Company management is always asking, “what is the market value of our jobs?”   But just how precise does your market pricing analysis really have to be?  To what extra lengths will you go, or should you go,  to increase the level of precision in your analysis, and would that effort prove worthwhile?   Does the appearance of a more precise figure bring meaningful results for you and for your management?

For example, would you consider that a market rate of $47,512 is an accurate reflection of current national trends for the subject job, or is that figure simply an arithmetic average that looks precise?  Would you fall on your sword over the accuracy of your analysis?

Regardless of need, how precise can you be?

The competitive “marketplace” is an imprecise animal, not often well defined and subject to numerous variations and interpretations.

• One survey doesn’t use the same companies as the next survey.

• The job matching spectrum swings from easy (benchmark) to difficult (unique jobs).

• Surveys provide different mixtures of industries and revenue (size).

• Weighted Average / Average / Median / 50^th Percentile formats are not always consistent, and they are not the same.

• International data is often a shadow of what is available in the U.S.

Meanwhile, the market itself is a moving target, never static, always changing, and the use of aging factors to bring it up-to-date will add a degree of guesswork.   For icing on the cake many practitioners round their analysis to the nearest Currency 100, in order to emphasize the “pulse” of the marketplace.   A minor distortion, I’ll admit, but exactitude is often an illusion anyway.

Each of us, in our respective roles, needs to ask of ourselves, what degree of precision is necessary?   Not what is attainable, but what is necessary to achieve our goals.  Is it sufficient to report the pulse, or does your organization require a digital thermometer that slices whatever data is available to a much finer degree?

When survey data is not robust (limited participation and scant industry and / or revenue segments) the extra effort expended in the search for precision can result in short cuts, assumptions and questionable (stretch) job matches – all to deliver a data capture anomaly that has only the appearance of exactitude.

Remember that the average of two survey sources doesn’t necessarily indicate a market trend, but only an arithmetic average – in effect, a splitting of the difference between two credible, or incredible figures.  That’s not a sign of anything.

A useful rule of thumb to consider is that any incumbent figure within +5% to -5% of a reported “market rate” is close enough to be considered as “on target.”   There are some who think that figure should be 10%, but to my thinking that leaves too wide a range for a so-called “going rate.”

Caution:  lots of analysis – paralysis jockeys out there advocate increasingly precise techniques to zero in on what they call your true market rate.  Toward that end several vendors have built a business model around encouraging organizations to slice and dice available information, trying to define and refine exactly what a “market” is, what jobs are exact matches and after a fashion how their singular survey source is the answer to your needs.

Part of that marketing strategy is to use custom designed evaluation techniques and their proprietary job matching system.  Such a strategy effectively marries the organization to the vendor, as one cannot easily co-mingle proprietary language and techniques with methodologies used by other survey sources.  Apples and oranges.

The hunt for precision can deliver less perceived value

Sometimes the pressure to report ever more refined analysis might actually result with the opposite effect; weakened credibility as the figures face challenges.

• When too few companies are reporting data.

• When having to stretch survey descriptions to match unique job content.

• When dealing with locations having volatile inflation spikes.

• When management doesn’t need to “dot the I and cross the T.”

At the end of the day, what does the client or your company management desire from your view of the competitive marketplace?  Chances are they simply want an understanding of approximately what the job is worth.   To gain a “ballpark” figure that could be used in planning, in recruiting, in assessing their reward programs.  You won’t have to report $47,512 to paint that picture.

On the other hand a simplistic sore thumb analysis is not an effective solution either, but instead let me suggest that a balance of time, effort and cost be used when conducting market analysis.  The key question is, what level of precision is really necessary?  What level will deliver credible results?

Do you really need such analytic exactitude to make a business decision?

I think you don’t, no matter what the over-analyzers suggest.  But then again, it may be rocket science in your organization.

With the fall of the Autumn leaves the attention of most senior management personnel shifts to the upcoming changeover of the business year.   And that click of the fiscal year calendar is accompanied by the beginning of their new annual incentive plan cycle.  So while the left hand is busy processing performance assessments and award payouts as an end-of-year project the right hand is getting ready for the new cycle.

In many companies this fresh start is automatic, an administrative process not given much thought past doing what they did last year, and the year before.

