BUILDING YOUR SALARY SCALE: ANALYZING BENEFITS

Written by Kai Donesa on . Posted in Resources.

Analyzing your benefits package is a step that can’t be missed. In many labor markets around the world, benefits are an essential part of total compensation. Particularly in developing markets, some benefits are mandatory, others may be cultural, and some given to address certain realities on the ground. Whether you are a local organization or an international one, it is essential to have a policy that aligns with your market’s local conditions.

Additionally, benefits are also an important part of a company’s Employment Value Proposition (EVP). Determining which benefits your company provides, the frequency it is provided, and grade levels eligible to receive them can be used a strategy to attract and retain talent, showcase company culture, and be seen as an employer of choice.

Once you have aligned your total compensation against the market, designing your benefits package will begin by ‘backing out’ your benefits to arrive at just base salary. From there, you can assess which benefits to keep and maintain, and which ones to change.

When examining your benefits package, here are three things we suggest you keep in mind:

  • What benefits are considered mandatory in your market? – different countries have different mandatory benefits. Some countries have mandatory bonuses on top of base salary, others may have mandatory housing or transportation allowances, while others have government-mandated health and pension contributions. As an employer, you will need to follow what is prescribed by law, especially if you are an international organization.
  • What benefits are common practice in your market? – knowing which benefits are commonly provided by most employers in your market can also help when designing your benefits package. Of course, it is not necessary to follow every single benefit provided. But those that are given by majority of the companies could be considered and examined further against your budget and policy.
  • What benefits are considered tax-advantageous to your staff? – depending on your market, some benefits can be considered taxable and others non-taxable. When thinking about benefits, employers can provide contributions or cash benefits that do not trigger a tax deduction from staff or maximize its non-taxable portion as much as possible.

Further, when designing your benefits package, employers also need to think about the grade levels that each benefit will apply to. Unless it is mandatory, not all benefits need to be provided to all grade levels and in the same manner. There are some benefits that are given to certain grade levels due to the nature of their jobs. Incentive-based benefits and representational benefits are more common for roles in managerial levels, while cash allowances and transportation benefits are more commonly provided to general and process-based grade levels.

Benefits can also be used by employers to encourage desirable behaviors from their staff. A classic example is using performance bonuses to reward achievement and a job well done at the end of the performance year. Another is the use of loans, seniority allowances, or even company-sponsored savings plans to promote staff retention. Sometimes, companies also hold activities that foster workplace culture among their employees, from team lunches, happy hour, to corporate social responsibility events. In our many years of conducting salary surveys and collecting data from employers in over 150 countries, we have certainly seen a lot of creativity from employers when using benefits that highlight their unique company culture.

When analyzing your benefits, we must remember that, in the end, benefits are cheaper than salaries. Base salary, bonuses, and allowances all come from the same internal budget, so every dollar that goes into providing more benefits will take away from the budget for other components of your staff’s employment package, such as pension and salary increases.

Birches Group can help your organization design a benefits package that aligns with your policy while meeting local conditions. Contact us to get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

BUILDING YOUR SALARY SCALE: MEASURING YOUR MARKET POSITION

Written by Kai Donesa on . Posted in Resources.

Measuring your market position is a critical step in building your salary scale. Once your target comparators have been narrowed down and the target percentile has been identified, analyzing your salaries against your chosen external market to arrive at recommendations that will frame your overall pay structure is when strategies around recruitment and retention begin.

