiple grade promotion.
  • If you have a “cap” imposed on promotional increases, such as no greater than 10% or the new salary cannot exceed the new salary range midpoint, consider removing the restrictions.
  • Please note that arbitrary “caps” placed on promotions will hinder you from properly rewarding high performers and from paying a market competitive salary.

How to Handle a Merit Increase + Promotion

Now, just because you invite your distant cousin, promotional increase over, doesn’t mean you can’t bring over merit increase, too. In fact, most promotions happen as needed throughout the year, so including a merit increase with a promotion is typical.

Three things to consider with merit increases coupled with promotions:

  1. If the employee’s promotion requires a transfer between departments, including a merit increase gives the former manager an opportunity to administer a final performance review.
  2. If the performance review and merit increase is for less than 12 months, then I encourage a prorated merit increase.
  3. Usually the prorated merit increase is calculated and added to the employee’s current salary prior to the promotional increase being applied.

Lateral Moves and Demotions

I’d be remiss if I didn’t briefly address lateral moves and demotions (who are even more distant relatives than promotional increases).

Lateral Moves

Organizations don’t usually consider employees moving to a lateral position eligible for a promotional increase, but there may be times when awarding an increase is appropriate.

  • If an employee transfers to a job at the same grade level, then no promotional increase is typically given.
  • If an employee is asked to take on additional responsibilities requiring a new skill set, then a salary increase, not a promotional increase, may be reasonable.

Demotions

The opposite of promotions, demotions represent an employee’s grade level decreasing.

  • In most organizations pay is not decreased.
  • Salary may be “grandfathered” or kept the same.
  • No future salary increases are granted until the employee’s salary is within the current salary range.

All in all, promotions are an essential relative in our pay increase family. They deserve our attention, because the more attention they get the more they come to visit. Not just around the holidays.

https://paymattersbook.com/

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

© 2020 David Weaver. All rights reserved.

How to Diagnose, Prevent, and Cure Pay Compression

by | | Compensation, Human Resources

There’s at least one in every class.

I teach a Compensation Management seminar, and every iteration there’s at least one person with the same problem:

“We have a chronic issue with compensation compression.”

They’re right to call it chronic, because it’s a potentially fatal diagnosis for any company.

First of all, what is compensation compression?

Pay compression happens when new hires are brought in at higher salary levels than current incumbents in the same jobs. As the organization grows, the hiring rate increases. As the hiring rate increases, the symptoms worsen. Over time, reading the side effects of pay compression will sound like one of those drug commercials: incumbent employees grow resentful, your labor costs get out of control, you lose sight of your pay philosophy, and so on. It’s not good.

Here are 6 potential signs that your organization is experiencing pay compression:

  • Over the last few years, you’ve focused on hiring hot skills in low supply and high demand.
  • You employ a high percentage of long-service employees.
  • You’ve frozen salaries over multiple years.
  • You’ve reduced merit budgets over a lengthy period of time.
  • Merit increase programs have been delivered as across the board increases.
  • Your salary ranges have not kept pace with market trends.

Do I Have a Problem with Pay Compression?

Do any of those sound familiar? To assess if you have a pay compression issue you need to perform an internal equity analysis.

1. Review all recent hires, including new college hires, and see if their pay is higher than incumbents in the same roles.

2. Next, evaluate each employee in those positions where new hires were brought in at a higher pay rate and review their performance and current pay.

3. Once you have all the data, you can decide if individual market pay adjustments should be made to bring long service employee salaries in line with competitive market salaries.

4. Once you’ve taken corrective action and cured current pay compression issues, it’s time to implement a pay “wellness” program to prevent it from occurring again. An effective pay wellness program will include:

  • Performing a competitive market analysis on a yearly basis, similar to an annual checkup.
  • Reviewing hiring practices, including an internal equity check before making a salary offer.
  • Instituting pay for performance merit increases that allow differentiation between performers.
  • Adjusting salary ranges regularly to keep them competitive and healthy.

Just like any health concern, pay compression will only get worse over time if it’s not addressed quickly.

Lucky for you, the doctor is in! Let me know if you need a prescription.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

https://paymattersbook.com/

© 2020 David Weaver. All rights reserved.

