Transcript Managing a Salary Survey Project Patricia A. Meglich, Ph.D., SPHR • 2011

Managing a Salary Survey Project
Patricia A. Meglich, Ph.D., SPHR • 2011
Key concepts
Session 1:
1. Motivation theories.
2. External equity.
3. Determine the compensation philosophy.
4. Purposes of a salary survey.
5. Legal considerations.
6. Make or buy decision.
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Key concepts
Session 2:
7. Planning a salary survey project.
8. Designing a survey.
9. Collecting data.
Session 3:
10. Analyzing and interpreting survey results.
11. Adjusting pay scales.
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Learning objectives for Session 1
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External equity.
•
Determine the compensation
philosophy.
•
Purposes of a salary survey.
•
Legal considerations.
•
Make-or-buy decision.
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Motivation theories
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Maslow’s hierarchy of needs.
Herzberg’s two-factor theory.
Vroom’s expectancy theory.
Adams’ equity theory.
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Equity theory
Focal individual
Inputs
Outputs
Referent others
vs.
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Inputs
Outputs
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Rebalancing the equity comparison
• Decrease your inputs:
> Stop working overtime.
> Take longer breaks.
> Don’t offer ideas or suggestions.
• Try to increase your outputs:
> Ask for a raise.
> Look for a new job with higher pay.
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Equity considerations
• Internal equity:
> Job evaluation – relative worth of jobs
within the organization.
> Parity between jobs.
> Parity between individuals in the same job.
• External equity:
> Market data – relative position in the
marketplace.
> Attract and retain quality talent.
> Competitive position.
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External equity
• Objectives:
> Attract talent.
> Retain talent.
> Reward desired performance.
> Cost-effective, affordable.
• Compensation philosophy:
> Competitive position.
> Compensation mix.
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Compensation philosophy
• Competitive position:
> Lead: Consciously pay more than the
competition.
> Lag: Pay less than the competition.
> Match: Pay roughly the same as competitors.
• Compensation mix (entitlement vs.
performance):
> Fixed pay component.
> Variable pay components.
> Indirect rewards:
• Employee benefits.
> Intangible rewards.
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Competitive position
• Lead the market:
> Pay in excess of the going rates.
> Provides the organization with ample supply of
applicants, decreases turnover, prevents
unionization attempts.
> May lead to higher overall labor costs.
• Lag the market:
> Pay below the going rates.
> May be due to financial inability to pay at market.
> May require increased non-financial rewards.
> Can lead to higher turnover, lower productivity, and
lack of applicants.
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Competitive position
• Match the market:
> Pay levels relative to the existing marketplace.
> Most commonly adopted strategy.
> Requires continuous monitoring and reactivity to
changes in market (playing “catch-up”).
> Leads to acceptable talent acquisition and retention.
• Combination approach:
> Different strategies are used during different
economic conditions.
> Different strategies used for different jobs within the
organization.
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Compensation mix
• Fixed pay:
> Base salary
• Variable pay components:
> Productivity bonus
> Skill- or knowledge-based pay
> Performance bonus
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Compensation mix
• Indirect rewards:
> Mandatory benefits
> Voluntary benefits
> Intangible rewards
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Challenging work
Autonomy
Feedback
Supportive work relationships
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What is a salary survey?
A salary survey is the systematic
process of collecting information
and making judgments about the
compensation paid by other
employers.
Milkovich, Newman and Gerhart, 2011
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Purposes of a salary survey
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Establish or adjust pay levels.
Establish or adjust pay mix.
Establish or price a pay structure.
Analyze pay-related problems:
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Employee turnover.
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Union organizing activity.
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Purposes of a salary survey
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Estimate competitors’ labor costs.
Decide where to locate an operation:
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New operations.
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Expanding operations.
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Legal considerations
• Anti-trust issues:
> Sherman Antitrust Act of 1890.
> Purpose of the survey.
> Collusion among participants.
• Privacy concerns:
> De-identify information.
• Labor union considerations:
> “Prevailing wage” issues.
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Make-or-buy decision
• Investigate off-the-shelf options
> Consulting firms:
• Mercer Consulting
> Trade/industry groups:
• National Telecommunications Cooperative Association
> Professional organizations:
• Society for Human Resource Management
> Government data sources:
• Bureau of Labor Statistics
> Ad hoc research:
• Common websites
– Salary.com
– Payscale.com
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Evaluating vendor surveys
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Background of the survey vendor.
Scope of the survey.
Survey methodology.
Number of participating organizations.
Number of incumbents represented.
Effective date of the survey.
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Make-or-buy decision
• Does the situation warrant a customized survey?
> Unique internal labor considerations.
> Unusual external labor conditions.
> Time considerations.
> Cost considerations.
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Activity 1 – Investigate benchmark job pay rates
• In this activity, students will research and analyze
benchmark jobs in two different geographic areas.
• You will use publicly available data, assess the
quality of that data and incorporate it into your
results.
• Finally, you will make a recommendation to the
management team regarding where the company
should locate its new facility.
• Good luck!
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End of Session 1
• This concludes Session 1.
• Assignment for Session 2: Complete the activity.
> Groups of 4-5 students.
> Research pay rates for six benchmark jobs:
• Two geographic areas.
