Developing a compensation strategy and determining your company’s strategy in the market can seem like an overwhelming process. Our goal is to make it simple and take some of the confusion out of that process as we discuss a “Meet the Market” strategy.
There are three main compensation strategies
the-market and meet-the-market. We will be discussing meet the market in this article. Meet the market compensation strategy revolves around doing market research and averaging your workforce’s pay
so that it essentially matches the middle of the market. This doesn’t mean that every one of your employees is making the average salary for a particular role. It means that you are averaging that middle point. You will have employees that are making more and employees that are making less. Generally, in a meet the market plan you will offer rapid increases to those who are making less than the middle of the market and then slow down the increase amount to avoid getting too far ahead of the market.
The compensation strategies that most companies employ are tied into one of three ideas. In a lead the market strategy, companies target the 75th percentile of a pay range for a particular role. In a lag the market strategy, companies aim for the 25th percentile for a particular role. A meet the market strategy is meeting the 50th percentile.
There are many advantages and disadvantages of a meet the market strategy. We can’t detail all of them, but we will highlight some of the important themes.
A meet the market is a fairly safe bet for your organization, but there are some sure fire ways to know that your organization is ready for a meet the market strategy!
You may have certain roles that you need to lead the market and others that you can lag the market. Just because you choose one compensation strategy doesn’t mean that you are stuck with that strategy. It is highly recommended to mix and match strategies so that you can meet all of your organization's needs.