Carol Hurst Director of Compensation, ASU. Carol Mercer Vice President, Sibson Consulting. December 11, 2012

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1 21 st Century Workforce Compensation: Re-Defined and Re-Aligned to rethink everything from organizational and curricular design to the basic concept of effectiveness... 1 Carol Hurst Director of Compensation, ASU Carol Mercer Vice President, Sibson Consulting December 11, The Arizona Higher Education Enterprise Strategic Realignment 2010 Forward, page 1

2 Topics Covered Background Compensation Design Strategy New American University A.B.O.R. Higher Education Enterprise Broadband Concepts Benchmarking Job Family/Competency Description Proposal Process Project Considerations Project Scope

3 Current Compensation Theory Strong alignment to organizational values Pay strategies reinforce desired behaviors 2 Reflect pay for performance, contribution, & competence Pay the person Clear differentiation in pay for key talent 2 People, Performance, & Pay Dynamic Compensation for Changing Organizations The Hay Group

4 Institutional Vision & Strategy New American University today 8 Design Strategies Define ASU Academic & Research arm of ASU Embraces innovation, risk taking & an entrepreneurial spirit Collaboration of diverse disciplines Dynamic and rapid change Higher Education Enterprise 2010 Strategic vision

5 Compensation ASU Compensation: Disconnected Reflects 1980s organization: focus on vertical job reclassification for new title Pay the job, not the outcomes; Another year another title COLA based salary increase referenced Narrowly defined jobs

6 Why do we need to change now? ASU is having difficulty recruiting & retaining talented employees ASU is not paying competitive wages ASU does not define clear job progression to support career development opportunities ASU does not currently link performance and pay The current compensation structure is broken & administered through many temporary guidelines

7 What are the Objectives? A compensation program that: Provides opportunities to reward proficiencies, performance, and outcomes Establishes a financially responsible system that is competitive to relevant labor markets Promotes consistency, fairness, and addresses internal equity Presents leadership/managers flexibility in pay administration & provides employees opportunities in career progression

8 What are the Cultural Considerations Advantage Reward acquisition of skills & competencies Encourage career exploration Provide greater flexibility to differentiate pay by performance Emphasize collegial, not hierarchical relationships Challenge Employees take ownership of their career path Current pay practices have little connection with performance Reliance is on title for prestige/recognition Promotions appear few Concern about senior leadership following same guidelines

9 Where else in Higher Ed? Boston College University of Florida University of Southern Florida Tufts University M.I.T Babson College University of Michigan University of Hawaii North Dakota University (system)

10 Benchmarking Broadband Use Consistent Themes of: Emphasis on rewarding individual performance Career development/exploration through horizontal band Recognition of individual SME equal to managers Reduces reliance on job changes Flexibility, ability to quickly change with organizational needs 1/7/2013

11 ASU Broadband Structure Goals Collapse 41 separate grades across 2 salary structures into 4 bands aligned with organizational levels Focus becomes horizontal career growth by acquiring deeper and broader knowledge Allows for pay progression within band without reclassification or promotion Emphasis on fewer job titles but career depth Flexibility to support organizational needs Promotions occur from band to band associated with significant and large change in scope/breadth/depth of position

12 Terminology Broadband Grouping of jobs into a band that reflects the major organizational levels Market Rate Average actual pay rate for any given position in the relevant labor market Market Pay Zone A range of pay (above and below the Market Rate) for jobs assigned to the Band; the range will vary with each Band Career Band Designation Use organizational career level references with no beginning or ending salary values assigned

13 Broadband Design & Definitions Sets & leads strategic/global vision & associated initiatives; multiple synergistic reporting areas (Leader) Career Band 4 Responsibilities/Accountabilities Strategic operational focus; translates goals into tactical implementation; focused operational area/function (Mid-level Leader & high level Individual Contributors) Career Band 1 Career Band 2 Salary Career Band 3 Applies critical thinking/knowledge for implementation of tactics at both an individual contributor and/or functional manager level Provides analytical, operational & admin support; generally task oriented works within policies/standards (non-exempt, admin support & includes team leads/supervisor)

