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2004-07-20 Workshop Meeting City Commission Meeting Agenda Packet
AGENDA DANIA BEACH CITY COMMISSION WORKSHOP MEETING TUESDAY, JULY 20, 2004 4:30 P.M. ANY PERSON WHO DECIDES TO APPEAL ANY DECISION MADE BY THE CITY COMMISSION WITH REGARD TO ANY MATTER CONSIDERED AT THIS MEETING OR HEARING WILL NEED A RECORD OF THE PROCEEDINGS, AND FOR SUCH PURPOSE MAY NEED TO ENSURE THAT A VERBATIM RECORD OF THE PROCEEDINGS IS MADE WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS TO BE BASED. LOBBYIST REGISTRATION REQUIRED - REGISTRATION AS A LOBBYIST IN THE CITY OF DANIA BEACH IS REQUIRED IF ANY PERSON, FIRM OR CORPORATION IS BEING PAID TO LOBBY THE COMMISSION ON ANY PETITION OR ISSUE PURSUANT TO ORDINANCE NO. 01-93. REGISTRATION FORMS ARE AVAILABLE IN THE CITY CLERK'S OFFICE IN THE ADMINISTRATION CENTER. IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT, PERSONS NEEDING ASSISTANCE TO PARTICIPATE IN ANY OF THESE PROCEEDINGS SHOULD CONTACT LOUISE STILSON, CITY CLERK, 100 W. DANIA BEACH BLVD, DANIA BEACH,FL 33004,(954)924-3622,AT LEAST 48 HOURS PRIOR TO MEETING. 1. Call to order 2. Roll Call: 3. Discussion of Compensation Plan/ Pay for Performance Program. (Mary McDonald, Director of Human Resources and Risk Management) 4. Adjournment. AGENDA 1 JULY 20, 2004 WORKSHOP MEETING COMPENSATION PLAN I. Increase prior salary data by 3.5% effective December 1, 2004 2. Make market adjustments by December 1, 2004 3. Roll longevity into current salary effective Dec 1, 2004 4. Longevity will be paid in November 2004 5. Create new"steps"to translate the plan from existing 6. Implement pay for performance, using established matrix 7. Implement performance bonus program PERFORMANCE EVALUATION MATRIX EXCELLENT 5% + lump bonus of 5-7% of salary COMMENDABLE 5% + lump bonus of 3-5% of salary SATISFACTORY 3-5% (based on score) NEEDS IMPROVEMENT 0-2% UNACCEPTABLE 0 C:\Documents and Settings\LStilson\Local Settings\Temporary Internet Files\OLK5\COMPENSATION PLAN STRATEGY 2005.doc CITY OF DANIA BEACH - PERFORMANCE EVALUATION FOR '. ME, „t7"E1'k+ kVW 3 s .P '�g DO NOT TYPE ON THIS FORM . RENAME IT AND SAVE. IT ON YOUR DRIVE Employee Name TYPE OF EVALUATION 90 Day_Annual Other(Explain) Job Title Rating Period DEPARTMENT Evaluator PLAN DESIGN - design of goals to be evaluated in the following year(See Page 3) Employee Signature Date Evaluator's Signature Date EVALUATION - Performance evaluation (competencies and goal achievement) Evaluator's Signature Date Evaluator's Comments Date Employee's Comments E E O U O o O o O O O O O O O o O O O O 0 09 O o 0 0 0 0 0 0 o O o O 0 u, u) v) v) Ln Ln u) Ln Ln o 0 0 m 0 H o In o N O N O N In In un Ln O O O O L O D O o 3 C N N U X W Lo N a '@O C N J E w E w U J � O ? U H @ Q N 2 m co (h C a) E N a) j Z O N a co N a5 0. U U a) C C O N C y Q) C D O � U W LL n d T O O aci J o ~ u y w n 0)°' a' o a N E Z N U Z o o c O O a) O Y D) a3 a) 07 @ O T ~ C (n E U G1 LL aa)i E N U J_ O F c W O) N w O N m c6 a) 'O 'O U T W C D) C W p a C Q UC d N NZcu co 0 (� O N Q O N A @ a) to Q a a) @ Z E CL O Q > U U c �_ J @ c 3 Q E .� � Q E J a O U Q V) O N — N U U 'c T J U c a E U W_ E N � O t a) a) m a~`0i o `a a - is v aa) aa) o a Z a") -o m Y a� D a r O a F- Q U a Y Q cn rn O U O of 0 a` O H T c O (D T U) — U C OU C p O O N T (a E Q 7) O E p V L _ M cn 0 a) L p cn cn N Y O N O cn �- t O _ C ° CU N w O C 7 U N p U O E f0 O U Oc a _ Y6 C U C O U U O p p U p N f0 C a) U p �_ N C U O Y to (6 E U C ` p C O T ° a) � N c '� O c O O cn f0 7 C C fD c T Q "a Q •C E (6 .E a) E E L ::. a) N C o cn U p i a) � f0 U) tco N L O O L Q V a) L a) > 'u L E p a) ` °- a) .F- °-, t O cn C C- a) L 7 cn ` O O a) E C O p T @ p N ° N °0 � C6 N U E U ` N >i N aj 3 O c0 C Q C_ O O O C p N C a) Q c p 0) w L O N LU N "� a) - L ° N N (�6 73 •- c c ° � U) o n o Y ° a) cma cn >; c6 (D 70 c °� ca a a°i > c E 4- °� cca a°) m a) a) a°)i cn o m 0 Q cn •cu ° ° ° L U U) N c o E -° u, N O U) Y Q — a) L Q O -C Y U C a) U O c c c o o �' a N E �' c aa)i :) o > ate) O E _0 cn 0 a) a) 3 3 3 a) L Q a) L a) o � '6 Y p O c c c U) a cn Q a) o '� c E (n a) O O ` cu 0' cca E a) m a) a) w aa) '�, aa) Q a) w L) 3 ft-'_' ° �� o cn Y o a) a) aa) o o a) ate) ai aa) a) a 0 o ° N o a o o E cu 3 ° Q> Q �, 3 a a 3 Q o E c L 3 3 c rn > n c aa)) aa)) aa)i aa) E 3 0 c °� E aa)) co m L c E Y N n v- w w a) O cn > N T T E 15 >O O to O 3 a w N p a) a) to O � Y N 6 .� (6 O a) C T a) 7 O O 3 to T d a) O a) a) 0 2 Q w (n Q. L O p 0 a) N co O O U) cLo a) p a) U co cn o a) oo a) �, a) ro a) c U) � c cn w n c cn U)) c a�'i Z3 o o U) E a) o w cn co o c c cn C ° c a�'i a�'i ° Q w '� >, c o is (D o O a) cn N •C Q E s > T ° ui N > E Y c = c E a) �' a) -° t c amino din din a° � c°� � c� Q � o o Q a U) w a) a) U � ° Z N w 3 o E W a) c° a 0) a) a) aa)) Y a > c O _a c c ° U) U c a) g o c ti E cn cn E co a) > N N N CL a) U N E D U m O) C C c L ZL � O O N j O C O 3 O >% iu a a) c`6 E 0- ° `; U H O C N (6 C � E w m >' > Q Z d w c co T U > •c o i> > > w 3 E L a) is ca m LL (6 U C Q O ° co c N W N N O 3 N o N O0 O C 0 F— U a F— Q U 0 U 0 w 0 m U / ! ~ § ° k 21 0j - 2a `7 0 \ kkf {55 | moo / LL, w \� \ � \} \ E= E � � «= ƒ ¥ § { « � � \ o ! ! = ] ) f ! u _ � ) ƒ § ka ± 2 ( }\ \ 0 j 0 020 M \ k® \5 / CL ¥ / x {{ ± 5 ± § _ o a % § t \/,C § \ / § ƒ 3 ± § k \ \ /\\\ (/ / \ ( \ z g w - z \ \ \ ) f ƒ c 2 / / ( g < < ± ® \ 2 ( § E E ± ° IL2 E E \ w 0 . -\ c # 2 E um Z LL ) [! wE ~ }) \/ \ \ 2 ) w kfiE E ; lEf co g 0- - E o § f > {! $ § \ - - - - - § I 2 S e g 2 9 3 e 3 r % 0 ) \ ) \ ) \ ) ) ) ± UNITED STATES :: . (OFFICE OF PERSONNEL MANAGEMENT WASHINGTON,DC 20415-1000 To the Public Service Community: I am extremely pleased to be able to share the U.S. Office of Personnel Management's White Paper,A Fresh Start for Federal Pay: The Case for Modernization. This thought- provoking document offers a timely and comprehensive examination of the way the Federal Government currently determines employee pay. It is merely intended to open the conversation on the possibilities for a modernized Federal pay system for the 21" century. We find ourselves in a time of extraordinary opportunity. Americans are expressing an interest in public service unseen in recent decades. This renewed desire to serve occurs at the very time that the Federal Government is looking to bring new talent, new skills, and new energy into its workforce. To attract the best and the brightest in this next generation into public service,we need a pay system that reflects the realities of the modern workforce where performance and results are emphasized and rewarded. What will such a system look like? My hope in sharing this OPM White Paper is that it will help to bring that vision into focus. It contains insights on the Federal Government's compensation system, its origins, how it upholds the merit system principles, and its operation in current labor markets and as an important component of the Government's performance culture. This paper is the result of extensive research and stakeholder discussions through OPM's Strategic Compensation Initiative. I was delighted to learn that this thoughtful dialogue was already well underway when I arrived at the U.S. Office of Personnel Management. Now we move to the next phase. I invite you to become an active participant in the broader discussion. The possibilities are truly exciting, and our workforce deserves nothing less than our best efforts at modernizing our pay system. Sincerely, ------------------------------------------------------------------- Kay Coles James Director vi ® Its structure suits the workforce of1990, not today's knowledge workers. In 1950, over 75 percent of Federal workers—mostly clerical —were in grade GS-7 or below; today that percentage has dropped to less than 30 percent. ® Its prescribed procedures and practices effectivelypreclude agencies from tailoring pay programs to their specific missions and labor markets. It is unlikely that a common and highly structured system is appropriate for positions as diverse as those found in agencies such as the National Weather Service,the Social Security Administration, the Defense Finance and Accounting Service, and the Centers for Disease Control. ■ Itis disintegrating. Through special authorities, a number of agencies already have begun to move toward more modern systems, and our ability to promote common policies across the Government where appropriate is diminishing. OPM does not fault the framers of the General Schedule for designing pay and job evaluation systems that reflected their world of work. But neither can a compensation system that was designed in the middle of the 20th century be expected to function well in the 21,t century where organizations use a broader view of strategic rewards. The result of OPM's examination is clear: seizing systemic,governmentwide opportunities for changing the white-collar pay system is no longer a luxury, but a necessity. In its current condition, the system is an impediment to the Government's critical efforts to enhance security and replace technical and scientific expertise in the face of looming retirements. This White Paper is pre-decisional: although it documents many problems in our current pay and job evaluations systems, it does not describe the solutions to those problems. Its objectives are to help stakeholders learn from the Government's history and experience and to inform the debate over hove the Government can preserve core values of public service—such as equity, procedural justice, openness, and accountability—while modernizing its compensation practices. OPM will distribute the paper widely to stimulate dialogue and discussion. The aim is to surface areas of agreement and disagreement and concern and consensus so that the Federal community may be fully informed as we pursue future directions for improving pay as a strategic tool for managing human capital. U.S. OFFICE OF PLILSONNNEL 1\/L-NAG AI NTr APIUL 2002 cn C rF k, y.r` L3 c •. c"I ej a a) o N 9Ft 1 i^ v O i r r z r o —tea J� F 8 t v E E a, o _ z a ' r ry :ov Q -0c i V y 4, Tly VOW- F(-4 76 Ai " N Y V ,6 N al L, ta� u io V ,c v Q,WMI a C°' o cL a c MN Mow m o WQ Y Oc O O V k 4 d z $Fa x r f t a, m a o y 3 o ��F{ s v 4 z ixtiEE L ao z c }-'n"z` 'a s Q, ° O O Q C y � � 0 �SEa �a ' - ' ��"�i 3• v z r< r ref z g -�e`e`"`'"�,�,,.