Question

1) What is a survey? What purpose does it serve in terms of compensation? 2) Who should be involved in designing a compensation survey? 3) Explain the low-high approach in selecting jobs for inclusion in a compensation survey. 4) Explain the difference between standard deviation and quartiles and percentiles. 5) What is a market line?

Answer 1

What is a survey? What purpose does it serve in terms of compensation?

Translating any external pay policy into practice requires information on the external market. Surveys provide the data for translating that policy into pay levels, pay mix, and structures. As such, a survey is the systematic process of collecting and making judgments about the compensation paid by other employers.
An employer conducts or participates in a survey for a number of reasons: (1) to adjust the pay level in response to changing rates paid by competitors, (2) to set the mix of pay forms relative to that paid by competitors, (3) to establish or price a pay structure, (4) to analyze pay-related problems, or (5) to estimate the labor costs of product/service market competitors.

Who should be involved in designing a compensation survey?

In most organizations, the responsibility for managing the survey lies with the compensation manager. But since compensation expenses have a powerful effect on profitability, including managers and employees on task forces makes sense. Outside consulting firms are typically used as third-party protection from possible "price-fixing" lawsuits.

Explain the low-high approach in selecting jobs for inclusion in a compensation survey.

If an organization is using skill-competency-based structures or generic job descriptions, it may not have benchmark jobs to match with jobs at competitors that use a traditional job-based approach. Market data must be converted to fit the skill or competency structure. The simplest way to do this is to identify the lowest - and highest-paid benchmark jobs for the relevant skills in the relevant market and to use the wages for these jobs as anchors for the skill-based structures. Work at various levels within the structure can then be slotted between the anchors.
For example, if the entry market rate for operator A is $12 per hour and the rate for a team leader is $42 per hour, then the rate for operator B can be somewhere between $12 and $42 per hour.
The usefulness of this approach depends on how well the extreme benchmark jobs match the organization's work and whether they really do tap the entire range of skills.

Explain the difference between standard deviation and quartiles and percentiles.

Standard deviation tells us how tightly all pay rates are clustered around the mean. As such they show how similar or dissimilar the market rates are from each other. A small standard deviation means they are tightly bunched at center; a large standard deviation means rates are more spread out.
Quartiles and percentiles order all data points from lowest to highest and then convert them in to percentages. Quartiles are frequently used to set pay ranges or zones.

What is a market line?

A market line links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis. It summarizes the distribution of going rates paid by competitors in the market.