Size and Geography Matter To Your Compensation Program

by on June 15, 2009 · 0 Comment POSTED IN: HR Info Center

Consider Your Location and Size When Building A Compensation Program

Let’s move on to sin number two. And that is the labor market for many organizations is broader than actually any of us probably realize, and that has an impact on how effective a compensation program is.

Do the analysis. Go back and look at the new hires you’ve made in the last year and see what kinds of organizations they came from. They may not be related to your industry niche at all.

So the point is that the industry will be broader than you may think. And you should be biased toward purchasing surveys or using surveys that have a much more broader kind of scope rather than very narrow.

Geography is also important to a good compensation program. San Francisco is one of the highest paying if not the highest paying area in the country. Biloxi, Mississippi pays 90% of what the national pay rates are. The difference then between San Francisco and Biloxi is almost 30%. So geography makes a difference in your compensation program, even for executive jobs.

For managers and above, size makes the biggest difference. The money paid to top human resources executive at a billion dollars is a lot more than you would for $10 million in revenue kind of company. The responsibilities may be very similar and what the tasks that they have to perform, but the scope of responsibility is a lot larger in a $1 billion a year company.

And the lower you go in the organization, even within the manager ranks the less of a difference you’re going to find that size makes. The higher in the organization like CEO, the more of a difference it’s going to make to your compensation program.

Industry segments also have a bearing on salaries. The top human resources executive gets paid about 10% more. So as you move down in the organization, the difference between market segments becomes less and less.

So the point is choose the right survey for finding your labor market, and you’ll be able to build a better compensation program. And even if you have to pay some money in order for the survey, even if it’s something like $3,000 given the amount of money that you spend for compensation payroll, that’s probably worth the investment to get a good survey.

Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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