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The Value of Pay Data on the Web—
Nominal or Real?
7/11/2002
By John A.Menefee, Ph.D.,
Watson Wyatt Data Services
When it comes to obtaining online pay data, compensation professionals
should not confuse access and convenience with accuracy and completeness.
QUICK LOOK
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Compensation professionals need tools and processes to evaluate the
reliability of online compensation data.
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New, nontraditional Web sites offer data for many different
reasons.
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Some sites provide pay data to generate traffic for a wide array of
products and services.
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Few new, nontraditional sites conduct valid salary surveys to obtain
data.
Compensation professionals face the daunting challenge of setting and
implementing appropriate pay practices in a rapidly escalating war for talent.
Hire the best, retain the brightest, but maintain a competitive and balanced pay
structure. Such a task requires having current benchmark pay data, along with
the compensation policies and practices that underlie current pay levels.
At first glance, some new, nontraditional salary survey sites appear to offer
a seemingly efficient way to access the pay data needed to maintain a
competitive pay strategy. This new way to acquire compensation information
provides rapid access possibly to one or more data sources. However, how does
pay data delivered over the Internet, in contrast to data delivered on diskette,
CD-ROM, or in print, enhance its real value?
To answer this question, compensation
professionals need some type of evaluation tool or process to help them make an
informed decision about the role and value of online compensation data
sites.
A simple
checklist might help, focusing on the following:
- The primary purpose of the data site and its host
- The site's targeted customers
- The underlying data base for the reported pay data
- The methodology used to gather and analyze the data.
The following discussion, hopefully, will help develop and expand a more
exhaustive evaluation checklist by providing some "rules of thumb" regarding the
validity, reliability and usefulness of online data sites.
Who Is the Web Site Host?
From large search engines to trade associations, Web sites are offering some
type of compensation data. As a first step in evaluating the usefulness of a
data site, look to see who maintains the site. Site ownership can help clarify
the real purpose or goal of the site. It's important to ask: What is the site's
primary business?
The majority of the established compensation survey organizations currently
host some type of Web site that provides either access to data or the
opportunity to order data from their ongoing compensation surveys. These sites
simply offer another distribution channel besides the more traditional methods
of print and electronic media, such as CDs and diskettes.
In contrast, the new, nontraditional data providers offer only pay data over
the Web for many different reasons. Several sites use the lure of compensation
data to "bait and catch" individuals to build databases of self-reported data.
Sites best described as virtual storefronts are providing access to pay data as
nothing more than a traffic generator for the marketing of a wide array of HR
related and non-HR related goods and services. Others are using pay data as a
means to build a job applicant referral database for recruiters.
A number of sites that call themselves e-businesses are "resellers." They are
middlemen or jobbers simply pulling together similar and disparate data sources
selling the convenience of access to one or more data sources on a single or
multiple job basis.
For example, some of these sites simply take data out of classified ads in
newspapers, job postings in trade publications, or off other Web sites and
resell it as current market data. Others are taking public access, government
data files and are compiling databases that contain estimated data 3-to-4 years
old. Because of the disparity in the makeup of these new sites, paying attention
to the site host and its underlying purpose or motivation will help the user
initially evaluate the value and applicability of the data such sites offer.
Who Is the Customer?
The second most important question to ask: Who is the site's ultimate
customer – businesses (employers) or individuals (consumers)? Sites targeting
individuals are more prone to offer the purchase of "one job at a time" salary
data. These sites are interested in generating a high volume of transactions
with little interest in building or maintaining any type of customer service or
relationship.
Sites targeted toward businesses should provide more than just salary or
total cash data. Supporting documentation related to the data survey source and
job descriptions for the position data reported are a minimal requirement to
accurately access the data's reliability, and the potential for any type of
continual use.
Data Sources
Customers purchase name brand products because they know the use of
highquality ingredients and proper processing/continuity results in a reliable,
quality product. When purchasing a new or unfamiliar product, greater attention
and scrutiny needs to be paid to the input sources and the processes
used.
This is especially true when purchasing something like
information on the Web where little, if anything, may be known about the inputs
or the processes of the information provider.
Few, if any of the new, nontraditional sites offering pay data conduct
statistically valid salary surveys to obtain their data. It is important to
check the extent of documentation on the data sources used. Is the data
self-reported by individuals, or is the data from employer-based surveys?
A description of the format, scope and purpose of the survey instrument used
to gather the pay data and the data submission process should be available. Look
for a list of the survey participants and a demographic profile that describes
the number, size, location and industry composition of the survey
participants.
What compensation elements were surveyed and how well do they fit with what
you are paying? Are job descriptions provided for positional pay data and is
there any information about the strength of the position match by the survey
participants? Mismatched jobs and not properly accounting for pay by job level
are the most common mistakes made in pay level comparisons.
It is extremely important to verify how the data has been acquired,
especially for the new, nontraditional sites. There is a growing concern
surrounding the resale of survey data by secondary parties. Recent court rulings
on the application of copyright laws to electronic media will make it illegal to
resell data without permission of the survey originator. This undoubtedly will
cause several of the newer, nontraditional sites to either rethink or drop the
offering of pay data as an end product or sales/marketing ploy. Reliance on
these sites for pay data needs may be short-lived and problematic.
METHODOLOGY
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Whenever survey data is used, close attention should be paid to how
the data is analyzed. Look for answers to these basic
questions.
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What experience and expertise does the data provider have in survey
methods and statistical analysis?
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How has the data been screened or cleaned to eliminate mismatched
jobs or erroneous values? One or two poor job matches can easily make the
"average" pay level far from its true value.
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Have multiple data sources been aggregated together to build a larger
database? Aggregated or compiled databases may be mixing data that has values
calculated with different statistical methods.
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There are seven different ways to calculate an "average." Has the
data been "aged"or updated? If so,was it done on a geographic, industry or
revenue basis?
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Finally, when was the data
gathered? What is its effective date? Mismatched data, in terms of effective
dates, can result in erroneous benchmark data for both salary planning and new
hire pricing.
Data Output
The type of information provided over the Web typically
is limited in its scope and depth. Most nontraditional sites offer what is
called "one job (pay level) at a time." For $29 to $225, one can purchase the
average pay of a selected position. It is quick and relatively cheap. The
difficulty comes in interpreting just one data point. For example, $23,500 is
given as the average salary for a benefit analyst. Is this the total annual
amount of direct cash compensation? What about bonuses, profit sharing, or in
today's high-tech world, broad-based stock options? Knowing the pay policies and practices of the
companies who are the pay data providers also is important, not only to properly
interpret average salary levels, but also to know how the salary component fits
into total pay.
Reliability is Critical
For most companies, compensation is the single largest annual expenditure. To
remain competitive in the war to attract and retain talent, compensation data
has to be reliable, supportable and complete both for salary planning and market
pricing. The availability of pay data on the Web by a growing number of new,
nontraditional data providers raises questions and concerns about their motives,
processes and products.
ABOUT THE AUTHOR
John A. Menefee, Ph.D., is managing consultant at Watson Wyatt Data Services,
a global organization that provides compensation surveys using information
compiled from a database of more than 750,000 incumbents.
FOOT NOTES
Visit our Web site at www.worldatwork.org and
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