Money, as Pink Floyd once said, is a gas. It certainly is if you’re a talent manager trying to attract candidates in a competitive market.
Frequent studies (including a few from Armstrong Craven) have shown that most job seekers still put salary at the top of their priorities when they’re sizing up an offer.
So how much is enough? What combination of base, bonus and incentives will secure your coveted candidate without breaking the team budget? Anyone who has grappled with that question will understand the value of a comprehensive, up-to-date compensation study. But they may also have discovered that most studies are anything but.
At Armstrong Craven, we think about Compensation Studies differently. Here’s how you should think about them:
1. Do your own research
The first stop for most talent managers will be an off-the-shelf online study. Often these are provided by very reputable companies and we’re not saying the data in these studies are wrong. But they’re unlikely to address your own specific needs.
For starters, the study may be out-of-date. Next, you have to ask how many companies it’s based on. Let’s imagine you’re BlackRock and you’re looking at a study which provides ‘market levels’ gleaned from, say, 100 asset managers. Well, most of these will be quite small and that will inevitably bring the averages down. What you need therefore is a study based simply on your top six or seven peers.
Then there’s taxonomy. How do you know the job titles in the study equate with those in your company? Take a term like ‘business development’. What does that actually mean? Sales? Marketing? Account management? Unless you understand the terminology the provider is using, you’re just comparing apples with pears.
2. Don’t just do surveys… Talk to people!!
Okay, so you’ve decided to do your own research. Realizing it needs to be based on a critical sample size, you decide the quickest way to reach the highest number of people is via a survey. And you’re not wrong. At Armstrong Craven, we run plenty of surveys, with carefully crafted questions which drive simple, easy comparable answers.
But don’t forget the human element. By adding a layer of primary research to your study, you can access invaluable market intelligence. In a recent study for a UK bank, we discovered one of their key competitors had recently changed its bonus structure and the new system wasn’t at all popular. That meant we were able to point our client to this bank as a prime headhunting target.
3. Don’t get hung up on too much detail
Don’t get us wrong, we love detail. We think detail can sometimes be the difference between mere data and actionable intelligence. But only sometimes. Other times, it’s a distraction. We’ve had clients ask us to find out every jot and tittle of a candidate’s package right down to the value of luncheon vouchers and gym membership. Getting this level of detail is time-consuming, expensive and, well, not that useful anyway.
The fact is, nobody moves jobs (or chooses not to move jobs) because of luncheon vouchers. Base salary and bonus are the two numbers you really need. In individual cases, it might make sense to find out about shares and pension contributions but at the talent cohort level, the focus should be getting the most salient information as quickly as possible.
The alternative is to spend months getting reams of data which – because you took so long to get it – will probably be out-of-date on arrival.
4. Remember, what people are being paid and what they want to be paid are two different things
We could have mentioned this under 1, but it’s so important, it needs its own section. Incredibly, it’s also the point that almost every compensation study overlooks.
Perhaps you’ve established that a certain type of individual is likely earning between £100,000 and £120,000. So what? How does that help you make them a compelling offer? The bit you’re missing is what percentage increase they would want to make a move. Of course, everyone will have a slightly different answer but across a specific talent pool there will definitely be a broad consensus. This can be hugely valuable if you’re combining a compensation study with some location analysis. If, for example, software engineers in Budapest typically want a 10% increase but those in Bangalore are looking for 20%, that’s crucial information.
Also, you can filter your results and work out which competitors are likely to be challenging targets and which present as more susceptible.
4. Rinse and Repeat…
Some salary levels increase rapidly. Others don’t. So how often should you be making decisions on the basis of any particular study? Clearly, it’s not practical to be commissioning a compensation study every few weeks, but if you leave it too long, there’s a chance you’ll be referring to out-of-date information.
We think once a year is best. There are two reasons for this. Firstly, most people only get an annual pay rise. True, you also need to factor in the pay of new hires and this is where you see pay inflation during the year; but this is very difficult to track because new hires are the least likely people to engage with you – they’ve just moved roles so why would they speak to a recruiter?
Which leads us to our second reason. It’s good to build up a bank of reliable sources for your compensation studies. When we engage with people, we always check to see if they’d be open to answering the same questions a year down the line. The answer is almost always yes. If we ask their indulgence any more often, we find the response rate drops significantly.
