In our first two posts on Compensation we discussed what resources we have and use to price jobs. We also discussed how we calculate base pay. Here we combine the third and fourth of our projected 10 posts on how priced jobs are built into a compensation structure, why a structure is needed, what it does, and how it's administered.
What and Why?
In any mid-sized or larger company you'll have several different job families. These are groupings of jobs more or less defined by similar competencies or purposes to their work. Within Nelson, we have Publishing, Marketing, Sales, HR, Facilities, Production, Distribution, Customer Service, Accounting/Credit/Collections, Tax, Information Systems, and Conferences. Every job that serves in one of these functional areas is part of that job family. Support positions such as Administrative Assistant are more generic core competencies and exist in all of these families. However, they share the same purpose as do the jobs they support, so they are grouped in accordingly. The jobs within a Family are then ranked by pay grade, using the base pay calculations we discussed in an earlier post. The combination of grouping and ranking gives us our first look at the career ladder for each department or division.
Spacing and Movement Up the Structure
Within the job ladder or Family we then establish a reasonable progression between levels. Promotional steps should be available at intervals that allow for moderate and periodic promotions as the individual climbs the learning curve for each job. Sometimes we add steps into the program to insure that an opportunity exists for 8 - 15% promotional increases every 2-4 years. This is vastly preferable to 20 - 40% increases every 5-8 years that occurs in some companies. I say preferable, because a person who waits a long time for a "big win" promotion is a greater risk to leave the company. Also, the job value in the market of one step in the promotional ladder over the other (think Marketing Coordinator up to Marketing Specialist as an example) is generally 8 - 15% and has been for years. Now here's where I get in trouble, as doubtless someone will chime in with an anecdote about someone who left our company for a huge promotional increase. Yes, that happens but remember that we've set our base pay at the 50th percentile of the market. Exactly half of the companies where you apply for your same job duties will pay you more, and approximately half will pay less. Imagine a bell curve, and note that about 20% of those companies will pay substantially more and roughly the same proportion will pay substantially less. Its just that hardly anybody ever leaves a company for less money, and when they do you don't hear from them.
Demotions and Lateral Moves
Another purpose of the structure is to determine what adjustments need to be made when people move in ways other than up through promotion. Sometimes people either don't like their role, fail in their role, or their position is eliminated and they have to find another role. When that happens, we try to keep the employee at their current salary provided that it is within the acceptable market range for their job. We then consider, in calculating future raises, how high the person is paid compared to their peers. Often, slower or suspended increases bring the demoted person back into line within 2-3 years. In some cases the change is too dramatic and we offer the individual an internally fair rate based upon their peers in the new job. Lateral moves are the easiest; no change in pay just to get a change in scenery.
The Salary Structure is moved for cost of living about every 18 - 30 months. We get information from salary survey publishing houses or similar resources each year on how much and how often salary structures are being moved in the market. Those moves tend to be 3 - 3.5%, but can be much more for "hot" jobs. Sometimes the decision to move the entire structure is more art than science; when we reprice our jobs, if the majority of our market targets are above our 50th percentile line then we know intuitively that the 50th percentile has moved.
As always, your comments are welcome and encouraged; even those of you who disagree. I encourage you to post your comments and include your name; but you are also free to post anonymously or to email me directly for private discussion at firstname.lastname@example.org or send an IM at jthom140 on AIM.