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PAY BANDING AND FLEXIBILITIES IN DEMONSTATION PROJECTS
AN UPDATE

Or What I Wish I Knew Before I Was Volunteered to Help Design and Manage a Pay Banding System

Gail Redd
Gary Hacker
U.S.Office of Personnel Management
Presented to Strategic Compensation Conference

8/27/02

Why Is Pay Banding "Hot" Now?

  • Even after 20+ years, we’re still on a learning curve.More to learn.We don’t have all the answers, but we can give the benefit of experience.

3 Ways You May Get Involved

  • Currently Existing System
    • (Air Force)
  • Design Demo Under Chapter 47
    • (China Lake)
  • Design APS under separate legislation
    • (Federal Aviation Administration)

What Do You Want -- Pay Banding Or A Pay Banding System?

  • Pay Banding (Broadbanding) – The compensation and classification framework that groups fifteen General Schedule (GS) grades into three, four, five, or six broadbands based on career path and occupation.

What Do You Want -- Pay Banding Or A Pay Banding System?

  • Pay Banding System – A human resources (HR) subsystem consisting of: (1) a pay banding core; (2) strengthened by flexibilities and innovations; and (3) integrated into an agency’s overall HR system.Pay banding systems are often used to move from an entitlement-based to a performance-based culture and to improve organizational effectiveness.

Pay Banding System Components/Options

  • Pay Banding
  • Performance Focused Pay. (e.g., Performance, Contributions, Competencies)
  • Categorical Ranking Process
  • Enhanced Three R’s (Recruitment, Retention, and Relocation)
  • Extended Probationary Period

Pay Banding System Components/Options

  • Modified Term Appointment
  • Performance Focused Reduction-In-Force Credit
  • Supervisory Differentials
  • Market Based Pay (Market Sensitive Pay)

Learn From Others

  • OPM’s Center for Human Resources Innovation (202-606-2820)
  • Internet Websites (http://www.opm.gov/demos/index.htm)
  • Project Managers of Pay Banding Systems
  • Agency and OPM Program Offices (compensation, staffing, classification)

Learn From Others

  • Conferences, Seminars, and Briefings
  • Professional Organizations(WorldatWork–former American Compensation Association)
  • Non-Federal Users (State governments, corporations, non-profits)
  • Evaluation Reports(demonstration project evaluations)

Collect and Use "Lessons Learned"

  • Pay banding is effective.
  • Large scale organizational change takes time.
  • There should be a solid business case for change.
  • Diverse systems can create inter-agency and intra-agency challenges.
  • An executive champion is a key to success.

  • Collect and Use "Lessons Learned"

  • A supportive culture is essential.
  • One size does not fit all.
  • Communication and training must be priorities.
  • Employees and employee organizations must have "buy-in."
  • Costs can be controlled.

Address Employee (And Union) Issues

  • Performance Management(Is there a credible performance system?)
  • Resources(Are there adequate resources?)
  • Type of Job(Are there jobs that should not be covered under a pay banding system?)
  • Management Control(Is management being given too much control?)

Address Employee (And Union) Issues

  • Pay Equity (Will funds be equitably distributed?)
  • Flexibility(Will the banding system be flexible enough to address differing local needs?)
  • Appeal Rights(Does the banding system include adequate employee appeal rights?)

  • Address Employee (And Union) Issues

  • Employee Training(Will employees under banding be given additional job training?)
  • Adverse Impact(Will the banding system have adverse impact on any group?)
  • What’s In It For Me?(Are there positive benefits for employees?)

ADVICE FROM THE EXPERTS

Based on New Focus Group Data

Design Considerations
Communication -- the Key to Success
How to Smooth the Way -- Implementation Tips
Outcomes/Limitations

Design Considerations

  • Shaping Career Progression
    • Decide on the shape of career progression for each band
  • Criteria for Entry into Band
    • Base Criteria for Entry of Occupation in a band on Matching Knowledge, Skills and Abilities, Certification Levels of occupations you group together

  • More Design Considerations

  • Perception of Fairness
    • Design the system so it is perceived as fair.
  • Identify Your Problems
    • Identify problems as your target and start from there.
    • Be honest.Say these are our targets.We’ll try to fix these things, but Demo can’t fix everything.

