# Presentation: 114552

## PAY BANDING AND FLEXIBILITIES IN DEMONSTATION PROJECTS AN UPDATE

- Or What I Wish I Knew Before I Was Volunteered to Help Design and Manage a Pay Banding System
- Gail Redd
- Gary Hacker
- U.S.Office of Personnel Management
- Presented to Strategic Compensation Conference
- 8/27/02

## Why Is Pay Banding “Hot” Now? 

- Even after 20+ years, we’re still on a learning curve.  More to learn.  We don’t have all the answers, but we can give the benefit of experience.

## 3 Ways You May Get Involved

- Currently Existing System
- (Air Force)
- Design Demo Under Chapter 47
- (China Lake)
- Design APS under separate legislation
- ( Federal Aviation Administration)

## What Do You Want -- Pay Banding Or A Pay Banding System?

- Pay Banding (Broadbanding) – The compensation and classification framework that groups fifteen General Schedule (GS) grades into three, four, five, or six broadbands based on career path and occupation.

## What Do You Want -- Pay Banding Or A Pay Banding System?

- Pay Banding System – A human resources (HR) subsystem consisting of: (1) a pay banding core; (2) strengthened by flexibilities and innovations; and (3) integrated into an agency’s overall HR system.  Pay banding systems are often used to move from an entitlement-based to a performance-based culture and to improve organizational effectiveness.

## Pay Banding System Components/Options 

- Pay Banding
- Performance Focused Pay. (e.g., Performance, Contributions, Competencies)
- Categorical Ranking Process
- Enhanced Three R’s (Recruitment, Retention, and Relocation)
- Extended Probationary Period

## Pay Banding System Components/Options

- Modified Term Appointment
- Performance Focused Reduction-In-Force Credit
- Supervisory Differentials
- Market Based Pay (Market Sensitive Pay)

## Learn From Others

- OPM’s Center for Human Resources Innovation (202-606-2820)
- Internet Websites (http://www.opm.gov/demos/index.htm)
- Project Managers of Pay Banding Systems
- Agency and OPM Program Offices (compensation, staffing, classification)

## Learn From Others

- Conferences, Seminars, and Briefings
- Professional Organizations  (WorldatWork—former American Compensation Association)
- Non-Federal Users (State governments, corporations, non-profits)
- Evaluation Reports  (demonstration project evaluations)

## Collect and Use “Lessons Learned”

- Pay banding is effective.
- Large scale organizational change takes time.
- There should be a solid business case for change.
- Diverse systems can create inter-agency and intra-agency challenges.
- An executive champion is a key to success.

## Collect and Use “Lessons Learned”

- A supportive culture is essential.
- One size does not fit all.
- Communication and training must be priorities.
- Employees and employee organizations must have “buy-in.”
- Costs can be controlled.

## Address Employee (And Union) Issues 

- Performance Management  (Is there a credible performance system?)
- Resources  (Are there adequate resources?)
- Type of Job  (Are there jobs that should not be covered under a pay banding system?)
- Management Control  (Is management being given too much control?)

## Address Employee (And Union) Issues

- Pay Equity (Will funds be equitably distributed?)
- Flexibility  (Will the banding system be flexible enough to address differing local needs?)
- Appeal Rights  (Does the banding system include adequate employee appeal rights?)

## Address Employee (And Union) Issues

- Employee Training  (Will employees under banding be given additional job training?)
- Adverse Impact  (Will the banding system have adverse impact on any group?)
- What’s In It For Me?  (Are there positive benefits for employees?)

## ADVICE FROM THE EXPERTS    Based on New Focus Group Data

- Design Considerations
- Communication -- the Key to Success
- How to Smooth the Way -- Implementation Tips
- Outcomes/Limitations

## Design Considerations

- Shaping Career Progression
- Decide on the shape of career progression for each band
- Criteria for Entry into Band
- Base Criteria for Entry of Occupation in a band on Matching Knowledge, Skills and Abilities, Certification Levels of occupations you group together

## More Design Considerations 

- Perception of Fairness
- Design the system so it is perceived as fair.
- Identify Your Problems
- Identify problems as your target and start from there.
- Be honest.  Say these are our targets.  We’ll try to fix these things, but Demo can’t fix everything.

