For decades benchmarking has been the private sector's employment solution, forcing candidates into salary bands the way square pegs fit into round holes – often by shaving off some sides. Published by industry bodies and recruitment firms after surveying multiple companies, these annual benchmarking studies attempt to explain what salary range a role (usually by job title) is paid within each industry.
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Cleverly marketed, they have been popular for so long because the data "benefits" two client segments: the employees and companies. Employees are told to use the range to ascertain their market value, while firms use the data to budget for new roles, with a level of comfort that they are in step with what the market is paying. However, as anyone who has interviewed or recruited recently knows, benchmarking is becoming increasingly unreliable.
Using salary benchmarks is dangerous for both the companies that rely on it to recruit and for executives who expect to be paid within a range. Some companies give benchmarking a cursory glance at budget time. Other companies absurdly state publicly and proudly that they pay only "up to the 75th percentile" of the industry's benchmark, a declaration that rarely attracts top talent (nor motivates their existing employees).
By evaluating a candidate and their eligibility for a role on salary rather than experience, these businesses often remove the most qualified candidates from the process, and it's these companies that employees should be wary of. The tip-off? The "What is your current salary/salary expectation?" question which will be often one of the first questions in the screening interview.
I was reminded of this recently when an old colleague shared his dismay after commencing a senior role in the software industry. It had been a delicate hiring process because the previous manager of the division had held the title of executive general manager…and before this had been the executive assistant! It was a classic and all too common case of a company that used a job title to reward an under-skilled employee, who didn't have the experience of an EGM and wasn't being paid the salary of a senior manager either. Obviously, this person couldn't perform the role and my colleague was hired to fix the problem. So, if this company was involved with a salary benchmarking survey, what did their figures do to pull the average salary of a software EGM down?
And that's exactly where the concept of benchmarking becomes redundant - job titles and salaries can vary wildly from employee to employee, company to company and situation to situation. Benchmarking them on the criteria of industry, title and salary is not enough for companies to use as a mandatory remuneration guide. The best and most in demand employees will expect to be paid well above a salary band they know has been derived from a motley crew of industry peers. They will know what their value is and wait for an educated employer to offer them an attractive salary. Moreover, successful companies are more aware than ever that their people create their competitive advantage and by offering a salary that is not competitive, they can't expect their people to stick around.
Where salary benchmarking is successful is within the Government. Generally departments work on strict salary bands aligned to job codes. This works well because they are limited by budgets set annually, and they vigilantly hire employees into strict bands and titles. Given the number of variables in the private sector, the concept isn't vaguely relatable, which is why salary benchmarking should be an interesting, but never a deciding factor these days in the hiring process.
Claire Linton-Evans is a senior executive and author of the career bible for modern women, Climbing the Ladder in Heels – How to Succeed in the Career Game of Snakes and Ladders. climbingtheladder.com.au