There are several ways to go about measuring market position. Here are some steps that you can consider:

  • Focus on Salary Ranges – salary ranges provide a more stable and realistic view of the labor market, rather than using incumbent salaries as a reference. We know that incumbent salaries are person-based, and rates can vary significantly depending on who is sitting in those roles. When building a salary scale, salaries need to be based on the nature of the job and the value the organization is willing to pay for it with reference to similar job levels in the external market. Further, incumbent salaries are extremely volatile especially in developing markets. Using salary ranges provides context and is based on actual market movement, as well as serving as ‘bookends’ that can take away outliers in your analysis.
  • Assessing Your Market Position – when measuring market position, a common approach is to average all benchmark jobs in the same grade level in your organization, while also considering the number of incumbents associated with each data point as the weighted average. Using the recommended salary survey in your compensation policy, you can then begin to measure your market position for each grade level using your findings and assess them against the external market.
  • Less Emphasis on Occupational Variance – over the years, too much importance in terms of pay has been placed on certain occupations simply because they are considered ‘hot jobs.’ But the truth is, occupational variance, when measuring market position, is not as meaningful as you think. When assessing pay, adjustments are applied to the salary scale, which is generic, and not to specific occupations. Moreover, market data results would sometimes report higher pay for certain industries giving an illusion that those functions are paid higher than other jobs of similar levels in the market. But what that higher number simply means is that there are more data points reported for those specific roles, therefore pulling the overall average compared to other jobs with less data points reported.
  • Do Not Forget the Four Job Clusters – in our previous article, It Starts with Jobs, we discussed that the labor market does not move at the same pace for all grade levels. This is especially true in developing markets. In our Community approach, we believe that the labor market has four job clusters – General, Process, Design, and Leadership – each one moving at different paces depending on the availability of talent in each unique market. In highly dynamic markets, it is common for grade levels found under the Leadership cluster to move much quicker than grade levels under the General, Process, and Design clusters. Due to the specific skills required and level of contribution expected from the Leadership cluster, jobs at these grade levels are usually harder to recruit therefore resulting to significantly higher differences in pay. On the other hand, jobs under the General, Process, and Design clusters are more widely available which explains the more gradual pay movement. Since this is the reality in most labor markets, it follows that setting pay should not just be one number but instead, requires a more tailored approach depending on the organization’s needs and objectives.

With the steps that we have recommended when measuring your position against the market, we must not forget that internal cohesion between grade levels is just as important when building your salary scale. Being able to balance external competitiveness while maintaining fair pay relativities internally is what organizations need for an effective and well-designed pay structure. Birches Group is ready to help your organization design a salary scale that meets your needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

composition and position from the salary survey

BUILDING YOUR SALARY SCALE: DETERMINING COMPOSITION AND POSITION FROM THE SALARY SURVEY

Written by Kai Donesa on . Posted in Resources.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale

Salary surveys are an important tool and step that managers use when building or refining their company’s salary scales. This helps managers establish and set appropriate compensation and benefits within their organization based on information provided by other employers present in the labor market. Current salary surveys offer different methodologies to capture market data, each one with differing employer samples, compensation and benefits information collected, and more importantly, varying approaches to job evaluation. All these are important factors to consider when selecting the right survey to use when building your salary scale.

Often, especially in large labor markets, there has been a preference among many employers to go with the salary survey that has the biggest employer sample. While this approach may seem reasonable, the reality is that many of the employers in the survey will not be relevant comparators, especially if they do not compete with you for the same jobs or share similar characteristics as your organization.

After establishing your compensation policy, creating your job structure, and participating in your chosen salary survey, determining your composition and position in salary surveys is the next crucial step towards building your salary scale.

Selecting the Right Comparator Group

Composition refers to the composition of the market used to establish your competitive position. Many employers will say, “We want to be at the 50th percentile of the market.” Composition answers the question, “50th percentile of what market?”

When designing your scale, you should establish a refined comparator sample, made up of employers important to your organization. Your compensation philosophy should identify the number of comparator organizations to be selected and the criteria they must meet to be included in your market comparison. Examples of criteria to consider include:

  • Talent competitors (those you recruit talent from and lose talent to)
  • Industry peers
  • Organizations of the same size or in the same geographic location
  • Other leaders in your market outside of your sector

Keep in mind that participants in a survey can change each year, with new ones added and old ones dropped. The key is having consistent criteria that ensure, even with a changing survey sample, your selected comparator group is consistent and still sufficient to meet your requirements.

