RESPONSE TO STAKEHOLDER COMMENTS

Transcription

1 RESPONSE TO STAKEHOLDER COMMENTS OPG and Aon Hewitt have reviewed the comments provided by stakeholders on the draft Terms of Reference ( ToR ) for the compensation study. Responses to the comments are provided below. Where responses were provided by Aon Hewitt, the responses are marked accordingly. The stakeholder comments and these responses will be posted on OPG s intranet site, RESPONSE TO BOARD STAFF COMMENTS 1.1 Page 1: Board staff suggests that AON Hewitt should strive to target a 50/50 weighting of public and private sector organizations as this is consistent with the recommendations of the Agency Review Board. Response The Agency Review Panel addressed executive compensation only. It gave no consideration to unionized positions, which make up approximately 90 per cent of OPG s workforce. Because of this significant difference, the ToR does not strive for consistency with the Agency Review Panel target of 50/50 weighting of public and private sector organizations, but rather, relies on the expertise of the compensation consultant to select the best comparator organizations. The ToR document describes the compensation study that will provide the best possible comparators for all positions including union, technical/ professional, and management. The objective of the study is to gather compensation information from all appropriate comparator organizations to maximize the number of acceptable observations (data collection). We believe that we should maximize both industry-specific companies and near industry-specific companies and examine general industry comparators which will include public sector for support and other generic positions. 1.2 Page 1: Board staff suggests that the number of secondary comparator sectors should be increased, using the organizations to which OPG loses employees as a guide. Aon Hewitt has identified secondary comparator sectors as appropriate based on where OPG may attract and lose talent, or where the skill sets of specific jobs are similar to the jobs within OPG. To extend secondary comparators beyond this list to less relevant comparators would affect the validity of the study's resultant data. 1.3 Page 2: Board staff suggests that the size of the organization is of less significance and should not limit consideration as a comparator. August 30, 2011 Page 1 of 9

2 The size of an organization is important to single incumbent positions whose decisions and advice may impact the entire organization. In general, these positions would primarily be found in management and senior professional levels. 1.4 Page 2: If compensation data from U.S. power generation companies will not be used for this study, Board staff is unclear how that information will provide insight to the compensation study and inform the Board. In the ToR, Aon Hewitt explains that we will survey a number of U.S. power generation companies and examine the data to determine if there are insights that are relevant. We also explain that the compensation data from U.S. power generation companies will not be used for direct salary comparison for a number of reasons including foreign exchange fluctuations, differences in taxation, regionalization, etc. This portion of the survey will help us, however, to supplement our understanding and knowledge of the pay practices of power generation companies in similar circumstances to OPG. 1.5 Page 2: It is not clear whether the proposed use of job families will provide benchmark results that are sufficiently granular, as no examples were provided. The following is a sample of an Aon Hewitt job family: Production Planner/Scheduler 1 3 (Professional) Plans, schedules, coordinates and/or monitors final approval of products through the complete production cycle. Works from engineering plans and production specifications to establish production schedules, labor loading, and capacity requirements. Coordinates production plans to ensure materials are provided according to schedules. Provides input to management; schedules and/or interfaces with marketing, sales, production and engineering managers. Works to resolve (in case of design changes) labor and material shortages, backlogs and other potential schedule interruptions Engineering Technician 2 4 (Technical) Supports engineering activities such as design, test, checkout, modification, fabrication, and assembly of prototype electro-mechanical systems, experimental design circuitry or specialized test equipment. Works from schematics, diagrams, written, and verbal descriptions, layouts or defined plans to perform testing, checkout and troubleshooting functions. Conducts engineering tests and detailed experimental testing to collect design data or assist in research work. Performs operational test and fault isolation on systems and equipment. Assists in determining methods or actions to remedy malfunctions. Assists in the design, construction, test and checkout of test equipment. August 30, 2011 Page 2 of 9

