What's my price tag?

The history of pay systems and methods intrigues me.

Did you know that the way we evaluate jobs and grade them has roots in military hierarchies? Seems their well-established chains of command embedded since the days they used spears and stones were perfect breeding grounds for the systems we use in corporate hierarchies. 

I also discovered that capitalist economies tended to lean towards more individual-centric ways to set pay, while others generally had fixed rates for jobs. A common thread across the corporate world is that people got paid, generally, for the jobs they filled, not for the skills they have or the people they were. That’s how most companies set their pay levels, and its one of the golden rules of compensation management – we set the rate for the job, not the person. 

Of course, when the person is a Michael Jordan or an Oprah Winfrey, those rates get slightly inflated (!) but the general principle holds for most of the office-bound world.

I also recently found out that the word “salary” comes from the Latin “sal” for “salt”, as Roman soldiers were paid in salt for their services. Hence the term “worth one’s salt”. Another link between pay and the military…

History is important when contemplating the future. 

The old sacred cows of pay management are gradually being picked off, one by one, as technology and digital advances impact the way people live, play and, yes, work. As the new world of work underpinning the gig economy manifests, one golden rule under the spotlight is pay benchmarking.

Benchmarking always looks at jobs and not people. An important step in this process is job matching to ensure like-for-like comparisons are being made. A rule of thumb has generally been to have “benchmark jobs” in surveys, meaning those which are fairly similar across different companies. I used to find that around 10% of our company roles could not be matched, because they were too unique and had no apparent match in other companies. Today, this has crept up to around a quarter of roles. The explosion of technology has upset the cart, both from the perspective of tech companies being much more flexible in how they package different competency sets, to non-tech companies going digital and creating bespoke roles as a by-product as they try to retain key people. 

Whatever the driver, traditional benchmarking through salary surveys is becoming less important in determining pay strategy as the benchmark job pool shrinks, making survey results broader and therefore less valuable in decision-making.

Join the conversation as I share some other "golden" rules screaming for change.