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09/19/2013

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All old economies are "broken" in a sense; but most still have lifecyles that persist somewhere long after newer models have emerged. Business types change faster than industry code systems can, as illustrated by this old article http://www.compensationcafe.com/2010/11/what-is-your-industry.html.

Problem remains that analysts need a vocabulary, language, taxonomy or other classification system to organize data for comparisons, and those terms keep evolving to match the new economic unit types. The ancient 1937 SIC industry code tells what your product or service is, while the newer more complex NAICS code defines how your stuff is made or sold, while the NTEE system for nonprofits describes why they exist. Each approach requires a different set of definitions; and none of them work well unless and until a significant percentage of users accept them.

Unfortunately, general acceptance requires time to reach consensus. Suspect there is little chance for new alternatives not already imposed by government, like those mentioned above. At least hybrids can be described in terms of their component elements. No two outfits will ever be identical, but all can be compared somehow. Judgment will always be needed, though, so that leaves room for compensation professionals to demonstrate their persuasiveness.

Thanks Jim,

Your article is a good reference. While many companies still, and will continue to, fit within the old codes many need something other than a single code. Even if the regulatory bodies and MSCI cannot quickly update their codes, the compensation data providers can find a way to make it easier to gather data from multiple industries and weight them accordingly. Of course, comp pros would need to be taught to be even more careful about using the data as guidelines, not fact, but that is a hurdle we can overcome.

The industry codes are now hybrids and jobs are too. But companies have always had divisions/subs that were in completely different industries. How has that been dealt with?

As far as jobs ---I think comp surveys will bite the dust eventually. If you have jobs that are split 3 ways then you might be able to piece something together --- it will be weak. Any more than 3 (you decide the number) things get too blurred. We end up trying to force-fit jobs into surveys that have obviously lost their relevance.

If you look at my post on hybrids CEOs put competitive info down the list of priorities. Primary to them is paying key/pivotal jobs really well.

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