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HomeMy WebLinkAboutIR 7414 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7414 D.1 ;00-ft"4t< 1V R To the Mayor and Members of the City Council r September 26, 1989 Subject: City of Fort Worth's Performance The purpose of this informal report is to provide members of the City Council with background information on the City's Performance Pay Plan and a historical perspective describing how the City's pay system has evolved to its current design. We believe this background will be especially beneficial to those members of the Council who have joined the Council since the program was initiated in October 1984, as well as a refresher for the senior members of Council. Historical. The City has had a pay system or plan for many years. Since the late 19501s, the City's pay plan reflected the practices of other local and state pay plans in one form or another. The basic pay plan, which the City used with most general employees up until September 30, 1986, was similar to plans used in most local jurisdictions in the United States. Each job classification was assigned to a range, which was approximately 25% to 30% in length; the range was divided into steps, usually from 6 to 8. Employee pay increases, under the system, were granted primarily in two ways. First, to move from one step to the next was based on length of service, "merit," and increased competency in the job. Secondly, based on annual surveys, employees received increases when adjustments were made to the pay ranges. These adjustments were typically across-the-board or were so-called "cost-of-living" increases and reflected changes in what other employers in the community or other cities were paying for the type of -work; selective adjustments greater than the "across-the-board" were granted when surveys indicated a more drastic change in the labor market. This allowed the City to be competitive with other employers. Example: Laborer making $5.00 per hour. Range adjustment of 5% "Merit" increase of 5%. Base wage/rate $5.00 Range adjustment .25 Adjusted wage rate 5.25 During the year, the employee was evaluated on his/her anniversary date. If the supervisor believed the employee was deserving, the supervisor could have granted an additional "merit" or step increase, which was usually 5%. Therefore, the laborer's rate of pay was adjusted 10% during the year. The above describes the pay plan that was in effect for most employees through September 30, 1986. It also describes the type of plan that is currently in effect for police officers and firefighters. Because of the State Civil Service Law, police officers and firefighters automatically receive the range adjustment and the step increase; the state law requires cities subject to the law to pay police officers and firefighters in the same classification the same pay; step increases are permitted since they reflect longevity or membership. "Merit" or "performance" based increases are precluded because of the above requirement. It should be noted that all police and fire classifications did not always have 5 or 6 steps within their ranges. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7414 p.2— To the Mayor and Members of the City Council September 26, 1989 Subject: City of Fort Worth's Performance Pay Plan Pay for Performance. The City of Fort Worth has been recognized for its leadership in making employee pay contingent upon job performance. The City's first open-range (no steps, just a minimum and a maximum), performance-based plan resulted from a City government-wide study conducted by an outside consultant in 1976. The plan was implemented on October 1, 1976 and included eighteen (18) executive level positions. In October 1979, the City Manager implemented a new performance-based compensation plan for department heads and certain special staff level positions. The new pay plan included a written contract of goals and objectives, an annual evaluation of past performance and merit increases based on a performance rating and current position in the range. The salary ranges for individuals occupying positions in these classes were "open" ranges with no steps, but the ranges were divided into quartiles (four divisions) to aid in determining the amount of merit increase. In October 1982, the Executive Pay Plan was expanded to include thirty-five additional classes at the assistant department head and division head level for a total of fifty-three classes covering sixty-three incumbents. In January 1983, A special Compensation Committee was appointed to review and to provide direction for the possible revision of the City's compensation program; the