Broadbanding Applications in an International Setting

1
Broadbanding Applications in an International
Setting

• IPMA-HR International Training Conference
• October 2, 2007
• Presented by
• Bruce G. Lawson, CCP, IPMA-CP
• Jim Fox, PhD, IPMA-CP
• Nontigorn Kanchanachitra

2
Agenda

• What is Broadbanding?
• How Broadbanding Has Been Applied
• Thailands Paradigm Shift and Proposed Broadband
  Pay System
• Q A

3
What is Broadbanding?

• It means different things to different people.
• Banding is
• Reduced number of salary grades and ranges
• Widened salary ranges
• It represents a dramatic change in salary
  management.

4
Background

• US Navy credited with developing the concept in
  1980
• Emerged in private sector in early 1990s
• Current popularity due to increased flexibility
• Broadbanding experience is still developing

5
Organizational Change

• It broadens the view of jobs and of work.
• It enlarges the scope of a managers job.
• It facilitates reorganization and change.

6
Traditional Salary Structure

• Most salary structures are based on the same
  principles.
• Salaries are managed within ranges using a merit
  policy or step increases.
• A traditional structure was designed to maintain
  control.

7
Broadband Example

Job Value
Low High
8
Implications

• Is banding consistent with shared compensation
  beliefs?
• Are managers ready for an expanded role?
• How will employees (and their union
  representatives) react to banding?
• How will you maintain cost control?

9
Reasons For Broadbanding

• Enhanced flexibility including starting pay
  rates.
• Less bureaucratic - more person focused.
• Reduces administrative resources.
• Reduces emphasis on job hierarchy (class
  consolidation).
• Can delegate accountability for people management
  to managers.
• Facilitates lateral career movement.
• Supports effective team work.

10
Restructuring

• Expedites restructuring.
• Facilitates delayering.
• De-emphasizes structural differences.

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Job Titles

• Facilitates the reduction of job titles /
  classes.
• Minor job differences less important.
• Generic titles enhance flexibility of program.

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Charlotte, NC Case Study

• Environmental Scan in Charlotte 1992
• Flat revenue following growth period
• Strong anti-tax sentiment
• Intense privatization/competition drive
• Changing City Council priorities

13
Charlotte, NC Case Study

• Human Resources in Charlotte - 1992
• HR was a police function
• Step, step/open range or open range pay plans
• Position Classification job evaluation method
  used
• Critical incident technique appraisal system

14
Charlotte, NC Case Study

• Culture Shock in Charlotte
• Rightsizing
• Delayering of middle management
• Organizational restructuring
• Mayors Compensation Task Force

15
Charlotte, NC Case Study

• How Charlotte Changed HR
• HR Philosophy
• Broadbanding
• HR as consultant
• MBR performance management plan
• Gainsharing programs

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Charlotte, NC Case Study

• Why Charlotte Chose Banding
• Support culture change
• Flexibility
• Pay the individual
• Push compensation decisions down in organization

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Charlotte, NC Case Study

• Charlottes Broadbanding Design
• 6 Bands
• Excludes Police and Fire
• Bands 100 wide
• 35 overlap
• Labeled A-F
• Market Focus
• Implementation 4 months

18
Charlotte, NC Case Study

• Characteristics of Charlottes Plan
• Market Sensitive
• Performance Driven
• Supports skill acquisition
• Flexible
• Business units accountable for decisions
• Fewer titles/broader jobs

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Charlotte, NC Case Study
20
Private Sector Case Study
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Private Sector Case Study

• Special Considerations for Private Sector
• High degree of confidentiality
• Limited disclosure of salary structures
• Examples presented reflect typical structures
• Represents local and international firms from
  many industries
• Dow Jones Company (media)
• Met Life Home and Auto (insurance)
• Rockwell Automation (manufacturing)
• Circle K Corporation (retail)

22
Private Sector Case Study

• Current Private Sector Environment
• Rapid industry transformation
• Increasing pressures of globalization
• Shift towards service-oriented economy
• Greater need for international knowledge and
  worker adaptability

23
Private Sector Case Study

• Changing role of HR
• Strategic business partner
• Emphasis on right place, right time employee
  development
• Need for flexible pay models
• Stronger emphasis on manager responsibility of
  pay management

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Private Sector Case Study

• Why are private organization adopting
• broadbands?
• Enable flexibility and simplify support in
  meeting unique business needs
• Link to market-based compensation
• Improve speed of decision making/minimize
  bureaucracy
• Reduce hierarchy

25
Private Sector Case Study

• Developing broadbands to Support Business
• Many organizations have job family pay models
  with multiple pay ranges
• Jobs generally separated into five bands
• Large pay range in new bands
• Allows greater flexibility to attract and retain
  talent
• Top executives not included, generally set by
  Board
• Moderate amount of overlap between bands

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Private Sector Case Study
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Private Sector Case Study

• Jobs in broadbands
• Associate Entry and lower level positions
• Professional Experienced administrative,
  professional, and technical employees
• Senior/Leadership Advance professional and
  technical, and supervisory and management
  positions
• Corporate Leadership Experienced management and
  director employees
• Business Leadership Strategic directors and
  executive level positions.

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Private Sector Case Study

• Common Obstacles
• Most private organizations have faced similar
  obstacles when implementing broadbands
• Employee confusion over job value
• Concerns of unfair pay practices
• Many novel and effective best practices have been
  developed
• Employee/manager appeals committees (e.g. Dow
  Jones)
• Career growth and development training (e.g. Met
  Life)

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Private Sector Case Study

• Communicating the change
• A recent WorldatWork survey found the following
  communication methods
• Written information/brochures (100)
• E-mail (80)
• Formal training sessions (80)
• Intranet postings (30)
• Meetings with HR staff (30)
• Meetings with business managers (30)
• Videos (30)
• Computer-based training (20)

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Duke University Case Study
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Duke University

• Background
• Large private research university in Durham, NC
• Nine schools
• 30,000 employees
• 3B (US) annual revenue/operating budget
• 420 pay ranges (yes, that is correct)

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Duke University

• Need for change
• 420 pay ranges many repeats!
• Desire for a pay program that reflects the value
  of job duties and responsibilities
• Need to be competitive with the market and
  attract new talent
• Provide more opportunities for pay growth based
  on available resources and performance
  contribution

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Duke University

• Developing the new structure
• Created 13 new broad bands, reduced from the
  420 original ranges
• 100 range spread
• Bands are used across all job families
• Each job assigned to one of three targets within
  the band, based on market data.
• 50 range spread calculated for each of the band
  targets
• New and developing staff are slotted in the range
  of each target, while high performers can extend
  into the top range

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Duke University
35
Duke University

• Results of new pay structure
• Greater flexibility and consistency of pay
  decisions
• Greater opportunity for professional growth
  within bands greatly reduced the number of
  reclassifications
• Managers more active in hiring, transferring, and
  managing performance

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Thailand Initiative

• The tight labor market will be an issue for a
  decade or longer.
• Operating budgets are tight and shrinking.
• Line management is feeling pressure for improved
  performance.
• The work paradigm is changing.
• The current pay system is viewed as broken.
• Need to change the culture.
• Desire to move more towards merit pay.
• Need to reduce administrative costs/time
  commitment.
• Need to reinvent Human Resources.

37
Thailand Initiative

• The tight labor market will be an issue for a
  decade or longer.
• There have been emerging trends relating to New
  Public Management i.e., performance management,
  competency based human resource management.
• Line management is feeling pressure for improved
  performance.
• The work paradigm is changing.
• The current pay system is viewed as not
  responsive to market, making it difficult to
  recruit talents.
• Need to change the culture.
• Desire to move more towards merit pay.
• Need to reduce administrative costs/time
  commitment.
• Need to reinvent Human Resources.

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The Setting

• 364,000 employees will be affected by proposal.
• 460 current job classifications.
• 11 current salary grades.
• Pay system currently used by other governments
  including teachers and college faculty, covering
  an additional 700,000 positions.
• Current system in place since 1975.
• OCSC goals tied to the goals of the Government.

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The Tai Model
The Thai Model
Operation Supporting
61,860
Level 5
28,960
57,470
Level 4
57,470
Level 4
16,490
24,860
39,640
Level 3
47,110
Level 3
12,730
20,260
SES
26,440
Level 2
34,630
Level 2
Middle Management
13,770
8,000
21,360
Level 1
17,490
Level 1
5,460
5,560
Knowledge Workers
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OLD versus NEW
Tenure based

• More focus on positions than pay
• 11 position levels
• 460 job classes
• Single pay schedule (step)
• 12 pay bands
• Average band width 104
• Quota oriented pay increase

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The Thai Model
?
63,920
61,860
57,470
28,980
57,470
51,620
57,470
16,490
61,860
27,450
39,640
24,860
46,820
48,580
47,110
12,730
22,330
26,440
20,260
34,630
8,000
13,770
17,490
21,360
9,320
5,460
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Next Steps

• Finalize plan
• Define strategies for pay delivery
• Skill based pay
• Performance based pay
• Longevity
• Other
• Develop compensation plan
• Define agency roles for implementation
• ?

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Questions?