Chuck Csizmar – CMC Compensation Group
“What is the competitive market price for a particular position?”
It’s a simple question. If you work in Compensation, this is what you do. And if you’re in the US, the survey sources you can call upon are numerous and well-stocked with participating companies and benchmark matches – the blessings of a large country. In fact, it is a common practice to segment the data (report separately) on the basis of industry, revenue size, or geographic region. In some instances you can further refine your analysis by operating budget, staff size or even years of experience.
For those accustomed to such robust analysis it can be a real wake-up call when asked to conduct a similar analysis for operations in another country. Suddenly your content-rich environment has disappeared, and in its place you find that the availability of good information can no longer be taken for granted. Now what do you do?
Your large country database is gone. Instead, you face a limited selection of survey sources and each offers only a fraction of your normal participant count – a far cry from business as usual.
Such is the key challenge when pricing international jobs – the limited number of companies included in surveys, even by the major vendors. For example, Mercer Netherlands has 81 participating companies. So it is not unusual for a market pricing analysis to include only 4 – 5 “matches” – but is that representative of common practice?
If you’re the one on the asking end of the original question, let me share the challenges your analyst is likely to encounter.
Impact of Reduced Participation
- Limited industry segmentation: Reported data will likely cover multiple industries, with limited or no segmentation. If you’re in either a high or low paying industry, surveys will provide inflated or discounted information.
- Hard to segment by revenue size: To the extent that larger companies pay more than smaller you lose that distinction as well. This can be especially problematic if you’re a small company.
- Global responsibilities vs. strictly national: The distinction is often blurred between national, regional and global responsibilities.
- Combination jobs not well represented: You will find yourself matching against jobs “close to” your own, just to gain a “feel” for pay levels. If your job content varies from benchmark descriptions, reported data might not capture such idiosyncrasies.
- Poor matches and / or no data when less than 5 respondents: Surveys tend to provide an “n/a” when they do not have enough participants. When you start with limited companies it’s not unusual to find unreported jobs.
- Forget Regional variations: While it is often the case that certain geographic regions have higher pay levels, the reported data is usually national. You may assume that participants are in the higher paid region, at your risk.
What to do?
Frustrating, isn’t it? You can’t very well throw your hands into the air, complain about poor survey quality and move on to something else. The limitations are there and you have to play with the cards you’ve been dealt. Management is waiting, wondering what is taking you so long.
Working with limited resources is a test. Your challenge is to balance an understanding of the subject position, the industry and the vagaries of limited data points in order to determine which figure best represents your position’s competitive value.
To succeed you must utilize subjectivity and your professional judgment to consider the available data and gauge which figures best reflect the job under review. The correct answer will no longer jump off the page at you. Compensation has become an art, not a science.
- To improve your matching, consider either the 25th or the 75th percentiles instead of the median or 50th percentile to reflect your position: this can be effective with poor matches, or concerns that the reported job is either larger or smaller than your own.
- You may have to add or subtract from a benchmark job to gain a more appropriate figure for your position. For example, if your job is a VP but the survey matches stop at the Director level (or converse), you may have to adjust up or down to create a better “guesstimate.” Note: in such a case don’t forget that the incentive percentages will likely differ as well.
- There is no formula in making adjustments, but changes in organizational level are usually around 15% – 20%. Within-level description changes are usually around 5% – 15%.
- If dealing with only a few positions you might have greater success by individually pricing jobs through a vendor’s database of multiple surveys, government sources and local surveys. Vendors like ORC, Birches Group and a few others offer this select service.
- Be careful of the arithmetic exercise (averaging averages, inappropriate matches, assuming numbers, etc.) that delivers a figure you cannot validate later. Caution: a number is remembered, while often the qualifiers that follow are forgotten. Make sure that you document such concerns before providing specific data.
All this subjectivity means that your judgment might suffer from more skepticism, even criticism, as you cannot simply point to a survey page and say, “there it is.”
Does all this subjectivity ruin the value of your analysis? Not at all, as long as you inform management about how limited survey resources have impacted your analysis. They expect an answer to their question (market value?) and you need do the best that you can with the resources you have available.
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