Diverging cost-cutting approaches make it hard to gauge competition
Benchmarking salaries has become more challenging as organizations modify compensation offerings to cope with recent economic difficulties, says Angie Wachholz, a senior recruiter at Chicago-based actuarial recruitment firm DW Simpson.
Prior to the recession, businesses could get an accurate view of what employees at other firms received as compensation, she says. However, the diverging approaches used by companies to save money have affected the results.
“In the past we could say, ‘This is how a company handles it, this is what you’ll get for your raise,’” she says. “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, says Jean-François Vernier, a Montreal-based principal at risk and financial management firm Towers Perrin.
When benchmarking the salary for a new hire, it’s important for the organization to identify the right level of expertise it needs, says Vernier. Being specific about applicant requirements is critical because it makes the process of sifting through the survey data much easier, he says.
“The biggest mistake would be to not pinpoint the right level of expertise and skill set,” he says. “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, says Vernier.
“(She) can operate with more or less supervision, develop an expertise, participate in strategic plans, develop technology — all factors that must be considered,” he says.
At DW Simpson, for example, the firm categorizes the positions of potential actuarial hires by exam level, years of experience and discipline, says Wachholz.
Setting a goal
Before delving into the hiring process, employers should define what they would like to achieve by benchmarking, says Vernier. An organization should consider whether it is benchmarking to determine the going rate for a specific job or to lure a qualified employee from a competitor, he says.
With the abundance of salary information available, companies should be mindful of how data is interpreted, says Vernier. 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 says. If the organizations providing information change every year, the reliability of the results should be questioned, he says.
It is also helpful if the organization knows what market it wants to target before sifting through the numbers, says Allison Griffiths, a Toronto-based associate at consulting firm Mercer.
Most organizations tend to target the middle of the market and, when analysing surveys, look at the median salaries, she says. Others 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 says. “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
HR professionals need to make sure they understand what is expected of each person in her job, says Griffiths.
“It is one of the hardest things for HR people,” she says. “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 is critical to calculating accurate salary, she says.
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, says Griffiths.
“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 says.
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 says.
Angela Scappatura is editor of Canadian Compenation & Benefits Reporter, a sister publication to Canadian HR Reporter that focuses on total rewards. For more information, visit www.hrreporter.com/ccbr.
