I Like “AND” better than “OR” for Compensation Planning

During the bowl games in December, Ford Motor Company ran several commercials about their mid-size vehicles based on an “AND” is better than “OR” theme. The commercial I like the most was titled, “Nuts or Bolts”. In this commercial, a couple is riding in a Ford Fusion and the husband is driving while his wife sits in the passenger seat. The wife comments about how the car handles really nice and her husband chimes in that the Ford Fusion has a great ride and great gas mileage. The wife then states, “It beats choosing a great ride or great gas mileage.” The husband says, “Like using Nuts or Bolts.”

The commercial shot then transitions to the couple standing in their backyard with an above ground pool full of water. The husband comments, “I wonder what these bolts are for?” Within a second of his comment, the sides of the circular pool collapse and water comes gushing out of the pool and soaks the feet and legs on the couple. The next commercial shot has the couple back in their Ford Fusion and the husband says, “I like “AND” better” and his wife affirms his comment.

This commercial provides a terrific analogy of an “AND” vs. “OR” process when developing and maintaining a job evaluation and compensation program with market pricing “AND” a point-factor system.

WorldatWork released a report on December 10, 2013 on the status of Market Pricing systems for Job Evaluation.  Based on the study, 73% of the respondents indicated market pricing is their primary method of job evaluation used in their organization for senior management positions. Kerry Chou, WorldatWork Senior Practice Leader for compensation stated in the news release, “While we’ve known that most organizations are utilizing market pricing, it is interesting to note that fewer than half of the respondents characterized their job evaluation system as very effective.  More research needs to be conducted to determine the causes of the discontent. However, issues such as the challenges in obtaining accurate, current market data or a perception that the internal relative value of jobs is not taken into account with pure market pricing may be contributing factors.”

The use of market pricing “only” with its challenges in obtaining accurate and current market data as stated by Kerry Chou or point-factor job evaluation “only” without market pricing validation seems to support the notion of building a compensation structure with only nuts or bolts.

At DBSquared, we believe “AND” is better as stated in the Ford Fusion commercial. We believe that a proven and comprehensive point-factor job evaluation process “AND” a market pricing mean/median validation study offers the complete system that will stand the test of time and the natural internal and external pressures associated with employee compensation management.

Our clients that have used the “AND” approach instead of the “OR” make more informed compensation decisions and they have not been subject to a pay inequity suit since 1985. We strongly encourage the 73% that utilize market pricing as their primary method of job evaluation to adopt the “AND” philosophy by including an internal job valuing process so they will mitigate causes of compensation management discontent and encourage development and use of a comprehensive, consistent and compliant compensation plan that is internally equitable and externally competitive.