Targeting Your Market Position

Once you have narrowed down your target comparator group, you will need to identify your desired market position. Position is the expression of how competitive you wish to be against your defined market – your target market position. The 50th percentile, or median, is a common target. That means you will be right in the middle of the pack. Is that where you need to be to reach the talent you wish to recruit and retain? Is it the same for all levels of the organization?

Before deciding on a percentile, it is important to refer to your organization’s pay policy. This will ensure that your resulting analysis aligns with the standards approved by your management, is credible, and is easily defensible to stakeholders. Selecting your target market position also depends on whether you wish to lead, match, or lag the market.

If you match the market, you are anchoring your salary scale to where the market is today. With lead or lag positions, you are deciding to either get out in front of the market or trail behind. A simple way to lead is to estimate the market movement from the date of your scale for a period of time forward — typically a year. This ensures your scale is competitive even as other employers adjust their compensation during the same period. A lag position is usually not desirable, as you will be trying to constantly catch up to your peer organizations.

If your organization is facing challenges to recruit or retain talent, you should reassess your target market position and adjust it to ensure your organization is positioned competitively against your chosen market. Sometimes recruitment and retention issues are limited to specific grades or bands. While some organizations may use the same target market position for all grade levels, labor markets are not uniform and do not move in a linear fashion. Certain grade levels can move faster due to high demand, hot skills, or other considerations. Organizations can choose a more competitive target market position for job levels where these talent challenges exist.

Finally, do not forget to consider budgetary resources. Whatever steps you take in the design of your structure need to be made with the cost impact in mind.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale. Hopefully, with this information, organizations will feel more informed and empowered to build one of the most important tools in human resources management. Birches Group conducts salary surveys in over 150 countries around the world and uses a simple and straightforward job evaluation approach to ensure consistency throughout. Through our surveys, we help organizations design salary scales that will fit their needs. Contact us to learn more about how we can help you get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

BUILDING YOUR SALARY SCALE: THE JOB STRUCTURE

Written by Kai Donesa on . Posted in Resources.

An organization’s job structure is an illustration of its how specific jobs are grouped and classified based on the nature and purpose of work, different levels of contribution, and how each level relates and progresses to one another. More importantly, the job structure provides the framework to which organizations can apply policies on compensation management, as well as design strategies around learning and development, specifically on career opportunities and promotion, all aligning to the company’s overall business objectives.

There are different types of job structures available, each one designed to support specific needs an organization might have. When choosing which type of job structure to adapt, the focus of your existing jobs – whether career-based or project-based, any future expansion, and the possible addition of new roles or teams within your organization – should be kept in mind.

The most common types of job structures are the traditional salary structure, the broad-banded structure, and the project-based structure, each with its own advantages and disadvantages.

Types of Job Structures

  • Traditional job structure – provides a well-defined sequence or progression path from one job level to the next. Think of a typical career progression: Entry-level roles start as analysts, then progress to specialists, while MBA graduates (for example) start as specialists, then progress to managers, and finally to directors. The differences in levels of contribution, complexity, and pay ranges are explicit at each level, and movement within the grade or to the next higher-grade can be deliberate based on skills growth and experience. Traditional job structures are easier to manage and communicate to staff, but the pay ranges often have less flexibility than other approaches, particularly when staff reaches the maximum point of their job grade. Traditional structures are found most often in organizations with well-established career paths, where staff grow their careers by moving “up the ladder.”
Traditional Job Structure
  • Broad-banded structure – A broad-banded structure comprises fewer bands with multiple job levels grouped into each one. Some organizations prefer the broad bands because they provide wider pay ranges and more flexibility in pay management. As staff accumulate more skills and experience, pay increases and progression can be provided through lateral movement within each band without necessitating a promotion. Broad bands are not without their own challenges, however: They often cause confusion for managers and staff since less structure and guidance are provided for salary setting and the differences between job levels within each band are not as distinct as a traditional structure. Broad-banded structures are more popular with organizations that desire a flatter hierarchy and fewer levels.
Broad-banded job structure
  • Project-based Structure – The project-based structure also has grades or bands similar to the first two structure types above. What makes this structure different is that each grade or band is designed for roles that have short lifespans to reflect the project timing, without the possibility of promotion. A structure like this is only appropriate for project-based organizations with definite term contracts. Project-based structures often have higher minimums reflecting the need for employers to reach experienced talent that can “hit the ground running.” Employers utilizing such a structure should also consider project completion bonuses to improve retention.
project-based job structure

