Every progressive business organisation compares its operations to similar ones in the industry; this is an effective way of staying abreast with trends that eventually become the standards. It’s also a reliable method of gauging whether their operations are at par or if they must implement some changes to ensure competitiveness and at the same time secure their valuable employees’ loyalty and satisfaction.
One of the “comparison tactics” employed for these purposes is salary benchmarking. This process uses internal job descriptions to match salary survey jobs to be able to determine the external salary rate for the benchmarked positions. The basic importance of this process is to ensure that a business organisation can provide the most deserved or suitable compensation package for its prized employees for their own and the employees’ peace of mind; the business wouldn’t worry about these employees setting their sights on greener pastures because they will be paid more lucratively for what they do, and the employees gain the confidence that they are getting what they truly deserve as important contributors to the organization — and, more importantly, that they are appreciated.
However, it’s not easy to procure information about what the competition is doing; top businesses are careful about sharing data about their operations. While some companies are known to plant moles that would leak information about the competition’s operations, there’s really no need for any of that undercover stuff because there are third-party organisations that can help. These companies have an in-depth understanding of different industry standards by gathering reliable information through membership surveys, an executive salary survey, etc. From the data these third-party groups present, businesses can then base their remuneration packages and make sure they are befitting the quality and overall value of service, the talent and promise, and the job description of their employees.
An important consideration behind the creation of better remuneration packages (which usually include basic salary, cash bonuses, share bonuses, special rewards, long term incentive plans (LTIPs) and pension) is that an organisation must not only follow the trend within the industry; rather, it’s also supposed to design its own that manifests its unique values and set its operations apart from the rest. Competitiveness is not about offering the same thing. It’s about being better and setting the bar.
It’s important to mention as well that competition among businesses can get dirty; pirating talented executives and promising employees is quite the norm these days. Therefore, it’s crucial for businesses to be smart with its compensation system for this can spell the difference between maintaining key players in the company and potentially losing them to a higher compensation offer from other companies. By using salary benchmarking, an enterprise gets to secure the higher likelihood of keeping its valuable employees content where they are.