Council hears of pay classification study

Posted on August 13, 2013 • Posted in News Articles

“Carlson Dettmann Consulting of Madison presented some options to the city council on what it should consider as the classification and compensation study gets under way.”

By Ryan Whisner, Daily Union regional editor | Posted: Thursday, August 8, 2013 10:51 am

With a widening gap between increased expenses and flat revenues, the City of Fort Atkinson is facing a challenge in reorganizing its pay and job classification to ensure job and service preservation.

On Tuesday, partner and principal consultant Charles Carlson of Carlson Dettmann Consulting of Madison presented some options to the city council on what it should consider as the classification and compensation study gets under way.

“What I see as our mission as a firm is to, in all cases, preserve city services wherever possible,” Carlson said. “To us, preservation of city services typically means preserving city employees, because those are the folks who provide those services.”

There are two intended outcomes of the study, he noted. The first is to review and update all job descriptions and job functions to ensure that city employees are appropriately classified. Second is to review compensation and organizational staffing levels to determine whether compensation is internally and externally competitive in the labor market.

The city last completed such a study in 1997.

Given what’s happened economically and politically the last five years, Carlson pointed out that employee morale has been in the tank.

“A whole list of things have been disrupted,” he said, stressing that it is important the city be as transparent and open as possible in discussing these issues with employees.

I want to make sure everybody understands that we are not here on a slash-and-burn mission; we just want to deal realistically with where you are

Carlson said “My reading of the data says we do have to bring the expense levels down because revenues are really limited.”

He noted that they are even more limited then they were before because of the “raise a fee, cut a tax” proposition in the most current legislation.

“If we have a consistent pay plan for all covered staff, that, I believe, emphasizes performance management,” Carlson said, noting that is a new phenomenon for a lot of communities. “We tend to manage performance or employee development in Wisconsin public sector in a fairly uneven manner.”

“A lot of us don’t have experience as managers or first-line supervisors making performance measures on employees and communicating those and having pay tied to it,” Carlson said. “We’ve got a ways to go. I think as we look across the state and all the places we are spending time in these days, this is probably the hottest topic in the State of Wisconsin in the public sector.”

He said due to the city’s current financial circumstances, there is no choice but to move in that direction.

“If employees are meeting expectations, they are looking at a flat-pay relationship until we are out of the soup here,” Carlson said. “You can’t expect, in all likelihood, to see a pay increase unless you can find ways to have substantial savings in cash or your performance is exceeding expectations and you have made a contribution that everybody acknowledges is above and beyond the expectations of what the job would be. I don’t think we can go forward if we are not prepared to recognize the highest contributors.”

The consultant said he expects the council will have to tell department heads that if employees want to see raises, let alone job preservation, new ways of saving money will have to be considered.

“That may mean people doing jobs they haven’t done before, consolidation of services, contracting of nonessential duties; it may be some reassignment,” Carlson said. “All in the spirt of trying to reorganize in such a way trying to avoid reduction in staff.”

While no decision was made Tuesday, Carlson presented the council with three pay plan options: Option A, a step-based plan; Option B, an open-range plan; and Option C, a combination of step and open range.

The first question is how did this happen?

He said “Over time, revenues flattened out, property values fell, the rebound hasn’t been very rapid and we’re limited by the state in terms of how much additional revenue we can raise. Our expenses just keep marching forward.”

The consultant noted that the longer the city spends trying to deal with the problem, the harder it will be to actually do so. Fortunately, Fort Atkinson is facing it at a time where projections show the expense line is just rising above the revenue line.

“Ideally, if we fix this, we’ll bring the expense line so its below the revenue line so you are actually putting some money in a sock and you have some money for other things you need to do,” Carlson said.

You certainly wouldn’t be want to be hit by another 2008 right now.

He suggested that the current gap tends to argue that heavy emphasis should be placed on performance-based pay.

“If we don’t, I think we are probably guaranteeing reductions in staff,” Carlson said. “I think that is not a road you want to go down.”

