As a participant or potential participant in the CompAnalysis Greater S.F. Bay Area 2006 Compensation Survey, you may be assessing your organization's needs for labor market data. This article addresses many of the questions that have been raised during our introduction of this new survey, which will provide participants with location-specific data on generic jobs within the nine Bay Area counties and two Central Coast counties.

The labor market is simply a measure of the "going rates" of pay for different types of jobs based on the supply of and demand for employees with the skill sets required to hold those jobs. For any given job, the market rates will vary depending on location, company size, and/or industry, to varying degrees. Executive jobs are particularly sensitive to company size. Clerical, administrative and technical support, and some professional and middle management jobs tend to be more sensitive to location.

As an employer, it is critically important to you to pay competitive wages and salaries if you are to attract and keep competent employees. The key is to define what "competitive" means in your organization. What is competitive is usually a function of a number of complex factors, including how relatively easy or difficult it is to fill open positions, what the organization's financial situation is, i.e., how much the organization is able to pay, and how well the compensation function is managed.

For many employers, payroll costs are the single largest expense item. As such, it is essential that wages and salaries be neither too high nor too low. Pay needs to be managed. Without reliable labor market data on a sizeable number of the organization's jobs, employers find themselves in a position of being held hostage to employees' demands, anecdotal information, and managers' "knowledge" of the market.

CompAnalysis' consultants have noticed that it is getting more and more difficult to find pay data that relate specifically to different locations within the greater Bay Area. Many people have perceptions that salaries are higher, for example, in Silicon Valley than in Marin County, but we haven't had very definitive data to support this — until now. Our survey report will array data by zip code clusters, which will provide the most geographically targeted data available today.

The survey intentionally includes only those jobs that are typically found across all kinds of organizations. Including jobs that are found only in particular industries or types of organizations, such as fundraisers in non-profits or assembly workers in manufacturing companies, would expand the scope of the survey beyond feasibility at this time. CompAnalysis recommends that participating organizations supplement the CompAnalysis survey by (a) using additional published surveys that provide data on jobs that are unique to their industry and/or type of endeavor and (b) consider engaging the services of a third party consultant such as CompAnalysis to conduct a custom survey designed to fulfill their unique data needs.

Yes, industry "cuts" of the data will be included in the report to the extent that sufficient information by industry category has been submitted. In addition, data on executive and management jobs will be arrayed by size of organization, as appropriate.

Following are some steps to take:

1. Assess your data needs.

   Identify which organizations are competitors for people, by type. For example, if you are in the insurance business, you are competing with other insurance organizations for claims examiners, but you're competing with all other employers in your area for administrative assistants. This means that it's important to assess your data needs in terms of which jobs are "generic", e.g. found in all kinds of firms, and which are industry-specific.

2. Identify & acquire data sources.

   It's always important to use multiple survey sources to effectively assess competitive pay levels applicable to your particular situation. Rarely does one survey meet all data needs for an organization. Surveys that focus on a particular industry often include generic jobs. Unfortunately, the data on the generic jobs may be unrealistically high or low. For example, when technology companies were paying extraordinarily high salaries for development engineers from 1999 to 2001, salaries for clerical jobs in that sector rose as well, even though the supply and demand picture was quite different.

   Most organizations should utilize both (a) generic, location-specific and (b) industry-specific data sources. These sources may be purchased from trade and industry associations, local business organizations, and compensation consulting firms. For hard-to-find jobs, it's sometimes necessary to sponsor and/or participate in specially focused custom surveys.

3. Select "benchmark" jobs.

   Choose jobs that are (a) populated by the most employees (multi-incumbent), and (b) those for which surveys are available. It is not necessary to find labor market data on every job in your organization if you apply a job evaluation process to determine internal relative job values. The resulting internal job levels will enable you to "slot" the unique jobs in between or equivalent to jobs for which you do have valid market data.

4. Analyze data based on job duties and responsibilities, not just on titles.

   Always look for survey data that include job descriptions as matching criteria. Titles can be very misleading, as they are often names for very different sets of job duties from one organization to another.

5. Don't forget to age data.

   Plan ahead. You can estimate what overall labor market inflation will be at the midway point of the period for which you plan to use the market data. For example, if your salary structure is intended to be in effect for a full calendar year, the data can be aged to the midpoint of the year. That way, the structure will slightly lead the market for the first half of the year and slightly lag it for the remainder of the year, resulting in reasonably competitive pay levels throughout the period (Annualized labor market inflation for the San Francisco Bay Area continues to be in the 3-4% range overall.)

   Aging is also a way to compare data from different sources and different effective dates to one common point in time.

   Keep in mind that labor market inflation reflects how much actual base pay levels are increasing over time. This is a function of labor market supply and demand. This is not the same kind of inflation as that which is measured by the Consumer Price Index (CPI). The CPI measures increases in the consumer costs of goods and services, which are not always in the same magnitude as labor market inflation for any particular location. These two measures are not directly related in terms of cause and effect. Most employers are more concerned about paying competitively than they are with keeping their employees' purchasing power whole. Therefore, using measures of labor market inflation usually makes more sense than applying the CPI, or cost-of-living index, to determine pay increases.

6. Remember that data for any given job will comprise a range.

The analysis of market data from multiple sources will result in a range of actual pay levels. Because data collection is not an exact science, it is to be expected that data from different sources will reflect different segments of the market. Sometimes, the pay ranges will be quite broad, especially for highly paid positions. It's important to identify where in the market range the organization wishes and/or needs to pay. Internal job values will help in this process.