Are We “In the BV Ballpark”? : Finishing the Play

As the year slides into the fourth quarter, compensation planning is on the horizon.  Everyone needs good, accurate and timely data to support decision-making for recruiting, retaining and rewarding employees.   In the previous two articles in this series, we’ve explored ways you can determine if your pay rates are “In the BV Ballpark”.  How will you finish the play?  Here are some features to look for if you are thinking about purchasing a compensation survey.

• Look for reputable organizations that follow proven methods to gather and analyze compensation data. Was the salary survey conducted in an objective, valid and reliable manner? 
• Review the research methodology to make sure it’s consistent with industry standards. Is the research organization surveying HR professionals or other executives with a good perspective on company-wide compensation practices? Surveys, which are completed by individual employees, that ask about only that person’s compensation, should be avoided, as there is no assurance the information reported is accurate.
• Look for a statistically significant sample size of incumbents covered by the survey. A good survey should cover a representative number of companies for its target population.  Data based on small sample sizes is unreliable.
• Look for studies that cover industries, jobs, and regions that are most applicable for your purposes. At the local level, the best salary comparisons will come from other firms in the same city or town. Good salary comparisons may also come from a different city or town with similar labor market characteristics and a similar cost of living.
• Look at the types and descriptions of respondent organizations.  Are the functions, services offered, and clientele of the organizations in the salary survey comparable to your firm?
• Note operating budgets of respondent organizations.  As a general rule, larger operating budgets or a larger number of full-time staff means higher salaries. The most valid salary comparisons will be derived from organizations of comparable size to your own.
• Look for your competitors and peers.
• Look for a good match of job descriptions between the survey and your firm. Be sure to compare job descriptions, not just job titles. To be comparable the jobs must have a similar level of responsibility and range of duties.
• Examine the type of data gathered and analyzed. The most valuable surveys will include such metrics as base salaries, raise percentages or amounts, merit increases, incentives/bonuses, salary ranges, starting salaries, allowances and benefits, working hours, educational requirements, geographic location, source of hire (internal/external), working conditions, etc.  Surveys with large datasets can be cross-tabulated to include other demographics such as tenure, years of experience, geographic location, and so forth.
• Rate its usability. Are median salaries reported as well as averages? The ‘mean’ can be affected by extreme values, usually by a few high salaries at the extreme high end of the range. In salary data, the median will almost always be lower than the mean.
• Take note of the dates on which survey data were collected. The date a survey is published is always later than the effective date of the data within the survey. Long lag times between compilation and reporting may require you to make inflation adjustments in your analysis.

A good salary survey can provide valuable insights and support for compensation plans.  But deciding compensation levels for a particular job involves much more than simply analyzing data in a salary survey. Other critical considerations are what the firm can afford, internal salary relationships, cost of living, recruiting problems and policy constrictions. Information from surveys only helps to determine how equitable your pay is in the marketplace. You must go beyond the data to make sure that your plans and practices reflect the needs and character of your organization. 

Ellen Warden consults with business valuation practices on a variety of human resources issues. Read more at WorkPlace Synergy.