Salary surveys are similar to a competitor’s price list in that they provide competitive pricing information to help determine an optimum price point.
What you do with the information depends on your business strategy. For example, you might decide to charge more because your product has higher quality or better brand name recognition. Alternatively, you may charge less to undercut the competition.
In other words, you use the information to help you differentiate your own product or service. What you DON’T do is adopt a competitor’s price list as your own.
Salary planning should work the same way, i.e., the goal is to differentiate what you do from what the other guy does and not just blindly adopt the median salary.
Besides, averages can be so misleading.
That’s where the total rewards package comes in, which is what your company offers in terms of salary, benefits, stock, flexibility, location, job experience, training and development, leadership, employer brand, etc. You should look at the whole picture because that’s why anyone would want - or not want - to work for you.
You want to ask yourself if your total rewards offering is attractive, well-designed and a good fit for the kind of employee you’re trying to attract. If the answer is no, you may want to make some alterations.
For example, you may realize you have to pay more to compensate for a scanty total rewards package in order to attract good people. Or you may be able to save money on salaries by offering strong development opportunities or a great work environment.
That's why it’s important to assess the total rewards package before setting salary levels.
Positioning is also important because it can make the difference in someone’s mind between a lousy salary and a golden opportunity. Most applicants will recognize a low offer so you aren’t fooling anyone by not mentioning it and you can turn it to your advantage with adroit positioning.
A couple of examples:
‘We pay about 20% below market but we attract the best people because of our world class training and development programs. We take growing talent very seriously and top performing employees have numerous career and advancement opportunities, such as....’
Or:
“We pay about 10% below market but in return we offer our employees absolute flexibility about where and when they work. We have employees all over the world in California, Chicago, Orlando, Portland, Madrid, Oslo and Sydney and we pride ourselves on our dynamic, virtual workforce.”
In other words, when defining salary structures you should have a very strong understanding of your total rewards offering so you can put that in the spotlight instead of the money. If you only follow market trends you may end up paying more to look good.
Or not paying enough.
Picture courtesy of scienceblogs.com.
Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA. She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University. Her articles and interviews on HCM topics have been published in the US, Europe and Asia. She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.
Excellent summary. The old rule used to be that you wanted to give as much as you had to pay but not a penny more. The market-clearing rate varies everywhere. Internet buzz can be deceptive, because firms don't display numbers on job boards unless they are impressively high, and that frequently indicates corresponding issues with the rest of the total reward package or with the assignment itself. Stinky jobs carry premium cash prices, for example.
Posted by: E. James (Jim) Brennan | 08/04/2011 at 11:23 AM
Very true about stinky jobs and high pay = which, to be fair, are better than stinky jobs with low pay - although I did once run across an absurdly highly paid job looking after a villa on a gorgeous tropical island. I assumed it was either for a reality TV show along the lines of 'Bachelor Meets Gilligan's Island' or else some sort of fall guy for organized crime.
Posted by: Laura Schroeder | 08/08/2011 at 06:25 AM