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JOBS, GRADES, INCUMBENTS: UNDERSTANDING THE LIMITATIONS OF SURVEY DATA AND HOW TO AVOID SURVEY DATA PITFALLS

Written by Kai Donesa on May 19, 2022. Posted in Resources.

Salary surveys are an important HR tool. They are necessary for organizations to properly manage and maintain compensation every year. However, survey approaches can differ greatly from one provider to the next, particularly in the information they collect, their approach to job matching, and their treatment and presentation of employer data.

When deciding which survey data to use, it is essential for HR practitioners to familiarize themselves with the kind of information that each survey provides, the methodology behind the analysis, and the limitations that come with every approach. Here are some things to keep in mind to help organizations steer clear of typical salary survey missteps:

Limits When Working with Job Data – in our article, “Measuring Market Position”, we explained that too much emphasis has been placed on certain occupations just because they are considered ‘hot jobs.’ But occupational variance is not as significant as you think, especially when looking at salary surveys, because when you update your salary scale, you essentially update your grade levels – and grade levels are generic, not based on occupations. When looking at survey data, job data can be a useful additional reference if you want to look deeper into the market data. But it is important to note that job data is not what impacts your salary scale, but grade level data.

Limits When Working with Incumbent Data – we have mentioned in a few of our past articles how incredibly misleading incumbent data can be when used as a survey data reference. Many employers believe that if a salary survey reports actual incumbent salaries, the market data is somehow perceived as more ‘accurate’. In Birches Group, we believe that salary range data, not incumbent data, provides a more stable and realistic view of the labor market. Incumbent salaries are person-based, highly dependent on the qualities of the individual sitting in that position. When working with incumbent salaries, it is common to find outliers that significantly skew the overall market data because their individual salaries are influenced by other factors separate from the job. But when salary ranges become the reference, this provides a more accurate picture of market movement and serves as bookends that prevent outliers in the analysis.

Limitations When Working with Just Base Salary – some employers, when looking at survey data, tend to rest their analysis just on base salary information. The problem with this approach is that in majority of labor markets around the world, base salary is only one component of an employee’s actual compensation. To be considered as an employer of choice, you will need to look at the full package, and that includes benefits – cash and in-kind – as well as market practices on non-salary benefits such as pension, medical, etc. In some markets, benefits have a big impact when it comes to recruitment and retention. In other countries, some benefits are mandatory, some cultural, while others address local hardships.

Birches Group’s conducts compensation and benefits surveys in over 150 countries around the world. Our multi-sector approach is designed for high growth, developing markets where leading employers determine local market trends and practices. We capture data from a total compensation perspective because in many of these markets, base salary is only part of the picture. Additionally, because developing markets are volatile, our surveys make use of salary range data to provide our participants a more accurate movement of the market that is linked to the purpose of the job, not the incumbent. Lastly, our surveys are updated three times a year, every April, July, and October which guarantees our clients fresh data every time. Contact us to learn more about our Community™ Compensation and Benefits Survey in your country.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

FIVE STEPS TO IMPLEMENT COMMUNITY™ SKILLS

Written by Kai Donesa on April 12, 2022. Posted in Resources.

In our previous articles, we have shared the powerful and versatile capabilities of the newest solution from our Community™ integrated approach and platform, Community™ Skills. In this article, we will go over the five steps needed to implement Community™ Skills in your organization. This innovative tool allows organizations to manage and build their capacity by measuring the skills of their workforce, tailor learning and development plans around explicit measures at every grade level and skill stage and be able to objectively recognize skills growth through pay movement, prepare for their staff’s promotion, and so much more.

So, perhaps you’re thinking, “Sounds great! But how exactly do I implement this? Where do I even begin?” “Does it really only take five steps to implement Community™ Skills in my organization?” Because there are several HR functions that will need to be aligned to the Community™ Skills approach, this undertaking will take a bit of effort. But we, at Birches Group, have gone through this process ourselves, and here are some of the steps that we have taken to get everyone on board:

Align your organization’s job evaluation and pay structure to Community™ – To implement any Community™ solution in your organization, we must start with your jobs. Through Community™ Jobs, we will evaluate and align your job structure to our fourteen Birches Group job levels which will be the same levels used once you carry out your Community™ Skills assessments. Once your job levels have been aligned, our five Skills stages can then be arrayed against the pay range at each grade and the corresponding pay increments can be tailored to follow your organization’s policy on pay movement and frequency of skills assessment rounds.

