W W W. W A T S O N W Y A T T. C O M Salary Planning Revised April 2005

176 What Do We Mean by Salary Planning? Salary planning is budgeting or forecasting how much it will cost to give employees additional money Topics covered: – Salary planning concept Analyses Models – Managing performance management systems – Creating a “bring to target” analysis – Creating a merit matrix analysis – Creating other types of analysis Note: April 2005 brings major change to this function. Comparisons to previous will be tagged > like this

177 What Do We Mean by Analyses and Models? Each analysis answers a single question, e.g.: – How much will it cost to: implement a merit matrix? bring employees to minimum of range? bring employees to market? bring employees within 10% of market? deliver an annual incentive? Models are a chain or sequence of analyses – So any of the above analyses may be part of a model

178 What’s So Great About THAT? YOU decide how the puzzle pieces should fit together No model is predetermined Models may consist of: – One bring to target analysis – One merit matrix – Multiple bring to target analyses – Multiple merit matrices – A combination of merit matrix and a bring-to-target analysis – A combination one or more merit matrices and one or more bring-to-target analyses

179 Salary Planning in REWARD In the Abstract Multiple types of analyses can be developed – Merit matrix – A distribution based on rating alone, or salary division alone – Bring-to-target, where target can be: A point in a job’s pay range. How much would it cost us if we brought employees in this job to: minimum? midpoint? maximum? % range penetration? A job’s market value or the market value aged to a particular date. How much would it cost us if we brought employees in this job to a current market value? A fixed increase. How much would it cost us if we gave everyone $500? If we gave a 4% increase?

180 Salary Planning in REWARD in the Abstract Another type of analysis is modeling annual incentive pay – Percent increase is aligned to salary structure grade – Target percentages are aligned with performance ratings Threshold Target Cap Increases can be based upon current programs or on “what-if” scenarios – Using a current salary structure – Developing what-if scenarios/structures Lump sum may be used in lieu of adding to base pay

181 Is There An Orderly Way to Do This? YES!!! – Determine which employees will be included within each analysis – Ensure you have the appropriate performance rating system(s) in REWARD—both target incentives and merit matrices are tied to performance ratings – Ensure that target incentive percentages have been included in any salary structures you are using – Develop your analyses independently of one another – Group analyses into models and run the models

182 How Will Employees Be Grouped? Some examples of employee groupings: – Business Unit, Division, or Department – Location/Country – Management/Non-Management – Job Family – Incentive Plan – Structure, or Grade Employees may overlap in analyses – You’re trying different “what if” scenarios For the best budgeting, do not put analyses with employee overlap into the same model— you may count the results for the same person twice, or even more!

183 What You Need to Begin For a matrix, performance rating system and/or codes entered into REWARD – Multiple rating systems may be added – Codes may be numeric or character For range-based increases, salary structures or pay/market ranges in the REWARD system – May also be bands and/or zones To run scenarios regarding annual incentives, you will need incentive plan percentages: – Cap/Maximum – Target – Threshold

184 Getting There Click on Analysis or Models

185 Analyses Screen Analyses may be copied from other users. You can delete yours. Name your analysis! Each analysis contains the date, time and person who created the analysis You have the capability to filter on specific employee groups Dimensions tell you it’s a bring-to-target (0), distribution (1) or merit matrix analysis (2) The comment column allows you to describe the analysis more fully

186 Viewing Analyses Clicking on an analysis name brings up the Analysis View screen. The screen is made up of the following sections:

187 Viewing Analyses The screen is divided into 4 major sections : * For merit-matrix type analyses only Section 1: Header. Defines the parameters. Section 2: Run stats. ( If you have run this matrix at least once, under the headers you see a notice of the results.) Section 3: Guidelines* and Cost Summary figures for the run. Section 4: Truing options*

188 Viewing Analyses Section 1: Header. Defines the parameters. > NEW: Four parameter sets replace the long scrolling edit pages for both bring to target and merit matrix. To run, click on calculate cost

189 Viewing Analyses Section 2: Run stats. If you have run this matrix at least once, under the headers you see a notice of the results: Tells you date/time of last time YOU ran it You can customize a label for each run Rerun the analysis after tweaking parms, or after new data feed You can print the analysis and results. > NEW: no longer have to run analysis, then go to Reports tab. Choose analysis and print it right from here.