Here’s a thought.  Instead of issuing another rubber stamp copy perhaps now might be a good time to review your annual management incentive plan and take the opportunity to breathe new life into it.   Because if left on autopilot too long it’s surprising how many extra names find themselves added to the incentive-eligible rolls, slowly adding what can become significant costs, and all without proper review.

Eventually senior management will notice the ballooning costs and clamp down, either by reducing eligibility in a broad-based fashion, and /or by reducing incentive payment opportunities.  Perhaps both.  You don’t want to get to this point.

The Sneak Attack On Your Payroll

Has your company made too many people eligible for the incentive program?  Take a quick look at a 3-year growth curve of positions and employees being included.   Would you consider all these deserving?  Is someone making that decision, or has title or grade designation become the deciding factor?  Meanwhile, can you explain the ROI for the growing total in management incentive pay?

Employees deemed eligible for an incentive opportunity should have a line of sight between their performance against measureable objectives and award payments.   If they don’t, what are you rewarding?  Your plan shouldn’t be a profit-sharing scheme, where eligible employees light a candle in the window and hope that the company does well.

Companies typically use the “Manager” title as an eligibility cutoff, but perhaps what you name a position should not be the sole criteria.  What about those whose responsibilities include managing people, versus individual contributors who manage a budget, or a non-staffed function, or a specific responsibility?  Sometimes they’re all called “Manager.”

Perhaps the title is a gift, regardless of roles and responsibilities.  I’m thinking of a “First Impressions Manager.”

Using a grade designation can have its own problems; is everyone in a grade eligible, and if not how do you differentiate between positions, when the company has already deemed each to be similarly valued?  Slippery slope here.

If you’re suffering from title inflation and have granted puffed-up titles for certain employees, are these Managers actually managing at all, are they only supervising, or are they really only technical experts with a gratuitous title?

Have a care that your pay-for-performance management incentive program doesn’t evolve into an entitlement program.

Where’s My Check, Please?

Something else to look at: is the incentive award at risk?  How many of your eligible employees do not receive an award each cycle?  If practically everyone receives an award, perhaps instead of an incentive plan what you have is a delayed reward program; managers put in their twelve months and expect a bonus payment.

Does your incentive program require behavior above and beyond, with individual objectives linked to broader company goals?  Or are your objectives only finalized at the end of the cycle, simply to comply with some Human Resource assessment form that must be completed?

At the lower limits of incentive eligibility some companies start with an incentive target of 5%.  However that low a reward opportunity is not a carrot for anyone.  For that small amount of reward you won’t change anyone’s behavior, never mind maintain their attention for 12 months, so why bother?   If behavior isn’t going to change, if you’ll receive the same performance as before, but now for an additional  5%+ cost increase, what is your return on your investment?  In my view this money is often wasted.

Now is the time that you should have a look-see at the effectiveness of your annual management incentive plan – and to suggest meaningful improvements.   Because once the current payment processing cycle is complete the pressure will be on to roll-out the 2012 program.  And at that point the die will be cast until the following year.

It will be too late.

A lot of talented folks are unemployed or “in transition” these days, working full time in their efforts to land a new job.

When that goal is finally reached, when someone says, “we love you, please come to work for us,” the tendency will be to respond with “thank you, YES.”  However, that immediate, knee-jerk reaction could be a mistake, as at that point you’re a desired candidate with options, while tomorrow you’ll be one of the staff – with little leverage at all.

When the moment of decision occurs, most Human Resource professionals would advise you to give the person who extended the offer a warm thank you, but then to take a little time for reflection on the particulars – the details.  The higher up the food chain you are, the more moving parts will comprise your employment offer.   No one is going to force you to decide right away, so don’t.

Presuming that the career implications are positive, that you don’t have to move to Northern Alaska, and that you want to accept the offer, let me suggest a few tactical strategies to help you make the most of what was offered.  Because with a bit of luck you can do better.

The Recruiter

Internal recruiters can be difficult to work with at times, but you need them.  So keep a smile on your face and play nice throughout the interview process.  At some point your recruiter may be called on to negotiate with management on your behalf, so the relationship you have with this individual is critical.  Why?  As your offer was likely developed from the combined thought of the hiring Manager and Human Resources, the recruiter would play the part of the messenger.  So if you wish to negotiate revised terms it’s the recruiter who needs to “sell” your point of view for a better deal.