14 What Career Progression Looks Like Salary managed within a Market Zone aligned with performance & skills of incumbent pay for the person provides greater flexibility and recognition for outcomes Career Band 4-45% +45% Market zone spread varies based on the band $74.4K Career Band % $57.8K $254K: Market rate for University Career Band 3 Technology Officer -35% +35% +27.5% $96.3K $173.6K $124K: Market rate for Director IT Security Career Band 1-20% +20% $77K: Market rate for Web Developer $39.1K $52.9K $46K: Market rate for Help Desk Tech

15 Using Bands in Practice Market zone spread varies based on the band and each market rate has a different $$ pay opportunity Career Band 4-45% +45% $254K: Market rate for University Career Band 3 Technology Officer -35% +35% Market zone spread varies based on the band $74.4K Career Band % $57.8K $124K: Market rate for Director IT Security +27.5% $96.3K $173.6K Career Band 1-20% +20% $77K: Market rate for Web Developer $39.1K $52.9K $46K: Market rate for Help Desk Tech

16 How Salaries are Adjusted in the Zone Market Zone Learn Competent Advanced Expert Exemplar Market Rate Skills/Competency/Performance Salary moves across band based on performance measures, skills & competency expansion

17 What Processes Take Place Intent provide greater flexibility to recognize acquisition of increased skills, competencies and performance demonstrated by staff Pos/Pay Action Defined Key Features Administrative Considerations Progression Promotion Market Transfer Re Band Performance Based Increases Retention Recognizes significant development of competencies and/or increase in responsibilities supported through achievement of career development objectives resulting in ability to demonstrate competencies of next career level Changes in current position results in movement to a higher band or Employee moves into another position in a higher band through recruitment activity Maintains competitive position between the external market and ASU salaries Movement to a different department, unit, or college in the same position title Position moving from one band to another due to significant scope change Individual pay action initiated consistent with the results of a performance evaluation Individual pay action initiated by the manager to retain a key employee in a situation in which there is imminent probability of loss Provides for salary movement within current position OR change of position w/in band at a higher market reference point Can occur within same dept or across departments Band remains the same Not an annual event Represents a major change in role and responsibility Pay increase depends on extent of change, market for position, and budget Based on review of data from relevant market surveys tied to recruiting source; can be local, regional, national, public, private, or industry specific No salary adjustment Band remains the same Position is changed; not person Recognizes and rewards performance within current job; pay change tied to evaluation Ad hoc in nature; justification provided in support of request Equity Intended to correct a pay disparity within a job classification Based on review of data by Compensation taking into consideration applicable contributing factors Reassignment Employee moves into different position title for re careering or organizational purposes May have salary implications on a TBD basis Market reference point is lower Reinforces career growth with potential ties to succession planning Supports differentiation in scope of positions between bands consistent with difference in expectations at higher organizational levels Compensation staff monitors salaries on an ongoing basis Manager and Senior Administrator may request ad hoc review Provides staff opportunity to explore other areas of ASU Anticipate this occurs during a re org; indicates a change in organizational level Usually occurs with an annual performance based salary improvement program Critical nature of employee s skills and adverse impact if job is vacant Manager may request analysis; ad hoc requests Organizational need associated with re org OR may be person driven due to special circumstances (match skills with better position match)

18 Career Descriptions Overarching standard/essential functions of job applies to all career levels Eliminates creation of incremental additional titles, reclassifications and title creep Expectations/competencies expand horizontally within job family Outcome focused and ties to performance management Career development & succession planning framework

19 Career Description - Example Overarching essential functions defines broadly typical job expectations/outcomes Essential Functions: Develops web forms, templates, database-driven web pages, new web tools and dynamic areas within web pages designed to enhance, sustain and support ideas and vision of the area in compliance with established styles and standards Provides technical consultative suggestions and recommendations to users for continued enhancements to web content and informational areas Works closely with users to understand requirements, security needs; develops and presents initial design ideas and associated tools, tests functionality to ensure objectives are achieved; integrates user developed content Identifies and troubleshoots errors and/or problems with web based applications; works collaboratively with involved stakeholders to facilitate timely resolution; escalates as appropriate Participate as either leader or team member in a wide variety of projects to develop and improve routine procedures through use of innovative and technology supported solutions; prepares associated documentation and end-user training Remains abreast of technology directions, initiatives and trends within scope of expertise to provide ideas, guidance and recommendations Designs, develops, maintains and enhances a variety of online instructional content, services and forms to facilitate the delivery of a technology based curriculum along with associated supporting content Provides technical support in the production of multimedia-based layouts, graphics, animations, video and sound; designs web interfaces and develops layout design/content; selects illustrative materials for use ensuring consistency, accuracy and compliance with all standards.