`'^�f. i'�;3 a t=• _V Qd t r � HIM tf s s..�i p t � mr••.be �� h «r f � ,� r� � 1 A�+� }� � � �� ����t �� _ N4al.Tlc:f�,6>.Tt�:�P _L i ?�"1t c)a•� 4_ hen Anthony A. '""` '-- to improve or face demo- Williams took _XteG lion,reassignment m tenni- office as the nation. Mayor of �`�x Evaluate Performance: Washington,D.C.,on January Employees receive an annual 25, 1999,he was determined to L p, '. Performance Evaluation make positive changes to the R ' - based on a Performance Plan District overnment to reinstate r r t g s y ^a�z that has been in place for at a higher degree of accountabili- � ,c tr least 90 days.PMP includes a j ty within the workforce."The m 5-point rating scale(5,Sig- citizens elected me to manage r 1 g �, nificantly Exceeds Expecta- - , the city,I take responsibility for �, bons;4,Exceeds Expecta- the overall perfor mance of this a '• s tions;3,Meets Expectations, government and expect the 2,Needs Improvement; same accountability from all my managers." 1,Does Not Meet Expecta- .___v bons).All employees are d In the spring of 2000, the P s rated on 10 standard com e District of Columbia Office of tencies(including such areas r Personnel(DCOP)introduced the are designed to support formance.The mid-year as communication,customer Performance Management their Agency Director's evaluation gives the manag- service, initiative,job knowl- `s ' Program(PMP)to help follow goals,which,in turn,sup- er and employee an oppor- edge)and supervisory tr, through on this promise and port the District's Strategic tunity to check-in on employees are also rated on increase the accountability and Plan,as outlined by the progress made against the an additional five competen- . overall performance of the Mayor.This concept of"cas- Performance Plan and make ties(including such areas as District by increasing the cading goals"drives the sure employees are on track strategic planning and con- accountability and performance accountability of city perfor- to accomplish goals on time. flict management).The score of individual managers. mance down to the individ- If an employee is under-per- on competencies accounts Currently,more than 1,500 ual manager level.In a sur- forming,the supervisor can for 40 percent of the overall District managers,supervisors vey conducted to assess the issue a Performance performance rating.Employ- and political appointees from 39 effectiveness of PMP in Improvement Plan(PIP)that ees also receive a"weighted 1 , agencies are participating in the August 2002,a manager of allows the employee 90 days rating"for each goal that is PMP.The vast majority of these 27 ears wrote,"PMP has 1 tY Y continued on page 26 employees have"at will"status; improved my performance no unionized employees are on the job.I know exactly -— -_— ---"--- -- included in the program. what is expected of PMP aims to encourage employ me.Therefore,I know that x ee development,promote fair my staff must meet their x ,�s performance goals in order ISPIECIA OSTS IN { ness,and support the District's for me to meet my goals."strategic goals and objectives. C SIFU �1 rp I®Np The program is designed to Each goal includes a time JOB VALUNFUG plan employees'performance frame for completion,and a ��� expectations by identifying goals percentage weighting that �y and developing objectives; helps establish priority rank- C Y®®6�'ENSA19 OOK y P manage employees'perfor- ing of goals.Total weighting mance throughout the perfor- of all goals is 100 percent. N. mance period;and evaluate The Performance Plan also employees'work performance includes specific develop ?" objectively based on criteria that ment objectives that are have been made known to the designed to encourage pro- #r y; ` employee. fessional learning and --- � growth-Typical development ""02 Plan Performance:At the �� v PUBLIC beginning of each fiscal r gg objectives include items such a as a commitment to learn t SECT®�i x year,employees and their r ng a new computer skill, 4 a supervisors create a PERSONNEL join a professional associa- CONSULTANTS "Performance Plan."The Performance Plan includes tion,or read a job-related -�• _- three to five job-specific journal. National Office: goals that are written to Manage Performance: 4110 N.Scottsdale Road.Suite 140,Scottsdale.AZ 85251 performance rating. Performance Plan online,make level supervisor reviews the evdiu ul l , - -- _• _ ••_r.. any necessary changes,and ation online,and has the option nates the need for counting hard and organizing for bare Online PIM11, approve the official Performance of approving it"as is"or request- copies and manually tracking rat- Track#2 —Ensuring Plan.The Performance Plan is ing changes.The final evaluation ings. Organization's Futurt One major improvement to the stored online,and the supervisor is printed out in hard copy and The Online PMP system was Leadership Developry any program was the October 2001 and employee have access to it signed by the employee, the designed specifically for the M Case Study:Many puutL introduction of"Online PMP,"a throughout the year.To allow for supervisor,and the second-level District's PMP and continues to mass retirements are currently fI fully automated web-based per changing jobs and duties,the supervisor and filed in the evolve and improve based on mass retirements from I formance management system. Performance Plan may be updat- employee's Official Personnel feedback from users. Logistics This password-protected system is ed up until the last 90 days of the Folder. experienced workers am M accessible on the District's Management Institute(LMI)is struggling to fill higher- accessible period(June 30). For each evaluation,Online PMP the system developer. ership roles.The Counts intranet,and it allows users to login at their own desktop and At the end of the fiscal year, automatically calculates the Diego has employed crc build rosters of reporting relation- Online PMP automatically popu- weighted ratings for each goal, Compliance methods to address thi, ships,complete Performance lates the employee's Performance subtotals for competencies and It has taken nearly three years,but drain."Through intensi' Plans and Performance Evaluation with the goals from goals,and the overall perfor- performance management has ship development,the a Evaluations,and monitor pro the Performance Plan and the mance rating.This eliminates become part of the District's cul- developing its future lei gram compliance.The rating peri- standard job competencies.The careless mathematical errors. tore.Each year,more eligible using a variety of cuttin od—which follows the fiscal system allows each employee to employees have complied with the training tools. year,from October 1 to create a Self-Evaluation online as Pro Management requirements of PMP.For instance, Track#3—Chester September 30—begins when an input into his/her evaluation.The The DCOP Performance in FY 2002,78 percent of total eli- University:Transition employee creates his/her own supervisor then completes and Management Unit is the primary gible employees had a Perform- Learning from HRM Draft Performance Plan on Online approves the employee's evalua- program manager and the ante Plan in place,and 90 percent Organization:Cheste tion,which generates an auto- DCOP Office of Information of the employees with a Perform- County,Va.,is current! Technology and Business Process ante Plan in place received an forefront among local Reengineering administers secu- annual Performance Evaluation at ments in creating its c rity and passwords.The the end of the fiscal year.For FY rate university.This pra Performance Management Unit 2003,we have received Perform- provides an overview c :F has developed a series of Stan- ante Plans for 98 percent of all it Bard reports that show program the eligible employees. compliance on an individual and agency basis, rating trends,on- for more information on the District's time submission,etc.The Mayor performance Management program, The International SOClet for and City Administrator use this please contact Heather Mayes, 3. Making or recomf ..A , Performance Improvement information to measure each Perforniance Manager.at(202)727- decisions that hat, agency's compliance with the 1743 or heathermayes�+dcgov. stantial impact or welcofneS 1`otl to the 2003 operations or fina eifOf anise Based 4. Analyzing and roc ing changes to of practices, l strulctloual systems esa a,� r � �y 5. Planning long-or �r , business objectivE (Onference, 6. Analyzing data,c `e. 9 i- - v x _ r - ` conclusions and I Palmer House Hilton in changes, and (hirago.Illinois p ; 9 9 Institute: 7. Handlingcompla September15-17 x ` r trating disputes c a r ar !9 q �x grievances. t'HIEF 1"Jerashans: ]EARNING September 17c` Work that requires a PFICER c trle �rZ r 'hrt 9i� YS+«!u �a skill or training incluc September l8 N who use a procedure 11'1 g.