Last week we did some 'probing' of executive remuneration and how it is influenced by economic factors. We touched on aspects such as equity, the need for perceived fairness and employee motivation.
Every so often, we hear people saying that, given their physical work in production, they should earn more than for example a person working in stores or in an office. Other people talk about their friend, with a similar job title, who works at a competitor but earns more than them. It would be amiss if we did not also mention dissatisfaction about a colleague that spends their time drinking coffee with clients, but has a company car and earns a bigger salary.
One also often hears of an entrepreneurial organisation, or small NPO, that grows and expands to a point where their informal hierarchy needs more structure. Management and the board starts qustioning if their salaries are on par with other similar organisations.
When we answer these questions, it is important that comparisons are credible and done correctly. Attempting to compare by title alone is not feasible. Just consider the title 'consultant', which has many interpretations and scopes of work. Also, consider the title 'store manager' where the size of the store and the value of stock and number of employees could differ radically. It is critical to compare apples with apples.
Today we publish a somewhat technical reflection about job grading, salary surveys and organisational remuneration. Starting with how the organisational strategy determines the staffing needs, we explain how differnt aspects work together to obtain internal and external equity.