market-pricing-coursebook

Market Pricing
Conducting a
Competitive Pay
Analysis
C17/GR17 v1.a.21
®
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Table of Contents
MODULE 1 5 MODULE 4 79
Market Pricing and Business Strategy Participating in Surveys

The Total Rewards Design Process 7 Participating in Salary Surveys 81
Compensation Philosophy and Strategy 8 Job Matching 85
Factors Influencing Compensation 9 Module Quiz 92
Market Position 16
Business Life Cycle 19 MODULE 5 93

Compensation Program Objectives 21
Utilizing Survey Data
Market Pricing – HR Functions 22
Utilizing Survey Data 95
Module Quiz 24
Aging Data 96
Blending 102
MODULE 2 25
Adding a Premium 103
Market Pricing Terminology and Weighting Market Data 104

Base Pay Structure Design Modeling 106
Market Pricing Terminology 27
Regression Analysis 108
Base Pay Structure Design 35
Module Quiz 113
Market-Based Pay Structure Design Steps 40
Market-Based Pay Structure Versus Pure

Market Pricing Approach 45 MODULE 6 115
Market-Based Job Evaluation and Pay Variable Pay Survey Data
Structure Design: Advantages 46
Short-Term Variable Pay 117
Market-Based Job Evaluation and Pay
Structure Design: Disadvantages 47 Short-Term Incentives 118
Module Quiz 49 Total Cash Compensation 119
Long-Term Incentives 122
MODULE 3 51 Long-Term Incentive Types 123
Total Direct Compensation 125

Survey Data
Module Quiz 127
Data Sources: Salary Surveys 53
Sources of Survey Data 55

MODULE 7 129
Decision Factors 57
Survey Data Formats 60 Case Study: Universal Plastics and

Survey Data – Statistical Data Points 64
Rubber Manufacturing
Local Government Survey 135
Survey Selection 67
Local Human Resources Group Survey 143
Documentation 71
Geographic Specific Survey 149
Accuracy of Survey Data 72
Industry Specific Survey 157
Data Integrity Components 73
Job Descriptions 164
Module Quiz 78
© WorldatWork. All rights reserved. 3

Table of Contents
MODULE 8 173
Communication
The Purpose of Communication
– Employee Perspective 175
The Purpose of Communication

– Employer Perspective 176
Management’s Role in
Communicating Compensation 177
Organization-wide Communication 180
Communication and Survey Sources 183
Module Quiz 188
APPENDIX 189
Quiz Answers 190
Job Pricing Worksheet 191
Job Worth Hierarchy Worksheet 193
4 © WorldatWork. All rights reserved.

MODULE 1
Market Pricing and

Business Strategy
5
Introduction
All organizations have a compensation philosophy and strategy, either stated or unstated, which
guides the design, implementation and administration of the compensation program. The philosophy
and strategy ensure that the compensation program supports the organization’s mission, goals and
business objectives.
In this module, we will explore how an organization’s business strategy should drive the way
compensation is designed and delivered. The importance of the compensation philosophy and
strategy as well as factors that influence pay programs will be discussed. Next we will talk about a
key component of the compensation philosophy, which is where an organization decides to position
its pay relative to the market. Finally, we will describe the business life cycle and how it may affect
pay decisions.
Objectives
By the conclusion of this module, you will be able to accomplish the following:
1. Describe how market pricing can assist an organization in meeting its business strategies.
2. Discuss compensation philosophy and strategy.
3. Explain various factors influencing compensation.
4. Identify the primary competitive pay positions vs. the market.
5. Describe the business life cycle and how it influences the decision on where to position pay.
6 C17/GR17 • MODULE 1 © WorldatWork. All rights reserved.

The Total Rewards Design Process
1.7
©2019 WorldatWork All rights reserved.
The Total Rewards Design Process

The design process begins with the corporate vision and mission. The human resources strategy
builds on the business strategy and serves as a guide in the design of all HR programs.
Human resources strategy is the big picture. Total rewards strategy narrows this HR strategy
specifically to the elements of total rewards.
The design of a compensation program should maintain alignment with the other elements in the
process. The synergy created by this alignment will help to ensure program success.
Market pricing is a powerful tool that directly supports an organization’s business strategy by
providing key competitive information on how the organization’s compensation levels compare to the
market. This is information which is paramount in setting compensation levels necessary to attract
and retain the workforce needed to execute the business strategy.
Since no organization has unlimited resources with which to compensate employees, compensation
professionals must also work within the organization’s cost structure. Establishing strong business
partnerships with other functions such as finance will contribute to overall success. They must
determine the right mix of reward components that meet the goals of attracting the right talent while
staying within budget. This positions the compensation professional as a valuable contributor in the
organization’s mission to succeed.
© WorldatWork. All rights reserved. C17/GR17 • MODULE 1 7

Compensation Philosophy and Strategy
Compensation philosophy
Compensation strategy
1.8
Compensation Philosophy and Strategy

Where does compensation fit within the organization’s business strategy? To answer this question, an
organization must first understand its compensation philosophy and strategy.
■ Compensation philosophy – A broad statement of what the organization believes about how
people should be rewarded. It should support the business strategy and be a good fit with the
organization’s culture. It includes items such as:
• Desired competitive pay level versus market
– Are all jobs positioned similarly against the market, or can some differences be observed
at different seniority levels or in different functions?
• Definition of “market” (i.e., who are our competitors for talent?)
• Mix of reward elements (e.g., base pay vs. variable pay, short-term vs. long-term)
• How are jobs valued? (i.e., what is job evaluation based on?)
• What behaviors are rewarded? (e.g., pay for performance, teamwork, innovation)
■ Compensation strategy – The compensation strategy includes specific principles that guide the
design, implementation and administration of a compensation program in an organization. It may
also specify what programs will be used and how they will be administered.
It is strongly recommended that organizations create a written compensation philosophy and strategy.

Factors Influencing Compensation
External competitiveness
Pay competitiveness
1.9

■ External competitiveness – A primary objective for most companies is to be externally
competitive. The tools and resources for measuring external competitiveness can vary greatly
from one organization to another, and can even change within the same organization over time.
• Market pricing assists organizations in remaining competitive by helping companies know
what the prevailing rates for jobs are in the current marketplace.
• Social media informs and influences a highly mobile and intelligent workforce
■ Pay competitiveness – Market pricing assists organizations with analyzing pay
competitiveness by:
• Collecting information on the prevailing market rates for benchmark jobs in organizations
with whom the organization competes for human resources
• Analyzing pay trends by identifying year-to-year movement of salaries and cash
compensation in the labor market
• Identifying pay practices by gathering information on competitive compensation practices,
programs, policies and procedures.

Factors Influencing Compensation …continued
Relevant labor market
• Market(s) from which organization draws or

loses employees
• Defined by:
• Organizational size
• Geographic location
• Industry specific jobs
• Differ by job groups
1.10
Factors Influencing Compensation (continued)

■ Relevant labor market
• Market(s) from which organization draws or loses employees – Relevant labor market refers
to an organization’s competitive labor market(s), i.e., the market(s) from which it draws its
employees and/or the market(s) to which it loses employees. This is the relationship between
the market data and the talent pool.
• Defined by – Relevant labor market can be defined by one or more of the following factors:
– Organizational size (e.g., revenue, number of employees)
– Geographic location (e.g., local, regional, national, international)
– Industry (e.g., pharmaceutical, healthcare, retail, manufacturing)
• Differ by job groups
– Scope-sensitive jobs (e.g., management) – national data broken out by organization size
– Clerical jobs – local data, all sizes of organizations
– Industry-specific jobs – industry-specific data (petroleum engineer, pharmacist, pilot)

Factors Influencing Compensation …continued
Organizations must be willing and able to pay
In-demand employees
Internal vs. external equity
1.11
Factors Influencing Compensation (continued)

■ Organizations must be willing and able to pay – Organizations must be both willing and able to
pay wages at particular levels in order to be competitive.
• Research about the labor market tells the organization what others are doing, but the
ultimate determinants of what the organization will do are based on its philosophy,
culture, value system, competitive positioning, internal and external influences, including
its relevant labor pool, and its financial resources. This will help you determine and
communicate how each of these factors affect your organization.
■ In-demand employees – Amid rapid changes in the labor market, companies must keep close
watch on how competitors are paying their employees and, in particular, hot skills, and identified
critical key talent.
• Certain skill sets might be in short supply and escalate market pay while organizations
continue to struggle in attracting and retaining individuals.
• Hot skills are critical to organizations and, as they are in short supply and high demand, they
will continue to drive up pay for in-demand employees who possess those special skills.
■ Internal vs. external equity – As the market supply and demand can dictate the availability and
retention of certain specialized talents and hot skills, the market can often create challenges
within an organization’s pay program. These challenges arise from the periodic conflict between
the perceived fairness of how employees are compensated internally relative to other employees
versus the differences in compensation levels between jobs necessary to achieve external
competitiveness outside the organization.

Internal Equity
• Internal equity
• Each job’s relative value
• Equal pay for jobs of equal worth
• Example
1.12
Internal Equity
Equity refers to employees’ perceptions of fairness and consistency. Each day, employees make
decisions to increase or decrease their contributions to the organization and whether to stay or leave,
based upon their views of fairness. It is critical to understand the impact of unplanned attrition and
how it can be avoided.
■ Internal equity
• Each job’s relative value – the factor that drives an employer to establish pay rates that
correspond to each job’s relative value in the organization
• Equal pay for jobs of equal worth – Because employees often compare their pay to the pay
received by other employees in the organization, it involves establishing equal rates of pay
for jobs of equal worth.
– Equal worth is a perception issue. An employee and an employer might have different
perceptions of equal worth. It is often conveyed that employees are the organization’s
most important asset, yet pay competitiveness may not match that message.
■ Example
• A company might recognize a buyer as a vital link in the revenue-generating process
and might pay that buyer more than comparable jobs (of equal responsibility) within the
organization in order to reflect the perceived importance.
• If an employee values a job more or less than the organization does, the employee might
perceive this as an unfair situation.

External Equity
• External equity
• Pay levels compared to competitors
• Prevailing external rates
• Achieving equity
• Retention
• Example
1.13
External Equity
■ External equity
• Pay levels compared to competitors – the measure of the organization’s pay levels compared
to that of its labor competitors
• Prevailing external rates – These rates imply that the employer pays wages that correspond
to prevailing, external market rates as determined by market pricing.
• Achieving equity – External equity is achieved when employees believe their compensation
is equal to what they would receive if they worked in a similar job at another company.
– Employees tend to make external equity comparisons within their own geographic area.
• Retention – Give employees a monetary reason to stay.
■ Example
• An accounting manager in Tokyo, Japan would not be paid the same as an accounting
manager in Mexico City, Mexico.

Internal vs. External Equity
Which method to choose?

• Blend and balance
• Job value
1.14
Internal Versus External Equity

■ Which method to choose – Attempting to keep a compensation system aligned with an overall
pay philosophy and strategy may require, at certain volatile times, a difficult balancing act to
ensure that a company has the appropriate workforce to meet its business objectives.
• Blend and balance – Organizations may emphasize either internal equity or external
competitiveness, but should blend and balance the two to meet their overall pay objectives.
– To achieve these objectives, organizations need to consider the market pay rate for jobs
that are similar to their own.
– Paying below the market may put the company at risk of losing valuable employees and
having to spend more time and money to find and train replacements.
– If the company pays above the market, there should be a corresponding gain in
productivity and revenue to offset higher costs.
• Job value – Organizations need to determine which jobs are of higher value to the
organization.
– If the market rates do not reflect this value, the organization would pay above
market value.

Desired Competitive Pay Level vs. Market
Where to position Pay vs. Market?

• Lead
• Lag
• Lead-lag
1.15
Desired Competitive Pay Level Versus Market

■ Where to position pay versus market – A key decision each organization needs to make with
regard to its compensation philosophy is how it intends to position its pay versus market (those it
competes against for employees). There are three common positions:
• Lead
• Lag
• Lead-lag
These decisions are based upon current conditions, forecasts and your organization’s compensation
philosophy and strategy.

Market Position
1.16
Market Position
■ Lead the market
• The company will consciously set its pay at year-end anticipated market level, not at the
current market levels.
• The company’s pay levels will then “lead” the market until the start of the next year. In other
words, the company will start the year ahead of its competition and remain there until the
end of the year, when market rates catch up.
• Viewed as a “pay leader”
• A company that leads the market may be better positioned to attract and retain more
experienced and/or higher performing employees by offering above market pay.
What are some risks that might be associated with leading the market?

Market Position …continued
1.17
Market Position (continued)

■ Lag the market
• The company will consciously set its pay equal to current market levels at the beginning of
the year.
• The company’s pay levels will “lag” the market as the year progresses.
• An organization that lags the market may experience greater difficulty in attracting and
retaining qualified employees. However, other reward elements, such as benefits offerings,
company culture, work flexibility or career development opportunities may offset below-
market pay.
Provide some examples of when an organization would opt to lag the market.

Market Position …continued
1.18
Market Position (continued)

■ Lead-lag
• The company will consciously set its pay at mid-year anticipated market level.
• The company’s pay levels will “lead” the market in the first half of the year and “lag” the
market in the second half.
• Requires organizational flexibility and broad awareness of business strategy.
What are the advantages and disadvantages of the lead-lag approach?

Business Life Cycle
1.19
Business Life Cycle

Business life cycle is the progression of steps an organization passes through from its creation
to its decline. An organization’s focus will change as it moves through the various phases of
the life cycle. Where an organization is in its life cycle can have a major impact on the types of
pay programs best suited to meet organizational objectives, including whether an organization
wants to lead or lag in the market.
There are four stages of a business life cycle:
■ Start-up – The organization is new with few or no formal policies or procedures. The
organization’s focus is on obtaining capital, marketing products or services, initial sales
growth and cash conservation.
■ Growth – In this stage, the organization is highly focused on growing sales, increasing
distribution capability and determining how to efficiently produce products or services
to meet growing demand. Growth typically generates the need to begin standardizing
procedures through policy creation.
■ Mature – The mature stage is characterized by a focus on maintaining/increasing market
share, improving productivity and otherwise reducing cost of sales. Improvements to
products are more evolutionary than revolutionary. The organization typically has higher
levels of bureaucracy and greater amounts of cash on hand than at other stages.
■ Decline – At this point, the organization’s revenues are declining. It must decide whether
to reinvest in current products, create new products or maximize profits with current
products as long as possible.
What are some examples of companies reinventing themselves after decline?

What organizations attempted but failed?
Adapted from Discipline of Market Leaders, by Michael Treacy and Fred Wiersema, Copyright 1995.
Reprinted by permission of Basic Books, a member of Perseus Books Group

Exercise
Business Life Cycle
1.20
Exercise – Business Life Cycle

A company may be in the start-up or growth stage for many years. A company may move back and
forth in the continuum, from maturity or decline to growth by finding new products and new markets.
Decline may not occur in all cases. This is also often referred to as a “turnaround” situation.
Instructions: Above is a table showing various aspects of compensation as they pertain to the
business life cycle. If you were the owner or president of a small to mid-size company, how would you
fill in the chart when discussing your approach toward compensation? Keep in mind that there is no
one right answer, each organization must determine what is most appropriate.
Consider the following as you answer:

■ The impact concerning compensation philosophy and strategy
■ What your business conditions could look like in each of the business cycles
■ How readily available cash is for compensation expenses in each business cycle stage

Compensation Program Objectives
• Internally equitable • Capable of being reshaped for

• Externally competitive the future
• Affordable • Appropriate for the organization
• Understandable • Attract, motivate, engage and
• Legal / defensible retain employees
• Efficient to administer • Create alignment of employee
efforts and business objectives
1.21
Compensation Program Objectives

It can be a challenge to meet all of the objectives of an effective compensation program. The most
common objectives are to be internally equitable and externally competitive. Each organization
needs to prioritize these objectives and decide which are the most important. It is essential to design
a program that not only meets the compensation objectives, but supports the organization’s business
strategy. Some objectives may conflict with each other, depending on the compensation plan.
What are the top three objectives of your compensation program?

Market Pricing – HR Functions
• Effect on other HR functional areas

• Benefits
• Recruitment
• Employee Development
1.22
Market Pricing – HR Functions

■ How does the compensation function affect and interact with any other HR function? Where are
the interdependencies among the groups? How do they support each other?
■ Examples
• Benefits – How does the compensation data link with benefits packages from a total
rewards perspective?
• Recruitment – Valuable insight can be obtained from recruiters regarding compensation and
the reality of being able to attract viable candidates.
• Employee Development – Are internal employees able to experience appropriate wage
increases commensurate with career progression?
What other functions might be impacted?

Can You?
■ Describe how market pricing can assist an organization in meeting its business strategies.
■ Discuss compensation philosophy and strategy.
■ Explain various factors influencing compensation.
■ Identify the primary competitive pay positions vs. the market.
■ Describe the business life cycle and how it influences the decision on where to position pay.

Module Quiz
1. What is one way market pricing supports an organization’s business strategy?

A. Provides key competitive information on how the organization’s compensation levels
compare to the market
B. Achieves the goal that no employee should leave the organization due to pay issues
C. Ensures that the organization will always lead the market regardless of financial resources
2. A compensation philosophy includes which of the following?

