Analyzing Salary Surveys

Peer Groups

Some companies design their compensation strategy to be competitive with a select peer group of companies. Typically, a peer group will be within the same industry, of similar size, have a similar location, and compete for the same talent. A peer group can be anywhere from 15-100 companies in size. For executive compensation, it is commonly 11-20 companies in size (with 15-20 being the preferred number). Custom survey data reports can typically be obtained reflecting these peer groups.

Compensation Platforms

Compensation software platforms are also available to support the compensation management process. These platforms are not a part of the human resources information system, but are separately used to manage the following:

• Salary survey database
• Compensation management process
• Analytics
• Job manager
• Positioning in global markets
• Salary administration functions
  • Benchmarking
  • Job leveling
  • Internal grading
  • Salary structure
  • Pay delivery
  • Total reward statement

Survey Studies

Employers attach different meanings to maintaining market competitiveness within their business location or industry. Also, organizations use industry and location differently within surveys.

The reason an organization utilizes survey data will vary from one organization to the next. Typically, however, an organization's compensation strategy helps determine how it intends to compensate its employees relative to its competitors. This will, in turn, affect how the organization uses the salary survey information. While the organization may choose to lead or lag the market, market pricing provides a way to determine a competitive market value for jobs, while its compensation strategy determines how the organization will utilize this information.

One study attempted to obtain more information on how organizations analyze and use survey data. Compensation professionals in organizations were interviewed at length (almost all over an hour) about what they did with survey information. Most of the organizations were in manufacturing; two-thirds were in technology. These companies ranged in size from under 350 employees to over 1000; half were in the latter category. About one-third of the companies were unionized.

Study Conclusions

The strongest conclusion was the high dependence of these compensation professionals on compensation surveys.

Most of these professionals reported that surveys carried over 50% of the weight in most compensation decisions, and a few asserted that compensation administration would be impossible without surveys.

Perhaps the most surprising finding of the study was the time, energy and imagination expended in analyzing survey data. The variety of methods of analysis applied to the same survey and the variations in analyzing different surveys were amazing.

Methods Used

Some methods of analysis, such as adjusting the data for time lag (over 90% did this) are quite understandable. Perhaps less justified, given the variety of survey methods, is the practice of combining surveys. This practice was reported by one-third of the firms. Most of the analyses involved eliminating some companies, selecting others for comparison, recalculating measures, arbitrarily weighting some of the data or custom building a mini-survey from the data. Various forms of statistical analysis were employed, including graphic analysis, calculation of trends and even some regression analysis. Thus, multiple attempts are used to effectively answer the questions posed by the analyst.

Equally surprising, each organization seemed to employ its own analysis.

No significant differences appeared in analytical approach by size, industry or unionization.

The major lesson from this study may be that compensation professionals prefer compensation data presented by job and the competitive marketplace. Many organizations, for example, make separate analyses of industry and area competitors. Only one-third of the organizations included maturity-curve data in their analysis. But some organizations had methods of forcing a comparison of job and maturity data.

Demand for Market Data

Except for maturity-curve data, there was no evidence in this study that organizations were obtaining more compensation survey data than they use. Most of the organizations made some use of all of the information in most surveys they accessed. Perhaps the best evidence of the need for survey data analyses is ERI Economic Research Institute itself. There were discouraging remarks voiced by peers as ERI ended its first year, 1987, with 67 subscribers and 142 subscribers the next year. Most believed that organizations would always collect and analyze data themselves, without outside assistance. All of this was before the impact of the personal computer, the Internet and corporate downsizing. Today, ERI Economic Research Institute has thousands of corporate subscribers, underscoring the on-going demand for salary survey analyses.