Compensation, getting it right for your practice!

Why is it so hard to get it right? Compensation is emotional & factual Is “getting it right” simply a matter of paying an individual what they want? Five key elements needed to deliver effective compensation Set Specific Goals & Objectives Use accurate information Clear integration Effective communication Regular re-evaluation “getting it right” in the eyes of employees can be challenging in the best of situations. Handled poorly compensation can prompt lowered morale, increased turnover, increased costs and decreased productivity. Not exactly a recipe for success.

Specific Goals & Objectives Organizational Attract the best talent in the specialty? Looking for innovation or “game changers”? Looking to maintain present state? Give autonomy to employees to improve the practice? Concentrate the power in the responsibilities of a few? Employees paid better/worse/same? Their view of “fair”? The answers to the questions let you figure out “What does your practice need to accomplish through people?” And “What do we intend our people to be? Your practice can become stronger by having Compensation philosophy, which is a by-product of clear organizational goals & objectives.

Accurate Information Should you make compensation decisions based upon information via discussion boards, cocktail parties, or industry conferences or employee threats in the midst of a big project? Should you call your peer at another similar practice? How do you look in orange? Outside consulting firms & trade associations produce credible salary surveys, which provide practices with a more reliable source of compensation for a position. Don’t get involved in Collusion. Directly sharing pay information with similar practices could be viewed as “price fixing” and is illegal.

Clear Integration If you use compensation as motivation, goals & objectives must be clearly linked to how employees are paid It is easy for compensation to have unintended consequences If you are re-evaluating your compensation philosophy and plans, have an inclusive approach.

Effective Communication DO’S Set clear goals, align the compensation system, communicate throughout the organization Use an early, inclusive approach Deliver “Live & In Person” Have two-way dialogue Create & use FAQs Follow up, let the grapevine process it Think about the idea of “Total Time” “How can we send this message so that the accurate, results-producing receipt takes the least amount “Total Time”? This is a very different idea than “How quickly can we get this over with,” or “What is the quickest way to get this to every member of the staff?” In an individual’s hands and accurately in an individual’s head so he or she can produce the desired results are two VERY different things! 

Effective Communication DON’Ts Let one or a few Executives design it in a vacuum Use one-way communication “sell-in’ ain’t tellin” Deliver exclusively through technology – email, website, Twitter Think everyone gets it the first time Focus on “how quickly can we get this over with”

Regular Re-evaluation Business & goals can change quickly Be proactive – much higher level of organizational control May not be convenient, but gives you more control Unexpected repair happens at the least convenient times, requiring greater resources, and lower levels of control

Why view these elements as a system? It’s critical to the success of your practice & it’s important to your employees It does require both Art & Science Increase your odds of compensation producing it’s intended results Set Specific Goals & Objectives Use accurate information Clear integration Effective communication Regular re-evaluation

Decisions to be made Financial- cost/investment Competitive positioning- lead, lag or average Competitive advantage- same or different than competitors Practice’s people strategy- long service or churn and burn

Typical components of a compensation program Base pay Pay increase options Special pay (shift, step, location) Variable pay Benefited pay is always better

What is a salary range? The range of pay allowed for each job, typically based on market & internal equity Facilitates administration of Job offers Internal equity Merit increases Promotions RangeMax Range Midpoint Range Min

Compensation Structures How many types do we need? Salary Ranges Clinical Staff Office Staff Administrators “All the same or different?” Multiple structures can facilitate career growth, very important to employees.

Compa-ratio (pay vs. market) Determines pay strength relative to market benchmark/midpoint Indicates competitiveness or appropriateness of pay for a given set of facts Compa-ratio = pay / midpoint (or market)

What is the FLSA? A 1938 law covering minimum wage, pay for time worked, and child labor. A bacterium that doesn’t respond to most antibiotics. An organization that protects animals from cruelty. A new grant program providing free tuition for students who love acronyms.

What is the FLSA? A 1938 law covering minimum wage, pay for time worked, and child labor. A bacterium that doesn’t respond to most antibiotics. An organization that protects animals from cruelty. A new grant program providing free tuition for students who love acronyms. Child labor, minimum wage, pay for time worked

Classification Definitions Non-exempt (classified/hourly) Pay for all hours worked Premium pay for hours worked over 40 in a workweek Everyone is non-exempt unless proven otherwise! Exempt (professional/salaried) Actual duties (not title) must meet certain tests to qualify Paid a minimum weekly salary for all hours worked Primary FLSA exemptions: Administrative, Professional, Executive, Computer, Outside Sales Comp time is not used Key fact: FLSA status (exempt/non-exempt) does not indicate personal value, pay level, or importance to the organization’s mission!

Compensatory Time Also known as “comp time” Allows for banking time in lieu of current pay Used by some, but risky Highly Recommended: pay non-exempt employees for all hours worked when they were worked Primary FLSA exemptions: Administrative, Professional, Executive, Computer, Outside Sales Comp time is not used

What are typical manager responsibilities? Ensure all hours worked by hourly staff are recorded when worked Correct any mistakes in reported hours Pay for, but do not permit, off the clock work Do not offer comp time Do not “dock” exempt staff- contact HR for help If you/HR reclassifies a job’s status, explain and support the process Radio Shack and Family dollar- supervisors. Hewitt Benefits Analysts Costs of non-compliance: $8.8M- Radio Shack (2007) $4.9M- Hewitt Associates (2008) $35.6M- Family Dollar (2006)

Job Analysis and Job Evaluation Job Analysis: Establishing what the job is (= job description) Disciplined and orderly way to think about job content Purpose Duties Requirements Skills Job Evaluation: Establishing the relative value of jobs Disciplined and orderly way to value job content Focus on jobs not people Key output: the relative worth of jobs- not the competence or value of the job holder

Basic Elements of Job Evaluation Know-How The total of relevant skills, however acquired, necessary for acceptable job performance Problem Solving The original thinking required by the job for analyzing, evaluating, creating, reasoning, arriving at and making conclusions & taking action Accountability The ownership of an action and its consequences. The measured effect of the job on end results

Why is this stuff important? Gives the practice control The practice is viewed as proactive, well managed Helps employees understand the rules of your game, and how to keep score Reduces the risk of people leaving due to pay

If not compensation, what’s most important to employee? Having a vision, knowing why your practice exists, and buying in The purpose of my company makes me feel my job is important. Sense of purpose, of belonging, enablement Empathy – Managers listen Fair financial rewards Career advancement Fun –life’s too short! as a waiter I measured my success in cash, by the tips I had made. I rarely ended a poorly paid shift simply happy to have provided really good service. What’s more, because my job as a waiter offered nothing more than an opportunity to walk away with cash in hand, my connection to my employer was also monetized – a surprisingly weak connection. Creating career paths that are well communicated and understood by employees is not something most companies do well. Even in the best-case scenario where managers are holding regular performance reviews with their employee, employees often don’t understand how to move either horizontally or vertically in an organization.