�J' dj+t •RBe'Ita9 t� ap 0 [ILP ]nlCr }.1 `�•� ��- �--��-ar r � ` -ter �'- e {r' long as the manual c P sn!rgili Ii I . z� � "Y � k i Id i. r aE ;try 'e`u r" +a1„s�,,. �s� a '" '`n^.� information that can interpreted properly I I I i,!n I! ,mli I. 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P3 0. � ,°: ...� _ 'L�w > � j 3 #t4C.a''3Ry a iY .„y��7 �,P, '4i- Ai.{="' ��i��i�-��'�s�a ��: -h'^3.yt�•Z�{1$}�'(a r �`-^ � • � ,x�, � , "� "'� ,K.",,'` �a i "�3• 1`>"�}t� 8 yN .15rC+ s � t�t. fit 'Cf�. $•. "'hft a,<•a .r4rp - at ,it- k ..r w}.. t �„aa�y r, i '7 'f-�Pw r..^ck a :>+',...i',-.'�L"f�, }.�.�t. ti;€' � °t• ru,+ t,�fi .� �''v tiv dot .. r 7 �- ' �s 4<� •";::ia..a .,.P.r .r.."'Stt.�,. ,��..-, :1•ra-. ,t t�tr, t.anP��t't....__a�3..J° +.v�,L.,f a.> :r+1 a�3�•xa. LIM Sugggestead Steps for Scri-aging nee Chasm 1.Seek out opinions on problems with existing pay pro�r"rnns from rrrajvr can be a chasm that is difficult to bridge. stakeholders, and develop sunrrrrmly documentation- if something is "broken," everyone is aware of it. This article looks at some of the coasid- 2 erations that affect these decisions. -Conduct/sponsor air educational workshop on the primary nciy progr nrn concepts.People have generally read or heard anecdotal comments that have influenced their opinions. Everyone who will be involved in planning needs The Reasons uar Change to get on the same page. Government pay programs have their 3.Discuss and seek to reach consensus on the;owls for charging the program.This origins in a different era.The federal pa}' step also should include in initial attempt to articulate a new pay philosophy system„as adopted in 1949 and,except People need to know how the new program will benefit the organization. for the introduction of locality pay in d-Develop a preliminary model for the new pay program.People need to see and 1990, has been static. To be sure, many understand ivhat the new program will look like. This model does not have public employers have "tweaked" their to include all details;the purpose is simply to move the discussion away from programs, but the basic pay model and the abstract. its components can be traced back at $-Discuss how a nely pay progran will be affected by other rnarra��enrerrt practices. least that far. It is almost impossible to It may be that other changes will be needed to support the new pay find other management practices that philosophy (e.g., performance management,supervisor training).It also will have been essentially the same for half a be important to estimate the cost,if any. century. 6.Develop a tentative schedule for plarnring and implementing the new program. The new compensation model relies People need to know what they can expect, and when. The duration of the on: a framework using a simple set of schedule may well extend over more than a year, but it will be useful to salary bands,alignment with market pay establish a date when the old system will be replaced. rates, a strengthened commitment to a 7. Give the stakeholders a chance to "Erne-tune"the preliminary plmr.People need pay-for-performance philosophy; and a to know that their opinions were valued and affected the planning process. responsibility delegated to line man- They also need to know that the plan will be evaluated and fine-tuned again, alters for day-to-day salary actions. The if necessary,after the first year or so. salary system now is seen as a manage- 8.Identify a charrrpion. The organization needs someone to champion the meat system that reinforces the goal of program changes. This individual needs to believe in the changes and to have successful performance. The "new credibility as a leader. model" is not new, however; experience with these ideas goes back 20 years. Are traditional government pay pro- to success.With the emphasis on reengi- management and senior professional grams working? This is a difficult ques- neering and on cost-cutting steps that roles. And an important aspect of the tion.From one perspective,as long as va- arose in the early 1990s,companies con- problem is that the next generation of cancies do not result in operating cluded that they could no longer afford workers is smaller and growing slowly. problems, there may not be pressure to the"price"of a traditional pay program. This fact is attributable to lower birth change.The common expectation is that Public employers may not be able to rates from the late 1970s through the any changes will increase the payroll,and live with the traditional model much early 1990s.The severity of the problem this often counterbalances tie interest in longer either. The reasons that have has been reduced by immigration, but program changes.In Charlotte,however, prompted corporate actions are, to be the demographic trends have already the reason for change was integral to a sure, relevant for government. However, contributed to tighter labor markets. broader strategy to change that city's two more pressing reasons are the emer- Demographic trends, combined government and to use financial rewards Bence of the knowledge economy and with the growing demand for knowl- as a tool to shift employee focus to irn- the aging of the workforce. The former edge workers, indicate that the supply proved performance. is important to employers that need to of qualified workers in some occupa- Escalating corporate interest in new compete for people in technical fields tions will be inadequate. Tight labor pay systeuns has been triggered by the re- like IT. The latter will affect all private markets and their attendant problems alization that traditional salary manage- and public employers with an older will continue for at least the rest of the meat practices are simply too bureau- workforce. current decade. Projections by the U.S. critic, too slow and unresponsive, and The baby boomers, who were born Bureau of Labor Statistics show that too costly to administer.Traditional pay between 1946 and 1961, are fast ap- the number of new jobs created in a practices also have produced a culture of proaching retirernent. Over the nest long list of occupations will grow entitlement contrary to the importance decade, organizations will see a rapid much more rapidly than the overall of individual initiative and commitment exodus of people now serving in key workforce. PUBLIC MANAGEMENT 17 In addition to the IT fields, health ment. The graving of the workforce will planning and implementing new sys- and personal.care occupations will grow mean clogged career- ladders that may tems, which has not lien part of their much faster than the norm of roughly 2 prompt younger, better-qualified work- job description.At thesame time,how- percent annually. Public school systems, ers to look for more attractive opportu- ever,pay administration is not seen as a for another example, will need to fill pities elsewhere. It is unlikely that the management concern,[hat is, as long as more than I million new jobs, and this new generation of iworkers will be com- job vacancies and turnover do not affect does not take into account the retire- fortable with the traditional, seniority- operations. All of these circumstances ments over the period. based pay model. contribute to an environment in which Tight labor markets trigger an escala- the pay system is prominent in every de- tion of salaries. The IT market is an ex- ` partmental budget but no one is truly �o�m. ample in which some specialists have a Gcme � t 5 accountable for it. commanded increases in excess of 20 ��j E�ce� percent a year.This is simple economics: Experience confirms that it is difficult TFee ficapa Lance®c. for mission-critical jobs, corporations for public employers to break away from Leadership Will pay whatever they have to pay.Pub- the traditional salary model. There is lic employers will have trouble compet- often support for the different alterna- Compensation is an important manage- ing under any circumstances, but a tra- tives in initial discussions; it also is easy ment tool. It can inhibit employee be- ditional pay system will exacerbate the to develop a consensus that the prob- havior if employees act only to preserve problem. lems of the current system are serious. their status or income. Or it can be used At the same time, a number of occu- But the unknowns and the anticipated to motivate an employee's efforts.It can pations important to state and local gov- reactions of employees make any deci- in fact be used strategically to accom- ernment will grow more slowly than the sion to move to the new model one that plish organizational goals, as is routine norm.With few exceptions, manual and is fraught with apprehension. in the private sector. clerical support-job families are pro- Pay always is a sensitive subject in any When Louis Gerstner became CEO jetted to grow slowly. This will affect organization. It affects employees' per- of IBM in 1993, he realized that the prevailing pay levels: there will be no ceptions of themselves,along with their company would have trouble surviving economic reason to grant pay increases. lifestyles. Pay can trigger anger quickly. unless it changed its culture.The proud And, in fact, pay surveys over the years And,of course, anticipated changes in a IBM was seen as too rigid and slow- have shown an increasingly wide gap be- pay system make