Compensation: Science or Art?

Recently, I came across an article from the Wall Street Journal titled, “Why There is No Science in Your Salary.” At first glance (me being a comp professional and all that) the title made me pause and emit a big ol “what the %#@&”?

Then I read the article

The article doesn’t really claim there is no science in compensation; just that some employers don’t actively manage compensation within their organization. (I’ll go a step further and say that some just let it flow along loosey-goosey.) The article also mentions that many employers are making an effort to corral their pay into a formal structure that benefits both employees and employer alike. It’s a well-written article with interesting information about how some companies manage the compensation process and I encourage you to read it.

Though it’s not as complicated as, for example, rocket science, the reality is that compensation management is loaded with science, including: regression analysis, job evaluation, compa-ratio, min-mid-max, and a whole bunch of other stuff. But I guess some of that’s more math than science. Anyhoo, it’s not all science, or math either for that matter, there is a bit of art involved in managing compensation as well.

Counting_HeadsThe balance between art and science kind of depends on the person managing the process, especially when it comes to job pricing. Some dyed-in-the-wool-very-serious-about-comp types tend to view salary market data somewhat rigidly, believing that if the data doesn’t include their exact job title then they can’t use the data. Not-quite-so-rigid-about-comp types, though, accept that not every job in existence is going to be included in every salary market survey. And, that is okay. Seriously.

Here’s where it gets artsy

Using salary market data to set up a salary range for some jobs is an art form unto itself. Yes, I said an art form. And, the beauty of comp data is sometimes in the eye of the holder. If you’re lucky, when wading through salary market data you’ll catch site of your job title and there will be relevant market data that goes along with it—making a beautiful picture of the salary range you’re looking for. This happens a lot with benchmark positions but, for those non-benchmark jobs, the view is not so pleasing to the eye. You see, there are a finite number of benchmark jobs out there and the rest are variations of blended jobs (aka: hybrid jobs).

The accepted practice is that if a market data job matches at least 70% of your job, then you can use that data. While I agree with that in principle, I’m also comfortable with blending multiple jobs that are less than a 70% match. If that makes me a rule-breaker, so be it. I think, however, it just means that I’m pragmatic, with a flair for art when it comes to the science of job analysis.

Comp planning resources

If you’re new to compensation, there is a lot of information available to help you learn about the science of job analysis. Here are a few to get you started:

Please share your thoughts.

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