A fruitless combination of guesswork and an over-reliance on other companies’ predictions on pay add up to what passes for salary increase data, according to our frustrated number-cruncher, Candid
It is that time of year again, when we make up the budgets for merit planning. There may be some people who like to think this stuff all very scientific, Big Bad Boss being one of them, but I’m here to tell you the truth. I’m sorry to burst the romantic bubble but salary increase data is just an urban myth. Yes, there are a dozen surveys on the subject, but does that data really mean anything? I should know as I’m one of the people who provide data.
The surveys ask us to predict the increases we are going to give next year. I haven’t got a clue so I just make something up. Of course, I don’t just think of my mother’s birthday and double it, I look at what we did last year and see if there are any dramatic changes but I’m still basically making it up. Then the results of what hundreds of other companies have made up get published and that’s what we use to set our budget. So, the average guess becomes reality. Is it just me, or is that a bit scary? Even more odd is that these surveys collect data on our movements too. I don’t mean that they ask toilet-related questions, but they do ask how much we plan to move our pay ranges. Well, I may as well put on a red headscarf and dig out my crystal ball. In a perfect world, pay ranges reflect the market so, in theory, every year we should analyse the market for a bunch of typical jobs and set our ranges accordingly.
But how can other companies’ pay range movements possibly be of interest to me? I’m not going to base my changes on what other people might do because I don’t know how much their ranges reflect true market movements or how much they might have been wrong in the first place. Besides, some of them might be as incompetent as my colleague Lazy Susan, who submitted data last year.
Sometimes, we don’t even bother with a full-blown market analysis to change the ranges. If we assume our ranges were OK to start with we bring in that old friend, salary increase data. Intriguingly, my colleagues in the US firmly believe that we should apply a factor at least 1% below the market salary increase. Why, they don’t seem to be able to articulate.
If we give someone an increase based on market rates but change the ranges by a lower figure, they will show as being paid higher in the range even though, in theory, their position to market hasn’t changed. Is this all part of a wider plot to make us all feel better off? The corporate world is sometimes a dark and cynical place.
The surveys publish average increase data for all companies and then a subset excluding those who have indicated a salary freeze. Every year, this makes for an intellectual challenge as I try to decide which version is best to use. If I assume the market is the market, I should include all companies. If I assume those companies with a salary freeze have financial difficulties, perhaps they should not be included in my market comparison.
But suppose they represent the norm? Suppose many companies are offering no increase because that reflects a general market tendency? Suppose most companies are having financial difficulties? Perhaps none of us should give increases. At this point my head hurts so I give in and just pick one. I wish the survey companies would think about the people who use their surveys and keep things simple.
Not content with asking us about salary increases, survey companies also throw in a bunch of questions about company size, details of bonus programmes and benefits plans, not to mention sneaky questions about proposed policy changes.
As a recipient of this data, I am frankly not interested in whether other companies are thinking of changing their job evaluation systems in the next 12 months. In fact, the only people likely to be interested are the survey consultants themselves, so they can work out who they may be able to sell advice to in the next year. The world of consulting is also a dark and cynical place.
Still, having got the results of the surveys and magicked up some merit plan budgets, I send them out to the HR community for comment. Here, interesting cultural differences come into play. Argumentative Agnes from France will debate the decimal point before realising the rounding is in her favour. At that point, she will become noticeably more agreeable. My German colleague will simply point out an insignificant typo. Bless. China and India will scream in protest, saying they will lose thousands of employees if we insist on giving a measly 15% increase again.
Eastern Europeans are also quite aggressive in this way. I know the emerging markets are moving fast, but it seems you could double their salaries and they would still want more. Big Bad Boss and other Higher Beings are no help. They always cow-tow to our strategic business units, and for me it has become career-limiting to keep pointing out they are already well-paid. If so-called low-cost countries go on like this, they will price themselves out of that label and start losing thousands of investing companies.
The increase budget for the UK is far lower, but you don’t hear me complaining. Well, not much.