On (Seemingly) Random Midpoint Differentials

I've posted before on controlling the salary chaos that comes in the form of inconsistent midpoint differentials.  These past few weeks have brought me several encounters with the problem, including a workbook on building salary structures (published by a major source of educational materials for the field of rewards) that essentially presented inconsistent midpoint differentials as one legitimate option to pursue in developing your structure.  Fortunately, in the latter case, the authors did do us the favor of highlighting some of the teensy little difficulties that this approach leaves in its wake.

This is me wanting to tear my hair out.

Midpoint differentials, for the uninitiated, are the differences (the "jumps" so to speak) between salary range midpoints as you progress up a salary structure.  Uneven midpoint differences are typically born of good intentions, the results of an attempt - during initial program development - to match midpoints to job groups that are clustered by value (whether that me a market or internally generated value such as job evaluation points).

Here's the issue as I see it.  If I roll off the pros and cons, the upside and downside of tailoring midpoints closely to your current job value groups, it goes something like this.

Upside

Salary grades and range midpoints closely parallel current job values.

Downside

Inconsistent midpoint differentials play havoc with your organization's efforts to manage promotions, job re-evaluations, and job upgrades in an equitable and consistent fashion.  For example, if a one-grade promotion means a 3% increase in job value in some cases (because there is a 3% jump to the next range and midpoint), and a 22% increase in job value in other cases (because there is a 22% jump to the next range and midpoint), it is difficult to conceive and manage salary treatment guidelines that address each case in a fair manner. 

This may seem like a fair balance to you.  After all, you may say, what's a little salary management equity challenge compared to the unparalleled beauty of a structure whose midpoints are tailored to current job values?  I am guessing that this is the mental trade-off made in the minds of those who decide to implement structures whose midpoint differentials appear to have come from a random number generator.

The problem is this:  Over time - typically even within the first year of the program - jobs begin to shift.  New jobs are added, some jobs go away, and many jobs experience change in their nature, scope or background requirements.  Even those jobs whose descriptions stay constant will see their market value grow at uneven rates.  Before long, your job hierarchy and the job groupings within it have changed, perhaps dramatically.

And now you are left with a structure "architecture" that has none of the upside and all of the downside described above.

Of course, you could totally revamp your structure every year or two, starting over from scratch in order to build midpoints around the newest job value groupings.  Plenty of time and resources to devote to this in today's era of slimmed down HR functions, right?

Better to begin with a structure design that can stand the test of time, one that features consistent midpoint differentials.

That's what I think.

Image:  Creative Commons Photo "Math Lesson" by Benjamin Rossen

Comments

[E James (Jim) Brennan]

Kind of disagree, I think, in concept, at least. Yes, it's nice to have uniformity and symmetry, but reality ain't made that way. Jack-booted ironclad inflexible midpoints and their differentials can mask the truth about competitive market changes. Job value changes in the real world are like people riding up a series of side by side escalators moving at different speeds going to and from different levels. Nice, if you can take a snapshot from the side showing the relative positions "height-wise" of all the passengers at a given moment, but over time, those relative positions will alter. The grade-range midpoints (and I despise that term, preferring "job value" because it may not be best administered at a "mid"point) and their differentials should simply supply a measurement scale like a yardstick rather than be considered a unique benchmark created according to any particular set of jobs. When heights change, you don't change your measurement scale, you just show the different values. Think of ocean waves... sometimes a job bobs at a 10 foot level above the bottom, sometimes at 7 feet, sometimes at 12 feet... when the tide changes, the overall level may generally rise an arbitrary approximately similar amount but the standard deviation of specific elements will continue and may become increasingly different if the wind picks up. Ranges should be scalar values for relative reference measurement, not carrying any implication that the current classification matches against midpoints are immutable fixed permanent relationships expected to move in lock-step steady progression. Even with the most symmetrical uniform system like you seem to recommend, you STILL have to realize that some jobs will always be outliers, moving either slower or faster than the norm and thus requiring periodic reclassification to a more appropriate grade. Hope this is clear.

[Ann Bares]

Jim:

I don't know - as I read over your comment, I think we may be more in agreement than not.

I agree that real world job values do not follow a uniform and symmetrical path, either in market worth or in relationship to each other. That, to me, is why it seems silly to take a snapshot of their current inter-relationships and create a structure which precisely reflects this, as if it were going to move in lock-step forward from this point (rather than mutate into a whole new set of inter-relationships and value differences).

Rather, I like your concept of an independent measurement scale - like a yardstick - against which we can periodically assess them. To me, a structure with consistent midpoint differentials supplies us with that independent measurement scale. It is this independent measurement scale, then, that allows us to apply salary administration policies and practices in a consistent and - hopefully - equitable way.

Whaddya think?

[E. James (Jim) Brennan]

Well stated. We are in complete agreement.