## More Design Considerations (2) 

- Keep it Simple
- Seize Opportunity to Clean Up/Streamline Current Processes
- Decide Up Front What Baseline Evaluation Information You’ll Track
- Good Metrics are Essential to Follow Outcomes

## Final Design Considerations

- Allow Flexibility
- Give enough leeway in your plan to allow units to customize to meet their unique needs.
- Don’t dictate how each pay pool should implement their appraisal system.

## Communication -- The Key to Success

- Keep People Informed in a Variety of Ways
- One-on-One Meetings
- One-on-Two Meetings
- Huge Briefings
- Newsletters
- Emails to Managers
- Emails to Employees
- Hotlines

## Communication -- The Key to Success

- Educate the people in your approval chain
- Educate approving officials for your proposal on the unique nature of the environment in which you must operate (nature of funding, culture, etc.)

## Communication -- The Key to Success

- Explain How All the Systems Integrate -- How it All Works Together.
- Market Through Communication, Especially to Get Buy-In From the Unions

## Communication -- The Key to Success

- Use Comparisons With the Traditional System
- People need to know how the traditional system works as well as a newly designed one.
- Educate on both.  Show how they differ side-by-side, and how the new one is better.

## Communication -- The Key to Success

- Communicate to Ameliorate Fear
- Communication can build trust.
- Be honest
- Say, these are targets.  Demo won’t fix everything.
- Communication Should Be Personal
- Tell people you need their help
- Everyone should feel they are in it together to improve the organization

## How to Smooth the Way -- Implementation Tips

- Work in Teams
- It’s not just Human Resources (HR) anymore.  Include managers in behind the scenes work.  Shift from it all being on HR to really working with managers.

## How to Smooth the Way -- Implementation Tips

- Use Process Action Teams (PATs)
- Address all important design features.
- Use PATs to develop the entire project plan, including the pay-out systems.
- Involve Senior Management and all sectors of the workforce.

## How to Smooth the Way -- Implementation Tips

- Communication Should be Personal
- Tell people you need their help to do it.
- Everyone has to feel that they are in this together to try to make things better for the organization.

## How to Smooth the Way -- Implementation Tips

- Conduct Mock Simulations
- Conduct a “dry run” before you implement the actual pay out to test the new processes within the pay pools.

## How to Smooth the Way -- Implementation Tips

- Get a Champion
- Should be “top banana” like a Laboratory Director
- Could be a team of Champions, like five  Senior Executives
- Have that person or persons present at all briefings
- Having a Champion lends continuity to the effort

## How to Smooth the Way -- Implementation Tips

- Don’t Let HR Conduct All the Training
- Let Managers train their own staff.
- Team Managers with HR to allow more sensitivity to what each unit requires in the training.

## Did Demo Make Better Managers?

- It encourages better and more frequent communication
- Better communication builds trust
- Turned subject of communication away from HR and towards the work employees are doing
- Shift in focus helped managers manage the work

## Did Demo Make Better Managers?

- Problems are rapidly surfaced to the top in a change environment.
- Managers are forced to rise to the occasion

## Do you have a Better Organization Because of Demo?

- Visibility through metrics
- When you are forced to concentrate on measurement, you get better at it
- For example, normalization of ratings

## Do you have a Better Organization Because of Demo?

- “It made it easier to hire, pay, reward, and rid our ranks of dead weight.”
- “There are some happier people whose lives are made easier by this.”

## Limitations

- Life Goes On
- Other “noise”
- regionalization, laboratory reorganization,
- shift in HR profession from specialist to generalist
- Hard to make strict cause and effect statements
- Experience has shown it has had positive impacts,
- We can advise on how to create environment that we’ve seen is conducive to innovation
- Can’t make the leap “if A, then B”

## Limitations

- Can You Measure Mission Accomplishment Yet?

## Limitations 

- Time will Tell
- Even with longstanding demos, we’re still on a learning curve, and don’t have all the answers
- Most demos are still evolving and yielding new findings

## Prospects/Wrap Up

- Pay Banding is Here to Stay
- Not just “flavor of the month”
- Numbers have increased since China Lake
- We expect trend to continue
- We’re positive about Governmentwide application
- Trend is also reflected in what we’re seeing in the Non-Federal sectors