1. 2019 FPHRA Academy Jeffrey Ling, PhD Evergreen Solutions, LLC
Compensation 101
2019 FPHRA Academy
Jeffrey Ling, PhD
Evergreen Solutions, LLC

2. Our discussion Compensation Matters Key Concepts to Remember
Compensation Systems
Different Approaches

3. Compensation matters Compensation practices impact:
Individuals: how we define ourselves, how satisfied we are, how motivated we are
Groups: how fair and equitable the practices are considered, how well we function as a team, how well we work together
Organization: how productive our organization is, how well we recruit, attract, and maximize our investment

4. Can Not Afford to Get It Wrong
Attraction
Motivation
Engagement
Retention

5. Alignment instead of conflict
Individual Needs
Organizational Needs
Pay

6. Individual needs
Fulfillment
Work Environment
Compensation

7. Compensation Strategy
Organizational need
Vision and Mission
Business Strategy
Compensation Strategy
o Three Approaches to Strategy
• Operational excellence – cost based leadership
• Product leadership – innovation based
• Customer intimacy – solutions based
o Business Life Cycle
 Start up
 Growth
 Maturity
 Decline

8. What is a system and what does it give us?
A successful compensation system that allows us to define the value of work, recognize and reward contribution, and motivate growth and improvement.
Two key characteristics of the a solid compensation system:
internal equity
external equity

9. Components of System
Placement
Movement
Structure (range)

10. Structure (Range)
Aligns with type of work being perform (simple to complex organizations – few to many jobs)
Establishes the minimum and maximum value of a job (value to organization and earning potential)
Determines the differences between the levels in the hierarchy (rank and level)
Needs to be consistent and easily understood

11. Placement
Determines what is the value of the incumbent considering the range of options for the job.
Addresses what is of value to the organization – time, performance, skills, etc
Ensure the financial and administrative capability to support placement

12. Movement
Rewards
Market
Time
Skill
Results
Hybrid
Flexibility
Movement is the most reoccurring factor since it is typically an annual occurrence.
Most public organizations utilize elements of several approaches.

13. Valuing market
Value = based on desired market position (position to peers)
Aligns position with a certain percentile or placement
Communicates positioning as recruitment and retention tool
Must account for change over career in value
Result: open range plans, fixed market-based plans

14. Valuing time Value = Time in job (Experience)
Specific tradeoff: fix the value of rewards
Range movement critical to ensure high value
Each year of experience has a specific value
Result: step plans, open ranges with fixed COLAs, longevity increases

15. Valuing skill Value = Full Competence (Skill and Ability)
Gain skills until reaching point of performing at an average level (know, can, and will)
Some might be purely skill based
Competency implies the ability to teach others
Market value equals full competence
Result: midpoint indexed plans, market control point plans

16. Valuing results Value = Performance (Production/Resources)
Move away from specific formula to outcome
More concern with technology, analytical ability, and adaptability
Attempts to assess outcomes as well as motivation
Result: broad market plans, performance-based plans

17. Valuing hybrid Value = Multiple factors
Combine factors most important to the organization
Adds flexibility since emphasis can be changed
Allows for difference emphasis at different career points
Result: open range, zone plans, hybrid plans (steps and open range)

18. Valuing flexibility Value = Management Flexibility
Lacks a real “method to the madness”
Maximizes flexibility with hiring and advancement
Creates issues with internal equity
Result: non-formal plans, practice diverging from the plan

19. Elements of all systems
What do we want to reward?
How will we reward?
How can everyone benefit from the system?
How do we deal with inequities?

20. Conclusion What does your organization really want?
What is your business strategy?
What is your human capital strategy?
How do you position yourself vs the market?
How do you want to organize work?