WHY A

JOBFAMIWAPPROACH?

s HR and compensation professionals, we knowthere are several approaches for handling organizationaihierarchy and pay guidelines, from point-factorsystems to market pricing to job family ot careerpath systems. All of these systems use market datato develop salary grades or bands.

The point-factor systems were developed morethan 50 years ago, but were fairly staff-tesourceintensive and somewhat confusing to employees'These systems seemed to work in environmentswhere the organization was more stable, which iscertainly not the case today.

As market data became more prevalent and acces-sib1e, companies moved more to market pricing.Jobs are placed into a grade structure based on thecompetitive pay for a job. Where there is no marketdata, jobs are slotted into a level based on the simi-Iaritv to other iobs at that level.

By Jeff Carlsen, Reyes Holdings LLCand Barbara Mannv, Benefits & Compensation Resources

LOOKr) Job families represent a grouping of similar jobs or

a hierarchy of iobs within a functional area, such ascustom€r service, finance and human resources.

t) The number of job families and levels are tailored toreflect the way the management sees the organization'

:) Job families reflect pay levels defined by labor marketsthat are relevant to a set of circumstances and people'management strategy.

. The business case for job familiesis that this type of structure ismore reflective of todav's needs(See Figure 3.)

. Job families avoid the problems withtraditional compensation structuresand broadband approaches.

. There is a focus on job familyprogression, not on tit les and grades.

. Job families create a broader view ofwork and cross-functional knowledge.

. Job families facil i tate acquisit ions.

. They reflect pay levels defined bylabor markets that are relevant toa set of c i rcumstances and people-management strategy.

. They shift focus away from managersmaking frequent decisions aboutcompensation and place thefocus on people progress and jobduty changes.The job family approach has been

successfully implemented in compa-nies with less than 200 employees tocompanies with more than 10,000employees, so the size of the orga-nization is not a l imiting factor. Forexample, Reyes Holdings LLC - thelargest privately held company in theChicago area, with more than 10,000employees - implemented a job familystructure that helps align all three

of its food and beverage distributionoperating units. The structure hashelped create parity and also helps withOffice of Federal Contract CompliancePrograms (OFCCP) and Lil ly LedbetterFair Pay Act compliance.

Depending on the organization'sneeds, requirements and resources,the job family approach can use theevaluation techniques mentioned earlier.

How are Job Families Created?Most managers and employees canreadily outl ine the natural career pathwithin their department. By tappinginto the organizational knowledge

Traditional Pay Programs Today's Needs Job Family Possibilities

Hierarchy, gradations

Job-focused

Slow, bureaucratic

Policy-based; structured

More driven byinternal equity

Flat, delayered structure

Team-focused

Adaptive; mobilityrequired

Flexible; decentralized

External focus

Fewer levels

Fewer labels

Beinforcement forhorizontal or lateraldevelopment

Less structure

Market-driven pay

Area CS Manager (3)

CS Supervisor (6)

Team Leader (18)

Senior CS Rep, (18)

CS Rep. (54)

CS Assistant (18)

Note: Numbers in O are employeesin the posi t ion.

(FA) (Level V)Job fami ly:finance andaooounting

Function: Responsible for a particular accountingfunction or division supported by a number ofprofessional section/location professionals.Ensures that effective procedures are establishedand followed in order to meet business require-ments including management of financial controls.Involved in the development of new accountingsystems to improve financial reporting. Activelyinvolved in management decisions relating tobusiness and strategic planning (e.9., budgetingand financial forecasting).

Job family profile: Responsible for day{o-day operations of variousaccounting operations. General accounting operations includingdebit and credit ledgers, pr€parations of statistics, d€velopment offinancial reports, financial statements, budgeting, financial analysis,decision support, period closing, financial planning, etc.

Education: Accounting degree and professional exam orpostgraduate degree.

Exper ience:10+.

People or process management responsibility: Managementof capital and revenue budgets.

Reporting relationship: Corporate controller or financial leaoer.

Primary facing assumptions: Direct reports, section leaders.

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argument about how many levelsare needed. The challenge is to getagreement on what differentiates theIevels. The documentation used toflow chart career paths in functionalareas is in the form ofjob descriptionsor organizational charts that helpidentify the career growth stages andreporting relationships. Figure 4 showsan example of a customer serv ice (CS)organization chart. This also acts asa flow chart to show the career paththe CS assistant can take to become adi rector , assuming the requis i te sk i l isand experience. The position descrip-tions are used Lo identify the necessaryeducat ion, sk i l ls and exper ience i ttakes to move up the CS career ladder.

