Become a Market Pricing Expert: The 4-Step Playbook

Managing market pricing is a juggling act. Compensation professionals must balance limited resources, disjointed data, and employee expectations, and doing so is easier said than done. 

‍

In a recent market pricing webinar, Pave tapped two industry experts—Evan Salisbury, Head of Total Rewards at Ancestry, and Kaylyn Reid, Head of Total Rewards and Analytics at GoFundMe—to dig into the details of how they approach market pricing at their organizations. We rounded up their insights to create this playbook, which can help you conquer your compensation market pricing processes. 

‍

Keep reading to get their tips on how to:

• Lay the groundwork with job architecture 
• Set market ranges
• Use data to create salary bands 
• Communicate ranges with employees

{{mid-cta}}

‍

Step 1: Set the Foundation With Job Architecture

Job architecture serves as a roadmap for your business. It typically outlines reporting structures, role progression, job responsibilities, and competencies but can be as straightforward as defining job levels and descriptions. 

It helps you navigate recruitment, performance management, and compensation planning as you scale, so “the earlier you set your job architecture, the better,” shared Kaylyn. “You don’t have to go the whole gambit and create a ton of jobs and ladders, but setting the foundation helps relieve stress later on,” she continued. 

‍

When designing your job architecture, it’s helpful to consider your growth stage. If you work for a startup where priorities change often, creating a roadmap that will guide you for the next 6-18 months may be best. More mature organizations usually build their job architecture with the next few years in mind. 

‍

In either case, it’s important to revisit your job architecture regularly – it isn’t a set-it-and-forget-it exercise. You should reevaluate your job architecture as your company evolves, especially if you’re:

• Planning to scale by entering new markets or launching new products
• Experiencing retention issues or having trouble getting candidates into the pipeline
• Changing your talent management philosophy

‍

Or, sometimes, the right time to reevaluate your job architecture is simply, “when it stops working for your organization,” shared Kaylyn.

Step 2: Choose Your Salary Structure 

Once you’ve laid the foundation with job architecture, the next step is to decide how employees will be paid. There are many approaches to setting salary bands, but here are a few of the most common ones.

Job-based

Companies that use a job-based structure create salary ranges for each position within the organization. 

‍

This approach can create trust with employees and help further pay transparency efforts. However, developing tens or hundreds of job-based ranges is an extremely tedious and time-consuming process that can be difficult to maintain, especially as the business grows.

Function-based

Function-based salary ranges group together roles that have similar compensation structures. 

‍

This creates a simplified approach to managing compensation bands as there are fewer ranges to monitor and track. The flip side is that this approach is not as granular as job-based.

‍

Function-based ranges can also boost pay transparency efforts. As Kaylyn shared, “Having function-based ranges creates equitability within the teams that have a lot of roles that are really similar to each other.”

Broad-based

A broad-based structure slots jobs into ranges and assigns them grades based on the relative market value of the position.

‍

This approach can be challenging for smaller organizations with fewer resources because it requires frequent reevaluation of pay grades and robust communication with employees. 

Step 3: Gather Relevant Market Data 

Market pricing isn’t possible without real-time, relevant, and accurate market data. Data gives you insights into market trends and enables more informed compensation decision-making. But, not every data provider offers the same benefits. Building a comprehensive data set often involves using multiple compensation data sources, like survey data vendors and compensation management platforms.

‍

For more information on the compensation management landscape, check out “The Buyer’s Guide to Compensation Management Software and Tools.”

‍

Once you’re equipped with robust market data, consider layering in geo tiers. Many companies today take a location-based approach to account for a distributed workforce.

‍

The team at Ancestry uses three tiers, including a premium market in San Francisco, an intermediary market with some select cities, and a national average for all other cities. GoFundMe also uses three geo tiers – one US national tier and two premium tiers for cities with higher cost of labor like San Francisco, New York City, Austin, Boston, Washington DC, and Los Angeles. 

‍

Finally, with any data, it’s necessary to double-check the details. Data is rarely 100% perfect, so trust your gut. Validate if your ranges make logical sense because, as Kaylyn shared, “the bands we set are only as good as the data that goes into them.” 

Step 4: Implement & Communicate Your Compensation Strategy

After you’ve chosen your salary approach, you need to share relevant details with employees. 

‍

Here are tips from Evan and Kaylyn on how to communicate pay information effectively.

• Over-communicate: Share information in different formats and settings so employees understand your compensation philosophy. “We want to make sure employees know how their pay fits into the overall strategy and that they feel confident that we are being equitable in our pay decisions,” shared Kaylyn.
  
• Create an accessible internal resource: Document your salary approach so employees can easily view more in-depth information. The team at GoFundMe created an internal intranet page detailing their compensation philosophy, relocation policy, bonus program, and equity details. “We put as much as we could on paper. We spelled it out for employees and made sure they could easily access it,” said Kaylyn. “A comprehensive intranet page will pay dividends over time as you get employee questions and can point them to a resource you’ve already created,” emphasized Evan. ‍
• Get executive buy-in: Involving leadership adds credibility and gives employees more confidence in your pay strategy. “You want to make sure that you roll out your plan from the top down,” shared Kaylyn. ‍
• Facilitate 1:1 conversations: Giving employees a direct way to contact HR helps them get their questions answered and enables them to build a personal connection with the compensation team. And, if you’re getting a lot of questions, it’s likely a sign you need to reevaluate how you’re communicating your message.

Level-up Your Market Pricing With Pave

Compensation market pricing is typically a nuanced and complex process. With Pave, you can improve efficiency and build confidence in your ranges. 

‍

Pave Market Pricing enables you to aggregate all your market data sources, map that data to your job architecture, fill in data gaps, and automate range generation. 

‍

Get a demo to learn how you can get time back in your day and build more accurate compensation bands.