Min, Mid, Max

Does a salary range really need a beginning, middle and end? I've run into this topic of conversation repeatedly in the last few months.

I've always had mixed feelings about naming the range midpoint, for example. It gives some immediate comfort to the listener because it is a nice, round, handsome number, but eventually it always seems to disappoint.  Sure it's the mathematical center of the range of numbers, but once we go much further than that in conversation (especially if the midpoint represents a job grouping) we sort of pull up short rather than having to explain the whole darn rigamarole. It often seems to me a range would be a more enlightened way to go than a single number, but nobody seems to like that approach, either. Once they've tasted midpoint wish fulfillment, they're hooked.

The minimum seems to stand up to closer scrutiny -- or does it? If you believe that your company should pay a market rate, then it just makes sense to pay new employees a salary that's in spitting distance of said market rate. Do we have guidelines to justify the length of time it takes before employees are paid at market? Can we stand up for these guidelines because they are based on something more than intuition? (Not very often.) And how freaked out are we if good performers don't get much closer to the midpoint as time and low merit budgets march on?

It's the range maximum that got me in this frame of mind, actually. An executive asked me recently whether his company really needed range maximums. "Now there's a great question for my consulting wisdom," I thought.  "Culturally, philosophically, strategically, there can be cases for making them disappear," I spoke up, "but what about responsibility to organizational finances? Where does that come in, especially when you're talking to stakeholders like the Board."

"Ah, optics," was his reply. See what I mean?

Want to step away from Excel and into the real world? Learn how to increase your influence through more than numbers in the popular eBook, Everything You Do (in Compensation) Is Communication. You'll find it @ www.everythingiscommunication.com. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal at Towers Watson.

Comments

[E. James (Jim) Brennan]

Margaret is correct that grade ranges are visual holdovers from control freaks who insist that everything must be defined in a symmetrical manner. None of that fits the real world, of course. The foolishness of fixed ranges is a favorite topic of mine, but few want to embrace rationality because it is inconsistent (like people).

One national retail chain used entry rate as the sole job value. No mid, no Max. Everyone started at or above the minimum threshold pay level for the least qualified newbie. No Mids and Maxes. If the local exec had the money in the budget, why deny a "generous" talent investment?

Another Fortune 50 multinational conglomerate simply assigned job values (rounded for group clustering) showing the standard market rate for a fully functional typical competitive peer (per the internal equity, too). Minimums depended on the incumbency trajectory (see http://www.compensationcafe.com/2013/01/solving-the-pay-progression-dilemma.html) and maximums didn't really exist. Control points were guides to trigger additional justifications to approve extraordinary payments within budgetary limits.

Mins and maxes rarely are realistic, and if they are, the mid is usually "wrong." The statistical assumptions are rarely valid for the arbitrarily symmetrical theoretical distributions around an accurate MRP. Hypothetical control points end up running businesses... instead of the companies running their pay systems. But it looks nice and neat and orderly, although it creates chaos.

[Trevor Norcross]

Here here! Ann and Jim

Get rid of the smoke and mirrors.

[Tony Bergmann-Porter]

Virtually all of our paradigms and methodologies were invented in the 1950s and 1960s.

It's long past time to let that go.