Why organisations lose talent, overspend, still get pay wrong

HR Perspective with Memory Nguwi

SALARY problems are com­mon in many organisations. Those doing well and those struggling. They show up when good employees resign, candidates reject offers, managers demand special adjustments, and employees complain that people doing similar work are paid differently. The board may then ask Human Resources to prove whether salaries are compet­itive, only to discover that nobody has reliable market data. By that stage, every pay decision is being made under pressure, and pressure is a poor substitute for a sound re­muneration system.

We have encountered organisa­tions that have operated for years without salary market data, basically with no idea how salaries are trend­ing year on year. Management relies on informal conversations, figures brought by newly hired employees, internet searches or reports that are several years old. Each executive argues from personal experience, and the loudest or most influential person often gets the adjustment ap­proved. The result is a pay structure shaped by isolated demands rather than by evidence, business priorities and a clear remuneration policy.

The damage is not always obvi­ous because payroll continues to run and most employees do not openly challenge leadership. Behind the si­lence, however, valued employees may be applying for jobs, scarce candidates may be declining offers and line managers may be making promises that Human Resources cannot defend. Some employees conclude that pay depends on fa­vouritism, negotiation power or closeness to decision-makers. Once that belief takes hold, even reason­able pay decisions are treated with suspicion.

Some organisations respond by purchasing a salary survey and im­mediately asking one question: how much should we increase salaries? That is the wrong starting point be­cause a survey does not automati­cally justify a blanket adjustment for everyone. The real questions are which roles are under pressure, which offers are being rejected, which employees are leaving, which reward elements are weak and what the organisation can sustainably af­ford. Without that diagnosis, market data is of no value as a decision.

Comparator selection is one of the most common sources of er­ror. Organisations often insist on comparing themselves only with employers in the same sector, even when many of their employees can move easily across industries. Ac­countants, technology specialists, Human Resources professionals, procurement staff, marketers and other support roles do not restrict their careers to one sector. Even engineers and technical specialists may move between mining, manu­facturing, construction, energy and related industries when the skills are transferable.

A sector-specific report is useful because it shows the cost environ­ment and pay practices of direct competitors. On its own, however, it may hide the wider labour mar­ket from which employees receive offers and to which they resign. We normally advise clients to examine both the relevant sector and a na­tional or multi-sector market, with the results separated by job fami­ly, grade and reward element. This gives management a clearer view of competitiveness without forcing the organisation to copy the high­est-paying employers.

Job matching creates another serious trial. Similar job titles can carry very different levels of respon­sibility, while different titles may describe work of comparable value. Comparing a finance manager in one organisation with every finance manager in the market can there­fore produce a misleading answer if team size, decision authority, busi­ness scale, complexity and account­ability are ignored. Credible salary analysis matches job content and organisational level, not titles alone.

The organisation must also com­pare the correct elements of reward. Base salary, guaranteed allowanc­es, variable pay, benefits and to­tal remuneration answer different questions and should not be mixed carelessly. An employer may appear competitive on basic salary while falling behind on total reward, or appear generous in total cost while employees receive too little depend­able cash. Unless each component is defined consistently, the final comparison may be mathematically correct but practically useless.

Outdated data adds another layer of risk, especially where pay levels and currency arrangements move quickly. A report may have been credible when it was produced but becomes dangerous when used long after the market has changed. Man­agement then makes permanent sal­ary decisions using evidence that no longer reflects current conditions. Before relying on any survey, the organisation should establish when the data were collected, what re­muneration period they represent and whether an appropriate ageing method is required.

Even good market data can be misused when the organisation has no proper job evaluation or pay structure. The survey may show the market value of roles, but manage­ment still needs grades, salary rang­es and rules for placing individuals within those ranges. Without mini­mum, midpoint and maximum val­ues for each grade, adjustments be­come a series of personal decisions that recreate the inconsistency the survey was meant to solve. Market competitiveness cannot repair weak internal equity on its own.

When we support a client, we begin with the live decision rather than the report. We ask what has triggered the concern, which roles are leaving, where recruitment of­fers are failing, whether the prob­lem concerns salary or total reward, which employers compete for the same talent and what the business can afford. We also examine the age and quality of existing data, the or­ganisation’s grades, current salary ranges and the distribution of em­ployees within those ranges. This diagnosis determines whether the client needs a published report, cus­tomised survey, pay competitive­ness audit or broader pay-structure review.

We then analyse the organisa­tion’s position by job family, grade and reward element instead of hid­ing everything inside one overall market figure. Compa-ratios and range penetration help show wheth­er employees sit appropriately with­in their salary ranges, while turn­over, recruitment and performance evidence help identify where action is genuinely urgent. The aim is to distinguish a widespread market problem from pressure affecting a small number of scarce or critical roles. This protects the organisation from increasing fixed payroll costs where no business case exists.

Affordability and sustainability must remain central throughout the process. An organisation can be be­low the market and still be unable to fund an immediate full correction without damaging operations, pric­es, cash flow or employment secu­rity. The answer may be a phased adjustment, targeted scarce-skill action, redesigned allowances, changes to variable pay or a deliber­ate market position that reflects the business model. Good advice shows management the options and conse­quences rather than pretending that market data makes the decision au­tomatically.

Governance matters because salary data affects executives, em­ployees, budgets and relationships of power. Boards and remuneration committees should insist on inde­pendent evidence before approving major wage-bill changes or execu­tive adjustments, and management should disclose the assumptions be­hind its recommendations. The or­ganisation also needs clear rules on who can approve exceptions, how market data will be refreshed and how internal equity will be protect­ed. Confidentiality should protect personal information, not prevent proper oversight of payroll risk.

The real value of a salary survey is not the number of organisations in the report or the number of pages delivered. Its value is the confidence it gives leaders to make targeted, affordable and defensible pay deci­sions based on credible evidence, es­pecially where payroll is a major op­erating cost. In our client work, the turning point comes when manage­ment stops asking, “What increase does the survey recommend?” and starts asking, “What problem does the evidence reveal, and which re­sponse will solve it without creating a larger cost problem?” That is how salary data becomes a management tool rather than another report filed away after the annual review.

l Nguwi is the managing con­sultant of Industrial Psychology Consultants and a registered oc­cupational psychologist.