Benchmarking


Raymond Welmers is a Partner at Focus Orange, a Dutch HR consultancy. A seasoned expert in rewards strategies, Welmers shares insights about benchmarking and leads the total rewards practice at Focus Orange. His journey in this specialized topic started in 1998.

Welmers explains that traditional rewards strategies presume predictability and hierarchy of roles. For many companies including scaleups, these factors no longer apply. He says: "If you took the picture of an organisation today, it would look different in six months." When it comes to benchmarking, it’s well known that the better you try to do this, the more room it leaves for discussion. A benchmark unwillingly becomes too complicated before you know it.

As a result, the following three trends emerge.

1

Benchmarks become much more generic

Companies compare themselves with the general market and take a relevant position that suits their proposition, perks and benefits. The very specific traditional benchmarking disappears.

2

Companies find what others pay less important

The adventure and the company purpose, and mission are often seen as the main driver to join. These companies ensure that they pay a decent salary, but salary doesn’t become a deciding factor in the job application process must not be a differentiator.

3

People are much better informed than they used to be

They can find a lot of information online and can often determine what a reasonable salary is.

Today’s companies, in short, put less emphasis on the value of benchmarks and instead focus more on themselves. Sometimes benchmark data is necessary, for example, when discussions arise or when companies have no idea what a reasonable pay is. This mostly happens at smaller organisations and often just for a couple of specific roles. In that case, a single benchmark is usually sufficient to solve these disputes. If, for example, you have no clue what to pay a SCRUM Master, buy the data from a specialist or investigate this yourself. A benchmark is not a magic wand that makes disputes disappear. In fact, you will often end up having more discussions because of it. Welmers’ advice: "As soon as you can, get the fixed pay topic out of the way and focus on your total package. No one will come and work at your company because you pay 3% above the market. Actually, people are willing to work at your company even when you pay below the market, as long as you have a strong story about what a person gets back in return in terms other than money and benefits.

Fun fact: Not all millennials are job-hoppers and seek purpose. What someone finds important in a job turns out not to depend on age but on the kind of study a person has followed.

How often should I benchmark?
Existing, established companies: once every 3 years Scaleup companies: once every 2 years
What is the most common mistake made in benchmarking?
"Taking the outcome to be the truth because there is more than one truth. The second most common mistake is assuming more benchmarking gives better data. More benchmarking will create more discussions and complexity."

Raymond Welmers, Focus Orange

Organisations often have no clear view on what drives their target group. According to Welmers, preference research is more interesting than benchmarking. “The main drivers for your target market salary will be part of the outcome, but there is much more.” His tip: "Ensure your fixed pay is fair and always remember those people who will join your company for money will also leave you because of it." There will always be someone else who’s willing to pay more. As a final question, we ask Welmers what his advice is for setting up a basic rewards structure in a scaleup. He advises to pick some characteristic key roles in the organisation and interpret them based on a couple of dimensions, such as job category responsibility, required experience or decision-making. Then find or buy a benchmark range for these roles to understand what the market is paying on average. This becomes the reference point. After these steps, Welmers suggests going back to the foundation and determining the message you would like to bring across with your rewarding strategy, “where do you pay for as an organisation and what is the fundament for it?" The result is a rewards position that suits your storyline, which can be reflected in your rewarding instrument. When it comes to the speed of development and salary growth per role, Welmers recommends to work on individual growth trajectories instead of generalising such a personal topic.

Where do you pay for as an organisation and what is the fundament for it?

Learn more: Fixed Pay

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Learn more: Variable Compensation