Would You Like a Shot of Erratic With That Salary Administration Process?

I have a bone to pick regarding midpoint differentials.

For the uninitiated - those who spend less time than I do fretting over salary structure design at the tactical level - midpoint differentials are the "jumps" from range midpoint to range midpoint as you move up a traditional salary range structure. 

What I regularly encounter, the core problem at the center of this post, is salary structures where the midpoint differentials appear to have been spit out of a random number generator; e.g., 11%, 3%, 25%, 8%, 4%, 19%, and so on.  In many cases, the structures were actually created this way on purpose, in an effort to "match up" salary ranges to the job groups and values in place at the time of structure development.  In other situations, the chaos emerges over time, as a result of ongoing one-off adjustments in response to the circumstances du jour.

What's the big deal, you ask?  Getting a little too hung up on order and symmetry, you say?

Here's the crux of the problem.  Let's assume you came to this special place on purpose (rather than simply via haphazard structure management), striving at the time of your structure's creation to tailor ranges and midpoint differentials precisely to current job values.  Your elegant plan hits a wall when it encounters the real world, where the organization and its jobs do not remain static and where market values do not follow a predictable and uniform path.  New jobs will be added, some jobs will go away and many more will experience change in their nature, scope or background requirements.  Even those jobs that stay constant will see their market rates move at different rates - some lurching upward, others flatlining or even dipping in value.

Fast forward a few years and there you sit, with a structure precisely designed to fit a snapshot in time and a set of jobs and circumstances that no longer exist. And your erratic midpoint differentials, which are now disconnected from current reality, play havoc with your efforts to consistently manage promotions and job re-evaluations in a consistent fashion (because, as example, a one grade promotion or upgrade inexplicably means a 3% jump in one case and a 25% jump in another).

Bottom line: better to begin with a structure that has some logical consistency, and that can stand the test of time.  (Or, in other words, good luck administering salaries in a consistent and fair manner when the underlying structure is whacked.)

Image: Creative Commons photo "Salkantay-85" by cspruit

Comments

[E. James (Jim) Brennan]

Great concise summary of the pros and cons of selecting midpoint differentials to reflect a certain temporary situation. Change is always a constant; although its rate is not, nor is it reliably symmetrical or regularly dispersed. Reminds folks that pay admin systems are created to serve the organization: the tail should not be permitted to wag the dog.

The chaos created by undue time-sensitive granular precision is more harmful than the equivalent issues stemming from excessive reliance of proportional symmetry.

[Mercedes]

Amen, Jim, about the tail wagging the dog. I have seen this in action, and it is a painful, timely and potentially expensive issue to fix. I agree with Ann that it is much better to start with 'logical consistency' and then plan in advance for different types of exceptions and how they will be slotted into the existing, logical structure.

[Ann Bares]

Great points, Jim and Mercedes. The ultimate trick, with any pay design process I suppose, is finding that "sweet spot" that perfectly balances independent symmetry or consistency with time-sensitive, situation specific precision.

[karen millen outlet]

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