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The SESCO Report – February 2013

Does Your Organization Have a Compensation Philosophy?

When SESCO assists employers throughout the country in challenging and updating compensation systems and practices, one of the most common issues that we find is the client has not considered compensation philosophy as the benchmark to an effective compensation system. Further, philosophy is not understood or appreciated by senior managers or human resource staff — the key in ensuring an effective compensation philosophy and system is successful. If senior management and human resource professionals do not understand, believe in or support an organization's compensation philosophy and plan, then ultimately the plan will fail. It will fail at a minimum in its credibility with employees and it will also impact the organization's culture and success.

Consider the following sample compensation philosophy. Further, SESCO is available to assist your organization in developing compensation philosophy as well as compensation plans to include analyzing your organization's position in the market, defining your strategy and developing a sustainable pay structure. We then can assist in implementation (affordability and communications) as well as training management, human resource professionals and employees.

ABC Company
Compensation Philosophy

To provide the assurance that ABC Company has an equitable and competitive method of compensation, we have developed a systematized wage and salary administration program to reflect individual growth, achievement and contribution, while acknowledging the relative value of all positions within the organization. The key tenets of our compensation program include:

1. Maintaining a proper internal relationship between the wages of all positions within our organization to reflect the difference in each position according to its responsibilities, required skills, and demands. In meeting this tenet, the ABC Company's Human Resource Team carefully assessed and evaluated every position within the organization utilizing a job factoring program. The result of this intensive study was the proper ranking of positions into labor grades based upon responsibilities, required skills and demands of the position. This evaluation is the benchmark of our compensation system ensuring internal fairness and equity.

2. Rewarding job performance and increased contribution with increased compensation. ABC Company has developed and implemented a comprehensive performance management program, thereby ensuring an effective review of an individual's performance based upon the job responsibilities as defined. To further support this effort, members of the management team who are responsible for conducting performance reviews have undergone professional training and development on how to conduct performance reviews and effective performance management techniques.

3. Updating the compensation program on a regular basis to ensure that our wages and salaries remain competitive, to the best of our ability based upon financial realities. To support this key tenet, ABC Company's Human Resource Staff will conduct and/or obtain wage survey studies with like organizations within the region that we operate.

4. Developing our "right price" for each and every position within the organization. This right price is the blending of three (3) elements – our ability to pay, our internal labor grade system and market studies. Utilizing these three (3) elements, we have developed our "right price" for each and every position within our organization and it is our desire to pay these rates assuming acceptable employee performance.

The Basics in Developing a Compensation Plan

As employers, it is easy to ignore compensation during tough economic times, especially when profit margins are ever tightening or when in the red. However, it is critical that you do develop a compensation plan and actively discuss and manage compensation even when most companies have frozen and/or are providing a small across-the-board increase to all employees. It is critical because that key, best performing employees are your highest turnover risk — those who are truly ensuring success during tough economic times. An organization can ill afford to have key employees who are at the heart of their success leave the organization, thus potentially crippling the organization.

Keys to successful compensation programs include:

1. Retain critical employees — retention is critical more than ever.
2. Don't over pay a dime — organizations do not have profits to burn.
3. Pay everyone fairly so that they can focus fully on their jobs and work and not internal inequities and perceived favoritism.

In developing a compensation plan, key employee retention seems to be frequently ignored in designing an effective compensation system. Consider the following steps for developing a sound compensation program:

•Step 1

-Get buy-in from company leadership at all levels.

-Ensure job descriptions are up to date, accurate and all employees have a job description/title.

-Develop compensation philosophy — decide how competitive the organization wants to be, re: lead the market, meet the market or lag the market with recognition to affordability and benefit offerings.

•Step 2

-Perform salary benchmarking.

-Select sources of salary market data including:
•published/traditional surveys — not recommended
•internet surveys — recommended with caution
•custom surveys — recommended which are specifically designed for your industry and region

•Step 3 — Establish pay grades and salary ranges.

-Create pay grades that reflect internal pay equity, but also provide flexibility in which to negotiate offerings to key managers and performers within the organization.

-Calculate the midpoint of each and every salary ranges which is the median value of the aged, weighted market data for the positions.

-Determine salary range widths by position. For example, a recommended, general rule for salary spreads include:
•nonexempt/hourly positions — 40% spread
•exempt positions — 50% spread
•executive level positions — 60% spread

-Calculate the minimum and maximum of each salary range. The final step to creating the salary range is determining a minimum and maximum for each range. To calculate the minimum, follow these steps:

•Divide your range spread percentage in half. Then, take your midpoint and divide it by 1.XX (XX = half of your range spread).

