Market Leadership & Pay (Part 2)
By James T. Stodd, SPHR, SHRM-SCP
August 18, 2015
In Part 1 of this series on Market Leadership, we discussed “big data” sources including the government’s OES system, proprietary surveys, and online “data warehouses.” We also mentioned several features that make these “big data” sources such valuable resources, as well as some limitations that may apply to their completeness and capability of providing a true picture of current labor market conditions for all job groups and industrial sectors. In this message, we will pick up on some additional data sources that may be more appropriate to an employer’s special circumstances and situations.
Professional & Trade Associations
When I was a young human resource professional, it was common for employers within a certain industry (e.g., hospitals) or a certain community (e.g., southern Louisiana) to directly share information about their pay practices. The way we did it was simple. Most of us belonged to trade or professional associations that would appoint a committee to coordinate and oversee its annual salary survey. That committee would develop a list of standardized “benchmark” jobs of interest to most participating employers, as well as a form for each member organization to use for recording its current and anticipated pay practices. Of course, names or other information identifying the institution were omitted.
On the appointed date, each member organization would come to the meeting with its completed survey and sufficient copies for each of the other participating organizations. Those copies were neatly placed in stacks on the “big table” in front of the meeting room. At the appointed time, usually after dessert, a member from each participating organization would go to the table and pick up a copy of each and every organization’s completed survey. Each employer would then take that stack of salary data back to their office, and do their own compilation and data analysis.
It was an amazingly simple process that allowed each participating employer to walk away with information about the pay practices of all their competitors within the relevant geographical area. What else do you need? And, there were only two rules: 1) in order to get data, you must bring data, and 2) graciously look away when a competing employer places their stack on the “big table” so there would be no appearance of impropriety. Of course, some years later the FTC stepped in and now requires professional and trade associations to at least hire an independent “third party” (usually a consulting firm) to manage the survey process.
The purpose of this story, however, is to illustrate that one of the simplest and best sources of pay information often comes by means of trade and professional associations whose members employ similar people, doing similar work, within defined markets or geographical regions. In addition, sponsored salary surveys of such membership organizations are usually a “cheap” approach to collecting very relevant and targeted salary information, compared to some other proprietary sources.
If your organization is part of such a defined micro-economy, be it small or large, getting pay information specific to what’s going on in that specific micro-economy should generally be your first choice. If your trade or professional association does not already have its own salary survey process, it may make sense to initiate one.
Incumbent Provided Data
One of the principal characteristics of the data sources noted earlier is that they all, including Salary.com, use data provided principally, if not exclusively, by employers. This “employer-provided” data includes pay information for all incumbents within a given job or job group, including lookers, job seekers and job changers, mixed with data generally representing a larger, more stable and more predictable workforce. As such, the true market dynamics of an increasingly mobile and “changeoriented” workforce may not be fully captured. And, we all know that today’s average employee, especially millenials, are inclined to change jobs with relative frequency compared to the past, perhaps in the belief that the quickest way to advance one’s career and income is to change jobs.
Interestingly, PayScale may have established a data collection and reporting method much more sensitive to these market dynamics and more in-tune with the values of today’s workforce. What makes PayScale unique is that all of the data it collects, and then provides to employers, comes from job incumbents; that is, it is 100{56cd7e6aa1a9e8b37b474966a37e40db52ca317c7a8b7c79ab3d6ff71decf1c7} “incumbent-provided.” Moreover, today PayScale reportedly receives data submissions from approximately 500,000 individuals each month, which puts it squarely into the same category of online “mega data” warehouses as those mentioned in Part 1.
When considering PayScale’s data it’s important to realize that all the data comes from incumbents willing to give data in exchange for data. Why is that important? Well, it would seem that all those who submit data to PayScale have something in common…they all want to know more about either a) the competitiveness of their current pay, or b) what they might expect to be paid if they change jobs. In my common sense view, this explains why PayScale’s data may do a better job of reflecting pay expectations and practices within a dynamic market than data collected exclusively from employers. In that regard, PayScale may also be in the process of becoming a “market maker” that not only summarizes data, but creates expectations. As such, if I were an employer that is experiencing significant turnover, or needs to compete aggressively to attract and retain top talent, I’d be sure to consider data provided through PayScale’s unique method, perhaps in addition to other sources.
Now that we’ve analyzed data and data sources, our next message will address what an aspiring Market Leader needs to do with the data. Thanks for listening!