Board Members present: Susie Smith, Jeff Osanka, Mike Dyer, Sandra Bishop, and Dorothy Anderson.
Others present: Randy Berggren, Tom Buckhouse, Mel Damewood, Sandy DeLuna, Rob Dotson, Marty Douglass, Kris Evonuk, Lynn Juilfs, Garry Kunkel, Rick Matcovitch, Roseanna McArthur, Kris Middlewood, Jim Origliosso, Rick Pieper, Lamonte Smith, Mat Sprecher, Steve Reed, Dick Varner, Shirley West, and Krista Hince of the EWEB staff; Kim Kunkel, Minutes Recorder.
President Smith called the meeting to order.
COMPENSATION BASE PAY STRUCTURE
Referring to a memorandum included in the meeting agenda packet, and materials distributedto the Board, Compensation Project Manager Jean Meyers said the objectives of the Work Session were as follows:
Ms. Meyers presented a brief overview of the Compensation Project work completed by the Board and staff to date, including development of the total compensation philosophy and objectives which have guided the design of the proposed compensation base pay structure and will serve as the standard against which EWEB will measure the effectiveness of the structure.
Referring to a series of overhead displays, EWEB Fiscal Services Supervisor Dick Varner presented an overview of how the proposed compensation base pay structure was constructed and applied to each EWEB "job family." Using the position of Finance Clerk as an example, Mr. Varner explained that positions were initially assigned to specific pay grades based on
He noted that initial assignments were adjusted to address significant internal equity issues.
Mr. Varner explained that per the Board's decision, staff selected the 55th or 60th percentile for each position for the purpose of bringing EWEB salaries into alignment with the market. He said the 55th percentile was selected for positions earning $40,000 or more, and the 60th percentile was selected for positions earning less than $40,000. He said staff then applied to the positions a 40 percent range width, identified the lowest position in each "job family," and constructed pay ranges at 10 percent intervals, beginning with the mid-point of the lowest position within a job family.
Vice President Osanka inquired as to how often staff intends to take "market snap shots." Mr. Varner responded that staff plans to assess the market value of job families every other year.
Vice President Osanka inquired as to how decisions were made with regard to "slotting," or placing into pay ranges those positions for which market data was unavailable. Mr. Varner responded that staff decided to place those positions into pay ranges of the most similar positions in terms of job descriptions. He noted that staff might bump to a higher pay range a borderline job if, for example, that position had a higher evaluation score similar to the positions above it. He said the purpose of such a decision, which was made by staff in only four or five cases, would be to balance internal equity with the market. Ms. Meyers noted that "slotting" decisions were job-related and non-specific to individual employees.
Vice President Osanka said he would be more comfortable if the pay structure disallowed decisions that override the mathematical pay range calculations. Vice President Osanka wondered what would be the basis for overriding the mathematical calculations. Ms. Meyers explained that informed judgement applies to every compensation system. She said that when a job is not reflected by the market, staff must assess the content and requirements of the job and utilize their judgement to place that position into an appropriate pay range.
President Smith inquired as to whether EWEB's mid-point corresponds to the market's mid-point. Mr. Varner responded that it does not. He explained that while the mid-point of the market is 50th percentile, the mid-point of EWEB's proposed pay structure is reflective of the 55th and 60th percentiles for each position in the market. President Smith said it was her understanding that the pay structure was designed such that the 55th or 60th percentile was the potential (i.e. top step). Mr. Berggren said the long-term goal of the proposed pay structure is that employee salaries will center around the mid-point. He said the 40 percent range width was designed to accommodate both those who are new to positions and those who consistently perform exceptionally. President Smith acknowledged that although she previously voted in favor of utilizing the 55th and 60th percentiles, she did so with the understanding that EWEB's mid-point would reflect that of the market. Vice President Osanka said it was also his understanding that EWEB's mid-point would reflect the mid-point of the market.
Noting that he understood that EWEB's mid-point would be slightly above market, Commissioner Dyer said the key is the execution of the plan. He said fully competent performers will remain at the mid-point and only outstanding performers will have the potential to be paid the maximum of range. Mr. Matcovitch noted that the 40 percent range width allowed staff to stretch out the maximum and therefore minimize the number of positions that were redlined.
