Is Public Power Compensation Competitive? June 22, 2004 Presented by: John Hankerson Practice Leader, Strategic Rewards 206/504-5545

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Presentation transcript:

Is Public Power Compensation Competitive? June 22, 2004 Presented by: John Hankerson Practice Leader, Strategic Rewards 206/

Milliman2 The Answer Not really...

Milliman3 How Do We Know? Identify labor markets Identify labor markets – Recruit labor talent – Lose labor talent Identify level of talent needs Identify level of talent needs Collect compensation data Collect compensation data Assess gaps between target competitive level and current practice Assess gaps between target competitive level and current practice Balance talent needs, affordability and competitiveness Balance talent needs, affordability and competitiveness

Milliman4 Base Pay Base pay is not competitive...

Milliman5 Base Pay (continued) Base pay compared to published industry data is even less competitive

Milliman6 Total Cash Compensation Total cash compensation is NOT competitive...

Milliman7 Medical Benefits Medical benefits are competitive...

Milliman8 Dental Benefits Dental benefits are competitive...

Milliman9 Retirement Retirement benefits are competitive...

Milliman10 Life Insurance Life insurance benefits are not competitive...

Milliman11 Long-Term Disability Long-term disability benefits are competitive...

Milliman12 Retiree Medical Retiree medical benefits are competitive... – Not common in public utilities – Not common in private utilities

Milliman13 Total Remuneration

Milliman14 Conclusions Opportunity to improve cash compensation Opportunity to improve cash compensation – Base pay and/or – Incentive/variable compensation Benefit programs in general are similar and changes will not create significant leverage in attracting labor talent Benefit programs in general are similar and changes will not create significant leverage in attracting labor talent

Milliman15 Option: Increase Base Pay Pros Immediate competitive improvement Immediate competitive improvement Attractive in this environment Attractive in this environment Easier to manage in terms of perceptions Easier to manage in terms of perceptions Cons Increased fixed costs Higher costs do not translate into performance gains Public perception

Milliman16 Option: Adopt Incentive Pay Pros No increase to fixed costs No increase to fixed costs Consistent with market trends Consistent with market trends Performance focus Performance focus Potential for improved performance Potential for improved performance Cons Cultural change Requires managers to manage performance Mistrust of employees Skeptical stakeholders

Milliman17 Variable Pay Model Individual Organization Behavioral/Abilities Operational/Financial What to pay for?

Milliman18 Variable Pay Concept Tied to organizational results Tied to organizational results Affected by individual performance Affected by individual performance Example plan Exceptional performance = 1.25 Competent performance = 1.0 Developing performance = 0.5