Who Cares About Midpoint Movement?

I don't get it.  Can someone help me understand?  Why are some organizations interested in what other companies are planning to do with their midpoints next year?  I presume that's the case because there are surveys out there compiling and reporting such data.  But who really cares?  Aside from anecdotal information I have never understood the importance of this reporting.

To be fair, perhaps my experiences are the exception, because I've never used that data in program analysis, or even reported it.  But somebody must be using it.  Somebody.

I can only guess that I've missed something; maybe I should taken another WorldatWork class, because the issue has never arisen from any employer I've dealt with, either as an employee or an outside consultant.  Which leads me to ask, do some companies actually recommend raising their midpoints on the basis of a survey(s) announcing what other companies are doing?  Is that metric as important as what is being paid for particular positions, or what the average merit spend might be next year?  How does projected average salary structure movement relate to my company's unique situation?

Can you envision recommending to senior management that midpoints be raised by X% because that is the projected average midpoint increase of other companies?

For me the focal point of survey analysis has always been to determine the competitiveness of our current midpoints.  In planning for next year we should adjust those midpoints to either remain competitive (our midpoints are already there), to improve our standing (our midpoints lag the market), or freeze them (midpoints already pegged above market rates), no matter what a survey reported was common practice.  Am I wrong here?  I have always thought that my company's salary structure should move in relation to our own competitiveness, regardless of what anyone else is doing.  Otherwise we could be making improper adjustments - either too much or too little.

And what about the expense involved?  Contrary to what some pundits have assured me from time to time, midpoint growth can create costs.  There is no free ride.

• When an employee's base pay drops below salary range minimum on January 1st, do you cover that amount - or wait until the next review?  Whenever that might be.  The fair thing to do would be to raise the employee to minimum and then (or later) grant a merit increase on top of that.  Extra cost though, right?

• Higher midpoints push experienced employees further from the internal "going rate" - creating pressure to restore the balance.  Have you ever explained to a long service employee why they weren't being paid at least the midpoint?

When are these midpoint estimates made, and how accurate are they?  They're really guesstimates, and many times the questionnaire is filled out without due consideration, just to get the form completed and sent away.  After all, most companies won't confirm their new structure commitment until @November (senior management sign-off), while the survey questionnaires are completed in mid-summer.  So how good a guess do you make in August?

Btw, a company's salary structure (grades and salary ranges) are usually segmented along the lines of hourly, non-exempt, exempt professional and management employees.  To gain a clear picture of your competitive marketplace you should consider that each segment is moving at a different rate.  For example, it's likely that management pay is growing at a different rate than for hourly employees.  Suggesting that only a single number would reflect your entire population would distort the reality of your multiple markets.

Now I suppose there may well be companies out there that have changes to their reward programs contractually tied to "market movement" or even structure (midpoint) growth, but do you think there are that many so governed?

So, can someone tell me why analyzing other company's guesstimated midpoint movement is important?  I'd really like to know.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  With over 30 years Rewards experience Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats. 

Image: Creative Commons photo by david_shankbone

Comments

[E. James (Jim) Brennan]

Silly man... you are confusing reality with top management desires! ;-)

Midpoint movement rates (and yes, also relative rates of payroll change) are important only to the extent that top management asks for the data. If someone important enough demands it or wants to make recommendations based on it, there will be a search for a number, no matter how meaningless it may be. Being technically correct, as you are, in explaining that it is irrelevant may not suffice in the face of a clear mandate to deliver the requested metric.

[Chuck Csizmar]

The personal biases of senior management would make for an interesting article in and of itself, but yes, one does toss logic in the air when you receive that phone call that says, "I want what I want because I want it."

The correct (public) answer is always, "I'll get it for you right away." What you say in private can be left to the imagination.

[Kim Walter]

Coincidentally I completed a survey last week that asked how much my company was going to move its midpoints and I laughed at the timing. It's August!