MERCER. Scott Cook Project Manager & Senior Consultant. Human Resource Consulting. Marsh & McLennan Companies

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1 MERCER Human Resource Consulting Scott Cook Project Manager & Senior Consultant Marsh & McLennan Companies

2 1. Study Steps and Key Objectives 2. Compensation Program Refinement Review of Positions Market Analysis Pay Structure Design Implementation Plan 3. Merit System Development Survey Highlights Implementing Merit Pay 4. Study Timeline 5. Next Steps 6. Questions 2

3 and Key Objectives staff standards 3

4 performance scal icy guidelines communicate age 4

5 Phase 1: Compensation Program Refinement

6 Steps Planning & Information Gathering Review current status Conduct meetings Define pay philosophy Job Analysis & Review (staff positions) Document job duties Review jobs to determine appropriate classification and title Market Benchmarking Confirm market definition Compare benchmark jobs to market Assess competitiveness Pay Structure Design &Job Evaluation Create pay structure and ranges Evaluate jobs for grade placement Implementation Review current salaries relative to pay ranges Salary adjustments based on degree of discrepancy and budgetary factors 6

7 d Classification of Staff Positions Position questionnaires completed by employees and supervisors to document key duties and responsibilities All questionnaires reviewed by Mercer to classify the positions into jobs - Similar functioning positions grouped under the same classification and title - Titling based on nature of work performed while reflecting typical market practices - Classifications coded to identify each unique job - Levels created, where appropriate, to establish career paths The process was a joint effort - Mercer took the lead in establishing the initial classification structure - Human Resources reviewed relative to internal equity and consistency This review resulted in the establishment of approximately 180 distinct jobs 7

8 d Classification of Staff Positions nnaires reviewed and classified into 180 jobs 1. Analyze Positions 2. Classify into Jobs and Title 3. Code Jobs ) ) ) ) ) ) ) ) ) ) ) 8

9 Staff Market Study Multiple surveys used to gather external pay data from general industry - 65 benchmark jobs market priced - Represents a solid sampling of staff jobs Higher education pay data compiled from CU PA* surveys - Mid-Level Professional Survey - Administrative Compensation Survey o o Special cut of 35 peer institutions Majority of peers same as those used for faculty Faculty Market Study Higher education pay data compiled from CUPA Faculty Community College Survey - Three educational levels priced o o o Bachelors Masters Doctorate Special cut of 27 peer institutions * College and University Professional Association for Human Resources 9

10 Market data reflective of the 50th percentile (median) was used as the basis of comparison Relative to the general industry surveys, the data gathered is largely reflective of the typical recruiting markets for staff-le., the local area for nonexempt jobs and the broader regional area for exempt jobs All salary data has been time adjusted so that is current as of July 1, 2006 In matching the staff jobs, comparisons were based on job content and requirements-not on job titles or incumbent-related factors - It is important to note that perfect matches are difficult, if not impossible, to obtain - Nevertheless, for the matches made, the data serves as a good indicator of how the market values comparable functioning jobs 10

11 .., i.,..,'.. '... ",... '..'. ' ',.. '.' '.'.' ".'.!. Illllllllmm! ~.r. I ~ I, 'M;I] """."'a",,, I ' I,Y al sis lin';!",... Jm'),)itive Assessment TCC's current salary practices, on average, are below median for staff -.TCC is paying at 89% of market median when averaged across the 65 benchmark jobs - The majority of benchmark jobs (43 out of 65) are being paid within +/ 15% of the aggregate 89% market position I 40% 55% 70% 85% 100% 115% % 160% Market Competitiveness 11

12 illii'!h11\!i }H;nl~~H 1 i; ~ ~ q ~' ~ ::",,,181 sis II!I 1"",1 1 I I ' y 1l;:I~:ii 1:., petitive Assessment II : TCC's current salary practices, in aggregate, are at median for faculty - TCC is paying at 1000/0 of market median when assessed for faculty at the Bachelors, Masters, and Doctorate levels - However, market competitiveness does vary by educational degree with the Doctorate being the least competitive 80% 85% 90% 95% 100% Market Com petitiveness 105% % 120% 12