A. Information about each job in an organization
B. Information necessary to complete the job evaluation process
C. Principles that guide the design, implementation and administration of a
compensation program
D. Statement of what the organization believes about how people should be rewarded
3. Which statement best describes the term relevant labor market(s)?

A. Market(s) which exclude geographic location and organizational size
B. Labor market(s) against which the organization must equal its pay levels
C. Market(s) from which an organization draws and loses its employees
D. Labor market information that is generally applicable only to the manufacturing sector
4. Choose the market position that matches the following description: The company’s pay
philosophy will stay ahead of the market the first half of the year, then fall behind the market.
A. Lead
B. Lead-lag
C. Lag
D. Lag-lead
5. An organization that is new with few or no formal policies or procedures would most likely be at
what stage of the business life cycle?
A. Start-up
B. Growth
C. Mature
D. Decline

MODULE 2
Market Pricing
Terminology
and Base Pay
Structure Design
25
Introduction
The terms and concepts used in market pricing and base pay structure design are an important part
of the compensation professional’s knowledge. This module will define terms used in market pricing
as well as the general process of designing a base pay structure. The steps for market-based pay
structure design will be discussed in detail along with the advantages and disadvantages of using
this approach.
Objectives
1. Discuss market pricing and the terminology associated with market pricing.
2. Discuss base pay structure design including job evaluation and establishing a job worth
hierarchy.
3. Identify and describe the steps involved in market-based pay structure design.
4. Explain advantages and disadvantages of market-based job evaluation and pay

structure design.

Market Pricing Terminology
Market pricing
Market rate
Market rate composite
2.27

■ Market pricing – the process of analyzing external pay data to determine the prevailing rates of
jobs in the market
■ Market rate – the prevailing pay rate for a job
• Hourly rate or salary
■ Market rate composite – Market rate composite results from combining market rates for the
same job from multiple survey sources.

Market Pricing Terminology …continued
Slotting
Whole job comparison
2.28
Market Pricing Terminology (continued)

■ Slotting – the act of placing a job into a job worth hierarchy established by a method other than
the organization’s primary job evaluation method
■ Whole job comparison – a job evaluation process in which jobs are compared in their entirety
against one another, as opposed to breaking jobs down into their respective components and
evaluating each component or factor

Market Pricing Terminology …continued
• Pay Structure
• Pay grade
• Pay range
• Midpoint differential
2.29
Market Pricing Terminology (continued)

■ Pay Structure – A grouping of job grades and pay ranges established for jobs within an
organization. Some organizations may have only one pay structure while others may have many.
Separate pay structures are often created for different groups or families of jobs or for different
geographic regions.
• Pay grade – a numeric, alphanumeric or other label identifying the different levels within
the pay structure
• Pay range – the range of pay rates, from minimum to maximum, established for a pay grade
• Midpoint differential – the difference between the midpoints of two adjacent grades

Number of Pay Grades
Skill or responsibility distinctions
Supervisor/subordinate relationships
Career progression
Administrative considerations
2.30
Number of Pay Grades

Jobs are assigned to grades in a traditional salary structure based on internal value and/or market
value. The determination of the number of pay grades within the organization’s pay structure is
accomplished by evaluating the following:
■ Skill or responsibility distinctions
• How many skill and/or responsibility distinctions (per job evaluation plan and internal value)
are evident in the organization?
■ Supervisor/subordinate relationships
• How many levels of supervision exist?
• How many grades are there between supervisor and subordinates at each level?
■ Career progression
• How does the organization view an employee’s career advancement?
■ Administrative considerations
• More grades generally result in more administration.
What other cultural factors might influence the number of pay grades?

Pay Range
• Pay Range
• Maximum
• Midpoint
• Minimum
2.31
Pay Range
A pay range refers to the range of pay rates, from minimum to maximum, established for a pay
grade or class.
One of the most commonly asked questions of a compensation professional is,

“Why can’t I pay my employee what I feel they deserve,
and how can I get them more money?”
■ Maximum
• Generally each job has a maximum pay level that the organization is willing to pay. This is the
maximum of the pay range associated with the grade into which the job has been assigned.
• When an employee is at the maximum of a pay range, it typically means that the employee
would no longer be eligible for pay increases unless the range is adjusted or the employee
gets promoted into a different, higher-graded position.
• Some organizations reserve the area of the range near the maximum for high performers or
highly-qualified employees.

Pay Range …continued
• Pay Range
• Maximum
• Midpoint
• Minimum
2.32
Pay Range (continued)

■ Midpoint
• The midpoint or middle-pay value for the range usually represents the competitive market
value for a job or group of jobs (sometimes referred to as control point).
• It is established as an estimate of the prevailing market rate, or the level at which the
organization chooses to set its pay against the external market.
• Some organizations may position their midpoints above or below market.
• An employee at the midpoint of the range is someone who is fully competent to complete all
the tasks required for that job.
■ Minimum
• Generally, each job has a minimum pay level, which is dictated by the minimum of the range
associated with the grade into which the job has been allocated.
• The minimum pay level is the wage that has been determined to be the lowest wage the
market will bear for jobs in this grade.
• Typically, employees who are at or close to the minimum of the pay range are individuals who
are new to the position or job responsibilities.
• It is important to ensure that the salaries of employees who are at, or close to, the minimum
of the range are automatically increased at the time of any upward adjustments to the
structure to prevent their pay falling below the minimum.

Midpoint Differentials
Relative Job Value
2.33
Midpoint Differentials
A midpoint differential is the difference (usually stated as a percentage) between the midpoints of
two adjacent grades. It is calculated by taking the difference between two adjacent midpoints as a
percentage of the lower of the midpoints.
Midpoint of higher grade – Midpoint of lower grade
Midpoint of lower grade
Example: (min) (mid) (max)

Grade 1 = 25,000 27,500 30,000
Grade 2 = 25,700 28,900 32,100
28,900 –27,500
= 0.05 or 5%
27,500

Benchmark Jobs
• Commonly found and defined across many organizations
• Within or across industries
• Data available in surveys
• Internal jobs that serve as anchor points
• Characteristics
• Easily defined
• Representative of breadth and depth
• Important to internal hierarchy
• As a general rule, at least 50% of jobs in the organization
should be benchmarked
2.34
Benchmark Jobs
■ Commonly found and defined across many organizations – a job that is commonly found in many
organizations and used to make pay comparisons
• Within or across industries – can be either common within one industry or across many
industries
– Example: Petroleum engineers are common within the oil industry, but not found in other
industries whereas accountants can be found in all industries.
• Data available in surveys – Pay data for these jobs are readily available in published surveys.
■ Internal jobs that serve as anchor points – Benchmark jobs are internal jobs that can serve as
market anchor points because they closely resemble jobs performed in other organizations or
industries (at least 70% match of duties).
■ Characteristics – When selecting benchmark jobs, choose jobs that are:
• Easily defined – These are easily defined and found in other organizations important to your
organization.
• Representative of breadth and depth – includes all levels of the organization, spread from
top to bottom and across all functions
• Important to internal hierarchy – Because these are important to the organization’s internal
hierarchy, ensure that core business employees are adequately represented.
■ As a general rule, at least 50% of jobs in the organization should be benchmarked – when using
the market-based job evaluation method.
Why might it be important to have at least 70% match of duties and 50% of all jobs?
Is this a practice your organization follows? Why or why not?

Base Pay Structure Design
2.35

There are several steps involved in building a base pay program. These steps provide the information
necessary to create a base pay structure. In the following pages, we will discuss job evaluation, job
worth hierarchy and base pay structure.
■ Job analysis – provides key information about the nature and level of work performed
■ Job documentation – includes written information about job content or the functions of the job
and required knowledge, skills and abilities (KSAs)
■ Job evaluation – a structured process to determine the value of an organization’s positions
relative to each other
■ Job worth hierarchy – to group or categorize jobs relative to other jobs (e.g., pay grades, bands)
■ Base pay structure – After the job worth hierarchy is built, a base pay structure can be created
and utilized as a framework for pay decisions.
Job analysis and job documentation provide the information needed to complete the job evaluation process.
The job evaluation process and job worth hierarchy lay the foundation for a base pay structure, and can be
used as a communication tool for internal stakeholders.

Job Evaluation
• How is it performed?
• Job content approach
• Market-based approach
• Why is it important?
• Establishes the value of jobs relative to other jobs
• Used to develop a job worth hierarchy
2.36
Job Evaluation
■ How is it performed?
• Job content approach (internal equity focus)
– Determines internal value of jobs based on the nature and level of work and the
organization’s value system related to jobs. Factors include scope, responsibility, decision
making and overall impact.
– Different methods are available to perform the evaluations
❙ Ranking (e.g., simple, paired comparison)
❙ Classification method
❙ Point method
• Marked-based approach (external equity focus)
– Jobs are priced using market data to determine relative value.
– Jobs without market data are slotted into the hierarchy using job content comparisons.
■ Why is it important?
• Establishes the value of jobs relative to other jobs
• Used to develop a job worth hierarchy.

Market-Based Job Evaluation
Rates set based on use of relevant

salary surveys for benchmark jobs
Job content considered
2.37
Market-Based Job Evaluation

■ Rates set based on use of relevant salary surveys for benchmark jobs – Market rate composites
are determined based on the company’s use of appropriate and relevant salary surveys to price
jobs and create the best estimate of the prevailing wage rates in the external marketplace for
that job.
• Job descriptions are used to match appropriate jobs in survey data.
• Market data are analyzed and benchmark jobs are arranged into a job worth hierarchy.
• All other jobs are slotted into the hierarchy based on whole job comparison.
■ Job content considered – After a preliminary hierarchy is established based on market pay levels
for benchmark jobs, job content is typically considered to ensure internal equity.

Job Worth Hierarchy
What is it?
• The process of grouping or categorizing jobs relative to
other jobs
How is it established?
2.38
Job Worth Hierarchy

■ What is it?
• The process of grouping or categorizing jobs relative to other jobs
– Grades
– Bands
■ How is it established?
A hierarchy of all jobs is created using whichever metric is chosen via either of the two
approaches below.
– Internal job evaluation results, such as ranking or job evaluation points, are analyzed and
groupings are determined based on logical breaks in the data.
– Using the classification method of job evaluation
– Market pricing data are analyzed and groupings are determined based on logical breaks in
the market data.

Job Worth Hierarchy …continued
What does it look like?

• Job content approach (internal data)
• Market-based approach (external data)
2.39
Job Worth Hierarchy (continued)

■ What does it look like? The dotted lines represent grade breaks.
(Internal Data) (External Data)

Position Job Points Hierarchy Market Data Hierarchy
Director of Accounting 875 100,000
Director of Human Resources 866 95,000
Senior Manager of Advertising 764 88,000
Manager of Accounting 691 76,000
Senior Compensation Analyst 414 50,000
Senior Human Resources Analyst 410 47,500
Senior Financial Analyst 401 47,000
Financial Analyst 350 42,000
Supervisor, Accounts Payable 322 40,000
Accounts Payable Specialist 193 28,000
Human Resources Specialist 189 25,000

Market-Based Pay Structure Design Steps
Analyze and Collect and analyze
document job content data for benchmark jobs
Develop midpoints for

Identify / select each grade in the pay
benchmark jobs structure
Identify / select Assign benchmark

relevant labor markets jobs to the structure
Identify salary Slot nonbenchmark

survey sources jobs into the structure
2.40

■ Compensation philosophy and compensation strategy play a role in market pricing, with the
emphasis on pay determination tied to the current market data gathered on jobs.
• The basic steps involved in building a job worth hierarchy and pay structure using market
data are shown above.
• It’s important to note that collaboration is needed between HR and line management in order
to achieve validation around both this process and the selection of benchmark jobs.


…continued
Analyze and document job content

• Method
• Not exhaustive
Identify / select benchmark jobs

• Job descriptions
• Benchmark job set
• Validate benchmark job matches with leadership
team
2.41
Step 1
■ Analyze and document job content
• Method – Job content needs to be analyzed and documented, just as with other job
evaluation methods.
• Not exhaustive – Job documentation does not need to be exhaustive (e.g., duties and
responsibilities, job specifications).
– Salary surveys tend to have brief job summaries and the key is to have appropriate job
documentation to accurately and appropriately match to those surveys.
– The goal is to compare like organizations and jobs for the best match.
Step 2
■ Identify/select benchmark jobs
• Job descriptions – Job descriptions are used to assist in identifying benchmark jobs and
matching to salary survey descriptions.
• Benchmark job set – at least 50% of total jobs; serves as a representative group of all jobs to
create an anchor for the salary structure
– Represents all jobs across the organization and all levels
• Validate benchmark job matches with leadership team – Based on an organization’s culture,
HR may choose to review internal job descriptions and organization charts for a department
with that department’s leadership team and then collaboratively match department jobs to
salary surveys.


…continued
Identify / select relevant labor markets
• Labor markets vary based on type or group of job
Identify salary survey sources

• Choose surveys reflective of your labor market
and benchmark jobs
• Published survey sources
• Custom surveys
Collect and analyze data for benchmark jobs

• At least 50% of jobs
• Jobs matched with data
• Composite is determined
• Assess competitiveness
2.42
Step 3
■ Identify/select relevant labor markets – Identify the organization’s relevant labor markets for
various jobs in the company.
• Labor markets vary based on type or group of job
– Consider where you recruit and where employees go when they resign.
Step 4
■ Identify salary survey sources
• Choose surveys reflective of your labor market and benchmark jobs.
– Published survey sources
– Custom surveys
Step 5
■ Collect and analyze data for benchmark jobs
– At least 50% of jobs – Collect survey data on at least 50% of jobs.
• Jobs matched with data – Benchmark jobs are matched with survey data from
appropriate sources.
• Composite is determined – Market data is analyzed and a market rate composite is
determined.
• Assess competitiveness – The market rate composite is then used to assess market
competitiveness of the organization’s current pay levels for benchmark jobs.


…continued
Develop midpoints for each grade in the

pay structure
• Range midpoints
• Reflect organization’s pay policy
• Lowest to highest
Assign benchmark jobs to the structure

• Closest midpoint to market rate composite
Slot nonbenchmark jobs into the structure

• Compare nonpriced to priced
• Assign grades
2.43
Step 6
■ Develop midpoints for each grade in the pay structure based on an analysis of the market data.
• Range midpoints – Most organizations establish a pay structure with job grades and pay
ranges to administer pay.
– Reflect organization’s pay policy – From the market data collected, develop a set of pay
range midpoints which reflect the organization’s pay policy relative to the market.
– Lowest to highest – Typically, these are established from the lowest to highest jobs in the
data set, taking the lowest job (lowest market price) as the midpoint of the lowest grade
in the structure.
Step 7
■ Assign benchmark jobs to the structure based on comparing midpoints to market rate
composite data.
• Closest midpoint to market rate composite – Each benchmark job is assigned to the grade
with a midpoint closest to the market rate composite for that job.
Step 8
■ Slot nonbenchmark jobs into the structure – Slot the remaining jobs into the structure. Once all
the priced jobs have been assigned to the structure, the remaining jobs are assigned to a grade
using the slotting method.
– Compare nonpriced to priced – Compare nonpriced jobs to those priced into the
structure.
– Assign grades – Assign each job to a grade containing other jobs which appear to be of
similar overall job worth.

Slotting: Key Considerations
• Define job
• Consider value
• Relative to other jobs within job family or function
• Relative to jobs in other functions
• Supervisor / subordinate jobs
2.44
Slotting: Key Considerations

When market data are not available for a specific job, companies will typically slot the job. Typically,
slotting is used to place and price unique jobs for which there is little or no market data for
comparative purposes. Since slotting involves comparing the job to one or more jobs in an already
established hierarchy, it cannot be used as a stand-alone method.
■ Define job – Define the criteria for comparing jobs (typically skill, effort, responsibilities and
working conditions).
■ Consider value
• Relative to other jobs within job family or function
– Look at other jobs in the job family – for example, a receptionist job in the generic clerical
job family may be slotted below a senior clerk’s job.
– Ensure appropriate distance between jobs of the same job family (e.g., 7% to 10% for
nonexempt jobs, 12% to 15% for exempt jobs).
• Relative to jobs in other functions
– Look horizontally at other functional areas (e.g., an accounting clerk job may be
appropriately slotted above the receptionist job.)
■ Supervisor/subordinate jobs – Ensure appropriate distance between supervisor and subordinate
jobs (typically 15% to 20%). Consider reporting relationships when job slotting.

Market-Based Pay Structure vs.
Pure Market Pricing Approach
2.45
Market-Based Pay Structure Versus Pure Market Pricing Approach

■ Market-based pay structure – Structure is developed by the steps addressed in this module
■ Pure market pricing – Benchmark jobs are priced but are not placed into a pay structure. This
approach can be used when the external pay market is volatile and any grade structure might
rapidly become obsolete.

