In a recent post, compensation consultant Ann Bares questions whether salary ranges, long a staple of compensation programs among America’s companies and organizations, are still a useful tool given the relatively slow pace of annual salary growth during the past two decades.
There is no question that administering salaries — and, in particular, differentiating rewards according to performance — is challenging in what I’ve long described as a “four percent world” (or, perhaps, for the past two years, a “zero to three percent world”). However, I believe that for the vast majority of nonprofit organizations, salary ranges remain an important and effective tool. This is especially true for growing nonprofits which find themselves adding staff and needing to ensure that salaries are equitable and competitive while simultaneously managing compensation costs.
A couple of years ago, I was retained by an organization in just that situation. The organization, which had been in existence for about 20 years, experienced significant growth through the previous decade, growing from fewer than 50 employees to more than 200. One of the problems the organization was experiencing was a high level of employee turnover, particularly among young, high-potential employees in their second and third years of employment. The organization’s management assumed this was related to compensation.
As I began to speak with employees and managers, I found that there was, in fact, a connection to compensation. But, rather than dissatisfaction with the actual compensation levels, an issue that emerged was that employees had no sense of what future opportunities existed compensation-wise in their current jobs or in positions to which they might aspire. Employees also questioned whether there was consistency and equity in compensation levels and the linkage between pay and performance.
Salary ranges are the foundation of a compensation program that can address each of these concerns and can serve the needs of a nonprofit organization and its employees in a rational, straightforward and effective manner.
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