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10/07/2020

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Maybe everyone has just given up on this Grade Range topic, because it has been an albatross for many decades. Forcing a completely arbitrary formal "structure" on human economic role values has always been stupid... and therefore popular with insecure senior managers who thus delude themselves with the illusion of "control".

Practical history tells us that no two jobs have even approximately equivalent values for long. Placing blacksmiths and data input clerks in the same grade might work temporarily, but since grades don't reflect employer demographic counts, the single blacksmith at the race track may become far more valuable than the easily replaceable keyboard operators.

My old classic articles like "Personal Pay vs Salary Structures" and my favorite about how the maturity curves vary by occupation constantly pound on those issues (see http://www.compensationcafe.com/2018/10/cafe-classic-solving-the-dilemma-of-pay-progression-over-time.html). Grades apply a ridiculously rigid and totally meaningless "structure" to a frequently chaotic external market for talent. And that ignores "internal equity": the excuse for cherry-picking survey matches or dictating that "this job is worth more to us here than to them there."

Turn to the individual factor next... Do you pay for the unique personal talents of the incumbent or for the general KSAs of the typical qualified new hire? Individual workers today rarely stick at one job for their entire career. They progress up beyond the entry level supposedly reflecting the minimum market clearing rate. Some are content to experience slower gross pay growth with higher grade range penetration, but others are not.

Bumping an entire occupational category into a higher grade because of perceived increases in their economic value merely starts fights. If Job Y is reclassified into a new richer grade range, every other job that USED to be their grade peers will agitate for "fairness", "equity" and "consistent parity." Once you match Jobs A, B & C in the same grade, moving once up causes the managers of other other jobs to demand that they share in the new wealthier grade's opportunity.

I decline to even hint at the unmentionable issues created when a job loses value compared to its grade peers. Web designers and SAS programmers who successfully demanded immense sums before Y2K found themselves unemployed or earning relative pittances after 2001. In such turmoils, grades range programs go through upheaval. Us old pros know the cycle... the firm with 20 grades changes to imposing 43 grades and dramatically shuffles the relationships to match the current internal/external reality which they choose to model. Some years later, when those modeled realities have again gone pear-shaped, they will dramatically trim their grade-range program to merely 15 grades, etc.

Those are the immense structural issues that face us. Short-term priorities justify special treatments of favored work classes or individual performers. Look up my ancient "What Color is Your Salary Circle?"

The basic issue behind the resulting "ratchet effect" is complicated by the insistence of OCD-driven executives to decree that when a minimum floor is established, there MUST be median midpoint created (although some have reluctantly permitted off-center "control points") for supposed reference purposes. That's not too bad for intelligent pay programs that actually administer a meaningful realistic individual employee progression from minimum entry value to market median (all those values being approximate, of course). But creating a "ceiling" is a ludicrous conceit rarely honored in real life practice. Top individual performers bend the curve, getting "grandfathered" or "green circled" or handled with lump sum bonuses (another system-killer). BTW, I have never heard a good explanation why the ranges must be internally symmetrical... it's not like a Golden Ratio applies to labor economics, you know!

Cafe habitues probably know that I have always advocated and counseled open-ended "ranges" with NO MAXIMUM. Let the max for any one position be determined by financial budgetary debate between the manager and top eecutives! That is what actually happens, anyway.

Grade ranges do create great pressure for compensation cops to police the silly caps which are ignored by the powerful executives. Grades keep us employed and enrich the external consultants who can make their inevitably required interventions to "re-balance" the defective pay systems.

I better stop before I start another book...

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