Defining Value – Part II

Leonardo DaVinci observed that there were three aspects that vary with perspective; size, color and clarity.  If compensation strategy is aligned with achieving business goals, then attraction and retention of the best people is the fundamental objective.  Understanding your relationship to the market in your industry and your region is paramount in terms of providing size and coloration to your compensation strategies and policies.  Market survey data provides insight from your competitors on how they define and value similar positions.  Regional information deftly adds another layer of subtlety to your compensation picture.

Understanding the size and color correctly informs the decision-making process with the requisite amount of clarity to correctly factor those elements into effective policies that support major business goals.  The trick to any analysis is having good information.  The good news is there are lots of sources for salary survey data.  A significant issue with market salary surveys is that these different sources use different formats, different descriptions and different criteria for inclusion.  Ensuring an adequate match is difficult.

Back to our original consideration of CEO salaries; it is fair to assume that the role of CEO is typically at the highest end of our internal value line for the firm (whether that is ultimately true is a debate for another time and place).  Comparing market survey data for similar position titles helps flesh out our understanding of our internal assessments against the relative value of the position in our own industry and others, provided we can correctly correlate positions with similar or even the same title to our own internal rating.  Having a similar title does not guarantee similar scope of duties and responsibilities or impact within the responding companies surveyed (the CEO of Walmart versus the CEO of Ford again).

Additionally national data needs to be refined with regional insights in order to factor the worth and availability of talent.  At the CEO level regional variance may have more impact on the cost of living and base salary then availability (the cost of living in Arkansas versus living on either coast). But for most other positions it is critically important, for example there are a lot more IT Analysts in northern California then perhaps Northwest Arkansas, but due to a few key local firms, there is more IT talent in Northwest Arkansas than the other regions of the state.  And therefore talent attraction and retention will factor differently into compensation planning for those positions.

Compensation planning and execution needs to be both internally equitable and externally competitive.  A company’s business situation and culture along with their financial and organizational structure combines to fix one axis of the relative value of any position.  Market salary survey data helps complete the picture enabling assessment of local, regional and national markets correlating for economics and supply and demand for different segments.

With appropriate software tools and applied knowledge the ability to precisely triangulate job evaluation and market salary information into an artful and complete picture of real value is increasingly easier and more productive.