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    A survey of state com pensation analysts in the Summer of 1987 elicited information concerning the use of cornpensatlon controls in state government. There are few studies which discuss compensation management in the American States. An effective compensation system facilitates the response to and anticipation of changing conditions and situations.

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    Lawther 1989 on Compensation Control in States 3 6 06

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    A survey of state com pensation analysts in the Summer of 1987 elicited information concerning the use of cornpensatlon controls in state government. There are few studies which discuss compensation management in the American States. An effective compensation system facilitates the response to and anticipation of changing conditions and situations.

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    21 views14 pages

    Lawther 1989 On Compensation Control in States 3 6 06

    Uploaded by

    Tony Baize
    A survey of state com pensation analysts in the Summer of 1987 elicited information concerning the use of cornpensatlon controls in state government. There are few studies which discuss compensation management in the American States. An effective compensation system facilitates the response to and anticipation of changing conditions and situations.

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    Compensation Control Mechanisms in the American States ‘There are few studies which report on the personnel practices in the American states. A survey of state compensation analysts in the Summer of 1987 elicited information concerning the use ‘of compensation controls in state government. Results indicate that withthe exception of wage and salary surveys, data concerning compensation controls is rarely collected. Initial analysis Indicates that the role ofthe legislature and the existence of collective bargaining may havean impact on the number of controls used. By Wendell C, Lawther Earle C. Traynham, Kenneth M. Jennings ‘eshte Profesor nthe Bepas- tment of Pale Admins Bl ihe Universy of Cental Florida, He bas published ‘cont administration an ee fants ftp ay ‘areas Include compensation ad- ‘natratlon tes vlan nd performance evaluation, There are few studies which discuss compensation management in the American states. What does exist are primarily descriptive reviews of various aspects of state compensation systems. McConomy and Ganschinietz (1983), in a survey of the American states, discovered that there are an increasing number of states employing a quantifiable job evaluation method. Information found in the annual editions of the Book of the States also provides only cursory information about state practices. Roeder (1986) in the 1986-87 edition, for example, reviews classification and compensation plans, providing information on legal bases, the number of classes, and the date of the most recent overall compensation review. There is no literature which combines a descriptive reporting of state data with a discussion of effective compensation programs or systems. According to Davis (1983), an effective compensation system facilitates the response to and anticipation of changing conditions and situations. In many ways, McElwan (1982) echoes this sentiment when he states that compensation program effectiveness is dependent upon a com- mitment to continually changing the compensation program to meet whatever challenges are present. Hunt and Gray (1986) provide additional insight into how compensation management should be practiced. They suggest that maintaining compensation program effectiveness “...means constant review and analysis of the combination of tasks, the relationship of jobs within the organization, and market conditions.” “Compensation controls” represent an important element in the “review and analysis” of the compensation program. According to Belcher (1974, p. 574), controls consist of three elements: 1) setting satisfactory standards; 2) reviewing control data to determine the extent to which the standards have been met; and 3) taking corrective action if required. Because the identification of standards and the collection of data is often inadequate, he further states, control in an organization is often “referred to in less formal terms such as ‘administration’ or ‘maintenance’. Public Personnel Management Vol. 18 No.3 (Fall 1989) 328 Yet Fischer (1978) stresses that establishing controls constitutes cru- cial elements of effective compensation management. The compensation manager must recognize that substantive organizational costs are related to organizational structure and levels of staffing. The compensation manager, thus, must be heavily committed to maintaining controls and subsequent planning in light of collected data. An effective compensation manager must be flexible and open to change, using control data to identify potential manpower problems, (ie., those indicated because designated