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R-94-08-11-10C - 8/11/1994City of Round Rock, Texas Alternative Compensation Strategies June 16, 1994 HaG oup Prepared By: Richard D. Maus Vice President for City of Round Rock, Texas Confidential HaJGlroup Table of Contents Section Page . I. Introduction and Project Overview 1 II. Project Objectives and Outline 2 III. Staffing, Timing, and Budget 5 Appendix - Consultant Resumes lay up I. Introduction and Project Overview The City of Round Rock, Texas has requested Hay Management Consultants to assist them in defining and understanding compensation alternatives that would be appropriate for City employees in both the near term and long term. During the past months, teams have been looking at such items as career pathing, skill -based pay, and broadbanding to name a few. Further, some departments have developed plans that are specific to their needs and concepts. The current plan was developed in 1990 and includes 95 job titles, assigned to 38 grades and includes longevity pay for all City employees. In 1994, all staff received a 10% across the board increase which is believed to position the City at the 75th percentile of the market for non - exempt employees. These historic actions and current recommendations from departments have identified the need to have a "road map" for a compensation philosophy and programs for the future. Ha `.^a vup 1 Objectives Project Outline Management Retreat 11. Project Objectives and Outline Based on the information in the Request for Quote and discussion with Dale Ricklefs, Quality Manager/Library Director, Hay suggests the following project objectives. 1. Orient the Executive Staff about alternative compensation programs: what they are; why the are used; and the criteria for development and implementation. 2. Establish the tolerance level within the City's culture for compensation programs that may not be uniform across departments. 3. Develop a consensus compensation philosophy within the Executive Staff which will guide development of specific programs. The consultants will interview the department heads, City Manager, and Assistant City Managers to obtain individual input about the future business needs of the City, how their department will contribute and be impacted by those needs, and the human resource requirements necessary to meet those needs. The results of the interview will be analyzed and categorized for presentation to the Executive Staff during a day -long retreat. "Finding solutions to problems (without consideration of others) is easy. Attaining agreement for solutions and implementing them is a little harder ". Hay will present to the executive group a detailed overview of alternative reward systems and link them by example to work and activities that are being done in the City. Example programs will include: • Gainsharing • Team Pay - multiple varieties • Skill -based pay • Competency -based pay • Pay relationship between salary, variable pay and recognition programs • Performance management Hay Gmup 2 Management Retreat (cont.) Interview Feedback Building a Road Map 11. Project Objectives and Outline (cont.) This discussion is to establish a common understanding of how pay programs should be aligned to specific operational needs of the City. The consultants will present the results of the interviews to identify the opinions and ideas each person has about compensation and what the programs should accomplish for the City. This feedback will be categorized to begin to identify the degree of consensus (or lack thereof) about the future direction of the City's program. The combination of common knowledge about alternative compensation programs and the opinions and values expressed by the individual executives will be the discussion foundation for formulating a consensus plan. Specific issues that need to be addressed are: • Must the program(s) be consistent across all departments? All job levels? • What is the readiness, at the employee level, for alternative reward systems? • Is the political environment such that alternative reward programs would be acceptable? How well are the TQM principles being employed and can alternative rewards enhance these efforts? For extemal comparison purposes, who should Round Rock use, and should it be the same for all jobs? These are a sample of issues that need to be aired and agreed to for the City to formulate its near term and long range compensation strategies. Attempting to deal with them one department at a time will likely be both time consuming as well as divisive. Hay 3 II. Project Objectives and Outline (cont.) Deliverables The result of the interviews and the retreat will yield one of three results: • A common view of future programs will be understood and endorsed by all. • A common understanding of the alternatives and issues will be present, but agreement on future direction will need further work. • An understanding of the alternatives and issues is present, but the opinions and interest of the executives is so diverse that more traditional compensation programs would best meet the City's needs. Hayti oup 4 1 1 Staffing 1 1 Timing 1 1 1 Budget 1 1 1 1 1 1 1 1 1 1 111. Staffing, Timing, and Budget The project will be staffed by two senior consultants. Richard D. Maus, Vice President, brings significant experience in government and private sector reward