compensation issues that keep you ... - washington state...
TRANSCRIPT
Looking Ahead
Compensation Issues That Keep You Awake at Night
(And how to get a good night’s sleep)
Washington State CouncilSHRM Washington
March 28, 2014
Dianne Burt-Green, CCP, SPHR, Principal & Operating Manager
• Identifying Trouble Spots– When your systems need extra attention
• Managing Compression– What is it and how to make it go away!
• Updating a Base Pay Structure– Example of tools to use in making an update
• When Performance Matters– How performance functions within programs
• 2014 Salary Trending
• No program is static– Wages increase – Employee populations change– Recruitment conditions fluctuate– Regulatory environment updates– Cultural conditions shift
• Time
• Metrics
• Labor Market
• Motivational Goals
• Unchanged compensation plans– Number of years, decades, millenniums since
compensation system underwent total review
• HR / Compensation / Total Rewards Staff Resources– Staff as “fire fighters” vs. “innovators”
External Internal Ability to Pay
- Time to hire- Salary offers- Cost of turnover - Tenure/ Retention- Market Index
- Compa-ratio- Compression- Salary distribution by
division, dept, mgr, location- Complaints- Communication- Compliance: salary
differences by gender, age or minority status
- Budget- Benefits as a % of payroll- Variable costs vs. fixed- Awards tied to organization
results- Revenue per employee
What do the Metrics tell us?
What’s YOUR labor market doing?• Economy• Political environment• Availability of talent– Variable in job categories; while some jobs have a flood
of candidates others jobs have a scarcity of talent
• Ease of obtaining comparable data
• Strategic Alignment• Values of the organization / values of the workforce• Reward Performance? Reward productivity?• Clarity and communication• Transparency of the system• Ease of administration
• Salary Compression– “Salary compression occurs when there is
little to no differences in pay, coupled with large differences in responsibilities, skill level or qualifications”
WorldatWork/Workspan 2009
y New hire rates > current incumbents
y Subordinate pay > supervisor
ÙTypically occurs when subordinates are eligible for overtime
y Inefficient merit pay programs
y Unionization
y Midpoint differentials (% between midpoints) too close to each other
{ Salary transparency among Millennial Generation
ÙTraditionalists and Baby Boomers have long considered pay a “private” matter
{ Increases in minimum wage January 2014
ÙOregon $8.95 to $9.10 (+1.67%)
ÙWashington $9.19 to $9.32 (+1.4%)
y Review positions to ensure all duties are captures and if reclassification is necessary
y Review market data to ensure positions are “priced” correctly
y Rotate OT amongst non-exempt staff
y Utilize lump sum merit increases, sign-on bonuses, off-cycle merit adjustments
y Variable pay
y Non-monetary rewards
Ù Explore benefits or work-experience options w/o compensation
y Communicate with management and staff
ÙCompensation Philosophy
Ù System Fairness
y Review pay structure and midpoint differentials
y Review merit pay system to ensure significant difference between top and low performers
• Evaluating employee position in range– By tenure– By performance
• Evaluating market target– Relationship of market to range– Desired position based on compensation strategy
• Market analysis of competitive wages– Evaluating all or some of jobs – Determining market movement
• Trend surveys– Published surveys on wage and structure
movement
Market Median Company Midpoint Delta
Administrative Assistant $31,119 $30,000 3.7%
Mechanical Engineer $66,011 $65,000 1.6%
Graphic Designer $43,889 $45,000 -2.5%
Project Manager $70,015 $65,000 7.7%
Overall 2.6%
• Selection of positions for benchmarking• Establish relationship to market• Determine appropriate structure adjustment
2.17%
1.43%
1.50%
1.62%
1.80%
2.00%
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
Actual 2009 Actual 2010 Actual 2011 Actual 2012 Actual 2013 Forecasted 2014
• Survey Structure Increase Movement
Executives
Range
Spread
50%
40-50%
25-35%
Exempt
Non-Exempt
MidpointMidpoint
Differential
20%-25%+
15%-20%
10%-15%
Min Mid MaxQ2 Q3
1st
Quartile
2nd
Quartile
3rd
Quartile
4th
Quartile
Midpoint is typically market “weighted average” or “median” (50th Percentile)
Min Mid MaxQ2 Q3
1st
Quartile
2nd
Quartile
3rd
Quartile
4th
Quartile
To tackle compression, keep the midpoint spreads substantial
A
B
• Ability to pay always matters• Moving the structure doesn’t mean increasing
wages, but . . .– Evaluate impact for employees at the current
minimums and the new minimum increases– Evaluate impact for employees at the current
maximums and the potential for salary increases
• Pay for Performance Plans– Merit Increases– Profit Sharing– Gain Sharing– Commissions– Target Incentive Plans– Spot Bonuses– And more!