Community™ Skills training with managers – Now that you’ve aligned your jobs and pay structure to the fourteen Birches Group job levels and five Skills stages, managers will need to be trained on the concepts behind the Community™ Skills approach and a briefing for them to use the tool. Birches Group is on hand to organize this for any organization to ensure that there is a shared understanding of the principles of each skill stage and the six indicators among all supervisors.

Conducting your first Community™ Skills assessment round – Once all managers have been trained on the methodology and platform, HR is now ready to conduct the first skills assessment round. Managers will assess each of their staff according to their evaluated job level and all results will be collated and stored in our Community™ system. Birches Group can assist in generating individual and overall reports. HR can then calibrate the results to ensure alignment in the assessments before presenting recommendations to management.

Tailoring learning and development plans – Simultaneously, managers can also begin tailoring individual learning and development plans for each of their staff. Each development plan should focus its activities to help the employee advance to the next skill stage or grade level, their assignments and metrics should align with each of the six indicators, and the timeframe in between assessments should also be determined.

Communicating assessment results to staff – once assessment recommendations have been approved and respective movements in pay have been taken into consideration, it is time for managers to communicate the results to their staff. At this stage, it is crucial for managers to be clear about how each employee was assessed, the impact on their salaries, and their follow-up development plans. At the same time, employees can also take equal ownership and provide suggestions to supplement or refine their development plans further. This way, assignments and metrics can be more attainable for staff in between assessment rounds.

The first round of skills assessments for any organization will, indeed, be a period of adjustment. HR has a role to play in making sure that the process that went into the assessments, creating the development plans, identifying promotion readiness, and pay movement are all being communicated clearly to staff. But with the structure and transparency our Community™ Skills tool provides, staff discussions around these critical talent management activities can now be done with ease. We hope that enumerating these five steps to implement Community™ Skills gives a clear pathway on how to get started. Contact us to see a demo of our Community™ Skills tool and how your organization can get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

COMMUNITY™ SKILLS – THE HR SWISS ARMY KNIFE

Written by Kai Donesa on March 23, 2022. Posted in Resources.

Birches Group’s Community™ Skills is a groundbreaking solution that radically changes the way organizations manage human resources. Like the well-known Swiss Army knife, Community™ Skills is so versatile that it can support different human resources activities using one simple and integrated approach.

In a previous overview of our Community™ Skills solution, we described how our methodology, with its five Skills stages and six indicators, can easily be adapted to an organization’s pay ranges and facilitate pay movement based on actual skills growth of staff, measure the capacity of its entire workforce, and help managers tailor learning and development assignments to enable movement of staff deeper into their grade or to the next skills stage.

Because Community™ Skills links the pay movement of staff with their growth in skills and experience, this approach can also be readily incorporated into other areas of HR from recruitment to succession planning. Here are other ways where Community™ Skills can support your HR program:

Establishing Fair and Equitable Hiring Practices

During recruitment, Community™ Skills makes it possible for managers to target the right candidate they need by allowing them to define the appropriate skill level required for a role. From the five Skills stages, managers can select from the first three skill levels, Basic, Proficient, or Skilled, depending on the level of skill they need. And because assessments are purely based on the candidate’s skill level, setting starting salaries during the recruitment process becomes simpler, more objective, and easily justifiable.

Aligning Skills to Pay

With the five stages of knowledge mapped across the different points in the salary range, Community™ Skills makes it possible for organizations to fully utilize their salary ranges and manage pay clearly and objectively. As staff build skills, they move across the stages driving movement in pay within their salary grade. Personal biases such as gender, race, etc. will have no impact on the increase that an employee receives.

Community Skills- The HR Swiss Army Knife

The illustration above can be applied to most grade levels.

Staff development can be tailored at every job level to be able to push out more of the work that is essential to the organization’s success.

