By: Charles Sterling, Project Manager
The selection of a set of comparator agencies is a critical step in the total compensation study process as it can profoundly affect the validity of results. Often, the selection of a sound set of comparator agencies is conducted without a great deal of thought as to what factors should play a part in the decision; when this happens, the results of the study are often affected, with data points dispersed in unintended directions. In our experience, it pays to take the time up front to carefully set up the conditions of the study, particularly the selection of the comparator agencies.
Guidelines for Selecting Appropriate Comparators
- Determine valid criteria for selecting the comparators
- Establish the list of comparators prior to beginning the study
- Don’t change the comparator agencies after the results start coming in
Select Valid Criteria
Follow these suggested criteria for selecting appropriate comparator agencies:
- Organizational Factors – In general, the comparator agency should be as similar as possible to the studied agency to be considered a candidate for inclusion in the study. Agencies should be of the same or similar type (e.g., city, county, water district), size (e.g., number of full-time equivalent employees (FTE), expenditures, number of residents supported), and offer the same services at the same level.
- Contextual Factors – Several contextual (or macroeconomic) factors should be taken into account when deciding whether or not to include an agency within the comparator list. Comparator agencies should be located geographically close to the studied agency and share similar labor and goods/services markets; these factors can be measured through mileage estimates (e.g., distance in miles of the comparator agency from the studied agency), cost of labor measurements, cost of living rates, median home prices, and median household income levels.
All of these factors should be, to the greatest extent possible, quantified in order to take the guess work out of the comparator selection process. For example, click the chart below:
Given this data, one can begin to see real differences between the agency being studied and the comparator agencies, both in terms of the comparator agency itself and the factors that affect the economy in which the agency is located.
Establish the List of Comparators
Prior to beginning the study, involve the governing body, management, human resources, and employee representation in the selection process of the comparator agencies to be included, using similar criteria to those above. Identify and confirm the comparator agencies that will be included in the external market survey, which will be the foundation for ensuring that the agencies’ salaries for the studied classifications are competitively aligned with the external labor market.
The identification of comparator agencies (typically 10-12), benchmark classifications, and benefits to be collected is an iterative process that includes all stakeholders. This open discussion philosophy is critical for organizational buy-in at the completion of the study.
Stay the Course
As the results come in, it is important not to deviate from the agreed upon conditions set at the beginning of the study. It’s important not to change the comparator agencies to affect or alter the outcome of the study; doing so reduces the credibility of the study and the study methodology.