standards are not met) and then alter- ing organizational conditions as a result. The choice of appropriate man- power control data to collect, analyze and act upon depends on what information the compensation analyst views as significant. Controls can pertain to: costs relevant to the acqui: employees; O salary data furnished by market conditions; and Q information relevant to the amount and distribution of employee salaries. ion, development and replacement of The purposes of this article are to review several compensation con- trol measuresand their usefulness and report on a fifty state survey of state government compensation management practices. Sources and Types of Compensation Control st ensetet e Une Sity ot Nony Florida He PRD. degre rm the Univer sy otSh Carin, Peter Traynham Is the author of pang. 20d Saalmaponet pay. There is a wide variety of compensation control sources, A related literature review and state survey can be grouped into three general areas: data collection directly related to employee salaries; employee-related costs; acquisition, development and replacement; and employee attitude surveys concerning wages and fringe benefits. Data Collection Directly Related to Employee Salaries ‘Compensation control can pertain to many single measures, wage and salary surveys, salary distribution data including the compa ratio, annual earnings, and grade slippage. Compensation control data is best interpreted singly or in tandem with data gleaned from more than one control. By itself, each control can highlight potential problems that may require additional study to fully identify a solution. If training cost, turn- over rate data and wage and salary results are all monitored concurrently, problem identification and solution justification are greatly facilitated. 326 Public Personnel Management Vol. 18 No.3 (Fall 1989) Kenneth M. Jenin, Jee Indusicial Relations at the UUnvensy ef Nath ei, He has served in avait ftor ‘ener Union Cari Coe Feo Roe Cotege and MLA and PhD. degrees from the Univeiy et Minas Pretec Jonoinge bos wan several ‘employerdiplns, greene: SN aeeatan, perens pese. ‘snd pe Ror pn ‘Wage and salary surveys represent the most significant compensation control data. Information gleaned from this survey allows for compensation ad- ministrators to make recommendations concerning: Q salary increases for the upcoming year; O grade adjustments for classes experiencing labor market shortages; and O darifications of agency or government policy concerning its salaries in relationship to those found in the market (1e., whether the government will adopt a lag, lead, or lag-lead approach (Henderson, 1985)). Salary distribution data examines the distribution of employee salaries along a salary range. Usually the distribution is monitored in terms of quartiles, and /or a compa ratio, i.e, the ratio between the mean salary actually paid in each range and the middle salary in the range. This data mustbe interpreted with great care, asa given distribution isnot necessarily preferred over any other. The data merely indicate whatiis, not what should be. Usually, distribution data must be analyzed along with other data. A large percentage of employee salaries, e.g., 45%, in the lowest quartile, or alternatively a compa ratio less than one, may indicate the following: O ahigh level of turnover among those recently hired; O asubstandard workforce; or C2 an aging workforce with a high number of retiring workers being replaced by newly hired employees. Ifa large percentage of employee salaries are in the upper range, or alter- natively the compa ratio is greater than one, it may mean that: O there is very little turnover; Gi there may be few promotional opportunities for employees in a nd Gi there have been recent layoffs with seniority the major desired criteria, The appropriateness of any particular distribution or compa ratio depends on management's objectives for the employees involved. Examining annual earnings data can indicate the extent to which there is a significant difference between salary rate and earnings. Salary rates attached to each range comprise an internal wage structure. This formally determined arrangement usually attempts to provide more com- pensation for those jobs considered more valuable to the organization or government. The combination of base salary, overtime, and pension pay may cause a rational rate structure to become “a jungle of earnings”. ‘Compensation Control Mechanisms 327 Again, solving a problem related to earnings requires that other information be reviewed. If subordinates are earning more that super- visors, perhaps the supervisor class is placed at an unrealistically low pay range. Inordinately high earnings for lower level positions may also reflect, high levels of overtime, which may reflect several additional management and/or personnel problems. High turnover and high vacancy rates, for example, may necessitate this overtime. Italsomay be that overtime and/or other supplements are being used to “correct” an internal wage structure that has gotten out of