In Birches Group, we believe that a simple, clear, and consistent approach to job evaluation is the key to a well-designed job structure. The type of structure and number of grades an organization chooses to go with is an easy one to adapt, but without a solid job evaluation methodology to readily provide the standard needed to classify your jobs into their appropriate levels, will only lead to bigger issues in capacity and pay management in the future.

Our Community™ Jobs solution uses only three factors – Purpose, Engagement, and Delivery – to evaluate any job across fourteen grade levels. These three factors are found in any job and together, provides a simple and transparent methodology that serves as the foundation for an exceptional job structure.

Organizations require structure to optimize and ensure the capacity it needs to achieve its goals and ultimately lead to business growth. Job structure, along with the pay structure, are one of the most important human resources management tools an organization will need to build and maintain an organized and efficient workforce. Through our integrated workforce management solution, Community™, Birches Group is ready to help your organization create a job structure that fits your needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

Pay Management using Skills-based Approach

BUILDING YOUR SALARY SCALE: ESTABLISHING YOUR COMPENSATION POLICY

Written by Kai Donesa on . Posted in Resources.

To effectively manage salaries, organizations need a compensation policy that will guide them during the scale design exercise. A compensation policy outlines the organization’s approach to selecting and refining their relevant comparator sample, determining their target market position, identifying which benefits to assess and include in their pay package, as well as determining the frequency of salary scale reviews. There is a misconception that salary survey data alone, can give organizations what they need to manage compensation. But in Birches Group, we believe that having a strong compensation policy, coupled with good survey data, will steer organizations in the right direction toward the answers that they need. Without a compensation policy, it will be difficult for organizations to know where to start, or what to do with the survey data that they have.

When establishing your compensation policy, a few things need to be considered, beginning with identifying one or more surveys of high quality as your source of market data. Be sure you fully understand each survey’s methodology and approach so you can easily aggregate the results in your market comparison.

Once you have your salary survey data, the next step to designing your salary scale is to establish a refined comparator sample comprised of employers important or comparable to you. While having a robust salary survey may sound ideal in providing an extensive range of data, not all survey participants will be relevant. Your compensation policy should clearly identify the number of comparator organizations to be selected and the criteria they must meet to be included in your market comparison.

Building a Compensation Policy, Examples of Criteria to Consider:

  • Talent competitors (those you recruit talent from and lose talent to)
  • Industry peers
  • Organizations of the same size or in the same geographic location
  • Other leaders in your market outside of your sector

Choosing the right target comparators is key to be able to narrow down the bigger survey data to a group of more significant employers that share qualities parallel with your organization. Additionally, organizations need to keep in mind that participants in a survey can change each year, with new ones added and old ones dropped. The key is having consistent criteria that ensure, even with a changing survey sample, your selected comparator group is consistent and still sufficient to meet your requirements.

Once you have selected your target comparators or target market, you will need to identify your target market percentile or target market position. Selecting your target percentile would depend on how competitive you want to be against your chosen market, while also taking your organization’s budget into consideration. Your organization’s compensation policy should define the ideal market position it requires to reach the talent it needs to recruit and retain. Further, the compensation policy should also identify if all levels in the organization will have the same market position or will be tailored to each level.

