1 Staff Compensation Program Update Campus ForumNovember 2016

2 Contents Background and Current StateResults of 2014 Compensation Assessment Project Timeline for Proposed Changes Introduction to Job Evaluation Approaches Market Pricing Introduction to Salary Structure Framework Next Steps

3 Background and Current State

4 Background and Current StateIn 2014, AFS leadership reviewed compensation program changes implemented in 2012 More than $2 million invested to support associate and support staff and administrators through program changes providing equity review, new hire equity review, and classification review requests In reviewing this investment and associated total compensation costs, it was determined that these expenditures were not sustainable for the long-term For FY 15, Dr. Wormack suspended some aspects of the classification and compensation program procedures including the above–mentioned equity and classification reviews In FY 15, HRSTM partnered with Aon Hewitt to conduct a comprehensive review of our classification and compensation programs in order to embrace sound compensation practices and strategically align our programs with MC 2020 in order to provide a compensation program that will be sustainable over the long term given budgetary and other resource constraints Key drivers for the refined compensation program will include: Budget Impact on staff Sustainability

5 Results of the 2014 Compensation Assessment

6 Results of the 2014 Compensation AssessmentDuring 2014, Montgomery College and Aon Hewitt partnered together to complete an assessment of the current compensation programs for faculty and staff We gathered viewpoints from leaders, faculty, and staff at the College As a part of the assessment, Aon Hewitt provided observations regarding Montgomery College’s current practices and offered market/best practices information and data and considerations for action planning Recommended considerations for action Job Classification Consider establishing compensation levels for positions based on not only the relative internal worth of a job, but also on the basis of the market or external competitiveness within the relevant labor market Ensure jobs are properly placed in the salary structure with external and internal considerations Salary Structure Align the salary structure with the external market in order to effectively retain and attract talent Consider changing some of the design elements of the compensation structure to align with market based pay practices Pay Delivery Align salary increase adjustments to the market to stop over-spending and retain and attract top talent Create clear career paths for employees Consider approaches that allow performance based increases that better align performance and rewards Review current policies, and ensure there is an element of flexibility to allow for management to reward performance or critical skill development within general pay delivery guidelines. Revise current compensation practices that are not financially sustainable (i.e., internal equity reviews)

7 Project Timeline for Proposed Changes

8 Project Timeline for Proposed ChangesFY17 FY18 FY19 Develop Interim Plan Comp 101 Comp Design Comp Admin Prepare for Implementation Implementation Adjust Communication Plan Determine if interim pay increase strategy is feasible for FY17 Develop Interim Pay Policies Develop Comp 101 Training Deliver training to leaders Linkage to pay for performance Evaluate jobs Review/refine structure design Refine job assignments Conduct cost impact analysis Develop and refine policies Develop compensation administration guide Gain program Approval (BOT, SALT) Develop communication and training strategy Develop communication and training material Deliver communication Conduct training Systems updates **(Labor Relations Reopeners)** Implement program Conduct ongoing communication and follow up Provide additional training as identified Evaluate program effectiveness Ongoing Communication & Updates SALT Governance Councils Finance/Budget Labor Relations Employees

9 Introduction to Job Evaluation Approaches

10 What Is Job Evaluation? Internal Value External Value…the PROCESS of determining the RELATIVE RELATIONSHIP OR VALUE of jobs or work within the organization Internal Value External Value Emphasis on RELATIVE VALUE -- a job evaluation process really aims to find the middle ground between how the market values a certain position and how the organization values it internally. Internal equity and external equity are usually both considered when valuing work. Internal Equity - is the perception that jobs are valued fairly when compared to other jobs within the organization. External Equity - is the perception that jobs are valued fairly when compared to similar jobs in the external marketplace. There is no ONE ideal process in JE -- it’s a matter of finding the process or technique that will work best for your respective organizations. Why Job Evaluation? Understand the internal value and external (market) value of positions Ensure jobs are aligned appropriately within the College’s salary structure Ensure equitable pay for jobs

11 Internal vs. External FocusInternal Focus External Focus Decision-Making Criteria Responsibility/Impact Managerial Scope Knowledge/Skills Job Complexity Market Data Availability of Talent Local Market Influences

12 Considerations for Selecting a Job Evaluation MethodOrganization culture Internal vs. external focus Availability of market data Types of jobs (i.e., technical, support, professional) Resources for administration Ease of communication Defensibility needs Several factors should be considered when choosing the most appropriate job evaluation method. These include the following: Culture/Climate of organization Formal versus informal - The more formal the organization, the more likely it is to desire a structured, objective job evaluation system. On the other hand, a less formal organization may choose a much less structured and more subjective system. Precise versus flexible - The degree of precision an organization prefers versus the ability to quickly respond to changing conditions influences the choice of a job evaluation method. The greater the precision required, the more likely the method is to be more formal and complex. Open versus closed - The degree to which a company is willing to share information about job evaluation can influence the system chosen. Some systems are much easier to explain than others. In addition, openness can include a greater degree of participation in the process. Quantitative versus qualitative - The more analytical or quantitative an organization is, the more likely it is to select a more numbers oriented system. The other extreme is companies which are more qualitative. These companies are more likely to select a system that allows for greater flexibility to meet the organization's needs. Availability of market data - The more data available, the more appropriate a market-based system is; the less market data, the less appropriate. Characteristics of job population - Volume of jobs, Number of locations, Diversity of job types Time and resources available - In selecting a job evaluation method, the company needs to consider the amount of time and effort required to implement the system and to continue its administration. Some approaches require more resources than others. Ease of communication - To managers and to employees As always, culture should, to a large part, determine how positions are valued in an organization. Any JE technique should be sellable and defensible and should address the specific needs of your labor market. Your technique of choice should be amply supported by the availability of market data and should adequately address the scope of positions in your organization. Finally, you should, internally, have the resources available to administer and run the system that you eventually choose to adopt otherwise it will not work for your organization. Key learning for this is keep it sweet and simple -- it need not be fancy for so long as it addresses your major needs.

