In each of the executive searches that we perform, prior to engagement we conduct a salary comparability study to determine market rates and a likely range of compensation for base salary, bonus, and incentive compensation. The assessment of compensation and competitive pricing helps us communicate with our clients and frame expectations for likely salary demands of the top 90 percentile candidates. We frequently create as many as 20 different salary data points to create our banded average of compensation and terms. There are many for-pay-services that can help you create compensation studies, and this is something ePraxis has done for time to time for our clients.
However, what if you were just interested in getting an idea about compensation and wanted to forgo the expense of a detailed study? What if a Back-of-the-envelope-calculation (BOTEC) was all you needed? Here now is some advice for the DIY (do-it-yourself) population that would like a little assistance in determining market competition for rates of your next hire, or perhaps your own compensation.
For this illustration, I will use the determination of competitive compensation for a financial controller.
Go to Google, type in: "payscale controller compensation salary" and you will see a chart like the following: Shown below is the average compensation for controllers;https://www.payscale.com/research/US/Job=Financial_Controller/Salary
Note that there is a wide range of financial controller calculations and so you will want to visit several portal tools (salary.com and glassdoor.com) to create a blended rate of ranges for your target compensation. Additionally, if you are looking for great talent, they will always be at the end of the scale (the 90th percentile, not the average or median comp). What you might want to view here is the percentages provided for the bonus, profit sharing and commission, and this figure can be computed into a percentage vis a vis your target base compensation for the controller. I like the Payscale site as it is informative, and has a broad range of positions and compensation data. However, this is only one site and you will want to visit additional sites to get a range of rates.
Go to Google, type in "salary.com controller compensation salary" and you will see the following: https://www1.salary.com/Controller-Salary.html
What you will notice below is that Salary.com site considers a wider range for Controller as shown in the chart below. Notice the pay range of $158,717 to $193,862 nationally.
What's cool about the Salary.com site is that you can tailor the comp to the number of employees, geography, industry, and who the controller reports to. This generic information is helpful, however, you can really narrow down your compensation info by using the levers on the site to switch up topics like education level, who the controller reports to, number of individuals managed, etc.
Have fun exploring this site to develop the ranges for your compensation plan. Salary.com has done a nice job on this site and there is much to explore for the HR executive. However, we are still not done yet. We need at least one more reference point.
Next go to Google, type in "Glassdor.com controller compensation salary" and you will see a report out like the following:
Like the other sites, Glassdoor provides a benchmark of general compensation for Controller. You will note that these controller rates are closer to the rates produce by Payscale above. Note below in the chart the nuance of different pay scales for controller types (assistant, corporate, plant, financial, etc).
What's neat about the Glassdoor site is the specific references to compensation listed by company types, and you might be able to view companies like yours, and the compensation levels.
Next, after you have the general ranges of compensation for Controller from the three sites above, you can generalize the data and estimate the competitive ranges of compensation. You now have the ability to determine average compensation.
I suggest that you create a spreadsheet with your compensation ranges, high to low, average them, and you have a way to talk about compensation data from real numbers, and you know you are not overpaying for base salary compensation.
Next, you can determine your incentive compensation for the controller. Typically controllers have a blend of team and individual performance associated with their plans. When I am putting plans together for compensation for controllers, I avoid plans that automatically pay a certain number, and instead focus on giving a percentage of a profit pool or EBIDTA allowance that is set aside for redistribution to the key employee stakeholders.
If this is not attractive to you, you might consider a two- or three-fold strategy for bonus or incentive compensation:
(1) Financial Performance Overall, something akin to your profits interest or profit-sharing plans.
(2) Individual Controller Incentive: perhaps a LEAN management waste reduction incentive tied directly to the controller's efforts; sharing X percentage of the efforts; I call it "Gainsharing."
(3) Team incentive hitting and supporting sales and operations goals; its always wise to have team goals so that everyone supports each other, and reduces cut-throat behavior that is toxic to a team
Lastly, I would avoid any reference to a COLA (cost of living) adjustment, and instead focus a modest base in the competitive range fo the talent you onboard, and get them to share in the upside and benefits they bring. Gainsharing has great value in a company and helps employees think like owners.
I hope this is helpful to you.