projects. Craig Nelson, Senior Consultant, is our Regional "expert" in variable reward programs and is just completing a project with the City of Arlington. Biographies for both are included. The project should be completed in two to three weeks based on schedule availability. We would like to interview the individual executives on two successive days. Both consultants will interview the City Manager and Assistant City Manager and will individually interview the nine department heads. The interviews should be scheduled for 1 1/2 hours. We recommend that the retreat be held off -site for one full day. Professional fees for the project as outlined will range between $11,000 (eleven thousand dollars) and $13,000 (thirteen thousand dollars). Our estimate is based on the time required and the level of consultant experience necessary to provide the City of Round Rock high quality value added result. Project expenses related to travel, material preparation, graphics, etc. are charged at cost or normal labor rate in addition to the professional fees quoted. Since this project is of short duration, we will issue one invoice at the project conclusion which is payable within 10 days. Should the City find it necessary or desirable to cancel the project prior to the completion, you are only obligated for the fees and expenses incurred to that point in the near term. Ha Group 5 Professional Expertise Previous Experience Background Government Consulting Richard D. Maus Mr. Maus is a Vice President in the Dallas Office providing project management consulting services to both public and private sector clients. His consulting assignments include all areas of human resources management with emphasis in integrating sound compensation programs with objective performance appraisal programs and development of effective organization structures. He holds a B.A. degree in Business with majors in Economics and Mathematics from the University of Nebraska - Omaha Prior to joining Hay Management Consultants, Mr. Maus served in personnel management positions in the industrial sector and consulted private sector firms in developing positive human resource programs and maintaining compliance with statutory requirements governing all aspects of employment. His background in specific personnel activities include: compliance with governmental regulations, EEOC, FLSA, Workers' Compensation, Unemployment Compensation, labor and safety regulations; management training and development; total reward management; performance appraisal; recruiting; communications; organization analysis and succession planning. County of Dallas, Texas - Project Director for two comprehensive studies: Department/Agency Heads; and all Professional/Managerial position. Conducted individual job analysis, job content evaluation and performance based salary administration plan, including training of Country personnel in all methodology. City of Tulsa, Oklahoma - Project Director for four studies of job evaluation, job content evaluation and merit based salary administration. The combined studies cover all the City's positions excluding bargaining unit and uniformed positions. Project methodologies used individual position analysis and HaJ`rvup 1 evaluation, and Personnel Analysis as job content evaluations. City of University Park, Texas - Project Director in job analysis, job content evaluation and salary administration plans. All City positions are included utilizing individual job documentation and internal committee for job content evaluations. Arkansas Highway Department - Co- directed the job content documentation, job content evaluation, and salary plan development of all of the Department's occupational classes using individual position analysis methodology. Texas Municipal Power Agency - Project Director, covering all Agency positions in individual job analysis, job content evaluation and development of merit based salary administration plan. Texas Department of Mental Health and Mental Retardation - Directed a comprehensive study for all exempt and classified positions in central office and operations including job analysis, evaluation and compensation. Mr. Maus is further assigned as a Job Measurement Quality Assurance specialist within Hay, with accountability for developing and ensuring consistent application of the evaluation technology. He is also designated by the firm as an "expert witness" for clients requiring those services. Hay Group 2 Professional Expertise Representative Clients Craig D. Nelson Mr. Nelson is the Southwest Variable Pay Practice Leader for the Hay Group in the Dallas office. Mr. Nelson has over 12 years experience in both designing and managing compensation programs. He has assisted numerous employers in establishing skill -based pay programs which promote productivity and quality. Mr. Nelson has managed over 100 consulting assignments in his consulting career. These have included well known Fortune 1000 companies, state, county and local governments and firms from almost every industry sector and size. He has a track record of success with both large and small clients. Mr. Nelson developed one of the first skill -based pay programs in the United States beginning back in 1983 when he partnered with a large pharmaceutical company to install an innovative pay program in new plants being built in Albuquerque, New Mexico and San