1. Promotional Guidelines Key Findings from the WorldatWork Survey of Promotional Guidelines, 2010 © 2011 WorldatWork. All rights reserved.

2. Overview Examine how the current environment impacts employee satisfaction Discuss the importance of promotional activity within total rewards programs Discuss current promotional practices survey results Review implications

3. Current Environment Let’s consider current environment within which we are operating And a question … Where does promotional activity fit within your total rewards program?

4. Employee Satisfaction Drivers Cash Benefits Boss Relationship Work-Life Balance Promotions / Career Development Recognition Employee Satisfaction

5. Job Losses Declining, But Is Real Growth on the Horizon? Source: Bureau of Labor Statistics – years 2009 – 2010 (data in 000’s) Avg. monthly increase: +49k Avg. monthly increase: +138k Jobs* Lost / Created Monthly Change * Total non-farm seasonably adjusted

6. Salary Budgets are Recovering, But Still Historically Low Lowest figure since survey’s inception Source: WorldatWork Salary Budget Survey 2010-2011 (exempt salaried budget)

7. How Do Organizations Generate Promotional Opportunities? Organizational Growth Vacancies as employees leave for other companies Retirements

8. Total Rewards Scorecard Cash Compensation Benefits Boss / Subordinate Relationship

9. Total Rewards Scorecard …cont’d Work-Life Balance Promotional Opportunities / Career Development Recognition

10. Job Satisfaction Is Declining 45.3 Source: Conference Board 61.1

11. Intangible Rewards Remain Important % Greater Focus in Future % Current Focus Education and training programs Career / development opportunities Flexible work arrangements Nonfinancial recognition Work climate / culture Work-life balance 54% 48% 40% 57% 48% 44% 53% 52% 40% 60% 50% 48% 57% 40% 48% 54% 80%60%40%20%0%20%40%60%80% Source: The Hay Group and WorldatWork – Next Reward Practices Survey 2009

12. Methodology Survey was sent out to 4,947 WorldatWork members during September 2010 Response rate of about 19% Demographics of respondents similar to WorldatWork membership as a whole

13. Definition of “Promotion” Please select all criteria that are REQUIRED to be considered a promotion. (n= 719) Increase in Pay Grade, Band or Level Addition of Higher Level Responsibilities New TitleNew Department Other

14. Definition of “Promotion” Please select all criteria that are REQUIRED to be considered a promotion. (n= 719) Increase in Pay Grade, Band or Level Addition of Higher Level Responsibilities New TitleNew Department Other 32% require both

15. Size of Promotional Increases “In 2010 (or current fiscal year), what has been the average promotional increase, expressed as a percentage, for each employee class in your organization?” Employee TypeAverageMinimumMaximumMode 1 Nonexempt (hourly) (n=504)7.1%0%45%5% Exempt (salaried) (n=584)8.3%0%23%10% Officers / Executives (n=380)9.5%0%30%10% 1 The mode is the number that occurs most frequently in the dataset.

16. Size of Promotional Increases by Level of Turnover Organization Turnover Rate 0% - 5%6% - 10%11% - 15%16+% Nonexempt (hourly) 6.8% (n=129) 7.0% (n=184) 6.2% (n=73) 9.0% 1 (n=55) Exempt (salaried) 8.1% (n=156) 8.2% (n=211) 8.1% (n=81) 9.5% (n=58) Officers / Executives 9.5% (n=97) 9.3% (n=136) 9.1% (n=56) 9.8% (n=46) 1 Organizations that reported a turnover rate of 16% or higher additionally report a statistically higher average for nonexempt promotional increase rates.

17. Determination of Promotional Increases Pay range for the new position Rates paid to other employees similarly situated within the organization External pay data, if available Qualifications of the individual, compared to the qualifications of other employees in the same job within the organization Performance level of the individual being promoted A fixed percentage increase for most promotional increases Number of pay grades between the old position and the new position Whether the promotion involves a change from nonexempt to exempt classification 66% 60% 36% 30% 29% 21% 19% 8% Option

18. Number of Promotions Down 3 A paired sample t-test demonstrated a statistically significant difference between annual promotions given in 2009 and 2010 (p<.000). 4 A value of 98 was submitted and considered excessive. This value was excluded from the analysis. “What percentage of employees were promoted in 2009 (or last fiscal year)? Please specify as a percentage of the number of total employees.” (n= 477) “What percentage of employees does your organization usually promote on an annual basis? Please specify as a percentage of the number of total employees.” (n= 441) Employee TypeAverageMinimumMaximumMode 2009 or last fiscal year promotions 7.0%0%40%5% Typical annual promotions 8.1% 1 0%35% 2 10%

19. Funding of Promotional Increases “How does your organization fund promotional increases? (Check all that apply.)” (n= 600) We budget for promotional increases separate from other pay increase budgets. We budget for promotional increases as part of our merit budget. We pay for promotional increases with vacancy savings (savings from vacant positions or during recruitment). We pay for promotional increases with salary savings (hiring at a lower rate than previous incumbent). We budget for promotional increases as part of another budget. Please specify budget. We pay for promotional increases out of merit budget, but merit budget is not inflated to cover promotional increases. We pay for promotional increases out of another budget, but the other budget is not inflated to cover promotional increases. 44% 24% 22% 16% 13% 8% Option

20. Coordinating Promotions with Merit Increases “How are merit increases managed for promoted employees?” (n= 620) Promoted employees are eligible for nearest merit increase. Merit increase is included in promotional increase. Promoted employees are eligible for a prorated merit increase. Promoted employees are ineligible for a merit increase until next cycle. Other 46% 17% 16% 7% 15% Option

21. Coordinating Promotions with Bonuses “How are bonus or incentive payouts calculated for employees who have received a promotional increase?” (n= 579) Prorate of previous and new rates New rate of pay and new bonus rate, if applicable Previous rate of pay and previous bonus rate Current rate of pay and previous bonus rate Previous rate of pay and new bonus rate 43% 29% 4% 3% 1% Option Other 19%

22. Frequency of Promotions “How often are employees eligible for a promotion?” (n = 613)

23. Timing of Promotions “When do most promotions in your organization occur?” (n= 622)

24. Promotions Have Positive Effect on Motivation and Engagement Extremely negative / negative effect No effect or neutral Extremely positive / positive effect 6% 33% 36% 62% 59%

25. Communicating Promotional Policies “What is your organization’s approach to the communication of promotional guidelines or policy?” (n= 622) Other We communicate the guidelines to employees only when they are involved in a promotion. We want every employee to fully understand the guidelines and policy. The guidelines and policy are mostly to guide HR and management; we will share with employees when they ask.

26. Promotion as an Attraction Tool “Does your organization feature or market the promotional opportunities (or activities) as a key employee benefit when attempting to attract new employees?” (n= 614) Yes 34% No 66%

27. Organizations Should Consider Lateral Increases “Are employees typically eligible for a promotional increase when moving laterally?” (n= 622) Yes 8% No 57% It depends on the position 35%

28. Summary There are several forces in the workplace impacting employee satisfaction Organizations should consider their ability to provide promotional / career development opportunities to their employees relative to other total reward elements Communication of promotional programs is “low hanging fruit” to increase engagement

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