How to Pay Competitively Across Geographic Markets

by | | Compensation, Human Resources

She was desperate.

A Human Resources Manager was on the phone with me, and she needed help.

“Our corporate headquarters is in Detroit,” she said, “but we’re trying to attract and retain engineers in our Boston offices.”

“Where is your salary data coming from?” I asked.

“Michigan.”

I like Michigan and the Motor City just as much as anyone, but utilizing Detroit salary survey data for Beantown employees may not be the best approach to paying competitively. The cities have very different costs of labor, so people who live in each city should be compensated very differently.

It begs the question:

How do you pay competitively across geographic markets?

(Or, in HR speak: How do you develop and implement geographic pay differentials to be competitive in all cities where your organization operates?)

Let’s take a look…

Reliable Data Above All

Reliable compensation survey data at the local level is the most important factor in setting accurate geographic pay. Credible salary data will ensure you don’t overpay in some locations (like Detroit) and underpay in others (like Boston).

If you’re using reliable local compensation data and are aware of local labor market conditions, then your organization is on a perfect track to use geographic pay.

Cost of Labor, Not Cost of Living

Proper geographic pay is based on major differences in the cost of labor between various locations, rather than the cost of living.

What’s the difference?

The cost of labor measures market-determined cash compensation for similarly matched jobs, whereas the cost of living reflects the cost of goods and services in each city, including housing, groceries, and transportation.

My rule of thumb is this:

If the cost of labor in the satellite office city is at least 10% higher than in the headquarters city, then a geographic adjustment should be made for the higher cost of labor market.

In this example, the adjustment can be made in two ways:

1. Apply the 10% Differential by Job

Using this method, the 10% pay differential only goes to the jobs that need to reflect the local market. For example, in the case of the woman from Detroit who called me, she might only apply the 10% differential to the engineers she wanted to hire and retain in Boston.

The directors and executives located in Detroit may not be included in a location specific pay differential because the labor market for their jobs might be regional or even national in scope.

2. Apply the 10% Differential to All Jobs

This method is more straightforward, but it may be unnecessary, especially if (in our example) certain positions are only needed in Boston, but not in Detroit.

Review Geographic Salary Structures Frequently

In the end, the HR Manager who called me eventually chose to apply the 10% differential to specific jobs. Namely, the engineer positions. Within one year, she was able to increase her engineer retainment and attract even more qualified candidates from the fantastic Boston universities.

But, like all compensation experts, her work wasn’t done yet.

Whenever an employee transfers from one geographic salary structure to another, you need to review that employee’s base salary.

For example, if an employee moves from a higher geographic structure (Boston) to a lower one (Detroit) and stays in a similar job, typically no increase is given. However, if an employee transfers from a lower salary structure (Detroit) to a higher one (Boston), it may be time for an adjustment.

The point is, using reliable local compensation data and geographic pay can give you effective tools to attract and maintain high quality employees across states and regions.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

https://paymattersbook.com/

© 2020 David Weaver. All rights reserved.

What Shakespeare Can Teach Us About Job Titles

by | | Compensation, Human Resources

Who knew William Shakespeare knew so much about human resources and compensation? Seriously. If you don’t believe me, just read this line from Romeo and Juliet:

“What’s in a name? That which we call a rose by any other name would smell as sweet.”

I don’t mean to take us back to freshman English class—I just want to highlight Billy the Bard’s point with this famous line: it’s the thing that counts, not the name.

Unfortunately, when it comes to job titles, Shakespeare’s logic doesn’t quite hold up. The title we give a job is important. A good title not only describes what you do, it also sheds light on your rank in an organization. A bad title, on the other hand, does neither. (When was the last time you met someone who was a “District Widget Controller” or some such thing, and you had to give up trying to figure out what it is they even do?)

Would a Compensation Level by Any Other Name Smell as Sweet?

Of course, job titles go hand-in-hand with compensation levels like roses go hand-in-hand with sweet smells. But once money is involved, things get dicey: the more we inflate people’s job titles, the more people expect to be compensated to match their job title.

Any HR professional who’s dealt with mergers, acquisitions, reorganizations, or downsizings knows that any organizational upheaval leads to tricky changes in job responsibilities and even trickier changes in job titles.