employees anxious. moving to compete effectively in the tween professional pay levels and those Moving to the new pay model is easier in highly competitive and dynamic IT for manual/clerical jobs. a corporation that can argue that the market. Gerstner was brought in to re- Another aspect of the problem is change is needed to be competitive.This vive the company,and one of the keys to the growing commitment of private argument justifies a lot of management his strategy was the introduction of a employers to recognizing and reward- actions, but it will be less credible in new pay system that ended the culture ing their better performers. Several government. of entitlement and delegated much of prominent companies have recently In the public sector, the problem is the day-to-day responsibility for re- been spotlighted for new policies re- compounded by the fact that no one warding key contributors to managers. quiring a forced distribution on per- "owns"the pay system.That is to say,no One of the reasons for IBM's turn- formance ratings: a specified percent- one has the responsibility for keeping it around and recent success is the change age of employees have to be rated as up to date, for modifying it, or for tak- in the culture,in which the new reward outstanding, and a smaller percentage ing the lead in initiatives to improve it. system has been key. as inadequate. For most management systems or policy In Charlotte, it was the city manager A similar philosophy is reflected in issues,someone is the resident expert or who saw a need to change the way the the practices of many companies. The is responsible for their maintenance. city was managed and began a signifr- purposes are to reinforce the impor- Corporations always have a director or cant reorganization of the structure and tance of good performance and to re- manager of compensation.Government operation of city- agencies. One of the ward and, ideally,retain the better peo- has specialists who manage the classifi- prominent changes was in the way peo- ple. In practice, this means that the pay cation process, but this is not the same ple are managed and compensated.The for the "best and the brightest" will in- as compensation management. city adopted a market-based pay system, crease, with compounding, at even The personnel/human resource func- administered within salary bands; an- faster rates. tion administers the pay system, but nual salary increases take into account It is not going to be easy for public even the best government HR managers market trends and individual perior- employers to compete in this environ- have rarely had direct experience in mance.Managers make these decisions. is €fcToeER 211,132 There also is a gain or goal-sharing in- best mana-er, however,may not be will- change is needed, their involvement centive s}stem that has enabled all city ing to lead an initiative to change a pay helps to convince others. employees to earn an extra$400 to $600 system. Clearly, in the public sector the vari- annually. The city has not raised taxes Introducing a new pay system is a ous stakeholders and constituencies since 19S6• source of concern for many managers in have to be involved, which makes the Effective managers can make change public as well as private organizations. composition of the committee a focal happen,-they control the"levers."Wien The term "bloodletting" has been used concern. It also makes it important to they conclude that change is necessary,, to refer to the reactions of people and consider the need for leadership within there is likely to be little resistance. work groups who feel they have not the committee so that members are able Control of the reward system is one of been treated fairly. This is perhaps an to reach a sound conclusion. Without the most powerful levers available. But overstatement, but the wrong imple- that leadership, a committee is likely to major organizational changes do not mentation strategy can undermine a be sty-inied by the same chasm. happen unless someone in a leadership leader's credibility. People often are re- The final decision to change the pay Position decides that change is neces- luctant to support an initiative that is system always is going to be difficult.Ex- sary and takes control of the change not popular. But this fact is at the heart petted benefits may not be fully realized if strategy, of the reason why leadership is funda- the new system is poorly designed or the Leadership is not the same as effec- mentally important. implementation strategy is faulty. And tive management; it is the ability to One strategy that often is used when managers have heard rumors of other identify organizational needs, to intro- an employer decides to evaluate the employers that changed a pay system and duce new ideas that satisfi-those needs, need to change the pay system is to as- experienced problems. In this context, to define the strategic direction, and to sign the task to a committee. It is diffi- managers find it all too easy to study the gain a shared commitment to the suc- cult to criticize a committee's decisions. problem and rationalize the deferral or cess of the change initiative. Even the If the committee members decide that rejection of changes in the pay system. Waw.,:.-r. 2 Y'• r+y"_ p'�. " 7" `} yT`- }t` .'•' E '_ "e, ,z.1 .S$- z.r" .� .''' tea'%-h ' . i �z ITS T- et,>' 4 4 $ E t3 ff F g 95Y a r ` y� 3 1 pp r irn ' s _ A E i k i �P--71 •_Y ..'RZ Y— -^'. L 1 F K -_ _rv}-'-��3--^rep � --.� � t 1-..•S 3 1 3 wsFar- ^s V uLi 1 'a 9 SZ x .=z T s 1 PUBLIC MANAGEMENT 19 ar- V ` ac[de€€ice less than 1 percent of companies have sources,or organizational enerw C considered moving back to a traditional lotte's experience confrrms this pointt.. program.The new model also substan- Moreover,as stated,the concern about ! The reason that a growing number of tially reduces the administrative costs increased payroll costs is not valid.One of organizations have moved to the near that support the pay system- Charlotte the decided advantages of the new salary ividual salaries can pay model is simple: it facilitates un- has a single person who manages the banding rbethslidat naiit out adjustments proved organizational performance.The system for the entire city government. I new model has a proven track record in With the new model, pay no longer from the old g and-range structure rade to the f i the corporate world. Surveys show that commands as much attention, re- corrrsen2mdude n s necessary market ments.) Companies control salary costs with a budget,and the need to manage a budget is not new to managers. lt The business reasons to make the de- z cision to switch to the neio,model are ob- Vious. But there still is a reluctance be- - cause the new model is so different. It involves a new employee relations philos- M A T C H I N G QUALIFIED W O M E m a m ophy, new values, and the requirement WITH PROFESSIONAL L O C that managers develop new shills. It also EMPLOYER calls for an intensive educational cam- paign because discomfort with change al- _ ways is an issue. These organizational SUBSCRIBE ® change issues can, however, be planned Opera the door to opportunity! ° and managed.The chasm can be bridged. e 2= Every issue of IC1XV:s fob Opportunities Bulletin `#` i ' As an outsider involved with many Q.O.B.),the nation's only publication targeted ° ° organizations that have bridged the specifically toward minority and NNomen local °° °° = ` ° chasm, I believe it is clear that change government management professionals,is ° °" • ' '° ` ° needs to happen. When managers and - filled Stith professional service information and ° ° °` '" "" °' employees adjust to the new environ- employmrent opportunities.J.O.B.has become "°° " ° ° ment,they like it,or at least they learn to a regular recruiting tool for mam employers. . ° ° ' °' '= ° ` ' live with it. If anything,the new model „. presents new opportunities to people. job listings and much more ° °`'-°16 ° The labor supply is going to be tight } + _°° i° at an u nbelievabEe rate! ` in some occupations for years. or or �a- i Every fivo weeks,you'll receive the latest nizations with a maturing workforce,re- emp6nient opportunities,local govemment .: r, tirements will exacerbate the problems. job line telephone numbers,and much more! ° ' Employers that do not adapt their pay This year-long subscription includes 23 issues ° ° systems to this market reality are going forjust$�0! -� '•e " ' = to have progressively serious problems in competing for talent.The federal gov- To subscribe,visit ICMA's Bookstore S More ernment already has found that it is un- online at bockstoce.icrna.o:g, able to compete for qualified college Email:subscriptionsoicma.org, graduates in technical fields. And salary or Fax:202/962-3500 increases compound over time, so the situation is only going to get worse un- Place an online ad at jo6s.ic.na.arg and get a free less changes are made. ' posting in the ICMA Newsletter or JOB Opportunities Bulletin> Howard Fisher is a senior fellow at the hrtematianal Center for Hurna�n Resources at the CiN/r�aaW47 . —' [Vh�zrrorr School, Univeiszty of Penn_ryhva- Maaagem t •� ma, Philadelphia (e-taTnil, h.risher@ icma.