committee reviewed the City's various plans, looking at methodology, procedures, equity, the number and type of classes, and competitiveness. The committee included prominent members of the business community, with extensive experience in management and in the administration of compensation programs. The members of the committee included Harry K. Werst,Consultant to Williamson-Dickie Manufacturing Company; William Connor, Founder and Past President of Alcon Laboratories and Medcon, Inc; Gerson Bernstein, Past Chairman of the Board, Mormig's Department Store; Leon Brachman, Senior Vice President/Special Projects, Petrochemicals Company, Inc.; Earl Hatchettq Vice President-Finance, General Dynamics; Ed Szol, Vice President, Industrial Relations, Bell Helicopter; and Tom Sassman, Vice President and Corporate Manager of Compensation, Texas American Bancshares. The Committee spent considerable time evaluating the plan then in effect and developed suggested refinements for salary structure for the affected management positions. The Committee endorsed the concepts of the performance-based compensation program and recommended the program be extended to additional levels. The 1984 Performance-based Pay Plan included 147 incumbents in executive level positions which included department heads and division heads; this group constitutes the Management Pay Plan. In October 1985, the performance pay plan was extended to professional and administrative employees. This expansion, which is called the Administrative Pay Plan, added 747 employees to the performance-based pay system. In October 1986, the performance-based pay plan again was expanded to include an non-exempt employees excluding Police and Fire Civil Service employees who are covered by the State Civil Service Law. Inclusion of non-exempt classes added 2,644 employees for a total of approximately 3,700 employees covered by the plan. -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7414 --R.3 To the Mayor and Members of the City Council September 26, 1989 Z3 Subject: City of Fort Worth's Performance Pay Plan •oil Pay for Performance - Objectives. There were five (5) goals in the development of our Performance Pay Plan: (1) Internally Equitable. Salary ranges for all positions were developed that fairly reflected the value of each position relative to all others within the City organization. (2) Externally Competitive. Salary ranges for all positions were established (over a three-year period) that are as competitive as the City believes it should be; City Council had approved a goal of setting the maximum range rates in the top 25% of our labor market or at the 75th percentile plus or minus 5%. (3) Personally Motivating. The plan as designed attempts to motivate employees toward specific achievement of essential end results. (4) Effectively Administered. The plan should be structured to facilitate sound analyses of compensation practices throughout the organization and accurate comparisons of the City's salary policy and practice to those of other cities on a timely and on-going basis. (5) A Continuing Program. The plan should be a viable, orderly and integral part of the management process if it is to be responsive to organization dynamics and fulfill requirements for the future. Pay for Performance - Plan Design. The development of a performance pay program was an attempt to more effectively reward performance. Under the previous program, when ranges were adjusted, ALL employees received the range adjustment in the form of an across-the-board or cost-of-living adjustment without regard to performance. Although there were merit steps under the previous plan, the competent or average employee expected to reach the maximum of the range even if his or her performance was only satisfactory. Under the Performance Pay Plan, when ranges are adjusted to market conditions employees do not automatically receive the increase. The competent or average employee can only expect to reach the midpoint of the range; the midpoint of the range is considered to be the "market value of the job." The only way an employee can get to the top of the range is by exceeding the requirements of performance measures for his or her position. Average performers will receive lower rates of pay; only superior performers should receive increases above the midpoint. Enclosure A is a chart which shows the status of increases granted in 1987-88 under the performance pay plan. Increases above 7% reflect adjustments to pay ranges in order to meet the pay policy goal of establishing salaries at the 75th percentile of our labor market or to address problems related to competition in the job