Fair compensation is relative
by Miki SaxonMy post May 24th talked about how monkeys lose productivity when treated unfairly. Unlike the managers I described in that post, good managers know that unequal pay can create problems, but they also know that not everyone with the same title deserves the same compensation—in fact, to do so would be extremely unfair! Most companies establish a range for each job and some guidelines within each range, but they frequently fall short of what’s needed in the real world.
So, how do you draw the lines to achieve fairness?
All the people I’ve talked with over the years define “fair” relative to themselves and those around them. Developers working in a small local company didn’t compare their salaries to the developers in IBM, nor to their bosses. They compared them to their peers, i.e., similar job, background, title, company, industry and location.
The problems arise when the person they sit next to gets X more dollars or a promotion for reasons such as those mentioned the 24th, reasons that have nothing to do with skill, experience, attitude or actual work. This knowledge is what helps you develop working guidelines for the ranges your company’s ranges.
Let’s say that ABC Corporation uses a three-level structure in engineering: engineer I, engineer II, and senior engineer and that there’s a $20K range within each level. They currently have five people who are Engineer II. The salary range is $60K – $80K. Of the current people:
- Judy was recently promoted and is at $62K;
- Jim, $68K, and Craig, $72K, both have been working for six years. Although Jim has an MBA, he started in sales engineering while Craig had three years’ experience in a specifically needed skill when he was hired.
- Tracy is making mid-seventies with five years of direct experience; and
- Kim, at $80K and due for promotion, has a Masters’ and 17 years of experience, 5 of them in ABC’s field.
Although they’re all Engineer II, because the salary differences are based on factual points, not charm, politics, or managerial whim, the group is satisfied that they’re being treated fairly.
