Office of Personnel INTEROFFICE MEMORANDUM TO: THRU: FROM: DATE: SUBJECT: Board of County Commissioners Terry Shannon, County Administrator 13'5 Paula Grover Gray, Personnel Director, February 1, 2016 Commissioner Guidance #10 Background: The Board of County Commissioners has established ten areas of guidance which outline goals within the Calvert County Comprehensive Master plan. Guidance #10 is the responsibility of the Office of Personnel which states - "Determine alternative approaches to the way government is run. Seek ways where some features of the government run more like a business (i.e., staff incentives, contract-vs-merit, and relook at the organizational structure)." Goal-10-1: "Evaluate incentive-based performance evaluations where employees receive an increase in compensation based upon actual performance". Discussion: Attached is the Office of Personnel's findings for Guidance #10. Conclusion/Recommendation: A presentation will be held on March 1, 2016. Attachment
Office of Personnel Commissioner Guidance #10 March 1, 2016 1
The Board of County Commissioners established ten areas of guidance which outline goals within the Comprehensive Master Plan. Goal 10-1: Evaluate incentive-based performance evaluations where employees receive an increase in compensation based upon actual performance. 2
Our Current Performance Evaluation Systems 1. Hourly and Part-Time 2. Full-Time 3. Executive (Department Heads) 3
Performance Evaluation Challenges Manual, paper process Generous ratings Inconsistent objectives Inconsistent feedback Inconsistent development/training 4
What is Pay for Performance? Pay for performance ties an employee s pay to their job performance. Pros Recruitment and retention tool Motivate and reward employees Cons Lack of adequate funding in public sector Maintain system integrity 5
Pay for Performance Implementation Considerations Is there adequate funding? How should employees be rewarded? Who should be rewarded? How can cost be managed? 6
What is Total Rewards Management? Compensation Benefits Professional Opportunities Motivating Work Environment Personal Growth Work/Life Balance 7
Human Capital Needs Silver Tsunami Generation Money, title, recognition Generation X Workplace flexibility and balance of work/life demands Millennials Personal development, workplace flexibility, risk aversion opportunities 8
Other Total Rewards Considerations (Not all inclusive) Expand authorized uses of sick leave Increase days of annual leave employees can sell Increase tuition assistance dollars Create workplace flexibility 9
Recommendations Identify gaps in Total Rewards (Work with Employee Committees) Enhance/modernize the current performance evaluation system (Work with Peers) Train supervisors to evaluate performance, set goals Research performance evaluation systems Generate annual benefit statements for employees 10
Office of Personnel Commissioner Guidance #10 Questions? Comments? 11
Commissioners Guidance #10 The Board of County Commissioners has established ten areas of guidance which outline goals within the Calvert County Comprehensive Master plan. Guidance #10 is the responsibility of the Office of Personnel which states - "Determine alternative approaches to the way government is run. Seek ways where some features of the government run more like a business (i.e., staff incentives, contract-vs-merit, and relook at the organizational structure)." Goal-10-1: "Evaluate incentive-based performance evaluations where employees receive an increase in compensation based upon actual performance". A. Calvert County's Current Performance Evaluation Systems The County has three different performance evaluation systems: 1. Hourly and Part-Time employees are evaluated once a year, typically before the beginning of the new fiscal year. There are two (2) evaluation rating options: Satisfactory or Unsatisfactory. If employees are rated Satisfactory, they are eligible for a step increase, if one is to be granted. Conversely, if employees are rated Unsatisfactory, they are not eligible for a step increase. 2. Full-time employees are evaluated on or before their probationary period and again on their anniversary date each year thereafter. There are currently five (5) evaluation rating options: Outstanding, Very Good, Satisfactory, Needs Improvement and Unsatisfactory. Employees who receive a Satisfactory or better performance evaluation rating are eligible for a step increase, if one is to be granted. Conversely, employees who receive a less than Satisfactory performance evaluation rating are not eligible for a step increase. For 1. and 2. above, performance is tied to pay if a performance rating is Satisfactory or above, employee is eligible for a step increase, if one is to be granted. 3. Department Heads are evaluated once a year, typically the later part of the fiscal year. The Board may grant a percentage increase Department Heads are not tied to step increases. Instead, pay bands have been established with minimum and maximum salaries. B. Challenges with our Current Performance Evaluation System: Manual, paper pushing process. Supervisors are very generous in their performance evaluation ratings (Satisfactory or above). Establishment of objectives is not consistent throughout the County. Feedback on performance is not consistent throughout the County. Feedback on development/training is not consistent throughout the County. C. What is Pay for Performance? Pay for performance ties an employee's pay to their performance on the job. Some believe pay for performance systems attract and retain better employees and offer incentives to motivate and reward improved performance.
