Developing an Equitable Compensation System:  Summit

and Trumbull Counties’ Process/Experience

OACB 2014 Winter Conference

Agenda

}  A few terms }  Overviews – You and Us }  Project Components }  Implementation and Administration }  Pay for Performance }  Project Outcomes, Lessons Learned, and the Future

A Lunch Break Somewhere

Terminology }  External competitiveness – The value of the job in the

market place. }  Typically what employers focus on. }  Market basket – Comparable organizations

}  Internal equity – The value of the job to the agency. Typically determined by looking at job content and its relative value based on skills, duties and responsibilities. }  Typically what employees focus on. }  Position Evaluation – method of determining relationship of

positions. }  Pay Structure

}  Ideally a blend of both external competitiveness and internal equity.

A Little About You }  Demographics

}  Role }  Size of agency }  Union/Non-union

}  How many of you: }  Have formal pay systems/structures (pay ranges, policies) for

your non-bargaining unit employees? }  Collect market information to determine pay rates? }  Use primarily across-the-board merit increases?

A Little About Your Issues }  Are any of you confronted by situations where:

}  You have to pay a new employee the same or more than current employees?

}  You’re not able to promote a bargaining unit employee to a managerial position because they can earn more money as a bargaining unit employee?

}  An employee questions why they are not paid at the same level as other employees?

}  Have any of you experienced employee turnover as a result of compensation issues?  

A Little About Us – Summit County Overview }  500 employees + substitutes }  Approximately 85 employees/50 positions are non-

bargaining }  Management, HR, IT, Investigative Agents, some administrative

support

A Little About Us – Summit County 2011

}  Pay structure – 22 pay grades }  Position Evaluation – proprietary to consultant }  Market basket – other public entities including DD boards }  Merit increases – performance based – across the board Problem areas }  Position Evaluation – lacked credibility and “explanability”

because we didn’t own it. }  Market basket – no general market data for shared services

positions (IT, HR, Fiscal) to ensure competitiveness }  Perceived market compression/inequity – higher pay to obtain

outside hires than current employees “who had come up through the ranks”

A Little About Us – Trumbull County Overview }  300 employees + substitutes }  Approximately 70 employees/40 positions are non-

bargaining }  Management, HR, IT, Fiscal, administrative support

A Little About Us – Trumbull County 2014

}  Pay structure – no formal pay grades }  Position Evaluation – no formal process }  Market Basket – other public entities including DD boards }  Across-the-board increases

Problem areas }  Market basket – no general data for shared services positions

(IT, HR, Fiscal) to ensure competitiveness }  Compression/inequity – non-bargaining employees’ salaries

tended to be lower than bargaining unit employees with same years of service.

}  No historical experience with position evaluation.

In Its Most Simplistic Form A Compensation Program Must Be:

}  Fair }  Understandable }  Manageable

The process is as important as the system itself!!!

Involve members of leadership team to promote credibility and trust.

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Compensation Strategy

}  What are the competitive markets for employees? }  How does the agency want to position itself in these

markets? }  What factors, outside of compensation, influence the

acceptability of compensation? }  What are the agency’s short and long-term strategic

objectives? }  What are valid benchmark positions that represent a

broad cross section (functional and hierarchical) of the agency?

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Job Descriptions and Position Evaluation

}  Ensure descriptions accurately reflect job responsibilities.

}  Position Evaluation }  Systematic method of determining the relationship of positions

within the agency. }  Focuses on the position; not the incumbent }  Consistently applied }  Designed to accommodate positions at all levels }  Factors

Position Evaluation Committee }  Broad spectrum of management employees applies

Position Evaluation Plan to create a job hierarchy }  Enhances compensation system credibility }  Promotes agency ownership }  Multiple layers of checks and balances

}  Position Evaluation Committee }  Supervisors/Managers }  Directors }  Superintendent

Committee has ongoing responsibility for new or restructured positions.

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Market Data Collection }  Identify benchmark positions

}  Summit = 17 benchmark positions }  Trumbull = 16 benchmark positions }  Examples: Director of Fiscal, SSA Manager, Facility

Manager, IA, Administrative Assistant

}  Compile and analyze data for benchmark positions to identify competitive rates in the various (local, regional, etc.) labor markets where the agency competes for and recruits employees.