Market-Based Job Evaluation and
Pay Structure Design: Advantages
2.46
Market-Based Job Evaluation and Pay Structure Design: Advantages

■ Simple to administer and update for currency
• It is easy and straightforward to price jobs for their initial evaluation (placement into
the job worth hierarchy) and also maintaining their currency through reviewing updated
survey data.
■ Easy to explain
• The market-based evaluation method does not involve a complicated comparison and
weighting of various job content factors (points), or a comparison of whole jobs to other jobs
so it’s generally an easy evaluation method to explain and understand.
■ Not overly time-consuming compared to other methods
• Jobs can be evaluated and re-evaluated simply by analyzing the most current market data.
■ Responsive to the market
• Since market-based job evaluation is using market data as its criterion, it is more responsive
to changes in market pay levels.
■ High degree of transparency
• Market-based job evaluation is more transparent than other more complicated evaluation
methods which can be difficult for employees to understand.

Market-Based Job Evaluation and
Pay Structure Design: Disadvantages
2.47
Market-Based Job Evaluation and Pay Structure Design:

Disadvantages
■ May be difficult to obtain sufficient data
• Market-based job evaluation and pay structures are based on the adequate supply of
reputable survey data. If data for certain jobs, or groups of jobs in certain geographies or
specialty areas, is not available or is unreliable, it can create challenges.
■ Any market inequities are built in
• Since pay levels are set based primarily on market data, any inequities of pay for jobs already
in the marketplace will be perpetuated within your pay program.
■ Not defensible on job content basis
• Market-based job evaluation does not consider job content of one job compared to another
to determine the job worth hierarchy and is therefore not a defensible method on that basis.
■ May not be aligned with internal equity
• Certain jobs within your organization may be particularly important to your business.
However, this may not be reflected in the market data for those jobs. Other jobs may be less
important in your organization but have relatively high market rates.

Can You?
■ Discuss market pricing and the terminology associated with market pricing.
■ Discuss base pay structure design including job evaluation and establishing a job worth
hierarchy.
■ Identify and describe the steps involved in market-based pay structure design.
■ Explain advantages and disadvantages of market-based job evaluation and pay structure design.

Module Quiz
1. Which one of the following terms refers to the act of placing a job into a job worth hierarchy
established by a method other than the organization’s primary job evaluation method?
A. Pay range
B. Market rate composite
C. Slotting
D. Pay policy
2. When using market-based job evaluation, what percentage of jobs in the organization should be
benchmarked?
A. At least 80%
B. At least 70%
C. At least 60%
D. At least 50%
3. When building a job worth hierarchy using market data, what is the purpose of using job
descriptions?
A. Verify survey data
B. Analyze job content
C. Identify benchmark jobs and match to survey job descriptions
D. Identify relevant labor markets
4. Which of the following is an advantage of market-based job evaluation and pay structure design?
A. Any market inequities are built in
B. Simple to administer
C. Takes into consideration the company’s perceived value of a job
D. Legally defensible based on job content

MODULE 3
Survey Data
51
Introduction
The purpose of collecting market data is to make informed decisions about the organization’s
compensation program. These decisions involve pricing jobs, analyzing pay trends, identifying pay
practices and establishing job worth hierarchies. In this module, we will describe the most common
sources of survey data and decision factors to consider in choosing between these sources. We will
describe the most common data formats and statistical data points found in salary surveys. Finally,
we will review the considerations for selecting appropriate surveys.
Objectives
1. Discuss sources of competitive market data.
2. Explain decision factors regarding which survey source(s) to use, including the use of multiple
survey sources.
3. Describe the various survey data formats and statistical data points used in salary surveys.
4. Discuss considerations for survey selection.
5. Discuss the use and importance of documentation.
6. Describe data accuracy and the components of data integrity.

Data Sources: Salary Surveys
Why are salary surveys used?
• Price jobs and determine market positions

• Analyze pay trends
• Document budget and pay structure movement
• Make informed decisions
3.53
Data Sources: Salary Surveys

■ Why are salary surveys used?
• Price jobs and determine market positions
• Analyze pay trends
• Document budget and structure movement
• Make informed decisions
What is your organization’s compensation budget?

For example, merit pay 3%, market adjustment 5%,
promotions 5%, annual structure movement 1.75%

Data Sources: Salary Surveys …continued
Why are salary surveys used?
• Gather data on policies and procedures

• Diagnose compensation problems
• Defend current practices
3.54
Data Sources: Salary Surveys (continued)

■ Why are salary surveys used?
• Gather data on policies and procedures
• Diagnose compensation problems
• Defend current practices
It’s important to align the compensation strategy and philosophy, human resources
strategy, business strategy, and the organization’s mission and vision.

Sources of Survey Data
• Published surveys
• Custom third-party surveys
3.55

Acquiring adequate and appropriate survey data provides the foundational information on which an
organization’s compensation competitiveness will be assessed. Sources of salary survey data include:
■ Published surveys
• There are thousands of published surveys available for purchase.
• Purchase price varies by survey scope, type of analysis and overall sophistication of the
final product.
• Most survey providers give a substantial discount to survey participants.
■ Custom third-party surveys
• A third party conducts the survey to meet your needs and specifications.
• The third party can be a consultant, professional association or graduate students from a
local university.
• In many cases, participants in a survey sponsored by an individual company pay nothing to
receive a copy of the survey results.

Free or Complimentary Sources
3.56
Free or Complimentary Sources

If you don’t have access to fee-based services, there are free services available.
■ Trade and industry associations
■ Internet
• Many consulting organizations have Websites containing sample survey data.
• Be sure the information is timely and includes adequate descriptions of the benchmark jobs.
• Data from sources where individuals are self-reporting information may be less reliable than
those that collect data directly from employers.
■ Periodicals and publications
• These may be less likely to be used in formal market pricing efforts since they often do not
include adequate job descriptions.
■ Professional recruiters
• Although often an underutilized source, recruiters provide insightful information.
Professional recruiters could be both internal and external recruiters.
■ Government data
• Local and national governments are another source of data. The reliability and currency of
such data should be considered in its utilization.

Decision Factors
Cost
Time
Reliability
Availability
Data format
3.57
Decision Factors
Many factors will help in the decision regarding which source(s) of survey data to use. The final
decision will probably be based on a number of trade-offs that need to be made. The custom third-
party survey may incur a higher cost, but free services may not have the robust data you need.
■ Cost – Does the survey provide enough benefit to justify the expense?
■ Time – How much time will it take to gather survey data? How quickly must survey data be
obtained and analyzed?
■ Reliability – Is the survey sponsor reputable? Has data been verified?
■ Availability – Is current data available in time to meet the organization’s needs?
■ Data format – Is data formatted to provide specific information? Is data reported by industry, by
geographic area, number of employees?

Decision Factors …continued
3.58
Decision Factors (continued)

■ Do not confuse access and convenience with accuracy and completeness.
■ When properly researched, survey data is an objective tool to guide compensation decisions.

Decision Factors
Multiple Survey Sources
• How many sources should you use?

• More sources
• Larger database
• Avoiding bias
• Clustering data
• “Muddying the water”
3.59
Multiple Survey Sources

■ How many sources should you use?
• More sources – There are alternative viewpoints on this. Some prefer a single source. Some
say more is better.
– Larger database – More sources yield a larger database with more information.
– Avoiding bias – More sources aid in avoiding any particular bias.
– Clustering data – More sources tend to yield a pattern or clustering of data.
– “Muddying the water” – Too many sources may “muddy the water” – the “right” number
of sources may depend on the position level in question.

Survey Data Formats
Summary statistics
Simple linear regression
3.60
Survey Data Formats

The following pages show examples of several types of survey data formats. Displaying data in the
aggregate is the norm, i.e. presenting all of the data about one position in the same document.
■ Summary statistics (Exhibit I and II)
– A majority of surveys are reported in this format.
– Information is provided which gives a simple and accurate description of the data, and
can include mean, median, sample sizes as well as percentiles.
■ Simple linear regression (Exhibit III) – only one independent variable
• Used for scope-sensitive jobs – (e.g., management)
– Example: an HR executive salary level based on the number of employees in the
organization
• May also be used to establish base pay line

Survey Data Formats
Exhibit I – Summary Statistics
Job Title: Marketing Manager

Position Description
Works with marketing staff to ensure that internal customer issues and marketing requests are met.
Coordinates materials to ensure company objectives and philosophies are met through all direct
and indirect communications. Develops and implements marketing processes and all operational
improvements. Manages staff and department budgets as required.
Total Cash Compensation

Compensation data reported in thousands
Number Number of 25th 75th

Company Analysis Median Mean
of Firms Incumbents Percentile Percentile
Company Weighted
250 280 124.7 142.3 140.4 152.6
Salary
Incumbent Weighted
250 280 127.2 143.1 142 158.5
Salary
Incumbent Weighted
Total Cash 250 280 133.5 163.2 164 187.7
Compensation (all)
Incumbent Weighted
Total Cash
Compensation 235 257 138.4 171.2 169.3 200.6
(incentive recipients
only )
Supervised
Employee Count
193 197 2 5 5 11
(incumbents who
supervise only)

62
Exhibit II – Summary Statistics
Job Title: Marketing Manager
Base Salary
C17/GR17 • MODULE
Average Weighted
3
Average Firm Number of Unweighted
Annual Revenue Number Mean Median
Revenue Count Incumbents mean
Survey Data Formats
of Staff (incumbent)
Less than 20 million 15.0 1 14 15 101.2 103.5 102.3

20 < 100 million 65.3 1 20 20 118.7 118.7 120.4
100 < 250 million 201.7 3 25 27 123.2 122.4 124.2
250 < 500 million 358.6 2 20 23 125.6 127.8 126.7
500 < 700 million 705.3 5 35 39 132.1 131.6 134.6
750 < 1 billion 859.9 7 42 46 138.4 138.7 138.5
1 billion < 1.25 billion 1,138.2 9 41 48 154.3 158.3 159.1
1.25 < 1.5 billion 1,421.4 13 53 62 168.9 169.1 170.9
All compensation data is reported in thousands
Base Salary
Average Weighted
Total Employee Average Firm Number of Unweighted
Number Mean Median
Count Employees Count Incumbents mean
of Staff (incumbent)
Under 250 223 1 3 4 98.2 96.0 99.3

250 < 500 420 2 14 16 104.5 101.2 103.2
500 < 1,000 852 3 30 31 113.4 116.7 118.3
1,000 < 1,250 1,101 3 23 26 122.2 123.2 120.0
1,250 < 1,500 1,423 4 39 42 122.3 124.2 125.2
1,500 < 2,000 1,758 8 45 48 146.5 151.2 153.1
2,000 < 3,000 2,687 10 42 49 152.0 153.2 160.0
3000 + 4,137 12 54 64 173.7 171.3 168.4
© WorldatWork. All rights reserved.

All compensation data is reported in thousands
Survey Data Formats
Exhibit III – Simple Linear Regression
3.63
Exhibit III – Simple Linear Regression

For purposes of pay analysis, simple linear regression shows the relationship between an
independent variable such as number of employees, and a dependent variable such as base salary
or total compensation. For scope-sensitive jobs such as management, there is typically a strong
correlation between company size and pay levels. The formula for simple linear regression is
y = a + bx.
When the data is entered into the regression formula, the resulting equation can be used to predict
pay levels for jobs at various points along the line of best fit. For example, in this model the predicted
pay level would be approximately 240,000 for an HR management executive in a company with 20,000
employees.
The components of the formula above are:

y = dependent variable
a = intercept
b = slope
x = independent variable

Survey Data – Statistical Data Points
3.64
Survey Data – Statistical Data Points

As compensation professionals, we are interested in what is the most representative or expected
value in a set of survey data. Most surveys provide multiple measures of central tendency.
■ Median
• Central tendency – describes the central tendency of the data to minimize the effect of
extreme values
• Extreme value – These extreme values affect the mean; they do not affect the median.
– The median answers the question: “What is the middle salary in a set of ranked salaries?”
■ Weighted mean (average)
• Reflects incumbents – reflects equally the number of incumbents in a survey
• Reflects market value – If companies participating are truly representative of the market,
the data should reflect the market value of the job.
– The weighted mean answers the question: “On average, what are incumbents in a
particular job paid?”
■ Unweighted mean (average)
• Reflects companies – Each participating company is given the same weighting in the
calculation, irrespective of its participant count. The unweighted mean provides each
company with equal weight in the calculation. It counteracts situations where one or a few
employers have the majority of incumbents, thereby heavily influencing the results.
– The unweighted mean answers the question: “On average, what are companies paying a
particular job?”

Survey Data – Statistical Data Points …continued
3.65
Survey Data – Statistical Data Points (continued)

■ Trimmed mean (average)
• Mean of the middle – This is the mean of the middle part of the data.
• Exclude extreme values – It is typical for surveys to exclude extreme values in order to
minimize their impact on final data recommendations.
– An example of a trimmed mean is excluding the data points with the highest and the
lowest value and taking the mean of the remaining data points.
– Another example would be trimming the top 5% and the bottom 5% and taking the mean
of the middle 90% of the data.
• Amount should be reported – The amount of trimming should be reported, so recipients of
the analysis know, understand, and can use the data properly.
• Can be biased – Analysis can be biased (an obvious ethical issue) if trimmed means are not
calculated correctly.
• Swaying the data – One can’t trim just the high values or just the low values to sway the data
in any fashion.
■ Highs and lows – It is important to note that the market pay for any given position may not
cluster closely around a middle point. Well-matched and solid surveys may show broad spreads
between market highs and market lows. Don’t be alarmed – below are various reasons for this
phenomenon:
• Pay philosophy – a company’s competitive pay position
• Job tenure – the length of time incumbents have been in a job
• Variations in responsibility – differences in the responsibility levels of jobs matched to the
survey job

Survey Data – Statistical Data Points …continued
3.66
Survey Data – Statistical Data Points (continued)

■ Percentile (as defined most widely by practitioners)
• Value that a given percentage of data is equal to or less than
– For example, targeting salaries at the 60th percentile of industry pay – this means the
value of salaries that 60% of the companies are equal to or less than.
• Most common percentiles provided within survey data include:
– 50th percentile (or the median)
– 25th percentile
– 75th percentile
– 10th percentile
– 90th percentile

Survey Selection
Support from management
Reputable high-quality sources
Representative of labor markets
3.67
Survey Selection
Before selecting surveys to use, remember that survey data is important in establishing market
comparison data, but surveys should by no means be the sole source used to determine pay ranges
and compensation packages. Government labor statistics, disclosure rule reporting of executive
data, proxies, association resources and many other factors (e.g., your company’s compensation
philosophy) can and should also be considered in establishing compensation packages.
■ Support – get the support of management
• Before even selecting surveys, make sure that you have management’s support on utilizing
survey data in the first place. If you don’t have this up-front support, dedicated time and
effort may go unappreciated.
• Ask management to participate in job matching and descriptions for difficult jobs.
■ Reputable high-quality sources – use reputable sources
• There is an abundance of survey sources available with varying degrees of quality.
• Do not be careless in survey selection.
• There are companies that specialize in cataloging salary survey sources and maintaining
information about them.
• These are excellent sources to locate the right surveys for your organization.
■ Labor market – Understanding your labor markets is key to selecting and participating in
surveys. Factors to draw upon include:
• Industry
• Organization size
• Geographic location (local, regional, national, international)
• High-demand jobs

Survey Selection
Sample Labor Market –

Large Pharmaceutical Firm
3.68
Sample Labor Market – Large Pharmaceutical Firm

This chart shows an example of the types of labor markets that might be identified for three job
groups in a pharmaceutical firm with annual sales of 2 billion.

Survey Selection
High-Demand Jobs
• Market rates may increase rapidly
• Market data may not reflect importance placed on
certain jobs internally
• High-demand, hot-skills jobs
• Shift focus to specific job-related skills
• Skill-level definitions
• Determine the premium
• Acquire data more frequently
• Skill-based pay
3.69
High-Demand Jobs
High-demand or hot-skills jobs present a particular challenge in terms of selecting survey data.
■ Market rates may increase rapidly – Market rates for these jobs, for which many employers or
industries are seeking employees, may experience rapid increases. However, this may not be
reflected in current survey data (e.g., Y2K COBOL programmers in the late 1990’s).
■ Market data may not reflect importance placed on certain jobs internally – Your organization
may have certain jobs which are critical to your strategy, but may not be critical to other
employers. Thus the market data may be undervaluing what you need to pay.
■ High-demand, hot-skills jobs – How do you measure the market for high-demand, hot-skills jobs?
• Shift focus to specific job-related skills – shift focus from the more broadly defined job
role to individual employees with specific job-related skills Example: shift from Application
Programmer to PeopleSoft Application Programmer
• Skill-level definitions – Create new skill and skill-level definitions.
• Determine the premium – Define base skills and capture compensation data on them to
serve as a reference point for determining the premium for hot skills.
• Acquire data more frequently – Acquiring data more frequently is most critical for
hot-skills jobs.
■ Skill-based pay – Skill-based pay is driven (like the market) by supply and demand economics.
However, skill-based pay tends to fluctuate more dramatically from quarter to quarter in reaction
to the market.