Angelo, Texas. He worked with several company divisions for over six years to first design the plans then refine and retrofit the plans as operational changes required. He understands not only the design aspects, but has lived with pay- for -skill plans and experienced their impact on quality, productivity and employee morale. He has developed self- managed work team concepts and trained managers how to facilitate and empower these work teams in numerous facilities. In another assignment he reengineered the manufacturing process to move from batch processing to continuous flow manufacturing (CFM). The pay program was designed to foster a multi- skilled workforce and promote flexibility in meeting production targets. The plan integrated total quality concepts and statistical control methods to measure productivity and linked the pay system to the multi - skilled concept. Ha G vup Previous Experience Education Mr. Nelson has also developed gainsharing and skill -based pay programs in service organizations where such plans have focused on professional and technical positions in the information services, engineering and healthcare industries. He brings value to organizations by partnering with them to achieve focused results. Mr. Nelson has published a variety of articles on compensation issues and is actively involved with the American Compensation Association. He is a frequent speaker on compensation, performance and total quality topics. Mr. Nelson holds a Bachelor of Science degree and a Masters degree from the University of Utah. His undergraduate work was completed in Psychology with graduate study focused on Organizational Development. He graduated with honors. Hay up ATTEST: r • KS /RESOLUTION RS40811C LAND, City Secretary RESOLUTION NO. £' / zi- O6- /1- )Qe. WHEREAS, the City of Round Rock desires personnel consulting services, and WHEREAS, the Hay Group has submitted a letter of agreement to provide said personnel consulting services, and I � WHEREAS, the City Council wishes to enter into said letter of agreement, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City a letter of agreement with Hay Group to provide said personnel consulting services, a copy of said letter of agreement being attached hereto and incorporated herein for all purposes. RESOLVED this llth day of August, 1994. CHARLES CU R, Mayor City of Round ock, Texas Hay Management Consultants has submitted a proposal to the City of Round Rock, Texas, dated June 16, 1994 to conduct a study of Alternative Compensation Strategies. The content of the proposal relative to the study approach, deliverables and cost are agreeable to the City and are hereby incorporated by reference. Professional fees will range between $11,000 and $13,000 and will not be exceeded except by mutual written agreement. Project related expenses for travel, material preparation, and project related support will be charged at normal labor rates or cost in addition to the professional fees. Submitted invoices are payable within 10 days. Should the City find it necessary or desirable to cancel the project prior to completion, only fees and expenses incurred to that point will be due. Respectfully submitted, Hay Management Consultants Richard D. Maus Vice President ACCEPTANCE OF PROPOSAL Accepted by City of Round Rock, Texas By: Date: City of Round Rock, Texas Alternative Compensation Strategies June 16, 1994 Hay up Prepared By: Richard D. Maus Vice President for City of Round Rock, Texas Confidential Ha Gvup Table of Contents Section Page . I. Introduction and Project Overview 1 II. Project Objectives and Outline 2 III. Staffing, Timing, and Budget 5 Appendix - Consultant Resumes H ayti Vup L Introduction and Project Overview The City of Round Rock, Texas has requested Hay Management Consultants to assist them in defining and understanding compensation alternatives that would be appropriate for City employees in both the near term and long term. During the past months, teams have been looking at such items as career pathing, skill-based pay, and broadbanding to name a few. Further, some departments have developed plans that are specific to their needs and concepts. The current plan was developed in 1990 and includes 95 job titles, assigned to 38 grades and includes longevity pay for all City employees. In 1994, all staff received a 10% across the board increase which is believed to position the City at the 75th percentile of the market for non - exempt employees. These historic actions and current recommendations from departments have identified the need to have a "road map" for a compensation philosophy and programs for the future. Hay Group 1 Objectives Project Outline Management Retreat II. Project Objectives and Outline Based on the information in the Request for Quote and discussion with Dale Ricklefs, Quality Manager/Library Director, Hay suggests the following project objectives. 1. Orient the Executive Staff about alternative compensation programs: what they are; why the are used; and the criteria for development and implementation. 2. Establish the tolerance level within the City's culture for compensation programs that may not be uniform across departments. 