Staff Compensation Program – Phase 2 Internal Equity Adjustments October 2005

Today’s Agenda Background Information Methodology Process Implementation

Staff Employment Value Strategy Salary levels that are competitive with Lehigh’s competition in the marketplace Cash based rewards for performance Benefits that are equitable and competitive Career opportunities for employees Professional development that is aligned with department goals and University’s strategic plan Work that is interesting and engaging Affiliation with a nationally recognized university

 Implement Market Referenced Job Evaluation Program (1/1/05)  Develop process to address internal equity concerns  Develop Job Family Accountability and Skill Guides  Establish Job Family Career Development Resource Guides  January Equity Adjustments  Performance Management  Complete alignment of training and staff development with SEVS  Complete comprehensive benefits allocation review  January Equity Adjustments  Complete Job Family Accountability and Skill Guides  Complete Job Family Career Development Resource Guides  Begin comprehensive benefits allocation review  Begin alignment of training and staff development with SEVS Our Timeline  Develop Staff Compensation Program

Staff Compensation Program Phase 1 – External Equity Assign positions to salary grades that mirror the pay rates found in the job families and labor markets in which Lehigh competes Phase 2 – Internal Equity Determine appropriate position in range for individual staff members

Market Referenced Program The market for each job family determines the salary grade, and knowledge, skills, experience, and performance determine position in range. Job Role, Responsibilities and Skill Requirements Salary Grade Knowledge, Skills, Experience and Performance Recommended Base Salary Position in Range +=

Determining Position in Range What factors contribute to a recommendation of position in range? Knowledge, Skills, Experience Overall Measure Performance Position in RangeIndividual Measure +=

Possible Approaches Set targets based on years of service – or years in position Set targets based on performance appraisal ratings for the current year – or the last five years Set targets based on individual competencies Etc.

Back to the Bank -- Compare 2 Customer Service Managers (CSM) – Who should earn more? JaneSue Hire DateJanuary 2000September 1990 Position HistoryCSM since January 2000CSM since April Teller from January 1990 until March Performance Appraisal Rated as “Outstanding” by an easy rater Rated as “Meets Expectations” by tough rater (new supervisor) 5 year performance history 2004 Outstanding 2003 Outstanding 2002 Above Average 2001 Above Average 2000 Meets Expectations 2004 Meets Expectations 2003 Above Average 2002 Above Average 2001 Outstanding 2000 Outstanding

Based on Hire Date -- Who should earn more? JaneSue Hire DateJanuary 2000September 1990

Based on Position History Who should earn more? JaneSue Position HistoryCSM since January 2000CSM since April Teller from January 1990 until March 2004

Based on the 2004 Appraisal Who should earn more? JaneSue 2004 Performance Appraisal Rated as “Outstanding” by an easy rater Rated as “Meets Expectations” by tough rater (new supervisor)

Based on 5 years of Performance -- Who should earn more? JaneSue 5 year performance history 2004 Outstanding 2003 Outstanding 2002 Above Average 2001 Above Average 2000 Meets Expectations 2004 Meets Expectations 2003 Above Average 2002 Above Average 2001 Outstanding 2000 Outstanding ?

Who should earn more? JaneSue Hire DateJanuary 2000September 1990 Position HistoryCSM since January 2000CSM since April Teller from January 1990 until March Performance Appraisal Rated as “Outstanding” by an easy rater Rated as “Meets Expectations” by tough rater (new supervisor) 5 year performance history 2004 Outstanding 2003 Outstanding 2002 Above Average 2001 Above Average 2000 Meets Expectations 2004 Meets Expectations 2003 Above Average 2002 Above Average 2001 Outstanding 2000 Outstanding ?

And, what about? Individual competencies Educational background Total work experience before the bank Etc.

What criteria are valid?

Lehigh’s Criteria Time in Position and Classification Performance history as supported by merit increases rather than appraisal rating

How to set the targets? Fixed percentages or dollar amounts for each year in the position and classification Ranges of salary targets for each year in the position and classification Fixed percentages or dollar amounts for relative merit adjustments

And what are those amounts? How should we determine the percentages or dollar amounts? What should they be based on?

Building a Model The equity model was developed in consultation with University leadership over the spring and summer. We needed answers to these two questions: What do we want to accomplish with the equity adjustments? Where will we find the appropriate salary values to use in building the model?

Our Goal – To define an appropriate salary for each staff member based on time in role and individual performance

Our salary change measures: Lehigh’s actual staff salary budget history since 1989.

An Example – Back to the Bank JaneSue Hire DateJanuary 2000September 1990 Position HistoryCSM since January 2000CSM since April Teller from January 1990 until March Performance Appraisal Rated as “Outstanding” by an easy rater Rated as “Meets Expectations” by tough rater (new supervisor) 5 year performance history 2004 Outstanding 2003 Outstanding 2002 Above Average 2001 Above Average 2000 Meets Expectations 2004 Meets Expectations 2003 Above Average 2002 Above Average 2001 Outstanding 2000 Outstanding

New Salary Program at the Bank Effective January 1, 2005: CSM positions assigned to Grade 3A Salary range for Grade 3A: $30,000 to $48,000 Jane and Sue have salaries increased to the range minimum of $30,000

Setting salary targets for CSMs The bank will use their own salary budget history over the last 5 years to determine appropriate salary targets for the Customer Service Managers.

The Bank’s Salary Budget History Year Range Movement Salary Adj. Budget %3.5% %3.5% %4.0% %3.0% %3.5%

The Bank’s Salary Growth Year Range Movement Salary Adj. Budget Salary Growth within Range %3.5%2.0% %3.5%1.5% %4.0%2.0% %3.0%1.5% %3.5%2.0%

Moving through a range MinimumMaximum MinimumMaximum MinimumMaximum MinimumMaximum Average salary of all Grade 3A employees hired in 2002 At Minimum 3.53% over minimum 2% over minimum 5.6% over minimum

The 2002 Hiring Class

Target for 2002 Hiring Class

Developing Salary Targets for All Year in Position Budget Year Total Growth Over Time Salary Target %$30, %$31, %$31, %$32, %$32,790 Assume Salary Grade Minimum of $30,000

Targets for Sue and Jane Year in Position Budget Year Total Growth Over Time Salary Target %$30, %$31, %$31, %$32, %$32,790 Assume Salary Grade Minimum of $30,000 Target for Jane Target for Sue

What a Target Represents The salary target represents the average salary that would be paid to all individuals in the salary grade who were hired in the same year. It does not represent the salary that each individual employee should earn.

Determining Salaries Jane and Sue both paid $30,000 at 1/1/05 Step 1 – Targets from HR Target for Sue = $30,600 (+/-) for performance Target for Jane = $32,790 (+/-) for performance Step 2 – Salary Determined by Branch Manager Salary for Sue = $30,300 Salary for Jane = $33,500

Setting Salary Targets at Lehigh Applying the Bank Example

Our Goal – To define an appropriate salary for each staff member based on time in role and individual performance

Our salary change measures: Lehigh’s actual staff salary budget history since 1989.

Setting the Targets Targets for individual staff member salaries are determined based on: Length of time in position and classification Actual potential for salary growth since assuming that position and classification

Setting the Salaries Department Heads and Stem Leadership will set actual salaries. They will consider: Targets provided by HR Employee performance history as evidenced by actual merit increases received

The Process at Lehigh Confirmation of position and classification dates by supervisors and staff Development of targets by HR Determination of salaries by area leadership and department heads Communication of salary changes to staff