Exercise:
Survey Selection
1. Read the job titles below and consider the list of survey sources.
2. Determine which survey you would use and list the reasons for your choice.
Job Titles Surveys

■ Director of Manufacturing Operations ■ Local Government Survey
■ Plant Human Resources Manager ■ Local HR Group Survey
■ Executive Assistant ■ Geographic Specific Survey
■ Industry Specific Survey

Documentation
• Documenting sources and process

• Documenting results
3.71
Documentation
■ Documenting sources and process – It is important to document the sources and process used to
price jobs.
• Specific surveys used and why
• Measures of central tendency used
• Practice of selecting the most appropriate number of surveys to calculate the prevailing
market rate accurately (may vary from job to job, depending on whether averages
are skewed).
• Method of aging the data from multiple surveys to a common point in time
• Method of developing market rate composite for each job
■ Documenting results
• Job pricing worksheet
• Market index of competitiveness – by job, department, organization-wide
• Graphic representation (scatterplot, simple linear regression of internal pay versus
market pay)
Why is record keeping important and to which internal stakeholders might it be valuable?

Accuracy of Survey Data
Factors that impact accuracy
General rule
3.72
Accuracy of Survey Data

It is important to note that it is impossible to determine the exact market rate for any job.
Compensation professionals must rely on survey data to estimate market rates. However, with many
sources to choose from, this task can be daunting.
■ Factors that impact accuracy include:
• Sample size
– Number of companies
– Number of incumbents
• Participant base
• Statistical analyses
• Survey methodology
• Job matching procedures.
■ General rule
• Survey data provides a best estimate, based on samples of the population, as to what the
“true” rates are in the market. In general, larger sample sizes provide greater confidence in
these estimates.

Data Integrity Components
3.73

Survey quality is impacted by three separate components:
1. Submissions – How accurate are the submissions to the survey?
2. Data – How accurate are the data being reported by the survey?
3. Survey Vendor Auditing – How extensively has the survey vendor audited the results of
the survey?
Exercise your due diligence when using surveys.

Data Integrity Components …continued
• Is the survey vendor reputable?

• Which organizations participate?
• How clear and concise are the instructions?
• How long does the vendor allow for data to be gathered?
3.74
Submissions
The accuracy of data being submitted is vital to a valid survey. This can be difficult for a
compensation professional to assess. Some key questions to consider are:
■ Is the survey vendor reputable? – Survey vendors will develop a reputation for having a well-
organized data submission process which will increase the accuracy of submitted data.
■ Which organizations participate? – Well known organizations and those that participate in a
survey on a consistent basis over time will be more likely to have better submission processes
established.
■ How clear and concise are the instructions? – If the submission instructions are clear and
concise, it might help alleviate potential data submission errors.
■ How long does the vendor allow for data to be gathered? – Quality surveys will provide an
adequate period of time from the request to submit to the submission deadline.
Although the above questions will not specifically address the question of accuracy, they can help
the compensation practitioner get a sense for the likelihood that the submissions are accurate.

• How many participants were involved?

• What are the survey scope factors?
• How close a match is the job description in the survey?
• What is the age of the data?
3.75
Data Accuracy
How accurate are the data being reported by the survey? In order to determine the accuracy of the
data being reported, the following questions should be considered:
■ How many participants were involved? – The more participants, the larger the sample size and
the more representative the data should be.
■ What are the survey scope factors? – Ensure that the survey you use accounts for the scope of
the positions you’re interested in. For some jobs, differences in geographic area, company size
or industry result in widely varied rates. Using data with the wrong scope factors will decrease
the accuracy.
■ How close a match is the job description in the survey? – The closer the job match to the survey
description, the closer the match to market.
■ What is the age of the data? – Data is reflective of a specific date as stated in the survey. The
older the data is, the less likely it will reflect current market levels.

• Outliers
• Incomplete survey submissions
• “Odd” data points
• Trends
• Correlations
3.76
Survey Vendor Auditing

How extensively has the survey vendor audited the results of the survey? Any reputable survey vendor
will go through some sort of “scrubbing” process to review the survey results. In scrubbing the data,
the survey analyst will look for a number of things:
■ Outliers
■ Incomplete survey submissions
■ “Odd” data points
■ Trends
■ Correlations
Analysts will typically compare historical data to current year data to search for anomalies, which can
result in an in-depth audit of results.

Can You?
■ Discuss sources of competitive market data.
■ Explain decision factors regarding which survey source(s) to use, including the use of multiple
survey sources.
■ Describe the various survey data formats and statistical data points used in salary surveys.
■ Discuss considerations for survey selection.
■ Discuss the use and importance of documentation.
■ Describe data accuracy and the components of data integrity.

Module Quiz
1. Which of the following is an advantage of a published survey?

A. You may receive a substantial discount if you participate in the survey.
B. Data is more reliable because it is self-reported.
C. It can be tailored to meet your needs and specifications.
2. If cost is a major factor, which of the following survey data sources would you least
likely consider?
A. Published survey
B. Custom third-party survey
C. Complimentary survey
3. How do you measure the market for high-demand jobs?

A. Focus on broadly defined job roles
B. Focus on individual employees with specific skills
C. Focus on internal value to the organization
4. What information should documentation of sources and processes include?

A. The price of the survey source and whether it has increased over time
B. The average time needed to match a job to the survey source
C. How many times per year the survey source is updated
D. The method of aging the data from multiple surveys to a common point in time
5. Which of the following is a component of data integrity?

A. The extent to which the survey has been audited
B. The number of jobs matches found in the survey
C. The availability of the results in both hard copy and electronic form

MODULE 4
Participating in
Surveys
79
Introduction
In this module, we will discuss participating in surveys. Your organization’s participation enhances
the value of the surveys to all others who use the survey and usually results in a substantial discount
in the purchase price.
Objectives
1. Discuss the typical data requested by surveys.
2. Describe considerations when providing data to salary surveys.
3. Define and describe job matching.

Participating in Salary Surveys
• Key benefits
• May provide a substantial discount
• Enhances survey value
• Provides easier job matching
4.81
Participating in Salary Surveys

In order for compensation professionals to use salary surveys, someone needs to supply information
to the survey collector. In spite of the time commitment, many compensation professionals feel there
are benefits to participating in salary surveys.
■ Key benefits
• May provide a substantial discount – Most survey providers offer a substantial discount on
the purchase price or subscription of survey data to organizations that provide their data to
the survey.
• Enhances survey value – As many surveys provide a list of participating companies, your
participation enhances the value of the survey and makes it more likely that others will also
participate. This benefits your company and all participants.
• Provides easier job matching – The process of matching your jobs to the survey jobs when
submitting data is a step which will benefit you later as you will already have determined
which of your jobs match to the survey for purposes of data analysis.

Participating in Salary Surveys …continued
• Typical data requested

• Job or incumbent information
• Organization information
4.82
Participating in Salary Surveys (continued)

■ Typical data requested – The typical types of information a survey request include:
• Job or incumbent information
– Internal job code
– Job title
– Wage rate or salary
– Pay range information
– Number of employees (if multiple incumbents)
– Incentive information
❙ Target award
❙ Actual award
❙ Equity-based compensation
– Number of direct reports
• Organization information
– Annual revenues
– Information reported by geographic region
– Total number of employees

• HRIS System
• Human Resources
Information System
• HRIS contents
• Typically, individual information
• Automated data submission
4.83

■ HRIS System
• Human Resources Information System – In most organizations, information related to
individual employees is located in an HRIS. It can be as complex as a custom-made database
or as simple as a file created in a spreadsheet program.
• HRIS contents – HRIS systems typically contain the following information regarding
compensation:
– Pay grade
– Wage rate or salary
– Pay range information
– Salaried/hourly or exempt/nonexempt status
• Typically, individual information – When using an HRIS system to gather information
for surveys, it is important to note that most HRIS systems have individual information.
Depending upon what information the vendor is requesting, additional data manipulation
may be required.
■ Automated data submission – Many survey vendors provide automated processes to submit data.
Once the internal process for collecting data has been set up, ongoing participation will be a
simple task of refreshing your organization’s data file and submitting.
What HRIS system does your organization use?

• Review data prior to submission

• Transfer issues
• Inadvertent symbols
• Be sure data is what survey requests
4.84

When completing a survey, it is important to keep in mind the following issues:
■ Review data prior to submission
• Transfer issues – Never assume the data you reviewed in one application “smoothly”
transferred to another application. Ensure all job titles and codes are accurate.
• When moving data from one computer application to another (HRIS to spreadsheet
applications), some data might not transfer correctly.
• Inadvertent symbols – Check for inadvertent symbols. Most surveys do not need commas,
monetary unit signs, etc.
■ Be sure data is what survey requests – Make sure the data you are reporting is what the survey is
requesting.
• If the survey wants aggregate data for all accountants, do not report each accountant.
• Check data to account for full-time versus part-time pay amounts.
• If different currencies are included for employees in multiple countries, ensure that they are
properly reflected.

Job Matching
Match to closest description
80% or higher
Job description or rate the match
Job matches several positions
4.85
Job Matching
Job matching is the process of matching your organization’s jobs to those within the surveys to which
you provide data and/or choose to use.
■ Match to closest description – Match your job to the closest description in the survey based on:
• Job content
• Job accountabilities
• “Leveling” chart – provided by some surveys to assist in the job matching process.
• Matching on title alone can be misleading.
■ 80% or higher – A generally accepted rule is if your job matches 80% or higher, it is a
strong match.
■ Job description or rate the match – Most surveys allow for a compensation professional to either
include a job description or to rate the match.
• Strong 80% or higher match
• Equal 75% match
• Weak 70% match
• No match <70% match
■ Job matches several positions – In some cases, you might find your job matches parts of two or
more jobs in the survey.
• In these cases, call the survey vendor to ask for further clarification.
• It is preferable to match your internal job with only one job per survey.
– Simplifies data submission
– Simplifies data analysis of results

Exercise: Job Matching
1. Read the two job descriptions that follow and review the position descriptions from various
salary surveys.
2. Determine the strength of the match.
3. Determine if you would use each survey.

Title: Plant Human Resources Manager
Department: Human Resources
Reports to: Plant General Manager
General Summary
Administer and/or manage human resource programs within a manufacturing plant covering
several of the following areas: employee relations, recruiting, salary administration, training and
development, safety, health benefits and employee services.
Duties and Responsibilities

• Actively recruit, screen and hire plant employees for job openings.
• Administer benefit activities including: annual open enrollment, change to coverage etc.
• Manage plant safety and workers comp prevention programs.
• Provide guidance to plant managers in all employee relations matters.
• Manage plant communication to promote employee understanding of programs, policies,
and objectives.
• Ensure legal compliance with various governmental laws and regulations.
• Train employees in corporate directed programs.
• Partner with plant management for performance evaluations; recommends salary
adjustments; rewards employees or takes disciplinary action, as necessary.
Job Specifications
• Ability to read, analyze, and interpret common financial reports, and legal documents
• Ability to respond to common inquiries or complaints from employees, customers, regulatory
agencies, or members of the business community
• Ability to effectively present information to top management and public groups
• Computer skill requirements include:
– Intermediate Office applications (Outlook, Word, Excel)
– Ability to define problems, collect data, establish facts and draw valid conclusions
Education/Training/Experience
• Bachelor’s degree in human resources or related field from four-year college or university
• Five to eight years of experience

Survey 1: Plant Human Resources Manager
Position Description:
Responsible specifically for labor relations in a specific production business unit. May have
responsibility for overseeing the administration of one or more collective bargaining units, including
the administration and communication of compensation and benefits programs, recruitment and
selection, and employment and employee relations issues. Addresses compliance and regulatory
issues, including the response to EEO, OFCCP, DOL, and other claims and audits.

Responsible for the overall human resources issues impacting a specific business production unit.
Has responsibility for overseeing the administration, and management of several functional areas,
including employee relations, labor relations, selection and employment, performance management,
and training and development. Works with line managers to communicate and implement various HR
policies and programs, in alignment with corporate, divisional, and business unit objectives.

Responsibility for administering and communicating various human resources programs. Conducts
new hire orientations, participates in local salary and benefits surveys, and spends a majority of
time in screening applications for potential employment opportunities, mainly for production staff.
Additionally is responsible for payroll administration, and the company’s unemployment and workers
compensation programs.
Survey 4: Human Resources Manager

Responsibility for administering and communicating various human resources programs for a
major division of the organization. Works with HR leadership and line managers in communicating
and implementing various HR policies and programs, in alignment with corporate and business
unit objectives. Conducts new hire orientations, participates in local salary and benefits surveys,
and spends a majority of time in screening applications for potential employment opportunities. Is
responsible for all government contracts reporting and working with all federal and state agencies in
reporting, disclosure, and other compliance issues. Has responsibility for responding to all disability,
workers compensation, and unemployment claims, and for answering EEOC and other charges filed
by employees and/or regulatory agencies.

Title: Director of Manufacturing Operations
Department: Manufacturing
Reports to: VP Manufacturing Operations
General Summary
Oversee management of all direct (non-support) manufacturing activities for all product lines at all
plants. The incumbent works to implement and monitor consistent manufacturing processes and
standards to maximize productivity and efficiently manage personnel, equipment and materials.
Ensures that approved products are manufactured on schedule, and within quality standards and cost
objectives.

• Assist the operations leadership team and other executives in the development and
formulation of long- and short-range planning, policies, programs and objectives.
• Develop the manufacturing plans and procedures to ensure that products conform to
established customer and company quality standards.
• Achieve optimum employee production levels with the least amount of overhead and raw
material costs to meet annual budgetary plan.
• Present manufacturing policies and programs to guide the organization in maintaining and
improving its competitive position and profitability of operation.
• Direct and monitor plant general managers in the accomplishment of manufacturing plan
goals consistent with established manufacturing and safety procedures. Act as liaison
between department management and subordinate levels, as well as executive and
department-manager levels to inform personnel of communications, decisions, policies and
all matters that affect their performance, attitudes and results.
• Identify, recommend and implement changes to improve productivity and reduce cost
and scrap.
• Direct and coordinate various programs essential to manufacturing procedures (e.g.,
training, safety, housekeeping, cost reduction, worker involvement, security).
• Initiate and coordinate major projects (e.g., plant layout changes, installation of capital
equipment, major repairs).
• B.A./B.S. in industrial, mechanical or business administration, or a four-year technical
degree in a related discipline.
• Ten or more years of experience in manufacturing management, preferably in a process-
oriented operation and/or related industry. A minimum of five years of experience
managing a significant segment of a large manufacturer or the entire operation of a smaller
manufacturer.
• Experience working with manufacturing-based technology, processes and principles is
preferred.

Survey A: Director of Operations
Has overall accountability for the entire manufacturing process for all company product lines.
Responsible for overall quality, productivity and cost improvement. Has accountability for product
quality control and safety procedures in place. Has a pivotal role in the strategic direction of the
manufacturing process, including feasibility studies on product enhancements. Recommends
improvements to production methods, equipment, and processes to senior management.
Survey B: Director of Operations

Has overall accountability for the manufacturing process for a product line at a single manufacturing
plant location. Has overall management responsibility for several cross-functional work teams,
including various project managers and team leaders. Responsible for the overall quality, productivity
and cost improvement of the product line.
Survey C: Director of Manufacturing Operations

Responsibility for the entire manufacturing process of a specific product line in a manufacturing
environment. Responsible for assembly and quality control production teams. Responsible for
monitoring overall inventory levels and providing input to senior management on issues related to
the marketing and sale of the product line. Works with production supervisors to ensure that all staff
follow standard work methods and comply with standard operating procedures.

Can You?
■ Discuss the typical data requested by surveys.
■ Describe considerations when providing data to salary surveys.
■ Define and describe job matching.

Module Quiz
1. Which of the following data is typically requested by surveys?

A. Wage rate or salary
B. Employee gender
C. Employee age
2. What is usually located in an HRIS?

A. Information related to individual employees
B. Information related to groups of employees
C. Spreadsheet applications useful for gathering and sorting information
3. Which of the following is true of job matching?

A. If your job matches 80% or higher, it is a “strong” match.
B. If your job matches 70% or higher, it is a “strong” match.
C. If your job matches 60% or higher, it is a “strong” match.

MODULE 5
Utilizing
Survey Data
93
Introduction
After selecting survey sources, the next step is to analyze the data. This module will help the
compensation practitioner utilize and analyze the survey data to incorporate it into useful
information. Topics on aging, blending, weighting and statistical analysis tools commonly used will
also be covered.
Objectives
1. Describe the process of aging survey data.
2. Define blending and explain the reasoning behind its use.
3. Explain the concept of weighting and identify considerations for its use.
4. Explain modeling and regression analysis and how they relate to market pricing.

The key to market pricing is to

know how to use the data collected.
5.95

■ The key to market pricing is to know how to use the data collected.
■ Survey data analysis is both an art and a science.
• The key to successfully interpreting data is to understand how the statistics are computed
in any given survey and tailor that information into your own organization’s compensation
philosophy.

Aging Data
Definition
5.96
Aging Data
It is important to age published data from multiple sources to one common point in time so that
consistent market comparisons can be made between surveys.
■ Definition – The practice of increasing market survey data by a percentage assumed to be
representative of wage movement to bring the data to a consistent point in time. This practice is
also known as “advancing” or “trending” the data.

