This is a continuation from yesterday's post on salary range design, which focused on the classic approach. While it is desirable to build salary ranges with a consistent, symmetrical design, it is also important that the ranges truly reflect your organization's specific needs and objectives. Most times the classic approach provides an excellent fit; however, in some cases its worth considering whether a bit of tailoring is called for.
Tailoring Salary Range Design
The classic salary range with a 50% range width, as illustrated in yesterday's post, provides a range of salary opportunity to distinguish differences in individual employee experience and performance. A newcomer with relatively little in the way of related skill and experience can be brought in at a rate as low as 20% below the market average/median; and your seasoned superstar can be paid at as much as a 20% premium above this market rate. Sounds good, right?
But what if this doesn't exactly fit your model for attracting, retaining and motivating employees? Consider the following examples of organizations who felt the need to tweak the classic salary range approach in order to secure a better fit.
A wealth management firm places a high value on retaining employees, at all levels of the organization, in order to build long-term relationships with its clients. Having staff in place who know their clients well and understand their particular needs is a critical part of how they execute their mission. In developing a new salary range structure, the firm began with a series of classically configured salary ranges, featuring a 50% range width for all positions. Management was troubled, however, by the range maximum at 120% of control point/market rate. They believed that keeping good performers in their positions to continue to bond with and serve customers was worth more than the 20% premium above market average afforded by this range design; therefore, they extended the maximum to 130% of the control point/market rate (resulting in an asymmetrical range with the minimum at 80% of the control point/market rate). This range design was a better fit for their human resource strategy and needs.
A manufacturing company's human resource strategy is to seek good but relatively inexperienced people, and then provide extensive training and development in their particular production approach and philosophy. They began design of their wage range structure with a series of classic ranges with 40% range widths (minimums at 83.5% of control point/market rate, maximums at 116.5% of control point/market rate). In consideration of their staffing approach (and their hiring experience to date), however, the company decided to extend the range minimums down to 78% of control point/market rate, to allow them to hire employees at a lower entry wage, but then provide them with a series of wage increase opportunities to recognize and reward their progress through the company's training and development program.
A professional service firm that tended to hire highly educated, experienced personnel took an opposite tact to that of the manufacturing company. Because of their need to hire staff with a track record and, often, an existing clientele, firm management did not believe that they could bring people in much below the going market rate for their roles. And, sometimes, the opportunity to hire a "star" necessitated an offer above what was considered market average/median pay. In developing their salary ranges, they wanted to put a range design in place that reflected this reality. Their salary ranges were also asymmetrical, with minimums at 90% of the control point/market rate and maximums at 130% of the control point/market rate.
I don't want to leave you with the impression that you can establish a series of salary ranges that randomly vary in design and width. This would leave you open to issues of perceived (and potentially real) discrimination, among other things. In the examples noted above, the range designs described applied either to all employees, or all employees in a designated group (e.g., all hourly employees). Understand and be prepared to explain the business case for your salary range design, particularly if you've tailored your approach to your particular human resource strategy - this should be an important part of your compensation communication.
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