Collecting Market Data Presented to NPELRA April 15, 2002 Bruce G. Lawson, CCP Fox Lawson & Associates LLC (602)

6 Steps  Define Compensation Philosophy and Market Pricing Strategies  Select and Review Survey Sources  Match Jobs to Survey Sources  Interpret Published Data  Determine Market Rates  Make Policy and Program Decisions

Compensation Philosophy  Base Compensation or Total Compensation?  How do you define your competition? Industry type, size, location  What is your target market position? Average, 50th percentile, 75th percentile  How will the pay structure be tied to the market? Structure policy  What is the targeted comparison of actual pay versus market pay? Actual pay versus midpoint pay relative to the market

Selecting Survey Sources  Published data versus custom survey  Is the survey sponsor reputable?  Are the survey job descriptions adequate for good matching?  How large is the survey sample?  How current is the data?  Is the survey cost effective?

Job Matching  Benchmark jobs should exist in similar form in the marketplace  Match should be based on description - not title  Make sure numbers used are consistent (mean, median, etc.)  Focus on essential duties and qualifications  Determine if all data sources are equal

Interpreting Data  Be consistent in using statistics (mean, percentile, etc.)  Trend analysis and regression analysis  Weighted or un-weighted data  Internal equity versus market parity  Correlation co-efficient (R square)

Determining Market Rates  Trend or age all survey data to a common date  Apply adjustments to jobs based on Philosophy/strategies Across the board, job by jobOccupational groupLevel of job  Lead, Lead-Lag, or Lag

Policy Decisions  How competitive is your current system or plan?  How are you using your compensation dollars?  What do you want you pay plan to do for you?  What can you afford to do?  What is the business climate in which you must operate?

Key Steps  Gather and analyze pay data and practices at the total compensation level if possible  Integrate market data with a job evaluation plan to design pay structures that blend market parity and internal equity  Perform more advanced statistical analyses to develop pay structures with increasing, rather than constant, midpoint differentials  Perform detailed cost analyses in relation to issues such as the implementation of new pay structures or the development of merit increase matrices and salary increase budgets