°rg worldnet.ntt.net). C)CTOEER 2002 20 -- 6 .L. RewardS Strategies r R mnted Public mdor to einve 0 0 Organizations By William M. Leavitt, Ph.D., CCP, and Robert J. Greene, Ph.D., SPHR, CBP, CCP his is a period of new imperatives for govern- the United States. More and more, one hears public ment organizations, including large federal bu- managers using new terms such as customer service, reaucracies,small local government agencies and pub- quality, employee empowerment, value added, incen- lic sector bureaus, agencies and organizations in be- tives, innovation, organizational performance and flex- tween. The 1990s began with major philosophical ibility. Many public organizations are emphasizing changes in the way governments at the local,state and leaner, more responsive government, a higher-perfor- federal levels conduct their business (Osborne and mance work force, more citizen involvement and re- Gaebler 1992,Barzelay 1992, Winter 1993),and it is ap- formed civil service systems. David Osborne and Ted parent that the bureaucratic paradigm is no longer the Gaebler, authors of the highly influential Reinventing only viable approach to public sector management. in Government: How the Entrepreneurial Spirit Is 46 ACA Journal Summer 1996 Tra:n.sforming the Public Sector,refer to these changes manding tighter controls over the budget. Indeed, the as government"steering more and rowing less." frugal delivery of basic services is becoming the The reinventing government movement mirrors watchword for many local governments(Gurwitt the private sector trends toward total quality manage- 1994). ment, continuous improvement, employee involve- ® The nature of public sector goals. PublicDrganiza- ment and organizational reengineering. However, the tions often do not enjoy the luxury of beingassigned differences between public and private enterprises programs and projects that are possible to accomplish. may cause the rewards strategies used by the two sec- Programs and projects frequently are selected on the tors to remain as dissnmilar as they always have been, basis of what should be done, not on what can be at least for the near future. done.Public sector goals tend to be difficult to define, Two important challenges are inherent in the de- with the added problem that greater goal specificity sign of public sector compensation plans: tends to attract greater political conflict. a The political nature of pay decisions. Because of Even when goals can be defined,it can be difficult the legal framework of the public sector, few public to measure progress.Public managers often have little sector managers possess the administrative discretion choice but to substitute input or activity measures of their private sector counterparts. Typically, public (e.g.,money spent or people served)for outcome mea- managers function within a web of rules and statutes sures (Kettl and Dilulio 1995). In addition, goals for whose primary purpose is not to achieve maximum ef- public organizations are established and circum- ficiency but to ensure stability of service, accountabil- scribed by laws and regulations. Personnel policies ity and equality of treatment. governing pay and staffing levels are important as- The fragmented system of authority in public sec- pects of management that are subject to legal and leg- tor organizations created by the separation and blend- islative determination and control. Therefore, perfor- ing of powers creates multiple and overlapping lines of rmance is more difficult to measure in the public sector authority.In private sector firms,the lines of authority than in the private sector,thus complicating the objec- tend to be primarily internal and relatively clear, tive of"pay for performance." whereas in public organizations,the lines of authority tend to be external as well as internal and often un- Defining the Reinvented clear.The potential for political conflict among exter- Public Organization nal forces is always present for public organizations. A considerable number of public sector organizations In terms of accountability, it is important to note that have joined the"re"movement in the 1990s.These or- public organizations have obligations not just to a par- ganizations have been attempting to reinvent,rethink, ticular group or to shareholders but also to the public re-envision,refocus and reengineer themselves.In es- at large, including its myriad of constituencies.Public sence, these tenors form an extended family of ideas sector organizations are supposed to do what the pub- about how to make government operations more pro- lic wants in ways that the public or its elected repre- ductive and accountable. The stakes are high in this sentatives have decreed. movement to a post-bureaucratic paradigm,given the One tenet of high-performance government is that size of the public sector. There are roughly 87,000 public executives must have flexibility in doing their state and local units of government,with more than 15 jobs_ However, as Charles Goodsell, director of the million full- and part-time employees. According to Center for Public Administration at Virginia Polytech- the U.S. Bureau of the Census' 1991 data, these em- nic Institute, notes, "Accountability is just as impor- ployees represent approximately 13 percent of the tant as flexibility—people have to be shown that their nation's total work force. In addition,there are more hard-earned money is being spent carefully and ac- than 2 million employees in the federal government's countably" (Gurwitt 1994). In many cities and towns civilian work force - fewer than in 1960, but still a faced with declining revenues, city councils are de- rather large number. ACA Journal Summer 1996 47 There is a growing consensus among citizens, services will add an element of competition from the elected officials, academicians and civil servants that market and require that public sector pay programs government institutions at all levels need to drastically become more competitive as well. improve their capacity and performance to meet the As the first steps toward reform, public agencies challenges of the nation's rapidly changing economic are delayering the bureaucratic structure and reducing and social systems. But the Winter Commission re- the number of job classifications. Yet, relatively little ported in 1993 that many government organizations change has been made in the pay systems used by hamstring their chief executives by diffusing their these same agencies, even though current systems do power and forcing them to operate with antiquated not fit the flatter, leaner, high-performance govern- systems for HR management,procurement, budgeting ment organization.Elected officials and organizational and operational decision making.On top of this, they leaders may define a mission for their agencies, but alienate key constituencies by underinvesting in their employees will not be aligned with that mission if the employees and failing to be responsive to the citizenry. pay system does not reward them for performing new The bureaucratic paradigm, which emphasizes behaviors needed to accomplish required changes and planning, organizing, directing, coordinating and con- assume more responsibility. trolling,defines the organization in terms of its formal structure rather than through its vision and mission. Pay for Performance And the key role of administrators in bureaucracies A primary rewards strategy for government in this new typically has been to use their authority to world to examine is more pay for performance and micromanage their subordinates. Clearly, in an envi- less pay for"time in grade."Yet,historical public sec- ronment that calls for flexibility and innovation, this for experimentation suggests that traditional pay for paradigm no longer is useful for managing public sec- individual performance(merit pay)programs may not for organizations.(See"A Review of Post-Bureaucratic work well for public organizations implementing the Public Sector Models.") high-performance model (Greene 1991). There have Government reinventors must reshape HR man- been several reasons for the difficulties experienced: agement systems (Kettl and Dilulio 1995). In rein- m Employees were hired and have worked under a vented agencies, government employees will work time-based system, and change is hard, particularly across organizational boundaries rather than be lim- when it may affect the employees'standard of living. ited by them.Managerial jobs will be redefined and in- m Managers have not been trained to do meaningful centives will be created to attract and retain the best performance appraisals and to reward high levels of people to do these new jobs. Managers also will need contribution more than contributions that add less more flexibility in deploying and rewarding their value. staffs.The ability of managers to find,attract,develop v Employees know that the personnel policies of and reward the kind of employee required will be a key public organizations offer them nearly endless appeal element in building the capacity necessary to accom- cycles,and managers know that reconciliation usually plish the goals of the post-bureaucratic organization. involves giving the employee who appeals what every- one else got. Potential Rewards Strategies To further complicate matters, the high-perfor- A high-performance organization model will work in mance organization model promotes the extensive government only if the barriers to developing a high- use of work teams,including the frequent use of self- performance work force first are removed (Winter directed teams without a traditional supervisor or 1993)_ Over time, a culture of entitlement tends to be- manager. The use of pay for individual performance come