What work is worth depends on how it affects the bottom line. Activities that appear substantially the same can have tremendous variations in compensation value according to the context in which they are performed. How and where specific knowledge, skills and abilities are applied make for different pay amounts both between and within organizations. Here is one example…
Adopting department identity as a predictive job evaluation factor was an interesting aspect of one large public utility’s pay system. Advanced statistical analyses of the reliably identifiable features of their benchmark jobs against their competitive comparable rates showed that when all other factors of skill, effort, responsibility and working conditions were precisely the same, some specific functional areas of operation paid more than others for the same human capital elements applied at the same hierarchical levels. The fulcrum point of the work (where it occurred) affected pay.
The value of human capital elements at that particular employer varied according to the organizational context of the specific work application. For example, precisely identical job evaluation scores in the regulatory affairs department produced much higher pay than in the human resources department. All else being equal, a mail room supervisor would be paid far more if transferred to a lateral organizational post in the critical government relations department where their personal talents would be applied to lobby legislators. A nuclear engineer was worth more running a power plant than occupied issuing worker identification badges.
It made sense. Impact can be defined in terms of organizational location as well as in terms of the targets of individual personal behaviors. The same work elements performed in a department engaged in critical dealings with government groups who controlled virtually every aspect of the public utility’s operation had a much greater fulcrum effect on competitive market value than comparable activities in a department focused on employees. Writing news stories for the company newsletter or website is less valuable than writing public relations news releases that can influence stock prices.
Situational effects also similarly affect external competitive market dynamics and internal pay equity judgments. Frequency of application tends to be less significant than the importance of the activity when it is performed. The executive administrative assistant who treats the intrusive IRS Examination Agent with courtesy, respect and deference might do it only once every few years; but that might be crucial. (Tip: do NOT transport an already hostile IRS examiner between your offices in the back of a dirty pickup truck bouncing over rough rural trails!) A disaster mitigation specialist who is a luxury on your payroll in good times can be critical to survival when things go wrong. Frequency is not the same as importance.
Bonuses therefore tend to be a preferred reward mechanism for emergency response workers whose specialty is rarely invoked although vital when really needed. Some people earn their pay every single day while others may only “do their thing” a few times a year. Actually fulfilling the principal responsibility occasionally does not necessarily change the value of the work performed, either. Acquisition experts don’t complete mergers on a daily basis, but they still earn far more than security guards who continually patrol the territory they secure.
The duration of time involved before an effect is identifiable is another different type of context. Remember the time span of discretion rule of Eliott Jacques? The longer the period of time between action taken and proof of its successful outcome result, the more it is worth. The receptionist who guides a visitor to their destination knows immediately if it was done right or wrong. The head of any enterprise who directs the organization onto a new strategic path may have to wait three years or more to learn if the course change was productive or not. Each tends to be paid according to the value of doing their job right, too.
Since this topic is not usually discussed, it may not be well understood. But context remains a vital concept for proper compensation decisions. Have you seen anything inconsistent with what I have said here? If so, post a comment so we can kick it around.
E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.
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