Even without organizational change, maintaining control over the standards for an organization’s job titles is surprisingly crucial to controlling labor costs and employee satisfaction. Overinflated job titles, for example, often fail to reflect the work being performed, and can cause endless troubles.

Therefore, how do we go about cleaning up, consolidating, and controlling job titles?

It’s not as hard as you might think. Just follow these 6 rules for accurate job titles.

1. Make It Descriptive

Simply communicate the work being done and ensure the title is well-aligned with the content of the job. To make things simple, state the level (Senior, for example) and the type of job (Playwright, for example). Senior Playwright isn’t a bad gig—just ask Shakespeare.

2. Avoid Fancy Titles In Lieu of a Promotion

Imagine you invite someone to a fancy restaurant, but when you get to the table, you’re served with something from the back of the fridge. That’s what superficially inflated titles are like. It’s demotivating, confusing, and it’s all but worthless compared to a pay increase.

3. Manage Your Managers

This is a hard and fast rule I urge you to follow: if someone is a non-exempt employee on your payroll, do not call them a manager. That’s a huge red flag and could trigger a Fair Labor Standards Act audit, which you do not want any part of.

4. Decouple Benefits from Titles

Don’t tie employees’ bonus targets, office size, and vacation time to their job title. All that does is turn peoples’ energy to the wrong things. For example, if everyone with a Director in their job title gets a 5% bigger annual target bonus than people with Manager in their title, you’ll likely feel a constant pressure from your Managers for title inflation.

5. Keep Job Titles Official

Similar to making job titles descriptive, you should have some consistency with job titles in your organization and job titles across the market. That way, when you match your organization’s jobs with compensation surveys, you’ll be more likely to find accurate fits.

For instance, while you may have some variety of Senior Administrative Assistants in each department with more specific titles, for matching purposes, they should all be grouped under this one title.

6. Give a Little Leeway

While you’ll still want to keep internal job titles in check, many employees may feel more confident and perform better with an external title they can show off to customers, even if it may be slightly inflated in comparison to their official company position. This is particularly true for customer- or vendor-facing employees. Cut loose a little, as long as it doesn’t get out of hand.

Changing job titles can be tricky, emotional stuff, and it’s not to be taken lightly. Make sure you work with your Managers to get the necessary support you need, and consider engaging some outside help with research and recommendations as needed.

And if you need to stop and smell the roses, Shakespeare has you covered.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

https://paymattersbook.com/

© 2020 David Weaver. All rights reserved.

How to Determine Your Company’s Pay Transparency

by | | Compensation, Human Resources

Across the business landscape, pressure is mounting for pay transparency.

With Pay Equity legislation sweeping the U.S., as well as company cultures transforming to embrace transparency, pay openness is a critical question in every organization.

But how far is your organization willing to go?

The degree to which you share your compensation formula with your employees (and the world) falls on a 4-part spectrum:

1. Administrative Transparency

This level of transparency relies on employees understanding how their pay is derived and the factors involved with measuring internal equity and external competitiveness.

With this approach, employees would know their grade level, the salary range associated with their current grade, and the other grades and salary ranges in their career path. Currently, this is the most common form of pay transparency.

2. Complete Salary Transparency

Complete salary transparency makes salaries available to all employees and may even disclose salaries to the public. Many government agencies follow this approach, but private organizations have been slow to embrace this level of openness.

3. Comprehensive Transparency

This allows for complete sharing of salaries, incentives, equity, and the methods of arriving at each of these compensation components. This is considered true transparency and very few organizations are following this model.

4. Hybrid Transparency

Hybrid transparency uses a mixture of approaches, such as publishing salary ranges for all grades, all jobs, and all employees with the exception of disclosing employee’s actual salaries. Using a combination of tools to provide more information to employees will assist in removing the uncertainty around compensation management.

Once you decide which of the four approaches is best for your organization, you’ll want to do 4 things:

  1. Communicate it often—explaining the compensation process helps to clarify your organization’s pay philosophy.
  2. Provide training—training your organization’s employees and managers on your transparency approach will create openness about your compensation system and how it drives your business strategy.
  3. Pay competitively—this means performing an annual market analysis on every job in your organization to make sure you’re compensating employees according to your organization’s pay philosophy.
  4. Consistently monitor your compensation program—this ensures fairness and equity in all aspects of your pay system.

