In the wake of my recent post on why salary ranges are a good thing, I thought it might be advisable to follow on with some thoughts on the general care and maintenance of a salary range structure, once you have one (or more) in place.
The advice I give my clients is to follow a two step regime, typically alternating steps every other year. This approach strikes a solid balance - I think - between competitive precision and the efficient use of available resources.
- In Year 1, you go through a market benchmarking process, matching your jobs to salary surveys and compiling competitive salary data. You do this either for every job in your salary structure, or for a heavy representative sample. (If you are doing a sample, be certain that your selection of jobs covers all grade levels, all major functional areas and the positions with the biggest incumbent count.) By comparing the results (estimated market value for each job) to your current salary range midpoints (or other control points), you accomplish the following things:
- You obtain a very precise sense of your range structure's overall level of competitiveness and the kind of general adjustment that is necessary to maintain your desired market position.
- You identify any jobs - or job families - where market values have moved at a different pace (more quickly, more slowly) than the overall norm. These might call for more targeted action, as in adjusting grade assignments.
- In Year 2, you forego the detailed market benchmarking, instead taking stock of general market trends (including, but not limited to, actual and projected salary budget increases in your industry and geographic region) and using that general information to determine whether and by how much to adjust your salary structure. Remember to adjust your structure based on actual and projected pay movement, not increases in the cost of living.
A number of my clients have made this a three year cycle, where they do the detailed benchmarking in Year 1, but then go through Years 2 and 3 making decisions based on general trend information. This is acceptable (and is often,frankly, a resource-based decision), but I find that the extension often comes at some cost. For those who follow a three step dance and only benchmark every third year, we usually find that there is a lot of fixing which needs to be done. Those who benchmark every second year tend to be able to nip most problems in the bud.
What about you? Are you a two-stepper or a three-stepper? What salary structure adjustment steps and process have you found to work best?
Good insight Ann.
For large organizations, especially for organizations with global operations and talent spanning multiple countries, market benchmarking process is often a time consuming and expensive process. So, my vote is for three step process. In my opinion the two vs. three step decision should be driven by a simple benefit-cost assessment by the organization.
Posted by: Gopi Padakandla | August 17, 2008 at 07:34 PM
Gopi:
Your vote sounds like a wise one. I would agree - if I were making this decision for an organization where benchmarking (due to geographical span or other reasons) was an arduous and complex undertaking, I would go with three years as well.
Thanks for the comment and thoughts.
Posted by: Ann Bares | August 18, 2008 at 06:38 AM
Hi
I'm doing Step 2 in this process as an internal HR task. Step 1 was done by an external consultant. I must say, however, that Step 2 is extremely time consuming and I am finding it difficult to get accurate market trend information for Thailand and the Greater Mekong Sub-Region. There are international NGOs against which we can benchmark but this is very limiting. I am finding out that I need to benchmark most positions one-by-one as opposed to using a standard benchmark template. The unique problem with INGOs in this region is that they have two salary scale ; one for international staff ( often based on global salary scales and not country specific ) and one for national staff. In our case we have both international and national staff and all positions are open to international staff as long as they have the language skills.An equitable but unique dilemma! Any suggestions on approaches as well as accessing market trends for sub-Asian markets ?
Posted by: Leonard Buckles | August 19, 2008 at 09:26 PM
Leonard:
I don't have experience with the two salary scale approach used by INGOs in that region, so don't know that I have a lot of value to offer. It does sound like a bit of a unique dilemma. Data-wise, WorldatWork's Salary Budget Survey (which was just released in its 08/09 version) does include actual and planned remuneration increases for a number of Asia Pacific countries, data that they say comes to them via an organization called Executive Resources, Ltd. Those might be a couple of places to check.
Best of luck and thanks for sharing your comments and challenges with us here!
Posted by: Ann Bares | August 22, 2008 at 10:16 AM