The steps to creating job families areas follows:

Step 1. ldentify the Career Paths inEach Functional Area of the OrganizationTypically, human resources wil l meetwith l ine and staff management repre-sentatives to identify the job groupingsand career path levels. Job descriptionsand organizational charts are used toflowchart the career growth and reportingrelationships. Once these elements areagreed upon, specifications are developedthat provide differentiation betweenthe levels based on educat ion. exper j -ence, people or process managementresponsibility, reporting relationship andprimary customer-facing requirements(see Figure 5 on page 68).

Step 2. Align Job Family LevelsThe job family levels are thenreviewed across functional areasdisplayed in a matrix (see Figure 6).Human resources, working closely withkey staff and operational heads, ensurethat the alignment across functionalareas from one job famlly level to thenext makes sense and makes adjust-ments if levels appear to be out^ f ^ 1 ; - - * ^ - +u r d l r B r r I l l t r l t L .

Step 3. Value the Job Family LevelT h c n e v f q f p n i n r r n l r r e c ^ h f . i - i . -

market data for benchmark jobs in eachof the levels. Market data for individualcontributor positions is blended inwithin a pay band level that may havesupervisory positions in it so the

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cEoCorporate vice presidents

Div is ion presidents

Div is ion v ice presidents

Vl: Director, lT

V: Nationalcuslomerservice manager

lV: Areacustomerserv ice manager

l l l : Customerservtcesupervisor/teamleader

l l : Seniorcustomerservice

l : Customerserv ice

CustomerService andPric ing Support

Vl: Director,finance

V: Senior financemanager/divisioncontroller

lV: Financemanager

l l l : Plantcontroller/leadprofessional

l l : Seniorprofessional

l: Professional

Finance andAccounting

Vl: Director,H R

V: Senior HRmanager

lV: RegionalHR manager

l l l : HRmanager/leadprofessional

l l : Seniorprofessional

l: Professional

HumanResources

V: SeniorlT manager

lV: lT manager

l l l : Leadprofessional

l l : Seniorprofessional

l: Professional

IT

Vl: Director,operations/director

V: Senior p lantmanager/seniormanager

lV: Plantmanager/manager

l l l : L i nemanager/leadprofessional

ll: Supervisor/teamleader or seniorprofessional

l: Operationsprofessional

Operat ions

Vl: Director,engineering

V: Seniorengineer ingmanager

lV: Engineer ingmanager

l l l : Leadengrneer

l l : Seniorengrneer

l : Engineer ordesigner/draftsman

Product/DesignEngineer ing

Vl : Begionalsares manageror seniorsales/marketingmanager

V: Regionalsystems manager,sales/marketingmanager or BDM

lV: Accountmanager/manager

l l l : Supervisor/lead professional

l l : Seniorprofessional

l : Professional

Sales andMarketing

Note: Each salary band wil l be developed for each job family level based on market data relevant for that level and wil l not necessarily match the same band level ofanother job family. lf a level is left blank, there is no current position slotted in that level.

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pay band reflects both. Based on themarket data, salary bands are createdfor each job family level.

Step 4. Slot Employeesinto Job Family LevelsHuman resources works with l inemanagement to slot employees intothe appropriate job family level. Thisslotting process takes place withoutproviding the pay band data, so l inemanagement makes the placementbased on the specifications of thejob level, which it helped create,rather than on what the employee iscurrently being paid. A11 employees'salaries are viewed against the paybands that have been developed todetermine if any employee's pay issubstantially over or under the pay

band for the job family level to whichhe/she has been assigned. Humanresources then reviews these outl ierswith line management to determine ifthe placement is correct and, if i t isn't,determines what remedial salary actionsmay need to take place.

The job family allows for currentjob tit les to be maintained in each ofthe levels it has. However, it is recom-mended that over time individualizedjob titles that might have exploded dueto the lack of a disciplined commonjob-tit l ing scheme be moved intomore of a common tit l ing framework.

If common job tit l ing is not animmediate next step, an interim ortransitional measure can be taken.A common job code structure can beused in place of a common job tit l ing

scheme. This wi l l focus people on"what people do" rather than "whatthey are called." At Reyes Holdings thisinterim step was required, as imme-diate tit le rationalization would havedelayed the implementation of theoverall structure.

Step 5. Develop Pay BandsThe pay bands for each level canhave varying range spreads based onthe company's philosophy. The payband can be designed with a tradi-t ional range spread of 50 percent(see Figure 7) or it can have abroader range spread of 70 percent to75 percent. The company can decidei f i t wants the pay band to be set upin th i rds or quar t i les.

Within each job group, the overallaccountabil ity, responsibil i ty andcomplexity of the work defined withineach job level differentiates one fromthe other. The distinctions within eachjob level are a progression from onelevel to the next. The descriptors foreach job level are consistent across theorganization. Experience, performanceand job proficiency drive where anindividual employee would generallyfall within the job group. As an i l lustra-tion of what can drive variation in pay,someone not fully experienced or whois developing the full skil l set for aposition l ikely may have a base salarythat is lower in a compet i t ive range,

A pay band has a lower and upper range to it that applies to all positions related to that jobcode and level within a job group. The pay band is divided into sections so that differencesin skill levels and competencies can be appropriately recognized and rewarded. Market dataare used to create the pay bands.

