Are You Sure About That?

That's what a client asked me the other day.  The SVP of Human Resources was mulling over my market pricing report when he said, "These summary averages tell me how my pay practices compare against my competition, right? And with these individual job comparisons, they tell me what the market is paying against my jobs, right?" Then a pause, followed by, "And you're sure about these figures?"

In other words, the client wanted a guarantee that what he was looking at truly reflected the competitive marketplace for his organization.  So that he could take my word to the bank. And fall on his sword if necessary. Because I have delivered the answers. Scout’s Honor!

Ahhhh, but it doesn't work that way. There are no ironclad guarantees, no handwriting in the sky, no finger pointing to an "X."   Practitioners who analyze compensation surveys can only report on what the sources show. It's how they, and their client interpret and ultimately utilize those reported figures that will advance the story for the organization.

An Imperfect World

Let's consider the possible variables that will prevent you from (honestly) making a pinky swear regarding the figures you've just shown to management.

• The client may be interested in what companies X, Y and Z are paying, but unless they're prepared to sponsor a custom survey what they'll get instead is a broader view that displays what many organizations are paying - some of whom they may not be interested in. And not all of the selected companies may be participating in your survey sources.
• Or perhaps management is only interested in "like" industries, or only like revenue size or like geography (or they want all elements at the same time). However, matching data slices may not be available. You may have had to pick and choose your points of comparative analysis. Choose wisely.
• Surveys never capture what everyone is paying, but only a representative sampling. A subjective presumption is that your information covers most (even a high percentage) of incumbents.
• An oft-forgotten aspect of surveys is that the input completion process (that dreaded questionnaire) is typically presumed by those on the receiving end as a virtuous document well-scrubbed of any errors or improper job matches. Probably not. A little garbage always slips in.
• Clients tend to think about what the market looks like today, while even the latest commercial surveys are only reporting data that was captured six months ago. And a typical aging process uses a flat growth percentage figure for all jobs; so, some could be overestimated, or the opposite of what things look like today. The market at the time of data collection could be different (pandemic, recession, global crisis, etc.) than what it looks like today.
• If the client's organization has caught the infection called title inflation, the job matching exercise might lose a bit of precision.

So, the figures you're looking at may not be quite as bright and shiny as you'd like. You will still have to work with them, make sense of them, and apply a dab of professional judgment. Use them less as an "x marks the spot" and more as a "let's move in this direction."

What To Do

All a practitioner can do is to present the best information that's available. That information should then be used by the client as part of their decision-making process (competitiveness, structure change, merit increase process, etc.), not as the whole and sum. Ugly scenario: picture someone running down the hallway, waving a piece of paper while shouting, “I have the number!” These figures should not be considered the penultimate answer, because they're not. Of course, it’s always easy to take the short cut and ignore the necessary analysis. But don’t do that.

Unless of course your compensation strategy is simply to follow the leader, whatever everyone else is doing, or whatever the surveys say. Then again, the client, with their limited understanding of survey mechanics, expects to learn what everyone is paying, but you know that you will never be able to present that figure.

When They Ask for A Guarantee

When management wants some sort of guarantee that what you're showing as the marketplace in your analysis is really the market, as they define it, the best tactic is to take that opportunity to educate them on how surveys work; what they can tell you and what they can't. Scrape off a bit of the mystique of precision that often surrounds how commercial surveys are marketed. Talk to them about your professional judgment.

Because there are no guarantees. And you can only be as positive about those survey figures as the survey limitations allow.

Sorry.