ingrained in public sector organizations because in a team setting can be divisive,promoting competi- they face little or no competition in the marketplace. tive behavior when what is needed is cooperative and The movement toward privatization of government supportive behavior (a reality being experienced by 48 ACA loumal Summer 1996 private sector organizations A Review of Post-Bureaucratle with teams). In addition, su- pervisors and managers may Public Sector Models feel that the restnicturing to Several post-bureaucratic models have been developed in recent years: teams is a threat to their n Total quality leadership (TOL). Adopted by various commands in the U.S. roles (and their economic Navy, TQL closely conforms to W.E. Deming's "System of Profound Knowl- well-being), and, as employ- edge" (Deming 1993) and promotes customer-focused guidelines similar to the ees, they have the same "Seven Fundamental Imperatives" (Whiteley 1991). Deming essentially saw seemingly endless recourse competition within an organization as destructive and noted that it would be better if everyone would work together as a system with the aim that everybody available if they believe orga- 'wins." Deming labeled this route to transformation as "Profound Knowledge," nizational changes have had which is composed of four interrelated parts: appreciation for a system, a negative impact on them. knowledge about variation, theory of knowledge and psychology (Deming 1993). Market-Based Pay R.C. Whiteley's Seven Fundamental Imperatives were developed for pri- In the Hampton Roads metro- vate sector organizations; however, based on the U.S. Navy experience, they polcan work equally well in public organizations. The imperatives work together, eral to area of Virginia, emsev- according to Whiteley, to produce an organization capable of delivering high eral local governments ein- quality in both products and services. The seven imperatives are create a bracing the high-perforniance customer-keeping vision; saturate your company with the voice of the cus- government model have tomer; go to school on the winners; liberate your customer champions; smash implemented or are planning the barriers to customer-winning performance; measure, measure, measure; to implement new, market- and walk the talk(Whiteley 1991). ® National Performance Review (NPR) model. This model was suggested by based employee pay plans. the NPR under the direction of Vice President Al Gore and strongly influenced Market-based pay is being by Osborne and Gaebler's treatise Reinventing Government. The NPR model is used to change organizational aimed at changing the culture of federal civilian agencies by creating a leaner values and culture.According government through work-force reductions and by championing the ideas of to author Judith M.Bardwick, - empowering employees Ph.D., entitlement cultures - improving customer service are characterized by high lev- - reducing red tape creating market dynamics els of risk avoidance, depen- _ forming labor-management partnerships dense, apathy, conformity - cutting back to basics and bureaucracy-not exactly - investing in greater productivity. a prescription for a high-per- a The high-performance organization (HPO) model. This model, developed formance organization. The by John W. Pickering and Robert E. Matson at the Weldon Cooper Center for movement to market-based Public Service at the University of Virginia, employs several assumptions about pay communicates a broad organizational leadership. The key assumptions are that managers at every level of the organization do more visioning and less micromanaging, more message to employees that supporting and enabling and less directing, more teaching and coaching and the entitlement cultures of less controlling, and more team building with a collaborative win-win focus these city governments are at and less one-on-one,win-lose politicking (Pickering and Matson 1992). an end.Also,the implementa- A significant number of local governments have adopted the HPO model, tion of market-based pay including the city of Norfolk, Va. Management personnel in Norfolk have could effectively signal discovered that the concept of empowerment inherent in the HPO model will work only if city leaders ensure that the strategies, structures and systems of employees that city govern- the city government are congruent with and supportive of the organization's ments need to be more com- shared vision and operating values. Furthermore, managers must display petitive and responsive to the intestinal fortitude and stand ready to accept employee mistakes. As Deming citizens. would say, it is necessary to "drive out fear." ACA Journal Summer 1996 49 A market-based pay strategy focuses more on the based systems. The flatter organization envisioned in external competitiveness of employee pay than on in- the high-performance organization model requires ternal equity. The concept;of equity is closely related fewer managers and management levels, and it places to the concepts of fairness and consistency, as per- new emphasis on employee participation and entpow- ceived by employees. Furthermore, the concept of erment. Skill-, knowledge- or competencybased pay equity always has both an internal and an external systems may enable reinvented public sector organiza- aspect: tions to motivate employees to acquire new skills, ® When making internal equity judgments, employ- knowledge or competencies. These systems reinforce ees compare themselves to other employees within the employee involvement initiatives, increase employee same organization. flexibility and broaden employees' perspective. Of o When snaking external competitiveness judg- course, this increased flexibility may be wasted if em- ntents, employees compare themselves to employees ployees are not given the information and power to use with similar jobs in other organizations. what they learn and if job design still produces narrow, From an organization's point of view, the goal of structured roles for them(Lawler, Chang and Ledford market-based pay is to determine how much pay is 1993, Lawler 1992). So, managers should be ready to necessary to attract and retain a sufficient number of support and reward skill development and the exer- qualified employees. This means that; salary levels cise of autonomy. have to be responsive to the competitive market con- siderations. Jobs are placed in a job-worth hierarchy ADVANTAGES TO USING A MARKET-BASED based primarily on external comparisons of pay levels PAY APPROACH Figure 1 for similar jobs in the community,thereby comparing N�L i the salaries of g employees to the averae salary of b y paid to incumbents in comparable positions in the market ® It can signal a move away from a culture of rather than to each other. entitlement. An important difference between market.-based pay systems and pay systems based on job contentand ® Compared to a point-factor pay plan,it is reasonably easy to ex n to employees. relative internal equity is that for pay systems based on r With complex:pay systems, it may be job content, the organization's jobs are evaluated be- ' �,4 difficult for employees to seethe linkage fore they are priced against the market. This prior between what they do and how much they evaluation ensures that internal equity is a higher pri- y get paid For doing it. Market based pay ority than external (market-based) competitiveness, ` makes ibis linkage quite apparent to the as the internal relationships tend to prevail where dif majority of emjiloyees ferences are found with the hierarchy of prevailing is somewhatMess complex toadroinister r market. rates. (See "The City of Hampton's Market- or factor pay plan et pay Based Pay System"on page 52.) data still need.to'be collected and inter There are several advantages to using a market- preted, but the point-factor evaluation of based approach to base pay. (See Figure 1.) While de- jobs is not needed. An associated advan tape is that it takes less time to train veloping and implementing market-based pay systems, 5 compensation staff to use a market-based public sector organizations adopting the high-perfor- approach. mance government model need to address severalki concerns;these are summarized in Figure 2. N It is more responsive to the local market than other pay systems. This responsive- Person-Based Pay ness may be critical in defending employee expense to taxpayers and funding agents. ' Another base pay alternative is person-based pay, t which includes skill-, knowledge- or competency- 50 ACA journal Summer 1996 Skill-based pay systems generally recognize depth CONCERNS WITH THE MARKET-BASED of skills, breadth of skills or both (Greene 1993). Sys- Figure 2 PAY APPROACH tents based on depth of skill provide rewards for learn- _ ingmoreaboutaparticular,specialized area orfortak- ® Good matches to the market may be mare ing on more responsible. work. Systems based on difficult to make, particularly for certain breadth of skill reward employees for learning more ` unique public occupations(e.g.,police, fire skills. Both approaches may make employees more and other public sector safety jobs). valuable in a team environment,or in units that rely on -® Government agencies tend to provide employee involvement. IgJ superior benefits and security; which makes Knowledge-based pay systems allow employees to comparisons based only on wages or progress through an occupational family when they salaries less