Compensation Data

Matchmaking and the Market

April 01, 2017
MRA Edge
Compensation Planning
Read time: 4 mins

In February, we discussed whether you really need a compensation philosophy. (Spoiler alert! Yes, you do.) Last month we explored the data contained in salary surveys—how to interpret it and how to decide what numbers to use. This month we tie together a solid base (compensation philosophy) with solid data (salary surveys) and explore the most important and exciting aspect of using market data to make compensation decisions: making solid matches.

The Market

Make sure you have a good understanding of your job’s market. When using survey data, consider the size of the sample but don’t lose sight of the other elements of the data. While a large sample size waters down extreme variations of a data set, you should also consider the scope cuts of the data. For instance, you may have a United States data point in a survey that shows 300 organizations but if you only recruit in the immediate geographic area, a smaller sample size in a smaller geographic region is more useful data for you. Consider who you compete with for business. That’s also who you compete with for talent, so look at industry scope cuts as well as data from a similar size company by revenue or number of employees. It’s a good practice to find several different data points from several different surveys. This will help ensure that the data is solid and representative of the market pay for the job.

The Match

Make sure you are comparing jobs effectively. None of the data in your treasure box of surveys is useful if you are not matching your organization’s job to the correct
corresponding survey job. A basic compensation guideline is that there should be at least a 70% match between your job and the survey job responsibilities. Take time to understand the job in your organization by reading the job description, talking to supervisors who oversee those in the job, or even those who are currently performing the job. You need a general overview of the job regarding the type and level of responsibility, not all of the details. The jobs generally found in surveys are "benchmark jobs"—those that are fairly common and comparable in terms of type and level of responsibility across companies. Even for benchmark jobs, however, don’t rely on title alone: always read the survey description to be sure you are making a good match. Many surveys also include more specific jobs that relate to a particular industry or type of responsibility. Sometimes a job in your company will be a combination of two or more survey jobs. In this case, you must decide on your approach.
You could match to the survey job that represents a larger part of the responsibilities or you could match to both/all of the survey jobs that are a significant part of your job. This is where the "art" of market matching comes in.

A Word About Crowd Sourced Data

In addition to salary surveys that are conducted and published in accordance with the Safe Harbor Guidelines issued by the Department of Justice and the Federal Trade Commission, HR professionals now have access to "crowd sourced" salary data from internet sites. Unlike the typical salary survey, crowd sourced data is self-reported, often anonymous, and available to anyone with access to the internet. Additionally, some data has been purchased by companies who then aggregate several surveys, resulting in "averages of averages", getting further and further away from the actual source of data and meaningful numbers.

While crowd sourced data sites may offer a quick answer to how much a job supposedly pays, the data is not verifiable nor can you be sure it was submitted by a company professional who has carefully matched their job to the survey job. Since employees have access to this type of data, you may want to check these sites to see what is being reported. However, if you use crowd sourced data at all, the best practice is to use it in conjunction with the solid, reliable and credible data you have from published salary surveys.

Survey data is an important source of information when determining market rates for your jobs. Used correctly, it will give you a competitive edge in the market and help you attract and retain the right employees with the skills and values that will strengthen your organization and help your organization move successfully into the future.

MRA’s Total Rewards team encompassing Compensation, Surveys and Benefits is here to help you create your strategy, build the business case, interpret data, conduct custom research, or partner on many other essential steps for a comprehensive Total Rewards approach.

This is the last of a three-part series of articles focused on compensation and salary surveys, designed to launch and reinforce your journey through:

  • Candid discussions and succinct documentation of your company’s compensation philosophy;
  • Reviewing your company’s existing compensation philosophy;
  • Using reliable survey data to make decisions impacting company costs and employee pay; and
  • Applying current, credible survey data for compensation decisions.

Source: Jane Crane, Compensation Specialist, MRA - The Management Association