Introduction of Total Rewards & Implementation of Market Pay Zones Presented by: UMHS Compensation 5/15/08

2 Objectives Share work to date regarding the Total Rewards ModelShare work to date regarding the Total Rewards Model –Process for support –Outcomes of Market Pay Zone Management Review period for staff in CFCS Introduce UMHS Total Rewards Philosophy for UMHSIntroduce UMHS Total Rewards Philosophy for UMHS –Formalize UMHS Compensation philosophy Gain support on next steps toward implementation of Market Pay Zone structureGain support on next steps toward implementation of Market Pay Zone structure –Compensation guidelines

3 TOTAL REWARDS STRATEGY Compensation - Base Pay -Variable Pay -Other Pay -Develop Pay Structure -Validate Structure -Develop Salary Administration Guidelines -Communicate/Educate Benefits - Health -Dental -Life & Disability -Retirement - Conduct Benefits Study - Identify market position -Communicate/Educate Work Experience - Training/Development -Work/Life -Cultural -Recognition -Identify approach to illustrate value of work experience -Communicate/Educate TOTAL REWARDS TOOLS -Website -Statements Total Rewards - The End in Mind

4 UMHS Current Strategies – WIP Become Widely Recognized As a Great Place to Work Coordinate Recruitment Efforts. Expand and Diversify the Potential Applicant Pool Mentoring, Mentoring, Mentoring Re-Recruit Current Employees Invest in Leadership Development Workforce Investment Plan 2003 to Present

5 Management Review Purpose UMHS Executive Leadership expressed interest in gaining organizational support: Introduce and gain support on “Total Rewards” model and new base pay structureIntroduce and gain support on “Total Rewards” model and new base pay structure Meet with Management to understand: Current departmental compensation practicesCurrent departmental compensation practices Organizational “fit” of proposed base pay structureOrganizational “fit” of proposed base pay structure Desired compensation guidelines & resourcesDesired compensation guidelines & resources Zone implementation preferencesZone implementation preferences

6 Management Review Communication Process Management Review Period : General information via Total Rewards websiteGeneral information via Total Rewards website Department specific information via UMHS HR ConsultantsDepartment specific information via UMHS HR Consultants –1:1 meetings with Department Management  All feedback was documented  Department specific issues are being resolved with the department/HR  Organizational issues are being resolved with appropriate stakeholders

7 Market Pay Zone Review Outcomes Review period itself was well-received: Continued dialog on implementation of new classification system and UMHS compensation practicesContinued dialog on implementation of new classification system and UMHS compensation practices Continued improvement of job classification within the new systemContinued improvement of job classification within the new system Process supported philosophy of “transparent” HR practicesProcess supported philosophy of “transparent” HR practices 1:1 communication to discuss business needs1:1 communication to discuss business needs

8 Market Pay Zone Review Outcomes Management expressed support for: Total Rewards ModelTotal Rewards Model –Integrated design of compensation, benefits and work experience programs to support recruitment and retention Target market competitive pay for UMHS positionsTarget market competitive pay for UMHS positions –Market target is higher for some positions The proposed Market Pay Zone structureThe proposed Market Pay Zone structure

9 Market Pay Zones Outcomes Management expressed interest in: Formalized compensation philosophy as part of a UMHS Total Rewards philosophyFormalized compensation philosophy as part of a UMHS Total Rewards philosophy Formalized compensation guidelines to ensure department compensation practices align with leadership intentionsFormalized compensation guidelines to ensure department compensation practices align with leadership intentions –Consistent compensation practices A “management implementation” period of market pay zone structure and accompanying guidelinesA “management implementation” period of market pay zone structure and accompanying guidelines

10 Market Pay Zones Outcomes More information on current UMHS compensation, benefits, and work experience programsMore information on current UMHS compensation, benefits, and work experience programs –To assist in recruitment and retention of staff –To support selected rewards strategy (competitive advantage of creating the ideal work experience) Information on common career paths and growth opportunities in UMHSInformation on common career paths and growth opportunities in UMHS

11 Market Pay Zone Review Outcomes Over 600 market titles/zones out for review: Approx. 85% market titles/zones have been “validated”;Approx. 85% market titles/zones have been “validated”; Reviewed, discussed and support recruitment/retentionReviewed, discussed and support recruitment/retention Some with recommended changes:Some with recommended changes: To align with internal pay relationshipsTo align with internal pay relationships Core positions with recruiting and retention challengesCore positions with recruiting and retention challenges Remainder require further review:Remainder require further review: Market titles with utilization or design issuesMarket titles with utilization or design issues Director level titles require more review to ensure proper pay relationshipsDirector level titles require more review to ensure proper pay relationships

Recommendations Recommendations

13 Recommendations Formalize UMHS Total Rewards PhilosophyFormalize UMHS Total Rewards Philosophy –To set guiding principles for the design of compensation, benefits, and work experience programs Considerations:Considerations: –Organizational fit of guiding principles –Identification of desired market position for programs

14 Recommendations Formalize UMHS Compensation PhilosophyFormalize UMHS Compensation Philosophy –To set guiding principles for the design of compensation programs Considerations:Considerations: Identification of desired market position (w/HSEG)Identification of desired market position (w/HSEG) Identification of pay factors (importance of performance, LOS)Identification of pay factors (importance of performance, LOS) Balance of internal and external equityBalance of internal and external equity

15 Recommendations Formalize UMHS Compensation GuidelinesFormalize UMHS Compensation Guidelines –To set guidelines around compensation policies & practices: Considerations:Considerations: –Placement within new market pay zone –Pay for zone “outliers” (tolerance & criteria) –Pay change guidelines

16 Market Pay Zone Placement Guidelines (Sample 1) Range of Competitiveness Market Pay Zone Developing Staff Highly Experienced & Highly Proficient Staff Experienced/ Competent Staff Midpoint

17 Market Pay Zone Placement Guidelines (Sample 2)

18 Pay Change Guidelines

19 Pay Change Guidelines

20. Compensation Philosophy FY08 Pay Structures Managerial Pay Zones Professional Pay Zones Establishing Pay Rates Adjusting Pay Rates Premium Pay Pay SPGs UMHS Pay AdministrationPay PoliciesPay Laws and Regulations UMHS Pay Administration UMHS Total Rewards

21 Next Steps Long-term: –Formalize UMHS Total Rewards strategy To support UMHS strategic goalsTo support UMHS strategic goals –Integrate total rewards in employment brand to fully support recruitment and retention strategies (& WIP) (i.e., “The MI difference is U ” Rewards)(i.e., “The MI difference is U ” Rewards) –Individual Total Rewards Statements

22 Next Steps What (unit) management should be able to communicate after trial period:What (unit) management should be able to communicate after trial period: Basics of the Total Rewards Model and how it supports recruitment/retention and our strategic goals Basics of the Total Rewards Model and how it supports recruitment/retention and our strategic goals UMHS compensation philosophy, overall targets for owned positions based on metrics and labor market UMHS compensation philosophy, overall targets for owned positions based on metrics and labor market Pay range for each of the utilized positions and basics of how they were established Pay range for each of the utilized positions and basics of how they were established Employees’ position in the range and how that relates to peers, market, and performance Employees’ position in the range and how that relates to peers, market, and performance Opportunities for career development for staff (next levels and/or closely related market titles) Opportunities for career development for staff (next levels and/or closely related market titles)