Benchmarking can be an invaluable tool for determining how much to pay your hospital's employees. Nell Mitchell of Hay Group discusses six steps to determine compensation for different staff members at your hospital.
1. Find data specific to your region. While hospitals often draw from a national pool to find executives, staff members are usually recruited locally and regionally, Ms. Mitchell says. Since your region may differ significantly from other areas of the country in population, economic prosperity and patient demographics, Ms. Mitchell recommends using local or regional data to benchmark staff salaries. "A nurse in New York City is going to make a very different amount that a nurse in Peoria, Ill.," she says. "The compensation team will have to ask what kind of data is available." She says local or regional human resources groups will frequently spearhead healthcare compensation surveys, giving hospitals the opportunity to zero in on data specific to their location.
She says if your hospital's region does not produce region-specific data on hospital compensation, you can still use national data. But ideally compensation data will come from the hospital's recruitment area to give a better idea of what hospital competitors are offering in terms of salary and benefits.
2. Determine how much money is required to attract and retain employees. Ms. Mitchell says the key question in determining compensation for all your staff members should be, "What is my ability to attract, retain, engage and motivate my employees?" Given what your hospital is paying now, are you able to recruit and keep employees? While money isn't necessarily the only retention driver, it can play a major role when staff members are deciding whether to transition to a new employer.
While compensation data might assist you in benchmarking against other hospitals, annual employee surveys and exit surveys may be most effective in determining whether your compensation levels are appropriate for your hospital. "You should [ask about compensation satisfaction] as part of your annual survey to gauge levels of satisfaction," Ms. Mitchell says. "Organizations also often fail to do [thorough] exit surveys. The survey should ask [employees] if they are leaving for reasons related to compensation, where they are going and for how much." She says even though looking at compensation satisfaction through exit surveys may seem reactive, the results can be very helpful in determining future salaries.
3. Align compensation with your mission and status. Though nearly all hospitals already have an executive compensation philosophy, Ms. Mitchell says most lack a staff compensation philosophy. This can be a valuable tool in aligning your organization's compensation with your mission, goals and values. For example, if you run a non-profit hospital, your decisions about compensation may be different than in a for-profit facility. "[Hospitals] should consider what their role in the community is," Ms. Mitchell says. "They may not want to be a 90th percentile payer because it goes against their community-based mission."
Aligning compensation with your hospital's status means determining where your facility falls in the market. You may have market data that reports nursing salaries by percentile, meaning your hospital must decide at what percentile you want to pay. If you need to offer more competitive salaries to retain employees, you might consider paying at a higher grade. If you dominate your local market and find recruitment easy, you may be more of a middle-of-the-road payer. It all depends on the individual hospital, Ms. Mitchell says.
4. Lay out the required skills for a particular role. In circumstances when a hospital is creating a new position, administration should take time to define the kind of skills, experience and education are needed for a successful candidate. For salaried roles, a candidate who fulfills these requirements — or goes above and beyond — may draw better compensation than a candidate who lacks in a few areas.
Once the required skills for a particular role are decided and documented, the hospital can decide on a general pay scale for the role. This pay scale will be shaped by both market data on average compensation for that role and how other positions in the hospital are compensated. Then when the hospital selects a candidate for hire, administrators can examine the employee's experience, skills and education and fit them onto the pay scale appropriately.
5. Use national data to determine which positions should have incentives. While long-term incentives don't typically exist at a staff level, Ms. Mitchell says some organizations implement annual incentives that reward some hospital employees with an annual bonus for excellent performance. She says hospitals should be discriminating in assigning incentive plans, however. "You can look at market data that will tell you that jobs making X dollars or more also have an annual incentive component to their pay," she says. "Typically jobs below that level do not."
She says market data often presents base salary for a position as well as "total cash compensation," meaning base salary plus any additional incentive compensation. If the base salary and total cash compensation are the same for a particular role, that means the role is typically compensated through base salary only.
6. Benchmark staff salaries internally. Benchmarking shouldn't start and end with market data, Ms. Mitchell says. Hospitals should also benchmark salaries internally to determine how employees in the same role — or at the same pay grade — are being paid relative to each other. "If I've got a grade structure and I have multiple jobs in a particular grade, I want to know if I'm paying relatively consistently within [that structure] or if one job is being paid more or less," she says.
She adds that hospitals should look at hospital roles, such as nursing, to determine whether employees are paid consistently for the same role. Benchmarking internally has two purposes: to ensure that pay is fair and consistent across similar roles and to ensure high performers are being rewarded for their hard work. "It doesn't mean everyone should make the same amount," she says. "If I have two employees doing the same job, and one is a star performer and one is a poor performer, each year the organization should have the ability to give the stronger performer more money," she says.
