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F 1 American Association of School Personnel Administrators Key Elements of a Total Compensation Plan Presented by: Bruce G. Lawson, CCP President Fox.

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Presentation on theme: "F 1 American Association of School Personnel Administrators Key Elements of a Total Compensation Plan Presented by: Bruce G. Lawson, CCP President Fox."— Presentation transcript:

1 F 1 American Association of School Personnel Administrators Key Elements of a Total Compensation Plan Presented by: Bruce G. Lawson, CCP President Fox Lawson & Associates LLC PO Box 32985 Phoenix, AZ 85064 Phone: (602) 840-1070 Fax: (602) 840-1071 October 22, 1999

2 F 2 Objectives of This Presentation  Discuss latest best practice  Strategic focus  Multiple systems to meet specific business unit needs  Key Elements of a strategic compensation plan  Job analysis  Job evaluation options  Compensation program  Alternative reward systems

3 F 3 Strategic Compensation  Aligning the compensation system with the goals and objectives of the School District:Spend dollars to achieve greatest impactMatch productivity with resultsStimulate creativityEnhance "ownership" value

4 F 4 Strategic Compensation  The conceptual design of a compensation program should be based on:The business environmentThe organizational environmentEmployee considerationsThe market environment

5 F 5 The New Business Environment  Strategic planning is necessary  Planning is specific and long term  Market share is threatened - there are new competitors  Past success is no guarantee of future success  Productivity and quality are paramount  Reorganization and restructuring

6 F 6 The New Organizational Environment  Reduced layers of management - fewer career opportunities  More direct impact on performance  Shorter term employees - loyalty to career, not the organization  An aging work force - decreasing pool of talent  Decreasing number of specialists but increasing needs  Entry level educational skills - changing demographics

7 F 7 Current Considerations  Attract, retain and motivate  Increased interest in incentives  Achieving pay in relation to performance

8 F 8 Future Compensation Trends  Emergence of management as an "investor"  Increased focus on entrepreneurship  Higher pay levels of all types  Growth in variable elements of pay - linking pay directly with productivity and "profit"  Increased decentralization of pay programs  Decreased emphasis on internal equity  Increased differentiation of pay practices by organizational unit

9 F 9 Systems to Consider  Mix of reward versus entitlement pay  Individual versus group incentives  Performance measurement  Alternative reward approaches  Broad banding  Skill based pay  Individual incentives  Group based incentives

10 F 10 Elements of a Strategic Compensation Program  Job analysis  Job evaluation  Base compensation plan  Alternative reward systems

11 F 11 Job Analysis Considerations  Data collection  Data verification  Establishment of classification structure

12 F 12 Job Evaluation Options  Point factor  Factor comparison  Market pricing  Decision banding

13 F 13 Compensation Plan Development  Select benchmarks  Market pricing  Surveys versus published data  Compensation structure design

14 F 14 Alternative Reward Systems  Broad banding  Skill based pay  Goal sharing/Gain sharing  Performance based pay

15 F 15 Broad Banding Broad Banding is the collapsing of a number of traditional salary ranges within a traditional salary structure into a few broad bands.

16 F 16 Characteristics of a Broad Band system  Significantly fewer salary grades (or bands)  Much wider ranges than those of conventional pay structures  No salary range midpoint identified because a band encompasses so many jobs of differing value

17 F 17 Broad Banding - Advantages  Greater flexibility in moving employees to meet organizational needs (lateral moves)  Less focus on titles and pay grades (supports team approach)  Encourages broadening of skills  Eliminates geographical structures  Supports flatter organizational structures  Less time spent on job evaluation  Offers a wider spread of pay opportunity in which to recognize and reward different levels of individual employee contribution  Supports an orientation towards greater responsibility on the part of management to "manage compensation"

18 F 18 Broad Banding - Disadvantages  Can be difficult to conduct external competitive analysis by job title or class summary benchmarking  Wider ranges result in less traditional cost control measures  elimination of control points (midpoints)  higher salary range maximums  Places more responsibility for administration on both Human Resources and Management  Employee education/communication is critical  Requires a different job evaluation orientation (traditional systems will not work)  Inflated expectations from stakeholders

19 F 19 Broad Banding - When Will It Work?  When you want a pay structure which supports a flatter organizational structure  The organization strongly supports career development, cross- training and inter-occupational mobility  Pay for skills (compensation) is encouraged  Change has top management's support  Effective communication channels exist within the organization  An effective performance management system is in place  First-line supervisors are well trained in performance management and in communicating the elements of the pay system to employees

20 F 20 Broad Banding - When Is It Likely to Fail?  The Organization’s existing culture values a traditional organizational hierarchy  The current compensation program is successful and already supports the organization's business strategy  Many elements are currently tied to pay grade (e.g. eligibility for benefits and incentives, office size, etc.)  Banding is regarded only as a way to solve salary administration issues

21 F 21 Skill Based Pay Skill based pay is a system designed to reward employees for the skills they possess and use in the work setting. Pay is directly related to the number of definable and measurable skills acquired and applied.