valid. Conversely, employee demonstrate that they can assume more responsibility bonuses and profit sharing,which are and/or perform more difficult.and complex work. Thus 5'q commonly found in the private sector,are much approach also seems to fit well in the team/employee less common in,the public sector, r which makes it difficult to make comparisons involvement environment. x, #o the market based on total direct compen Competency-based systems are driven by assess sation.;- ments of how capable employees are at critical fund ® ,kgovernmentagency in ay accord specific i, tions(e.g., interpersonal relations),and they tend to be occupations ahigher-relative value than measured in terms of knowledge, skills and abilities pnva�te sector'organization`s do, making.the that are necessary for a particular level of competence 1_;" reconciliation between internal equity on The most commonly used competencies in private competitiveness difficult. companies identified in the Spring 1996 issue ofACA ® Socipl issues(e., pa(equity) and unions t Journal also may be a good fit. for high-performance maypioduce an environment in the public - public organizations. They are: customer(citizen)fo- sector that is quite different from that of the cus, communication, team orientation, technical ex- private sector. .t pertise, results orientation, leadership, adaptability to The costs associated with maintaining a R and innovation (Zingheim et al. 1996)•A focus on pay- •competitive position are driven by external ing public sector employees for the attainment and use factors. Ifpublic,revenues are notsufficient $} to meet these,costs the a enc 'ma be of these competencies should send a signal to employ- g y y t unable to fund its stated policy. ees that managers intend to "walk the talk"of reward- ing behavior directed toward high performance. There are several challenges associated with using person-based pay systems in public sector organiza- already,even if the rates are justified by higher produc- tions: tivity levels. ® Overall payroll costs will increase as employees m The cost, of administering skill-based programs acquire new, compensable skills—at least until staff- tends to be greater than.the cost of ad7n.i.nistel•in.g t ra- ing levels can. be reduced because of increased pro- di,t,-ional.job-based pay plans. lfirthermore, HR staffs duct.i:vi.lp.Although overall payroll costs may be lower often do not have the capability to administer multiple in the long run if the otganization makes better use of pay programs or to develop adequate skill definitions, people and, therefore, has fewer employees, tenure skill training programs and competency testing nieth- policies may make it difficult to reduce head count. odologies. They also may lack the organizational Also, many public sector organizations will find that power to impose on managers the discipline necessary pay rates that exceed the average market wage will be to adhere to established standards. Person-based pay a tough "sell" to citizens, who largely feel overtaxed systems can help create a culture that supports learn- ACA lournal Summer 1996 51 ing,but they also put significant pressure on the orga- ® The transition to a person-based system. where nization to train its employees thoroughly and continu- there are no i.ncen.tives for longer-teen, highly paid ously (Lawler 1990). Public sector organizations will employees to learn additional skills or accumulate leave themselves open to criticism if they emphasize new knowledge is often difficult. Unfortunately, pub- training to such an extent that productivity or service he agencies with long standing, step-based pay sys- to citizens suffers or if training costs seem excessive, tems may find themselves in this situation (Lawler given the resources current tax revenues will support. 1990). One solution is to slow down or end longevity step increases when employees approach the market pay rate. In this way,there still will be room for some The City ®f Hampton"s growth in individual pay, and the payroll budget will Market-Based Pay System not be affected severely.One-time bonuses,lump sum payments or some other form of supplemental pay for The City of Hampton, Va., implemented a skill acquisition by employees at the top of their pay market-based pay system in July 1993, mak- ranges is one way to shift to a new system. If a large ing it, along with the City of Suffolk, one of percentage of employees are well above the market the first Hampton Roads cities to implement rate, these measures will have a limited impact on such a pay system.City administrators in Hampton costs in the short run. felt that their limited compensation dollars were c Organizations may find it difficult to apply per- not being used effectively because their sys tem focused almost exclusively on internal job son-based systems to management and supervisor y rankings and required equal pay adjustments work without making the systems quite complex. For regardless of prevailing market rates. They public agencies trying to keep these systems within also felt that the point factor system of job their capacity to administer, this means that all em- evaluation tended to reward longevity, not per- ployees may not be compensated using the same pay formance(The Wyatt Co. 1993). Hampton's new pay plan took cranking- systems, at least in the beginning. It makes sense for public agencies to start slowly with person-based sys- to-market approach to job evaluation. This was accomplished first by ranking benchmark terns (e.g., by implementing them first in departments jobs forwhich external market data were available that use self-directed work teams). Over time, career and then by slotting nonbenchmark jobs into ladders also can be added for managers, supervisors the job-worth hierarchy.This approach is similar and other appropriate jobs tohelp make up forthe lack to the"Guideline"approach developed by noted of promotional opportunities in the new,flatterorgani- compensation consultant Matt Murphy and used zation structures. extensively in the private sector during the It is no revelation to those working in the public 1960s, 1970s and 1980s. A final note: Hampton Roads cities with sector that many public organizations are under in- market-based pay systems frequently use"judg- creasing pressure to improve their effectiveness,prin- mental slotting" to determine the "correct" pay eipally because citizens are less and less willing tosub- grade and range for many jobs. There are a sidize inefficient government operations. As Radford variety of reasons for doing this, including an University Associate Professor of Political Science inability to match some jobs to market. How- Reginald Shareef, Ph.D.,notes,this situation begs for ever, it also appears that jobs are slotted for an upgrading of the skill knowledge and competency political reasons,which could lead employees to believe that the pay system does not reflect levels of public sector employees, and person-based the market accurately for all of the organization's pay may be just part of the answer. jobs.The result could be widespread employee Person-based systems will give employees the dissatisfaction. chance to develop or increase their skills and to in- crease their pay even when promotions are not avail- 52 ACA Journal Summer 1996 able. Organizations that,are downsizing or delayering In the new, high-performance public agency, tray find that these increases are an attractive way to orgaiuzationwide/team-based performance.measures maintain employee morale. should begin with a focus on customer (i.e., citizen) satisfaction. In general, there are three ways to mea- Incentive Pay sure customer satisfaction(Baranski 1995): Many public organizations that are implementing the ® Ask the customers. high-performance organization model and making in- ® Measure customer Behaviors,such as the number creasing use of work teams are finding that existing of complaints received or the number who switch to base pay systems do not support the work team con- alternative services when available. cept and actually limit the effectiveness of teams.Tra v Measure.employee contributions to customer sat- ditional job-based pay systems are a particular prob- isfaction. lem (Bartol and Hagmann 1992), as has already been Another critical design consideration in the devel- discussed.Because these systems are built on a hierar- opment of organizational or team-based incentive chy of job grades and pay ranges that is tied to the pur- plans concerns the method for allocating rewards. In- ported importance of the job,they typically do notpro- centive rewards can be distributed in a number of vide the incentives needed to support and reinforce ways(Bartol and Hagmamr 1992): the team concept. In fact, the emphasis on hierarchy ® equal payments to all employees or teani members and specific job descriptions associated with job- ® differential payments based on members' contri- based pay may undermine the sharing of responsibili- butions to overall perfonnance ties within a team enviromnent. Besides, every base ® payments based on a percentage of each person's pay increase is a career annuity, unrelated to current base pay rate. and future levels of organizational performance. Failures of organizationwideJteam incentive plans Organization wide or team-based incentives to have occurred in the private sector with uncomfort- supplement base pay adjustments may be an option. able frequency.