Aging Data …continued
5.97
Aging Data (continued)

■ Considerations
Considerations in selecting an annual aging factor and the date to which to age the data include:
• Different rates – In the marketplace, compensation levels increase at different rates for
different groups.
– Example: Pay levels for executive-level employees generally increase at a faster rate than
pay levels for other salaried or hourly employees.
• Market research – Market research should be based upon:
– Job level – hourly, salaried, executive
– Industry type – health care, service, retail, high tech
– Geographic location – State/Province, region, national, international
– Type of compensation – base pay, total cash compensation
• Aging factor – Aging factor should be based on:
– Published projected salary increase budget surveys
– Sources – WorldatWork, various survey providers
– This approach assumes that actual pay in the labor market increases annually by the
budgeted amount.

Aging Data …continued
5.98
Aging Data (continued)

■ Considerations
• Salary increase movements – Most salary surveys have salary increase movements listed in
the executive summary or back pages of the survey.
– These tend to be very accurate.
– These tend to be historical and not projected.
• Aging over two calendar years – for aging over two calendar years:
– Age one year first, then age the second year (compounding the increases)
– Do not combine into one factor
❙ While combining may not result in a significant difference when market rates are
increasing at a low percentage rate, it becomes more significant when the market is
increasing at higher percentage rates.
• Lead or lag approach – The desired competitive pay level versus market (lead, lag, lead-lag)
will determine to what point in time to age the survey data.

Exercise
Aging Data
5.99
Exercise – Aging Data

1. Annual aging factor is 4%, based on salary increase trends. Survey data as of January 1 is to
be brought to current compensation level as of September 1.
2. Annual aging factor is 5%. Survey data as of March 1 is to be brought to current compensation
level as of October 1.
3. Annual aging factor for jobs in country X is 12%. Age the market rate of a job currently priced
at 100,000 from January to January, two years later (24 months). What is the difference
between compounding the percentage increases and simply combining them together?

Exercise Solutions
Aging Data: Questions 1 and 2
5.100
10 0 C17/GR17 • MODULE 5 © WorldatWork. All rights reserved.

Exercise Solution
Aging Data: Questions 3
5.101

Blending
Using the market rate for two or more jobs from a single
survey to establish a unique market rate for a hybrid job
5.102
Blending
In a perfect “market pricing world,” each job in every organization would nicely match a single
description in a survey. Unfortunately, this is not always the case. In today’s world of knowledge
workers and the blending of roles and responsibilities, it can be difficult to find a single match for all
jobs in your organization.
■ Using the market rate for two or more jobs from a single survey to establish the market rate for
a hybrid job
■ Example: Director, Human Resources and Security
• Blend the data for the Director, HR with the data for the Director, Security to derive the
market rate
– The example shows an equal weighting for both jobs, but can be adjusted to place higher
emphasis on one job over the other. The total percent of all weightings must equal 100%.

Adding a Premium
An Alternative to Blending
5.103
Adding a Premium
■ An alternative to blending – If market data is unavailable for a component of the hybrid job, an
alternative to blending is to use the market rate of the job for which you have data and add a
“premium” to account for the additional responsibilities.
• The amount of the premium is a judgment call based on the scope of the responsibilities and
the importance of those responsibilities to the organization.
■ Example: Director, Human Resources and Security
© WorldatWork. All rights reserved. C17/GR17 • MODULE 5 10 3

Weighting Market Data
• Using multiple survey sources for the same job

• Creates market rate composite
5.104
Weighting Market Data

■ Using multiple survey sources for the same job
• The process of determining the relative importance (or weight) of each survey when using
multiple survey sources for the same job
■ Creates market rate composite
• The process of weighting creates a market rate composite.
■ Example

Weighting Market Data (continued)
Compensation philosophy and strategy
Quality of surveys
Quality of job match
Sample Size
5.105
Weighting Market Data (continued)

When deciding if weighting market data is appropriate, the following considerations should be
reviewed:
■ Compensation philosophy and strategy
• Surveys within your industry should be more heavily weighted if you have established a
philosophy and strategy that defines your competitive labor market as industry-specific.
■ Quality of surveys
• The analysis provided (scope, location, etc.) in each specific survey will contribute to the
perceived quality of that survey.
• Based upon judgments of quality, some surveys might receive greater weighting.
■ Quality of job match
• Certain job matches will be strong in various surveys.
• The stronger the job match, the more weighting that survey might receive.
■ Sample Size
• A survey source with higher numbers of companies and/or incumbents reported may warrant
greater weighting.

Modeling
What is a model?
A representation of a part of reality
Used to solve problems
Used to understand relationships

between data sets
5.106
Modeling
There are many types of models that you see in everyday life. Models include things like blueprints
and architectural drawings, model trains, road maps, or even wedding rehearsals and, certainly,
mathematical equations. A model helps us understand things and processes which occur in the world
around us.
■ What is a Model?
• A representation of part of reality
• Used to solve problems
– A model can help answer the question, “How does the market pay practice match our
pay policy?”
• Used to understand relationships between data sets

Modeling (continued)
• Regression analysis
• Statistical technique that measures the relationship between two
variables
• Valuable tool
• Creating or updating pay structures
• Estimating the change in market rates for jobs based on
scope data
• Auditing compensation programs
5.107
Modeling (continued)
■ Regression analysis – When discussing market pricing, one modeling method typically used is
regression analysis.
• Statistical technique that measures the relationship between two variables – the term
“simple” regression is also used when only two variables are analyzed.
– The output of a regression is a linear equation (y = a + bx) which defines a straight line of
“best fit” through the data.
• Valuable tool – This statistical method is a very valuable tool for compensation
professionals and can be used in a variety of ways:
– Creating or updating pay structures using market data and job worth hierarchy
information.
– Estimating the change in market rates for jobs based on scope data (e.g., number of
employees, company revenue)
– Auditing compensation programs to ensure unbiased and objective application of pay for
employees.

Regression Analysis
5.108
Regression Analysis
Regression analysis is an effective method for assessing the need to make adjustments to pay
structures due to upward movement in the market.
■ Use regression to determine pay structure competitiveness
STEP 1: Collect market rate composite data for benchmark jobs

– Age data as appropriate

Regression Analysis
5.109
STEP 2: Perform the Regression

– Using the data collected in STEP 1, create a regression line using the market rate
composite data and your benchmark jobs’ internal grades as the two variables. This
regression line provides a line of best fit of market pay levels for each grade based on the
benchmarks you’ve assigned within your pay structure.
– To the extent that your organization has multiple pay structures, a separate regression
will need to be performed for each.

Regression Analysis
5.110
STEP 3: Compare Regression Line to Current Pay Structure

Midpoints
The regression line (equation) can now be used to calculate the market pay level for each internal
grade. Compare these to your current midpoints (your current pay policy line). This comparison
becomes one factor in determining how much, if any, to adjust your pay ranges to better reflect
market pay levels.
How does this regression analysis answer the earlier question

about how the market pay practice matches our pay policy?

Regression Analysis
Regression Analysis: Outliers
Definition
What to do
Improved design
5.111
Regression Analysis: Outliers

In any model, a small number of outliers should be expected.
■ Definition
• Data points in an array of data that are anomalies in comparison with other data points.
■ What to do – What to do with outliers
• First, verify the data, including job matches in the survey sources.
• If everything has been verified and the outliers still exist:
– May be appropriate to consider eliminating these outliers and performing the regression
analysis again
• A single outlier, if extreme enough, can dramatically alter the equation for the line
of best fit.
■ Improved design – Improved pay structure design can result in:
• More clearly identified problems that perhaps cannot be resolved within the context of the
pay structure
– These unusual benchmark jobs may need to be handled by a special pay policy.
• Since the goal is to develop a structure that is competitive for the majority of benchmark
jobs, eliminating outliers might better align the midpoints to achieve competitive goals.

Can You?
■ Describe the process of aging survey data.
■ Define blending and explain the reasoning behind its use.
■ Explain the concept of weighting and identify considerations for its use.
■ Explain modeling and regression analysis and how it relates to market pricing.

Module Quiz
1. Which of the following is true when aging data over two calendar years?
A. Combine into one factor, then age
B. Age both years first, then subtract the second year
C. Age one year first, then age the second year
2. Which of the following is the definition of blending?

A. The process of allocating emphasis to a particular job and combining two or more
salary surveys
B. The process of using market rates for two or more jobs to establish a market rate for a single
hybrid job
C. The process of analyzing a blend of data (scope, industry, location, etc.) to determine worth
of a position
3. Which of the following is a consideration in determining if a survey should receive

greater weight?
A. Surveys that have a higher purchase price
B. Surveys that exclude data from your relevant labor market
C. Surveys with higher numbers of companies and/or incumbents reported
4. For which of the following would regression analysis be used?

A. Estimating the change in market rates for jobs based on scope data
B. Determining the market rate composite from several survey sources
C. Determining the premium for a hybrid job

MODULE 6
Variable Pay
Survey Data
115
Introduction
In this module we discuss the other important components of compensation that are typically found
in survey data: short-term and long-term variable compensation. For some jobs, particularly those
at higher levels of an organization, short- and long-term variable compensation can become a major
component of an employee’s compensation package, and at the senior executive levels often far
exceed what is earned in base pay. In addition to specific data on short-term and long-term variable
compensation, many surveys also provide total cash compensation and total direct compensation
statistics. These additional data will be explained.
Objectives
1. Discuss short-term variable pay and how it is typically presented in surveys.
2. Describe total cash compensation and how it becomes more important at higher-level
positions.
3. Discuss long-term incentives and the different types of long-term incentives.
4. Explain total direct compensation.

Short-Term Variable Pay
• Definition
• Types of variable pay included in survey data
6.117
Short-Term Variable Pay

■ Definition – These are rewards that are based on the attainment of short-term results within a
12-month period or less. It includes any form of variable payment tied to performance. Incentive
plans, bonuses and recognition programs are common types. The rewards may be monetary or
nonmonetary (e.g., event tickets, merchandise or travel).
■ Types of variable pay included in survey data – Although there are several types of short-
term variable pay, not all types are typically included when employers submit their data to
survey vendors.
• Incentive plans, such as profit sharing and performance sharing are the most common types
of variable pay to be reported. These plans often include all or a significant percentage of
employees.
– Profit sharing – Plans normally include a predetermined formula for allocating a share of
the profits among participants and for distributing funds accumulated.
– Performance sharing – This is similar to profit sharing, but involves more measures than a
single financial performance measure. Additional measures may be financial, operational,
customer satisfaction or those related to quality.
• Bonuses provided to employees on a case-by-case basis – (e.g., retention, spot or project
completion bonuses) are typically not included in salary survey data.

Short-Term Incentives
• Awarded vs. target

• Comparison
• Higher than target data
• Equal to target data
• Lower than target data
• Useful in incentive plan design
6.118
Short-Term Incentives
■ Awarded versus target
• Incentive data may be reported as the amount awarded or the amount targeted (both may be
provided).
– Awarded – the actual amount paid
– Target – Target incentive data provide information on what organizations would pay
incumbents if their incentive plans pay out at target or expected levels.
■ Comparison – When comparing awarded versus target data for incentive plans, one can expect to
make one of three observations:
• Higher than target data – When awarded data is higher than target data, it means employees
exceeded their targets for the survey period.
• Equal to target data – When awarded data is equal to target data, it means employees
reached their target goals for the survey period.
• Lower than target data – When awarded data is lower than target data, it means results
were lower than their targets for the survey period.
■ Useful in incentive plan design – Target data can be particularly useful when designing incentive
plans to determine where other employers are setting incentive targets for similar jobs.

• Definition
• Becomes more important at higher pay levels
6.119

■ Definition – Total cash compensation includes base pay plus short-term variable pay.
Base pay + short-term variable pay = total cash compensation
■ Becomes more important at higher pay levels – For jobs at lower pay levels, variable pay typically
represents a small percentage of the employee’s total cash compensation. It is not uncommon
for lower level employees not to participate in variable pay plans in which case their base pay is
equal to their total cash compensation. However, at higher job levels, variable pay becomes an
increasingly larger proportion of total cash compensation.

Example
6.120
Example: Total Cash Compensation

In the example above, note that the mean base salary data plus the mean incentive data does not
equal the total cash compensation data. Why is this?
For employers to price incentive-eligible jobs effectively, all three of the components listed above
provide valuable information.
■ The base compensation data provides information on what the market pays for base
compensation, without regard to whether the job is eligible for incentives.
■ The incentive compensation data provides information on what the market pays for only those
employees who received an incentive payment.
• By including only those who received an incentive payment, the average statistic is not
skewed downward due to employees who do not participate in a plan and therefore have
no payout.
• Some surveys will provide both statistics (incentive-eligible only employees and all
employees).
■ The total cash compensation data provides information on what the market pays (both base and
incentive) for all employees including those who do not participate in an incentive plan. This
provides an overall view of total cash compensation for the job.

Total Cash Compensation …continued
• Higher base or more variable pay?

• Pricing using total cash compensation
• Analyzing total cash data
6.121
Total Cash Compensation (continued)

■ Higher base or more variable pay? – In theory, organizations that do not provide variable pay for
their employees need to find a way to still be competitive in the attract, motivate, engage and
retain arena.
• In many cases these employers may pay higher base wages to compensate for the lack of
variable pay. For organizations that provide variable pay, they may pay less in base pay and
compensate with a higher pay-at-risk component.
• Variable pay provides an additional advantage to employers because it is not “fixed” pay and
therefore must be re-earned for every performance period.
■ Pricing using total cash compensation – When pricing jobs using total cash compensation,
the compensation professional needs to take into account the dynamic between base pay and
variable pay.
• Using the total cash compensation data statistics can provide a good indicator of the
prevailing levels of compensation regardless of the mix between the two components.
• If the compensation professional has a more targeted objective of understanding how much
employers are specifically paying (or targeting) for incentives, then the short-term incentive
data will be more helpful.
■ Analyzing total cash data – Total cash compensation data can be analyzed in much the same way
as base pay data to assess the competitiveness versus market.
• Example: Perform a regression analysis but use total cash data instead of base pay data.

Long-Term Incentives
• Long-term incentives
• Cover performance greater than one year
• Driven by individual and business performance
• Holding power over executives
• Eligibility
• Historically executives only
• Now common in middle management
• Industry
• Company culture
6.122
Long-Term Incentives
■ Long-term incentives
• Cover performance greater than one year – typically cover performance periods greater
than one year
• Driven by individual and business performance – Variable payment amounts of long-
term incentives are often driven by individual performance as well as overall business
performance.
• Holding power over executives – afford “holding power” over executives since they reward
over a long term
■ Eligibility – Employee eligibility to participate in long-term incentive programs varies by
organization.
• Historically executives only – In the past, only executives participated in long-term
programs.
• Now common in middle management – It is increasingly common for these programs to
be pushed down further in the organization to include middle management as well as key
individual contributors. This becomes a competitive necessity as more organizations offer
them to these employees.
• Industry – Certain industries (e.g., high tech) may provide larger long-term incentives than
other industries and include greater percentages of employees.
• Company culture – Organizations that wish to build a sense of teamwork and ownership may
decide to include most or all employees in their programs.

Long-Term Incentives Types
• Stock
• Appreciation vehicles
• Full value vehicles
• How stock is valued in surveys
6.123
Long-Term Incentive Types

■ Stock – A plan that provides stock to employees, or the opportunity to receive cash on gains in
the stock price. A primary objective of stock is to align the motivations of the employee to those
of the owners (shareholders). Stock takes two basic forms:
• Appreciation vehicles – These provide the employee the opportunity to purchase shares
of stock at a fixed price (typically established on the date of grant). If the stock price
appreciates the employee can then sell the shares at the higher price. Typically a period of
time must elapse (vesting period) before the employee can purchase (exercise) the stock.
• Full-value vehicles – The employee is awarded stock at its full market value. Typically
the employee receives the stock in portions as they remain with the organization over
time (restricted stock). Less common is to award employees with stock immediately (no
restrictions). Performance criteria may also be applied.
• How stock is valued in surveys – Most surveys report stock awards as a monetary figure
based on various valuation methodologies that capture the intended value delivered to the
recipient.

Long-Term Incentives Types …continued
• Cash
• Combination
6.124
Long-Term Incentive Types (continued)

■ Cash – A plan that provides cash payouts to employees based on multi-year performance goals
• Similar to short-term incentive plans, long-term cash plans pay out based on the attainment
of one or more goals as set by the organization.
■ Combination – Some plans provide for a combination of stock and cash awards.

Total Direct Compensation
6.125
Total Direct Compensation

■ Total direct compensation is the sum of total cash compensation (base pay plus short-term
variable pay) plus the value of long-term incentives.
• Total cash compensation + long-term incentives = total direct compensation
■ Total direct compensation data becomes increasingly more important for higher-level positions,
and especially for executives.
• Short-term and long-term compensation may be the majority of the executive’s
compensation package.
– Base pay becomes a relatively small percentage of their compensation.

Can You?
■ Discuss short-term variable pay and how it is typically presented in surveys.
■ Describe total cash compensation and how it becomes more important at higher-level positions.
■ Discuss long-term incentives and the different types of long-term incentives.
■ Explain total direct compensation.

Module Quiz
1. What is the difference between awarded and target short-term incentives?

A. Awarded pertains to profit sharing plans while target pertains to performance sharing plans.
B. Target represents what was actually paid; awarded represents what would be paid if the plan
pays out at expected levels.
C. Awarded represents what was actually paid; target represents what would be paid if the plan
pays out at expected levels.
2. What is the definition of total cash compensation?