The Package

I always advise clients to look past the base salary to the rest of the package, considering the offer in its entirety.  And make sure you have the offer in writing.   All the necessary elements should be included (i.e., title, salary, incentive, vacation, relocation, stock options, retirement, etc.), as there may be a cornucopia of opportunity to negotiate improvements by expanding your line of sight.

Cash Is Still King

It’s a safe bet that the company has left itself some wiggle room with its base salary offer, but the trick is to gauge how much room is left.  So be cautious.  Don’t be greedy by asking for a major increase, as that will alienate the hiring manager and your new friend, the recruiter.  Also, avoid giving the impression that you think they’ve low-balled you.  You can lose a lot of goodwill with that tact.

Perhaps an early performance review (six months?) will give you the time to prove your worth; or a sign-on bonus to improve your first year earnings.  Both are less visible within the organization than base salary, and management is often amenable to such “compromises.”

What’s Negotiable?

Once you’re past the cash part of the offer the company may prove more flexible, as the transparency of cash can be a limiting factor due to possible internal equity concerns.

Unless the company is restricted by plan documents, policy or statutory obligations they may be accommodating to certain requests, especially as they are eager for your acceptance.   As verbal promises carry little weight even a signed note in the margin of the offer letter would be sufficient authorization, so consider vacation days, early eligibility for incentives and options, perquisites as well as flexibility on relocation as possible improvements.

But have a care before asking for changes to tax-advantaged programs or those where equity issues might be a concern.  You will have little success here.

The Push Back

To open the negotiations first profess your genuine appreciation for the offer, then express an excitement at becoming part of the company team.  Only then should you mention your “disappointment” with whatever aspect of the offer package has created concern.

Note: make sure your list of disappointments is small.

When you ask for consideration of an improved offer remind the recruiter of your extensive background and experience, and the type and degree of contribution you will soon be making – but be specific.   Give the recruiter enough ammunition to help represent you.  Don’t leave the impression that you simply want more, but that you deserve more.

Final Thought

Your hard work at job search will pay off, that offer of employment will come your way.   When it does make sure you finish the job by not leaving opportunities on the table.  You can’t go back later to pick them up.

You just received an above average performance rating, which put a big grin on your face.  Which was soon wiped away when you heard that you’d receive only one percent (1%) more of a salary increase than “Joe Average” down the hall (there are no secrets out there).

One percent more?  For giving 110% effort for a full year?  Not worth it, you say?

What Does One Percent Gain You?

The pundits say that performance rewarded is often repeated.  So what if good performance is not rewarded?  In the eyes of the recipient.  Likely you won’t see the same level of personal contribution again next year.  Instead, what you’ll see is more of “Joe Average,” or worse.

So how much of a reward difference between you and Joe is enough to keep you and other high performers motivated and feeling appreciated?  Because Joe seems to be content with his lot in life, and you’re not.  Is a fair differential 2%, 3%, or even more?

Does the organization realize that such soul searching is happening among those employees they most want to retain?  Can their recognition systems balance the need to reward better performers against the reality of tight budgets?  It might mean that one would have to take from Joe to pay Bob – because the pool of reward dollars is not likely to expand.

But that idea flies against the practice that most managers follow – of trying to reward everyone – to keep everyone happy.  After all, if you’ve put in your twelve months you deserve a raise at the end, don’t you?  Kind of automatic, especially if the average spend isn’t much.

Have a look-see at how your high performers are being rewarded, then compare that against Joe’s contribution and reward.  Are you being fair?  With Joe, probably, but how about with the high flyers?  You can afford if Joe left.

Can You Make a Performance Decision?

Another consideration for determining fair rewards is the number of performance ratings you have in your appraisal system.  For example, with a seven scale system (from Walks On Water to Show ‘em The Door) the need to provide percentages for at least five assessment scores makes things rather tight.  And if you try to maintain a two percentage point differential between performance levels, the numbers might become higher than what’s affordable (if a 3 rating [Average] gains you 2.0%, then what do you do for a 7 rating?).  And what’s the population density of those receiving a 4, 5 or 6?

And while you’re ruminating over that dilemma, would Joe Average  be satisfied with a 2.0% increase?  He’s going to grumble and complain about what’s “fair” for those twelve months he spent on the job.