If your organization is facing challenges to recruit or retain talent, you should reassess your target market position and adjust it to ensure your organization is positioned competitively against your chosen market. Sometimes recruitment and retention issues are limited to specific grades or bands. While some organizations may use the same target market position for all grade levels, labor markets are not uniform and do not move in a linear fashion. Certain grade levels can move faster due to high demand, hot skills, or other considerations. Organizations can choose a more competitive target market position for job levels where these talent challenges exist.

In our article, It Starts with Jobs, we explained that there are four labor markets, not just one. In Birches Group’s Community™ approach, these are called the four job clusters. Different grade levels in the labor market are grouped into these four job clusters and movement from cluster to cluster can be very distinct, where jobs at higher grade levels often move much quicker than jobs at the lower levels. It is important for employers, when comparing their salaries to the external market, to recognize this when deciding which grade levels to adjust as it allows for a more refined approach that is targeted to the organization’s needs, rather than simply applying an across-the-board adjustment.

Now that you have identified your target market comparators and target market position, your compensation policy should also outline the benefits that will be included in your compensation package. If you are looking to introduce benefits into your compensation package or change your existing benefits package, you’ll need to consider the following:

Some Things to Consider if You’re Looking to Introduce Benefits into Your Compensation Package:

  • Locally Mandated Benefits – The first place to start is by checking if there are any benefits, whether cash or in-kind, that are prescribed by law. Different countries have different mandatory benefits; some may have mandatory bonuses or allowances, while others may have mandatory contributions toward pension or medical coverage.
  • Market Practice – When assessing your benefits package, it also helps to know the common practice in the local market. While some practices may not be mandatory, if they are provided by most employers in the market, it may be a competitive requirement to follow the market. Your survey sources should be able to provide detailed information on all types of benefits.
  • Benefits that Promote Desirable Behaviors – Some employers use benefits to promote desirable behavior among their staff. For example, a performance bonus to reward achievement and encourage good performance, and seniority bonus or subsidized loans to promote retention.

Finally, your compensation policy should also identify how frequently your salaries will be reviewed. In Birches Group, we recommend that organizations review their salaries and benefits every year to ensure that their salary scale is adaptable to changing operational realities in terms of budget and resources, and evolving team structures, as well as ensure that their scales are aligned to their target market position and is able to adapt to changing market trends.  

It is important for organizations to have well-articulated pay policies in place that will not only guide how they develop their salary structure and manage compensation, but also provide the framework for forming strategies around recruitment and retention of their staff, proving this to be a valuable HR tool. Birches Group is ready to assist in establishing the appropriate compensation policy that can address your organization’s needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

Salary Scales

BUILDING YOUR SALARY SCALE: WHY BOTHER HAVING A SALARY STRUCTURE?

Written by Kai Donesa on . Posted in Resources.

A salary structure is essential in every organization. It is the single most important document in human resources. Build a salary scale and have a salary scale, why bother? It tells you everything you need to know about an organization:

  • How the organization positions itself in the market
  • The value the organization places on its jobs
  • How relationships across jobs are managed
  • Possible career progressions
  • And where the organization stands on equity and transparency

For an organization to work efficiently and achieve team cohesion, a well-balanced salary scale is crucial as it drives all other critical HR programs — everything from recruitment, staff retention, promotion, and ultimately career development.

Many organizations fail to realize the value of a salary scale. More than just pay ranges, a salary scale, when used correctly, can guide an organization to efficiently execute all its different HR functions and strategies, from managing compensation to managing its people.

Beginning with compensation, though, the fundamental purpose of a salary scale is to provide a framework for managing salaries. Setting competitive hiring rates that facilitate recruitment, establishing pay ranges that show value for experience, and defining the differences in pay from one job level to the next — all these need to be managed carefully to ensure that organizations are attracting and retaining the talent they need while maintaining team cohesion.

