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Building the Range Architecture 8:28 Lena: Okay, Miles, let’s get into the nitty-gritty. We’ve talked about grades and midpoints, but I want to know the actual math. If I’m sitting at my desk with a spreadsheet, how do I actually calculate these numbers?
8:40 Miles: I love it when we get into the "how-to" mode. Okay, imagine you’ve determined that for Grade 4, the market midpoint is $60,000. That’s your target for a fully qualified, solid performer. Now, you need to decide on your "range spread." Let’s say you want a 40 percent spread.
8:57 Lena: Forty percent. Okay, so how do I find the minimum and maximum from that?
9:02 Miles: It’s a simple formula, but people often mess it up. To find the minimum, you take the midpoint and divide it by 1 plus half of the spread. So, if the spread is 40 percent, half is 20 percent, or 0.20. You divide $60,000 by 1.20.
9:18 Lena: Let me do the math... that’s $50,000.
1:28 Miles: Exactly. That’s your "floor." Now, to find the maximum, you take that minimum and multiply it by 1 plus the full spread. So, $50,000 times 1.40.
9:32 Lena: And that gives us $70,000. So the range for Grade 4 is $50,000 to $70,000, with a $60,000 midpoint.
9:41 Miles: You’ve got it. Now, here’s a pro tip: You also need to look at "midpoint progression." That’s the percentage jump from the midpoint of Grade 4 to the midpoint of Grade 5. If it’s too small—say, only 3 percent—people won't feel like a promotion is worth the extra responsibility. If it’s too large—like 30 percent—you’ll have a hard time moving people up because the jump is too expensive for the budget.
10:04 Lena: So what’s the "sweet spot"?
10:07 Miles: Usually, you’re looking at 8 to 15 percent between grades. It provides a meaningful raise that reflects a real step up in value.
10:14 Lena: And what about "overlap"? If the maximum of Grade 4 is $70,000, and the minimum of Grade 5 is $55,000, there’s a lot of overlap there. Is that a problem?
10:26 Miles: Actually, overlap is good! It recognizes that a highly experienced, top-performing person in a lower grade might actually be worth more to the company than a brand-new, inexperienced person in the next grade up. It gives you flexibility. However, if you have too much overlap—like 80 or 90 percent—then your grades aren't really distinct anymore. You might as well just have one big grade.
10:50 Lena: It’s like having different weight classes in boxing. There’s a bit of overlap, but you still need those distinct categories to keep the competition fair.
10:58 Miles: That’s a great way to think about it. Now, once you have these ranges, you have to perform a "compa-ratio" analysis. This is a classic diagnostic tool. A compa-ratio is just an employee’s actual salary divided by the midpoint of their range.
11:11 Lena: So if I’m at $60,000 and the midpoint is $60,000, my compa-ratio is 1.0 or 100 percent.
1:28 Miles: Exactly. If you’re at 0.80, you’re likely new to the role or underpaid. If you’re at 1.20, you’re at the top of the range. If a manager has a whole team with compa-ratios of 1.15, you know they’re either elite performers or that manager is being way too generous with the budget. It’s a red flag for a compensation audit.
11:36 Lena: I can see how that would be a vital tool for HR. It helps you spot inconsistencies before they turn into "equal pay" issues or budget blowouts.
6:27 Miles: Right. And speaking of equal pay, that’s a huge compliance pitfall. When you’re building these structures, you have to ensure they’re "gender-neutral" and don't bake in historical biases. Using objective job evaluation criteria—like the Hay method we mentioned—is your best defense there. It moves the conversation from "who you are" to "what the job requires."
12:06 Lena: It’s about building a system that is defensible, logical, and transparent. If you can explain the "why" behind the numbers using this math, you win the trust of the employees.