Determining the relationship of an organization’s pay structures and pay rates to those prevailing in the relevant labor markets is a critical part of its compensation management system. Getting it wrong can result in unnecessarily high compensation costs or non-competitive rates that can result in dissatisfaction and turnover. But getting it right is challenging.
Compensation surveys are the principal tool for determining market position. Their role is to act as a translator. They provide a means for organizations to both input their data and to extract results that represent prevailing market rates, which can then be compared to their current pay structure and pay rates. Surveys use “matching models” that include benchmark jobs and descriptions of those jobs. They are like “Rosetta Stones” that enable organizations to relate their practices to those of competitors. They do not tell an organization what to do… but only provide an indication of what competitive organizations are doing.
Surveys can tell organizations how much and how competitors are paying their employees. But they cannot answer all of the policy questions for an organization or indicate what it should do. Each organization must consider its mission, culture, internal and external realities, and its strategy to determine how much and how it compensates its employees. But without the kind of quality evidence about competitive practice that valid and reliable surveys can provide, practitioners can be left shooting in the dark.
Email me at firstname.lastname@example.org for a copy of the article originally published by WorldatWork Journal Q1 2014. Source Article: “Compensation Surveys: The Rosetta Stones of Market Pricing” by Robert J. Greene, PhD, CCP, CBP, GRP, SPHR, GPH