Crafting a Custom Cut – A Guide

Crafting a Custom Cut – A Guide

A customized cut of data from a larger salary survey report can greatly enhance the utility of the survey data in informing an employer concerning market conditions.  The objective of the custom cut is neither to justify higher or lower positions in the labor market but rather to provide market information that is more relevant.

Salary surveys are intended to provide market data for many possible users.  In this regard it is possible if not probable that a survey report contains data from some employers which may be of limited relevance to any one specific employer.  Therefore crafting a custom cut of data is intended to target or focus the salary data on that portion of the market which would best meet the needs of the employer in terms of sharpening the insight that customized data would provide on the market conditions most applicable.

To select the employers to be included in a custom cut, there are some useful tips or suggestions which may improve the utility of the cut and to ensure that potentially anomalous data in the selected sample is excluded.  In selecting employers for the cut, there are two considerations which should be borne in mind:

  • Representation of market sub-sectors in the selected employers;
  • Exclusion of data from the selected sample that may be too limited to be a representative guide.

Representation of market sub-sectors

Even in a salary survey focused primarily on one market sector, e.g. the Birches Group survey of NGOs, each sector can be further divided into a range of sub-sectors.  In selecting the employers for inclusion, it may be worthwhile to focus on two issues:

  • Employers operating in sectors/programs more closely aligned to the work of your organization;
  • Market leaders which have well established pay methodologies and well-articulated structures.

The first criterion is obvious, relevance and potential competition.  The second criterion concerns the effort to include data of the highest quality and consistency and therefore reliability in terms of alignment structurally to your organization.

Where a custom cut includes employers from possibly several sub-sectors in order to attain a degree of market scope, it may be worth considering weighting the selected sample giving greater importance to employers from the sub-sector of greater relevance where closer alignment is sought.

Exclusion of Data

In any salary survey employers do not provide data for every grade level.  There are often gaps or limited data due to the workforce composition of the individual employers.  It is therefore necessary to exclude data for grades where there are limited matches provided and for employers which have not provided data for a representative range of grades.  If data is retained where it reflects limited alignment to your grade structure, it can potentially skew your assessment of your overall market position.

50-50 Rule

A good rule of thumb to guide the exclusion of data is the 50-50 rule.  This means that data for a grade would be excluded if less than fifty percent of the selected employers provided data for that grade.  Similarly, an employer would be excluded from the survey if this employer did not provide matches for fifty percent of the grades you are seeking to survey.  This can be further refined whereby an employer should be providing a mix of data across the full range of the grades of your organization adding up to at least half of your grades.

Once Your cut has been selected – think about weights

Once you have made your selection of employers and have excluded data which does not meet the 50-50 rule, you will want to compare this data to your current salary scale.  Here it is worthwhile in analyzing the differences between your scale and the market data to consider giving emphasis to the grades where you have the most staff.  Afterall as you move to adjust the salary scale, the financial implications of the changes are influenced by the number of staff in each grade.  Calculating an overall weighted average movement provides a more accurate guide for determining the market order of magnitude that should guide revisions to the salary scale.

In all of these considerations, Birches Group is ready to provide assistance/guidance to facilitate the selection of a custom cut and to try and ensure the most refined and relevant sample. To get started on creating your custom cut, contact us.

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