Tailoring Learning and Development Assignments for Employee Growth

Through Community™ Skills, tailoring learning and development plans become a collaborative effort between the manager and staff. Because each skill stage is explicitly defined, employees can equally take ownership of their progress by providing feedback or suggestions that will tailor their initiatives to advance their skills growth.

Prepare for Career Pathing

Skills ratings inform managers about promotion readiness, providing objective criteria for succession and promotion decisions.

Never has there been any other solution that can address so many HR needs with just one approach. Community™ Skills not only seamlessly connects what used to be separate HR functions, but also links each of them in a way that any organization can adapt and design their respective strategies around. Contact us to learn how Community™ Skills can work for your organization.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz

BIRCHES GROUP’S COMMUNITY™ SKILLS MODEL

Written by Kai Donesa on February 24, 2022. Posted in Resources.

Through our Community™ Skills model, organizations can finally recognize and explicitly measure an employees’ growth in skills, knowledge, and experience – their abilities to perform their job.

In Birches Group, we believe that when organizations are able to explicitly measure their employee’s accumulation of knowledge and experience, this can serve as the foundation to ensure transparency and equity for other critical talent management functions such as managing pay movement, recruitment, learning and development, succession planning, and more.

The problem is, many organizations have always applied separate approaches and tools in managing each of these critical HR activities. This is an issue because none of these approaches align with each other or even share the same standards…but not anymore.

In Birches Group, we’ve developed a better approach, and it’s simpler than you think!

Community™ Skills

The Birches Group solution for measuring knowledge and experience is Community™ Skills. Community™ Skills measures the stages of skills and knowledge linked to the Birches Group Community™ job levels. We have developed explicit measures for each job level using the same factors and indicators that form the basis for our job evaluation methodology.

The Same Three Community™ Factors

Community™ Skills is part of our larger integrated HR management approach and platform, Community™, wherein the same three factors – Purpose, Engagement, and Delivery – are also used to assess each employee across the same fourteen Birches Group levels. A description of each of the three factors can be found in our previous Community™ article, “Just Three Things: How Purpose, Engagement, & Delivery Can be Used to Understand Your Organization and Support Your HR Programs” and how these three factors serve as the common standard of measure across all our Community™ solutions.

The Six Indicators

Each Community™ factor is then divided into two indicators. The factors and indicators are job-based and can be applied to any kind of role in any occupation in a generic manner.

For Purpose:

Conceptual Knowledge – What is the conceptual focus and complexity in the design of solutions? For rules-based transactions, what is the complexity of the data or information handled?

Applied Knowledge – What is the breadth of managerial or project/program oversight? What is the extent of supervisory or process management as part of a larger functional service?

On Engagement:

Internal – What is the collaborative role within the functional team? What is the depth and breadth of information provided to the team?

External – What is the advisory role with other functional teams or external clients? What is the depth and breadth of information provided to other functional teams or external clients?

And for Delivery:

Timeliness – Efficiency: How are resources deployed against project/program needs and cycles? How are process schedules maintained to strengthen service responsiveness?

Quality – Effectiveness: What is the measurable impact of interventions or the functional unit? How are quality metrics maintained throughout service execution.

The Five Skills Stages

Community™ Skills uses the job levels established within an organization as the basis for defining progressive Skills Stages, which can be used to measure the continuous growth of an employee within their job. In short, it provides an explicit measure of “experience” rather than relying on time as a proxy. In our Skills tool, we have identified five Skills Stages at each grade level:

The Basic stage reflects the minimal acceptable understanding of the job. Employees in this stage are capable of addressing simple issues in standard operational settings.

The Proficient stage reflects the level of understanding of work where more complex issues can be addressed and the employee can adapt to most operational settings, including more complex ones.

The Skilled stage is achieved with a complete conceptual understanding of the job and the ability to be effective in all types of operational settings.

The Advanced stage shows the level of knowledge that enables a high degree of independence in the job and reflects a broad understanding of concepts which overlap with the next higher grade level.

The Master stage indicates the highest level of understanding of the job and overlaps significantly with the next higher grade level. The level of understanding found at the master stage also allows for advising on process and systems improvements and the mentoring of others, which in turn results in better outputs and stronger capacity.

These Skills Stages were developed using the Birches Group Community™ Jobs approach as the underlying foundation.