Pay for performance programs first began in the private sector and then carried over into federal government in the late 1970s. One vital omission in the process of implementation was that stakeholders in the private sector differed from those in the public sector most notably, a lack of adequate funding. A limited and restricted budget is one of the biggest factors that can prevent a pay for performance system from succeeding. D. Pay for Performance Implementation Considerations: There are many decisions that need to be considered before implementing a pay for performance system. 1. Is the County ready for pay for performance? Is there adequate funding? Does the organizational culture support pay for performance? Is management committed to changing the performance management culture? 2. What are the objectives of pay for performance? To improve recruitment and/or retention? To increase individual and/or County performance? To establish greater fairness in pay? 3. Who should be paid for performance? All employees? Supervisors? Department Heads? 4. What should be rewarded? Individual, team, and/or organizational achievements? Short-term and/or long-term objectives? 5. How should employees be rewarded? One-time cash bonus? Increase to base pay? Provide other rewards in lieu of pay? Combination? 6. How much pay should be contingent upon performance? Do we want to establish percentage increases according to evaluation rating? Will this require the elimination of pay scales and steps? 7. How can cost be managed? Capped to percentage of salary budget per work unit? Forced distribution? Reward only top performers? Other? 8. Who makes pay decisions? Supervisor? Department Head? County Administrator and/or Board? 2 1Pagc Commissioners Guidance #10
9. Who provides input on the performance ratings? Supervisor? Department Head? County Administrator and/or Board? 10. How can integrity of the system be maintained? Pay system established must be adhered to (What if there is no money in a given year?). Training of employees and supervisors. 11. What are other considerations when implementing a Pay for Performance System? Purchasing a performance management system. Hiring a consultant to develop/implement a pay for performance system. Developing a new performance evaluation tool. Establishing a focal date versus anniversary dates for performance evaluation purposes. (This would enable supervisors to appraise employees at the same time, which promotes consistency. When anniversary dates are used, supervisors may have a tendency to grant more generous increases early in the year versus those scheduled later in the year. It may also help budgeting appropriately for pay adjustments.) Amending the Personnel Chapter of the County Code (major amendments) and possibly establishing administrative procedures. E. What is Total Rewards Management? In recent years, the phrase "compensation and benefits" has given way to a "total rewards" management which encompasses not only compensation and benefits but also personal and professional growth opportunities and a motivating work environment (for example, recognition, work/life balance, etc.). With the "Silver Tsunami" Generation exodus (Baby Boomers) and "Generation X" and "Millennials" in or entering the workforce, it is prudent to align our total rewards to human capital needs. Silver Tsunami Generation (Born between 1943-1960) They are looking for rewards in the forms of more money, a better title, and recognition. Generation X (Born between 1961-1981) They are looking for workplace flexibility and freedom to balance work/life demands. Millennials (Born between 1982-1997) They are looking for more personal development opportunities, workplace flexibility, wellness and disease management opportunities, risk aversion opportunities (financial planning, supplemental health insurance offerings, retirement/investment options, etc.). F. Other Considerations for Total Rewards: Increase accrual rates for annual leave. Increase accrual rates for sick leave. Increase personal leave (currently 5 days). Increase number of days sick leave can be used for parental leave (currently 5 days). Expand authorized uses of sick leave (i.e., funeral, care for others outside of family). Increase the number of days employees can sell leave back to the County (currently 10 days). 3IPage Commissioners Guidance #10
Increase promotional, detail, and reclassification percentage (currently 6% keep demotion percentage at 6%). Increase shift differential amounts. Increase opportunities for volunteering in the community/school. Increase tuition assistance dollars. Increase tuition assistance reimbursable credits. Expand training/development opportunities. Expand supplemental health insurance offerings (a' la carte selections). Offer financial planning assistance. Provide employees a copy of their total benefits package once a year. Create Workplace Flexibility: Teleworking, Flex-time, Compressed Work Schedules (CWS). Expand Wellness/Disease Management Options (Health Risk Assessments/Wellness screenings, weight management programs, Fitbits, etc.). Some of the above may have an associated cost, while others may reduce the County's leave liability. Conclusion/Recommendation: Below are my recommendations: 1. Enhance/modernize our current performance evaluation system. (Solicit performance evaluations from other Counties and perhaps establish a committee comprised of peers (supervisors and nonsupervisors) to enhance/modernize the evaluation tool. Until there is sufficient funding, do not implement a pay for performance system.) 2. Continue to train supervisors on the importance of establishing meaningful objectives in line with department goals and providing valuable feedback. 3. Research and purchase a performance evaluation management system. (Purchase a system that could potentially analyze employee performance data to identify skill gaps, track progress on performance goals, mandate feedback, establish 360 feedback, address workflow, etc.) 4. Consider offering/expanding other Total Rewards in F. above. I would request to work with the Calvert Employee Representative Committee (CERC) and the Employee Recognition Committee (ERC) to identify gaps in our total rewards and bring these suggestions back to the Board for consideration. 5. Generate annual individual employee benefit statements so employees can see the cash value of their fringe benefits. Wage Commissioners Guidance #10