step with the external wage structure. Such ad hoc measures are seldom applied evenly or effectively throughout the or- ganization. The “grade slippage” control indicator compares the percentage of positions in various classes over various periods of time. Table 1 provides an example of a grade slippage problem in a hypothetical clerical series. Within the last5 years, there has been a shift in the distribution of positions from the lower end to the upper end. Several compensation related problems may be indicated by grade slippage. It may be the result of continuous “grade creep” pressure (see, for example, Shafritz,1973), caused by lower than market salaries and/or the lack of viable monetary rewards for incumbents. It may also mean the existing position classification system needs revision, as the internal wage structure may no longer be equitable. In some agencies, grade slippage may be the result of high turnover, as supervisors attempt to consolidate posi- tions in order to retain valued employees. Table 1 Hypothetical Configuration indicating a Grade Slippage Problem In a Secretarial Series Number of Positions Class 1982 1987 Secretary V 10 20 Secretary IV 18 30 Secretary Ill 20 25 Secretary I 25 20 Secretary | 30 5 Total 100 100 328 Public Personnel Management Vol. 18 No.3 (Fall 1989) Employee Related Costs: Acquisition, Development and Replacement Compensation controls should include more than the collection of data directly relevant to salaries and benefits. Costs related to maintaining an employee workforce are likely to influence other aspects of compensa- tion. These costs include those related to recruiting and training. In addi- tion, a closely related data set is that of turnover rates. Consequences of turnover have been well documented. These include: 2 costs, including separation, vacancy, training and replacement; O disruption of performance; and G2 decline of morale (Mobley, 1982). Although there may be positive consequences of turnover (Staw, 1981), the negative consequences are more easily measurable and often out- weigh the positive ones. Asis the case with all compensation controls, turnover rates require the identification of adequate standards. Statewide or region wide rates for key organizational/ governmental positions can be employed. In the ab- sence of such standards, the organization or government may decide to monitor the extreme cases. As such turnover rates for both class and region should be calculated, especially if employment is distributed over a wide geographical region. Even though the overall turnover rate for a state may be relatively low, for example, it may be much higher for the more ur- banized areas of the state. Monitoring training costs may provide several benefits. It would seem appropriate for both a stateagency and the state compensation system to collect this data. The purpose of doing so would be for different reasons. The agency may wish to examine training costs in light of other manage- ment related factors, such as subsequent employee performance, instruc- tional costs and class size. For the compensation administrator, training costs may be monitored in a more general sense, examining costs per incumbent for each class. If training costs are rising for correction officers, for example, at a time when the turnover rate is also high for this class, serious compensation problems may exist. The state may find itself spending a large amount on tra costs only to have the trained office leaving state employment for paying positions in the private sector. Training costs, thus, can provide a valid indicator of overall compensation program effectiveness. ‘Compensation Control Mechanisms 9 Methodology The importance of monitoring recruiting costs is also best viewed in comparison with other compensation control data. First, a high turnover rate is likely to coincide with high recruiting costs, Here the problem may be a starting salary that is below similar positions in the labor market. Perhaps more important is the cost of vacancies. If recruiting costs are highest because certain positions can not be filled, even though the turn- over rate is low, then a compensation problem is indicated. Employee Altitude Surveys Concerning Wage and Fringe Benefits Attitudinal data collected from a sample of state employees may prove valuable fora number of reasons. First, results may confirm or dispel anecdotal information concerning the acceptance of a certain aspect of the fringe benefit package and /or a decision for change. Survey results indicat- ing a high degree of support for more state-supported day care services, for example, may help to convince key legislators to support an expansion of this benefit. Second, it could help to fund a better “mix” of fringe benefits, if itis discovered, for example, that more comprehensive dental benefits would be preferable to increased pension funding. Third, it aids compensation administrators in identifying those aspects for which there is extreme feeling among state employees. Incumbents of some classes, for example, may