Of course, salary scales’ use extends beyond compensation. Learning and development milestones can be defined by the underlying job structure used to build the salary scale, which enables effective career pathing. Salary scales can also facilitate the mechanisms to reward employee development through recognition of skills growth. Finally, a well-designed salary scale demonstrates and promotes fairness and equity within the organization.

To develop salary scales to meet the unique requirements of your organization, you need to start by establishing your job structure, defining your compensation philosophy, and developing your scale design methodology.

This is the first of our blog series on “Building Your Salary Scale.” In our next post, we will be discussing how you can begin to develop your organization’s compensation philosophy and the different elements that need to be considered. Birches Group can help design a salary structure that meets your organization’s needs. Contact us to get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

Pay Management using Skills-based Approach

USING SKILLS-BASED APPROACH FOR PAY MANAGEMENT

Written by Kai Donesa on . Posted in Resources.

One of the most significant responsibilities of human resources is pay management. Without a clear and objective way to manage salaries, managers are frustrated, employees are disappointed and organizations risk losing employee engagement. Traditional approaches use “merit” increases tied to individual performance don’t really work well, failing to achieve the key objectives of the process – to motivate and retain staff, and to differentiate between staff based on performance.  We think there is a better way.

As we explained in our article about Pay for Performance, pay management consists of two critical parts – recognizing the accumulation of skills and knowledge for the job, and rewarding individual and team achievement.  In this article, we will explore our ideas about how skills and knowledge can drive pay.

Skills, Not Time

If you ask any manager who their best employees are, they will know.  Dig a little deeper, and you will hear things like “Sophia is very experienced” and “Marc really knows the job well.”  In a lot of cases, these star employees have been in their jobs for a while.  Managers often use time as a proxy to measure experience – the longer the time in the job, the better the employee gets at doing it.  Sometimes, though, an employee with a short tenure excels at their job – their level of skill is one typically observed after a longer period.

Birches Group believes pay movement should reflect the value of an employee’s experience in their role.  Over time, employees gain experience through the accumulation of skills and knowledge.  It follows that growth in salary should be a recognition of growth in skills and knowledge.  The challenge is how to measure it, and how to apply the measurement to salary management.  Time is a terrible way to measure experience. 

Responsible pay management should be based on a framework that can clearly measure an employee’s capacity, rather than their achievement. As an employee grows and develops a deeper understanding of their role over time, the required skills and expected outputs naturally become bigger and more complex. Staff need to continuously learn and develop new skills to enable them to engage and deliver work at higher, more intricate levels.  In this model, growth in skills and knowledge drives increases in pay.

The Five Stages of Knowledge

Birches Group has developed Community™ Skills, a tool to measure experience.  In the Skills tool, we have identified five Skills Stages at each grade level:

  • The Basic stage reflects the minimal acceptable understanding of the job and is capable of addressing simple issues in standard operational settings.
  • The Proficient stage reflects the level of understanding of work where more complex issues can be addressed and the employee can adapt to most operational settings.
  • The Skilled stage is achieved with a complete conceptual understanding of the job and the ability to be effective in all types of operational settings.
  • The Advanced stage shows the level of knowledge that enables a high degree of independence in the job and reflects a broad understanding of concepts that also overlaps with the next higher grade level.
  • The Expert stage indicates the highest level of understanding of the job and overlaps with the next higher grade level. The level of understanding found at the master stage also allows for advising on process and systems improvements, which in turn results to better outputs and stronger capacity.

These Skills Stages were developed using the Birches Group Community™ Jobs approach as the underlying foundation.  For each Birches Group level, milestones are defined by Skills Stage for each of six Indicators – two Indicators for each job evaluation factor – as shown in the chart below:

Birches Group Community™ Jobs approach

With six Indicators and five Skills Stages, there are a total of thirty (30) milestones to measure skills and knowledge per grade.