22 F 22 Characteristics  Individually based pay versus job based pay  Focus is on skill development  Encourages cross training  Permits flexibility in staffing

23 F 23 Skill Based Pay - Advantages  Encourages skill development and career development  Creates staffing flexibility  Improved employee satisfaction  Reinforces teamwork and employee involvement  Lower staff requirements for the same amount of work  Higher output and quality over the long term

24 F 24 Skill Based Pay - Disadvantages  Can be difficult to conduct external competitive analysis by job title benchmarking  Skill blocks can be difficult to define and price  Works best for trades and production based jobs  May result in paying for skills not used  Certification/re-certification process needs to be established  Time and money needed for training  More employees can "top out"  Administrative complexities

25 F 25 Skill Based Pay - When Will It Work?  When you want a pay system which supports a new culture  The organization strongly supports career development and cross-training  Pay for skills is encouraged  The change is supported by supervisors and managers  When training money and time are readily available  The organization supports total quality initiatives

26 F 26 Skill Based Pay - When Is It Likely To Fail?  There is a lack of supervisor and management support  Unwillingness to endure implementation problems  Cultural desire for equity at expense of individual differences  Skill blocks are not well defined  Failure to install proper certification process

27 F 27 Individual Based Incentives Individual based incentives include any plan(s) that reward(s) individual employees for their own performance or contribution.

28 F 28 Characteristics  Emphasis is on individual performance or contribution  Types of plans include:Pay for performanceSuggestion programsRecognition programs

29 F 29 Individual Based Incentives - Advantages  Focus on individual employee performance or contribution  Consistent with historical values of pay and performance  Incentive to address performance issues  Relatively easy to install

30 F 30 Individual Based Incentives - Disadvantages  Plans lose potency after 1 - 2 years  Difficult to set measurable performance criteria for many jobs  Encourages individual performance at expense of group  Can create feelings of superiority and/or inferiority  Creates administrative systems that must be monitored  May be perceived as unfair because of its subjective nature  Forces managers/supervisors to confront employees who do not perform at or above standards

31 F 31 Individual Based Incentives - When Will They Work?  Clear measures are established for success  Evaluators receive good and frequent training  Rewards are worthwhile and meaningful  Communication is excellent  When top performance can be distinguished from regular duties  The organization supports individual effort over group performance

32 F 32 Individual Based Incentives - When Are They Likely To Fail?  Managers/supervisors cannot or will not distinguish between different levels of performance  Organization does not fund the incentive program - rewards are not meaningful  Measurement system is poorly defined  Monetary value is low in comparison to effort expended

33 F 33 Group Based Incentives Group based incentives focus on solving problems of cost, quality, and efficiency leading to a monetary reward for documented improvements. Programs include:Small group incentivesGain sharing/Goal sharing

34 F 34 Characteristics  Emphasis is on teamwork  Teams are rewarded for improvement  Rewards ($) are usually considered "found" money  Formula based (not subjective)  Measures of improvement can be financial, operational or a combination

35 F 35 Group Based Incentives - Advantages  Encourages teamwork and employee involvement  Increases in pay are funded out of "found" money  Supports new culture of work  Encourages higher productivity and quality  Lower staffing levels needed

36 F 36 Group Based Incentives - Disadvantages  Plans need to be re-adjusted every few years  Difficulty in setting measurable objectives  Public distrust of paying for improvements  Productivity improvements need to be bought back  Rewards may not be large enough to motivate change in behavior  Significant time and cost involved to set up

37 F 37 Group Based Incentives - When Will They Work?  When the culture supports teamwork  Good base line performance measures are available  Management and employees enjoy a level of mutual trust  When all levels of employees are included  When rewards are separate from regular pay  The organization supports total quality initiatives

38 F 38 Group Based Incentives - When Are They Likely To Fail?  Lack of policy maker, management, and supervisor support  Overly complex bonus/pay-out formula(s)  Employee and management distrust  Legislative meddling  Lack of good baseline measures  Poor communication

39 F 39 The Bottom Line  Compensation should be used as a tool to assist the District in achieving its strategic objectives  It should be consistent with organizational needs  It should be responsive to employee concerns


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