3. Develop a consensus compensation philosophy within the Executive Staff which will guide development of specific programs. The consultants will interview the department heads, City Manager, and Assistant City Managers to obtain individual input about the future business needs of the City, how their department will contribute and be impacted by those needs, and the human resource requirements necessary to meet those needs. The results of the interview will be analyzed and categorized for presentation to the Executive Staff during a day -long retreat. "Finding solutions to problems (without consideration of others) is easy. Attaining agreement for solutions and implementing them is a little harder ". Hay will present to the executive group a detailed overview of alternative reward systems and link them by example to work and activities that are being done in the City. Example programs will include: • Gainsharing • Team Pay - multiple varieties • Skill -based pay • Competency -based pay • Pay relationship between salary, variable pay and recognition programs • Performance management HayG "up 2 Management Retreat (cont.) Interview Feedback Building a Road Map II. Project Objectives and Outline (cont.) This discussion is to establish a common understanding of how pay programs should be aligned to specific operational needs of the City. The consultants will present the results of the interviews to identify the opinions and ideas each person has about compensation and what the programs should accomplish for the City. This feedback will be categorized to begin to identify the degree of consensus (or lack thereof) about the future direction of the City's program. The combination of common knowledge about alternative compensation programs and the opinions and values expressed by the individual executives will be the discussion foundation for formulating a consensus plan. Specific issues that need to be addressed are: Must the program(s) be consistent across all departments? All job levels? What is the readiness, at the employee level, for alternative reward systems? Is the political environment such that alternative reward programs would be acceptable? How well are the TQM principles being employed and can altemative rewards enhance these efforts? For external comparison purposes, who should Round Rock use, and should it be the same for all jobs? These are a sample of issues that need to be aired and agreed to for the City to formulate its near term and long range compensation strategies. Attempting to deal with them one department at a time will likely be both time consuming as well as divisive. H ayti vup 3 11. Project Objectives and Outline (cont.) Deliverables The result of the interviews and the retreat will yield one of three results: • A common view of future programs will be understood and endorsed by all. • A common understanding of the alternatives and issues will be present, but agreement on future direction will need further work. • _ An understanding of the alternatives and issues is present, but the opinions and interest of the executives is so diverse that more traditional compensation programs would best meet the City's needs. Ha ".r"Up 4 Staffing Timing Budget III. Staffing, Timing, and Budget The project will be staffed by two senior consultants. Richard D. Maus, Vice President, brings significant experience in government and private sector reward projects. Craig Nelson, Senior Consultant, is our Regional "expert" in variable reward programs and is just completing a project with the City of Arlington. Biographies for both are included. The project should be completed in two to three weeks based on schedule availability. We would like to interview the individual executives on two successive days. Both consultants will interview the City Manager and Assistant City Manager and will individually interview the nine department heads. The interviews should be scheduled for 1 1/2 hours. We recommend that the retreat be held off -site for one full day. Professional fees for the project as outlined will range between $11,000 (eleven thousand dollars) and $13,000 (thirteen thousand dollars). Our estimate is based on the time required and the level of consultant experience necessary to provide the City of Round Rock high quality value added result. Project expenses related to travel, material preparation, graphics, etc. are charged at cost or normal labor rate in addition to the professional fees quoted. Since this project is of short duration, we will issue one invoice at the project conclusion which is payable within 10 days. Should the City find it necessary or desirable to cancel the project prior to the completion, you are only obligated for the fees and expenses incurred to that point in the near term. H Group 5 A p p E N D | x Professional Expertise Richard D. Maus Mr. Maus is a Vice President in the Dallas Office providing project management consulting services to both public and private sector clients. His consulting assignments include all areas of human resources management with emphasis in integrating sound compensation programs with objective performance appraisal programs and development of effective organization structures. He holds a B.A. degree in Business with majors in Economics and Mathematics from the University of Nebraska - Omaha. Previous Experience Prior to joining Hay Management Consultants, Mr. Maus served in personnel management positions in the industrial sector and consulted private sector firms in developing positive human resource programs and maintaining compliance