Walk into any boardroom during compensation planning season, and you’ll likely hear the same phrase: “Let’s target market median.”

It sounds strategic, data-driven, and safe. Here’s the uncomfortable truth: aiming for the middle may feel safe, but it turns compensation into a default approach rather than a deliberate philosophy.

The Problem with Playing Follow the Leader

When companies default to market median across every role, they’re essentially admitting their people strategy is no different from anyone else’s.

But if your talent needs, business model, and competitive advantages are unique (and they should be), why would your approach to pay be a carbon copy of the average?

If you rely on this mindset, the outcomes are predictable:

• You’ll trail the market. By the time market data reflects a trend, the chance to lead has already passed.
• You’ll miss key talent needs. You may not need to pay top dollar for every role — but what about the ones that drive your competitive edge?
• You waste resources. Every dollar spent matching median for non-critical roles is a dollar not invested in critical talent.

“Playing it safe by copying the market median in every practice might feel comfortable and give false assurance that you are ‘competitive’, but it's a recipe for mediocrity. You’re missing what makes your organization unique.
If you're not building a strategy, then you're not differentiating on the factors that drive your business. It’s not about spending more — it’s about doing the work to maximize ROI on your compensation investments.”
— Scott Slipy, Co-Founder of Momentum Global HR

What a Real Compensation Philosophy Looks Like

A true compensation philosophy answers three core questions:

1. What behaviors do we reward?
2. Where must we win the battles for critical skills and talent?
3. How does pay support execution of our business strategy?

Examples of Real Compensation Philosophies

• Netflix’s Performance-Driven Model
  Pays top-tier cash compensation and trades job security for high accountability. Attracts elite performers who expect to be rewarded and challenged.
• Salesforce’s Equity Commitment
  Regular pay audits and heavy investment in closing pay gaps. Philosophy reinforces values and attracts purpose-driven talent.
• Buffer’s Radical Transparency
  Publishes all salaries using a public formula. Appeals to those who value openness, though demands a culture ready for full visibility.
• Google’s Strategic Premiums
  Pays well above market for engineering roles that fuel innovation, while other functions align closer to standard rates. Compensation follows impact.

Building Your Own Philosophy: A Practical Framework

Step 1: Identify Key Roles and Skills
Be honest about where talent contributes to or hinders success. Ask:

• Which roles directly affect revenue, customer satisfaction, or market differentiation?
• Where are you losing strong performers to competitors?
• What skills will be crucial three to five years from now?

Step 2: Understand Your Talent Landscape
Market survey data still matters, but context matters more:

• Who are you really competing with for talent?
• Where must you win talent battles, and where can you be less aggressive?
• What non-monetary advantages can you leverage?

Step 3: Align with Business Strategy
Compensation should reflect how you create value:

• Growth-stage startup → Equity-heavy packages for risk-tolerant talent.
• Established and regulated → Stability and benefits may outweigh base pay.
• Expanding aggressively → Location-flexible pay policies could be essential.

Step 4: Decide Your Strategic Advantages
You can’t be above market everywhere. Decide where to invest:

• Pay premiums for roles that deliver the most value.
• Structural differences (unique bonuses, equity, benefits).
• Experience & performance: how tenure, impact, and potential influence pay.

Making Your Approach Work

• Start small. Pilot your philosophy with one team or role family.
• Use data wisely. Combine internal insights and external expertise.
• Explain the “why.” Use transparency to link pay to goals and growth.
• Stay flexible. Markets shift, priorities change, talent doesn’t fit boxes.
• Measure what matters. Track retention, performance, and hiring success.

Case Study

Scott Slipy, a 4X Chief People Officer with 20+ years of global HR leadership, shared this example:

A rapidly scaling tech company was struggling to keep pace with salary increases and employee expectations in technical job families.

By differentiating pay practices across job families and countries, they expanded variable pay opportunities for technical roles instead of more base increases. This tied pay delivery more directly to performance and business impact.

The result: Top performers driving the business forward earned more, while others received a clear signal that reinforced performance expectations.

Key Takeaway

Market median isn’t wrong — it’s just not enough.

Use data to inform decisions, not make them for you. The companies that win the talent war are bold enough to pay differently because they know what makes their business different.

Your compensation philosophy should be as unique as your strategy. If it isn’t, you’re not really competing for talent — you’re just participating.

What is your compensation strategy really communicating, and is it what you intend?