Broadbanding in the industrial sector
96
BROADBANDING IN THE INDUSTRIAL SECTOR by Jaap Smit Nel (9607210) SHORT DISSERTATION Submitted in partial fulfilment of the requirements for the degree MAGISTER COMMERCII in BUSINESS MANAGEMENT in the FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES at the RAND AFRIKAANS UNIVERSITY SUPERVISOR PROFESSOR WOLHUTER BACKER MAY 1999
Transcript of Broadbanding in the industrial sector
BROADBANDING IN THE INDUSTRIAL SECTOR
by
Jaap Smit Nel (9607210)
SHORT DISSERTATION
Submitted in partial fulfilment of the requirements for the degree
MAGISTER COMMERCII
in
BUSINESS MANAGEMENT
in the
FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES
at the
RAND AFRIKAANS UNIVERSITY
SUPERVISOR
PROFESSOR WOLHUTER BACKER
MAY 1999
Broadbanding in the Industrial Sector
EKEKITIVE PW16
In recent years many South African companies made substantial progress in
penetrating the global market. This presented a vast array of opportunities, but
also fierce competition. In this study it is indicated that broad banding are
permitting organisations to operate more effectively in the business environment.
Consequently, it is the objective of this study to gain insight into broad banding
from the South African industrial perspective, assess the factors and propose
guidelines that are needed in order for broad banding to be successful.
In the literature study the traditional and modern organisation structure and
remuneration systems are contrasted and the importance of the change process in
achieving the desired state is emphasised. It is shown that broad banding aligns
with the concept of the modern organisation and to arrive at this state a disciplined
and logical approach must be followed. Broad banding is identified as a
compensation system that not only facilitates the change process to the modern
organisation, but also provides a solid foundation to build upon
The second part of the literature study addresses many of the questions
surrounding broad banding and provides guidelines for the design and
implementation of broad banding. The study presents amongst others the
background of broad banding, design and implementation aspects, remuneration
within bands, controlling cost, communication and training.
A South African company within the industrial environment formed the basis of the
practical study. The forces initiating the broad banding process are identified and
discussed and the resulting remuneration strategy presented. A review of a the
three-stage process follows which constitutes a pre-implementation,
implementation and post-implementation phase. The above process is scrutinised
and a number of learning points developed by the author. A recommended model
is provided for implementation of broad banding. The findings from the literature
research and the industrial company are combined to provide guidelines on what
to expect and how to enhance success.
1. OVERVIEW AND ORIENTATION 1
1.1 INTRODUCTION 1
1.1.1 Reasons for this study 1
1.1.2 History of company 1
1.1.3 Factors for success 2
1.2 PROBLEM DEFINITION 3
1.2.1 MMC in a global environment 3
1.2.2 The need for change 4
1.2.3 Changing to a performance culture 4
1.2.4 Rationale for choosing broad banding 5
1.3 OBJECTIVES OF STUDY 6
1.4 METHODOLOGY 6
1.5 RESTRICTIONS 6
1.6 OVERVIEW OF STUDY 7
2. LITERATURE STUDY: THE MODERN ORGANISATION
2.1 INTRODUCTION
2.2 DRIVING FORCES ACTING ON THE TRADITIONAL ORGANISATION
2.3 THE GAP BETWEEN THE TRADITIONAL AND MODERN ORGANISATION
8
8
9
1 0
2.3.1 Organisational structure 10
2.3.2 Remuneration system 12
2.4 CHANGE PROCESS 13
2.4.1 Kurt Lewin change model 13
2.4.2 Predicting impact 15
2.5 SUMMARY 16
3. LITERATURE STUDY: BROAD BANDING 18
3.1 INTRODUCTION 18
3.2 BACKGROUND 19
3.2.1 What is broad banding? 19
3.2.2 History 19
3.3 To CHANGE OR NOT TO CHANGE? 20
3.3.1 Rationale for implementing broad banding 20
3.3.2 Implementing broad banding: The risks 22
3.3.3 Two approaches to broad banding in industry 25
3.3.4 Union perspective of broad banding 26
3.4 DESIGN AND IMPLEMENTATION ASPECTS 28
3.4.1 Design Teams and Coverage 28
3.4.2 Time to Develop Broad banding 30
3.4.3 Readiness 30
3.4.4 Organisational Culture 32
3.4.5 Placing Positions into Bands 33
3.4.6 Administration of bands 35
3.5 REMUNERATION WITHIN BANDS 37
3.5.1 Changes in broad banding practises towards competencies 37
3.5.2 Methods of paying within bands 39
3.5.3 Cost control factors 40
3.5.4 Pay equity 41
3.6 COMMUNICATION, TRAINING AND MONITORING 41
3.6.1 Communication 42
3.6.2 Training 42
3.6.3 Monitoring 43
3.7 FEEDBACK FROM BROAD BANDED COMPANIES 43
3.7.1 The trade-off between hierarchy and flexibility 43
3.7.2 Training and communication dictates success 44
3.7.3 Benefits achieved from broad banding 44
3.8 FUTURE OF BROAD BANDING 45
3.9 SUMMARY 46