3 Uses manufacturing test, development or diagnostic equipment including but not limited to such equipment as oscilloscopes, signal generators and specialized test apparatus. Conducts engineering tests and detailed experimental testing to collect design data or assist in research work. Works closely with development engineers to create design prototypes and models. Typically does not require a university degree in engineering. After an organization has matched to the above job family, they are asked to segment the data by standardized levels of accountability (based on their job category, including Executive, Management, Professional, Technical and Support). The following are samples of the Job Leveling charts for the above two positions: PROFESSIONAL INDIVIDUAL CONTRIBUTOR JOB LEVEL CHART NOTE: Professional Individual Contributor levels generally require a university degree or its equivalent in education and experience. LEVEL 1 LEVEL 2 LEVEL 3 JUNIOR INTERMEDIATE SENIOR ANALOGY Learns about rope Can tie basic knots Calculates rope strength Shown complex knots Knows a lot about knots KNOWLEDGE Learns to use professional concepts. Applies company policies and procedures to resolve routine issues. Developing professional expertise; applies company policies and procedures to resolve a variety of issues. A seasoned, experienced professional with a full understanding of area of specialization; resolves a wide range of issues in creative ways. This job is the fully qualified, career-oriented, journeylevel position. JOB COMPLEXITY Works on problems of limited scope. Follows standard practices and procedures in analyzing situations or data from which answers can be readily obtained. Builds stable working relationships internally. Works on problems of moderate scope where analysis of situations or data requires a review of a variety of factors. Exercises judgment within defined procedures and practices to determine appropriate action. Builds productive working relationships internally and externally. Works on problems of diverse scope where analysis of data requires evaluation of identifiable factors. Demonstrates good judgment in selecting methods and techniques for obtaining solutions. Networks with senior internal and external personnel in own area of expertise. SUPERVISION Normally receives detailed instructions on all work. Normally receives general instructions on routine work, detailed instructions on new projects or assignments. Normally receives little instruction on day-to-day work, general instructions on new assignments. SKILL Applies acquired job skills and company policies and procedures to complete assigned tasks. TECHNICAL INDIVIDUAL CONTRIBUTOR JOB LEVEL CHART NOTE: Technical Individual Contributor jobs generally require vocational training. LEVEL 2 LEVEL 3 LEVEL 4 WORKING LEVEL SENIOR HIGHLY SKILLED Has substantial understanding of the job and As a skilled specialist, completes tasks in applies knowledge and skills to complete a wide resourceful and effective ways. range of tasks. JOB COMPLEXITY Works on assignments that are routine and semi-routine in nature but recognizes the need for occasional deviation from procedure. Works on assignments that are moderately difficult, requiring judgment in resolving issues or in making recommendations. Works on assignments requiring considerable judgment and initiative. Understands implications of work and makes recommendations for solutions. SUPERVISION Normally follows established procedures on routine work, requires instructions only on new assignments. Normally receives little instruction on daily work, general instructions on newly introduced assignments. Determines methods and procedures on new assignments. May be informal team leader. 1.6 Page 2: It is not clear what period of time the data represent, but Board staff assumes the data will be It is not clear whether other cash compensation includes overtime. August 30, 2011 Page 3 of 9

4 The period of time the data will represent is 2011 wherever available. If it is necessary to use 2010 data, it will be aged appropriately to reflect 2011 values. In the study, we will include questions on overtime pay practices within a survey section related to overall pay practices and will report on relevant data reported. 1.7 Page 2: Board staff suggests that the primary focus of the study should be the 50 th percentile and that the others are reported as additional scenarios. Response The draft ToR (page 6) states: All statistics on individual elements and aggregated elements of Total Compensation will be reported at the 25 th, 50 th and 75 th percentiles and average where there are a sufficient number of data points to provide a valid and reliable statistic and to ensure that confidentiality of participant data is maintained. As all data, including the 50 th percentile, will be provided, the report will not focus on one statistical measure or construct additional scenarios. 2.0 RESPONSE TO SCHOOL ENERGY COALITION (SEC) 2.1 Page 1-2 General Comment: Once the job classifications are identified, for each classification the next step is to determine the employer pool from whom those individuals would be recruited, and to whom those individuals would move.therefore, we believe the consultant should be changing the order of analysis. It is normal practice for compensation studies to use industry classifications to gather data from industry specific sectors and not by skill sets of specific positions. By identifying specific positions, we in fact, are choosing companies from the survey which are using the specific skills set that are similar to OPG. 2.2 Specific Comment 1: (a) why internal project management would be handled by the client; and (b) OPG should vigorously document the review and approval process at each step, so that the Board can review the extent, if any, to which OPG feedback influenced the consultant s final report (page 3). Response In its prefiled evidence, OPG will report on the review and approval process used for the study. The reference to internal project management in the cover letter to the draft ToR refers to management of the work performed by OPG, e.g., coordination of stakeholder review, provision of compensation data from OPG, etc. It is Aon Hewitt s normal practice to require August 30, 2011 Page 4 of 9