With six Indicators and five Skills Stages, there are a total of thirty (30) milestones to measure skills and knowledge per grade.

Using these thirty milestones, a Skills assessment can be recorded over time. Staff may progress through the stages at different rates across the different indicators as this reflects the natural competencies of people relative to areas where they have skill, and how quickly or slowly their Skills grow.

As managers and supervisors observe the Skills growth of their staff, critical HR functions such as pay adjustments and determining the readiness of staff for the next grade or assignment becomes clear, transparent, and objective.

Community™ Skills makes it possible for managers to measure skills, knowledge, and experience through explicit stages and indicators making this one of the most innovative HR tools yet. Contact us to learn how Community™ Skills can work for you.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

WHY YOU NEED TO ASSESS THE SKILLS OF YOUR EMPLOYEES

Written by Kai Donesa on January 18, 2022. Posted in Resources.

Organizations typically provide a range of pay for each job. And what these pay ranges represent is the value an organization places on experience within a grade level. Traditionally, pay ranges are divided into steps or increments awarded on a fixed calendar schedule. When an employee moves up a step, this usually indicates satisfactory performance was achieved. But what often happens is that organizations move staff through the steps simply because another year has passed.

While the general belief is that over time, with experience, the value of work carried out by an employee should increase, we know this isn’t always the case. Organizations can have staff who have been in their roles for ten years but only show minimal progression or improvement in their quality of work. Other times, an employee can be in a job for less than two years, but they learn fast and deliver timely and quality outputs proving an increase in tenure does not always equal an increase in the value of work.

The question managers and supervisors should ask is, “How can we measure experience without relying on time or tenure as a proxy?” “And if we continue to award pay increases each year to staff, how can we determine that the knowledge of our staff also grows at the same pace?”

The lack of an approach to move staff through the pay range continues to be a challenge for many organizations. And while the alternative approach to steps applied by many organizations is to use merit increases as a basis to manage pay movement, we know that this approach is just as flawed.

In our article, Pay for Performance is HR’s Biggest Epic Fail, the problem with using performance as the basis for pay movement is that it rewards an employee’s one-time achievement through a salary increase even if we know that their performance may not be the same the following year. Further, the rubric designed to determine increase differentials among staff is often so minimal that it has no impact and does little for employee retention.

We all know performance management can be tedious and difficult. But we all also know that they are important. So, what’s the alternative? In Birches Group, we have a different approach, and it is simpler than you think!

WHY SHOULD YOU ASSESS YOUR EMPLOYEES’ SKILLS?

We believe that pay movement should be linked to skills growth and knowledge. It is known that as one learns and develops further into their roles, they acquire more experience and skills that allow them to deliver faster, better-quality work. And because skills are accumulated and cannot be unlearned, there is a sustained value to the organization making it a more reliable basis for salary increases.

But beyond pay management, assessing the skills of your staff will also greatly support your organization’s strategies around capacity building and career development. Knowing the skill level of your entire workforce enables managers to identify and create the necessary initiatives that will help close existing skills gaps and facilitate the movement of staff, either deeper into their grade or promotion to the next higher level.

In our next articles, we will go deeper into our approach to measuring skills and how it can support many of your talent management programs from pay movement, learning and development, and recruitment and career planning. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SCALE: IMPLENTING YOUR NEW SCALE

Written by Kai Donesa on December 21, 2021. Posted in Resources.

Now that your salary scale and benefits package is ready, the final step is implementing your new scale and communicating the changes to your teams. Equipped with your analysis and overall cost implications against your budget, you will now need to secure the necessary approval from management.

When seeking approval, begin by presenting any existing issues with the current salary scale and the challenges your salaries are facing against the external market. Take management through your process when you built your new salary scale, making sure to highlight:

The chosen salary survey you used as a basis
Your chosen set of target comparators that met your criteria
The difference of your existing salaries against your target market position
The steps you have taken to address the current issues and build future capacity
The overall cost

Finally, you also need to present to management your implementation plan and the timeframe that it will require, so they can assess the entire impact of the new scale.

Once approval has been granted, the next step is communicating the changes to staff. This is a crucial process because you will need to equip your managers with the right information for them to relay later to each of their teams or units. When discussing the changes with your staff, keep these in mind:

Discuss the work that went into building the salary scale and be clear on the company policy that supports the steps you have taken. This will ensure that your managers will be ready to answer any questions or reactions their staff may have.

