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The Compensation Handbook, Sixth Edition: A State-of-the-Art Guide to Compensation Strategy and Design, 6th Edition by Dorothy Berger, Lance Berger

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12

Rationale for and Approaches to Benchmarking

TOM MCMULLEN

Hay Group

IAIN FITZPATRICK

Hay Group

The rewards strategies of most organizations can be summed up as “pay the right people the right amounts for doing the right things.” But is it really this simple? Compensation benchmarking is a key component in addressing the middle part of this statement: the right amounts.

Using surveys for compensation benchmarking ensures that the compensation levels determined by the organization are not extraordinarily misaligned with market practice—that is, pay is not too low or too high. Determining the appropriate amount of compensation is a balancing act. No organization wants to waste its financial resources by paying too high relative to the market, ...

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