A. Compensation, benefits and work-life programs
B. Base pay plus short-term variable pay
C. Compensation and health care benefits
3. How is the value of stock awards typically shown in survey data?

A. As part of total cash compensation
B. As a monetary figure
C. As the number of shares granted
4. What is included in total direct compensation?

A. Long-term incentives
B. Direct benefits expenses
C. Event tickets

MODULE 7
Case Study:
Universal Plastics
and Rubber
Manufacturing
129
Universal Plastics and Rubber Manufacturing
A Case Study
Universal Plastics and Rubber Manufacturing (UPRM) is a Texas-based (United States) company with
multiple plants throughout the Southwest and parts of China. Founded in 1951, the company has
enjoyed consistent growth and success, has nearly 50,000 employees and has revenues of more than
$4.5 billion annually.
For more than 50 years, Universal Plastics and Rubber Manufacturing has provided parts for the
aerospace, agriculture, appliance, automotive, electronics, medical, and military industries. For many
years UPRM enjoyed its reputation as the best – and often only – major employer in the towns that
hosted its plants.
But as UPRM evolved from a young startup focused on establishing its place in the market to an
established company, so has the marketplace. Management convened in the early part of this year to
discuss a strategy for the future. Central to this strategy is the need to stem the loss of critical talent.
Over the past five years, UPRM has lost an increasing number of employees to its competitors. There
is also concern that the finest young talent is not being attracted to the manufacturer as readily as in
the past. UPRM’s management has evaluated its internal readiness for continued improvement, and
decided to update its base compensation program.
UPRM will begin a redesign of its internal equity-based system to move toward a market-based
approach. The project team has identified several key requirements for a successful program:
■ The new pay system and salary structure must allow a fast response to market changes
■ Managers must be more involved in pay decisions, which means they have to have ready access to
the necessary information
■ Human resources professionals have to act as consultants, providing better information and tools
to managers, so managers can make their own individual pay decisions.
The team plans to structure pay so UPRM can track the competitive labor market very closely.

Case Study Instructions
Objective: Develop a job worth hierarchy and pay structure using the market-based job evaluation
approach. Price benchmark jobs into the structure and assign non-benchmark jobs into
the structure using the slotting method.
The following resources are provided for your use in the case study:
■ Current year’s salary budget survey (annual salary increase projections)
■ Organization chart
■ Selected data from four salary surveys
• Local government survey
• Local HR group survey
• Geographic specific survey
• Industry specific survey
■ Six benchmark job descriptions
• Customer Service Representative (CSR)
• Production Manager
• Plant HR Manager
• Executive Assistant
• Accounts Payable (A/P) Accountant
• Director, Manufacturing Operations
■ Three non-benchmark job descriptions
■ Product Historian
■ Engineering Customer Liaison Manager
■ Patent Researcher
Assumptions:
■ For data aging purposes, assume today’s date is June 1
■ The average size of UPRM’s plants is approximately 1,200 employees

Case Study Instructions
Part I: Price the CSR Job and Create the Structure

1. Determine the market rate composite for the CSR job. Based on the Company CSR job
description, determine which survey matches are appropriate to include in your analysis.
Remember to age the survey data based on the effective date of each survey. Use the job
pricing worksheet to calculate the market rate composite based on the provided survey data.
2. Using the job worth hierarchy worksheet, record the CSR in the “Priced Jobs” column in Grade
1 as well as the market rate composite you determined in the “Midpoint” column.
3. Calculate the remaining midpoints in the structure by increasing the midpoint of each grade
by 15% (i.e. set grade 2 midpoint 15% higher than grade 1, set grade 3 midpoint 15% higher
than grade 2).
Part II: Price the Remaining Benchmark Jobs, Assign to the Structure and Slot Non-
Benchmark Jobs
1. Using the same process as in step 1 above, determine the market rate composite for the
remaining benchmark jobs. Use a separate job pricing worksheet for each job.
2. Based on the market rate composite for each job, assign them to a grade within the salary
structure by matching the market rate composite to the closest midpoint in the structure.
3. Review the remaining three non-benchmark jobs and slot them into the structure based on
their perceived value relative to the benchmark jobs in the structure.
Note: A job pricing worksheet and a job worth hierarchy worksheet are available in the Appendix.

SVP Operations
VP Engineering & VP Finance & VP Sales & VP Human

VP Manufacturing Ops
Customer Support Accounting Marketing Resources
Product Engineering Manufacturing Support Finance External Sales/ Plant

Marketing
Director of Product Engineering Director – Mfg Support Director of Finance Director of
Director of Sales/ Plant HR
Mgr, Rubber Engineering Purchasing Mgr Tax Analyst
Marketing HR Plant
Patent Researcher Warehouse Mgr Sales Analyst
Mgr of Sales Mgr
Mgr, Plastics Engineering Assembly Mgr Budget Analyst
Mgr of M
arketing
Patent Researcher Logistics Mgr Financial Analyst III
Webmaster
Vehicle Fleet Mgr Financial Analyst II
Product Historian
Customer Support Product Shipping Mgr Financial Analyst I
Director of Customer Support

Mgr, Customer Service Manufacturing Accounting
Supervisor, Customer Director of Manufacturing Director of Accounting
Service Ops Mgr, Accounts
Customer Service Plant General Managers Payable
Representatives
Production Mgrs A/P Accountants
Sr. Mgr Customer Engineering Plant HR Mgrs Mgr, Accounts
Customer Engineering Receivable
Plant Maintenance
Liaison Mgrs A/R Accountants
Customer Liaison Reps Mgr, Credit
Credit Analysts
Mgr, Payroll
Payroll Clerks
C17/GR17 • MODULE
7
13 3
Case Study
Current Salary Budget Survey, as of March of this year
Manufacturing – National
General Increase Merit Increase Other Increase Total Increase

Nonexempt Hourly Nonunion 2.5 3.1 0.9 3.3
Nonexempt Salaried 1.9 3.2 0.7 3.3
Exempt Salaried 1.8 3.2 0.8 3.4
Officer/Executive 1.9 3.3 1 3.5
Manufacturing – Western Region

Officer/Executive 1.4 3.2 0.7 3.4
Manufacturing – Plastics and Rubber Products – National

Nonexempt Salaried 1 2.9 - 3
Exempt Salaried 0.8 3 1.1 3.2
Manufacturing – Plastics and Rubber Products – Western Region

Nonexempt Salaried 2 3 - 3.3
Exempt Salaried 1.3 3 0.3 3.4
National

Western Region

Exempt Salaried 1.8 3.3 1 3.6

Local Government Survey
Effective Date: January 1 of this year
Participants: 50 organizations in the local area, the local government reports salary data on
these 50 organizations
Includes: 20 manufacturing firms
15 banks
10 retail establishments
5 branches of the local government
Frequency: This survey is published annually in March.
Data Reporting: All data is reported in annual amounts.
Based upon the size of organizations in the area, the data has been grouped as
less than 1,000 total employees or 1,000 or more total employees.
The survey reports the 25th, median, and 75th percentile salary data.
The survey reports average bonus for those receiving a bonus.

Job Title: Plant Human Resources Manager

Responsibility for administering and communicating various human resources programs. Conducts
new hire orientations, participates in local salary and benefits surveys, and spends a majority of
time in screening applications for potential employment opportunities, mainly for production staff.
Additionally is responsible for payroll administration, and the company’s unemployment and workers
compensation programs.
Number of Employees Base Salary Bonus
25th 75th Average

Median
Percentile Percentile Bonus
< 1,000 53,000 64,300 71,200 4,800
1,000 + 58,900 76,800 83,400 6,300
Compensation data reported in annual amounts

Job Title: A/P Accountant

Responsible for the overall payment of all company expenses to service providers. Primary
responsibility to process payments to all vendors. Works independently and requires minimal
supervision. Has responsibility for general ledger entries and the reconciliation of all
company expenditures. Assists in the annual budgeting process and preparation of related
management reports.
25th 75th Average

Median
< 1,000 24,700 31,700 33,300 1,100
1,000 + 29,600 36,800 42,300 2,000

Job Title: Customer Service Representative

Handles all customer inbound calls. Answers general inquiries. Directs caller to appropriate
department for more specific answers. Also conducts customer satisfaction outbound calls and
records and tracks customer survey information. Is assigned customer contacts based on sales levels.
25th 75th Average

Median
< 1,000 24,100 25,600 31,500 1,200
1,000 + 23,900 27,800 34,600 1,500

Job Title: Director of Manufacturing Operations

Responsibility for the entire manufacturing process of a specific product line in a manufacturing
environment. Responsible for assembly and quality control production teams. Responsible for
monitoring overall inventory levels and providing input to senior management on issues related to
the marketing, and sale of the product line. Works with production supervisors to ensure that all staff
follow standard work methods and comply with standard operating procedures.
25th 75th Average

Median
< 1,000 72,300 86,400 99,900 12,900
1,000 + 87,400 97,600 104,800 14,200

Job Title: Production Manager

Responsible for the overall quality, productivity and cost improvement for a specific production
process within a product line in a manufacturing environment. Ensure that production staff follows
standard work methods and practice efficient, effective, and safe work habits. Plan, and schedule
all production tasks, and oversee compliance with standard company operating procedures.
Recommend improvements to production methods, equipment, and processes to senior management.
25th 75th Average

Median
< 1,000 59,700 70,000 75,800 7,700
1,000 + 75,500 84,300 88,900 9,300

Job Title: Executive Assistant

Responsible for answering phone calls, making travel arrangements for executives, processing
all correspondences, and providing support to all meetings involving the executive. This position
requires independent decision-making and operates under minimal supervision.
25th 75th Average

Median
< 1,000 29,900 36,800 40,200 2,200
1,000 + 34,700 39,900 43,300 3,200

Local Human Resources Group Survey
Effective Date: August 1 of last year
Participants: 23 organizations in the local area, survey originated by the need for banking
salary data, but has expanded to other industries
Includes: 9 banks
8 manufacturing firms
6 retail establishments
Frequency: This survey is published annually in the month of September.
Cash compensation is defined to include any bonus or incentive.

Job Title: Human Resources Manager

Responsibility for administering and communicating various human resources programs for a major
division of the organization. Works with HR leadership, and line managers in communicating and
implementing various HR policies and programs, in alignment with corporate and business unit
objectives. Conducts new hire orientations, participates in local salary and benefits surveys, and
spends a majority of time in screening applications for potential employment opportunities. Is
responsible for all government contracts reporting and working with all federal and state agencies in
reporting, disclosure, and other compliance issues. Has responsibility for responding to all disability,
workers compensation, and unemployment claims, and for answering EEOC and other charges filed
by employees and/or regulatory agencies.
Total Salary Compensation
Company Number Number of 25th 75th

Incumbents Percentile Median Average
Analysis of Firms Percentile
Company 23 30 71.2 82.0 82.3 86.3

Weighted Salary
Incumbent 23 30 71.0 81.9 81.8 86.7
Weighted Salary
Cash 23 30 75.8 87.2 87.5 93.1
Compensation
Supervised 19 23 1 2 2 3
Employee Count


Responsible for the payment of company expenses applicable to a business operating unit. Processes
payments and reconciles expenses consistent with department policies. Processes employee
business expense reimbursements for business unit employees. Has responsibility to work with local
financial institutions on credit lending and cash flow issues. Works as part of a company wide task
team to continually improve automation in enhancing accounting processes.

Analysis of Firms Incumbents Percentile Median Average Percentile
Company 23 45 26.6 32.4 32.3 36.7

Weighted Salary
Incumbent 23 45 27.1 32.7 32.5 37.0
Weighted Salary
Cash 23 45 28.0 34.1 33.9 41.0
Compensation
Employee Count


This position handles all customer inbound calls for a particular geographic region. Answers general
inquiries, and records certain key customer information into a database. Processes orders for
merchandise received by mail, telephone, and fax, E-mail or personally from customer or company
employee by performing the following duties. Directs caller to appropriate department for more
specific answers. Generally serves as the first point of contact for company phone calls.

Company 23 110 24.0 26.3 26.0 30.9

Weighted Salary
Incumbent 23 110 24.2 26.9 26.8 32.1
Weighted Salary
Cash 23 110 24.8 27.8 27.5 34.0
Compensation
Employee Count

Job Title: Executive Administrative Assistant

Reports to various executive-level staff supporting him/her through answering and responding to
phone, e-mail, and mail inquiries. Coordinates travel plans, meetings, and calendars. Responsible for
maintaining accurate and well-organized files and documents

Company 23 77 33.3 38.7 39.0 44.6

Weighted Salary
Incumbent 23 77 32.9 38.5 38.9 43.9
Weighted Salary
Cash 23 77 33.7 40.0 39.8 46.8
Compensation
Employee Count

Geographic Specific Survey
Effective Date: March 1 of this year
Participants: 101 organizations in the southwestern United States participate (Arizona,

Colorado, Texas, Nevada, New Mexico, Utah)
Frequency: This survey is published every year in June.
Levels: HR Plant Manager
A – average plant headcount: <100
B – average plant headcount: 100 - 499
C – average plant headcount: 500 - 999
D - average plant headcount: 1000+
Customer Service Representative
A – Entry, 0-2 years experience
B – Experienced, 2-4 years experience
C – Senior, >4 years experience
Production Manager
D – average plant headcount: 1000+
A/P Accountant
A – Entry, 0-2 years experience
B – Experienced, 2-4 years experience
C – Senior, >4 years experience

Levels: Director of Operations
D - average plant headcount: 1000+
Executive Assistant
A – Supports VP level
B – Supports SVP/EVP level
C – Supports President/CEO level
Scope: Southwest United States

Responsible specifically for labor relations in a specific production business unit. May have responsibility for overseeing the administration
of one or more collective bargaining units, including the administration and communication of compensation and benefits programs,
recruitment and selection, and employment and employee relations issues. Addresses compliance and regulatory issues, including the
response to EEO, OFCCP, DOL, and other claims and audits.

Salary Short-Term Incentive TCC

# of # of Wtd 25th 75th % ee % ee Wtd 25th 75th Wtd 25th 75th
Median Median Median
cos inc Avg pct pct elig recvd Avg pct pct Avg pct pct
Manufacturing - Southwest
Level A 35 45 66.9 55.5 67.3 77.4 67% 58% 4.2 3.2 4.2 8.3 69.4 57.6 70.0 84.9
Level B 20 32 75.0 62.7 74.3 84.2 75% 70% 6.2 5.1 6.5 8.0 78.0 66.8 78.2 89.5
Level C 10 10 75.6 63.4 75.5 86.4 80% 70% 7.0 5.7 7.0 9.3 81.0 68.2 80.9 92.3
Level D 13 27 75.4 68.9 75.7 90.8 92% 87% 6.9 5.8 7.1 10.2 79.9 71.4 81.0 98.4
All Levels 114 72.0 61.4 72.0 83.3 76% 69% 5.6 4.6 5.8 8.8 75.3 64.4 75.9 90.0
All salary/incentive data reported in thousands
C17/GR17 • MODULE
7
151
152
Responsible for the payment of all company expenses to service providers for the organization and works independently with minimal
C17/GR17 • MODULE
supervision. Has responsibility for general ledger accrual and cash bookkeeping entries, including monthly, quarterly, and annual financial
reconciliation. Responsible for preparing all applicable accounting reports.
7

Level A 85 100 32.3 24.1 32.6 38.5 42% 33% 2.5 0.8 2.6 3.2 34.1 24.5 34.3 40.3
Level B 95 113 34.7 31.1 35.0 39.3 48% 36% 2.0 0.9 1.9 2.5 36.9 31.7 36.2 41.0
Level C 96 102 38.0 33.4 37.7 42.0 51% 42% 3.1 1.9 2.7 3.8 39.7 34.8 39.6 44.9
All Levels 315 35.0 29.6 35.1 39.9 47% 37% 2.5 1.2 2.4 3.1 36.9 30.4 36.7 42.0

This position handles customer inbound and outbound calls. Knowledgeable about company products and services, and sells when
appropriate. Must partner with the Sales team to provide customers with service as outlined in the department’s policies and procedures.
Must address customer issues and ensure effective and long-term problem resolution. Directs caller to appropriate department for more
specific answers, but generally attempts to handle all inquiries at that level. Also conducts customer satisfaction calls and records and

tracks customer survey information. Generally serves as the first point of contact for company phone calls. Works as part of a small team of
representatives.