As compensation and HR professionals, our challenge is to make sure managers and employees understand the fundamentals of our pay programs. That requires a certain level of transparency about your salary information.

How transparent you are will depend on your pay philosophy, your compensation system, and your company culture. If you calibrate everything correctly, you’ll earn the most valuable return on your investment:

The trust of the people in your organization.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation available now on Amazon.

https://amzn.to/3j2OO1Y

© 2020 David Weaver. All rights reserved.

Free Online Salary Data, Can We Trust It?

by | | Compensation, Human Resources

Free is tempting. Free is easy on your bottom line. Free can be deceiving.

We all want something for free, but as an HR professional, should salary data be on the list of freebies you take advantage of?

There are several websites that provide employees with free salary information so they can gauge their worth in the external market.

One site uses a compilation of salary surveys, but doesn’t disclose its sources. Another site uses data from job listings and supplements it with information from the U.S. Bureau of Labor Statistics.

A third site gathers pay information directly from employees directly in exchange for providing aggregate salary data for the employee’s job title.

Therefore, the question remains:

Can we trust free online salary data?

I’ve developed a 9-part self-assessment to help you determine if free salary data is worth the price.

1. Will It Cause You to Under- or Overpay?

It isn’t wise to use self-reported employee salary if it causes you to either overpay or underpay your company’s employees.

Now, overpaying may help you attract and retain employees, but your labor cost will become inflated, and so will your organization’s cost of products and services. On the other hand, underpaying will result in higher turnover and a dramatic increase in the cost of recruiting and training.

2. Is the Data Published by a Credible Source?

It’s important to know if the data is coming from a professional survey source (like the Compensation and HR Group), a trade association, a recruiting source, or a third party who has bought another company’s database.

A trustworthy survey company will identify the source of the information and provide additional information such as descriptions, demographic information about the participants, and the effective date of the data.

Without this information, you can’t determine whether the data is relevant.

3. Who’s Supplying the Data?

The salary data should be supplied by Human Resources professionals or others who know how to match jobs to surveys. Data may be less valid if supplied by individual employees who might inflate their job duties or salaries.

4. Are Job Descriptions or Level Guides Supplied?

A job title is not enough to determine a job match. You need the ability to determine if the survey description or level guide matches your organization’s job in terms of job content, education, skills, and experience.

5. What’s Done with the Data That Is Collected?

Compensation data should always be reviewed to eliminate mismatches and ensure accuracy and validity. It should not be included in a database without checks and balances against data that’s been received from other participants. With web survey sources, it may be difficult to determine whether the data has been audited.

6. Does the Survey Source Indicate the Effective Date of the Salary Data?

The best surveys have data reported as of a specific date and are recent (within the previous 12 months). Some survey resources collect data over a wide span of time, so it’s important to know when the data was effective and whether or not it has been aged.

7. What Labor Market Does the Data Cover?

To the extent possible, the survey data should be local. This is especially important in gathering salaries for individual contributor positions where employees have a certain commuting radius.

Also, you may want to gather data for a specific industry or from companies with similar revenue size or employee population. Web-based surveys may not have this degree of detail. Moreover, if they have too much detail, they might be extrapolating data to fill in any holes.

8. How Many Companies and Employees Are Included in the Data?

Reliable survey sources do not report information for a job unless there is sufficient data. For most internet survey sources, however, you can’t determine the number of data points that have been supplied for a particular job.

9. Do the Results Include Everything You Need?

It is helpful to be able to gather percentiles as well as average salaries so you can see the range of actual pay. Incentive, bonus, and total compensation information is helpful to have in addition to the base salary. Web-based surveys often lack this data.

Most HR professionals will attempt to gather at least three reliable sources of information to market price a job. Knowing the survey publisher and ensuring the data has been validated, you can be confident you’re providing an accurate compensation analysis for your organization.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation available now on Amazon.

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© 2020 David Weaver. All rights reserved.