Review of critical comp analytics to give you a better understanding of basic compensation language, including how to actually calculate the numbers that matter to your organization. You’ll learn how to talk like a comp pro, calculate basic comp metrics and present the health of your comp program to execs.

1. Compensation Analytics:
The ROI of Turnover
Mykkah Herner, MA, CCP
Manager of Professional
Services
PayScale, Inc.
www.payscale.com

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14,000 Positions 2500 Customers 11 Countries
250 Compensable Factors
40 Million Salary Profiles

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Agenda
o What are comp analytics and why do they matter?
o Basic language and calculations.
o Communicating with execs about comp.
o How are we doing?
o Are we keeping up with the market?
o What about our critical positions?
o How are our top performers doing?
o Are there any potential risks?
o Any turnover issues? The cost of turnover.
o Immediate action.

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What are comp
analytics and why do
they matter?

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Comp analytics defined:
Quantifiable data that provides detailed
information about compensation costs at
your organization.

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Why bother
with comp
analytics?
o Measure performance of your comp
program.
o Identify pay issues that create
unnecessary cost.
o Identify pay issues that create risk of
litigation.
o Condense large amounts of information
into small understandable nuggets.
o Substantiate your hunches.
o Get your CFO on your side.

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Basic Comp Language
and Calculations

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Basic Comp Language:
Describing the Plan
 Comp Plan
o Comp Philosophy
o Comp Strategy
o Defining “The Market”
o Percentile – 50th percentile
o Comp Policy
o Comp Structure
o Ranges & Grades
o Schedules

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Basic Comp Language: Structure
Hourly Structure
o 17 hourly grades
o Expanding range spreads from 30-62%
o Midpoint differential of 12.5%
Grade
Range
Width Min Mid Max
A 30% $8.75 $10.00 $11.25
B 32% $9.75 $11.25 $12.75
C 34% $10.75 $12.75 $14.50
D 36% $12.00 $14.25 $16.50
E 38% $13.50 $16.00 $18.50
F 40% $15.00 $18.00 $21.00
G 42% $16.75 $20.25 $23.75
H 44% $18.75 $22.75 $27.00
I 46% $20.75 $25.75 $30.50
J 48% $23.25 $28.75 $34.50
K 50% $26.00 $32.50 $39.00
L 52% $29.00 $36.50 $44.00
M 54% $32.25 $41.00 $49.75
N 56% $36.00 $46.25 $56.25
O 58% $40.25 $52.00 $63.75
P 60% $45.00 $58.50 $72.00
Q 62% $50.25 $65.75 $81.50
Hourly Structure

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Basic Comp Language:
Schedules and Market Differentials
Purpose
Preserve both competitive pay and
internal equity.
Support simplicity of structure.
Implementation
Schedule = set of ranges & grades.
Markets are grouped in 5%
increments; schedules are adjusted
to reflect markets.
TAMPA
Schedule C:
-5%
NEW YORK
Schedule G:
+15%
PORTLAND
Schedule D:
Main

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Basic Comp Language:
Understanding Ranges
o Range Width [=(max-min)/min]
o How much flexibility do we give our managers in setting pay?
o Midpoint Differential [=(midpoint grade2-midpoint grade1)/midpoint
grade1)]
o Do we have a more or less hierarchical org structure? Positions with multiple
levels?

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Basic Comp Language: Using Ranges
o Range Penetration [=(EE Pay-min)/(max-min)]
o How well are employees moving through their ranges – do the ones at
the top deserve it?
o Green-Circled Employees [Below bottom of range]
o We may be untruthful and/or paying un”fair”ly.
o Red-Circled Employees [Above top of range]
o These are employees we decide to pay more, even though the data
doesn’t support it.

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Basic Comp Language: Measuring
Plan Performance
o Compa-Ratio [=EE Pay/Mid]
o Are we on track with our pay philosophy?
o Market Ratio [=EE Pay/Market]
o How are we doing vs our competitors?
o Midpoint to Market Delta [=(Mid-Market)/Market]
o Are our ranges current to market?

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Communicating
with Execs about
Compensation

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Executive
Communication
Basics
o Know your audience!
o Kill the HR Jargon, yet do use enough industry
language to demonstrate your knowledge.
o Don’t present problems without solutions.
o Focus on results not processes.
o Be succinct.
o For every question, identify:
o What’s the real concern?
o What’s the response?
o Proof for your claim.

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How are we doing?
What’s the real concern
o Comp is something nebulous that I can’t control or understand
o I’m afraid we’re far far away from the market
What’s the response
o Educate and update execs regularly on the comp info they need to know
Proof
o Market-Ratio – report for the org and by dept*
o Compa-Ratio – report for the org and by dept. Provide individual info to
managers, as appropriate

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How are we doing?
Sample Compa Ratio Report

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Are we keeping up with the market?
What’s the real concern?
o We’re losing a lot of people to our competitors.
o Someone annoying has been coming into my office every week for the past
quarter asking for an increase.
o Are we overpaying?
What’s the response?
o Share real-time data on your organization’s position relative to the market.
Proof
o Market-Ratio – report for the org and by dept.*
o Compa-Ratio – report for the org and by dept. Provide individual info to
managers, as appropriate.

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Are we keeping up with the market?
Sample Market Ratio Report

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What about our critical positions?
What’s the real concern?
o We have 12 names in a drawer and we’re willing to pay those people
anything – don’t tie my hands.
o We’ve had 3 of our best 8 people leave a critical job in the past few months.
What’s going on?
What’s the response?
o Share current market trends on critical jobs so you can be more responsive
to market shifts in an uncertain time.
Proof
o Market Reports – Hot jobs analysis.

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What about our critical positions?
Hot Jobs Analysis

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How are our top performers doing?
What’s the real concern?
o We just lost a really critical, high-performing, employee to our competitor.
What’s the response?
o Share info about where your top performers fall in range.
Proof
o Flight Risk Report.
o Underpaid over-achievers.

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How are our top performers doing?
Flight Risk Report

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Are there any potential risks?
What’s the real concern?
o Where are we open to law suits?
o We have a report due on our compliance with EEO.
What’s the response?
o Share info on disparate pay/potential risk areas.
o Provide assurance that there are no risk issues.
Proof
o Disparate pay report, divided by EEO classes.

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Are there any potential risks?
Disparate Pay and Reports by EEO
Disparate Pay
Gender-based Report

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Any turnover issues?
The Cost of Turnover
What’s the real concern?
o We’ve had a lot of folks who have been here a while leave! Is that ok?
o We’ve had some critical positions turnover, is that ok?
What’s the response?
o Get to the reasons behind the turnover. Not all turnover is bad.
o Share the physical costs of turnover.
Proof
o Turnover calculation.

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Any turnover issues?
Calculating the Cost of Turnover
Monetary
o Costs due to leaving
o Recruitment
o Training
o Low Productivity Costs
o New Hire
o Lost sales / opportunity costs
Morale
o Bad turnover vs good turnover
Typical Projections
o Line Staff = 150% of annual salary
o Managerial staff = 200-250% of annual salary
Additional Resource: http://www.isquare.com/turnover.cfm

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Immediate Action
1) Set ranges for positions
2) Evaluate ranges to market
3) Evaluate employees in ranges
4) Verify range penetration of top performers
5) Begin reporting and educating execs on
comp analytics

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Mykkah Herner, MA, CCP
Manager of Professional
Services,
PayScale, Inc.
www.payscale.com