Comp 101 (#2) – Paying your Dues

Thanks everyone for your emails and messages on my first comp post! I’ve been getting a lot of questions on other topics that I will attempt to build into the blog posts. It’s been great hearing your thoughts.

This post is on a topic that actually got me started on this whole compensation blog thing. I didn’t touch on it in the previous post, because I needed to explain the market data definitions first.

Post- College / University life is tough. You graduate as an idealistic, ready-to-change-the-world adult, sometimes not knowing what to do with your life. Do I go to grad school? Do I work a little first? Where do I start when I have no idea what I want to do eventually?? I wasn’t one of the people who knew I wanted to be a doctor, teacher, pastor, engineer, accountant…anything. I thought I wanted to be a lawyer, but wasn’t 100% certain. I worked in a law firm for a while and got so frustrated in my job. It didn’t hold my interest, it was an office job. I learned some good things and key skills when it came to writing business-y emails and interacting on a team, but it was incredibly frustrating. When I would express my frustration, I always heard “you’re paying your dues…you have to pay your dues”. For some reason, that explanation always annoyed me more. “Why do I need to pay my dues?!?! Does paying my dues mean being stuck in a job that feels like it doesn’t challenge me?”

I worked on a project in my current role, benchmarking every person in the company. This involved speaking to over 100 mangers and putting all 1500 employees into a benchmark job code (which would then correlate back to a salary range). This is when I had my lightbulb moment.

In the survey levelling structure, it talks about the typical years of experience required for certain roles. There are other categories such as Executive, Management and Support but I want to focus on the Professional roles. In the Professional realm (roles that usually require a bachelors/university education) there are 6 levels. There are other descriptors, but for the purposes of my illustration, I’m using years of experience:
P1 is a fresh grad, no experience or less than 2-3 years.
P2 roles need 2-3+ years of experience
P3 is Career Level. This is a fully fledged role, and this is the type of job that someone could stay in for their entire career. This is 5+ years of experience
P4 roles usually require 8+ years of experience, senior individual contributor and informal team lead. This role would normally act as mentor to more junior team members
P5 roles require at least 12+ years of experience. Internal guru technically.
P6 roles are the experts not just within the company, but also influencing the external industry

What stood out to me is that it takes 5 years of experience to be in a role that is considered fully fledged. Independent. Don’t need much direction etc. 5 YEARS. This means that by the time you graduate College/University and add on 5 years, that’s when you could be considered “career” level. Whilst that might be a depressing thought, it actually helped me rationalise my experience. For the first few years, working in jobs that felt meaningless, I wasn’t just “paying my dues”, I was building up a foundation of work experience so that as I built up more and more, I would be considered for roles that require that level of experience. As your experience increases, so does your ability to handle larger projects, to work on things that have more variety and to interact with leaders at a higher level. My issue with being told I was “paying my dues” was that it felt very demeaning – “you’re the junior one and you have to do junior work until we’ve decided you’ve paid your dues”, and I had no idea when I’d finish “paying my dues”. But knowing how the levelling structure works, actually gives me a frame of reference!

Now for some caveats. Not all companies use the same surveys, (as mentioned before) and different surveys use different levelling methodologies. What I WILL say though, is that there are similarities, and they do correlate to each other, so it’s likely that other surveys have the P3 Career level. There will also be people who are considered “fast tracked” and get put into roles that are more senior than their actual years of experience. This happens. There are high potential employees that managers and leaders want to give more opportunity to because they’ve been earmarked as the future leaders. There are also some people who will be in that P3 role for their entire career. There will always be some exceptions. This also doesn’t mean that you won’t get a variety of work, or be trusted by your manager to work independently, but it’s generalisation.

The last thing I wanted to caveat here is that it is again about the ROLE and not the person. Benchmarking is supposed to be an objective exercise. Where in the range an employee sits, is more of a subjective exercise. I’ll get into company pay philosophies later 🙂 The key here is that even if someone has 12+ years of experience under their belt, they’re not going to get paid like a P5 if the role isn’t the type of role that calls for that much experience. The chances are that if you’re a 12+ years of experience person in a job that requires 5 years of experience, you’re probably bored and feel like your talents are being wasted. The same is true for the Managers out there. Don’t convince your recruiter to let you pay someone with 20 years of experience more money to fill a job that requires 5-7 years. If you don’t set up the role to be at a level where someone with that much experience can operate, they will leave after 3 months because they’re bored and frustrated. If there’s someone that great that you want to bring in, re-write the job so that there’s justification to a) pay them more money; and b) set them up for success.

