XYZ Company
Market Competitiveness Analysis:
Senior Management Presentation
December 30, 2003
Prepared by:
Jennifer C. Loftus, SPHR, CCP, CBP, GRP
National Director
Jason Mitchell
Statistical Analyst
2
Original Project Charter
• Assist XYZ Company in the analysis of all positions to determine the
organization’s competitive position.
• Develop market based pay ranges for the positions.
• If warranted, recommend potential realignment with the market.
3
Market Pricing Methodology
Selection of Market Data
• Nine compensation surveys were selected for use in the market analysis.
• A total of thirty-seven positions were reviewed and compared to the market.
–Job matches were made based on comparability of duties and requirements, not job
titles.
• Salary survey data for New York City were selected as a first priority for use.
• If local data were not available, national not-for-profit salary survey data were
utilized and factored for the New York City area.
–The geographic wage factor for New York, NY is 119.0% of the national average.
–Wage differentials are similar to, but not the same as, cost of living differentials.

For example, if a person earns $20,000 in Tulsa, OK (100% of the national
average), an equivalent wage in New York City would be $23,800 (119.0% of the
national average).
• All survey data were aged to 1/1/04 using a prorated 4% annual figure.
• Comparisons are based on the 50th and 75th percentiles of the average base pay
reported.
5
Survey Data Sources
• 2003 Abbott-Langer Compensation in Nonprofit Organizations
• 2003 BLR Northeast / Middle-Atlantic Survey of Exempt Compensation
• 2003 BLR New York Survey of Nonexempt Compensation
• 2003 CompData Surveys Compensation Data New York
• 2003 / 2004 Watson Wyatt ECS Geographic Report on Accounting &
Finance Personnel Compensation
• 2003 / 2004 Watson Wyatt ECS Geographic Report on Human Resources
Personnel Compensation
• 2003 / 2004 Watson Wyatt ECS Geographic Report on Office Personnel
Compensation
• 2003 / 2004 Watson Wyatt ECS Industry Report on Top Management
Compensation
• 2003 Mercer Metropolitan Benchmark Compensation Survey
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Results of the Base Pay Market Pricing Process
Important Considerations When Reviewing
Market Pricing Results
• Titles falling between -10% and 10% of market average are
generally considered to be market competitive.
• Generally, XYZ Company strives to be “market competitive”
with base pay.
–“Market competitive” tends to equate to the 50th percentile (P50) of
the market.
–P50 means that in the salary survey data for a specific job, one half of
the respondents pay below the P50 rate. One half of the respondents
pay above the P50 rate.
• Market data do not take into consideration years of experience
of reported incumbents in the position or their job performance.
–Organizations with high or low turnover may appear off of the market
due to length of service differences from survey participants.
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Percentile Example
Data Points
Percentile
$200,000
$150,000
$100,000
$100,000
$99,000
$89,000
$100,000 is the 75th
$100,000 and $100,000)
percentile
(average
of
$94,000 is the 50th percentile (average of $99,000
and $89,000)
$86,000
$85,000
$75,000
$80,000 is the 25th percentile (average of $85,000
and $75,000)
$70,000
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Results of Market Pricing Process
50th Percentile Base Salary Data
Based on a comparison of XYZ Company average salaries and 50th percentile
blended market average data
54.5%
60%
30.3%
40%
15.2%
20%
0%
Percent of Titles
More than -10% Below Market Average
-10% Below to 10% Above Market Average
More than 10% Above Market Average
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Results of Market Pricing Process
75th Percentile Base Salary Data
Based on a comparison of XYZ Company average salaries and 75th percentile
blended market average data
60%
48.5%
39.4%
40%
12.1%
20%
0%
Percent of Titles
More than -10% Below Market Average
-10% Below to 10% Above Market Average
More than 10% Above Market Average
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Conclusions Based on the Market Pricing Process
Conclusions – Base Pay Market
Competitiveness
• On average, when current average salaries are compared to P50 average
pay market data, XYZ Company’s average salaries fall at the market.
• 2.3% above the market
• On average, when current average salaries are compared to P75 average
pay market data, XYZ Company’s average salaries fall below the market.
• 15.0% below the market
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Proposed Market Based Salary Ranges
Developed From Market Pricing Results
Development of Market Based Pay Ranges
• The job titles under review were broken into four families with similar work
duties, recruitment market trends, and pay market trends.
– Administration
– Clerical
– Client Services
– Management

