In yesterday's post on aging survey data, I advised against using structure adjustment data as the basis for aging. I thought it worth a follow-up post to expand on this topic and share what I believe are the perils associated with using structure and structure adjustment data to manage your salary program.
A quick pause for definitions:
By structure, I mean the salary ranges or schedules used to manage base pay.
By structure adjustment, I mean the amount by which that set of ranges or schedules is adjusted upward, typically on an annual basis, in response to competitive trends.
Structure and structure adjustment data is often offered by surveys in addition to data on actual salaries or actual salary increases. The key difference? Structure data represents policy, where salary data represents actual practice.
I think this distinction is an important one. Having practiced in this field long enough to see how a wide range of organizations actually manage pay, I can tell you that there may be sizable discrepancies between policy and actual practice. A couple of extreme (but very real) examples to illustrate my point:
Organization A - This organization is facing financial challenges, which have translated into a struggle to keep employee pay competitive. The organization has faithfully reviewed and adjusted its salary ranges every year, so that they are kept at market levels, but has lagged behind in delivering employee increases. The result is that while their ranges (as evidenced by their midpoints) are competitive, actual salaries are very low in comparison to both ranges and the external market. And so, you see, their structure tells a very different story about their pay program and practives than their actual salaries do.
Organization B - This organization has been in business for over 50 years in a relatively stable industry. Turnover is low to nonexistent, and the average employee has been in their job for over 8 years. The organization, because it has not experienced much competitive pressure for people, has chosen to manage its salary program and ranges at the lower end of market practices. Employees, though, being such a long-tenured group, tend to be paid at or near (or even over) the top of their assigned ranges. Here again, the organization's structure might tell you a very different story about the pay program and practices than their actual salaries would.
My point? Structure data (e.g., average minimums, midpoints and maximums) and structure adjustment data (how much the average organization has moved its structure) can paint a very different - and even misleading - picture of market pay practices in comparison to using actual salary data. Salary data - actual salaries and salary increase percents - tell you what's really being done, regardless of what kind of policy and structure posturing might be happening.
Better to base your analysis and decisions on reality - what and how people are really being paid. Pay decisions based on anything else ... well, my title speaks for itself!
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