I feel like if I’d known this when I first started out, I wouldn’t have had so much frustration. Some applications for this – Get clear guidelines and goals, from your manager, about how to get to the next level. What is the next step, and how will you get there? Some companies are great at giving their employees progression plans. I find that the engineering functions and finance functions are better at having a cut and dried progression model. Consultancies tend to be quite good at this too. The government GS levels are also a very clear model. If your company doesn’t have a progression plan, and tell you so, ask for one. You’re their employee and you have every right to know how to progress your career. I realised that when I was junior and “paying my dues”, I didn’t think that I had much of a voice to ask for things. I wish I’d spoken up more, and I wish I’d been more assertive with how I thought my career would go. Do your research, have a plan and know where you want to go, because not all managers will know, or care enough to help you with your development plan. Yes, responsibility lies with your manager to coach you and develop you, but in my experience, I’ve had to figure it out for myself and tell my manager what I want because of their lack of interest in my professional development.

Comp 101 (#1) – How do companies know how much to pay you?

Have you ever wondered how companies figure out how much to pay you? Or how managers determine how much of an increase to give you during pay review time? Over the years I’ve gotten quite a few questions from friends about this and I’m hoping that through a series of blog posts that it won’t be as elusive of a black box as it may be at the moment.

First off, a bit about me.  Most people who know me know I work in “HR”. Human Resources doesn’t always have the best reputation in businesses because they are the “police” of the company and blamed for pretty much anything that happens. The performance management system doesn’t work? It’s HR’s fault. You can’t find a good candidate for the open position? It’s HR’s fault because they didn’t let you offer enough on base salary. You don’t get as good of benefits as your friend in another company? It’s HR’s fault for not getting better benefits for the company. As a career, it can also be seen as more of the “soft” option. Don’t know what you want to do with your life? Try HR!. I have to admit, I got into HR because I thought I was “good with people”. The longer I work in HR, I realise that whilst I’m thankful it got me into my career, it probably wasn’t a very valid reason. I’ve come to appreciate how much of a strategic partner HR can be in a company, and through the course of what others see as “policing”, it’s important to recognise that they have more information than the average employee does, and there are reasons for doing what they’re doing. Are all company HR’s like this? Not necessarily, but in my experience, it has been.

There are many types of roles in HR and mine in particular is Compensation/Benefits, or Reward (I lean more towards the compensation side). I started out doing a recruitment coordinator role. Setting up interviews, scheduling them, assisting with the screen of candidates, etc. I then moved into a more analytical role within recruitment. It was in this role that I realised I had an affinity for numbers, systems and analytics. I’m thankful for a coworker in compensation who recognised this and really encouraged me to improve my Excel skills and explore the world of compensation. When we moved to London, I got a job as a compensation consultant, and currently work as an in-house reward professional. My experience has been entirely in the tech world. I was a consultant to tech companies and all my in-house experience has been in tech. What I’m sharing with you is from my own experience in the professional world, I’m not an expert but I’m hoping these insights will help. Non-profits/charities, government and other sectors may operate differently, but there is an underlying methodology that will be the same.

So let’s get started.

How do companies determine how much to pay you? Most companies will participate in a salary survey, or purchase data from a survey provider. There are different surveys for different sectors. For example, in the tech world, a company would want to use tech specific data, to make sure that they are paying their employees in line with what competitors would be. In oil & gas, there would likely be an oil & gas specific survey. Why is this important? Because certain sectors pay a premium. Technology should pay more than general industry, as should oil & gas. Charities / non-profits may not pay as much as private sector but there will be survey data specific to that sector. It’s about comparing like-for-like companies and like-for-like roles. All jobs, whether corporate, or technical will be in the survey. Different salary surveys use different methodologies, but each will have a way of categorising which discipline the role is in (whether it’s as a HR Manager, Software Engineer, Systems Engineer etc) and the level. Level usually denotes seniority, experience and the scope of the role.

You may notice I’ve been using the word “role” a lot. That’s because when benchmarking, it’s about the role, and not the person. Benchmarking (i.e. matching a job) is supposed to be as objective as possible. Does the person who is filling the role play a part in it? Absolutely, but it won’t be the key determining factor. I think we tend to take a very personal view on pay. When we’re lowballed, it feels like an insult, or that a company doesn’t want to pay what we think we’re worth, when really, it can be more about the role than about you as an individual.

Possible applications here: Ask your manager if you can see your benchmark data. If you’re high in your range, ask what you need to do in order to get to the next level. Think about how you can expand your role to warrant a raise or a promotion.

A company’s pay philosophy will also have an effect. The market data isn’t the end-all-be-all. It is a guide, and it is up to the company to determine how to use it. For example, a company may target median, to be exactly in line with market, they could take lower quartile (25th percentile) because they’re a smaller company and may be competing for talent with smaller companies, or they could take upper quartile (75th percentile) to be more competitive with large companies. Company A might place more value on their base pay and have give their employees a lower bonus target percentage, and Company B might place more value on the variable piece and offer employees a higher bonus target percentage.

I’ll get working on some other topics related to this, but if you have specific questions, let me know.