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Tuesday, September 26, 2006

Base Pay I: Resources We Use

As promised, we'll now turn our attention to how we calculate the fair market value of a position's base pay. To revisit our earlier post on terminology, base pay is the wage you receive every two weeks and does not include commissions, spiffs, or bonus. These are variable compensation pieces, and the value at targeted performance is usually calculated or expressed as some percentage of base pay. The base pay calculation, therefore, is very important in accurate and fair compensation as it impacts variable pay calculations.

The first important consideration in knowing how job prices are calculated is to know what we use to calculate them. This is the subject of today's post.

Job Descriptions - Specifically, we focus on the section in the JD template that addresses skills, duties and resopnsibilities, and specifically not the sections on education, reports to, or title. Job value is all about the duties of the position and the scope of responsibility (people supervised, level of direct customer or author contact, cost of mistakes, etc...). It is not about the qualifications of the individual who holds the job past consideration of the minimum qualifications to hold the job. In other words, you must meet the minimum standards to hold the job; past that what those qualifications happen to be do not directly influence pay. For instance, some jobs may not be available to high school graduates (such as the job of Accountant), but in jobs where there are no special education requirements high school graduates and MBAs doing the same exact job have the same pay range.

Salary Surveys - You may or may not know that there's an entire industry out there built around providing market information for various jobs. While the government tries to provide this information free for anyone who wants it through the Department of Labor, their surveys are done about every three years and take about a year to calculate and publish. As such, its out of date before it hits the public's eye. The most reliable and current data therefore comes from salary surveys published through for-profit compensation consultants, industry associations, chambers of commerce, etc... For Nashville operations we use the following outside resources:

Nashville Area Compensation Survey

Evangelical Christian Publishers Association Salary Survey

Comp Data Tennessee/Kentucky

Robert Half Accounting and Finance Survey

State of Tennessee Survey

Watson Wyatt Survey of Middle Management Compensation

Business and Legal Reports Survey of Exempt and Non-Exempt Compensation

Salary.com (we have a subscription to their data for employers that the public can't access)

We are currently beginning the task of refreshing the data and calculations for all Live Events jobs based in Plano, TX. As part of that process, we are looking for events industry and Texas data to add to our national salary.com data to assist us in that process. Let us know if you know a good source.
"Real World" Information- Salary Surveys and calculated prices are fine, but its also wise to compare the academic and mathematical to the real world. We maintain a recruiting database of applicants for all our positions, since all applications for non-warehouse jobs come through our on-line application process. Seeing the salary history of applicants who are qualified for the job and/or who are doing the same job elsewhere gives us a good reality check for our calculations. In addtion, turnover data and exit interviews from employees who leave the company provide us information on where people go and occasionally provide us salary information on what our competitors' pay when they hire our people.

That's all for now; next time we'll look at the calculation process of how we turn salary survey data into a job price. Until then your comments, as always, are welcome.

Jim

3 comments:

Bryan Norman said...

Jim, above you state that education is not a factor used to determine salary. Instead, it is only considered during the application process, making one more competitive in the applicant pool.

In your first post you stated, "Your college degree typically starts paying off 3-7 years into your career when you start to compete with equally-skilled but less educated co-workers for key positions. Until then, your degree indicates potential but doesn't usually return much value to your present job or make you worth more money."

Perhaps it's the type of job sought--especially if it's a management or executive position--but this statement contradicts what I've heard and have been told by business coaches, career counselors, and working people (who are not professors).

Most salary research I've seen will tier salaries based on education, often increasing salary estimates for advanced degrees. For example, Vanderbilt's MBA program shares that graduates often receive a 20% increase in their pay after receiving their degree whether it's at the same company or elsewhere. Now, it could be that the distinguished grad simply gets a promotion and that is the pay increase (the brochure doesn't specify). But salary research will often show numbers for the same position with a significant increase going to the advanced degree holder.

Does higher education create more payable value when coupled with the experience barrier you mentioned before? Is this a corporate myth, a working-force wish? Or have I missed a link in your explanation and misunderstood?

Bryan Norman said...
This comment has been removed by a blog administrator.
Jim Thomason said...

First of all, for anyone reading and noticing a deleted post from Bryan, I inadvertently posted his comment twice. There's not another comment that I've deleted.

As for your comment, I would need to see your salary surveys to comment on them specifically. However, I've never seen a salary survey that tiered target salary by education level. Now, you are absolutely correct in that education is a leading predictor of income; but it is in the more rapid career advancement to ever more valuable jobs that accounts for the earning power. It is not, typically, that the college grad gets more money for the same exact job.

As for the Owen program at Vanderbilt, it definetly makes its graduates worth more but is an anomalie due to two factors. It is one of the most difficult and prestegious programs of its type, and its graduates are worth more than the typical MBA and are sought after. Also, there is a high percentage of corporate sponsorship of Owen participants in my experience. Many of those in the program have already been identified by their employers as high potential candidates who are on the corporate fast track. I know of several who received increases and promotions as a reward for completing the program.

Your last comment is right on; it is the combination of education and experience that accelerates market value.

Hope this helps...I welcome all comments.

Jim