Dealing with Red-Circled Jobs

What can you do when aberrational competitive market fluctuations screw up your standard bureaucratic administrative assumptions?  In other words, how do you handle jobs whose values have fallen in this crazy market?

Here’s a question I answered today:  “We’re doing once again some benchmarkings for current positions... unfortunately the grades came out lower than the originals, but we have already employees in the current grades and their salaries now are in the maximum range or above the maximum.  My question is:  how can we manage this situation?”

Not being a consultant any more, I can offer free advice; I still hope it’s worth more than it cost the recipient.  Here were my responses….

1.  One option is to “grandfather” their salaries and continue them as they are today, ignoring the new benchmark results as they affect grade classification but not awarding any pay increase until their benchmark rates increase enough to support a pay rise.  This situation will change when the economy gets hot again and all competitive pay values rise consistently once more. That’s called making them “red circle” jobs, over the maximum and currently ineligible for pay increases.
 
2.  Another option is to grant a cash award like a bonus instead of a base salary increase in the amount they would have received (expensive, though, and this can have a serious impact on your cash flow).

3.  Reclassify the jobs down to the grade more proper for their new competitive market benchmark rate and administer them according to the rules;  they will then be reclassified upward again when the economy recovers and their job rises in value.  Such reclassifications caused by market comparisons are administrative adjustments, not demotions or promotions. 

4. Temporarily create a higher grade with a new maximum range to adequately encompass those who would otherwise be red-circled outliers with frozen salaries.

5. Like the prior option, temporarily raise the range maximums of the affected grade ranges in order to continue to administer normal increase practices.  After all, there is no rule that establishes range maximums any one universal point; they are whatever the enterprise wants them to be.  Administrators get caught up in the lazy habit of doing everything the same way for no particular reason except that it’s easier to remember and defend a consistent method.  There is no good logical reason to require each range maximum to possess exactly the same identical symmetrical relationship. 

6. The last option would be to completely ignore the new benchmark classification implications and proceed as though the jobs fit perfectly in their current grade structure as they did in the past.  That extremely generous policy should be very carefully considered before publicizing it.   Plans must be made to assure that you get maximum positive benefit from granting them exceptional advantages, without the negative problems of assuming infinite superior treatment like this. 

There are other approaches, too, but these were all I could think of at the moment.  Some are good options.  Some are terrible ideas.  Nevertheless, they are possible choices that could be considered, even if most of them may be impractical or undesirable in various situations.  So please don’t beat up on me for the obvious weaknesses of each of the concepts. 

Instead, let’s do a poll:  if there is one option above that you think is best, please comment and identify your preferred choice.  Even better, suggest a superior one.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired 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.) and will express his opinion on almost anything.

Image: Courtesy of logix.com

Comments

[Leah Davis]

I would use caution if you are changing your ranges down. Maybe leave them frozen for one year since the market does not say they have grown. If you are considering lowering them, I'd suggest averaging 2 years of data to determine your market values.

As for chosing one of Jim's options, I'd go with temporarily increasing the width to fit the higher end jobs into the ranges if you feel you must. If your system needs symetrical values then lower the bottom of the range to an equal distance from midpoint.

[E James (Jim) Brennan]

Good solutions, Leah. Market values tend to be inelastic, and drops in one period may be followed by a sudden rebound; so it is always prudent to hesitate and carefully verify that the current situation is permanent rather than a temporary pendulum-swing that will be reversed next year.

Agree that ranges should faithfully track reality, too. I have never seen any logic or justification in symmetrical ranges beyond ease of explanation; and the problems caused by arbitrary maximums are legion.