Annual Compensation Review for Managers who Care

It’s that time of year again. Annual performance reviews are a time to celebrate the individuals on your team and advocate for their earned increases; whether that be in the form of a title change and promotion to recognize the growing needs of the business, additional benefits such as increased PTO for those who value work-life balance, or special assignments such as high visibility projects that create lasting change. It should be noted that any feedback at this time should not be a surprise, it is a continuation of open communication throughout the year in regular one on ones. For those moving up in the organization, it’s important to take the time to review what’s current in the job market and not just slap on a #% increase on last year’s numbers. The market is changing quickly. So how do you analyze current market trends concerning salary? Gone are the days of paying a service company to collect current salary data of various companies in your industry and distilling it into a stale report. Unless that company is scrubbing current job postings, you’re going to base your analysis on old, dusty data.

There’s a few different ways to go about this; I would suggest a combination approach. First, always reach out to your HR department. If you are a department manager, they may have already done this for you or be tied to a strict pay level structure such as a raise increase formula defined by the company. Find out what services your HR department uses to better understand what they value, trust, and how approvals are processed.

Next, open up your computer and do the research yourself. Yes, that’s right, collect your own data. Here’s how you do it. Look up current job postings in your geographic area, in the same industry, and read through the job posting to find at least a 70%+ match to the role within your team. Copy the details of the job posting, the salary info, link to the job description, and file it in a digital folder. Do this multiple times over at least a 2-4 week period within a month or two of the annual review. Why? Because job postings are listed and filled daily so this will increase your sample size. It does not matter if the job description is for a senior, mid, or entry level role. This data will help fill in the gaps and paint a picture of the reasonable ranges for each level of experience. It would be wise to give your HR department a heads up that you will take a hands on approach to aid in the process and ask if there’s any concerns or things to keep in mind before going on this research rant adventure. That way you can get early buy-in, communicate intentions, and potentially become your HR department’s favorite manager due to the level of care and consideration in this time-consuming process. Know that HR ultimately has the final say, but as a good manager, it is your duty to advocate for the continued growth of your team.

After you collect your data, be sure to review general commonly accepted practices. Most title changes result in about 10-15% increase, inflation rate should be factored into your base calculations so the raise actually results in higher pay (especially if your company does not observe cost of living adjustments), entry level is typically 6 months to 1 year, Leads or Senior level contributors often carry the expectation of peer training so be sure to specify that level of responsibility in their updated job description. Also, take the time to review any red flags such as discriminate pay or wage compression that can occur over years of unintended inattention.

I’m sure there are other practices or wisdom I have not yet learned, considered, or listed here. If you have any feedback advice, please share it so I can grow as a leader and manager.