13 What’s Happening in the MarketCurrent Practices in Job Evaluation Starting in the mid-1980’s, U.S. companies moved away from internally focused job evaluation systems to externally focused market pricing systems Higher education has been slower to move toward an externally focused job evaluation approach The shift from an internally focused to externally focused job evaluation systems has occurred due to: Rapid evolution of technology and high rates of mergers, acquisitions, and spin-offs made it difficult to maintain current evaluations of ever-changing configurations of work The rise of the “knowledge worker” made the hierarchical logic of traditional job evaluation less relevant … “person-based” versus “job-based” pay became popular Rapid changes in demand for “hot jobs” made internal value of work less important than market pay rates Downsizing and decentralization of HR staff made labor-intensive approaches to job evaluation a challenge A general trend toward managerial empowerment and self-service in HR decision-making

14 Montgomery College’s Approach to Job EvaluationImplement a market-based job evaluation system that will: Enable the college to retain and attract talent Align base pay to the external market more directly Allow for ease of administration Be fiscally responsible Provide opportunities for clear and concise understanding

15 Market Pricing

16 Market Pricing ProcessMarket pricing is the process of establishing an external competitive market for jobs or skill sets that are comparable to those within the organization Jobs with a match in the market are called benchmark jobs Market pricing an organization's individual jobs is accomplished by the following steps: Identify Survey Sources Identify Benchmark Jobs Identify Survey Scopes Collect and Update Market Data Determine the Estimated Market Value

17 Sample Survey Sources College and University Professional Association for Human Resources Surveys: Administrators in Higher Education Non-exempt in Higher Education Professionals in Higher Education Local Data Montgomery County (Public Schools and Government) Maryland Association of Community Colleges Local Government Personnel Association Aon Hewitt Surveys Total Compensation Measurement (Executive and Management and Professional) High Demand Information Technology Skills Non-exempt Mercer Surveys Mercer Benchmark (i.e., Human Resources, Information Technology, Finance, Accounting and Legal, Sales, Marketing and Communications, etc.) Towers Watson Surveys Supervisory and Middle Management Technical and Operations Office and Business Support Note: Typically, we use 25–30 survey sources per market study.

18 Identify Survey ScopesDetermine the scope to include for each benchmark based on your market for talent From where do you hire employees? Where do employees go when they leave? Scope can reflect the organizational size, industry, individual responsibility, region and/or geography depending on the job level and market for talent Level Scope/Size (Budget, Enrollment, etc.) Industry Geography Executive Director Manager Professional/ Technical Support Very Related Somewhat Related Minimally Related

19 Introduction to Salary Structure Framework

20 What Are Salary Structures?A framework for organizing and grouping jobs Used to manage employee pay levels appropriately Created by combining information gathered through market pricing and job evaluation Provides an understanding of how jobs fit together and how to advance in career

21 Salary Structure Framework PurposeA well designed salary structure will serve several purposes: Gives managers the flexibility to reward performance, skill development, and critical skills needed by the organization but with some boundaries (guidelines versus rules) Supports and enables the development of the “pay for performance” philosophy In contrast, poorly designed salary structures inhibit properly rewarding performance or skill development in that they can be too restrictive to meet the market demands or too inflexible to address high performing individuals Helps to effectively control overall base salary costs while accurately reflecting the competitive market values of jobs in the grade Reflects meaningful career progressions through movement from grade to grade Communicates how much the organization values (internally and externally) each job, and establishes a standard guideline for managing pay within the organization

22 Salary Structure Framework Current and Future State—Montgomery CollegeCurrent State Currently, have one salary schedule for Administrative, Associate, and Support Staff Structure characteristics Includes 19 grades Has inconsistencies in terms of the structure design Does not align with typical pay practices (i.e., progression from grade to grade is inconsistent) Job evaluation approach is primarily internally focused versus market based Risk of jobs being misaligned to the market with the current approach May impact retention and attraction Future State Going forward, Montgomery College’s salary structure framework will include: A balance between external competitiveness and internal equity considerations Jobs being placed in the newly designed salary structure with both external and internal considerations Effective retention and attraction of top talent with a market competitive approach A more flexible approach that gives administrators a moderate level of autonomy to reward current employees’ performance and to respond to market demands within general pay delivery guidelines Supporting the College’s ability to evolve and to be more aligned with the external marketplace and to be more fiscally responsible

23 Salary Structure Framework Montgomery College’s Current Salary StructureCurrently have one salary schedule for Administrative, Associate, and Support Staff Structure characteristics Includes 19 grades Consistent range spread (70%) across all grades Inconsistent midpoint differentials ranging from 6% to 10% Midpoint differentials are lower (6%) at the top and bottom Largest differential (10%) exists in the middle, grades I through L Job evaluation approach is primarily internally focused versus market based Risk of jobs being misaligned to the market with the current approach Impacts attraction and retention

24 Next Steps

25 Next Steps Ongoing Communication:Regular updates and consultation with leadership, governance councils, and other key stakeholders FAQs will be posted on the Classification and Compensation website and will be updated regularly box will be created to receive questions and comments FY 2017 Project Activities Develop Comp 101 training for leaders Evaluate jobs Review/refine structure design Refine job assignments within the structure Conduct cost impact analysis Develop and refine policies