DO IT YOURSELF COMPENSATION Houston Compensation & Benefits August 23, 2016 Lane Transou, CCP, GRP, SPHR, SHRM-SCP Lane Transou & Associates, LLC Lane@lanetransou.com Lane Transou & Associates, LLC

Todays Build will have 4 key steps Blueprints Identify what to build How it will work Data needed Approvals needed Assessing the foundation The stability of the foundation is important to the strength of the structure Knowing the jobs Job families Career Levels Tools and Materials Survey data Market data Building the structure Benchmarking Building your workbook Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: Identify what to build Market based compensation structure for base pay Company information Houston Imagination Company Insurance Company Small company with about 60 employees Revenue $50,000,000 annually Located in Houston How will this be used Pay decisions Recruiting Merit Reporting Easy to update Grow with the company Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: what information is needed -Job Information- Job Title ID Job Titles Job Family Career Level Job Grades Exemption Status Last Benchmark Exercise Lane@lanetransou.com Lane Transou & Associates, LLC

Job Information Sample Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: What Information Is needed -Employee Information- Employee ID Employee Name Hire Date Job Title ID Job Title Exemption Status Gender Age Department ID Department Supervisor Annualized Base Salary Career Level (if available) Job Grade (if available) Lane@lanetransou.com Lane Transou & Associates, LLC

Basic Census File Usually from HRMS Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: what information is needed -Market Data- Survey Name and Date Job Code Job Title Job Level Market Scope(s) # Incumbents Reported # Companies Reported Market Base Pay 10th%/25th%/Median/Mean/75th%/90th% Market Total Cash 10th%/25th%/Median/Mean/75th%/90th% Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: identify your controllers Job Level Data Job ID (unique numeric identifier) Job Grade Career Level Job Benchmark This data will feed into HRMS at the employee level when job code is entered Lane@lanetransou.com Lane Transou & Associates, LLC

Blueprint: Approvals Who Makes the Decisions Avoid being red tagged Approval to start building Approval for project costs Avoid being red tagged Lane@lanetransou.com Lane Transou & Associates, LLC

Assessing your foundation: Know your jobs Identify the Following Jobs to Benchmark How many unique titles Job Descriptions Up to date Reflect the work that the incumbent is doing Job Families HR, Administration, Finance, IT, Legal, Sales Sub Families Finance: Accounting/Tax/Finance Career Levels Basic education/experience Job Grades Lane@lanetransou.com Lane Transou & Associates, LLC

The importance of Job Families and Career Levels Organizes the jobs into their general discipline Administration Finance Human Resources Legal IT Job Sub-Families Further define disciplines Accounting Tax Lane@lanetransou.com Lane Transou & Associates, LLC

The importance of job families and career levels Within a Job Family are Career Levels Executive Managerial Professional Technical Administrative These levels are further identified by education and experience Lane@lanetransou.com Lane Transou & Associates, LLC

Sample career level Lane@lanetransou.com Lane Transou & Associates, LLC

Assessing Your foundation: Know your company What Is Your Industry Company Revenue What Is the Company Compensation Philosophy Location of employees What Jobs Provide High Impact To the Organization Lane@lanetransou.com Lane Transou & Associates, LLC

Assessing your Foundation: know your Market What Industry Identified by NAICS or SIC codes Who Are Your Competitors NAICS North American Industrial Classification System SIC Standard Industrial Code Lane@lanetransou.com Lane Transou & Associates, LLC

Tools and materials Compensation Systems Market Data Excel /Access Market Data Systems HRMS Enterprise Systems (modules) Market Data Survey Databases Kenexa/ERI/PayScale Participation and Purchased Mercer/AON Hewitt/ Willis Towers Watson Private Surveys Industry Based Lane@lanetransou.com Lane Transou & Associates, LLC

Tools and materials What’s In a Survey Job Titles Job Levels Does it have jobs that match most or all of your jobs Is it specific to a particular population Job Levels Use your career levels to align Job Summaries Brief description of the job Participant List Lane@lanetransou.com Lane Transou & Associates, LLC

Surveys What’s In a Survey Scopes allow you to narrow down to your industry and size Industry Location National to Local Revenue Employee population Market Data Base / Total Cash / Bonus / Long Term Incentive (stock) 10th% /25th%/ 50th% / Median / Mean / 75th% / 90th% Number of companies reporting / number of incumbents Lane@lanetransou.com Lane Transou & Associates, LLC

Benchmarking Match to the job summary Focus on core roles and responsibilities Benchmarking is about the job not the person Education/Experience in job matters Level Executives – measure from reports to top executive Managers/Directors – years of managerial experience Supervisor – does not manage people Professional – years of professional experience, independence and education Top of this realm is the lead or manager of a function Clerical – years of work experience and job complexity Technical - level of training Lane@lanetransou.com Lane Transou & Associates, LLC

How Career Levels map to survey data Company Career Level Willis Towers Watson Mercer Administrative 1 U1/T1 - Entry Entry Administrative 2 U2/T2 - Intermediate Experienced Administrative 3 U3/T3 – Senior Senior Professional 1 P1 – Entry Professional Associate Professional 2 P2 – Intermediate Professional Experienced/Intermediate Professional 3 P3 – Senior Manager 1 M1 - Supervisor Supervisor Manager 2 M2 - Manager Manager Manager 3 M3 – Sr. Manager Director Lane@lanetransou.com Lane Transou & Associates, LLC

