great

2. BENCHMARKING
Prepared By:
Muhammad Anwar Arqam
SLIDES WORK
DISTRIBUTION
Starting & Ending 2
Title, Reading
Material, &
Learning Outcomes
3
Diagrams 10
Tables & Allied 9
TEXT 25/44

3. READING MATERIAL
 Book:
THE COMPENSATION
HANDBOOK, 5th EDITION
 Authors:
LANCE A. BERGER &
DOROTHY R. BERGER
 Chapter #: 10
 Internet Resources
 Book:
ARMSTRONG’S
HANDBOOK OF REWARD
MANAGEMENT PRACTICE -
IMPROVING
PERFORMANCETHROUGH
REWARD, 3rd EDITION
 Author:
Michael Armstrong
 Chapter #: 18

4. LEARNING OUTCOMES
To Understand:
 Compensation Benchmarking Environment
 Labor Market
Types Of Compensation Surveys
 Data Collection, Display, & Use
 Sources Of Compensation Information

7. 6 BENCHMARKING BEST PRACTICES
1. Start Early
2. Have A Timeline
3. Choose Appropriate Peer Group
4. Look Outside Your Industry
5. Stick To Meaningful Metrics
6. Focus On Improving Operations.

8. Systems of Performance Measurement

9. COLLABORATIVE & GLOBAL
BENCHMARKING
Identifying,
Understanding, &
Adapting
Outstanding
Practices
Of Organizations
Anywhere From
World
To Improve

10. COMPENSATION BENCHMARKING
Reward Strategies: Right Amounts, Right People, RightThings
Benchmarking: Right Amounts (Market Data / Demand &
Supply)
Balanced Pay: NotToo Low OrToo High (Ranges/Brackets)
 Wastage Of Financial Resources Or High Risk Of Unwanted
EmployeeTurnover
 One-Size-Fits-All Vs Benchmarking
 Better Compensation Information LeadsTo Better Decisions,
Clearer Messages, & Defined Expectations.

11. LABOR MARKET & PEER GROUP
1. Selecting Relevant & Current Peer
 Markets Are Dynamic & Are Constantly Changing
 LastYear Appropriate Peers May Not Be Appropriate For
Current
2. Peers Should Stem From Reasonably Large Sample
 Ideal Peer GroupTypically Contains At Least 10 Organizations
3. Peers Should be Consistent in Size & Scope
 Operating Characteristics Of Organization, Industry, Sector

13. TYPES OF COMPENSATION SURVEYS
1. JobTitle Matching
Simple But Highly Subjective & Misleading
Used For “Ball Park” (Approximate Figure Or Estimate)
Not Recommended For Development Of Salary Structures
2. Market Pricing (JobTitle & Job Description Matching)
More Accurate & effective
3. Job Evaluation (Point, Grade Or Factor Comparison
System)

15. 4. Base Salary: Irrespective Of Individual, Unit, Or Company
Performance (Fixed Bonus, Bonus, Holiday Bonus, Leave
Encashment,Vacation Allowance)
5. Total Cash: Sum Of Base Salary + Short-TermVariable
Payments
ReferTo Incentive Payments Contingent On Discretion,
Performance, Or Results Achieved
6. Total Direct Compensation: Sum OfTotal Cash + Long-
Term Incentive Payments (LTIPs)
LTIPs Are EconomicValuesTo Employee On Date Of Grant
Of Each Long-Term Incentive Reported As A Cash Equivalent

16. APPROACHES USED FOR DATA COLLECTION IN
COMPENSATION SURVEYS
Telephonic, On-Line, & On-Site Surveys

18. BENEFITS
1. Cost Basis
Employer’s Cost For A Specific Benefit Or
Perquisite
2. Value Basis
PerceivedValue For A BenefitTo An Employee
Based On Level Of Benefit Received

19. WORK EXPERIENCE
1. Acknowledgment, Appreciation, & Recognition:
ExtentTo Which Initiatives i.e. Service Awards
(Noncash) Are UsedTo Recognize Contribution
2. Work–Life Balance: How An Organization Uses Family
Programs, Nontraditional Work Arrangements, &
Other FactorsTo Create A Perceived Higher Quality Of
Life Inside & Outside OfWork
3. Culture: How Leadership, Diversity, & Other Factors
Create A PositiveWork Environment

20. 4. Development
ExtentToWhich Employees Receive Career
Development & Learning Opportunities
5. Environment
How JobVariety, Workspace, & Company
CombinesTo Affect An Employee’s
Perception Of Employer

21. DATA DISPLAY
Most Survey Data Are Presented In One OfThree
Fashions:
1. Tabular Display (Numeric)
2. Graphic Display (Visual)
3. Regression Analyses (Formulas & Chart Lines).