• At least two different sources.
• BRING YOUR RESULTS TO SESSION 2
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Learning objectives for Session 2
• Debrief results from Activity 1.
• Planning a salary survey project.
• Designing a salary survey.
• Collecting data.
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Planning the salary survey project
• Gather background information:
> Compensation philosophy and mix.
> Purpose of survey.
> Internal job evaluation/pay levels.
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Timeliness of data.
Determine competitor/participants to include.
Select jobs to include.
Decide what information to collect.
Design survey instrument.
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Planning the survey project
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Collect data.
Analyze data.
Determine appropriate adjustments.
Make pay adjustments as needed.
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Background information/timeliness of data
Background
information:
• Compensation
philosophy.
• Compensation mix.
• Purpose of survey.
• Legal
considerations.
• Internal job
evaluation.
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Timeliness of data:
• Purpose of survey.
• Volatility or
fluctuation in
economic situation.
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Competitors to include
• How many:
• Geographic:
> 6-10.
> Metropolitan.
• Industry:
> Regional.
> Industry-specific.
> National.
• Size/age:
> Generic.
> Revenue.
> Headcount.
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Jobs to include
• Benchmark job approach:
> Stable job content.
> Common across different employers.
> Include sizable number of employees.
• Low-high approach:
> Lowest paid.
> Highest paid.
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Jobs to include
• Benchmark conversion/survey leveling:
> Rely on internal job evaluation to “convert”
to benchmark job data.
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Information to collect
• Organization data:
> Identification.
> Industry classification.
> Financial performance.
> Size.
> Structure.
> Age.
• Total compensation:
> Direct compensation.
> Indirect compensation.
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Information to collect
• Incumbent/job:
> Job description.
> Education.
> Experience.
> Pay range.
> Pay rate.
• HR outcomes:
> Productivity.
> Retention rates.
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Design the survey instrument
• Response method:
> Paper and pencil.
> Electronic:
• SurveyMonkey.
• Zoomerang.
• QuestionPro.
• Ease of response:
> Don’t over-complicate.
> Don’t ask for too much.
• Assure anonymity:
> Use of third party.
• Make it worth their time:
> Free/discount results for participants.
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Activity 2 – Gantt chart activity
• You will plan the survey project using a Gantt
chart.
• Review all steps in the process from Sessions 1
and 2. You don’t want to forget an important step.
• Make a list of all tasks and how long they will take
to complete.
• Transfer all data to the Gantt chart.
• Good luck!
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End of Session 2
• This concludes Session 2.
• Session 3 will ideally be held in a computer lab.
Alternatively, ask students to bring calculators to
Session 3.
> Data analysis requires calculations and graphing.
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Learning objectives for Session 3
• Collect and analyze data.
• Interpret survey results.
• Construct a market line.
• Discuss dealing with pay issues.
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Collecting data
• Recruiting participants:
> Consulting firm or other third party.
• Managing data:
> Complete responses.
> Contact information.
> Deadline.
> Aggregated database.
• Resource limits:
> Time.
> Money.
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Analyzing survey results
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Verify accuracy of job matches.
Deal with outliers/anomalies.
Run statistical analyses.
Construct the market pay line and the pay policy
line.
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Dealing with outliers/anomalies
• Does any one organization dominate?
> Perhaps delete responses to avoid aberrations.
• Do all organizations show similar patterns?
> Look for trends regarding compensation mix.
• Do jobs tend to fall in the same high-low order
in terms of market pay?
• Are there outliers or odd data points?
• Questions to consider:
> What difference will it make if outliers are dropped?
> What difference will it make if outliers are included in
the analysis?
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Statistical analysis
• Frequency distribution.
• Mean: mathematical average.
> Simple mean.
> Trimmed mean.
> Weighted average.
• Median: middle data point in ordered data set.
• Mode: most frequently occurring value.
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Statistical analysis
• Percentile: pay rate that a certain percentage of
the salary data is less than.
• Range:
> Simple range = highest – lowest value.
> Interquartile range (IRQ) = difference between 75th
and 25th percentiles.
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Market pay line
• Plot the benchmark jobs on the horizontal (x) axis
and the market rates on the vertical (y) axis.
• Can be drawn manually or developed through a
regression analysis.
> This analysis utilizes internal job evaluation points to
calculate the regression line.
• Excel makes this very easy.
> Enter data in Excel.
> Calculate slope and y-intercept.
> Create the graphic (plot).
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Market pay regression line
Job evaluation points
90000
80000
y = 294.52x - 12585
70000
Axis Title
60000
50000
Job evaluation points
40000
Linear (Job evaluation points)
30000
20000
10000
0
0
50
100
150
200
Axis Title
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350
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Activity 3 – Analyzing survey data activity
• You will analyze survey sample data by computing
measures of central tendency.
• You will then plot the results to set a market pay
line.
• Good luck!
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Dealing with pay issues
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Communicate findings to employees.
Above market pay issues.
Below market pay issues.
Job evaluation adjustments.
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Wrap up
• Equity considerations:
> Internal.
> External.
• Competitive market information.
• Designing and conducting a salary survey.
• Using survey data to make compensation
decisions.
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End of Session 3; End of Module
• This concludes the learning module on managing
a salary survey project.
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