190 Viewing Analyses Section 3: Summary figures for the run. Overall info on eligible employees.

191 Viewing Analyses Section 4: Truing options (matrices only) Overall info on eligible employees. There are 3 interpretations of how to true the matrix. We’ll talk about them later.

192 Viewing Analyses Now for some detail on sections 2-3 : * For merit-matrix type analyses only Section 2: Run stats. ( If you have run this matrix at least once, under the headers you see a notice of the results.) Section 3: Guidelines* and Cost Summary figures for the run.

193 Viewing Analyses (Section 2) Set parameters and print!

194 Viewing Analyses (Section 2) Report

195 Viewing Analyses Section 3: Summary figures for the run. Overall info on eligible employees.

196 Viewing Analyses (Section 3) then Summary by employee For list, click on employees

197 Viewing Analyses For more, click show detail on employee list (Section 3) then Further detail by employee

198 Viewing Analyses Once the analysis is run, each cell displays the number of employees (clickable) and the increase amount: Click to see employees by row, column or cell #ees $amt (Section 3) If analysis a matrix, you get view guidelines

199 Viewing Analyses Clicking on a number of employees displays a summary view: Tells us which row/column – and the conditions that got them there (Section 3) View guidelines – placement in row and column Increase Amount LumpSum button for additional info

200 Viewing Analyses Detail view shows each line item calculation: If proration was applied, the pro-ration factor is a separate line item so you can see what it was (Section 3) View guidelines – calculation details

201 Viewing Analyses (Section 3) Summary can also show you the results of any previous run. Select from previous runs to see results...or Delete previous runs

202 Creating Analyses Click here to add a new analysis—of any kind.

203 Creating Analyses Define new analysis in pop-up For a bring to target, choose this. This is in effect a single-cell matrix, dimension = 0.

204 Before creating a bring-to-target analysis, define your target – Current base pay plus a fixed-dollar amount – Market data aged to a specific date – A point within the pay range: e.g.: Minimum Midpoint Maximum Range penetration Annual incentives may be modeled as a bring-to-target option Creating A Bring-To-Target Analysis

205 Creating A Bring-To-Target Analysis Analyses may be adjusted by percentage or dollar amounts What-if and bring-to-target analyses may use different salary structure scenarios Target amounts can be delivered as lump sums

206 Creating A Bring-To-Target Analysis >Not this : Section 1: Header. Defines the parameters. > NEW: Four parameter sets replace the long scrolling edit pages >Now this :

207 Creating A Bring-To-Target Analysis Header. Defines the parameters. 4 major sections: Basic, Cell, Costing, and Definitions.

208 Creating an Analysis Header. Defines the parameters. section1 : Basic To define employee set, click here

209 Creating an Analysis Header. Defines the parameters. section1 : Basic – Define population Brings up the filter expression builder— > format not NEW: Same as before...

210 Creating an Analysis Header. Defines the parameters. section1 : Basic– Define population Define employee set, click add expression... > NEW: Structure now available for filters!

211 Creating an Analysis Header. Defines the parameters. section1 : Basic– Define population > NEW: Structure now available for filters! Fields available for filters: basic EE and job fields job properties employee properties plus annual hours worked annual incentive pct (from the grade) compa-ratio grade code grade rank hours in a standard year market ratio max mid min pay (as defined by the analysis) range penetration structure code structure name structure version

212 Creating an Analysis Enter filter description... Then press save Header. Defines the parameters. section1 : Basic– Define population

213 Creating A Bring-To-Target Analysis Basic settings defined... So now define the cell. Click on text Header. Defines the parameters. Section 2 : Cell

214 Creating A Bring-To-Target Analysis Basic settings defined, Enter a general description of the analysis It’s important to be clear and simple here. Header. Defines the parameters. Section 2 : Cell – What is being calculated?

