Changing Your Perspective From the Stern to the Bow

In 30 or so years of looking at salary surveys, I don’t think I ever heard a description of this critical tool of the compensation professional that made me think as hard and as critically about what I do as,

“Salary surveys are like the wake of a boat; they only tell you where you’ve been, not where you’re going.”

Think about that for a minute.  Why is that the case? Why can’t we make that more strategic turn towards a future view of where to go?  Here are a few reasons I’d offer up:

  1. We’re comfortable just doing what we’ve been asked to do.  We provide average salary data, we align our policy lines with our approved pay strategies.  We report compa ratios and gaps and calculate funding budgets.  And we have spreadsheets and other tools we’ve created to make it pretty easy.
  2. We’re scared of the implications of a forward look over the bow.  Scared by threats and getting sued for price-fixing.  So no one really talks about how to turn your head around and stop looking at the wake.  We’re permanently pointed in the opposite direction of our business and HR strategy.
  3. Someone else is responsible for looking ahead.  Finance, strategic planning, compensation consultants, the CHRO, someone else.  Someone who gives us the orders.  Apparently someone else is the captain of the compensation ship.
  4. We are uncomfortable with being wrong.  Predicting the future is a less secure outcome than squaring up with the past.  But think about it for a second; how far off could you be, especially in this economic environment where 3% is the new 4%?  And if you were off a fractional percentage with a prediction of where your market would end up couldn’t that be trued up at the end of the year when you do actually look at the wake?  Management take note, you set the direction and tone here!
  5. Other related reasons as they occur (the standard compensation disclaimer!).

Another aspect of being forward looking rather than towards the past is actually a little bit of a contrary view.  (You may just need to put your head on a swivel to be a successful compensation practitioner in the future!).  I’m talking about the emerging practice of workforce analytics, looking at the market and you in total (not just a benchmark view) to get a better understanding of total labor costs, not just a snapshot view that most surveys offer.

Talk about rocking your world.  When you start looking at compensation data from the standpoint of total labor costs, you give the word ‘competitiveness’ a whole new meaning.  Now that could mean either a pleasant or unpleasant surprise.  Wondering why your company just can’t get over that margin hump?  Why your average revenue per employee never gets beyond the 25th percentile?  And yet you have an average 1.0 compa ratio so everything is cool, right?

Consider a company with a distribution of their professional employee population only slightly skewed towards level 4 of a 6 level job family. But if your competitors are more normally distributed across 6 levels, they likely have a cost advantage over you, although you are both employing the same base, variable or target cash strategy.  Enter compensation from stage right on the workforce design stage with some very useful data on where you could enjoy labor cost advantages!

That’s just a simple example of why changing the way we’ve done things needs to be the path forward.  It doesn’t by any means detract from the past to say we’ve got to start thinking differently about the future.  We still need experts in designing sales incentives, deep knowledge of executive pay, basic blocking and tackling on surveys and salary structures, etc.  Making the sort of strategic contributions that many would like to be known for though has to include not just areas like business acumen, communications and change management but in the analytics space those that get out ahead will be the ones who are actually looking that way, not the ones still tracking the wake of where they’ve been.

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