Maintaining a Competitive Edge: Effective Strategies for Competitive Market Pay Analysis Presentation Team Gregory A. Gast, SPHR, Principal, PROXUS Jeffrey Green, Principal, PROXUS Maya Johnson, HR Manager, Air Products Healthcare

Our presenters today come from both Air Products Healthcare and PROXUS Maya Johnson, HR Manager, Air Products Healthcare Jeff Green, Principal, PROXUS Greg Gast, SPHR, Principal, PROXUS

Today we will cover the following topics The situation and the players Air Products Healthcare PROXUS The Challenge AHS acquisition by Air Products Growth through Acquisition strategy The Solution Project scope Project implementation Outcomes and Lessons

Let’s start with a history of Air Products Healthcare American Homecare Supply formed in 1999 Air Products acquisition of AHS in 2002 15+ acquisitions in 5 years

Air Products Healthcare grew by acquisition The strategy was to leverage existing strengths Local Identity Patient Care Customer Experience Grandfathered Structures

It soon became clear that a major problem existed Grandfathered compensation plans created difficulty establishing and administering a competitive pay program across multiple geographic regions The corporate growth by acquisition strategy drove the need for a corresponding HR strategy to support it. The PROXUS – Air Products partnership was established to develop and implement the HR strategy specific to compensation

Not having a consistent approach to base pay created challenges Difficulties around recruiting/hiring/onboarding of new hires post-acquisition Pay for Performance relationship could not be implemented Increased exposure to perceived unequal/unfair pay practices Impossible to benchmark competitiveness in overall industry Inconsistency in pay rates and job title structure

We looked at the business issue and identified a goal To develop a consistent, yet geographically adjusted pay program structure across the organization

PROXUS was identified as the best partner to help us achieve these goals Who is PROXUS: HR Management and Consulting firm Joint venture of Granatt HR and Professional Payroll Solutions Provide Payroll, HR and Benefits services

Initial goals for Air Products – PROXUS Partnership PROXUS was engaged to develop a simple, easy to administer base pay program that was: Consistent with the pay philosophy of APH Competitive within each geographic location Equitable within APH Inclusive of reasonable pay ranges for each position Easily accommodating of future acquisitions

Further Analysis resulted in goals being broken into manageable, sequential components Short Term Everyone paid within their range (no one over or under) Standardized titles recognized by entire organization Long Term Established procedure for adjusting pay ranges/geographical differentials Enhanced automation of compensation program

The Air Products – PROXUS Partnership The Project Plan - A 4 Step Process: Position review and analysis of all job titles Identification of market data sources Market analysis Salary structure re-design

Prioritization of project phases 1. Exempt / Non Exempt 2. Job Titles 3. Job Descriptions 4. Benchmark Companies 5. Geographic Differences

Identify . market data sources Execute The Plan Secure Leadership Commitment Identify . market data sources Job matching techniques and criteria Geographically adjusted pay program

We will walk you through our plan Identify market data sources Job matching techniques and criteria Leadership commitment Geographic Adjustments

The 1st thing we did was to determine Market Data Requirements Sources The 1st thing we did was to determine Market Data Requirements Market Data Sources Define the competitive marketplace Who are key competitors? What industries do we operate within? Within what geographic regions are we located? Research available survey sources Industry Position Trade and professional organizations Obtain input from internal managers

Next we had to select the right Market Data for this project Sources Next we had to select the right Market Data for this project Market data used for the Air Products project: Economic Research Institute Comp Data Surveys Watson Wyatt Hospital/Healthcare Survey

Effective techniques for job matching build credibility Collect, organize and analyze available job related information Job title report Job descriptions Table of organization charts Compare job titles across facilities and geographic regions Establish job families Reduce overall # of job titles Identify each unique job classification Conduct interviews as necessary Improve understanding of scope and role Involves managers in the process

Establishing Job Families and Job Documentation builds consistency Matching Establishing Job Families and Job Documentation builds consistency Human resources, with location representatives, established the following job families: Accounts Receivable Pharmacy Administrative Rehabilitation Customer Service Respiratory Delivery Sales IV Warehouse Resulted in reduction from 155 to 60 job titles

Critical Considerations in Pay Program Development Geographic Adjustment Critical Considerations in Pay Program Development How do we create a consistent program across locations in multiple states? Obtained geographic differentials By location or nearest metropolitan area Economic Research Institute data utilized Analyzed the results Determine # of structures required High/low market values dictated # of salary grades Include location differential list (if appropriate per APH)

% of U.S. National Average Geographic Adjustment 6 geographic regional structures based on a % of the U.S. national average % of U.S. National Average Structure ID Range 90 A 88% – 92% 95 B 93% - 97% 100 C 98% - 102% 105 D 103% - 107% 110 E 108% - 112% 115 F 113% - 118%

Fine tuning the results Geographic Adjustment Fine tuning the results Each location slotted into the appropriate structure (A - F) Individual jobs slotted in the appropriate grade/range for their structure All jobs were slotted into the same grade across all locations “Majority rule” used to standardize grading across locations Pay higher in range if local market conditions dictate Maintain same salary grade for all positions

Implementation Challenges Developing a philosophy to address employees: Under range minimum Over range maximum Educating the management team Maintaining confidentiality Technology restrictions Click to bring up each item for discussion (items display after manual click allowing you to discuss)

Discussion Activity Break into pairs or trios Discuss your experience with these issues and how you have addressed them At the end of the discussion we will ask 2-3 groups to share a key learning from their discussion This is a place holder for a discussion activity where you involve the group in the process. I’m glad to help you identify what you can put here. You should receive higher involvement and interest if you do this Should take no more than 12-15 minutes

Challenges presented in implementing the process Discussion topics Philosophy around under minimum/over maximum pay Management team education needs Maintaining Confidentiality Technology restrictions Delete the show to aid discussion DELETE the banner if you are going to use this slide. This does not have the build that is present on the earlier slide.

The President must lead the charge and empower HR to proceed Leadership Commitment The President must lead the charge and empower HR to proceed Align the HR project with the business strategy Growth through acquisition strategy Broad geographic locations Communicate early and often with leadership Educate on compensation fundamentals Establish multiple check-in points Engage the management team throughout process Establishment of job families Job description content Solicit input on salary information sources Review of job titles for accuracy

Lessons learned from 2003 - 2008 Communicate the difficult information (employee impact) Compensation does not function in a vacuum Benefits and employee relations implications Alignment with corporate strategy Communications to multiple stakeholders Service provider relationship must be a true partnership Role of PROXUS has evolved from 2003 – present Extension of HR as opposed to outsider Avoid organizational paralysis…move ahead (“we do not have to get it all right out of the gate”, Gretchen Pendleton – VPHR, Air Products Healthcare)

This change does not happen overnight, it is a journey that can make a difference to a company

Questions?