Surveys, Salaries and Reality

As a particular sector of a job market heats up, compensation becomes a key component for company’s to remain competitive.

I am going to preface this blog by stating that this is an opinion piece, based more on experience and observation, than extensive analytical research.

In the last few recovery cycles, one of the recurring themes for clients replacing, upgrading or hiring new roles is compensation. How much should we pay, what are like companies compensating in our size and sector? How do we remain competitive? What types of incentives do our competitors offer, etc.

Many of my clients rely on salary surveys and comp firms for their data. They often pay substantial fees for the latest compensation information. Public companies have comp committees and are particularly sensitive to compensation issues.

When a specific sector of the market picks up compensation can quickly vary. What was valued at X just yesterday, is now Y and often companies will suffer from ‘sticker shock’ as formerly stable comp packages see multi percentage increases in a short period of time.

Of course, this is a classic supply and demand scenario. If the demand increases and the supply decreases, a few likely scenarios occur. There are more companies/competitors vying for a particular talent. Bidding wars may ensue. Recruited candidates receive counter offers. Candidates understand their value in the marketplace and demand better compensation packages to make a change. The more specialized and in demand the skill, the more competitive the candidate. The candidate pool of today is more educated and research savvy about their particular value in the market.

Here’s where the worlds of reality and salary surveys collide. In recent months, I’ve had not a few clients experience ‘sticker shock’ at the rapid increase in specific job categories. Lengthy discussions ensue regarding the data they have versus current market conditions. I remind them that I deal in realities and regardless of what their information implies, real time recruiting is just what it is: reality!

Compensation guidelines are just that, guidelines! They are subjective, and even when broken down based on company size, region and public vs. private, the intangibles differ widely, whether it’s bonus, equity, vacation time, sign on bonuses and responsibilities vs, title. I have a client who never gives accurate data on what her company pays their best talent. She doesn’t believe in sharing what her top employees are compensated. Companies often zealously guard, and rightfully so, their key performing managers and directors.

Vehemently adhering to a salary guideline may severely limit your ability to compete for the talent you want. Casting a recruiting net with few qualified results or making offers that go unaccepted, may be the indicator that, everything else being equal, your compensation package may be wanting. From a perception standpoint, it has negative connotations in the marketplace and internally. If a company must adhere to guidelines based on internal equity, then requirements may need to be made more flexible or how a department is compensated needs to be reviewed.

Overall, unless your company wants to be left behind in the war for talent, or poached because of under compensation, hiring outside the box for the best talent may ultimately save time, money and new hire goodwill.