In the final analysis, he said, a pay plan makes sense in which the employees are shouldering the burden equally, meaning that those covered by the plan and protective services still are covered by collective bargaining.

He said pay increases for protective services that are not offered to other employees as well cannot be continued.

Collective bargaining was all but eliminated for public employees with passage of Wisconsin Acts 10 and 32.

“If the plan is entirely fair and the pay ranges reasonably reflect what employees can earn in your labor market performing similar duties, if it supports employee development and employees have an opportunity to make more based upon their contributions and you can fund it and maintain it consistently, you have a pretty good pay plan,” Carlson said.

In terms of internal consistency, Carlson said all of Fort Atkinson’s employees had completed job questionnaires, reviewed by department heads, which will be rated by Carlson Dettmann based on education and required experience to do the job; the kind of decisions the employee makes and impact on the organization; what the employee thinks are challenges and what problem-solving skills he or she has; who the employee communicates with, what is the intent and purpose and outcomes; and the employee’s working conditions.

Carlson suggested that an appeal process be in place following adoption of a new pay plan. Data then will be collected based on comparable communities and private sector pay for similar jobs.

We try to match up a reasonable set of benchmark titles to the market data. When we are all said and done, the market sample will cover thousands of employees.

It will be up to the council to determine what position the city wants to take in the labor market: high, low or average.

Carlson had highlighted “average” as the more typical response. However, due to the city’s financial circumstances, it might not be possible.

“There may be a decision that has to be made that says ‘we prefer to preserve jobs, so maybe we’d better position ourselves a little low in the labor market until we come through this,’” he said.

No decision was made on that issue Tuesday. The council wishes to wait until the data is available and it is able to discuss the city’s financial situation further.

Under Option A, Carlson said, the steps would be 2 percent to 2.5 percent of the range control point or the mid-point tied to the market rate. Progression across the schedule would likely be 11 steps over a 10-year progression based upon annual performance that meets recommendations.

Carlson said that in and of itself is a major step for public employees.

The consultant said Option A is simple to manage, costs are predictable and employees know what to expect. However, on the downside, it is not a flexible plan and costs are fixed unless steps are suspended.

Every employee is treated the same regardless of their contribution.

He defined Option B as an open-range pay plan or the tournament model.

Under this option, there is a minimum, a control point and a maximum but no fixed steps. Ranges tend to be broader and the council would establish some sort of merit pay matrix to manage progression in which, based upon performance reviews, employees are entitled to a given percentage of a raise.

Carlson said this is used a lot in the private sector, but not as much in the public sector.

“This is all pay for performance all the way across the lane,” he said, noting that advantages of this model are maximum flexibility and no fixed costs.

Carlson said the negatives include the uncertainty for employees and pressure on administration and council to fund adequately and stay the course.

“This is where most pay-for-performance plans in the public sector have died,” he said. “Its failure to stay the course becomes politically unpopular, councils change and the new council doesn’t hold the policy of the last council and then everybody has a bad taste in their mouth.”

Lastly he presented Option C, a combination plan. Ranges are broader and raises for the first five years are steps similar to Option A up to the market rate and then merit-based beyond the control point up to the maximum similar to Option B.

Carlson said the advantages for Option C is less work and no expectation for half the plan. Disadvantages are again the pressure on the administration and council to stay the course.

“Any time you add pay for performance into the equation, you are also adding commitment,” he said. “You have to make sure employees are not being evaluated highly just to qualify for raises.”

Council members questioned how a mere pay plan would help address the city’s financial future.

“As we do come into budget season, those are the things they will be looking at,” City Manager Evelyn Johnson said. “As we move forward, the council is going to have some tough decisions in terms of policy. We probably need to do some type of strategic planning that overlooks all of that stuff and really defines what our values are as an organization as we move forward.”

She further noted that the overall picture of a new pay plan allows the city to act on areas and forecast costs into the future.

Meanwhile, Carlson pointed out that there is an intersection between approval of a pay plan and fixing the financial issue.

You are not going to solve this problem off the backs of your employees.

Posted from: Daily Jefferson County Union