Learn more about Hay Group.
1. Find data specific to your region. While hospitals often draw from a national pool to find executives, staff members are usually recruited locally and regionally, Ms. Mitchell says. Since your region may differ significantly from other areas of the country in population, economic prosperity and patient demographics, Ms. Mitchell recommends using local or regional data to benchmark staff salaries. "A nurse in New York City is going to make a very different amount that a nurse in Peoria, Ill.," she says. "The compensation team will have to ask what kind of data is available." She says local or regional human resources groups will frequently spearhead healthcare compensation surveys, giving hospitals the opportunity to zero in on data specific to their location.
She says if your hospital's region does not produce region-specific data on hospital compensation, you can still use national data. But ideally compensation data will come from the hospital's recruitment area to give a better idea of what hospital competitors are offering in terms of salary and benefits.
2. Determine how much money is required to attract and retain employees. Ms. Mitchell says the key question in determining compensation for all your staff members should be, "What is my ability to attract, retain, engage and motivate my employees?" Given what your hospital is paying now, are you able to recruit and keep employees? While money isn't necessarily the only retention driver, it can play a major role when staff members are deciding whether to transition to a new employer.
While compensation data might assist you in benchmarking against other hospitals, annual employee surveys and exit surveys may be most effective in determining whether your compensation levels are appropriate for your hospital. "You should [ask about compensation satisfaction] as part of your annual survey to gauge levels of satisfaction," Ms. Mitchell says. "Organizations also often fail to do [thorough] exit surveys. The survey should ask [employees] if they are leaving for reasons related to compensation, where they are going and for how much." She says even though looking at compensation satisfaction through exit surveys may seem reactive, the results can be very helpful in determining future salaries.
3. Align compensation with your mission and status. Though nearly all hospitals already have an executive compensation philosophy, Ms. Mitchell says most lack a staff compensation philosophy. This can be a valuable tool in aligning your organization's compensation with your mission, goals and values. For example, if you run a non-profit hospital, your decisions about compensation may be different than in a for-profit facility. "[Hospitals] should consider what their role in the community is," Ms. Mitchell says. "They may not want to be a 90th percentile payer because it goes against their community-based mission."
Aligning compensation with your hospital's status means determining where your facility falls in the market. You may have market data that reports nursing salaries by percentile, meaning your hospital must decide at what percentile you want to pay. If you need to offer more competitive salaries to retain employees, you might consider paying at a higher grade. If you dominate your local market and find recruitment easy, you may be more of a middle-of-the-road payer. It all depends on the individual hospital, Ms. Mitchell says.
4. Lay out the required skills for a particular role. In circumstances when a hospital is creating a new position, administration should take time to define the kind of skills, experience and education are needed for a successful candidate. For salaried roles, a candidate who fulfills these requirements — or goes above and beyond — may draw better compensation than a candidate who lacks in a few areas.
Once the required skills for a particular role are decided and documented, the hospital can decide on a general pay scale for the role. This pay scale will be shaped by both market data on average compensation for that role and how other positions in the hospital are compensated. Then when the hospital selects a candidate for hire, administrators can examine the employee's experience, skills and education and fit them onto the pay scale appropriately.
5. Use national data to determine which positions should have incentives. While long-term incentives don't typically exist at a staff level, Ms. Mitchell says some organizations implement annual incentives that reward some hospital employees with an annual bonus for excellent performance. She says hospitals should be discriminating in assigning incentive plans, however. "You can look at market data that will tell you that jobs making X dollars or more also have an annual incentive component to their pay," she says. "Typically jobs below that level do not."
She says market data often presents base salary for a position as well as "total cash compensation," meaning base salary plus any additional incentive compensation. If the base salary and total cash compensation are the same for a particular role, that means the role is typically compensated through base salary only.
6. Benchmark staff salaries internally. Benchmarking shouldn't start and end with market data, Ms. Mitchell says. Hospitals should also benchmark salaries internally to determine how employees in the same role — or at the same pay grade — are being paid relative to each other. "If I've got a grade structure and I have multiple jobs in a particular grade, I want to know if I'm paying relatively consistently within [that structure] or if one job is being paid more or less," she says.
She adds that hospitals should look at hospital roles, such as nursing, to determine whether employees are paid consistently for the same role. Benchmarking internally has two purposes: to ensure that pay is fair and consistent across similar roles and to ensure high performers are being rewarded for their hard work. "It doesn't mean everyone should make the same amount," she says. "If I have two employees doing the same job, and one is a star performer and one is a poor performer, each year the organization should have the ability to give the stronger performer more money," she says.
Learn more about Hay Group.