215 Click to enter the cell and add formula Then click to add the first element Each cell has its own formula. The formula can have many steps, or cell elements. As a bring-to-target analysis, this analysis will have only one cell. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula

216 This brings up the screen to define the formula for a cell. These are all the things that can be inside a cell element These identify the cell element Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements These modify the cell element result

217 Cell element identified. First operator always “Start with” Target item chosen Click link to define market Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements

218 Target market defined as survey pay type Base Click save Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements – defining market

219 Add multiplier for 110% Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements - multiplier

220 Click save to save this element of the cell formula Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements

221 Click add to enter the next element of the cell formula Now we have the first element of the cell formula Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula element added

222 Click save to keep this 2 nd element of the cell formula New Cell element identified. Subtract operator What to subtract Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula element - adding the next one

223 Click Save here to keep all elements of the cell formula Now we have the first and second (all) elements of the cell formula Creating A Bring-To-Target Analysis Summary of specification Specification Header. Defines the parameters. Section 2 : Cell – Formula – 2 elements added

224 Creating A Bring-To-Target Analysis Basic Settings and Cell defined... Header. Defines the parameters. Section 3: Costing So now define Costing. Click edit

225 Creating A Bring-To-Target Analysis > NEW ! Save increases to pay types Header. Defines the parameters. Section 3: Costing set proration > NEW Turn off proration, prorate for part-times If a matrix, here select high, low, or average % to cost

226 Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 4: Definitions Master Configurator dashboard is behind this screen... Click edit

227 Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 4: Definitions Master Configurator dashboard Part Part Part

228 Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 4: Definitions – Part 1 Here “pay” and “market” are used only to pigeonhole which row/column coordinate the employee falls into in a matrix. For example, in this matrix columns are defined as quartiles. How do we calculate quartiles? By determining where somebody’s “pay” falls within their range. Well...what do you mean by “pay?” That’s why you have to define “pay” for the matrix.

229 Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 4: Definitions – Part 2 Values to be used in the analysis

230 Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 4: Definitions – Part 3 As ratings are used only for analyses of more than one dimension, we’ll come back to this later...

231 To run, click on calculate cost Creating A Bring-To-Target Analysis Now we have a Bring-to-Target Analysis.

232 Creating A Bring-To-Target Analysis Calculating arrow box indicates work in progress...

233 Creating A Bring-To-Target Analysis Finished calculation shows results. When run finished, results display And run is archived for future retrieval (For how to unpack results, see “some detail on sections 2 & 3” pages )

234 Creating a Matrix Define new analysis in pop-up For a matrix, choose one of these two. Now that we’ve built a Bring-to-Target analysis, we build a matrix

235 Creating a Matrix Define new analysis in pop-up This is a distribution matrix, dimension = 1.

236 Creating a Matrix Use this where distribution depends on only one attribute, such as performance without respect to position in grade. Or for stock distribution based solely on grade.

237 Creating a Matrix Define new analysis in pop-up This is a standard matrix, dimension = 2.

238 Creating a Matrix Basic settings is the same For a matrix, define rows and columns.

239 Creating a Matrix Select an attribute for rows.

240 Creating a Matrix Define each row

241 Creating a Matrix Row order Row label Perf levels less than 1.5 go in this row. If they are greater, they go in some higher row. After new pay reaches this range penetration, increase goes into lump sum

242 Creating a Matrix Click add to save Then define next rows...

243 Creating a Matrix Design the rows the way you want them: Note control over row thickness, here producing better high-end granularity Vary lump sum thresholds by level

244 Creating a Matrix Click on pencil to edit a row Click update to keep edits

245 Creating a Matrix Press save to keep rows definitions

246 Creating a Matrix Rows defined!

247 Creating a Matrix Makes a row for each value in data > NEW ! Auto populate option Let’s go back a few steps... instead of add for each row,

248 Creating a Matrix > NEW ! Auto populate option Has brought in all actual values for this variable, and made a row for each. Note: use only on known discrete values. Max rows = 100

249 Creating a Matrix Check values to delete We want to use only whole values, so

250 Creating a Matrix Check ‘all’ to delete all values or

251 Creating a Matrix Check ‘all’ to invert all values Note: checking “all” works as “invert.” Handy if only some checked: After Before