Aligning Skills to Pay

In a salary range, there are three important points – the minimum, the midpoint, and the maximum. The midpoint of a pay range represents full capacity for that particular role, while the minimum reflects entry level experience for that grade, and the maximum shows a highly developed level of skill that may overlap with the next higher grade. Using these three points in the pay range, we can easily establish a mapping of the Skill Levels to pay ranges:

The illustration above can be applied to most grade levels.

Pay Management Using the Community™ Skills Solution

With the five Skills Stages mapped to the salary range, it is possible for any organization to easily manage pay clearly and objectively. Using Birches Group’s Community™ Skills solution, pay increases are linked to increases in Skills Stage.  Organizations can determine the specific set of rules to govern these increases.

For example, you can grant pay increases when a new Skills Stage is fully achieved.  Another approach is to grant an increase for partial achievement, with a proportionate reduction in the increase amount.  You can also require that growth be broad and encompass milestones from each of the three factors, to ensure well-rounded growth is being rewarded.  Organizations could even pay per milestone.

This innovative approach to pay management eliminates the guesswork for managers and HR and assures that pay increases are explicitly tied to an employee’s growth in their job.  Organizations can objectively measure experience and ensure that higher salaries are paid to those employees who are the most capable in their job.  At the same time, the skills-based approach to pay management is motivating and empowering for staff.  There are clear milestones to strive towards, and managers can conduct meaningful discussions with their staff about how best to grow their skills and grow their career.

Finally, an objective and deliberate framework that can truly allow for an engaged workforce. Contact us to learn more about Community™ Skills.

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

Follow us on our LinkedIn for more content on pay management and HR solutions.

Webinar – Managing Compensation in Volatile Economies

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group and The HR Partners held a Webinar on March 2, 2016 on the subject of “Managing Compensation in Developing Economies.”  If you were unable to join us, or just want to listen to the content again, you can watch a video of the full webinar below.

Date:  Wednesday, March 2, 2016
Time:  9:00 (New York) / 12:00 (São Paulo) / 14:00 (London) / 16:00 (Johannesburg) / 18:00 (Dubai)

Watch the Webinar Recording:

Download the Presentation

Download the Questions and Answers

PERFORMANCE MANAGEMENT IS BROKEN. FIX OR GIVE UP?

Written by Kai Donesa on . Posted in Resources.

Performance management is the Achilles Heel of HR.  It remains a contentious process that many companies have now abandoned, or at least are thinking of abandoning. A tool initially intended to communicate management objectives and keep the work of staff aligned throughout the year has now evolved into a dreaded exercise that just further leads to a disengaged workforce. With its rigid design and lack of adaptability, the traditional performance management approach has left many questioning its effectiveness. But without it, organizations are deprived of the feedback system needed between management and staff.  Sure, you can abandon performance reviews, but before you do that, check with your lawyers to see if it’s a good idea.  They will probably suggest that it is not.

Clearly, performance management is broken.  Let’s explore why it’s broken and look at some ways to fix it.

The Failure of Cascading Objectives

In classic performance management, the broader company objectives provide the framework which is cascaded into the different departments and then finally delivered as individual objectives to staff. While this may certainly sound like a logical approach, many find the entire process confusing, subjective, and frustrating.

One of the biggest issues with the cascading objectives approach is that it is a one-sided conversation. Many employees, especially at the lower levels, find it difficult to understand the goals set out for them by management with respect to their actual roles. Since the approach does not allow the goals of the staff to be centered around their jobs, there is often a disconnect between what the employee is hired to do in the first place versus what they are asked to accomplish by the end of the year.

Another issue with the cascading objectives approach is that the process does not allow for much flexibility. Strategic goals established by management at the beginning of the year can easily change after some time. But classic performance management tools can be difficult to use, and executives are often reluctant to update their goals and go through the entire process again.