with statutory requirements governing all aspects of employment. Background His background in specific personnel activities include: compliance with governmental regulations, EEOC, FLSA, Workers' Compensation, Unemployment Compensation, labor and safety regulations; management training and development; total reward management; performance appraisal; recruiting; communications; organization analysis and succession planning. Government Consulting County of Dallas, Texas - Project Director for two comprehensive studies: Department/Agency Heads; and all Professional/Managerial position. Conducted individual job analysis, job content evaluation and performance based salary administration plan, including training of Country personnel in all methodology. City of Tulsa, Oklahoma - Project Director for four studies of job evaluation, job content evaluation and merit based salary administration. The combined studies cover all the City's positions excluding bargaining unit and uniformed positions. Project methodologies used individual position analysis and Hayup 1 evaluation, and Personnel Analysis as job content evaluations. City of University Park, Texas - Project Director in job analysis, job content evaluation and salary administration plans. All City positions are included utilizing individual job documentation and internal committee for job content evaluations. Arkansas Highway Department - Co- directed the job content documentation, job content evaluation, and salary plan development of all of the Department's occupational classes using individual position analysis methodology. Texas Municipal Power Agency - Project Director, covering all Agency positions in individual job analysis, job content evaluation and development of merit based salary administration plan. Texas Department of Mental Health and Mental Retardation - Directed a comprehensive study for all exempt and classified positions in central office and operations including job analysis, evaluation and compensation. Mr. Maus is further assigned as a Job Measurement Quality Assurance specialist within Hay, with accountability for developing and ensuring consistent application of the evaluation technology. He is also designated by the firm as an "expert witness" for clients requiring those services. Hay` coup 2 Professional Expertise Representative Clients Craig D. Nelson Mr. Nelson is the Southwest Variable Pay Practice Leader for the Hay Group in the Dallas office. Mr. Nelson has over 12 years experience in both designing and managing compensation programs. He has assisted numerous employers in establishing skill -based pay programs which promote productivity and quality. Mr. Nelson has managed over 100 consulting assignments in his consulting career. These have included well known Fortune 1000 companies, state, county and local governments and firms from almost every industry sector and size. He has a track record of success with both large and small clients. Mr. Nelson developed one of the first skill -based pay programs in the United States beginning back in 1983 when he partnered with a large pharmaceutical company to install an innovative pay program in new plants being built in Albuquerque, New Mexico and San Angelo, Texas. He worked with several company divisions for over six years to first design the plans then refine and retrofit the plans as operational changes required. He understands not only the design aspects, but has lived with pay- for -skill plans and experienced their impact on quality, productivity and employee morale. He has developed self- managed work team concepts and trained managers how to facilitate and empower these work teams in numerous facilities. In another assignment he reengineered the manufacturing process to move from batch processing to continuous flow manufacturing (CFM). The pay program was designed to foster a multi - skilled workforce and promote flexibility in meeting production targets. The plan integrated total quality concepts and statistical control methods to measure productivity and linked the pay system to the multi- skilled concept. HayG vup Previous Experience Education Mr. Nelson has also developed gainsharing and skill -based pay programs in service organizations where such plans have focused on professional and technical positions in the information services, engineering and healthcare industries. He brings value to organizations by partnering with them to achieve focused results. Mr. Nelson has published a variety of articles on compensation issues and is actively involved with the American Compensation Association. He is a frequent speaker on compensation, performance and total quality topics. Mr. Nelson holds a Bachelor of Science degree and a Masters degree from the University of Utah. His undergraduate work was completed in Psychology with graduate study focused on Organizational Development. He graduated with honors. H a Gu `pup DATE: August 9, 1994 SUBJECT: City Council Meeting, August 11, 1994 ITEM: 10.C. Consider a resolution authorizing the Mayor to enter into a letter of agreement with the Hay Group for personnel consulting services. STAFF RESOURCE PERSON: Joanne Land STAFF RECOMMENDATION: This was presented to the Council at their last meeting. This is the resolution to enter into an agreement with the Hay Group. There have been no changes since this was presented to the Council.