When it comes to compensation analysis, you know it’s not as simple as just updating a spreadsheet or comparing job titles. In our experience, figuring out fair pay today almost always demands more than just a DIY approach.
We talked with Susan Pyles, a seasoned compensation expert, who explained why many organizations benefit from outsourcing this critical project.
The State of Compensation Analysis Today
Modern compensation strategies should use two to three reputable market data surveys when pricing jobs. This is highly beneficial when matching benchmark responsibilities for unique roles. If you rely solely on free online pay data (or even riskier, Google or ChatGPT), you could miss these critical details.
Susan Pyles emphasized this point clearly: “most organizations should probably be outsourcing their compensation analysis.”
She explained that many organizations simply don’t have access to reliable, comprehensive market data. Even if you have your own compensation analyst, your data might be limited—perhaps relying on only one source.
According to Susan, relying on a single database may skew your market view, while credible, premium databases like those offered by ERI (Economic Research Institute) or CompAnalyst provide broader benchmarks crucial for a complete picture.
Common Pitfalls of a DIY Approach
While managing compensation analysis in-house may initially seem cost-effective, Susan pointed out that organizations often face common pitfalls.
One of the biggest issues is the risk of inconsistency and subjectivity in making compensation decisions. For instance, using job titles alone to set compensation can lead to misleading outcomes. Consider two employees with the title “Manager”: one might supervise a small team while another might manage an entire department.
Without deeply examining their day-to-day responsibilities, comparing their roles based on job title alone could be misleading. Susan noted that many organizations make these decisions informally, often failing to document their rationale clearly.
Another concern Susan raised is the potential for bias without systematic, documented processes. When you handle compensation decisions without clear guidelines, personal biases—intentional or not—can influence outcomes.
Expert-led, third-party approaches apply standardized, transparent methods to ensure decisions remain objective and defensible.
When Expert-Led Analysis Makes Sense
Choosing an expert-led approach offers some distinct advantages.
For starters, experts have access to reliable comprehensive compensation databases, apply established compensation methodology, and have broader market insights.
Susan emphasized premium compensation databases, which may be costly for organizations, are often accessible through a compensation consultant. These databases provide benchmarks and data that internal sources often lack.
Cost efficiency is another important factor. While an internal approach might seem economical at first, errors and inefficiencies quickly add up—and add cost.
Experts also mitigate risks and ensure fairness through clear, standardized methodologies. External experts bring an objective perspective free from internal organizational politics, improving trust in your compensation decisions.
From a strategic standpoint, expert-led analyses align your compensation decisions with your broader HR and organizational goals. Keeping your pay practices current helps you maintain your reputation as an attractive employer, which will impact your ability to acquire and retain top talent.
Some organizations with robust internal teams and extensive data subscriptions might manage effectively in-house. However, even larger companies would likely benefit from periodic external audits to validate and enhance their practices.
Assessing Your Compensation Strategy
Before deciding whether to handle compensation analysis internally or seek external support, Susan recommends closely evaluating your current processes. Consider the following key assessment areas:
- Data Access: Do you have subscriptions or access to multiple current, credible compensation databases?
- Expertise and Experience: Does your internal team possess the specialized skills required to conduct an accurate market data analysis?
- Process Documentation: Is your decision-making process clearly documented, or is it informal and ad-hoc?
Conclusion
As Susan Pyles pointed out, many organizations—especially those lacking access to comprehensive, up-to-date data—can gain a lot by working with an expert compensation partner. Experts not only bring robust data and reduce bias but also help align your compensation strategy with your business goals.
We encourage you to learn more about our 30-minute compensation strategy session. During these sessions, we talk through your compensation challenges and give you practical answers and advice so you have a clear action plan.
