v-2013-Summer-Extra Lecture-01-Compenation 101 Using Market Data

8/11/2019 v-2013-Summer-Extra Lecture-01-Compenation 101 Using Market Data

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Compensation 101

Todays lesson plan: Compensation 101 -How To Use Market Data To Support YourCompensation Philosophy


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Compensation 101

Market Pricing

Data Analysis

Job Matching

CompensationPhilosophy

= Putting all of the piecestogether for the final product

= Taking accurate measurements

based on the foundation created

= Selecting appropriateresources that are easily

recognizable; limit custom design

= Foundation for defining yourmarket and competitive position


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Foundation for defining yourmarket and competitive position.


Compensation philosophy:We use an external market-referenced approach to attractingand retaining top candidates in

Southeast Michigan. We pursueall avenues to get what we want;no company is safe from ourrecruiting efforts. We strive to

lead the market and pay morethan the going rate to ouremployees based ondemonstrated skill andperformanceour money growson trees.


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Foundation for defining yourmarket and competitive position.


So what do we know aboutthis company in terms of themarket-referenced approach?

What is the hiring andretention strategy?

What is the labor market?What is the market position?


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Selecting appropriate resourcesthat are easily recognizable

Using our job descriptions thatare reviewed and updated everyyear

Select benchmark jobs from thesurveys

Do not rely on job titles or levels

Job Matching


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There are few jobs in the marketthat will match your jobs 100%in terms of job content

Therefore one rule of thumb is toconsider the match to beappropriate if 70% or more of

the job content is similar

Job Matching


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So what do you do about the jobthat doesnt meet the 70%criteria?

Consider different approaches to

tackle the person-specific jobsin your organization

Job Matching


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Selecting appropriate resources that areeasily recognizable; limit custom design

Lets say 60% of a job is chiefbottle washer and 40% of a jobis executive chef. What can youdo?Pay market rate of similarbenchmark job Pay the market rate of thebottle washer

Pay the bottle washer rate +a premium % Combine the market data60%/40%Pay the highest market rate ofthe two jobs

Job Matching


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Taking accurate measurementsbased on the foundation created

Data Analysis

What did we say in ourcompensation philosophy about:

Our labor market?

Our target competitive pay?

Our market position?


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Data Analysis

Target - Pay more than thegoing rate

The Median or 50thpercentile is

generally considered to be thegoing rate of pay for the position

Paying more than the going rate

might could mean using the 75th

percentile for competitivepositioning


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Data Analysis

Market Position - Lead themarket

All survey data must be aged

Salary surveys will typicallypublish projected structure andbudget increases

Select your change rate and afuture common date to age yourdata


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Data Analysis

Reacting to trends

Data jumping up or down?

Consider removing data fromyour study that appearsinconsistent based on your

research


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Putting all of the pieces togetherfor the final product

Market Pricing What do you do with multiplesurvey sources or data points?

Take the average of the data

points for each job

Weight surveys/data differentlybased on your compensation

strategy

Weight surveys/data differentlybased on the quality of thesurvey/data


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Market Pricing What do you do with the marketdata points?

Could use the data points

(10th%, 25th%, 50th%, 75th%,90th%) to establish market ratesfor each job or to develop/updatesalary ranges


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Market Pricing Pay rates are setthey arealigned with the compensationphilosophyso now what?

Compare incumbent pay to themarket data and analyze need toadjust pay


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Market Pricing Look at incumbent pay or jobfamily pay compared to marketrate.

Market indexdivide the basesalary by the market rateCompa-ratiodivide the basesalary by the midpoint

1.00 or greaterat or abovemarket rate/midpointLess than 1.00below marketrate/midpoint


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Market Pricing Things to consider if it appearsyou are over/underpaying:

Match to market

Skill/performance

Accuracy of survey data

Labor market conditions

Plan to correct issues over time


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Market Pricing Educating staff:

Communicate, communicate,communicate

Transparency

Support the right decisions


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Compensation 101

Market Pricing

Data Analysis

Job Matching


Final Exam

Documents

v-2013-Summer-Extra Lecture-01-Compenation 101 Using Market Data