XIV. Still Your Turn: Word-of-Mouse: Dot-Com Comparisons
Summary of Case
Compensation data for numerous jobs are more available due to the existence of various
alignment and external competitiveness to actual pay rates for specific jobs.
Learning Objective
Understand and apply several of the concepts of internal alignment and external
competitiveness in analyzing actual pay data of specific jobs.
Teaching Guideline
Student responses to the following questions will vary depending on the jobs a student selects
for analysis. To gain the maximum benefit from discussing the case questions, you may wish to
assign students one of the following options:
Select specific job(s) in specific cities
Select specific job(s) using the U.S. national average
The following responses to the case questions are based on salary data retrieved for the job of
Accountant I (retrieved 10/10/12).
Discussion of Case Questions
1. Which jobs are paid more or less? Is this what you would have expected? Why or why
not? What factors could explain the differences in the salaries?
provided below.
Accountant I
Base Salary
Location 25th percentile Median 75th percentile
Boston, MA $44,742 $49,270 $54,458
Accountant I
Total Cash (Base + Bonus)
Location 25th percentile Median 75th percentile
U.S. National Average $41,178 $45,477 $50,446
Accountant I
Total Compensation (Total cash+ Benefits)
Location Median
Boston, MA $72,252
An individual employer is also constrained by its ability to pay.
Accountant I
Total Compensation (Total cash+ Benefits)
Location Median
Boston, MA $72,252
Accountant I jobs in Boston are paid more due to the higher cost of living when compared
An individual employer is also constrained by its ability to pay.
Location Boston, MA Boulder, CO U.S. National Average
Base Pay $49,270 $44,936 $44,599
Note: This data is based on the analysis by Salary.com’s team (comprised of Certified
locations.
2. Do the jobs have different bonuses as a percentage of their base salaries? What could
explain these differences?
Salary data for an Accountant I position for two cities and the U.S. national average are
same in all situations and is quite small, less than 2%. This finding is rather interesting
since bonuses typically vary due to the diversity and variety of incentive programs used by
3. Do the data include the value of stock options? What are the implications of this?
The data provided do not explicitly indicate that stock options are included. However, an
new start-up.
4. Read the job descriptions. Are they accurate descriptions for jobs that you would be
applying for? Why or why not? Are there jobs for which you cannot find an
appropriate match? Why do you think this is the case?
in the field or in a related area.
Has knowledge of commonly-used concepts, practices, and procedures within a
particular field.
Primary job functions do not typically require exercising independent judgment.
5. If you are majoring in computer science, you may find that some surveys include data
on software developers, but not software engineers (and vice versa). How similar are
these jobs and can you use data on one of these job titles to estimate pay rates for the
other title? Also, where does the job of computer programmer fit in?
Software engineers are also software developers but not all software developers are
6. Check out pay levels for these types of jobs in your school’s career office. How does
the pay for jobs advertised in your career office differ from the pay levels on
salary.com? Why do you think these differences exist?
Student responses will vary since they are dependent on two factors: existence of a career
7. How could you use this information while negotiating your salary in your job after
graduation? What data would you provide to support your “asking price”? What
factors will influence whether or not you get what you ask for?
The ability of a student to negotiate a salary will first depend on an organization’s pay
perspective, data to support his/her asking price would include education, work experience,
8. What is the relevant labor market for these jobs? How big are the differences between
salaries in different locations?
The relevant labor for the Accountant I job would likely be regional. However, there are
between the median base salary for Boulder, CO and the national average. When
9. For each job, compare the median salary to the low and high averages. How much
variation exists? What factors might explain this variation in pay rates for the same
job?
The national average data for the Accountant I job (see question #1) is used for illustrative
Accountant I job would fall within this.
10. Look for a description of how these salary data are developed. Do you think it
provides enough information? Why or why not? Discuss some of the factors that
might impair the accuracy of these data. What are the implications of using
inaccurate salary data for individuals or companies?
According to the website, Salary.com’s team of compensation consultants review
factor). One of the most significant benefits of Salary.com’s proprietary methodology for
determining pay ranges based on national averages and geographic pay differentials is that
jobs that builds on professional industry standards. Salary.com purchases the most current
compensation survey reports from well-recognized, reputable compensation consulting
firms. Salary.com’s compensation consultants match our job descriptions to the most
industry, geography, or company size biases within each survey. For a reality check,
Salary.com’s compensation consultants validate the data points by comparing them with
reflect the general movement of salaries.
Based on the above information provided on the website, adequate information has been
11. With this information available for free, why would you bother with consultants’
surveys?
details specific to a job, location, company size, and industry. For example, if Microsoft
wants to compare the pay of a specific position (say Software engineer) with any of the
essential.
12. If you were a manager, how would you justify paying one of your employees either
higher or lower than the results shown on this website?
experience, certification courses completed, the type of industry, the size of the company,
Too often, managers lack the required information and the training to handle such a
the amount of pay employees receive if they are provided with the information. Evidence
suggests that organizations that use fair procedures and supervisors who are viewed as fair
in their allocations of rewards are perceived as more trustworthy and command higher
Answers to Review Questions
1. Which competitive pay policy would you recommend to an employer? Why? Does it
depend on circumstances faced by the employer? Which ones?
The most common pay policy for an employer is to match rates paid by competitors. Failure
financial position of the organization.
2. How would you design a survey for setting pay for welders? How would you design a
survey for setting pay for financial managers? Do the issues differ? Will the techniques
used and the data collected differ? Why or why not?
labor market differs. A survey for a welding job would probably encompass the local or
regional market, while the relevant labor market for a financial or other managerial position
positions. The data collected differs in order to attain the same objective: relevant pay
comparisons.
3. What factors determine the relevant market for a survey? Why is the definition of the
relevant market so important?
Factors that determine the relevant market include:
wages relevant to an organization in setting its own pay level and pay mix.
4. What do surveys have to do with pay discrimination?
Market data provided by surveys may be used to defend pay differentials. That is, an
5. Contrast pay ranges and grades with bands. Why would you use either? Does their use
assist or hinder the achievement of internal alignment? External competitiveness?
collapse salary grades into a few broad bands, each with a sizable pay range. This approach,
known as broad banding, consolidates as many as four or five traditional grades into a
minimum and maximum levels that an employer is willing to pay for work.