Author Archives: David Weaver

What Shakespeare Can Teach Us About Job Titles

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

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?

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.

https://amzn.to/3j2OO1Y

© 2020 David Weaver. All rights reserved.

The HR Professional’s Easy 4-Step Guide to Creating Salary Ranges

Salary ranges. The phrase alone is like nails on a chalkboard for most human resources professionals.

When we think of salary ranges, we envision an unnecessary administrative burden, we imagine wasting our time on a useless project for management, and we think of…math (cue thunder and lightning).

So why bother with salary ranges in the first place?

According to a recent Compensation Planning Survey, nearly 70% of participants have formal salary ranges. If that many companies use salary ranges, they must have some utility, right?

The truth is, pain in the butt or not, salary ranges are one of your best tools as an HR professional to accomplish one of your most important job duties:

Control Labor Costs

Let’s start by thinking about salary ranges from the perspective of external competitiveness.

By creating salary ranges for every job in your company, you determine each job’s value. A salary range explicitly states the ceiling (range maximum) and floor (range minimum) for each position.

Internally, salary ranges provide an opportunity to recognize varied levels of employee performance or experience. How does it do that? By allowing your company to pay employees at different points in the range. For example, high performers may be paid in the upper third of the range, lower or less experienced performers may be paid in the lower third.

That’s why salary ranges are important. How do you actually create a salary range?

By following a 4-step process:

1. Develop Grades

Start by grouping together jobs with similar internal or external worth. An internal job evaluation tool, such as a point factor system, is one way to determine a job’s worth. However, most organizations use external market pricing to establish each job’s marketplace value. I recommend using an external market pricing system where you assign each job a grade based on your market analysis.

2. Set the Minimum, Midpoint, and Maximum

Determine each job’s midpoint based on your organization’s pay policy (to match, lead, or lag the market) and by conducting a competitive market analysis for a group of jobs in each grade.

Once you compile and average the market rates, you can establish the midpoint of each grade. The midpoint will give you an approximation of what your competition pays on average (in other words, the job’s external value).

Range spreads (which is the range maximum divided by minimum) will vary based on the level of the job. Jobs with greater decision making, and with less promotion possibility, tend to have wider ranges.

3. Set Range Overlap

Midpoint differentials and range spreads control the amount of overlap between salary ranges. A low degree of overlap and small midpoint differentials equates to small differences in the value of jobs and smaller promotional increases. As jobs become more challenging and move further up the hierarchy, your ranges should be spread wider and the midpoint differentials should be greater.

As a rule of thumb, midpoint differentials tend to start at about 7.5% and gradually increase to as much as 15%.

4. Connect Your Salary Structure to Your Performance Management System

To reinforce the fact that your company pays for performance, most salary ranges will be split based on the number of performance ratings.

For example, if your organization has 4 ratings, your ranges will be broken into quartiles. If you have 5 ratings you’d split into quintiles.

This type of compensation program design allows you to use other tools such as merit or promotion matrices to assist your efforts in controlling labor cost and encouraging pay for performance.

Should I Use Unified or Multiple Pay Structures?

Once you develop your salary ranges using that 4-step process, you have to decide if you want to use unified or multiple pay structures.

If your goal is to keep administration to a minimum and implement the least number of salary ranges, consider one unified salary structure for the entire organization.

However, if your organization has a compensation philosophy that values functions or disciplines differently, (such as engineering or information technology) then you may need to implement separate pay structures for those groups.

Another X-factor to consider: having employees in the same role in different geographic labor markets may require you to implement multiple pay structures.

Does Broadbanding Really Work?

Broadbanding reduces the number of salary ranges, for example to 4 or 5 “bands.” At first glance, you seem to be simplifying your administration when you implement broadbanding techniques, with wider ranges and fewer job grades.

In my experience, broadbanding doesn’t actually reduce administration or simplify communication to managers and employees. To control labor cost in a broadbanded structure, you may have to market price every job, and create a pay zone around each, to prevent salaries from creeping up through the wide band.

That’s a lot of work to avoid a little administration work.

Secret Salary Ranges

It’s a controversial topic:

Should you communicate your salary ranges to managers and employees?

If you value open communication, are confident in your analysis, and can defend the competitiveness of your salary ranges, then consider training managers in the proper use of pay structures and communicating salary ranges to employees.