• Defining the “Performance” in pay-for-performance– Organization, division, department, individual
• Determining how it will be measured– Objective metrics• What data, where is the data, how is it calculated?
– Subjective evaluation• Who is the evaluator, what is the evaluation tool?
• Motivation requires Communication– Everyone involved in the program needs to
understand• Why is this program important• How does this program work• What are the performance targets• How are the performance targets evaluated• What is the performance time period
• Performance Targets (a few examples)– Safety– Quality– Profit– Productivity– Efficiency– Customer Service
– Teamwork– Market share– MBO’s– HR metrics– Mission based– Product Sales
• Objectivity makes metrics highly desirable• Metrics alone may have unintended actions• In selecting metrics, think through the data
components that are used in calculations and every possible influence on each data piece
• Customer Satisfaction– Measurements: customer satisfaction
surveys, feedback at purchase, purchase analysis
• Compensation components– Business unit (store / location) with targets to
meet for quarterly bonuses– Individual wage increases based on evaluations
targeting customer service
• Measurement = Safety– Metric = # of injuries & # of accidents– Unintended outcome = supervisors fail to report
accidents as the reporting will lower potential bonuses
• Measurement = Sales Productivity– Metric = sales revenue ÷ # sales representatives– Unintended outcome = large increase in overtime
wages with an understaffed sales team
• Model the measurements and create templates for how the program will run– What if?
• Evaluate financial impacts and outcomes• Evaluate the non-financial impacts and
outcomes• Use modeling to ensure clear agreements
(understanding) on how the program will work
MBL Group 2013 – 2014 Wage Trends Report
Ù National & Regional Trends
Ù Special Supplement for Oregon & SW Washington
Compensation Philosophy
Base Pay
72%15%6%7%
% Responses
At MarketAbove MarketBelow Market
No Idea!
Total Comp
48%36%1%
15%
Salary Structure
y Actual 2013{ Executive 1.97%{ Management 2.16%{ Exempt 2.32%{ Non-Exempt 2.14%{ Union 0.77%
y 54% reported having a formal salary structure in place
y Projected 2014{ Executive 2.18%{ Management 2.49%{ Exempt 2.66%{ Non-Exempt 2.5%{ Union 0.78%
Types of Base Pay Increases
y 79% budget for Merit Increasesy 21% budget for COLA increases
y 45% budget for promotional increasesy 38% budget for “other types” of increases
Year Executive Exempt Nonexempt
Actual 2000 4.8% 4.5% 4.3%Actual 2001 4.8% 4.4% 4.3%Actual 2005 3.7% 3.5% 3.5%Actual 2007 4.1% 3.8% 3.7%Actual 2008 4.1% 3.9% 3.8%Actual 2009 1.8% 2.1% 2.2%Actual 2010 2.4% 2.4% 2.4%Actual 2013 2.9% 2.9% 2.9%Projected 2014 3.1% 3.1% 3.1%
Year Executive Exempt Nonexempt
Actual 2000 3.2% 3.5% 3.4%Actual 2001 3.3% 3.6% 3.4%Actual 2005 2.5% 2.5% 2.4%Actual 2007 3.1% 3.0% 3.0%Actual 2008 2.9% 2.9% 2.8%Actual 2009 2.1% 2.2% 2.2%Actual 2010 1.4% 1.4% 1.5%Actual 2013 1.9% 1.9% 1.9%Projected 2014 2.1% 2.0% 2.1%
Merit:
Ù Oregon / SW Washington
| 2.9% (with zeros)
| 2.9% (without zeros)
Ù Portland
| 2.9 % (with zeros)
| 2.9 % (without zeros)
Structure:
Ù Oregon / SW Washington
| 2.1% (with zeros)
| 2.3% (without zeros)
Ù Portland
| 2.3% (with zeros)
| 2.4% (without zeros)
y Dianne Burt-Green, CCP, SPHR{MBL Group, LLC
Ù(503) 850-4972 x13Ù[email protected]Ùwww.mblgroup.com