be more happy with their salary levels that others. Overall, it may improve employee morale because it does encourage employee feedback. During its 1986-87 legislative session, the Florida State legislature directed the State University System to provide a study of the state's compensation system.' Nine faculty members from four of the State Universities were chosen to participate in the study. To more fully provide compensation system alternatives for the State of Florida, personnelists from the remaining 49 states were contacted via telephone. Of those con- tacted, all of whom where in the area of compensation / classification, 27 were Division Directors, Bureau Chiefs or Section Heads, 14 were titled Personnel Analysts /Supervisors, and 9 others were of indeterminate posi- tion within the state personnel function. These individuals answered a variety of questions dealing with the nature of the compensation system in his or her state, including compensation policies, legislative role, nature of collective bargaining, salary structure data and compensation control data. Telephone conversations lasted 45 minutes to one and one half hours. Surveys were made during June and July, 1987. 330 Public Personnel Management Vol. 18 No.3 (Fall 1989) Recruiting Taining Tumover Atliude Annual Grade Salary Coss Costs Rates Survey Eamings slip isto Compensation Controls in the American States Table 2 state ZZ>>ZZZu0rZZZZ opty» 22z2z2z2222z2z22ZZo2ZoZZ>>z2z2zz>2z> ZZ>>2>Z>Z>>2Z22uz2z> z>yezzzzzzz2>2>>22>>>022Z>Z2>Z2Z> +ZZ>Z>>>Z2Z2ZZ2Z>Z2z2>>z z22z>Zzzz>zZZ>>>Z> Z>z>zZz2z2zzZ>>z2z ZzZ>Zz>v2ovzzz222z2249 z>zz2z2z2z2ZzZzZZ0 ZZ>ZZ>>Z>zzZ>>vzra Oo Deere rR Hem Zoe ZHZZo eee ZZ rrr Zen Zr Zr ore zoo zr> oZZZ>>>Z222Z2z2z2z2>2z2Z> 22222>2z2z2Z2>Z2>22>22>22>22>>>Z202 oZozz>z2Zz2Z>Z2Z>22z22 z2z2z2z2Z>Z2Z2Z2Z22>>22>zZ>Z2z2z2>2z2>>Z20> AL AK AL AR cA co cr DE FL GA H D L IN a ks Ky lA ME MD MA Mi. MN MS Mr Ne Nv NH NU NM Ny Ne ND O# Kk oR PA, RI sc sD IN x ur vr vA WA w wi wy 331 Ns no Ys yes $= sometimes, occasionally, intrequenty, pertormed for some of the state ‘Compensation Control Mechanisms agencies or classes Results Table 2 provides a summary of the types of compensation control measures used by the fifty state governments. As indicated in Table 2, the turnover rate is the only control, other than wage and salary surveys, that isused by a majority of the states. Thirty-five states collect this data for their employee workforce on a continuing basis, while three additional states collect it for some classes. The comparable figures for recruiting and train- ing costs show a much more limited interest, Only 15 states collect recruiting cost data on a regular basis, with some data collected in three additional states. For training costs, officials from 14 states reported the collection of this information, while two additional states review training cost data on a limited basis. Only eight states collect all three types of data, while 10 states collect none. In the salary related compensation controls, 18 states reported cal- culating annual earnings. Grade slippage is monitored in 18 states, with two additional states examining this information for selected classes. Salary distribution data, including the calculation of compa ratio, is examined in only nine states, plus three more states monitoring this information for some classes. Only one state collects data for all three controls, while 17 states collect none. Almost all states have some association with a wage and salary survey. This association takes one of three forms. A wage and salary survey may be conducted by the Personnel Department or division therein, or may be conducted by outside consultants. This survey collects data from local government, private sector employers within the state, and often from adjoining states. The survey can be comprehensive, or may focus only on “critical” classes for which the state may be experiencing recruiting difficul- ties. The second form of association consists of participation in a survey in which data is collected in a regional (several state) area. In this case, state employment data is furnished to allow comparison with surrounding states, Third, Bureau of Labor and/or privately funded wage and salary data may be examined by state compensation managers. As reflected in Table 3, 43 states conduct their own wage and salary survey, performed either with state compensation analysts or with the help of an outside consultant. At least 14 of these conduct a survey annually, with a few states required by law to perform a compensation survey for all state positions. An additional six states conduct a survey every two years, with five more states indicating a more infrequent time period. Twenty-nine states survey local and private employers within the state, as well as adjoining state governments. 332 Public Personnel Management Vol. 18 No.3 (Fall 1989) fables Characteristics of Wage and Salaty Surveys in the American States stole AL AK Az AR cA veves, survey Performed ¥-8 Closs 4<

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