Lower mafket zone Midmarket zone Upper market zon€

Market zons maximum(80% of. market value)

Market value (100%) Market zone maximum(12O% ot market value)

Each pay band's minimum is 80 percent of the midmarket zone; the maximum is 120 percentof the mid-market zone. The pay band has a spread of 50 percent from the lower end of thezone to the upper end (120 percent/8o percent-l00 percent = S0 percent).

Below marketzone minimum

Lower market zone Midmarket zone Upper market zone Above marketzone maximum

ReviewEmployees paid belowmarket zone minimummay need adjustmentto minimum

Partially meets perfor-mance expectations(meets some, butnot all performanceexpectations)

New employeeLearners(gaining neededskills/experience)

Meets performanceexpectationsFul ly competent(all the neededskills/experience)

Consistently exceedsperformanceexpectationsTop performer,highly experiencedPossesses specialskills (beyond normalrequirements)

ReviewEmployees paid abovemarket zone maximummay be "red-c i rc led"or frozen

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With the job familylevel specifications,managers can workwith employeesto develop

SPT@ilFil@a^\l /7nn n /A\UtrU]LLUto grow theircareers.

depending on his or her education andexperience background. Time in posi-tion alone does not determine where anindividual's salary is positioned in thecompetit ive marketplace; performanceand sk i l l set are st rong determinants(see Figure 8).

Step 6. Communicate withManager and EmployeeIt is important that the communicationof the job family structure be transparentand clear to managers and employees.

It is also helpful to provide managerst ra in ing on the system and providethem with talking points so they knowhow to communicate the new struc-ture to their employees. Managersshould provide employees with aconfirmation statement that showsthe employee's personal information,current salary, salary increase andeffective date, new base salary(if appropriate) and the relationship

of the base salary to the midpointor midmarket zone of the pay band.It is also helpful to provide managerswith a guidebook as a reference toolfor future salary actions.

The employee should recelve abooklet that summarizes the newprogram structure, along withfrequently asked questions.

With the job family level specifi-cations, managers can work withemployees to develop specific skil lsto grow their careers.

Step 7. Oversee Systems lmplementationEach job family level can be assigneda unique code that identif ies thejob level and the Equal EmploymentOpportunity (EEO) category, as wellas the job's Fair Labor Standards Act(FLSA) status.

Each job code can become the driverfor various compensation, benefitsand HR programs designated in theHRIS system. The system can alsofeed a company's time and attendancesystem. The job code can be usedto automatically populate the EEOcategory and salary type (i.e., exemptand nonexempt). Job codes can facii i-tate salary planning if they are l inkedto the base pay bands.

How Job Family Levels Help inToday's Economic Turmoil andthe Regulatory EnvironmentThe job family approach fits well witha pragmatic management style. WithHR staffs being resource-constrainedand wi th companies st ruggl ing tomainta in prof i tab i l i ty dur ing th iseconomic downturn, job familiesoffer some economic advantages overother job evaluation approaches in thefollowing ways:. More effective use of the salary

budget spend because it is tailoredto the organization's way ofdoing business

. Less compiicated and less labor inten-sive to maintain and administer

. Creates a better Ledberrercompliance environment andfacil itates OFCCP compliance.In today's economic climate, the

business challenge is to be flexibleand adaptable to be poised for upturnsand downturns. The job familyapproach allows companies to adaptto changes in the competit ive worldin which we work more quickly thanother s t ructures might . Companiescan accommodate combining jobsor eliminating them without creatinghuge impediments to the workforce orits supporting systems or processes. EE

ABOUT THE AUTHORS

Jeff Carlsen is vice oresident of human resources

at Reyes Holdings LLC and can be reached at

jcarlsen@reyesholdings.com or 847 -227 -6688.

Barbara Manny is president of Benefits &

Compensation Resources and can be reached at

b-cresources@msn.com or 847-236-1208.

@rtutFor more information related to this article:

www.worldatwork.org

Type in any or a l l of the fo l lowing keywordsor phrases on the search l ine '

o Point-factor. Job+families. Pay+hierarchy.

www.worldatwork.org/booksto re. Building Pay Structures: How-To Series

for the HR Professional. Determining Compensaflon Cosfsr

How-to Series for the HR Professional. When Pay Plans Go Wrong: Managing

Compliance /ssues Before the Audit.

www.worldatwork.org/education. Base Pay Administration

and Pay for PerformanceCertification Course: C4

. Market Pricing - Conducting aCompetitive Pay AnalysisCeriification Course: C1 7

. Compensation Fundamentals, Seminar.

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