Survey Quartiles Are Not Salary Ranges, And I'll Tell You Why

Most professionally published salary surveys report, in addition to mean or average salaries, salary quartiles.

Quick stats lesson (with a little help from Wikipedia):  A percentile is the value below which a certain percent of pay rates fall for a particular reported survey job.  So the 75th percentile is the level below which 75% of the reported pay rates may be found.  The 25th and 75th percentiles are known as the first and third quartiles, respectively, and the 50th percentile is known as the second quartile or median. 

There is a tendency, a growing one in my experience, to simply lift the quartiles reported in a salary survey and use them - as is - as a de facto salary range for your job.  In the most common variation of this, the first quartile becomes the minimum, the median becomes the midpoint and the third quartile becomes the maximum.  While this is an easy (and apparently common) way to establish a salary range for a job, I advise against it.

Here's why.

One of the primary reasons for creating salary ranges for jobs is to establish some structure to guide salary decisions in order to ensure that they are made in a fair and consistent manner.  And if you use a standard approach to develop ranges - e.g., a midpoint established at market value, minimum at 80% of midpoint and maximum at 120% of midpoint for a symmetrical range 50% wide from bottom to top - you will accomplish this.  But if you pull quartiles from surveys and create ranges from them without ensuring a consistent pattern, you are setting up arbitrary ranges which may vary substantially in width and pattern from job to job, and which will - invariably - produce erratic and capricious salary decisions.  Sound like a good idea to you?  Me neither.

Better instead to use a consistent and well-thought-through approach to creating ranges - either from market values or from values generated through an internally-based job evaluation approach.

Comments

[The Career Encourager]

Great post - you do such a great job of "demystifying" comp by expaining the context and philosophy of various practices.

[Ann Bares]

Thanks, P! I was a little worried that this would be a tough one for non-compensation people to slog through, but I keep running into this practice and felt compelled to post about it. I am heartened to hear that you thought it was helpful!

[Ray Chung]

Ann,

Thanks again for an excellent write up! This is a great post that I think I'm gonna use to teach with! Suggestion: Perhaps a follow-up post can include how to determine the ranges as determined by compensation philosophy (lead-lag).