Have you ever benchmarked a position, determined a salary, and interviewed, only to find out no one will work for what you are paying? How does that happen?
Ever heard the expression, “what the market will bear”? In a nutshell, your data doesn’t match market data. Maddening, right?
Let’s break this down.
Benchmarking is an incredibly helpful process that allows you to compare your positions against a variety of data sources and set competitive pay rates. How you determine the data sources may vary, but in general, you might use industries similar to yours, same geographical location, size, etc. This data will change, but not often.
Market data is made up of various sources specific to a point and time. It fluctuates often. Examples of market indicators are general economy, unemployment rate, new competing business, talent pool, etc.
Every employer’s goal is to attract and retain the best talent. By using both benchmarking and market data, you can make smart decisions about a key attraction and retention indicator pay.
Fair warning: Employees also know about the combination of benchmarking and market data, so don’t get caught in a trap. Do your own research. Know your data. Just because an employee says a competitor is paying more doesn’t mean they are.
Also, don’t let data drive an unnecessary decision. For example, through benchmarking, a specialized chemist may reflect a wage 35% over what you are currently paying. Market data shows that you are currently paying 15% above competitors in your market. The benchmarking data would lead you to believe that you need to quickly increase the wage. But the market data says to slow down, everything is just fine.
Great! … Now what? Now you evaluate your data. In this case, I would suggest that you not increase the wage now. But if your current specialized chemist leaves, be prepared to recruit outside your market. That means you will have to pay more. In anticipation of potentially paying more, I would also consider starting incremental increases to the budget now.
By using benchmarking and market data to your advantage, you will be able to build a solid wage structure, feel confident about your budget, and have a great tool to attract and retain the best talent.