I don’t get it.  Can someone help me understand?  Why are some organizations interested in what other companies are planning to do with their midpoints next year?  I presume that’s the case because there are surveys out there compiling and reporting such data.  But who really cares?  Aside from anecdotal information I have never understood the importance of this reporting.

To be fair, perhaps my experiences are the exception, because I’ve never used that data in program analysis, or even reported it.  But somebody must be using it.  Somebody.

I can only guess that I’ve missed something ; maybe I should have taken another WorldatWork class, because the issue has never arisen from any employer I’ve dealt with, either as  an employee or an outside consultant.  Which leads me to ask, do some companies actually recommend raising their midpoints on the basis of a survey(s) announcing what other companies are doing?  Is that metric as important as what is being paid for particular positions, or what the average merit spend might be next year?  How does projected average salary structure movement relate to my company’s unique situation?

Can you envision  recommending  to senior management that midpoints be raised by X% because that is the projected average midpoint increase of other companies?

For me the focal point of survey analysis has always been to determine the competitiveness of our current  midpoints.  In planning for next year we should adjust those midpoints to either remain competitive (our midpoints are already there),  to improve our standing (our midpoints lag the market), or freeze them (midpoints already pegged above market rates), no matter what a survey reported was common practice.  Am I wrong here?  I have always thought that my company’s salary structure should move in relation to our own competitiveness, regardless of what anyone else is doing.  Otherwise we could be making improper adjustments – either too much or too little.

And what about the expense involved?  Contrary to what some pundits have assured me from time to time, midpoint growth can create costs.  There is no free ride.

• When an employee’s base pay drops below salary range minimum on January 1st, do you cover that amount – or wait until the next review?  Whenever that might be.  The fair thing to do would be to raise the employee to minimum and then (or later) grant a merit increase on top of that.  Extra cost though, right?

• Higher midpoints push experienced employees further from the internal “going rate” – creating pressure to restore the balance.  Have you ever explained to a long service employee why they weren’t being paid at least the midpoint?

When are these midpoint estimates made, and how accurate are they?  They’re really guesstimates, and many times the questionnaire is filled out without due consideration, just to get the form completed and sent away.  After all, most companies won’t confirm their new structure commitment until  @ November (senior management sign-off), while the survey questionnaires are completed in mid-summer.  So how good a guess do you make in August?

Btw, a company’s salary structures (grades and salary ranges) are usually segmented along the lines of hourly, non-exempt, exempt professional, and management employees.  To gain a clear picture of your competitive marketplace you should consider that each segment is moving at a different rate.  For example, it’s likely that management pay is growing at a different rate than for hourly employees.   Suggesting that only a single number would reflect your entire population would distort the reality of your multiple markets.

Now I suppose there may well be companies out there that have changes to their reward programs contractually tied to “market movement” or even structure (midpoint) growth, but do you think there are that many so governed?

So, can someone  tell me why analyzing other company’s guesstimated midpoint movement  is important?  I’d really like to know.

When you’re trying to grab the attention of Senior Management, remember this; they like a good story, especially one with pictures.

If you’re addressing your company’s single largest expense, its employee pay programs, the pictures become charts & graphs that illustrate the points being made.

Pictures capture attention and build memories much better than text or even the spoken word.  Show a picture and the image is locked in, while reliance only on text is a risk.  The drone of dry prose can grow boring and is liable to lose the attention of all but your strongest supporters.

Attention grabbers that work: 1) speedometer style formats that graphically indicate the current situation against the target; 2) the green light, yellow light, red light approach, again to colorfully paint a picture that stays in the mind; and 3) pie charts, tables, even regressed lines that tell a story.

People remember images because they capture the imagination.  They have a harder time recalling (and taking to heart) what you said or what you wrote.  So concentrate on your supportive imagery.

Make the story a short one.  I once worked for a CEO who thought any proposal could be reduced to a single piece of paper, with plenty of white.  “If you need more than that,” he would say, “it’s not such a grand idea.”

You need a plan

However, before you settle on the visual format best suited to sell your case you should focus on the data points necessary to make that case.  Remember the old adage that a dream without a plan is only a fantasy?  If you don’t take action steps to convert ideas to reality, what you’ll be left with is smoke & mirrors – with no results to show for your efforts.

For those of you who have ever been on a diet, you treat it like a project plan, right?  Experts advise that participants write down everything they eat, have goals to strive for and milestones to gauge progress.  It helps to have a plan and to keep score – to know where you stand and where you’re headed.

To accomplish this you should create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) – and then establish baselines (current state) and targets for each performance indicator.  This key step will help you understand whether your costs are being contained and whether the ROI on employee rewards is at the level your company requires.

Commonly used HR metrics:

• Average salary / wage

• Compa-ratios (comparison of pay to a range midpoint)

• Count of employees per segment (hourly, non-exempt, professional, management)

• Average performance ratings

• Average annual pay rise for each performance rating

• Count and average promotional and “equity” increases

• Voluntary turnover (employees who decided to leave)

• Average employee age and length of service

We could go on and on, but you get the point.  Refine these and any other quantifiable factors by further segmentation – per salary grade, employee group, male / female, etc.  Make sure each metric is measurable, because accuracy counts.  A compelling argument demands precision.

To make these metrics work for you, to avoid a series of make-work arithmetic exercises that do nothing more than capture minutiae, be certain to measure what is important to your business – not simply what data you can capture.  Make sure the importance of the metric is clear to management (or can be made so).  Management needs to grasp the importance of success, to understand why the metric is important and what achievement would mean.

Once you have the right metrics established (collectively called the “dashboard”) and a baseline in place, you will readily see where the problems lie.  Then set specific targets going forward to improve these weak areas, creating periodic milestones to mark your progress.

What to look for

Every organization has different pressure points.  However, if your metrics data indicates any of the following situations, management should be informed.

• Average performance ratings that exceed how the business was rated

• A workforce where key segments are approaching retirement age

• Promotion and “equity” increase activity that overwhelms the merit budget

• Low compa-ratios that indicate you are not paying your salary ranges

• Any figure that is an unpleasant surprise

When you’re telling a story to management, make it compelling – with facts and pictures that feed off critical metrics analysis that form the pulse of your business.  Then bring home the sale by showing how to solve the challenges being faced – with practical strategies designed to end your story on a happy and successful note.