Your Work Isn’t Over Yet…

Once you’ve established your salary ranges, it’s important to maintain them annually. According to our survey, 80% of participants review their salary ranges on a yearly basis.

Review may mean analyzing salary structure trend data and moving ranges accordingly, or performing a comprehensive market analysis to determine more accurately how to adjust ranges.

Whichever process you choose, remember: salary ranges are a key tool in administering your compensation program. Keeping them up-to-date and competitive is critical to your business.

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.

The Impact of Demographics and Technology on HR

Currently, unemployment is at a near twenty-year low. There are more jobs available than workers looking for them. The big question – is this a short-term or a long -term issue? If your organization is experiencing this now, how are you addressing it? What is your strategy for addressing it in the future?

There is some indication that we could be at the beginning of a major economic upheaval that might impact the work environment for several decades. Bain and Company Macro Trends Group provides a comprehensive overview of two major forces that will impact the work environment over the next ten to twenty years. The two forces are demographics and technology, and their collision has the potential to trigger economic disruption more severe than we have experienced during the last sixty years. These forces are already posing challenges, risks and opportunities for organizations and Human Resources practitioners. Over the next decade, Human Resources and the organizations they support will need to develop effective strategies and programs to counteract the collision of demographics and technology.

Demographically, the era of an adequate labor supply is ending. According to the Bureau of Labor Statistics, the largest labor force growth took place during the 1970s when the labor force grew by 2.6%. Since then, each ten-year period has resulted in a declining labor force growth rate. Over the past ten years the labor force has grown only 0.7%, and during the next ten years it is projected to grow by only 0.4%.

The shrinking labor pool might be good news for workers. The short supply of labor, coupled with a high demand for workers, will most likely increase their market value over the short-term. The longer-term pressing challenge for organizations will be attracting and retaining staff that have the skills required to fill critical organizational roles. Highly skilled staff are already scarce and will continue to be scarce; therefore, it will become an added challenge to attract and retain them. The organization and HR will need to enhance existing incentives with competitive compensation and benefit packages, flexible work arrangements, remote work options, more attractive organizational cultures, and a higher purpose for work.

During this period, new automation technologies will continue to augment and impact many job-focused organizations. Some jobs will evolve into role-focused positions, continually changing to do what needs to be accomplished. Other jobs will be augmented with technology, providing incumbents the opportunity to devote more time to critical non-transactional tasks.

As labor becomes scarcer, organizations will need to invest in labor-saving technologies. New technologies and innovation will generate productivity growth as automation replaces and enhances human labor. Over the next decade, the rapid spread of automation will collide with the slowing labor force growth. While higher productivity through automation is generally positive, it can be highly disruptive and will impact employment. During this period new job categories and resulting career tracks will be added to support automation advances and alleviate some of the job losses.

It will be incumbent on Human Resources to anticipate the impact of automation on the workforce and implement a comprehensive program to upskill and reskill employees. The program will need to focus on reskilling employees in declining jobs, upskilling the workforce to adapt to future implementation to technology, and attracting and retaining new talent to fill critical future roles. To increase their allure, employers need to enhance existing incentives with monetary benefits, an attractive culture, flexible work arrangements and a higher sense of purpose in their work.

During this disruptive period Human Resources organizations must understand the broad forces at work – demographics and automation – to be prepared to guide and assist Leadership in adjusting to the disruption. How can HR begin to anticipate disruptive change? They must ask the question: Are the initiatives to improve efficiency and productivity making the organization resistant to change? Any action that improves efficiency, productivity, and resilience to change is a prudent move.

Getting there will be the challenge, there is no magic formula for managing a significant macroeconomic upheaval. There are many steps organizations can take to position themselves to ride out the change. The first and most important step is to build resilience into the organization. Organizations that can absorb shocks and change course quickly and smoothly will have a chance of thriving throughout the turbulent 2020s and beyond. Human Resources needs to be prepared to provide leadership during this transformation.

Welcome to the CHRG Blog

Welcome, reader, to CHRG’s new blog! Here, you’ll find helpful, thought-provoking content written by highly-experienced human resources practitioners, touching on topics related to compensation, benefits, human resources, and general business.

While we are happy to have a platform to share our knowledge with other human resources professionals, we don’t want our voices to be the only ones heard. Our vision is for this blog to be an interactive environment for people to share their experiences for the greater good of the HR community. When it comes to leaving comments, don’t be shy — we would love to hear your thoughts!