LifeCare Assurance, a 150-employee insurance plan administrator in Woodland Hills, Calif., used to make compensationdecisions using a method long favored by small companies -- educated guesswork. "We tried to go by what felt appropriate,"says Carol Box, who oversees human resources at LifeCare. Then, however, 10 departing employees in a row all had thesame complaint about LifeCare: skimpy pay. Box concluded that the company's pay scales might need adjusting. LifeCare,which had 1998 revenues of $8 million, needed to get some relevant salary surveys to find out.
Box is not alone in her interest in comparative salary data. Fortunately, a proliferation of salary surveys, many of themavailable over the Internet, is making that sort of benchmarking more accessible to small companies. Of course, bigconsulting firms sell hefty compensation surveys, usually at equally hefty sums. But these days, trade associations, chambersof commerce, the U.S. Bureau of Labor Statistics, and state and local governments are all sources of relatively inexpensiveintelligence on market rates for compensation. You can also subscribe to a number of Internet services that will provide youwith comparative job/price data, either on a one-time basis or for an annual subscription fee.
The danger of using any survey is that you might end up with the wrong numbers or you might analyze the numbersincorrectly. Behind every survey is a set of assumptions and criteria. If you are unaware of them, you could be comparingapples and oranges, or computer programmers with program directors. Assessing the data in compensation surveys can betricky, but here are some key questions to ask.
- Are the companies polled comparable in size to your own? Big companies, of course, tend to pay more than small ones. Butthe size of the disparity tends to be proportional to the job level. A chief financial officer will earn a lot more at a bigcompany than at a small one. Data entry clerks at both companies will probably make about the same amount.
- Is the geographic focus appropriate? Geography does not affect compensation for high-level positions nearly as much as forlow-level ones. The reason? The job market for managers and professionals is national, while the market for blue-collarworkers is generally regional, or even local.
- How were the jobs "matched"? A study is of little value if the jobs in question aren't comparable to one another. Simplymatching them by title doesn't do the trick, especially in this day and age of cross-training, hybrid workers, and offbeat jobtitles such as "chief evangelist." For this reason, many surveyors are switching to so-called "maturity studies," whichmeasure a worker's skill set rather than job description. In general, if a survey is based on in-depth, face-to-face interviews,the jobs will be better matched than if the survey is conducted by mail.
- How old is the data? In rapidly moving fields such as information technology, fresh information is of the essence. Whenassessing the age of a survey, consider when the salaries in question were put into effect, not when the survey was published.
- How many companies were polled? Experts say that a survey isn't credible unless it includes at least 20 organizations anddiscloses a full list of them in its report.