October 2010 issue of HR News magazine - IPMA

comP doctor tm
By Jim Fox and Bruce Lawson, Fox Lawson & Associates, A Division of Gallagher Benefit Services, Inc.
Question: we have just been
hammered with requests from the city
council, the media, the public and every
other life form on the planet about the
salaries and benefits offered by our city.
this is probably the result of the considerable
publicity about exorbitant compensation
paid to officials in a few cities in
california including a city manager
making almost $800,000 per year in a
city with fewer than 50,000 residents. at
the same time, there are reports that a
former city manager in another small
california city was receiving a pension of
more than $500,000 per year. to quote
the former head of bP, we just want our
lives back. what, if anything, can we do
to “make this right”?
CompDoctor TM
: You want your
life back? Just remember that the author
of that quote got his life back and,
although he is still employed by BP, his
new outpost is Russia and not London.
Unfortunately, this situation, we believe, is
not going to go away easily or smoothly
but there is a lot you can do to at least
address the problem and hope that the
stakeholders in your community are openminded
enough to listen and smart
enough to understand the facts. If they
are not, then little that we say can or do
will make much of difference, at least in
the short run.
The situation that has arisen in California
as a result of the revelations of compensation
abuse in the city of Bell is, we believe,
unique, and, we hope, isolated.
Unfortunately, the media has played this
up in such a way that every public agency
in California, if not throughout the nation,
is now going to be subject to a level of
scrutiny about compensation that heretofore
only existed when we went in for our
annual physical exam. Now, we know that
over the years there have been many local
newspapers that have periodically
published the salaries of all public officials
earning over a certain amount of money.
Many eons ago (back in the ’60s), we
recall that the amount was $10,000 per
year. (When you all stop laughing, we will
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go on.) Slowly, the base amount rose to
$25,000, then to $50,000 and then to
$100,000. Now we have cities, counties
and other units of government paying
some top officials $300,000 or more in
base pay. Whether these amounts are
appropriate is a topic that we will be
happy to address in the future; however,
for now, we will focus on how to deal with
the public scrutiny about public sector pay.
Over the past three to four years, we have
all seen major exposés on private sector
compensation abuses coming out of the
financial services meltdown and the
golden parachutes that many private executives
have received, even when their
performance was not stellar. We now have
the federal government providing oversight
of pay levels in certain private organizations
as well as not for profits, and others
are now required to disclose their
compensation levels to shareholders and
subject them to advisory votes. We can all
ask why this is necessary but it appears to
stem from individuals getting greedy,
comparisons with inappropriate peers
(which means they really are not peers)
and not thinking about compensation
from a strategic view. When organizations
define their compensation philosophy and
strategies up front and there is open
discussion of the philosophy and strategies,
we find that there is generally less
resistance to how pay is delivered and the
amounts of pay.
In a survey conducted by IPMA-HR, 78
percent of public sector organizations
have a defined pay philosophy. Whether
that philosophy has been widely shared,
or instructive, is another matter.
However, we have digressed, so back to
the issue at hand. What can you do about
this mess?
There are some things you can do right off
the bat; the first would be to have an independent
audit of your pay setting process.
For example, the state of Colorado
conducts annual audits (through the office
of the state auditor) of the salary survey
process used by the Colorado State
Personnel Department to determine salary
adjustments for state employees. The city
of Denver conducts a similar audit every
three to four years.
The audit process serves a very legitimate
and public purpose and that is to show
the stakeholders that the salary levels are
reflective of the labor market and that the
process used to determine salary levels
can withstand public scrutiny. In other
words, the process and the results are
valid and reliable. If you have not had an
audit of your pay system process and pay
levels in the last couple of years, you
might want to consider having one done
at the earliest opportunity.
The second thing you can do (and agencies
in California will be doing this
because they will have no choice given
legislative mandates that will no doubt
result) is to put your entire job classification
and pay plan on your Web site.
The reason we say both the classification
and the pay plan is so that anyone can
look up any job, see what it is, and what it
gets paid. One of the problems that we
have noted with the publicity resulting
from the Bell situation is that reporters
have been trying to show comparative
data but, because the data is not easily
available, they are making some rather
erroneous assumptions and conclusions.
This is simply a result of comparing job
titles without any understanding of the
differences in actual duties between
organizations even though the titles may
be the same or similar.
Publishing actual employee salaries is
another matter. Ultimately, that information
is public record in most states but
whether you are willing to list every
employee and show their current job title
and their current pay, is a decision that
each agency will have to make for itself.
A third thing you might do is become
proactive. Rather than waiting for the
media to come to you to ask for information,
go on the offensive. Post and provide
information that not only talks about what
you are paying, but WHY you are paying
what you are, which takes you back to the
pay strategy! The public needs to understand
why pay levels are what they are
and, more importantly, what they are
getting (i.e., performance) for their money.
For example, if you pay your city manager
and department heads more than comparable
cities, but your crime rate is low,
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