Compensation System Overhaul
As of Jan. 1, 2007, The Johns Hopkins University rolled out HopkinsOne, its new enterprise resource planning system, replacing legacy systems that did not include an HR information system. With 28,000 university employees and 44,000 employees in the entire Hopkins enterprise, we needed a much more timely and reliable way to obtain detailed information about our workforce. Our HopkinsOne project also includes seven shared services centers that centralize administrative transactions for both the university and health system, which are two separate corporate entities. Among these is the HR Shared Services Center, which centralizes most personnel actions and benefits-related transactions. Real-time payroll information available online is only one of the benefits of the new service center. Previously, payroll took place through each division, as did recruitment, employee relations, and maintenance of HR personnel records. By isolating most of the transactional work within our services center, our divisional HR personnel can now focus more attention on the strategic human capital issues facing managers across the enterprise.
From an HR perspective, we see these broad technology and service advances as foundational to some of the strategic changes we needed to make in the compensation and benefits arena—our total rewards. Our institution has long been known to have excellent benefits. For instance, in comparing our medical benefits to the overall market, while most industries today average a 75/25 employer-employee cost-sharing benefit, we are currently near an 85/15 split. Our goal is to gradually shift closer to an 80/20 cost-sharing arrangement and to seek even more aggressive means for controlling our benefits costs. In the face of increased economic pressures, we recognize the need to make adjustments so that we can afford to maintain our overall quality of benefits that provide such high value to employees.
When it comes to compensation, our reputation for salaries has also been very good in the past, but not great. In thinking through our total rewards strategy, we decided it was time to rebalance our benefits and pay systems to be competitive in the market so that we can maintain our edge in attracting and retaining the best talent for the long term. In looking to bring these two tracks together, we saw a need to tweak our benefits and to make a substantive overhaul to our compensation system to prepare for changing workplace needs and expectations.
The Old Way of Paying
For more than 20 years, JHU operated on a “basic abilities” system, with pay grades assigned to positions based on certain knowledge and ability factors. Among the administrative problems associated with this system were backlogs of reclassification requests and a reliance on reclassifications to reward staff. Compensation analysts, supervisors, and employees spent excessive time discussing job duties and pay grades. The system was not easy to understand and steered attention away from appropriate strategies for rewarding and retaining high-performing employees.
Likewise, a common complaint among employees was that to grow professionally, many felt they had to leave their department to take a higher-level position since there was no real opportunity for recognition or advancement where they were. Instead of spending so much time and energy on issues around pay grade, we wanted employees to get away from thinking about what grade or title they are and instead think about their role and the contributions they can make to their departments and to the institution.
Clearly, the university had outgrown its current compensation system. A new program was needed that would be flexible, more responsive to the market, and provide value-added support needed by managers. We also wanted a system that could reward staff in a timelier manner. With the upcoming changes that HopkinsOne would bring, we set out to re-engineer our staff compensation program.
Process for Change
In 2005, with the assistance of HR consulting firm Watson Wyatt, JHU embarked on a study of its staff compensation program. The objective of this study was the redesign of the current program for nonbargaining unit staff, including its job classification system, salary ranges, and pay policies and procedures. Corporate officers, faculty, and other academic appointees, fellows, students, and bargaining unit staff were not included in this study.
As part of our preliminary research, we collected input through an online universitywide compensation survey and through focus groups. Among the key elements managers identified that they wanted was a system to:
- reward important work accomplishments, increased skills and competency, and contributions to university goals;
- encourage career and professional growth; and
- give managers more flexibility and opportunity to reward and recognize staff.
Most frequently identified as problems with the old system were rewarding important accomplishments, increasing salary due to increased duties, rewarding increased skills and competencies, identifying and making market adjustments, and determining annual increases. These problems stemmed from established salary levels and percentages, the time it took to obtain decisions, required justification and documentation, and the required number of signoffs and approval from divisional HR staff.
Watson Wyatt helped us build a model and we filled in the gaps. We formed an implementation team composed of staff from different areas of HR and formed advisory groups representing different job families across the university. The focus of the implementation team was to examine pay policy issues and concerns; update and develop new pay policies, procedures, and guidelines; and work out rollout logistics and processes. About 10 different advisory groups of six to eight staff each were the subject matter experts who provided input to the compensation staff. These advisory groups helped us ensure the appropriateness of new job classifications, salary ranges, and titles.
We launched the new program in July 2006, rolling it out among all divisions with the exception of our IT group, which we are currently in the process of doing. Because of the wide differences and complexity of IT jobs, as well as all the work our IT staff was engaged in leading up to the launch of HopkinsOne, we intentionally left this group until last.
