Just saw an update from a compensation survey service I subscribe to that said “it is no accident that job evaluation, skill-based pay valuations, job analyses, and other esoteric approaches have waned in the last decades, only to be replaced with competitive pricing focused on salary surveys,” and further goes on to assert that years of experience are the best predictor of performance. Of course, since they’re in the business of selling expensive tools based solely on market data, and analyze their data based on years of experience, there’s no big surprise there, but hey, people actually read these updates, and might actually believe them. Not meaning to be rude, but that’s some ridiculous and off-base thinking from someone purporting to be a compensation professional.
Let’s knock the easy one out of the way first — “years of experience as a proxy for performance.” Nope. I’ll stop there. It is true, beyond a doubt, that there is a learning curve for every job. Unless you walk in the door knowing everything except where the bathroom is and how to make the coffee, you aren’t fully functioning. So it takes time. How long? An entry level clerical job, maybe a year or two at the outside? A professional job, maybe three to five years? Executives… oh, a couple more. It takes time to learn, but once you learn, all you’re doing is making minor incremental improvements, if you’re doing that at all. What’s the biggest problem many employers have? Long-service people who’ve packed it in. It’s true that they’re earning more — but not because they should be!! One of the major issues we’re called in to solve are compensation programs that reward experience over performance, and fixing them is a long-term solution. Experience does give you more chances to show you know what to do, but does NOT guarantee higher levels of performance, and should not automatically warrant increased pay.
Now, as to compensation program design. In the couple of months, we’ve had several organizations call us begging for a compensation program that would actually work. There was nothing wrong with their “only market” design, except that “only market” approaches don’t work. I think the most vivid description was “a train wreck waiting to happen.”
1. Competitive market data has limited usefulness for matching to jobs. Why? Because organizations don’t have only benchmark jobs anymore. In fact, among our clients, its safe to say than less than half of the jobs within their organizations match up neatly with jobs in a survey. Lead roles, multiple tiers of management, odd titles, combinations of roles (maintenance people who run websites) and all sorts of things that real employers have to do to get by create jobs that you can’t figure out what to do with based on market data.
2. Competitive market data doesn’t give you a way to express your job differences in any structured way. Yes, there are people who say “oh, we’ll just add 15% for that duty” WHAT? Where’d you get 15 percent? Did you read in a book somewhere? How do you know it’s not 5%, or 25%? This is really old school (my polite term for something I shouldn’t type) thinking. We learned it decades and rejected it decades ago. It doesn’t make sense, except that its easy.
3. Competitive data doesn’t help you with gender based pay discrimination. Yes, for the moment, “any factor other than sex” is still floating out there, but it’s going to be legislated away because there is simply too much belief that “male dominated jobs” pay more than “female dominated jobs.” Doesn’t even matter if it is true or not, its a belief, and even the people who write the studies suggesting it isn’t true know that they won’t be believed. Some sort of internal equity model is essential to really show you’re serious about not discriminating — and you should be doing it regardless of whether you fear a regulator.
4. Job Evaluation is hardly “esoteric” It is true that more employers are using market based structures — mostly because the consultants they used for their job evaluation programs made everything too expensive, too proprietary and too confusing for their clients to use. A structure based on a simple job evaluation approach is cheaper and easier to maintain than a pure market approach… and additionally… works.
If I don’t stop now, this post will just get too long, but there’s much much more…
This post will go under the recently established category “rant.”