•For example, if your midpoint is 30,000 and you want a width of 40%, then you would divide 30,000 by 1.20. This equals 25,000. Twenty-five thousand (25,000) is your minimum for the range.

-To calculate the maximum, take your minimum and multiply it by 1.XX (XX equals your range spread).

•For example, if your minimum is 25,000 and your width is 40%, then you would multiply 25,000 by 1.40. This equal 35,000. Thirty-five thousand (35,000) is your maximum for your salary range.

•Step 4 — Complete compensation analytics.

-Analyze employee pay. Once you have created formal salary ranges, you will want to make sure that you compare your employees' or incumbents' pay against the typical range. Determine if you have employees who fall below the minimum or over the maximum (red-circled). If you have these situations, you will want to include an implementation plan for how to deal with employees that fall outside your typical salary range.

-Choose to green or red-circle, it may be necessary and adviseable to bring any employee below the minimum of the salary range up to the range minimum or even higher. Or, you may want to consider implementing a red-circle policy for freezing salaries of those who are above the top of the range.

•Step 5 — Be consistent and schedule regular updates.

-Once you have developed a formal compensation plan, consistent compliance to your documented pay practices and policies are critical to defend against charges of pay inequity from employees as well as outside agencies such as the EEOC. Also by formalizing your compensation strategy, you levitate your company to what is working to the best in its industry in every way. This is a great message to send to current employees, potential employees as well as competitors.

Contact SESCO to discuss a review, update or developing a new compensation plan for your organization.

Ten Reasons Employees Resist Change

Leadership is about change, but what is a leader to do when faced with resistance? Resistance to change manifests itself in many ways, from foot-dragging and sloth to petty sabotage to outright rebellions. The best tool for leaders of change is to understand the predictable, universal sources of resistance in each situation and then strategize.

Consider the following SESCO recommendations:

Loss of control. Change interferes with autonomy and can make people feel that they've lost control over their territory. Our sense of self-determination is often the first things to go when faced with a potential change coming from someone else. Smart leaders invite others into the planning process, giving them "power" and subsequently ownership.

Excess uncertainty. If change feels like walking off a cliff blindfolded, then people will reject it. People will often prefer to remain mired in misery than to head toward an unknown. To overcome resistance requires a sense of safety as well as an inspiring vision. Leaders should create certainty of process, with clear, simple steps and timetables.

Surprise, surprise!
Decisions imposed on people suddenly, with no time to get used to the idea or prepare for the consequences, are generally resisted. It's always easier to say "No" than to say "Yes." Leaders should avoid the temptation to craft changes in secret and then announce them all at once. It's better to plant seeds — that is, to sprinkle hints of what might be coming and seek input, i.e. employee opinion surveys.

Everything seems different
. Change is meant to bring something different, but how different? We are creatures of habit. Routines become automatic, but change jolts us into consciousness, sometimes in uncomfortable ways. Too many differences can be distracting or confusing. Wherever possible keep things simple and familiar. Remain focused on the important things; avoid change for the sake of change.

Loss of face. By definition, change is a departure from the past. Those people associated with the last version — the one that didn't work, or the one that's being superseded — are likely to be defensive. When change involves a big shift of strategic direction, the people responsible for the previous direction dread the perception that they must have been wrong. Leaders can help people maintain dignity by celebrating those elements of the past that are worth honoring, and making it clear that the world has changed.

Concerns about competence.
Can I do it? Change is resisted when it makes people feel stupid. They might express skepticism about whether the new software version will work or whether digital journalism is really an improvement, but down deep they are worried that their skills will be obsolete. Leaders should over-invest in structural reassurance, providing abundant information, education, training, mentors, and support systems. A period of overlap, running two systems simultaneously, helps ease transitions.

More work.
Here is a universal challenge. Change is indeed more work. Those closest to the change in terms of designing and testing it are often overloaded, in part because of the inevitable unanticipated glitches in the middle of change. Leaders should acknowledge the hard work of change by allowing some people to focus exclusively on it, or adding extra perqs for participants (meals? time off? bonuses?). They should reward and recognize participants — and their families, too, who often make unseen sacrifices.

Ripple effects.
Like tossing a pebble into a pond, change creates ripples, reaching distant spots in ever-widening circles. The ripples disrupt other departments, important customers, people well outside the venture or neighborhood, and they start to push back, rebelling against changes they had nothing to do with that interfere with their own activities. Leaders should enlarge the circle of stakeholders. They must consider all affected parties, however distant, and work with them to minimize disruption.

