Eddy’s HR Mavericks Encyclopedia
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Benchmark Jobs
Do you ever wonder if you are paying employees too much? Not enough? Benchmark jobs give you valuable points of reference to gauge whether you are leading, matching, or lagging in pay compared to the market. It also helps optimize job descriptions and effectively screen candidates.
What Are Benchmark Jobs?
Benchmark jobs are positions with a consistent set of duties across a large number of organizations. The consistency of criteria is what makes these roles reliable jobs to compare against. You will be comparing criteria such as the purpose of the job, key responsibilities, education, years of experience, the complexity and decision-making ability of the role, whether or not there are managerial duties, the rank in the company, and who they report to. When 70% or more of these criteria align between your role and the benchmark job, you have a valid match and can rely on the comparison as trustworthy data. In statistics, to attain a trustworthy answer, you want to know that the method for obtaining information is:
- Valid (which refers to the accuracy of the measure; are we actually measuring what we think we are measuring?)
- Reliable (whether results can be reproduced under the same conditions)
To accomplish this, you need enough data points to be confident that your conclusion is not skewed by outliers. Statisticians call this statistical significance. Benchmark jobs are useful because they are common (think quantity of data points) and requirements are similar, if not the same (think validity) from one organization to another, which makes them a reliable source of data to compare salaries.
Benchmark Jobs vs Non-Benchmark Jobs
Non-benchmark jobs are jobs for which there is little to no data, or the data is so varied that we cannot consider a match valid. This could be for a number of reasons, such as roles that are unique and specific to an organization, roles for which few organizations participate in salary surveys, or new, emerging jobs.
Why Are Benchmark Jobs Beneficial?
Benchmark jobs offer valuable insight to help you:
- Determine what skill level your organization needs.
- Ensure that the job description accurately reflects the purpose, responsibilities, and necessary qualifications of the role.
- Assess how much the market is paying for the level of knowledge, skills, abilities, and experience a specific job function requires.
- Set a strategic pay range based on how your organization values each role compared to the market.
Best Practices for Benchmarking Jobs
Benchmarking is a complex statistic-driven task that requires training. However, let's look at a couple of best practices.
Focus on Function and Level
Ensure that the matching process is focused on the function and level of the position rather than the compensation. If the organization requires the skills of an analyst III, you should expect to pay the rate of an analyst III. For example, if a hiring manager determines that they need an employee with the skills of an analyst III but can only afford to pay the mid-range of an analyst II, and the role is advertised as an analyst III, you are likely to have a difficult time filling the role. Once the role is filled, the candidate (who has the skills of an analyst III and was hired as an analyst III but is being paid the rate of an analyst II) may only stay a short time before quitting because they know they are being underpaid for the level of work they are doing. This in turn may result in undesired outcomes like earning your organization the reputation of not providing appropriate compensation for what you ask people to do. This may make it even more difficult to hire and retain qualified candidates, resulting in lost productivity and increasing the time and money spent finding and training replacements.
Create Clear Development Paths
Another example revolves around employee development. If an organization only has a single job title to describe employees, such as “engineer,” you may be missing opportunities to create clear paths for employees to advance into as they gain more skills, education, and experience. Let's see how benchmark jobs can assist you here. You can use tools like observing the employees performing their roles, job shadowing, interviewing employees and managers, and referencing the current job description to determine what the actual job duties and qualifications are and update the job description. Next, compare the updated job description to the market data to find a valid match. Once you have found a valid match, look for levels above and below the position to identify a job family. As a result, you may recommend instituting job levels (such as I, II, and III) for the mechanical engineer job so employees have something to work towards and managers have a way to recognize their growth and development.
How to Benchmark Jobs
In this section, we will go over the basics of ensuring your benchmark matches provide valid and reliable data. The main idea is to ensure the best match possible that could reasonably be considered a match.
Step 1: Check the Job Description
Ensure the current job description accurately reflects the employee’s current role and responsibilities. Sources include employees currently in this role and their manager(s).
