Explain the three reasons why companies often choose not to develop their own compensation surveys

What will be an ideal response?

Answer: Managers must decide whether to develop their own survey instruments and administer them or rely on the results of surveys conducted by others. In theory, customized surveys are preferable because the survey taker can tailor the questions and select respondents to provide useful and informative data. Custom survey development should enable employers to monitor the quality of the survey methodologies.

In practice, companies choose not to develop and implement their own surveys for three reasons. First, most companies lack employees qualified to undertake this task. Developing and implementing valid surveys require specialized knowledge and expertise in sound questionnaire design, sampling methods, and statistical methods.

Second, rival companies are understandably reluctant to surrender information about their compensation packages to competitors because compensation systems are instrumental to competitive advantage if companies are willing to cooperate, the information may be incomplete or inaccurate. For example, rival companies may choose to report the salaries for their lowest-paid accountants instead of the typical salary levels. Such information may lead the surveying company to set accountants' salaries much lower than if they had accurate, complete information. Setting accountants' salaries too low may hinder recruitment efforts. Thus, custom development is potentially risky.

Third, custom survey development can be costly. Although cost figures are not readily available, it is reasonable to conclude that most companies use published survey data to minimize costs such as staff salaries and benefits, telephone and mail charges, and computers for data analyses.