Benchmarking Review the job summaries: Job Title: Accountant Does it match: The primary duties of the job Survey summary will not capture all duties The career level for the job Managerial/ Professional / Technical / Administrative One benchmark per job per survey Job Title: Accountant Mercer Accountant B Budgets Accountant B Financial Accountant B General Accounting Accountant B Credit Lane@lanetransou.com Lane Transou & Associates, LLC

Benchmarking When is it a benchmark? Weighting a job benchmark 80% description match is a good match Less than that is not a match Weighting a job benchmark Used when a job benchmark is close but not quite Apply -20% or +20% when applicable Weight a job and not an incumbent – include in benchmark summary worksheet How many benchmarks One job match per survey Final step: Review Benchmarks with managers Lane@lanetransou.com Lane Transou & Associates, LLC

Benchmarking: Golden Rules Benchmark the job and not the person Match the job role not the job title Focus on primary duties and responsibilities Exact matches are rare Be consistent with levels Benchmark to manager only if the role manages people One benchmark per job per survey Market Data is the Output not the Input Lane@lanetransou.com Lane Transou & Associates, LLC

Survey Job Summary Sample ERI # Title Description 4003 Administrative Assistant Supports an organization or department by performing administrative services. Assists management with administrative tasks such as tracking and compiling information of interest. Prepares various reports detailing the administrative information handled by the position. Reads and answers correspondence. May handle confidential information. NOTE: This is not a secretarial position. 91 Customer Service Manager Manages by directing and coordinating subordinate customer service staff in connection with any product or service offered. Manages workers who investigate complaints, such as those concerning rates or service. Analyzes reports of findings and recommends response to complaints, considering nature and complexity of complaints, requirements, and actions of subordinates to ensure settlements are made correctly. Studies schedules and estimates time, cost, and labor estimates for services, and/or completion of job assignments. Develops and implements methods and procedures for monitoring work activities, such as preparation of records of expenditures, progress reports, etc., in order to inform management of current status or work activities. Analyzes department budget to identify budget needs and/or reductions, and may allocate operating budget's funds. Interprets company policy to employees and enforces company policy and practices. May authorize retention of data and preparation of documents for use during governmental or customer inquiries. May recruit, hire, train staff, evaluate employee performance, and initiate promotions, transfers, and disciplinary action. 19998 Human Resources Manager Manages Human Resources staff and plans, develops, recommends, and implements human resources activities, policies, procedures, and programs for an organization, assisting upper management as requested. Manages activities relating to staffing, employee education and training, management development, labor relations, affirmative action, benefits administration, and salary administration. Lane@lanetransou.com Lane Transou & Associates, LLC

Benchmark Worksheet Lane@lanetransou.com Lane Transou & Associates, LLC

Survey Market Datasheet Lane@lanetransou.com Lane Transou & Associates, LLC

Pull it all together Multiple Data Sheets Job Data Employee Data Benchmarks Survey Job Summaries Survey Market Data Settings: Aging Drop Down Lists Tenure Create Employee Market Data Worksheet Excel =vlookup as the primary command to pull data from other worksheets Updates to the data sheets will carry over to this worksheet Lane@lanetransou.com Lane Transou & Associates, LLC

Pulling it all together Lane@lanetransou.com Lane Transou & Associates, LLC

Employee Market Data pulls from other worksheets Lane@lanetransou.com Lane Transou & Associates, LLC

Analysis By using a =vlookup command you can insert analysis columns. Lane@lanetransou.com Lane Transou & Associates, LLC

What to measure Variance of base pay to market median Shows how far off base pay is to the market middle Less than 75% is a concern for paying too low More than 125% indicates pay is too high Before adjusting pay review the job and benchmark. Employees in the same job title should be reviewed. Use hire date to compare compression issues Use market median to build grade structures and ranges Those positions that have close market median may be in the same grade Can move up and down a grade One job for each job title (no jobs in multiple titles) Lane@lanetransou.com Lane Transou & Associates, LLC

What to measure Market Data Distance between 25th% to 75th% Indicator of data reported Median/Mean difference Year over year changes Speaks to the market movement Lane@lanetransou.com Lane Transou & Associates, LLC

Ongoing measurement The Database is built your analysis opportunities are endless Updates are fast Update each data sheet in the same format and copy paste into workbook Primary Market Data File will update Errors are minimized Compensation should be reviewed once a year Every two years at the least Companies in high transition no less than once a year. Lane@lanetransou.com Lane Transou & Associates, LLC

Considerations Before Building a compensation system Plan Before You Start Time Benchmark all jobs or job groups together Not one at a time Its about the job and not the person Discipline Consistency Maintenance Plan Lane@lanetransou.com Lane Transou & Associates, LLC

Thank You Questions? Lane Transou, CCP, GRP, SPHR, SHRM-SCP Lane Transou & Associates, LLC Lane@lanetransou.com Lane Transou & Associates, LLC