Top seven executives – not part of today’s discussion
• Within each family, the positions’ P75 market data were sorted from high to
low.
• Approximate 15% breaks between market levels were made to create a grade.
• The average market P75 rate of pay within each grade was used as the
midpoint of the salary range.
• When current XYZ Company pay range minimums were higher than the
prevailing market rate, the current XYZ Company range minimum was used as
the salary range minimum.
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Pay Range Spreads
• Range minimums and maximums were constructed around each
midpoint.
• Range spread is the distance between the range minimum and the
range maximum.
• In the proposed XYZ Company ranges, the range spread for the
Administrative and Client Services positions is 50%.
• In the proposed XYZ Company ranges, the range spread for the
Clerical positions is 30%.
• A typical range spread of 50% allows for flexibility in placing
employees in the range and future room for growth, while
controlling payroll costs.
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Sample Salary Range (50% Range Spread)
$10.00
Minimum
(Start of Q1)
$12.50
$15.00
$11.25
$13.75
Start
of Q2
Start of
Q4
Midpoint
(Start of Q3)
Range
Maximum
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General Anatomy of a Salary Range
Generally, the target zone for
seasoned, consistently
satisfactory performers, or
newer employees with “hot”
technical skills or a uniquely
impactful role.
Minimum
Generally, the target
zone for employees
relatively new in this
position (less than 5
years), or longer service
employees with some
performance deficiencies.
Midpoint
Maximum
Generally, the target zone for
seasoned outstanding
performers or selected
individuals who, because of
“hot” technical skills or a
uniquely impactful role, need to
be paid at or above market
average in order to attract
and/or retain.
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Important Considerations When Reviewing
Market Based Pay Ranges
• The proposed ranges do not take into consideration any incentive
compensation, benefits, or perks incumbents in the positions may
receive.
• Placement in the range is dependent on a number of factors, uniquely
weighted by each organization.
–Performance
–Length of service with the organization

In the same or similar positions

In a different position
–Prior experience in similar positions at other organizations
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Important Considerations When Reviewing
Cost Implications of Market Based Pay Ranges
• Three cost levels have been provided for each family.
–Bring to minimum only

The cost to bring each employee’s pay, if necessary, to the minimum of the
new range.

This is the minimum cost XYZ Company will incur to implement the new
ranges.
–Placement in the range assuming a 10 years to midpoint scenario

The cost to bring each employee’s pay, if necessary, to a point in the range,
assuming it takes 10 years to bring each employee’s pay to the midpoint of
the range.
–Placement in the range assuming a 5 years to midpoint scenario

The cost to bring each employee’s pay, if necessary, to a point in the range,
assuming it takes 5 years to bring each employee’s pay to the midpoint of
the range.
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Sample Placement in the Salary Range:
Employee with 5 years experience
$10.00
$12.50
$11.25
Placement
under bring to
minimum
scenario
Placement
under 10
years to
midpoint
scenario
$15.00
$13.75
Placement
under 5
years to
midpoint
scenario
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Cost Implications of the Proposed Market
Based Pay Ranges
• Bring to minimum only

Seventy-seven of 166 current employees’ pay will require bring to minimum
adjustments.

Assuming current payroll levels, this approach would cost an additional
$205,859, or an increase of 2.9% of the current payroll of $7,020,238.
• Placement in the range assuming a 10 years to midpoint scenario

One hundred forty-two of 166 current employees’ pay will require
adjustments.

Assuming current payroll levels, this approach would cost an additional
$426,502, or an increase of 6.1% of the current payroll of $7,020,238.
• Placement in the range assuming a 5 years to midpoint scenario

One hundred fifty of 166 current employees’ pay would require adjustments.

Assuming current payroll levels, this approach would cost an additional
$734,856, or an increase of 10.5% of the current payroll of $7,020,238.
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Looking Ahead:
Base Pay Recommendations
Recommendations
•XYZ Company should review the proposed costs to
determine if such a program is fiscally responsible.
 If
current fiscal concerns preclude implementing the ranges
in their entirety, a phased-in approach over two years may
be advisable.
•If fiscally possible, bring the incumbents’ base pay at
least to the minimum of the range.
•XYZ Company may want to consider the use of variable
incentives
to
provide
additional
compensation
opportunities to employees without adding fixed salary
costs to organizational budgets.
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