22. TABULAR DISPLAYS
1. Arrays
High-To-Low Listings Of All Data Collected
To See How Data Is DistributedThrough Range
2. Statistical Reference Points
Arithmetic Mean / Simple Mean / Average
Weighted AverageVs. Simple Or Unweighted
Average

27. 3. Standard Deviation: How WidelyValues Are Dispersed
From Mean
4. Median (50th Percentile Or Second Or Inter Quartile):
Middle Of All Data Points Reported
Commonly Referred As Market Rate
5. Percentiles (Quartiles, Deciles, etc.): ReferTo Locations In
An Array BelowWhich A Certain Portion Of Data Lies
75th Percentile: Frequently In High-Paying Companies
25th, & 50th Percentiles: Many Analysts PreferToView.

28. MEASURES OF DISPERSION
1. Upper Quartile:Value AboveWhich 25 % Of
IndividualValues Fall
2. Lower Quartile:Value Below Which 25 % Of
IndividualValues Fall
3. Inter-Quartile Range: Difference Between Upper
& Lower Quartiles.

29. FREQUENCY DISTRIBUTIONS
 Used In Lieu Of Arrays If
Presenting Individual
Data May Loose
Confidentiality Of
Participants
 Shows How ManyTimes
A Digit Is Reported Within
Certain Ranges Of Data

33. 2. Graphic Displays
 Charts (Line, Pie, Bar) For Presenting DataToTop
Management
 Where Big Picture Is More DesirableThan Details
3. Regression Analysis
 Very Powerful Form Of Presentation RelatesTwo Or
More Data Elements & Shows Central Data
RelationshipTendencies
 Forecast Reliability Of InformationTo Its Dispersal
Around Line Of CentralTendency.

35. USING SURVEY DATA
 Assessing Reliability & Usefulness Of Data Before
Incorporating Information Into Spreadsheet Or Database
 All Survey Data Are Not As Meaningful As Required
 Choose Annual Survey SourcesThat Contain Majority Of
Positions & Competitors; Don’t LimitTo One Source Of
Information; Compare Data From Different Sources
 Don’t Get Only Free Survey Information
 ChooseVendors Renowned ForTheir Quality &
Comprehensiveness Of Survey Instruments.

36. TIPS FOR MARKET RATE ANALYSIS
1. Select Benchmark Jobs For Which Market Data Is Available
2. Identify All Sources Of Market Rate Information Available
3. Evaluate SourcesTo Assess Likelihood Of ProducingValid &
Reliable Information
4. Use MoreThan One SourceTo Collect As Much Comparative Data
As Possible
5. Make Every AttemptTo Match Internal Benchmark Jobs With Jobs
Covered In Data Sources In OrderTo Compare LikeWith Like
6. Analyze Data From Each Source; IfVariable Results Are Obtained
Use JudgementTo Produce Most Reliable Results

37. CHARACTERISTICS OF RELIABLE COMPENSATION SURVEYS
 Clear & Consistent Definitions OfTerms Used
Tested & Accepted Method UsedTo Compare On Like & Fair
Basis
 Reasonable Representation Of Market For Determining
OrganizationsTo Include In Surveys
 Representative Data Sample
Trends Analyzed On Basis Of Comparing Same Organizations
 ShortestTime Possible Between Dates Of Survey & Its
Publication

38. LEGAL CONCERNS ASSOCIATEDWITH INFORMATION
SHARING
■ Survey Should Be Managed By IndependentThird Party
■ Data Provided By Survey Participants Must Be MoreThan 3
Months Old
■ At Least 5 Data Participants Each Representing Not More
Than 25 % Of Data
■ Results Must Be Reported In SuchWayThat No Recipient
Can Determine Specific Participant Data
■ For Conducting Salary Survey Must Seek Legal Counsel

39. SOURCES OF COMPENSATION INFORMATION
Relevant & Reliable Market Data Is Required In Benchmarking;
It’s More CredibleTo Use Direct Market DataVia Credible
Source; Key Considerations For Sources Include:
 Comparator Organizations
 Peer Groups
 Major Compensation & HR Consulting Firms
 Government Bodies
Trade & Professional Organizations
 Survey Bibliographies.

40. 1. Published Surveys
2. Consultants’ Databases
3. Special Surveys
4. Club Surveys
5. Advertisements
6. Other Market Intelligence
OTHER SOURCES OF MARKET DATA

41. GETTINGTHE MOST OUT OFYOUR BENCHMARKING
EFFORTS
 Start By Creating Survey Library
 Be Selective In RespondingTo Surveys
 Consolidate Data Onto One Spreadsheet or
Database
 Derive Single Answer From Each Set of Data
 Answer All Questions toThe Best ofYour Ability.