Are Your Salaries Competitive?
Clowns in New York City earn an average of $55 per performance. The chairman of Mobil Oil Corp., Rawleigh Warmer Jr., hauled in $935,000 in total compensation in 1978. And the average bank robbery nets only $4,000.
Compensation figures like these (courtesy of America's Paychecks: Who Makes What, by David Harrop) are a perennial source of fascination for the public. A small business manager, however, needs to know something much more practical -- the going rate for a bookkeeper in his locale, for example, or what he has to pay to hire a competent sales manager for a medium-sized pharmaceutical company.
Setting salary levels doesn't have to be a seat of the pants decision, and it doesn't have to require an elaborate research effort. A surprising amount of information is easily available, provided you know where to look and know how to define the job you need to fill.
Job definition, in fact, is the starting point for any useful comparison of salaries and wages. Glance at a newspaper's "Help Wanted" section and you'll see a confusing range of salaries advertised for almost every job from clerk to board chairman. Actual salary surveys are far more precise, but you won't be able to tell what it costs to recruit a competent secretary (see page 98), for example, unless you can define duties, responsibility, skill, and experience levels with some accuracy.
In addition, geography often affects salary levels. Especially for jobs that don't require scarce skills, you're competing for employees against other local companies. But jobs that require specialized professional skills or management ability tend to reflect regional or national salary levels. Moreover, the type of industry and the size of the company play a part in determining what constitutes competitive pay.
The U.S. Bureau of Labor Statistics has collected a great deal of salary information that it issues in the form of inexpensive reports, and these surveys are the best starting point for any company that needs to have a clearer idea of prevailing pay rates for the majority of its employees.
The bureau's Area Wage Surveys are detailed, well-researched reports designed to bring employers up to date on local job market conditions for dozens of common occupations, such as office, technical, and maintenance jobs. Each survey is published in booklet form for a particular geographical area, and the price ranges from 70? for Canton, Ohio, to $3.25 for Newark, N.J. (A complete list is available from the U.S. Government Printing Office, Washington, DC 20402.) Each survey includes an appendix that breaks down jobs according to skill and responsibility levels (there are 10 levels of secretary/typist, for example), and the surveys themselves present data on ranges of weekly earnings, and average pay relationships within companies. This information is further grouped by the company size and type of industry, and tells you the actual number of employees surveyed to arrive at the figures in each category.
If you're interested in establishing comparative scales for employees with a higher level of skills, the Bureau of Labor Statistics also has available an annual National Survey of Professional, Administrative, Technical, and Clerical Pay, a $4 book also available through the Government Printing Office that provides nationwide salary averages for 21 occupations broken down into 91 work levels. The jobs surveyed here include, among others, auditors, attorneys, computer operators, personnel directors, and secretaries. (There are some jobs in which the National Survey covers the same ground as individual Area Surveys. ) Again, to make best use of this survey, job requirements need to be defined carefully. For a personnel manager, for example, you might find the National Survey offers you a choice between someone who manages an "operations level" personnel program and someone who operates a "development level" personnel program, as defined by the survey. Further, the difficulty of the work is a factor the survey takes into account, as well as whether your company is based in an urban area.
Once you've pinpointed your requirements, the survey can be remarkably precise at telling you what the going rate for a particular type of personnel manager is, and what the ranges are above and below this rate. Thus, based on a sample of 932 urban personnel directors at the lowest of five possible levels, the survey can tell you the median salary was $2,016 per month.
Since salary levels often depend on conditions in a particular industry, you may be able to use a third Bureau of Labor Statistics series of surveys that refine salary data even further. The Directory of Occupational Wage Surveys is an index, available for free, that lists studies of 32 manufacturing and 17 nonmanufacturing industries ranging from refuse hauling to hotel and motel management. Even if your particular industry isn't covered by a bureau study, there will probably be points of comparison with the ones that are covered that can help you further.
Likewise, there are literally hundreds of specialized salary surveys prepared by periodicals, by professional and trade associations that provide information on a narrow slice of the job market. Every spring, for example, Datamation magazine surveys salaries for data processing employees, broken down according to more than 50 different job descriptions from managers to entry level employees. The National Society of Professional Engineers (2029 K St. NW, Washington, DC 20006) compiles current data on salaries for its members according to job type, level of experience, industry, and region. The College Placement Council (Box 2263, Bethlehem, PA 18001) issues five annual reports on the salaries offered to recent college graduates, as reported by 161 colleges. Such surveys can give you detailed, reliable information -- but often they reflect compensation levels for larger firms where data is easier to obtain. It's important to check company sizes and the number of employees covered by the survey before relying too heavily on the data in such surveys.
As you move up the managerial ladder, the problem of finding reliable compensation information becomes much trickier. Job descriptions are harder to pin down, and company size begins to play a more important role. (Most surveys reveal that the larger the company, the higher the management salary scale.) There are almost two dozen major studies on management compensation in the United States, not to mention the data collected by individual industry sources. But only a few of these surveys are especially useful for smaller companies.
One of the top two or three sources is Dartnell's 13th Biennial Survey of Executive Compensation, published in 1980 ($89.50 from Dartnell, 4660 Ravenswood Ave., Chicago, IL 60640). In looseleaf format, Dartnell's covers 67 executive and middle management positions for seven different sizes of companies, and includes median salary ranges and averages for both base salary and total compensation. The data is drawn from a sampling of 4,000 executives in more than 300 companies. Dartnell's will tell you, for example, that for companies with sales under $5 million, the average 1979 compensation for a vice-president of marketing was $36,000, the total range of salaries for marketing managers in this part of the survey was from $18,000 to $65,000, and the bonus opportunity was $2,000 to $15,000. For companies with sales of $5 million to $25 million, the same job paid an average of $48,000.
Another survey of management salaries, more specialized than Dartnell's, is a book called Executive Compensation, published by Arthur Young & Co. and sponsored by the Financial Executives Institute (633 Third Ave., New York, NY 10017). Written by Edwin S. Mruk and James A. Giardina, the book is a biennial survey of compensation for top-level executives and financial managers -- treasurers, controllers, and similar employees. Copies are $125 each.
Finally, there is INC.'s own Annual Compensation Survey, which appears in July. Based on a national survey of 10,000 smaller companies, this study reports the most current compensation patterns for three key small company positions -- chief financial officer, chief operations officer, and chief marketing officer -- and also reports on the one salary that can be the most fascinating to small company owners: the chief executive officer's paycheck.