13 It is quite common for the actual pay competitiveness of individual jobs to vary from market median - Employees who are relatively new and continuing to learn in their jobs could be paid as much as 25% below market Employees who are highly experienced with a strong performance history could be paid as much as 25% above market It is for this reason that pay ranges are established to allow for justifiable salary variations among employees to reflect differences in their knowledge, experience, skills, and abilities 13

14 The proposed pay structure for staff consists of an open range system encompassing 17 grades I 4 $ $ 14

15 " "'I"'I,,'I,::.,l,.ure Design 'ii' H~ Ill"! i III Ill', Lowest Grade -- 45% Wide Highest Grade /0 Wide 15

16 jl I Hill :!~ure Design ~aff Structure J Illl Grade Minimum $14,694 $15,935 $17,324 $18,880 $20,626 $22,590 $24,801 $27,295 $30,112 $33,302 $36,918 $41,026 $45,701 $51,031 $57,119 $64,087 $72,077 Midpoint $18,000 $19,620 $21,438 $23,482 $25,783 $28,379 $31,311 $34,630 $38,393 $42,668 $47,532 $53,077 $59,411 $66,659 $74,969 $84,515 $95,502 Maximum $21,306 $23,305 $25,553 $28,084 $30,940 $34,167 $37,821 $41,965 $46,674 $52,034 $58,146 $65,128 $73,121 $82,287 $92,819 $104,943 $118,927 16

17 II m~i... 'I,ure Design.Iof Staff Jobs to Grades IIi III; Each benchmark job was assigned to the grade midpoint that best captures its market value Non-benchmark jobs were slotted based on internal equity comparisons and/or where additional market data could be collected $46,674 Grade 12 Market value used to establista overall"job value" Buyer II $40,432 Accountant I $37,215 Maintenance Painter.... $33, Grade 11 $38,393 Computer Operator 11. $34, Jobs assigned to grade with range midpoint closest to market value Academic Advisor $31,292 ~ Accounting Clerk II..... $30, $37,821 Grade 10 $34,630 $30,112 Non-benchmarks slotted based on internal equity and comparison to benchmarks Computer Operator I Grade 10 Accounting Clerk III. Grade 11 Maintenance Carpenter.. Grade 12 $31,311 $27,295 $24,801 17

18 The proposed pay structure for faculty consists of an open range system encompassing 7 levels I Doctorate Masters+48 Masters+36 Masters+24 I Masters+12 I Masters Bachelors I $ $ 18

19 I~ure ~p I! Iii Design Bachelors Level -- 55% Wide 60% +-- Wide 19

20 Bachelors $37,059 $47,250 $57,441 Masters $38,416 $49,140 $59,864 Masters + 12* $39,823 $51,106 $62,389 Masters + 24* $41,281 $53,150 $65,018 Masters + 36* $42,794 $55,276 $67,757 Masters + 48* $44,363 $57,487 $70,611 Doctorate $45,989 $59,786 $73,583 * Assumes graduate level course work in teaching field The fact that certain teaching disciplines (e.g. Nursing) are hard to fill because of market conditions may require that TCC consider establishing higher salary ranges or allowing greater flexibility in setting salaries Because these ranges are more competitive than the current ranges, it is recommended no additional adjustment be added at the present time for high demand disciplines However, the situation should be periodically monitored for appropriateness 20

21 mplementation Plan Purpose - To equitably set individual salaries within the assigned pay ranges - To address existing salary compression Methodology - First priority is to ensure that all employees are paid no less than the range.. minimum - Second priority is to give in-range credit to employees for experience in the job Rationale - Equity pay adjustments are normally not proposed for those employees whose,salaries are at or above the new range midpoints D D focus is usually on salaries that are below a competitive market level salaries above the range midpoints are already competitive 21

