It’s the middle of autumn and you are wearing your new orange corduroy blazer, college and professional football season are in full tilt, pumpkin spiced lattes are your new morning must-have. You’ve also just received notification that the new compensation surveys have been released and are now available so you can start benchmarking your jobs. The next logical thing to do is heat up your extra-large latte and jump right on it, right?
Not so much if the following items have not been addressed first…
5 Key Considerations to Review Before Starting Your Salary Benchmarking Project
1. Do You Fully Understand the Annual Strategic Plan for the Company?
As workforces emerge and companies look to be more competitive, it is key that the business approach and strategy for the coming fiscal year be taken into consideration before you start the annual benchmarking process for your current jobs. If the company is coming off of a record year financially it might be looking to expand its product offerings and the coming year might have a heavy emphasis on ramping up new and growing current talent. If that is the case, then the organization’s focus might be around attracting and retaining top talent which might alter your compensation philosophy as it relates to where you set pay. On the flip side, future sales projections might be dismal or stagnant and the firm might not have the resources to invest in updating the compensation structure. No matter the situation your company finds itself in prior to the launch of the fiscal year, it is critical to understand the direction the company is headed to better inform how you should price your roles and pay mix offerings.
2. Discuss the Feasibility and Impact of Budget Changes with Finance
Now that you’ve met with executive leadership on the general strategic focus of the firm, you might want to put some time on the calendar with Finance to discuss whether the organization can handle salary ranges increasing in value. As the company hires, promotes and plans for salary and merit increases, Compensation always refers to the salary range to make pay decisions. As midpoint values grow so will the salary range minimum and maximum, and it is critical that the company keep this in mind and cushion the salary budget accordingly. Additionally, it is imperative that you make both the HR and Finance teams aware of any employees who will potentially fall below the range minimum to enable the green circle exercise once the new structure goes into effect. Gaining the buy in of Finance during salary budget season is key and allotting for a larger or flexible salary line is essential before you start updating your salary range structure.
3. Review and Update Job Descriptions
Before you get started with pricing, you should revisit any job descriptions that might need to be updated or were revised during the year as a result of any reorganizations or shift in responsibility. When jobs either grow or shrink, the job descriptions should reflect these changes and these modifications ultimately will inform how you match and price your jobs.
4. Identify Hot Jobs
So you’ve had a chance to meet with executive management about the strategic focus and the affordability of increasing structures, you have reviewed your job descriptions and now it’s time to sit with the Talent Acquisition and Strategic HR teams to understand if there are any hot jobs that are either hard to fill because of the scarcity of this skillset in the market or are critical in the execution of the mission of the organization. Knowing about keys roles and hot jobs will help you formulate your approach on pricing them during the benchmarking process. If the majority of your hot jobs are priced at the 50th percentile, you might want to look pricing them at the 75th or the 90th percentile depending on recent experience with turnover and issues with attracting talent. It is important that organizations stay current with workforce trends and employ a different strategy for jobs that have a key impact on the overall success of the organization.
5. Define your Organization’s Pay Mix Strategy
Okay, so now we have consulted with management on the annual strategic plan, you and the CFO are on the same page and HR has provided you revised job descriptions and a list of hot jobs, it is now time to consider revising the pay mix for key roles. The use of variable pay is on the rise and companies are finding that employee and company performance is improving as a result. Sales roles and other jobs that drive for revenue and other key business objectives should be reviewed annually to make sure the proper amount of their pay is put at risk. Knowing this information prior to pricing your jobs is important so you can keep an eye out for any changes in the market and maintain a competitive position.
Once the above mentioned items are addressed, you can get to pricing! Have fun!!