How Is a Midpoint Like a Tuba?

It's like those picture puzzles that you used to do in the Doctor's waiting room. Two pictures of a big, old oak tree in a yard. A familiar scene, and both pictures look identical. You could turn the page, but if you pay attention and really scan the one on the right, the first thing you'll notice is a tuba in one of the higher branches of the tree. What's that doing there?

Over the last few weeks at Compensation Cafe, we've been encouraging you to notice the tuba in the tree -- in other words, look beyond your assumptions about how compensation works to see what's actually there these days. Ann Bares talked about a blog post by Peter Bregman called, "Don't Let Your Expecations Fool You". I wrote about Stephen Jay Gould's quote that "The most erroneous stories are those we think we know best."

So one long, dark night, this got me thinking about the fundamentals that we stake our compensation practices on. Like midpoints and salary grades. In today's "new normal," do they really still mean what we have always believed to be true?

When I teach Base Pay Essentials with my colleague, Brooke Green of Presidio Pay Advisors, I make sure to remind my students that they are building salary ranges from a collection of competitive salary data. That a midpoint is not an exact market target. In fact, the middle third of the range more accurately communicates the reality of a market target since multiple jobs are clustered in each grade.  And I suggest that they should be very careful to explain these realities to employees so that they aren't misled into thinking that midpoints are meant to be exact mirrors of the marketplace.

And now we come to today. After two or more years of salary freezes or minimal increases and no structure updates. What do minimums, midpoints and maximums really mean after a few years of rough handling?  What if you put last year's Salary Grade "7" next to this year's Salary Grade "7"? In many companies, they may both actually have the same minimum, maximum and midpoint, but are they really equivalent? Not only in terms of competitiveness, but also in relation to what they should mean to your employees and their Total Rewards.

Here's a litmus test. Imagine using your salary grades to try to influence top performers who are being recruited to a competitor. Should they trust the explanation that you've used so many times about where their salary falls in their salary range? How confident do you feel that you're giving them accurate advice, especially if these employees will remain in the same salary range for the next few years?  How much more important has their bonus become to them and their family? How much control will they have on whether those bonuses are paid?

Let's not let our habits dull us to what is really happening in our compensation programs today. Look really closely, even at fundamentals like midpoints, and determine what they really mean. Make sure we are not being fooled by lingering, out-of-date assumptions. Midpoints have always been more than just a number. What do they mean now?

See the tuba in the tree? Is it a big leafy oak that happens to have a photoshopped tuba in its branches? Is it a horticultural wonder? Is it a years-old testament to a tuba prodigy who couldn't cut it any more? Could it have fallen out of a traffic helicopter? Has there been a tornado? Once it gets noticed in those branches, there may be lots of stories that it could tell. The trick is to find the one that's true.

Margaret O’Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communication to the dialogue at the Café; before founding re:Think Consulting, she was a Principal in Total Rewards Communications with Towers Perrin.  Margaret earned her M.S. and Ed.S. in Instructional Technology at Indiana University.  Creative writing is one of her outside passions.

Comments

[Shawn Miller]

Margaret O;Hanlon -- I love the tuba in a tree analogy. What a great way to blend your rewards expertise with your passion for creative writing (heavy on the 'art' side of the profession)!

Thank you for the thought-provoking article.

The methodology I've used (gleaned from a great mentor) is the concept of 'tri-tiles' versus quartiles in using salary ranges. The result is three 'mini-ranges' described briefly as follows:

1st Tritile, "Developing" -- the entry point into the position, individuals early in learning curve

2nd Tritile, "Proficient" -- experienced employees w/all required skills & abilities to effectively perform the job (competitive 'sweet spot' for hiring qualified candidates)

3rd Tritile, "Master" -- reserved for consistent high performers / more seasoned employees that provide most valuable contributions to the org. SMEs.

This helps reduce the focus on midpoints and gives guidance to using the entire range of paypoints available, dependent upon the multiple factors that an employee and/or candidate brings to the role.

I've been happy with this practice, but am wondering if I have a tuba or maybe a conga drum...

Again, thanks for providing a new point of reference!