22 The model grants in-range penetration to: - Staff for their years of experience in their current position - Faculty for their years of teaching experience with TCC For each full year of experience, 1/20th of the range (or 5 % ) is credited Experience is capped at the midpoint (Le. up to 10 years of experience would be recognized) Range Penetration Illustration 1 yr 2 yrs 3 yrs 4 yrs 5 yrs 6yrs 7 yrs 8 yrs 9 yrs 10 yrs I I I I I I I I I I Minimum $36,918 $42,225 I I I I I I I I I I Midpoint $47,532 I I Maximum $58,146 22

23 , Ilmplementation Plan.f Model Below is an example of how individual adjustments would be given under the model using the Masters salary range for the faculty as an example Predicted Salary if: Current Years at Raised to With In-Range Resulting Salary TCC Minimum Only Credit for Experience Salary Employee 1 $37,500 2 $38,416 $40,561 Employee would receive Employee 2 $41,265 5 $38,416 $43,778 the higher ofcurrent salary or predicted Employee 3 $36,930 <1 $38,416 $38,416 salary Employee 4 $51, $38,416 $49,140 Minimum $38,416 I Masters Level Salary Range I I I I I 1 Yr 3 Yrs 5 Yrs 7 Yrs 9 Yrs $39,488 $41,633 $43,778 $45,923 $48,068 Midpoint $49,140 2 Yrs 4 Yrs 6 Yrs 8 Yrs 10 Yrs $40,561 $42,706 $44,851 $46,996 $49,140 23

24 mplementation Plan inancial Impact--$1.4 million $965,788 total cost $220,914 raise to minimum only $744,874 in-range adjustments 4.6% of staff payroll 48% (281 employees) receive an increase average increase for those receiving an increase 110/0 $11,721 total cost $0 raise to minimum only $11,721 in-range adjustments 1% of executive payroll 10% (1 employee) receive an increase average increase for those receiving an increase 140/0 $420,773 total cost $10,527 raise to minimum only $410,246 in-range adjustments 30/0 of faculty payroll 390/0 (104 employees) receive an increase average increase for those receiving an increase 8.7 % 3.50/0 added to all salaries to reflect anticipated pay increases for July 1 before applying the model In-range credit given for each full year of experience Pay structures set at market median (50th percentile) 24

25 ! ' I. 'Implementation Plan ationale The implementation of this plan will result in some employees receiving special one-time salary adjustments The amount of the adjustment will vary from person to person depending on their particular situation - The model focuses on those employees whose salaries are below market - Salaries currently above the midpoint are competitive - Adjustments above the midpoint should be based on performance - Adjustments to individuals above the midpoint take away from those below Regular pay increases associated with the beginning of the new fiscal year will continue in the same fashion as before and will not be impacted by this study Specific results will be communicated to employees once the study results have been finalized and approved 25

26 let Competitive Analysis If 3.50/0 pay adjustments are granted to employees and if the cost model is applied as described, the competitiveness of TCC's actual pay practices will notably improve - Staff competitiveness improves from 890/0 to 980/0 of market median - Faculty competitiveness improves from 1000/0 to 1060/0 80% 85% 90% 95% 100% Market Competitiveness 105% % 120% 26

27 Phase 2: Merit System Development

28 I' ition to Variable/Merit Pay :tionnaire During the 3rd quarter of 2005, Faculty, Administrative Staff and Classified Staff were asked to complete a questionnaire to solicit their viewpoints about merit pay The overall response rate was 59% (517 out of 879) - Faculty: 480/0 (135 out of 284) - Administrative Staff: 74 % (112 out of 152) - Classified Staff: 61 % (270 out of 443) 28