Finally, because managing cascading objectives is so time-consuming, running the exercise always requires extensive monitoring by HR. The problem with this top-down approach is t takes too much time.  By the time the process reaches lower-level staff, the allotted timeframe for the entire exercise has already passed.

With these challenges, it is easy to see why many organizations have chosen to give up on performance management entirely. But before you throw in the towel, shouldn’t you consider some alternatives? 

What if we tell you that there is a better approach? One that brings the entire performance management exercise back to what it was originally meant to measure – results.  Introducing Community™ Performance from Birches Group.

Why Do You Need Performance Management, Anyway?

Community™ Performance

In our article about pay for performance, we highlighted the key differences between recognizing employee growth in their job and rewarding employee achievement. The former is focused on measuring the accumulation of skills and knowledge in staff as they become more expert in their job roles.  This growth should be recognized through pay movement.  Employee achievements, on the other hand, should be measured and rewarded with one-time recognition through bonuses or other, similar tools.

Like the performance of the stock market, past achievement does not guarantee future achievement.  Therefore, performance should not be the basis for salary movement. Instead, achievements attained during the performance year should be celebrated and rewarded relative to that year.

Linking Performance to Purpose

One of the most glaring flaws of classic performance management is that it sets goals for staff that are often irrelevant to their jobs. Birches Group’s Community approach to performance management centers its expectations on performance to the actual definition of the job level. While specific initiatives set for each job may change year after year, the purpose of the job level remains the same.

Going back to Community’s approach that jobs at every grade level can be evaluated using only three factors – Purpose, Engagement, and Delivery – the same can be used to measure performance by simply asking three questions:

  • Purpose – Does the employee have good ideas?
  • Engagement – Did they listen and adapt to customer feedback?
  • Delivery – Did they deliver on time with high levels of quality?

Using an approach that measures achievement by linking it back to the job evaluation factors, this provides organizations a performance management system that is standardized, simplified, and can easily align with objectives across different grade levels and teams.

When the focus of measuring achievement becomes purpose-driven, employees will better understand how their objectives contribute to the overall mission of the organization, resulting to a more engaged and motivated workforce. Equally, this can allow employees the responsibility for setting their own initiatives in a way that contributes to the organization’s strategic priorities giving them ownership of their own performance.

Focusing on the Good

In traditional performance management, only the achievements of high performers are celebrated often causing the rest of the staff to feel demotivated and ignored. Because it uses a five-level rating system, many see the Achieve rating as inadequate. But the fact is most staff in an organization are reliable and satisfactory performers – those that deliver what is expected of them in a performance year. If most of the staff were able to carry out their jobs effectively by the end of the year, why only reward the achievements of an exceptional few?

Through Community Performance, we believe that achievement should be connected to reliable and satisfactory performance – celebrating the many good performers that are able to Achieve their primary purpose. Instead of a five-level rating system, we have developed a four-level rating system where there is only one level above Achieving the primary purpose of the job. This way, outstanding accomplishments achieved by an exceptionally few high performers during the year can be rated accordingly, but still allowing majority of staff to be rewarded.

360° Performance

Classic performance management applies a top-down approach where only the direct supervisor provides feedback on an employee’s performance. While it is the supervisor that would be familiar with the work of their staff, allowing for only one perspective can create room for partiality.

Additionally, the standards used in classic performance management has not always been clearly defined, making it possible to have differing interpretations among supervisors leading to inconsistent ratings despite similar levels of performance among some of the employees.

Our Community performance management approach allows for multi-rater perspectives. By applying our 360° feedback from the supervisor, peers, and external clients, this gives depth to the assessment and allows for a more holistic and objective outlook of one’s performance.

Traditional performance management has left many organizations confused and frustrated. But measuring performance remains essential to good workforce management. It provides an opportunity to link everyone’s contribution to the success of the organization. Rather than giving up on performance management, Birches Group is here to help your organization provide structure and clarity. Contact us to learn more.

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.