Labor market data isn’t enough for a compensation plan
When creating a strategic compensation plan, it will likely be a default to rely on labor market data. Although market surveys are a good resource when making a compensation plan for your organization, we often see them used in isolation. Using market data alone will not cut it.
Yes, this may be the way that you’ve always done it, but that doesn’t make it the best way. We urge you to question everything about how you’ve done things in the past. There needs to be a complete mindset shift to create an optimal strategic compensation plan in the current market. Two aspects that you should also consider when creating an effective compensation plan are anecdotal and internal data.
The mindset shift
In past decades, many people thought an employee’s place was to be subservient to their employers. But, in recent years, that has shifted. Employees have realized their value, which they exchange for compensation. This shift must be understood to create fair and equitable compensation in today’s market. There has been a fundamental shift in who has control.
In the past, employers have worked with the mentality of “having power over their workforce,” and now we’re seeing that change to “having power with their workforce”
Where should you look?
Market data is a good resource, but it isn’t enough on its own. Creating a compensation plan that works requires considering anecdotal and internal data. For example,
What is anecdotal data? It is what you hear from within your organization, and out on the street. It could mean noticing that your local competitor is paying more for the same role or hearing from your employees that the practice down the road offers signing bonuses. What is internal data? It is quantitative and qualitative data gathered from within your specific organization. Internal data could mean auditing your team salaries and noticing that there are internal inequities within your organization. This information is vital to creating a plan that works for your organization.
The bottom line is that simply using data from a market survey does not take into consideration the internal value of a job to an organization.
What are some benefits of using anecdotal and internal data?
- Understanding the value of a job at your specific organization
- Identifying internal inequities across the organization
- Understanding your local environment’s market
- Catering your compensation plans to the particular needs of your organization
Welcome the change
Let go of the way things were always done. Instead, welcome the “power with your workforce” mentality. By looking within and putting yourself in your employee’s shoes, you will create a compensation plan that will help optimize your organizational structure. Your employees aren’t just numbers to help fulfill your bottom line, and once you realize that, you’ll be in a much better position.
When you work with ElementOne, we take all of these aspects (labor market, anecdotal, and internal data) and create a customized strategic communication plan for your organization.