Step 2: Compare With Survey Data
Organizations that collect market data to benchmark against include companies like Radford, Mercer, and CompaAnalyst; self-reported data such as salary.com, indeed.com, and glassdoor.com; or local, state, or federal datasets such as local area survey data or the Bureau of Labor Statistics. Compare your internal job to several potential matches to benchmark jobs in your dataset. Identify these matches using data such as:
- General purpose and function of the job within the organization
- Required education
- Required years of experience
- The complexity and scope of work
- Seniority within the organization
- What level of position this job reports to (i.e., supervisor, manager, director, VP, President, CEO, etc.)
- Managerial duties
- And, if you are in the United States, Fair Labor Standards Act Status (exempt or non-exempt)
Step 3: Identify the Closest Match
If 70% or more of the criteria in Step 2 match the internal job description, you have likely found a good potential match. Organize your top potential matches, share them with the hiring manager, and ask them which benchmark job is the best match to the internal job. (When you prepare the options to share with the hiring manager, remove the compensation information so the decision is made based on the function and level of the role rather than market compensation data).
Step 4: Recommend a Pay Range
Find out from the hiring manager how much they want to lead, match, or lag the market based on the organization's strategy and the value the role contributes to that strategy. Calculate a recommended pay range based on how much your organization wants to lead, match, or lag the market compensation data.
What if There's No Good Match?
If a job does not have a match, the next best thing is to consider if the job is a blend of one to three roles that you can match. Estimate what percentage of time is invested in the responsibilities of each role. Once you have matching salaries for each of the roles that this job combines, you can use those percentages to calculate a hybrid match. (This is more time-consuming and may not be preferable for large-scale projects or jobs that are unique.) For unique jobs, one possible source of insight is to evaluate internal data on turnover and how much employees were traditionally paid for this role to determine if the company has historically underpaid for the role or not.
Topics
Spencer Vance
Spencer Vance is an alumni of the MHR program at USU. He is a recipient of the HR professional of the year award for 2021 from Utah SHRM and PHR from HRCI. Spencer has over 5 years of professional experience supporting global corporate HR, 4 years of executive coaching, 4 years of providing HR support to manufacturing, logistics, and supply chain entities, and has done small-scale consulting for small to medium size organizations.
Frequently asked questions
Other Related Terms
Eddy’s HR Mavericks Encyclopedia
Benchmark Jobs
Do you ever wonder if you are paying employees too much? Not enough? Benchmark jobs give you valuable points of reference to gauge whether you are leading, matching, or lagging in pay compared to the market. It also helps optimize job descriptions and effectively screen candidates.
What Are Benchmark Jobs?
Benchmark jobs are positions with a consistent set of duties across a large number of organizations. The consistency of criteria is what makes these roles reliable jobs to compare against. You will be comparing criteria such as the purpose of the job, key responsibilities, education, years of experience, the complexity and decision-making ability of the role, whether or not there are managerial duties, the rank in the company, and who they report to. When 70% or more of these criteria align between your role and the benchmark job, you have a valid match and can rely on the comparison as trustworthy data. In statistics, to attain a trustworthy answer, you want to know that the method for obtaining information is:
- Valid (which refers to the accuracy of the measure; are we actually measuring what we think we are measuring?)
- Reliable (whether results can be reproduced under the same conditions)
To accomplish this, you need enough data points to be confident that your conclusion is not skewed by outliers. Statisticians call this statistical significance. Benchmark jobs are useful because they are common (think quantity of data points) and requirements are similar, if not the same (think validity) from one organization to another, which makes them a reliable source of data to compare salaries.
Benchmark Jobs vs Non-Benchmark Jobs
Non-benchmark jobs are jobs for which there is little to no data, or the data is so varied that we cannot consider a match valid. This could be for a number of reasons, such as roles that are unique and specific to an organization, roles for which few organizations participate in salary surveys, or new, emerging jobs.
Why Are Benchmark Jobs Beneficial?
Benchmark jobs offer valuable insight to help you:
- Determine what skill level your organization needs.
- Ensure that the job description accurately reflects the purpose, responsibilities, and necessary qualifications of the role.
- Assess how much the market is paying for the level of knowledge, skills, abilities, and experience a specific job function requires.
- Set a strategic pay range based on how your organization values each role compared to the market.
Best Practices for Benchmarking Jobs
Benchmarking is a complex statistic-driven task that requires training. However, let's look at a couple of best practices.