20 Career Description Example Competencies/ Skills Knowledge Tactical/Strategic Thinking Planning and Organizing Incorporates Competency levels Learn Competent Advanced Expert Exemplar Good understanding of the concepts, methods and techniques of marketing and graphic presentation; good understanding of search engine optimization practices and basic database concepts for web content delivery. Provides web content editorial feedback and suggestions to maintain current and consistent look and feel; defers to supervisor Documents activities and tracks progress against objectives; as directed by supervisor Strong understanding of the principles, methods and techniques of marketing and communication to support user initiatives; basic database concepts for web content delivery; strong understanding of search engine optimization methods and techniques Identifies content areas for revision; updates pages for currency; develops reporting and/or tracking methods to assist identify trends, anticipate and respond to results Defines tasks, responsibilities and outcomes; documents activities and tracks progress Strong understanding of web application and relational database design concepts, principles, practices and methods; security/permission standards; knowledge of store procedure methods and techniques Utilizes knowledge of subject area needs to design and/or modify web applications; creates reporting, views and automated procedures Defines tasks, responsibilities and outcomes; documents activities and tracks progress Strong knowledge of CSS and standards for consistent user experience of website and all pages; strong understanding of graphic design principles and practices; strong knowledge of marketing practices and principles Provides vision and support for overall purpose, look, feel and functionality of web site Defines tasks, coordinates multimedia; reviews outcomes and tracks progress Strong knowledge and understanding of the practices, methods and techniques of application testing, project management, Leads initiatives to develop solutions and processes to meet needs; identifies unique innovative approaches; thorough knowledge of objectives Clearly articulates deliverables, objectives, results and outcomes; establishes milestones and timetables Supervision Received n/a Regular review of completed tasks Regular review of completed tasks Regular review of completed tasks Budgetary n/a None None May prepare project level budget Review of results; consultative feedback Develops project level budgets

21 Proposal Process Consultant engagement defined: Primarily Advisory capacity Strategic assessment of initial design concepts Review of anticipated & desired outcomes Drive change management and communication strategy

22 Consultant Criteria Evidence of at least 3 years prior work in the subject area Submit examples of work of completed projects at comparable institutions Communication Understanding diverse stakeholders Change Anticipate resistance & issues Consultative relationship

23 We are working in a highly collaborative project structure Provide input and guidance around compensation priorities Provide alternative considerations and approaches Manage to the project plan and ensure key deliverables are completed on time Sibson s Core and Advisory Teams Senior Leadership Office of Human Resources ASU Project Manager Approve recommended design for compensation program Lead communication to stakeholders Provide subject matter expertise Provide guidance on design and implementation issues Collaborate with other stakeholders to provide support Develop detailed design Create framework for job leveling Design Committee Support Committee Initiate key communications Act as Sounding Board Assist in communication

Project Overview Phases and Deliverables CHANGE MANAGEMENT PROCESS & COMMUNICATIONS Phases Phase 1 Assessment of

Implementation Deliverables Preliminary assessment of project materials, design concept, and methodologies

recommendations for ensuring compensation philosophy is consistent with broadband systems Materials for educational

Change management process Communications plan for implementation that defines key messages, sender, audiences,

guidelines Process for confirming assignments of jobs to salary bands and understanding of market reference points