market, e.g., attorneys. Enclosure B is a chart, previously given to Council, which shows the adjustments required by job family of the City of Fort Worth salary rates to the 75th percentile of other survey cities or employers. Performance reviews are conducted annually, usually on their anniversary date. The matrix shown as Enclosure C provides the proposed percentages for the performance pay plan if the City Council approved the equivalent of a 4% increase. An employee's salary rate would be based on where his or her current salary is located in the salary range and their level of performance. -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7414 p.5 I it 0 *, To the Mayor and Members of the City Council September 26, 1989 $O pp X Subject: City of Fort Worth's Performance Pay Plan Our current performance pay plan has been developed to more effectively use salary dollars approved by the City Council. Ideally, the plan will not necessarily be the "cheap" way of rewarding employees. The plan, however, should reward those who have exceeded the requirements of their job. Unlike the City's previous plan, the performance pay plan rewards the superior performers and encourages the poorer performer to improve. In summary, the City's Performance Pay Plan is similar to plans in the private sector. It is performance-based and not based on longevity or membership. For the program to work as it was designed, employees must believe that good performance will lead to higher pay. With the state of the economy over the past several years, this has been a difficult challenge for the City's management and the City Council. Department Heads strongly believe the Performance Pay Plan has been an effective management tool and that across-the-board increases do not provide the same positive incentive for employees to be more productive. Departing from the pay strategy started under City Council leadership in 1984 and based upon citizen recommendations should be carefully evaluated. ow DOUGLAS HARMAN -ISSUED BY THE CITY MANAGER FORT WORTH. TEXAS CTX'Y C►IF 3F011;ZX WC)IRXH F>0aSC>WW3E1-' nMPAPL3RXM0WX PERFORMANCE PAY PLAN SALARY INCREASES BY PERCENT FISCAL YEAR 87/88 The following chart lists the number of employees in each pay plan who received the percent increases shown in the first column . The last column shows the percentage of the total number of employees receiving the indicated percent increase. PERCENT MPP* APP* NPP* TOT OF TOTAL 0 . 0 6 36 244 286 9. 4 0 . 5 - 0 . 99 3 2 5 0 . 2 1 . 0 - 1. 99 3 21 78 102 3. 4 2 . 0 - 2 . 99 23 135 494 652 21 . 4 3 . 0 - 3. 99 36 227 583 846 27. 8 4 . 0 - 4 . 99 35 164 386 585 19. 2 5 . 0 - 5. 99 22 98 200 320 10 . 5 6 . 0 - 6. 99 9 60 112 181 5. 9 7 . 0 PLUS 20 19 27 66 2 . 2 TOTALS 154 763 2126 3043 100 . 00 LESS THAN 2% INCREASE 393 12 . 9 LESS THAN 5% INCREASE 2476 81 . 4 LESS THAN 7% INCREASE 2977 97. 8 7% OR GREATER 66 2 . 2 * NOTES MPP - Management Pay Plan ; CM Staff, Department/Division Heads APP - Administrative Pay Plan ; Section Heads , Supervisors , Professional , Administrative NPP - Non-Exempt Pay Plan ; Clerical , Technical , Para-Professional , Public Safety Related, Service, Trades ATTACHMENT A PERSONNEL 9/ 15/89 omrrly OF JFC>nrx WC)]Plrxm i=lmlzsc)mwm]Ll nmRAFzrxmmwrx SURVEY SUMMARY AVERAGE RELATIONSHIP TO 75TH PERCENTILE MANAGEMENT/PROFESSIONAL 4% - 9% CLERICAL 6% - 10% TECHNICAL 3% - 9% LABOR/TRADES 12% - 15% POLICE/FIRE 6% - 8% ATTACHMENT B 40, PERSONNEL 9/15/89 C)F FC>E2.2' WCaRTH PMnSC)hTNEL L7EPAR2'MENT 1989/90 PROPOSED SALARY INCREASE MATRIX PERFORMANCE QUINTILE QUINTILE QUINTILE QUINTILE QUINTILE LEVEL 1 2 3 4 5 OUTSTANDING ( 5) 6% 6% 6% 6% 6% EXCELLENT (4 ) 5% 5% 5% 5% 5% COMPETENT ( 3) 4% 4% 4% 0-28 0 BELOW STANDARD (2 ) 0 0 0 0 0 UNACCEPTABLE ( 1) 0 0 0 0 0 OUTSTANDING This level is normally reserved for those individuals whose outstanding performance is clearly obvious to all . EXCELLENT This level is for seasoned employees whose performance is noticeably better than "Competent" in most and/or major accountability areas . COMPETENT This level is for employees who consistently perform a satisfactory job as defined by job/position description accountabilities. This is a standard performers level . BELOW STANDARD This level is for performance of the job which is noticeably below "Competent" in one or more accountability areas . Improvement is needed before the employee can reach the "Competent" level . UNACCEPTABLE This level is for inexperienced new hires and others whose performance is clearly below acceptability level . Incumbents should either move up in performance level or out of the position in a relatively short time. ATTACHMENT C PERSONNEL 9/ 15/89