A fundamental human need is learning and growth. If your employer can't show you what jobs would be a natural next step in your career, it means they haven't invested in developing career paths.

Career paths are not difficult to define.

Step 1 - Group jobs by their functional focus. Example: Accounting, Finance, Legal, Sales, Operations, HR, IT, Marketing, Communications, Government Relations, etc.

Step 2 - Define career levels. Many employers have an individual contributor career path and a management or supervisory career path.

Employers typically benchmark their jobs to determine if they are competitively paying their employees every year or every other year.

Most of the time my team and I find that 70% or more of the employees are paid within the market-based salary range. 

But I really get to understand the leadership capabilities of HR and the executive team when it comes to their reaction to seeing the employees who are under or over paid.

Sometimes, there is an immediate agreement to provide increases for those who are underpaid.  There is often concern expressed about how this happened and how they can prevent it from happening in the future.

In a recent meeting with a client’s executive leadership team, I facilitated a discussion about Compensation Guiding Principles. A principle is a kind of rule, belief, or idea that guides you. They are basic truths that help you with your life and decisions.

And in the case of compensation decisions, there is often tension and a balancing of priorities that needs to happen to arrive at an outcome you can communicate with transparency and that builds trust.

It’s a good idea as an employer to write your own guiding principles so you have a compass to reference if you find yourself debating what action to take and how best to communicate the decision and why behind it.

Compensation Guiding Principles:

Shifting your HR/Compensation team from rules-based policing to a business partner (internal consulting) is a daunting task. 

Here is my advice to CHROs and CEOs who need to make this happen to better align their people impacting decisions to business realities.

Become a Business Partner: The 5 Guiding Principles:

1.        Business Acumen and Context – Know how your business drives revenue and manages expenses. It’s all about money and profitability. How do employees and financial capital get deployed to achieve these goals?

I was talking with an employer client recently about the pay grades and base salary ranges my team developed for their organization.

There were a few employees paid above the maximum of the salary range. We were discussing what to do about that and here is a list of my recommendations:

1)        Don’t continue to give them base pay increases until the ranges allow for base pay growth in the future. This assumes you will update the pay grades and ranges annually.

2)        Consider providing a lump sum payment in lieu of a base pay increase during your merit planning process.

Most people who do compensation work end up there by accident. I don’t know any 5-year-old that says they want to be a Compensation Analyst when they grow up.

Compensation is a profession that requires many skills and competencies. Things like data analysis, Excel skills, storytelling, effective communication, influence (sales) skills, critical thinking, problem solving, business acumen, and empathy are on the list of competencies I look for when adding people to my team.

Most people start off doing broad-based compensation work. Then there are the specialties within the profession that they sometimes go toward as their career progresses.

It usually starts when you are under resourced.  

You don’t have enough time to do all the work that is expected of you, so you do something quick to answer a question. And then you never go back and do the full analysis and implement final decisions made with intention and integrity.

·        Instead of assigning the grade to the job, you market price it and then calculate a base pay range around the 50th percentile. Then you share that specific range with the hiring manager or on the job posting.

·        Instead of updating the pay grade structure for the next year by doing the external market analysis, you just age it by 3%.

In the last 24 hours, I’ve listened to two podcasts on this topic:

a)        The Modern People Leader, hosted by Stephen Huerta, Episode 186 with Hebba Youssef

b)       Josh Bersin, The Ever-Expanding Role of the CHRO

To summarize, they point out that the CHRO role has grown in responsibilities and impact over the last few years. Not only do these leaders need to understand the multiple disciplines within HR but they also must know about:

When I started doing compensation work in the 1990s, the only compensation data we used to market price jobs was the traditional salary surveys.

Traditional salary surveys are still published by a variety of firms ,but now there are more pay data sources employers can use.

1.        Crowd sourced and/or self-reported pay data

2.        Job offer pay data (from your ATS, for example)

3.        Web scraped or job posting pay data

What’s the paper ceiling?