President Smith said her concern about the 40 percent band width is related to the high rates of pay of EWEB positions in comparison to similar City of Eugene positions. Mr. Matcovitch explained that over time, pay rates of employees who meet or exceed expectations will cluster around the mid-point. He said only outstanding performers will fall outside the mid-point. President Smith said she thinks EWEB's goal should be that all employees perform at an exceptional level.
Vice President Osanka inquired as to whether the Board, if it so elected, could reduce the range width to 30 percent. Ms. Meyers said the Board can elect to modify the range width. Commissioner Dyer explained that if the maximum falls outside the market, the problem is not the range width but the mid-point. He reiterated that the key to this pay structure is how it is executed. He said that if the structure is truly based on the notion of pay-for-performance, only outstanding employees will fall outside the mid-point.
Commissioner Bishop said that while she is uncomfortable with the 40 percent range width, she is more uncomfortable with the consequences of narrowing the bandwidth. She said narrowing the band width will result in the redlining of a significant number of positions. Commissioner Anderson agreed. She said EWEB must simply discipline itself in the execution of the pay structure.
Ms. Meyers expressed appreciation for the Board's caution. Noting that staff is developing a monitoring system that will assist staff in evaluating its behavior with regard to linking performance evaluations to pay increases. Ms. Meyers inquired as to what would assist the Board in feeling more comfortable with regard to the execution of the pay plan?
Vice President Osanka said that while he likes the idea of a monitoring system, he is concerned that the implementation of necessary adjustments to the structure will be delayed by the standard Board review and approval process. He said he would prefer a system wherein Board-approved, automatic consequences are in place to address a situation in which above average performance ratings are being issued. Mr. Matcovitch explained that because merit pay will be a percentage of the payroll budget, the budget will quickly reveal the nuances of excess above average performance ratings. Commissioner Bishop agreed that the budget is a control that is already in place.
Noting that EWEB employees are paid well, President Smith said that in terms of communicating to the public the proposed pay structure, she would be more comfortable if the structure included a mechanism that, in the event a defined threshold was exceeded, would activate a systematic change. She said she would like the structure to include an element of accountability so that EWEB can accurately represent the limits of the pay structure. Commissioner Anderson agreed that it would be politically wise to establish such a mechanism. Mr. Varner said that if that was the direction of the Board, staff could establish reasonable margins.
Noting his discomfort with the disparity between pay range group salaries, Vice President Osanka suggested EWEB calculate the pay structure using only public sector market data. He said that doing so might better align EWEB's salaries with those of other public agencies. Commissioner Bishop said the issue of EWEB using a mix of public and private market data had already been discussed and she would like to move on.
Mr. Berggren presented a brief overview of the organizational involvement in the pay structure development process, highlighting responses by the Executive Management Team, supervisors, and employees. Mr. Berggren noted that from a cost-savings perspective, transitioning to a market-based pay structure will save EWEB approximately $500,000 in 1999, and annual savings will continue to grow to an estimated $1,378,000 in year 10 of the pay structure.
President Smith inquired as to the assumptions imbedded in the annual savings projections. Mr. Varner said the assumption is that employees at the top of their pay range will receive lower increases, and employees at the bottom of their pay range will receive higher pay increases. He said this will result in an overall migration toward the mid-point. Vice President Osanka requested that the cost impact summary include cost comparisons of EWEB's current compensation structure and the proposed structure.
Vice President Osanka stated that the distribution of redlined positions, a significant number among two employee groups versus only two managerial positions, "red-flags" this entire proposed pay structure. Commissioner Bishop explained that the proposed plan, aligning EWEB's salaries with the market, will diminish the disparity that already exists due to EWEB's past compensation practices.
With regard to next steps, Ms. Meyers said the following project activities are scheduled to be completed prior to the implementation of the new base pay system on January 1, 1999:
Commissioner Dyer inquired as to how much staff time would be involved in calculating the impacts of a 30 percent range width. Mr. Varner said staff would require two or three days to calculate the impacts. President Smith expressed interest in the impacts of a 35 percent range width. Reiterating her misunderstanding of the Board's previous decision, President Smith said that although she is willing to support the proposed pay structure, she would be more comfortable if EWEB established the 50th percentile as its mid-point. She said that given the 20 percent range width on either side, establishing the 50th percentile as mid-point would allow greater flexibility in terms of providing incentives for employees to perform above mid-point.
The meeting adjourned at 7:35 p.m.