(See Figure 3.)In public sector organi- To be effective, however, these incentives should be zations, the failure to articulate a clear vision,the lim- linked to specific goals that clearly spell out what per- ited availability of training resources and the unrea- fonnance is expected from the organization/team(s). sortable expectation of achieving a short-term payback Typically, rewards will be given to all members, often with no distinctions made,instead of giving individual MAJOR CAUSES OF INCENTIVE rewards,which may focus employees on their own rat- Figure 3 PLAN FAILURE inc, rather than on overall performance. A problem EN unique to government agencies is that they often must MAz maintain idle capacity to ensure their ability to deal " ® Failure to articulate a clear,vision ® `: Lack of management commitment to mak- with public crises, emergencies and peak load situa ing the reward program work t.ions. When public agency performance is evaluated, ® Inadequate communication of program goals reserve capacity can look a lot like waste and inefir ® Insuffi.cient.employee involvement in;pro ciency,oft en making it difficult for the agency to show gram design the same productivity gains that a private sector orgy-raining resources nization may be able to muster. As a result, it may be Unreasonable,;expectation of achieving a short-termpayback hard to defend the outlay of funds for incentives.How to gad timing of the system change ever, it is possible: to make a qualititative assessment of how well units did given the context they operated ... ..: h ,... : .N in, and these judgments can be used for perforniance_ Source: S.T. Johnson, "Work Teams: What's Ahead in Work Design and Rewards Management," Compensation&Benefits Review,March- based incentive rewards. April 1993 ACA Journal Summer 1996 53 are particularly common problems that need to be performance organizations are high-involvement taken into consideration. Public sector executives organizations and, as such, employee participation in should not"oversell' incentive systems to legislators operational decision making should be sought and or city councils,which naturally wish to see major re- encouraged_ sults before the next election. Creating high expecta- It is crucial to the success of the new culture that tions for quick improvements in organizational perfor- employees at all levels of the organization be involved mane based on a new compensation philosophy and in designing and implementing new pay and incentive system can be dangerous and self-defeating. programs. This is one area where executives must The development of performance incentives for "walk the talk"of employee involvement,even though public agencies can be difficult and may be an exercise all their training leads them in another direction. En-1- in political futility. Legislators and citizens alike may ployees can be viewed as the "consumer"of the pay endorse the concept of incentive pay while at the same programs. If they do not"buy"the product,no matter time requiring strict monetary limits on its application. how technologically superior it is,it is a failure. Perhaps the best strategy for public sector organiza- tions is first to get a commitment to an overall payroll budget and then to argue for the flexibility to mix base pay,individual incentives and group incentives as long as they keep the total costs within the budget. Sustaining Innovation in the Public Sector Social philosopher Peter F. Drucker notes in his 1995 article"Really Reinventing Government"that agencies must rethink themselves to move to higher levels of performance. He contends that every policy, program and activity has to be rethought in terms of the current mission,and that the mission should be scrutinized to ensure that it is still valid. According to Paul Light of the Humphrey Institute, it is relatively easy for government agencies to inno- vate the first time; the real trick is to sustain innova- tion over time (Gurwitt 1994). Unlike reengineering, continuous improvement, a key element of the high- performance culture,builds from the bottom up,with cooperation among employees replacing competition (Kettl 1995). Rewards systems have to be designed to foster cooperative behavior among employees instead of forcing them to compete for dollars. The process of designing rewards systems that support and complement a high-performance organi- zation culture is a difficult one.The real devil is in the details of implementation.The implementation of new pay systems in the public sector should be well thought out and approached with caution. Failure to achieve"advertised"results can lead to close political scrutiny and legislative micromanagement. High- 54 ACA Journal Summer 1996 a ° Johnson, S T."WOrk Teams:What's Ahead in Work Design and Re- Wallis Management.."Cornpeusatiort & BentJi.ls Review. March- April 1993.35-41. William M. Leavitt, Ph.D.,CCP, is an Assistant Professor-of Public KeLtl,Donald F."Building Lasting Reform:Enduring Questions,Miss- William and Urban Studies at Old Dominion Universit.v in Nor- ing Answers."In Iuside the Reiaveittion Machine:Appraisal Gov- folk,Va.His research interests are in the areas of public sector pay erwineutal Reform.. Washington, D.C.: The Brookings Institution, and human resources issues. Prior to his present,appointment, he 1995. 1 worked as the Manager of Employment.and Compensation and in a variety of other positions for the Denver Water Department.He holds KeLtl,Donald F.,and John J.Dilulio Jr.,eds.Insight tire Reirrvc:ntiorz a B.A. in political science from New York University and an M.P.A. Broo i ng Appraising Gover rzmertt Rt for rn. Washhrgton,D.G.:The and Ph.D.,in public administration from the University of Colorado. Brookings Institution,1995. Lawler, Edward E._IU.Strategic Pay:Aligning Orgaitizational Robert J. Greene,Ph.D.,SPHR,CBP,CCP,is a Consulting Principal Strategies and Pay Systems.San Francisco:Jossey-Bass,1990. N iLh James&Scott Associates Inc., headquartered in the Chicago area.He specializes in conipensation/HR-strategy formulation,direct The Ultiarzczte Advantage:Creating the Higl�lrizoh crreent compensation,program design and strategy/program evaluation,and Organization.San Francisco:Jossey-Bass,1992. he has 25 years of experience in consulting and several years in pri- vate sector organizations. Greene has chaired the ACA Research Lawler, Edward E. Ill., L. Chang, and G.E. Ledford Jr."Who Uses Committee and served on the ACA Education Committee.He also has March-Apriasedl Pay, and Why." Compensation &Bertefils Review. designed a number of ACA's educational seminars and continues to March-Apri11993.22-26. serve as an ACA faculty member and as a member of the ACA Certifi cation Advisory Panel. He is a 1995 recipient of the ACA Keystone National Performance Review-.Frrorrt Red Tape to Results:Creating Award,the highest honor ACA bestows for outstanding achievement a Governrraent That Works Better and Costs Less. Washington, in compensation and benefits. D.C.:U.S.Government Printing Office,1993. Osborne,David,and Ted Gaebler.Rcinventing Government:How the Entrepreneurial Spies it Is Transforming the Public Sector. Reading,Mass.:Addison-Wesley,1992. Pickering,John W.,and Robert E.Matson."Why Executive Develop- ment Programs (Alone) Don't Work." Training&Development. May 1992.91-95. Shareef,R."Skill-Based Pay in the Public."Review gf Public Person- " nel Administration.Summer 1994.60-74. Acker,J.Doing Comparable Worth:Gender-,Class and Pay.Phila- Whiteley,R.C.The Custonter=Driven Company:A9ovingfrom Talk delphia:Temple University Press,1989. to Action.Reading,Mass.:Addison-Wesley,1991. Baranski,M.H."Paying for Customer Satisfaction."A CA News. April Winter,W.F.(Chairman).Hard Truths/Tough Choices:Aat Agenda 1995.3-4. for-State and Local Reform—First Report of the National Conartis- sion on the State and Local Public Service. Albany, N.Y.: The Bardvvick, Judith M. Danger in the Comfort Zone. New York: Nelson A.Rockefeller Institute of Government,1993. AMACOM Books,1991. The Wyatt Co.City of Hampton:Final Suntntar y Report.Washing- Bartol, K.M.,and L.L.Hagmann. "Team-Based Pay Plans:A Key to ton,D.C.:The Wyatt Co.,1993. Effective Teamwork." Compensation &Bcnefi.ts Review. Novem- ber-December 1992.24-29. Zingheim, Patricia K., Gerald E.Ledford Jr., and Jay R. Schuster. "Competencies and Competency Models: Does One Size Fit. All?" Barzelay,Michael.Breaking Through Bureaucracy:ANew Vision ACAJournal.Spring 1996.5(1):56-65. for Mcrnagivg in Govet—entma. Berkeley, Calif.:University of Cali- fornia Press,1992. Deming,W.E.The Neu.,Ecorzornicsfor Industry,Governnment and Contents©2000 WorldatWork. The content is licensed Educ:atiort. Cambridge, Mass.: Massachusetts Institute of Technol_ for use by purchasers solely for their own use and not ogy Press,1993. for resale or redistribution. No part of this article may Drucker, Peter F.r "Really Reinventing Government." The Atlantic be reproduced,excerpted or redistributed in any form without express written permission of WorldatWork and Monthly.Februay1995.49-s1. appropriate attribution. Reach WorldatWork at Greene,Robert J."Alternatives to Time-Based Pay."Public Person- 480/922-2020; customerrelations@worldatwork.org nel Alanagenu,-ut.Winter 1991.419-427. "Person-Focused Pay: Should It Replace Job-Based Pay?" Compe-n.sation&BeneJ•itsReview.Autumn 1993.9(4):46-54. GuraiLt, Rob. "Entrepreneurial GovenunenL: The Morning After." Governing. May 1994.34-40. ACA Journal Summer 1996 55