5 the client to provide project management of the work that is internal to the client s organization. 2.3 Specific Comment 2: we do not believe that the appropriate first step is to identify a comparator sample. The first step is to identify the representative positions. For each position, a comparator sample may then be necessary, depending on the extent and reliability of general market information available to the consultant (page 3). To clarify, our objective is to identify comparator organizations from which OPG recruits for and loses talent with similar skill sets. The five points listed around identifying a comparator sample on pages 1 and 2 of the Terms of Reference are designed to achieve the same premise that SEC has taken - that we are looking for jobs with similar skill sets as OPG through the establishment of an appropriate comparator sample. 2.4 Specific Comment 3: Choice of geographic scope for different positions (page 3). We believe that our explanation on establishing geographic focus for specific positions in the study is consistent with your comment. See response above. 2.5 Specific Comment 4: list of comparator organizations appears to us to be inappropriate because it comes from a conceptually incorrect perspective (page 3). Please see response to Item 2.1 above. 2.6 Specific Comment 5: If the consultant proposes to study all elements of total compensation, the ToR should say so explicitly (page 3). Aon Hewitt will review all elements of total compensation where the data is available from survey sources. This will include base salary and short and long-term incentives individually and on an aggregated basis, where available In addition, we will include pension and benefits data where available. Pension and benefits data will be provided only on an individual element basis and will not be aggregated with any cash compensation data. Aon Hewitt will revise page 6 of the Terms of Reference as follows to address this comment: Collect data on the following all elements of total compensation where available, including: 2.7 Specific Comment 6: In our view the consultant should make clear that they are attempting to identify the market level of total compensation for each position, and should set out what that is, including all components they can identify, and all criteria used in August 30, 2011 Page 5 of 9

6 determining the market rate. They should then compare it to the OPG figures, with analysis of any differences (page 3). The ToR is focused on the collection and reporting of relevant data necessary to benchmark the compensation practices at OPG. Therefore, the ToR does not consider any interpretation of the data. 2.8 Specific Comment 7: Again consistent with our general comments, it appears to us that the method of collecting data will not be the same for each job classification (page 4). Please see response to Item 2.1 above. As outlined in the ToR, it is our intent to identify, collect, and report the relevant data from the surveys by industry sector, company size and geographic region as appropriate to the position, where available. Our selection of what constitutes relevant data for a specific position or family of jobs in terms of sector, size or geography will be identified in the detailed section of the survey report. 2.9 Specific Comment 8: It would be useful to have further information on the contributions, and relative role, of the team members (page 4). All members of the team have had relevant experience with competitive compensation analysis and benchmarking and surveys, and are therefore appropriate for this engagement with OPG. 3.0 RESPONSE TO POWER WORKERS UNION ( PWU ) 3.1 Specific Comment 1: The ToR should include a provision that requires Aon Hewitt to document and present the impacts of using a sample of comparators that is, for example, disproportionately composed of organizations in the category of secondary or general industry positions (pages 2 and 3). We will be using standard compensation practices and methodology. Our approach is to make adjustments to compensation data that is less than relevant in terms of location, degree of match, and/or size of organization. This practice is consistent with compensation best practices and methodology. This approach would only be used for those jobs that are considered to be near and relevant matches to OPG. 3.2 Specific Comment 2: The ToR should include a provision that requires Aon Hewitt to detail the consequences of less than full participation by either the organizations or functions (page 3). August 30, 2011 Page 6 of 9