So you say, a proper rating scale looks to be three factors, right?  Wonderful, Pretty Good and Needs Improvement.  With three factors it’s easier to provide reward differentials that make a difference.

But then reality bursts that nice fantasy you had going.   Many companies experience managerial ambivalence (can’t make a decision) around performance assessments, where the desire is great to place employees in between ratings, as in 1.5 or a 2.5 score.  Somehow the employee(s) just don’t fit right into those three neat buckets.  “We need more choices,” they say – and so the five scale system was borne.

When the managerial ambivalence is acute, more than a few companies have decided that even five performance ratings aren’t enough to accurately reflect employee performance; thus the seven scale system was created.

And in each case the ability to differentiate performance with rewards  has lessened.  How do you reward a 7 or 6 rating, vs. a 5, vs. a 4, vs. a 3, etc,  when the average spend for everyone might be only 3.0% – or a tad less?

You don’t.  At least not if you try to reward everyone.  You won’t have enough money.

Recently I was asked by a U.S. client why I recommended that they create an international assignment letter for their expatriate employees.  After all, they only had a few employees overseas and previously had resisted the call to “play the lawyer card.” They felt that management could effectively deal with the circumstances of expatriate situations as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

This is not the first time I’ve been asked that question, as it’s not unusual for small companies or non-profit organizations to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, often these casual and hurried arrangements have proved painful and expensive experiences:

• The shock faced when coming to grips with actually living in a foreign country, vs. visiting.  The realities of daily life, combined with cultural differences compared against “back home” become quite a wake-up call when no longer insulated by the transitory nature of a business or vacation trip

• The constancy of unforeseen and confusing local situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction that employees lost focus on the job – the reason they were there in the first place.

• Relationships with headquarters suffered as the employee asked for repeated consideration (increased payments) to redress what they considered coverage gaps in their terms & conditions.  The trust element was weakened as employees felt they were being short-changed by management.

Coming from an environment where every expatriate was given a detailed assignment letter “before” getting on the plane, I was at first taken aback by the client’s question – because the absence of mutually agreed terms and conditions is almost certain to prove expensive to companies trying to take a “short cut.”

So why is providing an assignment letter a good idea?

• Protection:  Like any contract, confirming the terms & conditions of the assignment protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity:  Accepting an overseas assignment is a major step for any employee, as well as for family members.  The more you clarify the terms and conditions of the assignment, the more likely you are to ensure a smooth assignment for all parties.

• Cost control:  Defines expenses that the company will pay for and conversely what they will not.  An agreement here will mitigate issues rising once the expatriate is on the ground in the host country.  Concerns raised once the assignee is relocated usually result in increased company costs, as negotiating leverage is lost and the company feels compelled to avoid alienating an expensive investment.

• Standardization:  Your international policy should strive to treat expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be followed for every assignee.

So how bad can it be, playing it by ear and leaving terms & conditions to be developed over the duration of an employee’s assignment?  Aren’t flexibility and quick thinking positive management traits?

Yes, but when courting the inherent risks that accompany an undocumented assignment, you should be prepared for:

• Higher and unbudgeted costs.

• Frequent negotiations to improve the expat’s situation.

• Disgruntled assignees and / or affected family members.

• Greater risk of failed assignment.

Short cuts usually limits the financial and emotional protection the employee and their family will rely on, while the company has committed  substantial monies to place them overseas.  That is not a good management practice.

Terms and Conditions

When preparing an international assignment letter, the following  key elements should be included.

• Title, compensation and assignment duration – critical elements of status and reward in the host country.

• Housing and cost of living allowance – should include the amounts involved and frequency of review.

• Benefit coverage (medical, dental, life, vacation, holidays etc.) – how will home country benefit protections be handled in the host country.

• Relocation –coverage for the employee’s home country residence, to include overseas movement of household goods.

• Property management (as applicable) – what will happen to the home country residence?

• Tax preparation – employee obligations in both countries.  Usually a statement of company liability for “additional” taxes.

• Home leave – how often, and under what circumstances?

• Schooling, language, cultural orientation (as applicable).

• Repatriation – a balance is usually struck here between the employee’s strong concern and the company’s natural vagueness for what the future might bring.

The items listed above represent only a portion of the questions that your expatriate candidate will have.   So should your company consider taking a casual approach to sending an employee overseas, unsupported by a signed assignment letter, be aware of the risks involved.