As a manager, you want to make sure your team is adequately compensated. You also know the current talent environment will make it hard to replace your high performing employee. We know you mean well when you consult with your compensation team for a salary adjustment on behalf of your team but some of the things you might say will not get you the results you want. The purpose of this article is to give you some insight into what your compensation consultant may be thinking (but not saying) so you know how to approach this conversation.
Manager: This job is hard to recruit for.
Compensation Consultant: Duh. This is a tight labor market. Every job is hard to recruit for.
Okay, that’s a little bit ungenerous. However, they are probably thinking the manager doesn’t understand that market pricing takes into consideration how difficult a job is to recruit for because it is determined by the laws of supply and demand. If the demand for a job is high and the supply is low, the pay for the job will increase over time. All jobs that are market priced have already been adjusted for the difficulty in recruiting.
Manager: The job they are performing is really difficult.
Compensation Consultant: Because the pay for jobs is determined by supply and demand, the difficulty of a particular job is not what determines the pay for it. If a job is back-breaking work, but there are lots of people who are willing to do it, it might still be a low-paying job. (You might argue that this is a negative component of basing pay on the market, but that’s a topic for another article.)
So, your compensation consultant may smile and nod their head because they don’t want to say out loud “It doesn’t really matter how hard it is.” That said, the difficulty of a job does typically have an impact on the supply, which in turn will drive the pay up.
Manager: Someone on my team is leaving to go work for XYZ Company because they are offering more money.
Compensation Consultant: How do I know they are not leaving just to get away from you?
Okay, this is a tricky one, but I’m going to say it. Sometimes the managers who argue the most aggressively for more pay for their staff are the ones who are the hardest to work for. It’s so much easier to ask for more money than to become a better boss. The other problem with this argument is that it is typically unsubstantiated. Unless you have a copy of the offer letter from the new employer, you don’t know for sure what the new pay is. And even if you do have it, you don’t know about the other variables that determine the desirability for a job such as the type of work, the schedule, paid time off, benefits, culture, the employee’s commute time, and many other things besides pay.
Manager: I was talking to someone in the breakroom/hallway/parking ramp and they mentioned that their brother-in-law/sister/cousin/next door neighbor is getting paid a lot more for this job.
Compensation Consultant: There are so many things wrong with this, it’s hard to know where to start. Statistically speaking, a sample size of one is not valid. Not to mention the fact that it is not random. Not independent. And doesn’t come with any of the other data we need to market price jobs.
Employers who market price their jobs use independent third-party data to determine appropriate pay. The firms that perform market pricing surveys and supply the data to employers have strict protocols to ensure the data are accurate and unbiased and statistically sound. This includes making sure there are enough participants in the survey (in all cases more than one) for the results to be meaningful.
Manager: The job description doesn’t include everything they do.
Compensation Consultant: Adding a few tasks to a job description is not going to change the value of the job.
The issue of job descriptions is a tricky one because managers are correct in being concerned if the job description is really bad. This can lead to a job being market priced incorrectly if the compensation consultant can’t even tell what the job is. This can be contrasted with the typical situation where the manager thinks that adding a few more tasks (duties, responsibilities, knowledge, skills, abilities) to an already pretty accurate job description will move it into a new pay grade. It won’t.
So, what’s a manager to do? Stay tuned for the next article on what you can say to your compensation consultant to help this conversation be more productive and get the results you want.