29 tion to Variable/Merit Pay hlights The majority of administrative and classified staff favor the concepts and principles associated with a merit based pay system Faculty predisposition toward merit pay is mixed with those having longer tenure generally opposed to most of the concepts supporting merit pay Not surprisingly, those employees with shorter service «8 years) are inclined to support merit pay Respondents have mixed feelings about whether people can be objectively and fairly evaluated by their supervisors 29

30 Pay increases should be based on longevity. - Faculty: 33% o 16+ years: 43% o 8-15 years: 34% o 0-7 years: 24% Administrative Staff: 15% o 16+ years: 190/0 o 8-15 years: 16% o 0-7 years: 13% Classified Staff: 260/0 o 16+ years: 33% o 8-15 years: 380/0 o 0-7 years: 160/0, Pay increases should be based on performance. - Faculty: 51 % o 16+ years: 35% o 8-15 years: 490/0 o 0-7 years: 65% Administrative Staff: 690/0 o 16+ years: 56% o 8-15 years: 630/0 o 0-7 years: 79% Classified Staff: 56% o 16+ years: 460/0 o 8-15 years: 490/0 o 0-7 years: 650/0 30

31 Employees should be paid more based on long service with TCC. - Faculty: 43% [J 16+ years: 500/0 [J 8-15 years: 490/0 [J 0-7 years: 310/0 Administrative Staff: 18% [J 16+ years: 320/0 [J 8-15 years: 210/0 [J 0-7 years: 10% Classified Staff: 310/0 [J 16+ years: 390/0 [J 8-15 years: 41 % [J 0-7 years: 230/0 Employees should be paid more based on performance. - Faculty: 390/0 [J 16+ years: 290/0 [J 8-15 years: 22% [J 0-7 years: 58% Administrative Staff: 650/0 [J 16+ years: 420/0 [J 8-15 years: 630/0 [J 0-7 years: 780/0 Classified Staff: 520/0 [J 16+ years: 38% [J 8-15 years: 420/0 [J 0-7 years: 63% 31

32 ing Merit Pay lard Ii The vast majority of employees endorse the concept of merit pay but there is concern among many that it will not be effectively managed From these findings, it can be inferred that the implementation of a merit based system should be carefully planned out and implemented in an orderly fashion It is for this reason that Phase 1 of the study was conducted in advance of Phase 2 Having the compensation infrastructure in place is critical to laying the foundation for the development of an effective merit system 32

33 n9 Merit Pay For merit pay systems to be effective, they should be carefully designed, employees educated, and managers appropriately trained The higher education environment is characterized as one of "shared governance" in which the constituencies provide input into the area being addressed - While senior management will set the strategy and objective, key college stakeholders will help to shape the design - This helps to increase buy-in and strengthen support - Installing this without involving others will hinder its effectiveness 33

34 ing Merit Pay oughts as we move into Phase 2 The foremost supervisory responsibility An effective supervisory tool Only as effective as the management staff administering it A simple process that can be quickly installed 1000/0 objective although with proper training rater objectivity can be maximized A supervisory practice that can be abused Beneficial to both the employee and the or anization Viewed as an annual event Poorly trained managers Perceived as unfair with no credibility The need to maintain equity and avoid conflict Conflicting and/or inconsistent goals set among employees A forced ranking process is established 34

35 eline Compensation Program Refinement Project planning; employee meetings; staff questionnaire completion Job review and classification development Market benchmarking &competitive analysis Pay structure design &job evaluation Costing analysis & implementation plan development Communication & rollout (Sept / Oct 2006) Merit System Development Merit predisposition survey; survey summary System design; performance criteria / performance measures development; rating scale definition Process guidelines & procedures Supervisory training Communication & rollout (June / July 2007) 35

36 Next Steps Finalize grade assignments of staff jobs Reach agreement on pay philosophy and pay policy position Develop compensation program implementation plan Determine appropriate pay policy guidelines Move into Phase 2 (Merit System Development)

37 Questions?

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