Be clear about your implementation plan, what staff can expect, and when. This way, you can manage everyone’s expectations and hopefully have them feel excited about the changes that are soon to take place.

With the steps we have shared on implementing your new scale, we hope this has provided you with the insight you need to get started in designing your own pay structure. Birches Group is always ready to help organizations create a salary scale that will work for them. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: ADJUSTING YOUR SCALE

Written by Kai Donesa on December 9, 2021. Posted in Resources.

Now that you’ve created your salary scale and examined your benefits package; the next step is adjusting your scale. Refining your scale will be a trial and error process until you get as close to your target as possible. There are several factors that will affect the impact of your scale, both externally and internally, so it is crucial to keep these in mind every step of the way.

When we think about external factors that affect the impact of your salary scale, factors such as average market movement, your budget, the number of incumbents per grade level in your organization, as well as the overall cost all need to be considered. When you start allocating adjustments for each grade level in your scale, using the average market movement and your budget, you can start adjusting your scale’s minimums and maximums, while keeping the number of incumbents per grade level in mind. Once you have gotten as close to your target market position as possible, check if your adjustments are all within budget. If not, keep adjusting and tweak where necessary.

While adjusting your pay ranges, you also want to keep in mind the issues that your existing salary scale has and how your changes will best address them. Are your hiring rates competitive at the job levels where you need more capacity? Do any of your existing staff fall below your current hiring rates? Similarly, do you have staff that are currently paid beyond the maximum salaries of their grade level? Do you make use of your salary ranges per grade level or do you find many of your staff clustered in certain points in each grade? Remember, adjusting your salary scale is not simply about updating salaries following market movement. It is also about making corrections where you know there are inefficiencies in the current pay structure.

Just as important as reaching your target market position and being competitive externally, is your team’s internal cohesion. Once you have reached your desired salary scale results, give it another look to see if everything makes sense. Pay close attention to your internal parameters, such as the progression from one grade level to the next, and see if the overlaps are reasonable. Examine your spans – the difference between your minimum and maximum salaries – as well and see if they align with the nature of each job level within your organization. Also, you will need to see how each of the adjustments you made will affect staff at every grade level. Checking for fair internal cohesion will ensure strong staff engagement to which they can tailor their development and build their careers over time.

Designing and refining salary scales is both a technical exercise and a sensitive one. As managers in human resources, we must realize that without an efficient salary structure in place, along with a solid job structure, achieving a strong engaged workforce will always be a challenge. And while we know that the salaries we set will not always make everyone happy – someone will always want higher pay, someone will challenge your chosen set of target comparators, and perhaps ask why they cannot have more benefits – what is important is making sure that the policies that went behind designing the salary scale is clear and communicated to staff. To learn more about how Birches Group can help you design a salary scale fit for your organization’s needs, contact us today.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: ANALYZING BENEFITS

Written by Kai Donesa on November 18, 2021. Posted in Resources.

Analyzing your benefits package is a step that can’t be missed. In many labor markets around the world, benefits are an essential part of total compensation. Particularly in developing markets, some benefits are mandatory, others may be cultural, and some given to address certain realities on the ground. Whether you are a local organization or an international one, it is essential to have a policy that aligns with your market’s local conditions.

Additionally, benefits are also an important part of a company’s Employment Value Proposition (EVP). Determining which benefits your company provides, the frequency it is provided, and grade levels eligible to receive them can be used a strategy to attract and retain talent, showcase company culture, and be seen as an employer of choice.

Once you have aligned your total compensation against the market, designing your benefits package will begin by ‘backing out’ your benefits to arrive at just base salary. From there, you can assess which benefits to keep and maintain, and which ones to change.

When examining your benefits package, here are three things we suggest you keep in mind:

What benefits are considered mandatory in your market? – different countries have different mandatory benefits. Some countries have mandatory bonuses on top of base salary, others may have mandatory housing or transportation allowances, while others have government-mandated health and pension contributions. As an employer, you will need to follow what is prescribed by law, especially if you are an international organization.