Level A 83 438 28.4 24.9 28.5 31.2 50% 42% 1.0 0.5 1.2 1.8 28.8 25.0 29.2 32.5
Level B 85 310 29.8 24.9 29.8 33.4 54% 50% 2.0 0.8 1.7 3.0 30.4 25.5 30.8 35.7
Level C 85 207 30.3 26.8 30.6 38.0 64% 56% 2.7 1.0 2.5 4.3 32.8 27.2 32.7 40.9
All Levels 955 29.3 25.3 29.4 33.4 54% 48% 1.7 0.7 1.6 2.7 30.2 25.6 30.5 35.4
C17/GR17 • MODULE
7
15 3
15 4
Job Title: Director of Operations
Has overall accountability for the manufacturing process for a product line at a single manufacturing plant location. Has overall management
C17/GR17 • MODULE
responsibility for several cross-functional work teams, including various project managers and team leaders. Responsible for the overall
quality, productivity and cost improvement of the product line.
7

Level A 33 42 91.2 83.0 92.0 97.4 78% 70% 11.7 5.7 12.0 18.3 99.4 85.5 99.9 108.6
Level B 22 28 94.9 85.6 96.5 102.4 81% 71% 14.5 5.9 14.3 18.4 102.5 88.2 104.5 115.9
Level C 18 23 99.0 88.7 99.3 109.8 85% 77% 15.4 7.6 15.8 23.6 106.7 93.7 108.9 126.4
Level D 15 20 105.5 88.9 104.8 113.5 88% 78% 17.3 8.0 17.1 25.0 117.0 94.3 116.3 113.4
All Levels 113 96.2 85.8 96.9 104.0 82% 73% 14.1 6.5 14.2 20.6 104.8 89.4 105.8 118.4

Responsible for the overall quality, productivity and cost improvement for a specific production process within a manufacturing environment.
Ensures that production staff follows standard work methods and practice efficient, effective, and safe work habits. Assists in improving a
system of production control, standard operating procedure, safety, and quality control. Has overall responsibility for maintaining proper
inventory levels.


Level A 42 50 72.0 64.5 72.2 79.9 68% 60% 9.9 6.3 10.1 15.6 78.5 69.8 78.8 90.0
Level B 16 22 72.3 62.3 71.8 81.4 69% 60% 10.6 6.0 11.0 14.9 79.2 67.4 80.0 92.5
Level C 31 42 84.3 70.0 83.8 85.0 78% 71% 11.9 7.4 12.1 18.0 91.1 75.7 90.3 99.6
Level D 30 47 86.7 77.8 87.0 94.2 85% 80% 15.2 8.5 15.8 22.3 98.7 83.4 99.4 109.8
All Levels 161 79.5 69.5 79.5 85.6 76% 69% 12.1 7.2 12.4 18.1 87.8 75.0 88.0 98.6
C17/GR17 • MODULE
7
15 5
156
Reports to various executives and is responsible responding to all department and external correspondences. Coordinates travel plans and
C17/GR17 • MODULE
supports internal and external meetings. Processes all correspondences, expense reports, and provides all other administrative support to
7
the executive as well as other department members as required. This position works under minimal supervision and requires independent
decision-making.

Level A 94 342 40.9 34.6 41.1 44.7 49% 41% 2.7 1.5 2.9 4.1 42.8 35.4 42.9 47.3
Level B 90 267 45.1 36.5 44.7 48.6 53% 42% 3.0 1.6 3.1 5.0 45.8 37.2 45.8 51.9
Level C 85 88 53.4 43.9 54.7 60.2 74% 71% 6.9 3.3 6.7 8.3 57.0 46.3 57.3 65.2
All Levels 697 44.1 36.5 44.2 48.2 54% 45% 3.3 1.8 3.5 5.0 45.7 37.5 45.8 51.3

Industry Specific Survey
Effective Date: March 1 of this year
Participants: 157 organizations in the United States participate
Frequency: This survey is published annually in June.
Levels: For All Job Matches:
A – <1,000 employees
B – 1,000 – 4,999 employees
C – 5,000 – 14,999 employees
D – 15,000 + employees
Scope: Plastics and Rubber Industry

15 8
Responsible for the overall human resources issues impacting a specific business production unit. Has responsibility for overseeing the
C17/GR17 • MODULE
administration, and management of several functional areas, including employee relations, labor relations, selection and employment,
performance management, and training and development. Works with line managers to communicate and implement various HR policies and
7
programs, in alignment with corporate, divisional, and business unit objectives.

Level A 46 50 65.0 60.5 64.5 68.3 69% 65% 4.8 3.0 4.4 7.0 66.6 62.1 66.9 74.4
Level B 20 22 70.9 62.7 71.0 78.0 72% 66% 5.6 4.3 5.4 7.2 74.1 66.7 74.3 83.4
Level C 33 42 72.8 61.1 72.8 80.3 78% 70% 6.3 4.0 6.0 8.7 76.0 64.7 76.6 86.1
Level D 35 48 74.8 65.8 74.6 85.7 83% 79% 7.0 5.6 7.1 9.1 80.0 70.5 79.8 93.6
All Levels 162 70.7 62.5 70.5 77.9 76% 71% 5.9 4.2 5.8 8.1 74.0 65.9 74.2 84.3

Responsible for the overall payment of all company expenses to service providers for the organization. Primary responsibility is to process
payments to all vendors, but, also, oversees the accounting of all fixed assets. Works with Accounting Director and other team members
to consolidate all financial reports, and assists in the annual budgeting process and preparation of all management reports and financial
statements.


Level A 47 49 31.0 25.6 31.1 36.6 39% 32% 0.9 0.5 1.0 1.5 31.5 25.7 31.7 37.6
Level B 18 21 32.4 27.5 32.5 37.0 44% 39% 1.7 0.6 1.8 2.3 33.4 27.7 33.4 38.2
Level C 33 38 36.0 29.5 35.5 38.7 47% 39% 2.0 0.5 2.0 2.6 36.2 29.9 36.4 40.0
Level D 37 46 36.7 37.1 37.1 42.0 49% 43% 1.9 1.0 2.1 3.0 37.6 31.6 38.1 44.2
All Levels 154 34.1 28.5 34.2 38.8 45% 38% 1.6 0.7 1.7 2.4 34.7 28.8 35.0 40.2
C17/GR17 • MODULE
7
159
16 0
This position handles all customer inbound and outbound calls for an assigned geographic region. Answers general inquiries, as well as
C17/GR17 • MODULE
specific product and service questions, and records certain key customer information into a database. Generally serves as the first point of
contact for company phone calls. Is responsible for making sales calls to new, existing and potential customers. Responsible for building
7
customer relationships beyond a sales environment, understanding and recommending company products and services, based on the
particular needs of the company.

Level A 47 60 25.4 24.1 25.5 29.0 49% 41% 1.5 0.4 1.5 2.0 26.4 24.3 26.2 30.4
Level B 26 56 26.8 24.9 26.8 29.7 54% 50% 1.3 0.5 1.2 1.7 27.4 25.2 27.8 30.6
Level C 36 85 28.7 25.6 28.7 31.2 54% 48% 1.4 0.4 1.4 2.0 29.6 25.8 29.8 32.2
Level D 38 117 29.0 26.6 28.8 33.0 58% 51% 1.5 0.4 1.6 2.4 29.8 26.7 30.0 34.9
All Levels 318 27.9 25.6 27.8 31.2 55% 48% 1.4 0.4 1.5 2.1 28.7 25.7 28.8 32.6

Job Title: Director of Operations
Has overall accountability for the entire manufacturing process for all company product lines. Responsible for overall quality, productivity
and cost improvement. Has accountability for product quality control and safety procedures in place. Has a pivotal role in the strategic
direction of the manufacturing process, including feasibility studies on product enhancements. Recommends improvements to production
methods, equipment, and processes to senior management.


Level A 33 33 107.1 97.4 106.0 123.4 92% 87% 17.7 9.3 18.0 21.0 121.3 104.0 122.6 137.0
Level B 22 22 116.9 102.7 118.4 127.4 91% 87% 22.9 16.7 22.5 28.5 137.2 114.8 137.3 153.6
Level C 18 18 121.6 109.5 121.5 139.5 92% 85% 26.8 19.4 26.7 36.8 140.9 122.7 142.8 170.4
Level D 15 15 129.9 118.5 130.0 153.5 98% 91% 28.7 23.6 29.9 35.6 155.3 133.8 154.6 183.2
All Levels 88 116.4 104.8 116.4 132.8 93% 87% 22.7 15.7 22.9 28.6 135.1 115.6 135.9 155.9
C17/GR17 • MODULE
7
161
162
Responsible for the production process for a specific product line within a manufacturing plant environment. Ensures that production staff
C17/GR17 • MODULE
follows standard work methods and practice efficient, effective, and safe work habits. Plan, and schedule all production tasks, and oversee
compliance with standard company operating procedures.
7

Level A 42 57 66.9 59.9 67.3 77.4 67% 58% 4.6 3.2 4.2 8.3 69.3 62.3 69.8 83.2
Level B 15 47 75.0 62.7 74.3 84.2 75% 70% 70 4.7 6.5 10.3 77.9 66.8 78.5 92.5
Level C 29 39 79.3 63.4 78.4 86.4 80% 70% 10.2 7.2 10.5 13.7 83.9 68.9 84.8 97.0
Level D 30 52 83.9 68.9 84.4 94.8 92% 87% 15.1 9.0 14.8 16.7 96.3 74.4 96.7 107.9
All Levels 195 75.9 63.7 75.8 85.5 78% 71% 9.1 5.9 8.8 12.1 81.5 67.9 82.1 94.8

Reports to company executives at the Corporate offices, supporting all individuals through answering and responding to phone, e-mail, and
mail inquiries. Spends significant time preparing reports of confidential matters for the senior leadership team. May travel to support Board
and other team meetings.


Level A 49 58 40.0 33.4 40.2 45.0 42% 38% 1.6 0.9 1.7 2.6 41.2 33.8 41.4 46.3
Level B 23 40 41.2 32.6 40.9 44.2 45% 39% 1.3 1.0 1.5 2.4 41.0 33.0 41.2 45.4
Level C 37 56 42.3 33.7 42.1 45.8 44% 36% 1.6 1.1 1.8 2.8 43.0 34.4 43.1 47.2
Level D 40 62 42.2 33.2 42.2 47.2 49% 44% 1.9 1.3 2.0 3.1 43.2 33.9 43.4 49.2
All Levels 216 41.5 33.3 41.4 45.7 45% 39% 1.6 1.1 1.8 2.8 42.2 33.8 42.4 47.2
C17/GR17 • MODULE
7
16 3
Job Descriptions
Title: Customer Service Representative
Department: Customer Support
Reports to: Supervisor, Customer Service
General Summary
Provide timely response to customer phone and e-mail inquiries concerning both the products and
the delivery of those products to the customers.

■ Answer telephones and e-mail to:
• Take product orders
• Ensure product delivery
• Assist customers with inquiries concerning the company, company products and shipment of
company products
• Resolve billing issues
■ Responsible for input in to customer data system pertaining to:
• Customer orders
• Call tracking
• Verifying shipment dates
■ Investigate problems related to the shipment of products, credits and new orders
■ Maintain customer records in customer data system
Job Specifications
■ Data entry
■ Attention to detail
■ Accurate record keeping and filing skills
■ Ability to communicate both in writing and verbally at an above-average level
■ Ability to read and interpret customer service scripts
■ Effective listening skills
■ High school diploma
■ Three to six months related experience
■ Ability to add, subtract, multiply and divide using whole numbers and decimals

Job Descriptions
Title: Production Manager

General Summary
Reporting to the plant general manager, the production manager oversees a major portion (raw
material preparation, manufacturing, or assembly and quality test) of the production process within
a plant. The incumbent ensures that process flows are maintained to meet customer orders and that
human and capital resources are efficiently utilized.

■ Produces daily production schedules
■ Oversees the scheduling of personnel to ensure adequate coverage to meet production demand
■ Works with Plant Maintenance personnel to repair or replace equipment as needed
■ Directs the daily production briefing
■ Implements safety procedures
■ Continually reviews and improves process improvements
■ Works closely with plant general manager and other production managers on productivity
improvement and implementation
■ Responsible for budgeting and human capital within area of responsibility
■ Resolves issues between employees with assistance from the plant HR manager
Job Specifications
■ Deep working knowledge of production equipment operation and manufacturing processes
■ Organizational skills to understand production quotas and schedule work processes and
personnel to meet quotas
■ Ability to communicate both in writing and verbally to various organizational levels
■ Analytical ability to assess performance results and recommend improvements
■ Ability to quickly assess and recommend solutions on production issues to minimize down time
■ 7+ years of experience in a plant production environment
■ 3 to 6 years related plant supervisory experience
■ Six-Sigma training

Job Descriptions
Title: Plant Human Resources Manager

Department: Human Resources
General Summary
Administer and/or manage human resource programs within a manufacturing plant covering
several of the following areas: employee relations, recruiting, salary administration, training and
development, safety, health benefits and employee services.

■ Actively recruit, screen and hire plant employees for job openings.
■ Administer benefit activities including: annual open enrollment, change to coverage, etc.
■ Manage plant safety and workers comp prevention programs.
■ Provide guidance to plant managers in all employee relations matters.
■ Manage plant communication to promote employee understanding of programs, policies, and
objectives.
■ Ensure legal compliance with various governmental laws and regulations.
■ Train employees in corporate directed programs.
■ Partner with plant management for performance evaluations; recommends salary adjustments;
rewards employees or takes disciplinary action, as necessary.
Job Specifications
■ Ability to read, analyze, and interpret common financial reports, and legal documents
■ Ability to respond to common inquiries or complaints from employees, customers, regulatory
agencies, or members of the business community
■ Ability to effectively present information to top management and public groups
■ Computer skill requirements include:
• Intermediate MS Word, Outlook and MS Excel
■ Ability to define problems, collect data, establish facts and draw valid conclusions
■ Bachelor’s degree in human resources or related field from four-year college or university
■ 5 to 8 years of experience

Job Descriptions
Title: Executive Assistant

Department: Manufacturing Operations
Reports to: Vice President of Manufacturing Operations
General Summary
This position provides administrative and clerical support to the Director of Manufacturing
Operations and administers day-to-day activities under minimal supervision,

■ Schedule and organize various activities such as meetings, travel and department events for all
members of the operations management team.
■ Create and develop visual presentations for the director.
■ Organize and prioritize large volumes of information and calls.
■ Sort and distribute mail to the operations management team; open and prioritize mail for
the director.
■ Answer phones for the director; take messages or answer routine and nonroutine questions.
■ Assist the director in the management of his/her schedule.
■ Handle confidential and sensitive information.
■ Work independently and in a team environment on various projects. May act as project manager
on behalf of the director, which would include planning and coordinating presentations,
disseminating information and organizing department-wide events.
■ Design and type general correspondence, memos, charts, tables, graphs, business plans, etc.
Job Specifications
■ High level of interpersonal skills to handle sensitive and confidential situations. Position
continually requires poise, tact and diplomacy.
■ Ability to interact and communicate with individuals at all levels within the organization.
■ Knowledge of a variety of computer software applications, including MS Word, Excel, Access and
PowerPoint.
■ Attention to detail in composing, typing and proofing materials, establishing priorities and
meeting deadlines.
■ Ability to work in a fast-paced environment requiring management of competing tasks
and demands.
■ High school diploma or equivalent and four years of administrative or clerical experience.

Job Descriptions
Title: A/P Accountant

Department: Finance
Reports to: Manager of Accounts Payable
General Summary
Responsible for payment of all goods and services necessary for the basic operation of the company.

■ Enter invoices into computer.
■ Process mail daily.
■ Process check requests, garnishments and tax payments insuring all appropriate approvals have
been received.
■ Communicate with employees, management, vendors and others in a courteous and
professional manner.
Job Specifications
■ General knowledge of accounting and understanding of the general ledger accounts and how
they relate to invoices.
■ Attention to detail.
■ Accurate data-entry skills.
■ High school diploma or equivalent.
■ Two years of accounting experience, or two years of clerical experience in a financial
environment.

Job Descriptions
Title: Director of Manufacturing Operations

Reports to: Vice President of Manufacturing Operations
General Summary
Oversee management of all direct (non-support) manufacturing activities for all product lines at all
plants. The incumbent works to implement and monitor consistent manufacturing processes and
standards to maximize productivity and efficiently manage personnel, equipment and materials.
Ensures that approved products are manufactured on schedule, and within quality standards and cost
objectives.

■ Assist the operations leadership team and other executives in the development and formulation
of long- and short-range planning, policies, programs and objectives.
■ Develop the manufacturing plans and procedures to ensure that products conform to established
customer and company quality standards.
■ Achieve optimum employee production levels with the least amount of overhead and raw
material costs to meet annual budgetary plan.
■ Present manufacturing policies and programs to guide the organization in maintaining and
improving its competitive position and profitability of operation.
■ Direct and monitor plant general managers in the accomplishment of manufacturing plan goals
consistent with established manufacturing and safety procedures. Act as liaison between
department management and subordinate levels, as well as executive and department-manager
levels to inform personnel of communications, decisions, policies and all matters that affect their
performance, attitudes and results.
■ Identify, recommend and implement changes to improve productivity and reduce cost and scrap.
■ Direct and coordinate various programs essential to manufacturing procedures (e.g., training,
safety, housekeeping, cost reduction, worker involvement, security).
■ Initiate and coordinate major projects (e.g., plant layout changes, installation of capital
equipment, major repairs).
■ B.A./B.S. in industrial, mechanical or business administration, or a four-year technical degree in
a related discipline.
■ Ten or more years of experience in manufacturing management, preferably in a process-oriented
operation and/or related industry. A minimum of five years of experience managing a significant
segment of a large manufacturer or the entire operation of a smaller manufacturer.
■ Experience working with manufacturing-based technology, processes and principles is preferred.

