Chapter 9
 Purpose
of a survey
 Select relevant market competitors
 Design the survey
 Interpret survey results and construct a market
line
 Pay-policy line
 Grades and ranges
 Broad banding
 Balancing internal and external pressures
 Specify
competitive pay-level policy
 Define purpose of survey
 Specify relevant market
 Design and conduct survey
 Interpret and apply result
 Design grades and ranges or bands
 Translating
external pay policy into practice
requires information on the external market.
 Surveys provide the data for translating that
policy into pay levels, pay mix, and structures.
 A survey is the systematic process of collecting
and making judgments about the compensation
paid by other employers
 An
employer conducts or participates in a
survey for a number of reasons:
• Adjust to the pay level in response to changing rates
•
•
•
•
paid by competitors
To set the mix of pay forms relative to that paid by
competitors
To establish or price a pay structure
To analyze pay related problems
To estimate the labor costs of product/service market
competitors
 The
same occupations or skills
 Employees within the same geographic area
 The same products and services.
 Who should be involved? (Price fixing)
 How many employers?
• Publicly available data
• Word of mouse
• Where are the standards?
 Which jobs should be included?
• Benchmark job approach
• Low-high approach
• Benchmark conversion approach
 What information should be collected?
• Organization data
• Total compensation data
Base pay
Tells how competitors
are valuing the work in
similar jobs
Fails to include
performance incentives
and other forms, so will
not give true picture if
competitors offer low
base but high incentives
Total cash (base +
bonus)
Tells how competitors
are valuing the work:
also tells the cash pay for
performance opportunity
in the job
All employees may not
receive incentives, so it
may overstate the
competitor’s pay; plus, it
does not include long
term incentives
Tells the total value
competitors place on this
work
All employees may not
receive all the forms.
Don’t set base equal to
competitors’ total
compensation. Risks
high fixed costs.
Total compensation
(base + bonus +
stock options+
benefits)
 Verify data
• Accuracy of match
• Anomalies
 Statistical analysis
• Frequency distribution
• Central tendency
• Variation
 Update the survey data
 Construct
a market pay line
 Combine internal structure and external market
rates
Lag
January 1: Current year
Surveys completed.
Participants report
actual rates in effect
last Jan. 1
Median base
Engineer I = Rs. 45,000
Today:
Analyze survey, make
recommendations
Forecast 5% increase
by end of current year
Implement plan
Lead/lag
Lead
January 1: Plan year begins
Forecasted rate =
Rs. 47, 250
Update up to here.
Pay Rs. 47250 during
plan year
Resurvey
Forecast 5% increase
by end of plan year
Update up to here.
Pay Rs. 48431 during
plan year
December 31: plan year ends
Forecasted rate =
Rs. 49,612
Update up to here.
Pay Rs. 49612 during
plan year
Maximum
Maximum
Midpoint
Midpoint
Salary
Maximum
Minimum
Minimum
Maximum
Pay-policy line
Midpoint
Maximum
Minimum
Midpoint
Minimum
Grades
Contain jobs
Minimum
1
2
AB
CDEF
3
GHIJK
Pay structure
4
LMN
5
OP
 They
offer flexibility….
• Differences in quality (skills, abilities and experience)
among individuals applying for work
• Differences in the productivity or value of these quality
variations
• Differences in the mix of pay forms competitors use
 Develop
grades
 Establish range midpoints, minimums, and
maximums
 Overlap
 Broad
banding
 Consolidating as many as four or five
traditional grades into a single band with one
minimum and one maximum.
RANGES SUPPORT







Some flexibility within controls
Relatively stable organization
design
Recognition via titles or career
progression
Midpoint controls,
comparatives
Controls designed into system
Give managers “freedom with
guidelines”
150 percent range-spread
BANDS SUPPORT







Emphasis on flexibility within
guidelines
Global organizations
Cross-functional experience
and lateral progression
Reference market rates,
shadow ranges
Controls in budget, few in
system
Give managers ‘freedom to
manage” pay
100-400 percent spread