24 Project Overview Phases and Deliverables CHANGE MANAGEMENT PROCESS & COMMUNICATIONS Phases Phase 1 Assessment of Work Completed by ASU Phase 2 Change Management / Communications Process Phase 3 Program Design and Review Phase 4 Implementation Deliverables Preliminary assessment of project materials, design concept, and methodologies developed to date Recommendations for program design concept and project plan improvement Review and recommendations for ensuring compensation philosophy is consistent with broadband systems Materials for educational sessions with Business Operations Managers and HR liaisons Integrated Change Management / Communication strategy Change management process Communications plan for implementation that defines key messages, sender, audiences, media, and timing Recommendations for broadband standards and criteria Role definition / job titling protocol guidelines Process for confirming assignments of jobs to salary bands and understanding of market reference points within bands Focus groups, including guide, facilitation, and summary of findings Implementation plan system administration and communication roll-out 24

25 Design Process Key Steps to Complete Compensation Program Design 1. Determine purpose of bands for compensation 2. Assign benchmark positions to levels Enables first level of analysis: Dispersion of market reference points by level Distribution of salaries by market zone 3. Validate alignment of non-benchmarks to benchmark positions (within job families) Review methodology for alignment Validate alignment of non-benchmark positions to benchmarks Calibration of benchmark and non-benchmark jobs using salaries against market reference points 4. Assess viability of market zone spreads for pay progression and ease of administration 5. Test compensation design against key tenets of the New American University strategy and ASU s Vision, Mission, and Goals 6. Determine existing / desired compensation variability among Divisions Variation to market Variation across Divisions Reasons for variations 25

26 Keys to Successful Transformation Why do Transformations Fail? Transformations fail when change leaders*: Allow for complacency Lack strong alignment Fail to set vision Under-communicate vision Permit roadblocks Do not create short-term wins Declare victory prematurely Neglect to anchor changes Research indicates that 70% of change management initiatives fail to achieve their intended results on time due to one or more of the above factors. * Source: John P. Kotter and Dan S. Cohen, The Heart of Change (2002).

Keys to Successful Transformation Why do Transformations Fail - Dealing with Positive Change EFFECTIVENESS Uninformed Certainty I think I know what is going to happen and I am comfortable.

27 Keys to Successful Transformation Why do Transformations Fail - Dealing with Positive Change EFFECTIVENESS Uninformed Certainty I think I know what is going to happen and I am comfortable. 1 2 Informed Doubt I definitely know what is going to happen and I am not comfortable. Wilderness Zone Informed Certainty Embedding the new ways into what I know and understand. Realistic Concern I know what we need to do, but I know it will be a stretch. TIME When it comes to the New American University, where are ASU s employees on this change curve? When it comes to the new compensation program design, where is the Design Committee on this change curve?

28 Keys to Successful Transformation Eight-Step Process for Leading Successful Change* Engaging and Enabling Implementing and Sustaining 7. Keep At It 8. Make Change Stick 6. Acknowledge Short-Term Wins 5. Focus on Action 4. Communicate for buy-in Creating the Environment 3. Develop Guiding Structure 2. Create a Vision 1. Build Urgency The central challenge in all eight stages is changing people's behavior. The central challenge is not strategy, not systems, not culture. These elements and many others can be very important, but the core problem without question is behavior what people do, and the need for significant shifts in what people do. * Source: John P. Kotter and Dan S. Cohen, The Heart of Change (2002).

29 Project Considerations/Constraints Training/Collateral Materials Communication Infrastructure ABOR Constraint Timing/Resources Eat the Elephant Low Hanging Fruit Policies, Guidelines, References

30 Project Considerations/Constraints Training & Communication How delivered Timing/Frequency Customized to Stakeholder Method for follow-up Infrastructure Review/identify change elements How to transition Does it support?

31 Project Considerations/Constraints ABOR Constraint Tri-University Classification & Compensation Policy NAU & U of A Discussions Timing/Resources Integration with other OHR projects Phased approach used Structure now Classification work over time

32 Project Considerations/Constraints Policies/Guidelines/References Review language/applicability Update web based materials and related content links Peer Review for clarity, completeness, and consistency How to Guides Content from Training materials

33 Additional Resources Broadband Concepts Boston College Project Deciding on Compensation Models Broadbanding: In Band Progression

34 Questions? Carol Hurst Director of Compensation Arizona State University University Services Building (USB) 1551 S. Rural Road Tempe, AZ Carol Mercer Vice President Sibson Consulting 1230 West Washington Street, Suite 501 Tempe, AZ

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