Job Descriptions
Title: Product Historian

Department: External Sales and Marketing
Reports to: Director of External Sales and Marketing
General Summary
Responsible for maintaining a historical perspective on company products. Will maintain the
organizational archives and update the product library as new products are developed. This position
will advise management as needed on historical information (production, sales, life span, costing
figures, etc.).

■ Research historical company data to build reports for management
■ Maintain hardcopy and electronic archive data
■ Review organizational releases to ensure historical accuracy
■ Assist sales force with historical product and sales information
■ Communicate to all levels of the organization
Job Specifications
■ Knowledge of library science
■ Accurate record-keeping and filing skills
■ Knowledge of editing processes
■ Ability to read and analyze complex technical specs and organize them for archiving
■ Technical knowledge of manufacturing processes and procedures
■ Masters degree in library science
■ 5 to 8 years of experience in a library setting
■ 2 to 3 years of editing/proofing experience
■ Proficient in Office applications (e.g., Outlook, Word, Excel, etc.)
■ Exposure to the sales environment

Job Descriptions
Title: Customer Engineering Liaison Manager

Department: Customer Support
Reports to: Sr. Manager of Customer Engineering
General Summary
Responsible for providing technical expertise with customers through face-to-face, telephonic and
electronic communication. Able to discuss, evaluate and assist customer inquiries concerning the
engineering of products. Responsible for taking all elevated customer service calls relating to the
engineering of products.

■ Support sales calls in answering customer technical questions
■ Respond to external customer contacts concerning engineering of products
■ Evaluate and analyze call data reports
■ Report on stage 1, stage 2 and stage 3 customer contacts
■ Manage a staff of two engineer customer service reps
Job Specifications
■ In depth technical knowledge of products
■ Understand and read process maps
■ Excellent verbal and written communication skills
■ Strong research ability
■ Able to speak “engineer technical” and able to interpret that same information into layman’s
terminology
■ Masters degree in engineering
■ 10 to 15 years of experience in a plastics/rubber engineering processes
■ 5 to 6 years of customer-facing experience (face-to-face, telephonic and electronic)

Job Descriptions
Title: Patent Researcher

Department: Product Engineering
Reports to: Engineering Manager
General Summary
Responsible for researching and evaluating patent requests, reporting to federal government and
maintaining the internal library of patents. Works closely with the product historian to ensure patent
validity and eliminate repetition.

■ Research patent information for new product development
■ Maintain hardcopy and electronic archive data
■ Communicate to all levels of the organization
■ Research current patent information to ensure no one/organization is infringing on
company patents
Job Specifications
■ Knowledge of research skills
■ Accurate record-keeping and filing skills
■ Ability to read and analyze complex technical specs and organize them for patenting
■ Associates degree in research
■ 1 to 3 years of experience in a research environment
■ 2 years of experience in patent research
■ Proficient in MS Office Suite
■ Proficient in using any means necessary to research and determine
• New patents
• Patent infringement
• Similar patents
• International patents

MODULE 8
Communication
173
Introduction
For employees, pay delivers a very strong message. Compensation can be both a motivator and
source of dissatisfaction, so it is important to effectively communicate to help employees and
management understand the reasoning behind compensation and market pricing.
In this module, we will discuss the important role that communication plays in an effective
compensation program. The purposes of communication from both the employee and employer
perspective will be explored as well as what role management plays in the communication process.
The advantages and disadvantages of communication around market pricing and pay practices will be
discussed.
Objectives
1. Discuss management’s role in communicating compensation.
2. Describe the advantages and disadvantages of communicating market pricing methodologies

to the organization. Steps for initial communications roll out.
3. Discuss how to communicate to employees the reasoning behind using one salary survey
instead of another.

The Purpose of Communication –
Employee Perspective
• Provide education and tools
• Provide timely information
• Clarify expectations
• Increase awareness
• Improve the emotional environment
• Reinforce decision to join and remain with the company
8.175
The Purpose of Communication – Employee Perspective

From an employee’s perspective, communication should:
■ Provide education and tools – enable participants to understand the program and make
informed decisions
■ Provide timely information – provide the information employees need, when they need it. Clearly
identify specific actions the employee must take and when they must take action.
■ Clarify expectations about compensation programs
■ Increase awareness and appreciation for compensation programs
■ Improve the emotional environment
• Increase job satisfaction/morale
• Promote employees’ feeling of value
• Decrease stress/anxiety in a changing environment
• Improve employee focus
■ Reinforce decision to join and remain with the company
Employees expect that compensation communication

is honest, thorough, understandable and relevant.

The Purpose of Communication –
Employer Perspective
• Reinforce corporate philosophy, culture, values
• Help achieve compensation program goals
• Streamline administration
• Comply with legal requirements
• Increase ability to understand and respond
• Change employee attitudes and behavior
• Build employee trust
• Improve productivity
8.176
The Purpose of Communication – Employer Perspective

From an employer’s perspective, communication should:
■ Reinforce corporate philosophy, culture and values
■ Help achieve compensation program goals
■ Streamline administration – helping to reduce the time HR administrators spend answering
employee questions
■ Comply with legal requirements
■ Increase employer’s ability to understand and respond to employees’ needs/expectations
■ Change employee attitudes and behavior
• Move away from entitlement mentality
• Increase appreciation
• Increase sense of fairness and efficiency
■ Build employee trust
■ Improve productivity

Communicating Compensation
• Managers and supervisors have the primary

responsibility for communications with employees
• Buy-in and support of the programs and communication
8.177
Management’s Role in Communicating Compensation

■ Managers and supervisors have the primary responsibility for communications with employees
(or the person to whom the employee directly reports). Therefore, managers play a significant
role in how and what communications are delivered and received. Organizations that link
manager rewards to effective communications reinforce the message that communications are
valued. Furthermore, the link holds managers and supervisors accountable for the role they play
in communications.
■ Buy-in and support of the programs and communication – Managers are typically the voice of the
programs. If they don’t support the programs and the communication campaign, employees may
receive different messages than intended. Employee dissatisfaction may potentially be a result.

Communicating Compensation …continued
• Keep upper management informed
• Selecting the messenger
• HR Manager
General communications
• Executive
• Supervisor
Individual communications
• Manager
• Preparing the messenger
8.178
Management’s Role in Communicating Compensation (continued)

■ Keep upper management informed – In order for upper management to be able to support
and deliver compensation program communications and messaging, they will need to have an
adequate understanding of the compensation philosophy and strategy. Providing this foundation
to leaders will allow them to more effectively deliver appropriate communications to employees
within their chain of command.
■ Selecting the messenger – The type of compensation communication will affect who is best
suited to deliver the message. General communications for groups of employees or for all
employees may be communicated by executives or from Human Resources. Communications at
the individual employee level should be delivered by an immediate supervisor or manager.
■ Preparing the messenger – The messenger will be responsible for both delivery of the message
and the handling of questions after the message is delivered. To the extent that the messenger
has been properly briefed in advance on not only the “what” but the “how” and “why” behind the
compensation communication, both the messenger and the recipient are much more likely to
have a positive experience.

Communicating Compensation …continued
• What information should be communicated?

• Accurate information
• Specific messages
• Utilize “business owners”
8.179
Management’s Role in Communicating Compensation (continued)

■ What information should be communicated?
• Accurate information – Compensation affects every employee in a very personal way. It has
a major influence on how the employees feel about the organization, including their level
of commitment and engagement. It also directly impacts their standard of living and ability
to meet personal financial obligations. For these reasons, it is important that pay-related
communications are timely and as accurate as possible. If an answer is not known, the
messenger should be honest and tell the employee(s) that he or she doesn’t know the answer
but will find out and follow up later. Once employees have been told information that later
turns out to be inaccurate, it is very difficult for the messenger to be credible in the future.
• Specific messages – Pay-related messages should be as clear and concise as possible:
– What is the reason for the pay action?
– When will the pay action become effective?
– Is the pay action a one-time adjustment?
– Will the pay action be in a lump-sum or a periodic action?
• Utilize “business owners”
– When developing and rolling out new programs or changing existing programs, using
employees from the operating departments or lines of business affected by the changes
will improve acceptance.
❙ Rollout should be presented by the business owner with support from compensation.
❙ Process could add both credibility and recognition among participants that all
business issues were considered and discussed.

Organization-wide Communication
Is it appropriate for organizations to

inform their employees of all
pay decisions?
• Utilize compensation philosophy
• Pay practices
• Organizational culture
8.180
Organization-wide Communication
Some organizations elect not to widely communicate the compensation philosophy and strategy
to employees while others have a more open approach. Practices vary greatly from organization to
organization and from industry to industry.
■ Is it appropriate for organizations to inform their employees of all pay decisions?
• Utilize compensation philosophy – A written compensation philosophy can be an effective
way to communicate broad pay-related information to employees at a general level without
getting overly detailed.
• Pay practices – Some organizations feel it is important to openly communicate pay practices
including:
– Where the organization positions its pay relative to the market
– What surveys are used in market pricing
– Grades
– Minimum, midpoints and maximums
• Organizational culture – Many organizations use a culture of open communications (not only
related to pay) as a method to attract and retain employees. Compensation communications
should be consistent with the organization’s culture.

Organization-wide Communication …continued
Why would an organization

communicate the method it uses to
determine employee compensation?
• Fair and defensible
• Increased scrutiny
• Policy
8.181
Organization-wide Communication (continued)

■ Why would an organization communicate the method it uses to determine employee
compensation?
• Fair and defensible – One of the most challenging tasks for an organization is to
communicate to its employees that the compensation program is fair and defensible.
• Increased scrutiny – Most employees have access to online data, trade publications and
friends at other organizations – therefore pay decisions are more carefully scrutinized.
• Policy – With a policy of open communication:
– The methodology and survey sources can be relayed and understood by the employee
population.
– Fear of the compensation program being unfair can be minimized.
– Employees can understand why their jobs are priced the way they are, and what they need
to do to advance in their careers.

Organization-wide Communication …continued
Why wouldn’t an organization

communicate the method it uses to
determine employee compensation?
• Pay philosophy
• Survey sources
• More questions might arise
8.182
Organization-wide Communication (continued)

■ Why wouldn’t an organization communicate the method it uses to determine employee
compensation?
The major disadvantages to open communication are:
• Pay philosophy
– If the organization targets the 25th percentile, it might not want to specifically
communicate this information.
– Requires buy-in from upper management
• Survey sources – Employees might question why one survey source was used over another.
• More questions might arise – If the communication is not clear and concise, more questions
concerning the compensation program could arise.

Communication and Survey Sources
8.183
Communication and Survey Sources

With the information/knowledge workers of today, employees have a multitude of survey sources at
their fingertips. Compensation professionals might find themselves defending the survey sources
used and why one survey might be better than another.
■ Web-based and alternative sources
• Ask questions – Availability of pay data on the internet is increasing. Be wary of motives.
You especially need to recognize and ask the following questions:
– What is the site’s targeted audience?
– What is the source of the data? Is it self-reported or from employer-based surveys?
– Who is the customer – employer or employees?
– What is the purpose of the data site? Is it to build their database? Virtual storefronts and
applicant referrals are at times set up for this purpose.
– Who maintains the site?
■ Resellers – Resellers are in the business of selling convenience of access to a number of
alternative sources. Sources included are newspapers, job postings, other websites and
public sources.
■ Secondary parties – Be cognizant of the potential resale of survey data by secondary parties.
Survey users and providers not in possession of proper authorization could be held liable for
infringement of copyright law.

Communication and Survey Sources …continued
8.184
Communication and Survey Sources (continued)

■ Characteristics of a good survey
• Sample size
– The survey selected must have large enough sample sizes for the jobs being assessed to
ensure the information is valid.
• No secrets
– All valid and useful surveys readily identify the key elements of the survey, including
effective date of the data, term definitions, clarity of statistics and position descriptions.
– All of these elements and a consistent reporting design are always inherent in
reputable surveys.
– Aggregate (i.e. summarized) data should be reported.
– Data collection, screening and verification techniques should be identified to ensure the
survey was properly conducted and reported.
• Sources identified – Survey participants and sample sources should always be identified.
– Source information is an important part in the assessment and recommendation for
compensation program changes.
– Reputable surveys are always open to revealing the source of their sample to show the
data is both valid and accurate.
– Be cautious of reports presented by survey data aggregators – they may not identify
sources of their data and may have a vested interest in how or even what information
is reported.

8.185

■ Communication
• Source information – When discussing survey and survey sources with employees, it is vital
to understand the source information they are using.
• Differences in figures – The following variables could contribute to a difference in
salary figures:
– Sources – It is important to ensure that the sources used represent the relevant labor
market for the job in question.
❙ Industry
❙ Geographic location
❙ Organization size
– If the employee is receiving information from someone from another organization, ask:
❙ What is its pay philosophy?
❙ ❙Where does the person fit into the range?
❙ ❙What are the individual’s primary duties?
❙ ❙What are that person’s education and experience levels?

8.186

■ Communication
• Not always easy – Communication about pay is not always an easy task, especially when the
employee feels he or she is being compensated unfairly.
• Tips – When communicating with employees, the following tips should be helpful:
– Convey a consistent message
– Align communication with the corporate mission, vision, strategic business plans and
organizational objectives
– Encourage feedback by providing a way to receive employees’ feedback and questions
– Follow up on feedback
What communication plans have you seen that are effective compared to those that are ineffective?
What are the characteristics that appeal to different generations?

Can You?
■ Discuss management’s role in communicating compensation.
■ Describe the advantages and disadvantages of communicating market pricing methodologies to

the organization.
■ Discuss how to communicate to employees the reasoning behind using one salary survey instead
of another.

Module Quiz
1. Who is best suited to communicate compensation information to individual employees?

A. The HR Manager
B. Senior executives
C. Managers and supervisors (or the person to whom the employee directly reports)
2. When is it appropriate to practice open communications regarding pay decisions?

A. It is never appropriate; organizations should not share pay decisions with employees.
B. If the organizational culture supports open communications
C. If the organization’s competitors practice open communications
3. Which of the following is a characteristic of a good survey?

A. Survey sources are identified
B. A limited sample size
C. Aggregate data is trimmed

APPENDIX
18 9
Quiz Answers
Module 1 Module 5
1. A 1. C
2. D 2. B
3. C 3. C
4. B 4. A
5. A
Module 6
Module 2 1. C
1. C 2. B
2. D 3. B
3. C 4. A
4. B
Module 8
Module 3 1. C
1. A 2. B
2. B 3. A
3. B
4. D
5. A
Module 4
1. A
2. A
3. A
19 0 C17/GR17 • APPENDIX © WorldatWork. All rights reserved.

Job
JobPricing
PricingWorksheet
Worksheet
Job Title: Job content (key elements for job matching):
Company Scope Data:

Salary Data Aging Aged To:
Survey Eff Survey # # Survey
Factor:
Source Date Job Title Cos. Inc. Scope Salary Total Salary Total
25th
Median
Mean
75th
25th
Median
Mean
C17  APP 6.‹#›

75th

25th
Median
Mean
75th
25th
Median
Mean
75th
Market Consensus
25th Median Mean 75th
Base Salary
C17/GR17 • APPENDIX
Total Cash Comp
191
192 C17/GR17 • APPENDIX © WorldatWork. All rights reserved.
Job Worth Hierarchy Worksheet
Grade Midpoint (000’s) Priced Jobs Slotted Jobs
12
11
10
Customer Service
1 Representative
© WorldatWork. All rights reserved. C17/GR17 • APPENDIX 19 3

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Market Pricing

WorldatWork Values and Protects Your Professional Development

Congratulations on your commitment to professional development and excellence. Thank you.

Market Pricing and Business Strategy Participating in Surveys

Compensation Philosophy and Strategy 8 Job Matching 85

Factors Influencing Compensation 9 Module Quiz 92

Business Life Cycle 19 MODULE 5 93

Market Pricing Terminology and Weighting Market Data 104

Market-Based Pay Structure Versus Pure

Module Quiz 49 Total Cash Compensation 119

Long-Term Incentives 122

MODULE 3 51 Long-Term Incentive Types 123

Total Direct Compensation 125

Sources of Survey Data 55

Survey Data Formats 60 Case Study: Universal Plastics and

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The Purpose of Communication

Organization-wide Communication 180

Communication and Survey Sources 183

Module Quiz 188

Quiz Answers 190

Job Pricing Worksheet 191

Job Worth Hierarchy Worksheet 193

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Market Pricing and

2. Discuss compensation philosophy and strategy.

3. Explain various factors influencing compensation.

4. Identify the primary competitive pay positions vs. the market.

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The Total Rewards Design Process

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Compensation Philosophy and Strategy

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Factors Influencing Compensation

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• Market(s) from which organization draws or

Factors Influencing Compensation (continued)

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Organizations must be willing and able to pay

Internal vs. external equity

Factors Influencing Compensation (continued)

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Internal vs. External Equity

Which method to choose?

Internal Versus External Equity

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Desired Competitive Pay Level vs. Market

Where to position Pay vs. Market?

Desired Competitive Pay Level Versus Market

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Market Position (continued)

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Market Position (continued)

What are the advantages and disadvantages of the lead-lag approach?

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Business Life Cycle

What are some examples of companies reinventing themselves after decline?

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Business Life Cycle

Exercise – Business Life Cycle

Consider the following as you answer:

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