6 steps to fair and flat compensation
by Miki SaxonImage credit: asifthebes
Be sure to read yesterday’s post for background on ‘fair’.
When setting compensation, never forget that credentials are well known, promotions are public and salary news travels faster than naughty gossip, so secret is not an option.
Problems start when a person doing the same work and with a similar background as the person in the next cube gets X more dollars or a promotion for reasons that have nothing to do with skill, experience, attitude or actual work, but rather for charm, politics, or managerial whim.
This approach also works for companies with flat organizations, such as the one Phil Gerbyshak described over at Slacker Manager, where most people have the same title.
For convenience we’ll call them knowledge workers.
1. Department heads are responsible for establishing title categories, including the parameters for education, experience, skills, etc. The fineness is dependent on the size of your organization and the difference experience-wise between entry level and senior. For example,
- Knowledge worker I
- Knowledge worker ll
- Knowledge workers lll
- Senior knowledge worker
- Principle
- Fellow
2. Each category carries its own salary range, ideally a spread around $20K. Again, depending on your business it can be less, but rarely more.
3. Each category has different responsibilities with the actual work structured so your people enjoy solid challenges and opportunities to grow.
4. Working together, department heads and their managerial reports (if any) assign all current employees to the correct level.
5. The department head then meets with the entire department and explains the new system.
6. The department head and any other managers involved meet with their direct reports to explain to what category they’ve been assigned and why.
Here’s an example to help you visualize it.
Let’s say that you decide on a three-level structure in your department because the senior title is given only rarely.
You currently have two people who are Analyst l, range $40K-$60K,
- Craig, who just graduated was hired at $48K; and
- Julie at $55K, who has three years, two of them with you.
You have five people who are Analyst II, range $60K-$80K,
- Trudy was recently promoted and is at $62K;
- Jason, $68K, and Craig, $72K, both have been working for six years. Although Jim has an MBA, he started in sales, while Craig had three years’ experience in a specifically needed skill when he was hired;
- Terry is making mid-seventies with five years of direct experience; and
- Kim, at $80K and due for promotion to Analyst lll, has a Masters’ and 17 years of experience, 5 of them in directly in your field.
Along with keeping the structure transparent and honest, it’s imperative to be sure that every new hire clearly understands the structure and the career path it offers.
What compensation techniques do you use?
April 30th, 2008 at 3:49 am
Great post Miki. The leveling is an important point for new hires to understand. If there are 3 levels in their job title, they have a great opportunity to grow into more duties and responsibilities. Much better than being hopelessly stuck on level 1 forever.
April 30th, 2008 at 9:14 am
Thanks, Phil, and thanks for stopping by. Understanding career paths that involve leveling (love that term) is critical when hiring, but full disclosure no matter what you have to offer is the best way to retain people, while fudging career-path truth is the fastest way to lose them.