Compensation Ideas

Both David Maister, in Compensation Systems, and George Dinwiddie, in Agile Compensation, have useful comments about compensation systems. There's something implicit in both pieces, that the criteria to move from position to position (as well as from one salary to another) have to be explicit. For years, I called this expertise criteria.

You develop expertise criteria by defining what's critical about a position. If you've done a hiring strategy and a job analysis for each level of the jobs that report to you, you can develop expertise criteria. Take your 5-7 essential skills (most of these are non-technical), and rank them across the top of a table. Do NOT include number of years of experience or the educational level. Those two things are for HR, not for promoting or compensating people.

Down the side, list the levels. If you have developers and testers, and they similar essential skills (likely in an Agile team), list the levels of developers and testers together. That is developer level 1 and tester level1 are on the same line. Now fill in the matrix. (I know, this is hard work.)

When I did this for my engineering group many years ago, these were the essential skills across the top: Technical knowledge and methods, Initiative, Independence, Responsibility/Judgment, Scope, Complexity. Down the side, I listed positions from associate engineer, engineer, senior engineer, principal engineer/manager, consulting engineer/group manager, senior consulting engineer, director, vp.

I found it relatively easy to fill in the matrix for the first 4 levels. It was much harder for the last 3 levels. But without expertise criteria, I don't see how you can have an entire conversation about compensation. You get stuck in “did you do this practice” as in George's post, rather than “did you better the project or the organization?” (George argues against the “did you do this practice” thinking.)

For me, the expertise criteria gives a level of transparency that I think David Maister is trying to get to, but doesn't actually say. (He does say the system needs to be fair.)

Many of my clients do not have expertise criteria charts. If you're a manager, consider making one just for your group, and see if your performance evaluations and compensation discussions are easier. I bet they will be.

Links you might want to read:

Hiring Strategy #1: More People for Similar Work. (There are 7 hiring strategy posts. I will categorize all of them at some point.) Avoid Shot-in-the-Dark Job Analysis. There are more job analysis posts. I gotta get to this categorization 🙂

2 thoughts on “Compensation Ideas”

  1. Thankfully our company has spent a lot of time on developing expertise criteria charts for all positions and levels within the organization. We call them “core competencies”. I totally agree that it makes discussions around “what do I need to do to get promoted?” much easier and it clearly shows the employee where they need to focus.

Leave a Comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: