2-intro - grading pay
TRANSCRIPT
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Grading structures: options
and considerations in design
And it is not just about pay!
Developing Competency Based
Salary Structure Workshop
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2
Agenda
Understanding the dynamics of pay
Definition of grading
Why grading?
The use of grading in managing pay
Various options in designing grading structures:
grading is organization specific
Summary and conclusions
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3
What are you paying employees for and what doyou want to pay them for?
Understanding the dynamics of pay
Job/Role
CompetenciesPerformance
Working conditions and environmentMarket
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!
Understanding the dynamics ofpay
Pay for Position
Pay for Performance Pay for People
Job/Role
CompetenciesPerformance
Working conditions and environmentMarket
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"
job weight
age
years in service limited job scope
experience
job weight
age
years in service limited job scope
experience
from to
otpt ! reslts "#what#$
performance
inpt ! competencies "%how#$ job weight
market vale
broad job scope / mlti!availability
experience
otpt ! reslts "#what#$
performance
inpt ! competencies "%how#$ job weight
market vale
broad job scope / mlti!availability
experience
Trends in what to pay for
&ifferentiating factors
#lue or white collar
organisation type
phase of de$elopment
la#our mar%et
need&desire to #e inno$ator
'a(or de$elopments in reward #ase
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)
Definition grading
* grading + classification is a ,for the organization- logical grouping&clustering of
the different (o#s #y their relati$e (o# weight
Which (o#s ha$e a similar $alue for the organization and
do we thus consider as e.ual? Which (o#s do we consider as higher or lower?
has a #ig impact on the company culture/ atmosphere
and the employee attitudes
defines the status of each employee
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Why grading?
1rganizations use grades as a reference framewor% for the organization & easy
administration to ma%e the results of (o# e$aluation easier to
communicate and to manage to pro$ide more transparency as a #asis for remuneration management
* grading is #asically the cornerstone of all 45
processes/ most typically 6areer paths 7romotions 6ompensation 8 9enefits policy
Training 8 De$elopment
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The characteristics of anoptimum grading structure
*pplica#le across the current organization
;leow in maintenance
=asily lin%ed into a num#er of other 45 systems and
processes eg 7erformance 'anagement/
Succession 7lanning/ 5ecruitment/ De$elopment/ etc
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Where do we situate a gradingexercise?
Job &escription
Job 'dentification (
Job ( Recriter
J ob h ol de r( ' r in a
& iv is io n ( ) m an R e so rce s
Reporting to ( )ead of &epartment* )R &epartment
&ate ( +pril ,--,
.rganisation chart(
Jobdescription
Evaluation Grading
Company DATE: #######
JOBTIT! Depart"
ment
# $O W" %O W P &O B S O' (C CO )$ T(B T OT ( P &O *+
SOT P$TS SOT , P$TS SOT P$TS P$TS S%&T
%ead of *inancial Transactions *inance !II"- ./0 !-1 -2 344 D0c 3-. 496 (.
Telecom e5pert Support *"I1. ./0 !-1 -2 344 !"01 336 479 (3
a7yer egal !1I- ./0 ! -1 -2 344 !"01 336 479 (3
%ead of %eads Prod+ !I1- ./0 !-1 -2 344 D0"c 336 479 (3
J
O B S
Job &escription
Job 'dentification (
Job ( Recriter
J ob h ol de r( ' ri na
&ivis ion ( )man Resorces
Reporting to ( )ead of &epartment * )R &epartment
&ate ( +pril ,--,
.rganisation chart(
Job &escription
Job 'dentification (
Job ( Recriter
J ob h ol de r( ' ri na
&ivis ion ( )man Resorces
Reporting to ( )ead of &epartment * )R &epartment
&ate ( +pril ,--,
.rganisation chart(
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Exercise
5an% the following (o#s from highest to lowest (o#
size: 'anagement 6onsultant 9us dri$er
6ar mechanic 5esearcher & product de$elopment Doctor 7rofessor
7ilot Secretary
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From job grades to salarystructure
Co#s
, 0 1 2 3
Salary
Job ranking Salary structure
1
0
,
2
Job grades or job structure
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AA AB @ : 0 ) " ! 3 2 A
ow !rading is lin"ed to pay Monthly
Base Pay Ranges
10,000
80,000
+20%
-20%
+20%
-20%
30,000
+20%
-20%
Salary scale
(e.g. ‘x % to ‘y %!
Brea"th o#
gra"e
$ra"es Ban"s&e'els
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Salary evolution
Bonus pay-out + Salary Database
Determining indi#idual pay
P E O P L E
NAME FUNCTION Grade ASE SA! ONUS ENEFITS
P456'7
Recriter
1 012-- 0-8 car
&.59.J:;56' +ccontant 1 215.'
9ranslator
0
,0---
,-8 car
W.&6+ 5pecialist ,
,'7
:conomist
, ,12?- ,-8 car
+R=+9 +rchitect ,0?@< 28
=+5'> =enefits specialist ,0--@ 28 lnch allA
):RM'9+B:
>awyer
01,,,
28 lnch allA
lnch allA
Job &escription
Job 'dentification (
Job ( Recriter
J ob h ol de r( ' r in a
&ivis ion ( )man Resorces
Reportingto ( )ead of&epartment * )R &epartment
&ate ( +pril ,--,
.rganisation chart(
Job description Evaluation Grading
Company DATE: #######
JOBTIT! Depart"
ment
# $ OW" %O W P &O B S O' (C CO )$ T(B T OT ( P &O *+
SOT P$TS SOT , P$TS SOT P$TS P$TS S%&T
%ead of *inancial Transactions *inance !II"- ./0 !-1 -2 344 D0c 3-. 496 (.
Telecom e5pert Support *"I1. ./0 !-1 -2 344 !"01 336 479 (3
a7yer egal !1I- ./0 ! -1 -2 344 !"01 336 479 (3
%ead of %eads Prod+ !I1- ./0 !-1 -2 344 D0"c 336 479 (3
J O B S
Job &escription
Job 'dentification (
Job ( Recriter
J ob h ol de r ( ' r in a
&ivis ion ( )man Resorces
Reporting to ( )ead of &epartment * )R&epartment
&ate ( +pril ,--,
.rganisation chart(
Pay structure
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$ptions in designingclassifications%gradingstructures
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!rades are organi&ation specific
* classification&grading is a management tool and should supportthe goals of the organization
t should reflect the organizational structure
The grading structure must fit with the internal EF$alue of wor%FFperceptions of the company
The starting point of grades will often #e tied to internalpopulations: management/ specialists/ clerical/ #lue collar
The choice of the width of grades is also companyGspecific as itwill #e the #asis for remuneration/ promotion and mo#ility policies
6opying a classification of another organization/ competitor/sector leader/ E'ost *dmiredF wonFt wor% 9enchmar%ing is not a solution
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Decision points in designing a jobgrading structure
The num#er of structures
The num#er or le$els&grades and width of
classes&grades
1$erlaps? 'ethod&approach for determining (o# weight and thus
positioning of (o#s in grades
9orderGmanagement: processes to determine how togo o$er #order ,assessment/ reGe$aluation of (o#s/
role of 45 as system owner/ promotion panels-
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!rading ' ow it can loo" li"e ()*"Traditional#$ One Structure
arro) $ra"es Broa" Ban"s
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!rading ' ow it can loo" li"e (+*
CEO
Directors
Management
I
Project
Manager Sr. Experts
Experts
Officers
- C
Supervisors
I
Supervisors
II
SUPPORT STAFF I
SUPPORT STAFF II
SUPPORT STAFF III
SUPPORT STAFF IV
Management
II
Project
Manager
Directors
Supervisors
I
Experts
Officers
- S
Junior Officers
- S
SUPPORT STAFF I
SUPPORT STAFF II
SUPPORT STAFF I II
SUPPORT STAFF IV
C
O
R
E
S
U
P
P
O
RT
Multi%le Structures
2
3
!
"
#
$
%
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&&
2
3
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#
$
%
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&&
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!rading ' ow it can loo" li"e (,*
O&erla%%ing Grades
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2B
"Tec'nical !adders#
!rading ' ow it can loo" li"e (-*
re#erencele'el an" *ont range
LEGAL
STRATEGI
LA""I"G
#R $
%&&'"IATI%"S
(I"A"EI"(%R&ATI%"
TE#"%L%G)
S)STE&S $
%ERATI%"S
*9
#ead o+ o,icy $
,anning
Assistant -irector.
#R
Assistant
(inance
-irector
Assistant
-irector. IT $
/usiness
,anning
#ead o+ rojects
#ead o+
%perationa,
Ser0ices
Assistant
-irector.
rocure1ent $
Syste1s
*2
Asst Secretary
Lega,
#ead o+
o11unication
(inancia,
ontro,,er
*7
In+or1ation
Syste1s
&anager
*6
rincipa,
Lega, %++icer
Land &anager rincipa, Syste1s
-e0e,oper
Syste1s
%perations
&anager
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2A
!rading . how it can loo" li"e (/*
Creating %arallel ladders "Job Grades# and "(ersonal Grades#
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0roadbanding #ersusnarrow grades
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23
Two fundamental types of gradingstructure
small #ands Similar (o# weight #y grade ncrease in responsi#ility H promotion 6areer perspecti$e in terms of Eclim#ing the hierarchyF
#road #ands >imited num#er of #roader grades
Co#s of significantly different (o# weights are in the samegrade ncrease in (o# weight: not necessarily promotion in grade
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2!
0roadbanded pay structure
Base
Salary
Grade
E3tra pay possibi,ities
"e re+erence sa,aries
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2"
Why broadbanding? A changingorgani&ational en#ironment
4ierarchical strong structure
Taylorised
6entralized
Co# specific (argon
*d hoc solutions
Io strategic connections
7eople are a resource
;lat + networ%s
,;le
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2)
Why adopt broadbanding?
To deGemphasize status/ hierarchy and (o# size To reduce pressure for promotion and reGgrading
To accommodate more fle
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20
1is"s and disad#antages ofbroadbanding
5is% of Jthe s%y is the limitK
Dri$e for promotion disappears
Status differences disappear
>ower positioned (o#s are #eing referred to higher
reference salaries/ #enefits
Salary #enchmar%ing is more difficult
The most documented negati$e effect of#road#anding is a drastic increase in salary costs
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2
Pa y 'ncrease =dgets
Brades and Ranges
Perf ormance Management
>oosening the reigns in one area
puts increased tension on the others
>oosening the reigns in one area
puts increased tension on the others
Three ways to control pay23
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2@
4anaging pay in broad bands
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3B
nctional
Process &riven
121
2
3
4567
8
9
10
11
9ime =ased
7etwork
R e l i a
b i l i t y
C l e x i b i
l i t y
C s t o m e r
9 e c h n o
l o g y
Wor" 5ulture should be considered indesigning a grading structure
;our Wor% 6ulture 'odels
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3A
Process &rivennctional
Process &riven
7etwork
12 1234
567891011
9ime =ased
Ai)s *pply specialized
technologies Iew applications G same
technology >imit ris%s
*ork +esign
4ierarchy
Specialized position
Tas% team
(eo%le Manage)ent
;unctional e
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nctional
Process &riven
7etwork
12 1234
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9ime =ased
-e.ards
Salaries and increases #ased
on proficiencies and team
competencies
S%illG#ased $alueGadded #ands
6ompetencyG#ased
TeamG#ased output incenti$es
6areerG#ased #enefits
Ai)s
6ustomer satisfaction
6ontinuous impro$ement
6ustomers&indi$idualized
ser$ices&products
*ork +esign 6ustomer dri$en processes
Wor% teams
5oles
(eo%le Manage)ent
TeamG#ased
7rocess proficiencies and
team competencies
(er,or)ance Manage)ent
7rocess not an e$ent
TeamG#ased
7roficiencies and
competencyG#ased
6rocess Wor" 5ulture
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nctional
Process &riven
7etwork
12 1234
567891011
9ime =ased
Ai)s
Temporary alliances
'ar%et creation&penetration
'o#ility
*ork +esign
Situation determined roles
5elationships not structure
Venture dri$en
(eo%le Manage)ent
De$elopment of personally
rele$ant proficiencies&
competencies
=
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3!
nctional
Process &riven
7etwork
12 1234
567891011
9ime =ased
-e.ards
Salaries and increases #ased
on proficiencies and
competencies
4ighGle$erage incenti$es #ased
upon program success
7ro(ect milestone incenti$es TeamG#ased e.uity
6areerG#ased #enefits
Ai)s
5esponsi$eness/ fle
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3)
To sum up333
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30
To sum up
IS NOT
+ different representation of the
organiDational strctreE
spplementaryF company!specific
+ means to grop jobs based on
assessments of varios criteria
+ framework to define different
levels/ ranges of pay based on
relative internal vale and external
relativities
+ system that provides
recommendations regarding pay
Replacing the organiDational strctreE
contradictory
Changing the natre or content of jobs
or where they fit in the organiDational
strctre
+ set of rigid rles that spport leveling
and abolition of niGeness
+ HManagerI "it will not make the
decision for yo$
IS
Lrading:
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And 8t9s 7ot :ust About 6ay
Lrading can facilitate:
Differentiating internal contri#ution
Designing wor% and organization
Understanding&defining career paths
7lanning for succession and continuity >in%ing professional #eha$iors and characteristics with wor%
and wor% le$els& grades
I)%acting %ay decisions is only one o, t'e
%ur%oses o, Grading
I)%acting %ay decisions is only one o, t'e
%ur%oses o, Grading