The paper ceiling references the career advancement barriers people without a college degree experience.

62% of the workforce in the U.S. potentially has paper ceiling barriers given that about 38% of the population (age 25 and older) have a bachelor’s degree. 

I hear from employers all the time that they struggle to find qualified candidates to fill open jobs.

1.        Compa-Ratio, short for compensation ratio, is a comparison of an individual’s salary to the midpoint of a given pay range.

2.        Range Penetration measures an employee’s salary as a percentage of the total pay range.

3.        Market Ratio compares an employee's salary to the market rate for their job.

4.        Salary Range Spread is the percentage difference between the minimum and maximum salaries in a pay range.

1.      Driving in heavy traffic

2.      Wear shoes that hurt my feet

3.      Not being authentic

4.      Seeking approval from others

5.      Pretending to be happy

Step 1 – Determine area(s) of focus. Pay compression is when the pay of an employee is very close to or above (a) the pay of more experienced and higher performing employees in the same job title or (b) their first level supervisor.

·        Example: We pay our supervisors at least 10% above their highest paid direct report. Exceptions are made for the following reasons: insert text.

Step 2 – Determine the executive summary needed at the completion of the analysis.

Step 3 – Determine the fields needed in an Excel file to do the analysis. Pull the Excel data from your HRIS.

The siloed functions within HR, especially at large employers, can be problematic. Example:

·        Talent Acquisition doesn’t know the impacts of the job architecture being designed by Compensation.

·        Talent Development creates the new performance management program without including Compensation until the new program is almost ready for implementation.

·        HRIS is working with an outside implementation partner to get Workday in place. They haven’t worked with any of the HR functions to review/change current processes to be in alignment with Workday functionality.

ALTERNATIVE 1 - Black & White:

I’ve worked with a few employers who have pay decision tools (Excel spreadsheets) that tell the user what the employee or new hire should be paid based on a few factors.

The factors are usually one or more of the following:

·        Years of relevant experience

·        Performance rating

·        Education and training

·        Seniority

I talk about this when I am working with pay negotiation clients.  For example, when an employer makes a job offer and the pay is so under market that you cringe, it is time to consider walking away.

And low pay plus red flags like an employer that is struggling to find a competitive advantage or learning that several executives have left recently can add to your confidence that walking away is the right decision.

There are red flags I look for when I am talking to employers who want compensation work done.  I look for slow decision making, a small budget for a large project, and a lack of an ability to influence other decision makers within the organization.

Be sure to not over emphasize the years of experience in the job description as the primary element on which you base your market pricing match decision.

The elements that should be considered when market pricing include:

·        The level of the job’s responsibilities – example: entry, intermediate, senior, or expert if the job is an individual contributor role.

·        The reporting hierarchy – Does the job report to a supervisor, manager, director, or VP?

An example: “Employees with similar jobs, performance, skill sets, and experience within a company are paid similarly. This includes salary, benefits, and other forms of rewards.”

Let’s look at that definition in more detail.

“Employees with similar jobs,...

·        Similar jobs can be further defined as (a) same job title, (b) same job family and career level, and/or (c) same job family and pay grade.

A fundamental human need is learning and growth.

If an employer can't show you what jobs would be a natural next step in your career, it means they haven't invested in developing career paths.

Career paths are not difficult to define.

Step 1 - Group jobs by their functional focus. Example: Accounting, Finance, Legal, Sales, Operations, HR, IT, Marketing, Communications, Government Relations, etc.

Market pricing 100, 500, or more jobs is a grind. It is slow and deliberate work, but the data ultimately tells a story.

Employers: Are you paying too much? Are you paying too little?  Where do you need to spend money? How much should your budget be for pay changes going forward?

The market pricing of the jobs depends on well written job descriptions. Reading hundreds of job descriptions and then using that understanding to choose matches from salary surveys can be viewed as tedious. Or it can be done with curiosity and a focus on learning.

How can AI help with this work?