Dont Get Stuck in Compensation Jeopardy Presented By

Don’t Get Stuck in Compensation Jeopardy® Presented By: Lyn Harper & Karen Hutcheson Mercer Exclusive Technology Sponsor:

HOUSEKEEPING Some things to remember: • Restrooms are outside the auditorium. • You may be photographed during the course of this event for use in Chapter publicity materials. Please alert the photographer if you do not wish to be photographed. • Look for volunteers in black shirts for assistance.

HEALTH WEALTH CAREER NORTHERN CENTRAL CALIFORNIA CUPA-HR – MAY 31, 2018 DEMYSTIFYING COMPENSATION PROGRAMS SESSION OVERVIEW Karen Hutcheson Partner Lyn Harper Principal

HELLO! Let’s play Compensation Jeopardy to introduce you to the key foundational elements of effective compensation programs (or affirm what you already know!) These slides are just a snapshot of some of the topics we will cover. See you soon! KAREN HUTCHESON Partner LYN HARPER Principal karen. hutcheson@mercer. com 215 -982 -4203 lyn. harper@mercer. com 202 -331 -2508 Copyright © 2018 Mercer (US) Inc. All rights reserved. 4

WHAT IS AN EFFECTIVE COMPENSATION PROGRAM? Basically it is a way to organize and

WHAT WORK IS BEING DONE? CAREER FRAMEWORK OVERVIEW CAREER STREAMS People management JOB LEVELS JOB FAMILIES JOBS WHAT is expected of me? HOW can I get there? Individual contributo r Support Copyright © 2018 Mercer (US) Inc. All rights reserved. 6

WHERE DO YOU START? MARKET PRICING STEPS 1. Develop Methodology Confirm relevant markets and the jobs to benchmark 2. Select Sources Select surveys to benchmark against, keeping in mind the following criteria: survey age, survey description, data relevance, survey statistics 3. Match Jobs Match jobs to survey jobs based on content (good match if 70%-80% of benchmark job matches) 4. Choose Scope Ensure data cuts you select match the targeted markets (industry, size, location) and that there is enough data available in the scope 5. Gather Compensation Statistics Collect multiple data percentiles for base salary and incentives (to understand competitive landscape, even though you may not offer incentives/bonuses) 6. Make Adjustments to Data Make adjustments (premiums or discounts) to the available survey data based on differences in responsibilities, level, organization size, location, etc. 7. Age Compensation Data Age the data from the various survey sources to a common point in time 8. Develop Market Composite Combine the data from multiple survey sources into a single, blended number based on the relevance of each data source 9. Analyze Market Results Evaluate competitiveness and use market data to inform salary ranges Copyright © 2018 Mercer (US) Inc. All rights reserved. 7

WHERE ARE THE JOBS IN YOUR INSTITUTION? GET GOOD COVERAGE WITH YOUR BENCHMARKING Y

HOW SHOULD WE PAY OUR EMPLOYEES? PREVALENT STRUCTURE DESIGN MODELS Range Design Description Traditional Grades Many narrow pay grades Typical number of grades Wide Grades Fewer, broader pay grades 10 -20 Broad Bands A few very wide pay bands used to manage both career growth and pay 12 -15 5 -8 5 4 3 3 Typical Range Width & Midpoint Progression 2 + 10 - 15% 1 2 + 20 - 35 % 1 2 1 100% + 60 - 80% 40 - 60% Midpoints used as control points Copyright © 2018 Mercer (US) Inc. All rights reserved. Midpoints referenced less frequently, more typical to reference thirds or quartiles within the range No midpoints. May use data points or zones within bands as “market anchors” 9

SALARY STRUCTURE DESIGN CONSIDERATIONS COMPONENTS OF SALARY STRUCTURES & RANGES • There is a salary range associated with each grade or level in a structure. • The graphic below indicates key characteristics of ranges and the interrelationships of ranges within a structure: Grade 3 2 Range Midpoint 5 1 Range Spread Midpoint Progression Range Maximum Salary Copyright © 2018 Mercer (US) Inc. All rights reserved. 1. 1 Range spread: The percentage by which a range maximum of a given level is greater than the minimum of that range. 2. 2 Range minimum: The lowest amount an organization is willing to pay for jobs in a certain level. Range 6 Overlap Range Minimum Definitions 4 3. 3 Range midpoint: The midpoint of a salary range; in market-based structures, approximates an organization’s target competitive position for jobs in that level. 4. 4 Range maximum: The highest amount an organization is willing to pay for jobs in a certain level. 5. 5 Midpoint progression: The percentage by which the midpoint of one level exceeds that of the next lower level. 6 Range overlap: A measure of the 6. difference in value of positions in adjoining levels. 10