Market Data Collection }  Executive and specialized professional – highly specific

to DD operations; may be in limited supply. }  Superintendent, Director of SSA, Investigative Agent }  OACB Survey

}  Administrative and technical – skills are transferable to a variety of environments. }  Business Manager, IT, HR, Administrative Assistant }  OACB and Employers Resource Council (NEO employers’

association) – used for profit and not-for-profit

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Develop Pay Structure }  Correlation of the internal position evaluation results

with the external market data. }  Consists of a series of grades and ranges that are

internally equitable and externally competitive. }  Minimum, Midpoint (Market Rate), Maximum

}  Our Results }  Summit = 11 pay grades (decreased from 22); 50%

spread }  Trumbull = 7 pay grades; 50% spread

Grade Minimum Midpoint Maximum   Pay Structure Job Title 1 $31,200 $39,000 $46,800 Assistant I (Adult Services, Quality/Fiscal)   $15.00 $18.75 $22.50 Coordinator I (HR)             2 $35,200 $44,000 $52,800 Assistant II (SSA, Sr. Director/Assistant Superintendent)   $16.92 $21.15 $25.38 Coordinator II (HR/Employment)             3 $39,200 $49,000 $58,800 Assistant III (Superintendent)   $18.85 $23.56 $28.27 Coordinator III (HRIS, FMLA/Benefits)         Application Developer I             4 $44,800 $56,000 $67,200 Application Developer II   $21.54 $26.92 $32.31 Investigative Agent         Supervisor I (Facilities Management, Payroll             5 $48,800 $61,000 $73,200 Supervisor II (Mechanic, Adult Services)

  $23.46 $29.33 $35.19 Manager I (Transportation/Comm. Travel, Records,            

6 $54,400 $68,000 $81,600 Manager II (SSA, Project, IA, Intake, SUD, Facility,

  $26.15 $32.69 $39.23 Children’s Services, Fiscal, HR/Payroll

Project Components

Philosophy and Strategy Job Content Position

Evaluation Market Data Pay Structure Implement and Communicate

Implementation and Communication

Remember – Involved members of leadership team to

promote credibility and trust.

A Compensation Program Must Be: }  Fair }  Understandable }  Manageable

Implementation and Communication

}  Explain to and train managers }  Managers must believe the process was fair and the

results are valid.

}  Implement the new pay structure by assuring that individual pay rates are within the assigned range. }  Assuming satisfactory performance, Summit adjusted pay

rates of all employees whose current pay rate was below range minimum to range minimum.

Implementation and Communication Challenges:

}  Summit }  Bargaining unit compression }  Employee expectations }  Budget limitations

}  Trumbull }  Employee expectations }  Budget limitations

Administration and Performance Based Pay

}  Merit increases now based on two factors: }  Performance }  Placement in pay range

New term: }  Compa-ratio – actual salary divided by midpoint

}  Minimum = 80% compa-ratio }  Midpoint = 100% compa-ratio (Market Rate) }  Maximum = 120% compa-ratio

Grade Minimum Midpoint Maximum Pay Structure Job Title

1 $31,200 $39,000 $46,800 Assistant 1; Coordinator 1

80% 100% 120%

Merit Based on Performance Alone

}  Basing merit increases on performance alone ignores internal pay comparisons. }  Same performance – higher paid employees receive

greater absolute increases, even though the merit percentage reward is the same.

}  Perpetuates pay inequities that might exist; may reward long-tenured and/or higher paid employees disproportionately.

Merit on Performance and Position

}  Alternative is to calculate merit increases based on both performance and position in pay grade (compa-ratio). }  Over time, inequities in salaries of employees in

same pay grade will be reduced as lower paid employees are accelerated toward midpoint and high paid employees are “slowed down.”

Merit Increase Matrix 80-90%

Compa-ratio 91-100%

Compa-ratio 101-110%

Compa-ratio > 110%

Compa-ratio

Exceeds Expectations

4% 3% 2% 1%

Meets Expectations

3% 2% 1% 0%

Below Expectations

0% 0% 0% 0%

Average Market Rate = 100%

Merit Increase Matrix Advantages: }  Reduced tendency to perpetuate tenure-based pay

inequities. }  More likely to be deemed “fair” by employees because,

over time, employees with similar performance in the same pay grade will tend to be paid comparably.

}  Top performers receive bigger rewards with greater frequency, yielding significant increases due to the compounding effect.

}  During times of tight budgets, limited merit $ can be distributed to the highest performing employees rather than “spread” across all performance levels.

Outcomes/Deliverables of Project }  Compensation Strategy Statement }  Position Evaluation Plan and Point Table }  Final Position Evaluations }  Market Summary }  Pay Structure (pay grades and ranges)

}  Summit = 11 pay grades (decreased from 22) }  Trumbull = 7 pay grades (previously no formal pay grades)

Outcomes/Deliverables }  Pay Administration Guidelines

}  Performance Pay }  Pay rate positioning }  Promotions }  Lateral Transfers }  Demotions }  Red circle pay rates }  Pay structure adjustments

Lessons Learned and the Future Process: }  Provided invaluable information about the agency

structure and how decisions are made. }  Using a group process created advocates and supporters

of the system – and in the long term will help maintain the integrity of the system.

}  Well positioned for industry changes: }  The role of DD Boards }  How jobs are designed and valued }  Expansion of community employment

In Its Most Simplistic Form

A Compensation Program Must Be:

}  Fair }  Understandable }  Manageable