252 Creating a Matrix Check values to delete We want to use only whole values, so Click to delete

253 Creating a Matrix Now for typical columns...

254 Creating a Matrix Click a field to define columns

255 Creating a Matrix Enter column defs Click add for next column Enter next column defs Etc.

256 Creating a Matrix Click save Columns defined!

257 Creating a Matrix Now click edit to add formula for each cell Then add

258 Creating a Matrix Click link to define pay Usually start with pay

259 Creating a Matrix Click add for second element in cell First element defined

260 Creating a Matrix Click button to make a box in each cell for multiplier % Now for increase percent Or two boxes...

261 Creating a Matrix Click save to keep Elements for each matrix cell’s formula defined.

262 Creating a Matrix For a matrix, elements for each cell’s formula defined in guidelines grid

263 Creating a Matrix Click edit guidelines to populate % > NEW ! Now populate whole matrix, not just one row

264 Creating a Matrix > NEW ! Now populate whole matrix, not just one row Click save to keep increase % guidelines

265 Creating a Matrix guidelines for each cell’s formula displayed in grid Click Calculate cost to run matrix

266 Creating a Matrix REWARD calculates cost for each cell using guidelines for each cell’s formula displayed in grid

267 Creating a Matrix Grid propulates with cost and ees (listable by click) Summary (listable by click) And below...

268 Creating a Matrix Truing options Bring to budget using different Sum of current pay for differently defined employee groups 1. Use pay for Ees selected and eligible and got increase 2. Use pay for Ees selected, and eligible, whether got increase or not 3. Use pay for all Ees selected.

269 Creating a Matrix Truing options Same budget percent with different Sum of current pay Produces different increase budget 1. Use pay for Ees selected and eligible and got increase 2. Use pay for Ees selected, and eligible, whether got increase or not 3. Use pay for all Ees selected.

270 Creating a Matrix Truing options Same total increase with different Sum of current pay Produces different increase ratios 1. Use pay for Ees selected and eligible and got increase 2. Use pay for Ees selected, and eligible, whether got increase or not 3. Use pay for all Ees selected.

271 Creating a Matrix Truing options Click on a true to budget

272 Creating a Matrix

273 Creating a Matrix Truing Original Trues to:

274 Creating a Matrix Truing Original Trues to: Etc.

275 Creating a Matrix Truing options Click on a true to budget > NEW ! Don’t have to copy matrix first ! > REWARD saves it for you...

276 Creating a Matrix > REWARD saves previous runs Here

277 Creating a Matrix Truing options > REWARD saves previous runs They are labeled, so you know which run you’re looking at.

278 Creating a Matrix Truing options Restores original % and all other values Click on a Date/time to display previous run

279 Start one back from here

280 Creating a Matrix Analysis Header. Defines the parameters. Section 4: Definitions – Part 3: automatic use of ratings Click to create or maintain rating systems > NEW ! You can also automatically assign ratings to either rows or columns

281 Header. Defines the parameters. Section 4: Definitions – Manage ratings Creating a Matrix Analysis

282 Header. Defines the parameters. Section 4: Definitions > not NEW: Same as before Click on the name of the performance management rating system to edit it Click here to add a new performance management rating system to REWARD Creating a Matrix Analysis

283 Adding Performance Rating System Detail Add your Performance Rating System code here (e.g., 1, 2, 3, A, B, C, etc.) Describe your Performance Rating System code here (e.g., 1 = Exceptional, 2 = Outstanding, etc.) Rank is the order in which you want the Code + Description to appear on your screen, once input of performance ratings is complete > not NEW: Same as before

284 Adding Performance Rating System Detail How much of the employee population should fall into this rating If you want to model a cost analysis for an annual incentive plan, enter the Threshold, Target and Cap percentages here > not NEW: Same as before

285 Results of Adding Performance Ratings > not NEW: Same as before

286 The Completed Merit Matrix Run the merit matrix analysis Edit the merit matrix analysis parameters Merit matrix parameters

287 Running the Merit Matrix Merit Matrix Parameters Merit Matrix Results

288 Merit Matrix Results Based on the first merit matrix iteration, here are the percentage and dollar cost.

289 Creating Models Click on the model you are interested in running to pull up the parameters

290 Sample Model Click Run to view the model

291 Model Results