Focus on Function and Level
Ensure that the matching process is focused on the function and level of the position rather than the compensation. If the organization requires the skills of an analyst III, you should expect to pay the rate of an analyst III. For example, if a hiring manager determines that they need an employee with the skills of an analyst III but can only afford to pay the mid-range of an analyst II, and the role is advertised as an analyst III, you are likely to have a difficult time filling the role. Once the role is filled, the candidate (who has the skills of an analyst III and was hired as an analyst III but is being paid the rate of an analyst II) may only stay a short time before quitting because they know they are being underpaid for the level of work they are doing. This in turn may result in undesired outcomes like earning your organization the reputation of not providing appropriate compensation for what you ask people to do. This may make it even more difficult to hire and retain qualified candidates, resulting in lost productivity and increasing the time and money spent finding and training replacements.
Create Clear Development Paths
Another example revolves around employee development. If an organization only has a single job title to describe employees, such as “engineer,” you may be missing opportunities to create clear paths for employees to advance into as they gain more skills, education, and experience. Let's see how benchmark jobs can assist you here. You can use tools like observing the employees performing their roles, job shadowing, interviewing employees and managers, and referencing the current job description to determine what the actual job duties and qualifications are and update the job description. Next, compare the updated job description to the market data to find a valid match. Once you have found a valid match, look for levels above and below the position to identify a job family. As a result, you may recommend instituting job levels (such as I, II, and III) for the mechanical engineer job so employees have something to work towards and managers have a way to recognize their growth and development.
How to Benchmark Jobs
In this section, we will go over the basics of ensuring your benchmark matches provide valid and reliable data. The main idea is to ensure the best match possible that could reasonably be considered a match.
Step 1: Check the Job Description
Ensure the current job description accurately reflects the employee’s current role and responsibilities. Sources include employees currently in this role and their manager(s).
Step 2: Compare With Survey Data
Organizations that collect market data to benchmark against include companies like Radford, Mercer, and CompaAnalyst; self-reported data such as salary.com, indeed.com, and glassdoor.com; or local, state, or federal datasets such as local area survey data or the Bureau of Labor Statistics. Compare your internal job to several potential matches to benchmark jobs in your dataset. Identify these matches using data such as:
- General purpose and function of the job within the organization
- Required education
- Required years of experience
- The complexity and scope of work
- Seniority within the organization
- What level of position this job reports to (i.e., supervisor, manager, director, VP, President, CEO, etc.)
- Managerial duties
- And, if you are in the United States, Fair Labor Standards Act Status (exempt or non-exempt)
Step 3: Identify the Closest Match
If 70% or more of the criteria in Step 2 match the internal job description, you have likely found a good potential match. Organize your top potential matches, share them with the hiring manager, and ask them which benchmark job is the best match to the internal job. (When you prepare the options to share with the hiring manager, remove the compensation information so the decision is made based on the function and level of the role rather than market compensation data).
Step 4: Recommend a Pay Range
Find out from the hiring manager how much they want to lead, match, or lag the market based on the organization's strategy and the value the role contributes to that strategy. Calculate a recommended pay range based on how much your organization wants to lead, match, or lag the market compensation data.
What if There's No Good Match?
If a job does not have a match, the next best thing is to consider if the job is a blend of one to three roles that you can match. Estimate what percentage of time is invested in the responsibilities of each role. Once you have matching salaries for each of the roles that this job combines, you can use those percentages to calculate a hybrid match. (This is more time-consuming and may not be preferable for large-scale projects or jobs that are unique.) For unique jobs, one possible source of insight is to evaluate internal data on turnover and how much employees were traditionally paid for this role to determine if the company has historically underpaid for the role or not.
Topics
Spencer Vance
Spencer Vance is an alumni of the MHR program at USU. He is a recipient of the HR professional of the year award for 2021 from Utah SHRM and PHR from HRCI. Spencer has over 5 years of professional experience supporting global corporate HR, 4 years of executive coaching, 4 years of providing HR support to manufacturing, logistics, and supply chain entities, and has done small-scale consulting for small to medium size organizations.
Frequently asked questions
Other Related Terms
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