What benefits are common practice in your market? – knowing which benefits are commonly provided by most employers in your market can also help when designing your benefits package. Of course, it is not necessary to follow every single benefit provided. But those that are given by majority of the companies could be considered and examined further against your budget and policy.

What benefits are considered tax-advantageous to your staff? – depending on your market, some benefits can be considered taxable and others non-taxable. When thinking about benefits, employers can provide contributions or cash benefits that do not trigger a tax deduction from staff or maximize its non-taxable portion as much as possible.

Further, when designing your benefits package, employers also need to think about the grade levels that each benefit will apply to. Unless it is mandatory, not all benefits need to be provided to all grade levels and in the same manner. There are some benefits that are given to certain grade levels due to the nature of their jobs. Incentive-based benefits and representational benefits are more common for roles in managerial levels, while cash allowances and transportation benefits are more commonly provided to general and process-based grade levels.

Benefits can also be used by employers to encourage desirable behaviors from their staff. A classic example is using performance bonuses to reward achievement and a job well done at the end of the performance year. Another is the use of loans, seniority allowances, or even company-sponsored savings plans to promote staff retention. Sometimes, companies also hold activities that foster workplace culture among their employees, from team lunches, happy hour, to corporate social responsibility events. In our many years of conducting salary surveys and collecting data from employers in over 150 countries, we have certainly seen a lot of creativity from employers when using benefits that highlight their unique company culture.

When analyzing your benefits, we must remember that, in the end, benefits are cheaper than salaries. Base salary, bonuses, and allowances all come from the same internal budget, so every dollar that goes into providing more benefits will take away from the budget for other components of your staff’s employment package, such as pension and salary increases.

Birches Group can help your organization design a benefits package that aligns with your policy while meeting local conditions. Contact us to get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: MEASURING YOUR MARKET POSITION

Written by Kai Donesa on October 25, 2021. Posted in Resources.

Measuring your market position is a critical step in building your salary scale. Once your target comparators have been narrowed down and the target percentile has been identified, analyzing your salaries against your chosen external market to arrive at recommendations that will frame your overall pay structure is when strategies around recruitment and retention begin.

There are several ways to go about measuring market position. Here are some steps that you can consider:

Focus on Salary Ranges – salary ranges provide a more stable and realistic view of the labor market, rather than using incumbent salaries as a reference. We know that incumbent salaries are person-based, and rates can vary significantly depending on who is sitting in those roles. When building a salary scale, salaries need to be based on the nature of the job and the value the organization is willing to pay for it with reference to similar job levels in the external market. Further, incumbent salaries are extremely volatile especially in developing markets. Using salary ranges provides context and is based on actual market movement, as well as serving as ‘bookends’ that can take away outliers in your analysis.

Assessing Your Market Position – when measuring market position, a common approach is to average all benchmark jobs in the same grade level in your organization, while also considering the number of incumbents associated with each data point as the weighted average. Using the recommended salary survey in your compensation policy, you can then begin to measure your market position for each grade level using your findings and assess them against the external market.

Less Emphasis on Occupational Variance – over the years, too much importance in terms of pay has been placed on certain occupations simply because they are considered ‘hot jobs.’ But the truth is, occupational variance, when measuring market position, is not as meaningful as you think. When assessing pay, adjustments are applied to the salary scale, which is generic, and not to specific occupations. Moreover, market data results would sometimes report higher pay for certain industries giving an illusion that those functions are paid higher than other jobs of similar levels in the market. But what that higher number simply means is that there are more data points reported for those specific roles, therefore pulling the overall average compared to other jobs with less data points reported.

Do Not Forget the Four Job Clusters – in our previous article, It Starts with Jobs, we discussed that the labor market does not move at the same pace for all grade levels. This is especially true in developing markets. In our Community approach, we believe that the labor market has four job clusters – General, Process, Design, and Leadership – each one moving at different paces depending on the availability of talent in each unique market. In highly dynamic markets, it is common for grade levels found under the Leadership cluster to move much quicker than grade levels under the General, Process, and Design clusters. Due to the specific skills required and level of contribution expected from the Leadership cluster, jobs at these grade levels are usually harder to recruit therefore resulting to significantly higher differences in pay. On the other hand, jobs under the General, Process, and Design clusters are more widely available which explains the more gradual pay movement. Since this is the reality in most labor markets, it follows that setting pay should not just be one number but instead, requires a more tailored approach depending on the organization’s needs and objectives.

