The AirComp Calculator

Time for yet another reason why aviation leaders and HR professionals won't raise compensation levels. 8) "Our compensation philosophy dictates that we pay at the 50th percentile. That's being competitive with the market." This line usually comes from HR comp professionals, but it can also come from accountable executives. There's more to unpack here than you might think - so stay with me. First - what is the 50th percentile? In statistical terms, the 50th percentile is the median- the value that is in the middle of the data set. It is not the average or the mean - although the two values are often close to each other. For example, if we had three values $100 $250, and $350, $250 would be the median while the mean would be $233. Compensation professionals prefer the median to the mean because it is less affected by outlying values on either the high or low side. Second - what does it represent? While you can make the argument that as it represents the middle of the dataset, the 50th percentile is competitive with the market, that is true only when the data is current and then only for a brief period of time because the market is always changing. The value that represents the 50th percentile today won't be the same as the one that represents it in a few months and definitely won't be the same as the one next year. It is fleeting. Third - the 50th percentile does not remain solitary value in practice. It's typically at the center of a range constructed with a certain amount of "spread" on either side of it. Often, pay is targeted on the high side of the range, above the 50th percentile value and stays there as the market changes and surpasses it. This is a "lead-lag" methodology. Fourth - if an organization's compensation philosophy includes targeting the 50th percentile, remember the organization is probably doing that for all the other departments in the company. Finally - and this is probably what you've been waiting to read - what is my opinion of paying at the 50th percentile? Simple. An organization that pays at the 50th is accepting risk, especially given the current personnel market in our industry. When you have compensation in BA increasing at over double the average rate of private companies, the 50th percentile won't be that for very long, and that leaves the company vulnerable to personnel departing for higher pay. As I've said multiple times, paying your personnel more ALWAYS costs less than replacing them. (Sheryl Barden, CAM has written a definitive article on this topic.) Here's slide from some of the work I do that outlines my theory on percentile targeting and in the analysis I've done, I've seen every permutation of this possible. Questions? You know where to find me - drchrisbroyhill@aircompcalculator.com

Time for yet another reason why aviation leaders and HR professionals won't raise compensation levels. 8) "Our compensation philosophy dictates that we pay at the 50th percentile. That's being competitive with the market." This line usually comes from HR comp professionals, but it can also come from accountable executives. There's more to unpack here than you might think - so stay with me. First - what is the 50th percentile? In statistical terms, the 50th percentile is the median- the value that is in the middle of the data set. It is not the average or the mean - although the two values are often close to each other. For example, if we had three values $100 $250, and $350, $250 would be the median while the mean would be $233. Compensation professionals prefer the median to the mean because it is less affected by outlying values on either the high or low side. Second - what does it represent? While you can make the argument that as it represents the middle of the dataset, the 50th percentile is competitive with the market, that is true only when the data is current and then only for a brief period of time because the market is always changing. The value that represents the 50th percentile today won't be the same as the one that represents it in a few months and definitely won't be the same as the one next year. It is fleeting. Third - the 50th percentile does not remain solitary value in practice. It's typically at the center of a range constructed with a certain amount of "spread" on either side of it. Often, pay is targeted on the high side of the range, above the 50th percentile value and stays there as the market changes and surpasses it. This is a "lead-lag" methodology. Fourth - if an organization's compensation philosophy includes targeting the 50th percentile, remember the organization is probably doing that for all the other departments in the company. Finally - and this is probably what you've been waiting to read - what is my opinion of paying at the 50th percentile? Simple. An organization that pays at the 50th is accepting risk, especially given the current personnel market in our industry. When you have compensation in BA increasing at over double the average rate of private companies, the 50th percentile won't be that for very long, and that leaves the company vulnerable to personnel departing for higher pay. As I've said multiple times, paying your personnel more ALWAYS costs less than replacing them. (Sheryl Barden, CAM has written a definitive article on this topic.) Here's slide from some of the work I do that outlines my theory on percentile targeting and in the analysis I've done, I've seen every permutation of this possible. Questions? You know where to find me - drchrisbroyhill@aircompcalculator.com