It’s pop quiz time. Can you tell me the value of an entry-level accounting role in your organization? What about how much a software engineer or an administrative assistant is worth to your company? If you answered “no” to either of these questions, then it might be time to consider implementing market pricing into your compensation strategy.
Market pricing a job is the process used to determine the external value of a position, and it is fast becoming the norm for organizations as they establish competitive compensation practices. At a high level, market pricing enables companies to attract and retain top talent. When companies grow and expand into new markets, the process becomes even more critical as it provides a method for analyzing and evaluating internal pay practices against existing market rates.
By taking the time to examine market data that is reliable and relevant, you just may find that you’re overpaying for that customer service rep in Cleveland after all. Having a deeper understanding of a job’s worth within a particular industry, company size and geographic location can provide a strategic position from which to value a job within your company. Plus, market pricing also creates internal equity, engendering a sense of fairness among employees that colleagues in similar roles are being paid similar salaries.
To help you get started, here are the basic steps to Market Pricing:
if you believe that market pricing could be the right approach for your company, where do you begin? Here are the essential steps to follow that can help you successfully market price the jobs in your company:
Step 1 – Analyze Your Company’s Jobs and Create Job Summaries: Organize and understand the jobs you have in your company. Analyze these jobs and create brief job descriptions. Ensure the job descriptions describe the key functions and responsibilities of this job at your organization.
Step 2 – Select Benchmark Jobs: Determine which of these jobs are considered benchmark jobs that would be common in other similar organizations as well, such as an accountant. While every company has niche roles or part-time positions, it is important to understand the core roles you have that are also common in the recruiting market. The number of benchmark jobs your company decides on will depend on the size of your company and the number of overall jobs.
Step 3 – Choose Market Data: Determine which surveys and market data you want to use to price your benchmark jobs. There are many survey vendors available, so be sure to select vendors that have proper job coverage, and make sure these vendors have relevant and accurate data across the industries, company size and geographic locations you need.
Step 4 – Make a Match: Match your company’s jobs to the jobs in the surveys – but make sure to do this by job description, not job title. Industry best practice is to use three to five market data sources to accurately establish a market price. With Salary.com’s CompAnalyst® Market Data, we do this work for you. Each one of the jobs in Salary.com’s database is priced using 3-5 sources and you get access to the composite result.
Step 5 – Chose Appropriate Market Scopes and Determine the Job Value: Select the appropriate scope of data from the survey to create the value of the job. Be sure to take into account the industry, company size and geographic location that you want the data to reflect. This will help you determine the proper market value of this specific job. Also, determine the pay points that align with your compensation strategy. For example, will you look at the mean or median of the market?
Step 6 – Adjust Data as Needed: There is a particular art to market pricing, so be sure that after you have determined the market value, you make adjustments to the data or age data to make sure it accurately represents your pricing philosophy.
Step 7- Slot Non Benchmark Jobs Based on Comparable Worth: It is just as important to make sure you have an accurate rate of pay for non benchmark jobs within your organization. You can compare these non benchmark roles to benchmark jobs that require similar levels of skill, knowledge or responsibility or “slot” the job between two survey jobs your position may fall between.
Step 8 – Do a Reality Check: Take a look at your market pricing and determine whether there is a big variance between your company’s jobs and what the market is paying for those positions. If so, you can then take steps to reconcile those against your company’s unique business priorities.
As the backbone of your company’s compensation strategy, market pricing can help you ensure that your pay remains competitive and firmly rooted in the realities of your market. Many companies have found our CompAnalyst® Market Data (which offers a robust library of more than 4,000 jobs) to be an invaluable tool to map market data to their internal positions.
Through this comprehensive database, you can scope data that is specific to your company’s geographic locations, size and industry. You can also automatically receive market reports for base salary and variable compensation. Your company jobs can even be loaded into the database so you can explore how your internal pay compares to market data for your matched jobs. Instead of spending hours poring over multiple data sets and surveys, you can take advantage of a simple, cloud-based tool to price your jobs with just a few clicks.