With the steps that we have recommended when measuring your position against the market, we must not forget that internal cohesion between grade levels is just as important when building your salary scale. Being able to balance external competitiveness while maintaining fair pay relativities internally is what organizations need for an effective and well-designed pay structure. Birches Group is ready to help your organization design a salary scale that meets your needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: DETERMINING COMPOSITION AND POSITION FROM THE SALARY SURVEY

Written by Kai Donesa on September 17, 2021. Posted in Resources.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale

Salary surveys are an important tool and step that managers use when building or refining their company’s salary scales. This helps managers establish and set appropriate compensation and benefits within their organization based on information provided by other employers present in the labor market. Current salary surveys offer different methodologies to capture market data, each one with differing employer samples, compensation and benefits information collected, and more importantly, varying approaches to job evaluation. All these are important factors to consider when selecting the right survey to use when building your salary scale.

Often, especially in large labor markets, there has been a preference among many employers to go with the salary survey that has the biggest employer sample. While this approach may seem reasonable, the reality is that many of the employers in the survey will not be relevant comparators, especially if they do not compete with you for the same jobs or share similar characteristics as your organization.

After establishing your compensation policy, creating your job structure, and participating in your chosen salary survey, determining your composition and position in salary surveys is the next crucial step towards building your salary scale.

Selecting the Right Comparator Group

Composition refers to the composition of the market used to establish your competitive position. Many employers will say, “We want to be at the 50th percentile of the market.” Composition answers the question, “50th percentile of what market?”

When designing your scale, you should establish a refined comparator sample, made up of employers important to your organization. Your compensation philosophy should identify the number of comparator organizations to be selected and the criteria they must meet to be included in your market comparison. Examples of criteria to consider include:

Talent competitors (those you recruit talent from and lose talent to)
Industry peers
Organizations of the same size or in the same geographic location
Other leaders in your market outside of your sector

Keep in mind that participants in a survey can change each year, with new ones added and old ones dropped. The key is having consistent criteria that ensure, even with a changing survey sample, your selected comparator group is consistent and still sufficient to meet your requirements.

Targeting Your Market Position

Once you have narrowed down your target comparator group, you will need to identify your desired market position. Position is the expression of how competitive you wish to be against your defined market – your target market position. The 50th percentile, or median, is a common target. That means you will be right in the middle of the pack. Is that where you need to be to reach the talent you wish to recruit and retain? Is it the same for all levels of the organization?

Before deciding on a percentile, it is important to refer to your organization’s pay policy. This will ensure that your resulting analysis aligns with the standards approved by your management, is credible, and is easily defensible to stakeholders. Selecting your target market position also depends on whether you wish to lead, match, or lag the market.

If you match the market, you are anchoring your salary scale to where the market is today. With lead or lag positions, you are deciding to either get out in front of the market or trail behind. A simple way to lead is to estimate the market movement from the date of your scale for a period of time forward — typically a year. This ensures your scale is competitive even as other employers adjust their compensation during the same period. A lag position is usually not desirable, as you will be trying to constantly catch up to your peer organizations.

If your organization is facing challenges to recruit or retain talent, you should reassess your target market position and adjust it to ensure your organization is positioned competitively against your chosen market. Sometimes recruitment and retention issues are limited to specific grades or bands. While some organizations may use the same target market position for all grade levels, labor markets are not uniform and do not move in a linear fashion. Certain grade levels can move faster due to high demand, hot skills, or other considerations. Organizations can choose a more competitive target market position for job levels where these talent challenges exist.

Finally, do not forget to consider budgetary resources. Whatever steps you take in the design of your structure need to be made with the cost impact in mind.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale. Hopefully, with this information, organizations will feel more informed and empowered to build one of the most important tools in human resources management. Birches Group conducts salary surveys in over 150 countries around the world and uses a simple and straightforward job evaluation approach to ensure consistency throughout. Through our surveys, we help organizations design salary scales that will fit their needs. Contact us to learn more about how we can help you get started.

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