7 Aon Hewitt is only prepared to report data that is specifically collected for this survey. For purposes of confidentiality, Aon Hewitt cannot report on companies who choose not to report their data either to published sources or to this specific survey See response to item 3.6. The ToR is focused on the collection and reporting of relevant data necessary to benchmark the compensation practices at OPG. Therefore, the ToR does not consider any interpretation of the data. 3.3: Specific Comment 3: The ToR should indicate that Aon Hewitt will document and present consequences to the findings of the fact that we cannot do a direct market comparison with the U.S. (pages 3 and 4). See response to Board staff on the same question (Item 1.4). 3.4 Specific Comment 4: A comparison with peers will have little use without an understanding of the extent to which other comparators utilize contractors for such services (page 4). We will report data on employees from comparator organizations in the study and not data for contractors; therefore, the salaries of contractors will not be collected and used in the study. 3.5 Specific Comment 5: The Study should identify, and the ToR should indicate labour cost drivers Evaluation of the compensation costs of the benchmark group relative to the cost drivers would allow for a fair and prudent assessment of the reasonableness of OPG s compensation costs compared to the benchmark group (page 4). Factors such as workers skill and education/training level, availability of appropriately skilled people, employee experience on the job, competition for new employees, operational productivity, reliability, dependability, safety, etc. are reflected in the salaries that will be reported by comparator organizations. In the case of unionization, we will be collecting specific data on unionized versus non-unionized positions in the study. 3.6 Specific Comment 6: The ToR should clearly state that Aon Hewitt will (a) be available to explain and discuss the design of the study at stakeholder meetings; (b) provide progress updates to stakeholders; (c) document and make available assumptions and associated consequences, limitations/deficiencies of the study s findings and statistical tests; (d) participate full, in cooperation with OPG, in OEB s review/hearing of the compensation cost benchmarking study. Response As previously indicated, OPG will arrange for Aon Hewitt will meet with stakeholders to discuss the results of the benchmarking study before the report is finalized. OPG does not believe that further progress updates are warranted given the timeframe for completing the August 30, 2011 Page 7 of 9

8 study in advance of OPG s application in early Aon Hewitt will be available to participate in the OEB s review, as appropriate. We will make available details on any assumptions made and the significance of the study s findings. The Terms of Reference (pg. 1) will be revised to address this comment as follows: Following the collection of the market data, Aon Hewitt will provide its observations and conclusions on the data, including any assumptions made and the significance of the study s findings. 4.0 RESPONSE TO THE SOCIETY OF ENERGY PROFESSIONALS ( SEP ) 4.1 Page 2: The OEB s concern was with nuclear operations of OPG, so it is crucially important that the benchmarking study maintain a focus on nuclear as distinct from other operations. The benchmarking should place appropriate weighting on company results depending on how closely the organization s business relates to nuclear generation. We would adjust the data based on its relevance. See response to Item 3.1 above. 4.2 Page 3: benchmarking should correct for the fact that it costs significantly more to live in the GTA than in other major Canadian cities. We will consider differences in competitive salaries in different regions of the country. 4.3 Page 4: One insight that Aon Hewitt may wish to explore in various US regions is the relationship between the compensation of, say, an electrical engineer in the nuclear field and the same engineer if s/he were in the non-nuclear field. See response to the Board staff Item 1.4 above. 4.4 Pages 4 and 9: SEP is 30% of the OPG work force so, pro-rata, and assuming the same relative number of different jobs in the rest of the company (there are over 400 different jobs in SEP ranks), we would estimate that a 50% sample would require the benchmarking of about 60 jobs. Our intent is to gather as much data as possible to make effective compensation comparisons. The estimate on page 5 in the ToR, targeting 50 per cent of the employee population, is what we believe is the maximum number of matches available and possible from external sources. August 30, 2011 Page 8 of 9

9 4.5 Page 5: Would Aon Hewitt please clarify the first paragraph under Recommended approach for OPG with the references to job families and generic level descriptors. The Aon Hewitt Job Leveling approach allows us to segment compensation levels by distinct levels of accountabilities for a benchmark position. Benchmark positions are grouped into one of five job categories; executive, management, professional, technical and support. A job family definition will be created to capture groups of positions from there (e.g., Production Planner/Scheduler or Engineering Technician). Participants are then asked to segment their data based on standardized levels of accountability, which are defined for each job category. See response to Board staff for examples (Item 1.5). 4.6 Page 6: We believe that the average/mean is a far better comparator statistic than the median. It is common practice for compensation comparisons to use the median rather than the average (mean). However, our detailed findings will report data on both average (mean) and median by job. 4.7 Page 8: A simple comparison of base pay or total cash with the mean (or the median) does not adjust for the maturity or years of experience of the workforce, which may in some cases be proxied by performance standing or compa-ratio. Survey data will not include the necessary data to determine the years of service of incumbents, their position in the salary range or their performance level. The general assumption in survey methodology is that these factors will be diluted when considering the broad distribution of all reporting organizations. August 30, 2011 Page 9 of 9