While the same basic principles apply when building compensation structures for companies of all sizes, there are some nuances that middle-market human resource professionals should keep in mind.
Aon’s mid-market compensation consulting experts shared what they do differently when working with companies with revenues ranging between $100 million and $1 billion. Here's what we learned:
They adopt a compensation philosophy.
Having a solid understanding of how your organization wants to approach compensation is an important first step when developing a competitive pay structure. Typically in mid-size companies we see a few common denominators embedded in their approach to pay:
Reward levers: Since the mid-market tier comprises more private companies than publicly-traded, traditional equity pay plans are used less frequently. Even if you work at a public company and you have the full suite of equity vehicles at your disposal, be aware that a higher percentage of similarly sized companies will have a different pay mix profile.
Ownership - Again, since a greater proportion of mid-sized companies are privately-held, the philosophy can often times be as much of a reflection of the values of the founder—or their family.
Growth stage - There are a higher percentage of companies in the mid-market stage that are earlier stage companies. Earlier stage companies tend to target lower in the market and rely more on variable pay.
Their management hierarchy reflects the division of labor.
Compared with larger organizations where roles tend to be narrow and specialized, employees at mid-market companies are often times expected to take on more hybrid roles. This difference in specialization impacts the pay level of both management and individual contributors – and should be reflected accordingly in the compensation range for their roles.
They compare apples to apples.
Though there can be value in using the same salary data as large enterprises, middle market companies should be basing compensation off organizations that are similar in size. Our Mid-Market Total Compensation Measurement is an option for companies to use to compare themselves to similarly-sized peers.
They allocate resources to their cause.
If a compensation structure is new to your organization, chances are senior leadership is not familiar with the costs and level of skill associated with the design and implementation. That is why it is important to create a budget and allocate the resources needed for the creation of a compensation structure. This includes staffing the HR function with the level of skill needed to lead the comp structure initiative, as well as purchasing the tools and systems necessary.
Developing a competitive salary structure in any organization is no easy task. Doing this work in a mid-market company presents unique challenges and opportunities. Contact us if you would like help in the design or implementation of a salary structure or if you’d like to discuss how using the right market data can keep your company competitive.