The 70% Rule: A Guide to Market Benchmarking

When working to match an organization's jobs to published compensation surveys, and especially when involving line managers and supervisors in this matching process, I have found it helpful to use something I call "the 70% rule". 

The rule works in this way:  When trying to assess whether or not a survey job description fits, or matches to, one of the organization's jobs, we use 70% as our guidelines.  If the survey job description appears to capture 70% or more of the job content, then we call it a match.  If it doesn't meet the 70% criteria, we don't use it. 

I am a fan of involving line managers in survey matching for the jobs reporting to them, and I find that this rule of thumb helps managers with that fuzzy, challenging  and sometimes disconcerting task.  Of course, it also helps to remind them that the benchmark jobs found in surveys are not "real" jobs, but rather common roles that exists across many organization.  For this reason, survey job descriptions are purposefully brief and generic.  They must be defined broadly enough that they can provide comparisons across a range of organizations, so that a critical mass of pay data can be collected.  If they were defined in a way that exactly matched the jobs in your organization, the likelihood that any other employer would see them as matches and provide data is pretty slim.  Then you have a perfect match - but no competitive pay information.  So, yes, at the end of the day, the act of market benchmarking must involve some compromise.  And because this involves art as well as science, it helps to have a guideline like the 70% rule to help us make the calls.

Note that there are multiple versions of this rule floating around the rewards/compensation profession, including "the 75% rule" and "the 80% rule".  The concept is the same, the percents vary slightly.  I was raised on 70% and that works for me.

Comments

[Dan]

outstanding article and great points..if only there was a way to help managers understand the difference between the roles & job content vs the perceptions they have of the poeple in these positions.

[Angel]

Can the same rule be applied for compensation? i.e. when using salary.com for business overview of salary we take the 50th percentile for our job descriptions. If the person has to cross mutiple job titles, we'll add about a 5%-7% increase for the additional required background and role.

[Ann Bares]

Angel:

See this post for some thoughts about market pricing employees with multiple job roles -

http://compforce.typepad.com/compensation_force/2008/02/mixed-bag-marke.html

Thanks!