Why Your Compensation Survey Data is Wrong

Fred WhittleseyPay and Performance: The Compensation Blog0 Comments

Most compensation professionals realize that compensation survey data has always been flawed. Over the past two years, however, it has become not only meaningless but dangerously misleading. Having always been skeptical of the data, my concerns were highlighted by a two-year stint as a consultant affiliated with the self-described “leading provider” of surveys for a particular industry. As I work with Boards of Directors to assess and design programs, these surveys have become not only of lessened importance, but a laughing stock. OK, this is a blog, so I can say it: the data is garbage.What’s the solution? For top executive pay, current disclosure requirements provide a wealth of information. While some still think that reading the annual proxy statement is sufficient, those who have been paying attention know that 8-Ks are a rich source of data, and 10-Qs are required reading for understanding equity compensation practices. The data changes daily! Online services are now available to facilitate the gathering of that data rather than requiring direct examination on the SEC’s EDGAR site. But outside of those top five positions no such data is easily available.

Those following the recent surge in internet-based services (whether you like the term “Web 2.0” or not) have seen a wave of new data become available in many fields but, as usual, HR is the lagging field. As Chief Compensation Officer of PayScale, Inc. I love to promote our service as a solution to this; in fact, I love to promote my blog on that site and have just done both.

Compensation has become exceedingly complex, not just for executives, but for all levels of employees. The talent market has become global. Individuals have an expectation of immediate access to information online without the interference of intermediaries (like HR departments). People know that they have value based on their unique combination of skills, experience, and work histories that may or may not fit into a job description box. All of these factors are real, not speculative and explain why that survey binder you have on your shelf – or that online data service that is a mere automation of your survey binder – is causing more harm than good.

As we enter the annual “executive compensation season” with daily (hourly, actually) news stories about executive pay, we will see the real-time nature of pay information like never before due to the new environment of disclosure. This will trigger a wave of scrutiny, and dissatisfaction, with published survey data coming from executives and boards of directors. And then HR, and their consultants, will have a real problem. Actually, they already do.

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