Back in the day, our Benchmarking Maven, Ashley Adair, worked to benchmark the role of an Office Manager. In the customer’s market, the job would have normally been about $50k. When we checked to see where employees were falling relative to the market, we were stumped by this one. The incumbent was being paid close to six figures! Did we have the right match? What might the Office Manager be responsible for to warrant that kind of pay? When we brought the question up with the customer, we learned that the Office Manager was a daughter of the owner. The customer believed “yeah… nothing we can do about that.”
Companies that start as a family-run business often have some point where they either decide they’re going to make exceptions for family, or they put measures into place to reward according to the market value for the job. Many small organizations go through this transition as they grow and evolve. It doesn’t have to be scary, but does rely on a strong vision, reliable market data, and great communication skills.
#4: Mommy Dearest
Years ago, we partnered with a customer to develop compensation grades and ranges for their organization. Our main contact was an HR Generalist who believed she had full authority on the project. During the course of the project, there were a number of pivotal points where we asked to speak with someone at a higher level in the organization. How competitively do you want to pay in the market? You’re overpaying a high portion of your employees by as much as double, how do you plan to handle red-circled outliers? It looks like you’re currently paying this function higher than that one, but the market shows the reverse should be true, should we fix it? Unfortunately, we didn’t talk to the executives until it was time to present the new plan we’d developed. Their very first question: “wait, what’s this project?”
Gaining executive buy-in doesn’t have to be scary. It can be as little as quick water-cooler conversation or as much as a regularly scheduled update. One thing we’ve learned is that it’s hard to do something as foundational as develop an organization-wide comp plan without an executive sponsor.
We worked with a company that had recently done a ton of mergers. When we started, they were using four different payroll systems and trying to centralize their compensation planning efforts in PayScale’s Insight. When we started, they had 700 titles for their 1800 employees. The same title meant different things in different locations. At the same time, different titles were actually the same job across many locations. By the end we whittled down their total count of job titles to one hundred!
Growing fast can be scary. The sooner you can wrap your arms around your plan and draw some clear parameters for adding new jobs, the better it will be. The faster you grow, the more you’ll want to get that plan in place first. There’s rarely a great time to do it, but there’s a bad time: after you’ve already made a thousand new offers at much too high a salary.
#2: The Mummy
In one organization, one of our savvy Customer Operations Specialists, Carley Anderson, worked to carefully benchmark an office assistant role. In that customer’s market, that role was valued around $35k. In this particular smaller company, they paid their office assistant $90k, more than twice the value of the job! When we asked if they had any special duties, or more generally what the rationale was for that level of pay, the response was that the incumbent had been there for twenty years.
Capping people’s pay is scary. A lot of organizations struggle with how to differentiate between the value of the job and the value an employee brings. Market data helps identify the value of the job, after you layer in your organizational priorities and competitive talent market. Employee pay should be appropriately differentiated based on their skills, experience, performance, or productivity. At some point, however, there’s nothing more an employee can do to add value to that job. Find the talking points that work for your organization’s values, culture, and priorities, and be consistent when you communicate.
#1: The Matrix
And the number one compensation horror story came from one of our top Benchmarking Specialists, Will Jenkins, who gleefully said, “I’ve got one for you.” He received a benchmarking project from an oil company not too long ago; they had a thousand jobs! At face value, their thousand jobs for fifty-thousand employees may not seem like much. But when he looked closer, they only had about fifty distinct job titles. Each job was developed with twenty levels! As he dutifully set up all thousand jobs, he noticed that all twenty levels of the job had the same exact tasks and education reflected. The only difference between levels was the number of years in each role. It’s really hard to differentiate twenty different levels of a job and make those levels fully meaningful, from both a compensation and an org design perspective. In their case, it resulted in positions like “Principal Office Clerk,” with 20 years of experience, with the highly critical tasks of typing, filing, and phone support. Unsurprisingly, the incumbent in that role was highly compensated.
Developing a realistic and fair compensation structure doesn’t have to be scary. Consider the real needs of each job function, think about how you can meaningfully differentiate levels within that role, and develop your jobs accordingly. Think about the typical path an employee might take through that function. When they work hard to earn a promotion, will they be promoted to a level that is substantively different from the one they just moved out of? And if so, are you compensating it appropriately?
How about you? What are some of the scariest compensation situations you’ve seen or fixed? We’d love to hear from you. Until then, have a safe and happy Halloween!