  • More Design Considerations (2)

  • Keep it Simple
  • Seize Opportunity to Clean Up/Streamline Current Processes
  • Decide Up Front What Baseline Evaluation Information You’ll Track
    • Good Metrics are Essential to Follow Outcomes

  • Final Design Considerations

  • Allow Flexibility
    • Give enough leeway in your plan to allow units to customize to meet their unique needs.
    • Don’t dictate how each pay pool should implement their appraisal system.

  • Communication -- The Key to Success

  • Keep People Informed in a Variety of Ways
    • One-on-One Meetings
    • One-on-Two Meetings
    • Huge Briefings
    • Newsletters
    • Emails to Managers
    • Emails to Employees
    • Hotlines

  • Communication -- The Key to Success

  • Educate the people in your approval chain
    • Educate approving officials for your proposal on the unique nature of the environment in which you must operate (nature of funding, culture, etc.)

  • Communication -- The Key to Success

  • Explain How All the Systems Integrate -- How it All Works Together.
  • Market Through Communication, Especially to Get Buy-In From the Unions

  • Communication -- The Key to Success

  • Use Comparisons With the Traditional System
    • People need to know how the traditional system works as well as a newly designed one.
    • Educate on both.Show how they differ side-by-side, and how the new one is better.

Communication -- The Key to Success

  • Communicate to Ameliorate Fear
    • Communication can build trust.
  • Be honest
    • Say, these are targets.Demo won’t fix everything.
  • Communication Should Be Personal
    • Tell people you need their help
    • Everyone should feel they are in it together to improve the organization

  • How to Smooth the Way -- Implementation Tips

  • Work in Teams
    • It’s not just Human Resources (HR) anymore.Include managers in behind the scenes work.Shift from it all being on HR to really working with managers.

  • How to Smooth the Way -- Implementation Tips

  • Use Process Action Teams (PATs)
    • Address all important design features.
    • Use PATs to develop the entire project plan, including the pay-out systems.
    • Involve Senior Management and all sectors of the workforce.

  • How to Smooth the Way -- Implementation Tips

  • Communication Should be Personal
    • Tell people you need their help to do it.
    • Everyone has to feel that they are in this together to try to make things better for the organization.

  • How to Smooth the Way -- Implementation Tips

  • Conduct Mock Simulations
    • Conduct a "dry run" before you implement the actual pay out to test the new processes within the pay pools.

  • How to Smooth the Way -- Implementation Tips

  • Get a Champion
    • Should be "top banana" like a Laboratory Director
    • Could be a team of Champions, like fiveSenior Executives
    • Have that person or persons present at all briefings
    • Having a Champion lends continuity to the effort

  • How to Smooth the Way -- Implementation Tips

  • Don’t Let HR Conduct All the Training
    • Let Managers train their own staff.
    • Team Managers with HR to allow more sensitivity to what each unit requires in the training.

  • Did Demo Make Better Managers?

  • It encourages better and more frequent communication
    • Better communication builds trust
  • Turned subject of communication away from HR and towards the work employees are doing
    • Shift in focus helped managers manage the work

  • Did Demo Make Better Managers?

  • Problems are rapidly surfaced to the top in a change environment.
  • Managers are forced to rise to the occasion

Do you have a Better Organization Because of Demo?

  • Visibility through metrics
    • When you are forced to concentrate on measurement, you get better at it
    • For example, normalization of ratings

  • Do you have a Better Organization Because of Demo?

  • "It made it easier to hire, pay, reward, and rid our ranks of dead weight."
  • "There are some happier people whose lives are made easier by this."

  • Limitations

  • Life Goes On
    • Other "noise"
      • regionalization, laboratory reorganization,
      • shift in HR profession from specialist to generalist
    • Hard to make strict cause and effect statements
      • Experience has shown it has had positive impacts,
      • We can advise on how to create environment that we’ve seen is conducive to innovation
      • Can’t make the leap "if A, then B"

Limitations

  • Can You Measure Mission Accomplishment Yet?

  • Limitations

  • Time will Tell
    • Even with longstanding demos, we’re still on a learning curve, and don’t have all the answers
    • Most demos are still evolving and yielding new findings

  • Prospects/Wrap Up

  • Pay Banding is Here to Stay
    • Not just "flavor of the month"
    • Numbers have increased since China Lake
    • We expect trend to continue
    • We’re positive about Governmentwide application
    • Trend is also reflected in what we’re seeing in the Non-Federal sectors
 
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