Features of the New System
In a nutshell, the new system eliminates pay grades, replacing 17 grades with six levels. Each position is assigned a role, a level, and a salary range that is tied more closely to the market based on what other organizations are paying for comparable jobs.
Roles can be either an operations, professional, or leadership role. Positions are also assigned one of six levels based on their contribution to the organization—for instance, contributions may range from performing routine activities to engaging in collaboration and problem resolution to implementing strategic direction. Nine factors are used to evaluate a job and to determine the level assigned: knowledge, problem solving, impact, interpersonal skills, supervisory responsibility, mission service orientation, teaming skills, innovation, and managing change. These represent a combination of typical job evaluation factors and specific factors identified by our leadership as critical to success in the Hopkins environment. Finally, salary ranges are assigned for positions based on what the job market is paying for similar types of jobs.
In the former system, dissimilar jobs were often found in the same salary range. In the new system, there is a set of 8 to 10 salary ranges for every role. The salary range is assigned based on market data for that job. If no market data is available for a specific job, the job is slotted into a range based on other factors, such as other jobs in the department, similar jobs in the university, or recruitment and hiring experience.
Working Out the Kinks
One dilemma in launching our new system is that we still haven’t found a good way to talk about it without using old terminology. For instance, while we have redefined the term, we still talk in terms of promotion. The new system allows more opportunities for salary increases within each level, and there are fewer opportunities for traditional promotions from one level to the next. Some employees have raised this as a concern, but we have asked employees to give the new system at least a year before they reach judgment or before we begin to do any tinkering with it. Instead, we’ve asked employees to try to understand what this new system means for them and for their salary and growth opportunities. Perhaps the biggest surprise to me has been that instead of focusing on details about how salary ranges are assigned, the most important thing to many employees is their title.
Breaking Free From Titles
One important goal of this new system was to tackle job titles. Under the old system, there were many grades, with very small differences between them. Therefore, reclassifying jobs to a higher pay grade with a different title was one of the only ways to recognize and reward employees. As a result, jobs in different grades weren’t really that different, and so it became difficult to judge internal equity and to identify like positions. This was one of the criticisms often voiced by staff about the old system.
With our new classification system, we changed job titles in some instances to be more consistent across the university by better grouping positions whose core functions are similar. We also tried to achieve consistency of titles compared with those in the external labor market. When compensation analysts compare a job to data available in market surveys, they compare the primary duties and responsibilities of the job. As a result, some titles had to change to ensure we were making the appropriate comparisons to the market. Through this process, we also ended up consolidating some titles. For instance, we used to have three categories of administrative assistants. We combined these into one title of administrative coordinator with wider pay ranges.
Management and Administrative Benefits
The new system is market-based, externally competitive, and internally equitable. It is also administratively less cumbersome. The new system eliminates many of the administrative problems associated with the old classification system, including long waits for reclassification, and a frequent lack of clarity about why similar jobs were assigned different grades. Likewise, if market demand changes for a particular position, we can now more easily make internal adjustments accordingly.
The new system is also more manager friendly, giving managers greater responsibility and accountability as they work in partnership with human resources. The university also implemented more responsive pay policies and procedures to better enable managers and supervisors to reward and recognize their staff based on significant additional responsibilities or changes in job duties.
The new system is also better suited to recognize individual performance and promote career advancement. By focusing on their roles and contributions to the institution, individual employees also have greater opportunities for reward and professional growth.
Focusing Our Workforce on Shared Goals
The new system better serves employees by encouraging them to develop within their current job with clearly defined milestones and performance expectations they can achieve without advancing to the next level. One overall impact of the new system is that it requires greater interaction between employee and supervisor as they together develop a road map of career and professional development.
Overall, the initial feedback we are getting from employees is that they do seem to understand the need for the changes we are making and appreciate having a defined way to make contributions within their current jobs. As such, we believe we are achieving a primary goal of the new system—that is, making clear to staff that the more they engage in improving their skill levels and seeking new ways to contribute, the greater their opportunities for reward.
When we conduct a full review of the new program, the first thing we will do is analyze the impact of the system and how fast employees are moving up through pay ranges. We will also find out if managers are feeling better about their ability to reward staff, and whether employees are feeling valued.
The driving force behind JHU’s new roles and contributions-based compensation system has been to develop a pay system that the institution can use to shape the quality of our workforce—a workforce that will be focused on achieving shared institutional goals and individual milestones rather than comparing salaries, pay grades, and titles. We believe we have designed and implemented a system that will do just that.
Charlene Moore Hayes is vice president for human resources, The Johns Hopkins University, Baltimore; e-mail: email@example.com