Difficult to measure competition amid cuts
Benchmarking salaries has become more challenging as organizations modify compensation offerings in order to cope with recent economic difficulties, said Angie Wachholz, senior recruiter at Chicago-based actuarial recruitment firm, DW Simpson.
Prior to the recession, businesses were able to access an accurate view of what employees at other firms received as compensation, she said. However, the diverging approaches used by companies to save money has affected the results, she added.
“In the past we could say ‘this is how a company handles it, this is what you’ll get for your raise,’” she said. “Some (businesses) aren’t giving out bonuses, some aren’t giving out merit increases. It is difficult to have a benchmark with things like this because there is no consistency with companies and how they are handling things.”
While economic factors have slightly affected the data available, the approach to benchmarking should remain the same, said Jean-Francois Vernier, Montreal-based principal at risk at Towers Perrin.
Identifying expertise
It is important for an organization to clearly identify the right level of expertise it needs in a new employee, he said.
In the case of DW Simpson, the firm categorizes the positions and roles of potential actuarial hires by exam level, years of experience and discipline, said Wachholz.
Being specific about applicant requirements is critical because it makes the process of sifting through the survey data much easier, said Vernier.
“The biggest mistake would be to not pinpoint the right level of expertise and skill set,” he said. “If you were to price a (vice-president) finance job, it’s probably easier because the role is more clearly defined.”
However, an engineer, for example, can have several levels of responsibility throughout her career, said Vernier. “(She) can operate with more or less supervision, develop an expertise, participate in strategic plans, develop technology” — all factors that must be considered.
Before delving into the hiring process, employers should define what they would like to achieve by benchmarking, said Vernier. An organization should consider whether it is benchmarking to determine the going rate for a specific job or if it is calculating salary in order to lure a qualified employee from a competitor, he said.
Companies should expect the results to differ depending on the answer, he said.
Interpreting the data
With the abundance of salary information available, companies should be mindful of how data is interpreted, he said. One way organizations can determine the accuracy of data is by comparing the year to year numbers for consistency.
Companies should also pay attention to the survey participants, he said. If the organizations providing information change every year, the reliability of the results should be questioned, he said.
It is also helpful if the organization knows what market they want to target before sifting through the numbers, said Allison Griffiths, Toronto-based associate at consulting firm, Mercer.
The majority of organizations tend to target the middle of the market and, when analyzing surveys, look at the median salaries, she said. Others, she said, may consider higher compensation because the industry isn’t very desirable to workers.
“It is a matter of defining a compensation policy before delving into the numbers,” she said. “Some organizations target the top of the market thinking they are going to get top talent but other companies may be like, ‘we don’t need top talent, we just need someone to get in and get the work done.’”
HR acquainting itself with roles
Human resources professionals need to make sure they understand what is expected of each person in their job, Griffiths said.
“It is one of the hardest things for HR people,” she said. “There are so many things going on and many (HR professionals) don’t understand what people are actually doing in the company.”
The disconnect can cause problems during the benchmarking process because specificity it’s critical to calculating accurate salary, she said.
Being familiar with job descriptions is also valuable when benchmarking for jobs that don’t necessarily fit into a single category. This can be particularly challenging in small workplaces where a person may be responsible for several different jobs, she said.
“Someone might do a little bit of this and a little bit of that and you might be the HR manager but you also might be a whole bunch of other things as well,” she said.
Companies can overcome this challenge by looking at the information for a range of related positions and using those numbers along with an internal value, she said.
Employee appreciation
Beyond defining company compensation structures, regular benchmarking also sends a positive message to employees, said Griffiths.
“From an employee perspective, it’s nice to know your employer does this, and that they are paying attention to the market,” she said. “So from an employee communication standpoint it is kind of nice to have that transparency.”
