Benchmarking Salaries: How much Salary is Enough? (Part III)

Chart 1 Chart 2

Chart 3
Chart 4

Benchmarking Salaries: How much Salary is enough? (Part III)

The earlier posts have dealt with benchmarking salaries against experience and the critical mass theory which speaks about how ultimately every one ends up some what rich anyhow.

Signing the cheque

Firstly, this is not a first-time-heard-never-existed –before sort of thing. One of my earlier bosses and mentors had mentioned this thing about “signing the cheque”. To put in some detail, it is the realization of your salary potential. More often, this comes along with changing your organization and joining another. It is a sad part of life that employees who have stayed in organization get only 10-20% increment per annum (and that too is an optimistic number) and yet when the same employee jumps his organization, the salary leap is about 25% or above. Conversely, companies would prefer giving older employees 10-20% per annum increment, where as for a recruit they would be ready to pay 25-30% over the recruits earlier salary. There is the tool of “positioning” of employees, which actually helps this during the recruitment process. Well actually, the job market along with the head-hunter organizations exist because of this.

So we get back to the “Signing the cheque”. Flash back to this chart that we had made basis the Experience- salary Continuum.

Chart 1
Its been 5 years and the salary line trails the benchmark line (The Red Salary line trails the Blue Benchmark line). However, the 5 years that have passed have added onto your experience continuum. Other companies seek your understanding of work and business. So for all the less pay, you have been subjected to, here is an equalizer opportunity. You can cash on the experience that you have build up. And the act of putting a monetary value on the experience gained so far is called “signing the cheque” i.e unlocking the potential.

So if you are thinking of a job shift, what do we target? How much is enough? How much is good? How much is unsatisfactory?

We can discuss three leading scenarios for the salary after the job change
Red (Salary line) trails Blue (Benchmark Line)
Red (Salary line) equalizes Blue (Benchmark Line)
Red (Salary line) leads Blue (Benchmark Line)


Red (Salary Line) trails Blue (Benchmark Line)

Chart 2
At the end of 5 years, your red line was lagging the blue benchmark line. You took the jump at 30% growth. You may end up better off, but is that enough? 30% is a good-to-hear figure, but it doesnot take you past your blue line. Whats worse? An increment of 15% annually also doesnot add effectively in pushing your Black line past the Blue one. You are stuck where you started. Except that you are marginally better than where the red line would have taken you.

Does not provide any gratification and within the next 2/3 years your salary is obsolete. Worse is the fact that it is difficult even to make the high jump after 2/3 years. The equalization of the black anad the blue becomes a pipe dream. So you have pretty much missed the Blue line for ever, unless there is a stroke of luck or genius that guides you. Don’t count on such things though! If you are stuck in such a situation, it would be wise to probably re think the multiplier. The fact could be that you have a very high multiplier where as your experience and skill sets do not support that multiplier.

Red (Salary Line) equalizes Blue (Benchmark Line)
Chart 3
Ok then, your new job looks good and you have hit the blue line. Life seems to conferring on you what you truly planned for your deserving self. However, ask yourself, are you there yet? You may have caught up with the blue line once, but your multiplier happens to be much higher than your increments. You have a choice, either to decrease your multiplier or take another jump in ¾ years under a similar set of circumstances. Initially the going is actually good, but it may not give you the stickiness you may want to augment your learnings and experiences. Going forward the nagging will increase. I will not ditch this option as I ditched the first one. It is better than the first one, but please remember, its not a salary salary continuum, it is a experience and salary continuum and the more higher you go, the more you would need to stay put and gain experience.

You need to beat the blue by a long mile because eventually it will catch up. So then, the third option emerges:

Red (Salary Line) leads Blue (Benchmark Line)

Chart 4

Mark the salary line in Black. The jump from 6th year salary to 7th year salary is substantial. Its almost 2.5 times. Even when it evens out in 8th and 9th year, there is enough stickiness in the salary for the individual. So apart from gratification, pre-poning the critical mass point, it also gives huge amount of stickiness provided there is a culture fit. The stickiness in here is critical to augment your learnings and your “new” experience. Probably after the end of these 2/3 years, you would get the next level/ platform to add another dimension.

Most of us would tend to believe, whether a 2.5X jump is practical. It is difficult and this jump presumes that you are “A” quality on your role, learnings, teamwork and other aspects expected from you for delivery. The lesser you are on competencies required in your role; the lesser is the quantum of the jump. In case competencies are not as per required metrics, one could end up on the Trails/Equalizes charts. That in some association would be fruition of the


Summary

Be careful about the Multiplier you use. You may want to adjust that after 5 years of your work life
If you think the multiplier is good, then “signing the cheque” is a critical activity
Always look to significantly over haul the Benchmark so that you are good for the future.