Past resentments. The ghosts of the past are always lying in wait to haunt us. As long as everything is in a steady state, they remain out of sight. But the minute you need cooperation for something new or different, the ghosts spring into action. Old wounds reopen, historic resentments are remembered — sometimes going back many generations. Leaders should consider gestures to heal the past before sailing into the future.

Sometimes the threat is real. Now we get to true pain and politics. Change is resisted because it can hurt. When new technologies displace old ones, jobs can be lost; prices can be cut; investments can be wiped out. The best thing leaders can do when the changes they seek pose significant threat is to be honest, transparent, fast, and fair. For example, one big layoff with strong transition assistance is better than successive waves of cuts.

Contact SESCO to assist in preparing for and managing change.

SESCO Introduces Online Employee Satisfaction Survey Program

SESCO has been conducting Employee Satisfaction Programs for over 50 years. Our first satisfaction programs were in the form of face-to-face interviews with employees reporting feedback and recommendations to management. The survey process then evolved into paper and pencil surveys (still available today and by far the most effective with employees), to "mail in" surveys and now online surveys.

The online survey maintains at its core SESCO's validated survey program as studied and validated by the University of Tennessee with a 93% validation. The only survey on the market that has received any such study and validation.
One of the major challenges to online surveys is convincing employees (particularly the older generation) that the survey is, in fact, confidential and viewed only by the survey consultant/firm. If properly planned and communicated, this valid challenge can be overcome.

Please contact SESCO to discuss planning and conducting one of the most effective and beneficial human resource management tools available — SESCO's proprietary Management/Employee Satisfaction Survey Program.

SESCO Adds Library/Research Tools

In a continuing effort to ensure SESCO clients receive the best possible human resource management services available today, a 360 degree approach, SESCO has added the following services which are available to clients through our Professional Service Agreement:

•PayScale– PayScale provides market pricing and compensation solutions to include:

–Marketing price specific positions

–Real-time data updated daily

•Affordable Care Act Law – Explanation and Analysis – a CCH research and library system

•FMLA, ADA Leave Advisor – a CCH library and research program

•Department of Labor – White-Collar Exemption Assessment Tool – a CCH library and research tool

These tools enhance SESCO's already large online as well as hard copy library, research and resource center. All tools are designed to assist SESCO's professional consultants in providing expert, timely and accurate support to SESCO's retainer clients on a daily or as needed basis.

SESCO Client Feedback

"Jamie, great job with today's webinar (Affordable Healthcare Law). It was so much information to cover, but you made it understandable in a well-paced presentation. Well done.

A few of our staff members were listening and were very impressed."

~ Faye Bonini — National Funeral Directors Association

Special Insert -Spring Seminar Series 2013

Seminar Agenda

Effective Leader/Manager – March 13-14, 2013 (Richmond, VA)
March 13-14, 2013 (Bristol, VA)

Using Your Management Style Effectively
Effective Leadership Skills
Practicing Performance Management
Setting Goals and Motivating Employees
Positive Approach to Discipline
Supervision Basics — EEO, ADAAA, FMLA, EFCA, Wage-Hour, Safety Compliance

Human Resources – The Basic Course – April 10-11, 2013 (Richmond, VA)
April 10-11, 2013(Bristol, VA)

Pre-employment Recruiting, Screening, and Hiring
The Importance of Employee Handbooks and Clear Discipline Policies
Determining Pay Rates and Developing Compensation Systems
Effective Performance Appraisal Systems
EEOC and Wage-Hour Regulations and Practices
ADA, FMLA, COBRA, Workers' Comp Compliance

Human Resources – The Advanced Course – April 24, 2013 (Richmond, VA)
April 17, 2013 (Bristol, VA)

Union Avoidance/Awareness
Responding to EEOC Charges
OFCCP Compliance
Strategic Planning for the Human Resource Department

$375.00 per person for 2 day classes and includes comprehensive take-home materials ($275.00 for 1 day)

Richmond, Virginia Location:
Virginia Community Healthcare Association (VCHA)
3831 Westerre Parkway — Henrico, VA 23233-1330

Bristol, Virginia Location:
Courtyard by Marriott
3169 Linden Drive — Bristol, VA 24202

Earn 12 HRCI Credits and 1.6 CEU Credits for Effective Leader/Manager seminar
Earn 13 HRCI Credits and 1.6 CEU Credits for Human Resources – The Basic Course
Earn 6.5 HRCI Credits and .8 CEU Credits for Human Resources – The Advanced Course

For complete information and registration click HERE or contact Lacey Johnsonl by phone at 423-764-4127 or e-mail: to register.