4. IMPLEMENTATION OF BROAD BANDING 48
4.1 INTRODUCTION 48
4.2 THE PROCESS FOLLOWED 49
4.2.1 The two phased approach 49
4.2.2 The process 49
4.3 FORCES INITIATING CHANGE 51
4.3.1 Broadbanding driving forces 52
4.3.2 Remuneration Strategy 54
4.4 PRE-IMPLEMENTATION PHASE 56
4.4.1 Establish representative team 56
4.4.2 Time span 56
4.4.3 Design 57
4.4.4 Remuneration within bands 60
4.5 IMPLEMENTATION PHASE 62
4.5.1 ' Prepare stakeholders 62
4.5.2 Establish agreements (Influences on the broadbanding process) 62
4.6 POST-IMPLEMENTATION 63
4.6.1 Monitoring 63
4.6.2 Training 63
4.7 LEARNING POINTS FROM THIS PROCESS 64
-11I-
4.7.1 Pitfalls 64
4.7.2 Impact of organisational climate 67
4.7.3 Strategic factors in the process 68
4.8 FUTURE PROSPECTS: THE PROCESS STREAM CONCEPT AND SKILL-BASED PAY. 69
4.8.1 Steps in applying the process stream concept at MMC 69
4.9 SUMMARY 72
5. CONCLUSIONS AND RECOMMENDATIONS 74
5.1 INTRODUCTION 74
5.2 FUNDAMENTAL ASPECTS OF A BROAD BANDING PROGRAM 74
5.2.1 Expectations of broadbanding 74
5.2.2 Measures to enhance the chances of success 77
5.3 PROPOSED BROAD BANDING PROCESS TO FOLLOW 82
5.4 FUTURE OF BROADBANDING 85
5.5 FUTURE RESEARCH 85
6. BIBLIOGRAPHY 86
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., 2.4 r.nri-, a)
FIGURE 1-1 SAMANCOR SHAREHOLDERS AND DIVISIONS 1
FIGURE 1-2 STRUCTURE OF STUDY 7
FIGURE 2-1 PROCESS OPTIMISED ORGANISATION. (PETERS, 1996) 10
FIGURE 2-2: TRADITIONAL HIERARCHICAL ORGANISATION. (PETERS, 1996) 10
FIGURE 2-3 THE KURT LEWIN CHANGE MODEL (O.D.RESOURCES ,1995) 13
FIGURE 3-1 PRIMARY REASONS FOR IMPLEMENTING BROAD BANDING 22
FIGURE 3-2 PRIMARY REASONS FOR NOT IMPLEMENTING BROAD BANDING 24
FIGURE 3-3: THE SALARY ADMINISTRATION SPECTRUM INDICATING THE DIFFERENCE BETWEEN BROAD
GRADES AND CAREER BANDS. 25
FIGURE 3-4 CAREER BAND RANGES 26
FIGURE 3-5 BROAD-GRADE RANGES 26
FIGURE 3-6 METHODS USED TO PLACE POSITIONS INTO BANDS 34
FIGURE 3-7 JOB EVALUATION METHODS USED BEFORE AND AFTER BROAD BANDING. 35
FIGURE 4-1 OUTLINE OF INITIAL PROCESS FOLLOWED IN BROADENING OF BANDS 50
FIGURE 4-2: REMUNERATION STRATEGY 54
FIGURE 4-3 THE PHASE 1 CONVERSION OF PATERSON BANDS TO BROAD BANDS 58
FIGURE 4-4: THE INDUSTRIAL PROCESS CAN BE DEFINED IN TERMS OF INPUT, TRANSFORMATION AND
OUTPUT. 70
FIGURE 4-5: ILLUSTRATIVE EXAMPLE OF THE PROCESS STREAM CONCEPT APPLIED TO A POWDER MILLING
OPERATION 71
FIGURE 4-6: STRUCTURE INDICATING ALL PROPOSED LEVELS WITHIN MMC 71
FIGURE 5-1 PROPOSED PROCESS TO FOLLOW 82
TABLE 2-1: THE CONTRAST IN STRUCTURE BETWEEN THE TRADITIONAL AND THE MODERN
ORGANISATION. 12
TABLE 2-2: THE CONTRAST IN REMUNERATION BETWEEN THE TRADITIONAL AND THE MODERN
ORGANISATION. 13
TABLE 4-1: REPRESENTATIVE DESIGN TEAM 56
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1
1. OVERVIEW AND ORIENTAtION
1.1 Introduction
1.1.1 Reasons for this study
Compensation literature is full of descriptions of the benefits of broadbanding.
However, little has been written about the practical experiences of companies
within the South African industrial sector. In this study the author reviews the
process followed within Manganese Metal Company (MMC), a division of
Samancor.
1.1.2 History of company
Samancor was first incorporated in 1926 as South African Manganese limited.
Major shareholders are the Billiton and Anglo American Groups. The company
employs approximately 12 000 people at its mines and metallurgical plants
which are located in five of South Africa's nine provinces.
* PERCENTAGE AS AT 30 JUNE 1998
Figure 1-1 Samancor shareholders and divisions
2
Samancor has three operating divisions - Chrome, Manganese and Metals,
Minerals and Technical Services. They are optimally structured to service
customer needs with reliability and dependability.
The business activities of the Metals, Minerals and Technical Services Division
(MMTS) comprise the production and sales of silicon metal as well as high-
purity electrolyte manganese metal. Manganese Metal Company (MMC) is the
world's largest producer of high-quality electrolytic manganese, which is mainly
used in the aluminium, steel, welding, chemical, agrochemical and electronics
industries.
The combined output of the company's two plants at Krugersdorp in South
Africa's Gauteng Province and at Nelspruit in Mpumalanga Province is 44 000
tons per annum.
1.1.3 Factors for success
Approximately 80% of the world's manganese ore reserves are located in South
Africa, and production of electrolytic manganese, the purest form of
manganese, commenced in the country in 1954. More than 95% of MMC's
output from its two plants is exported to the world's steel and aluminium
industries.
Both the Nelspruit and Krugersdorp plants have ISO 9002 accreditation. The
company's reputation for product quality and supply continuity is maintained by
sophisticated laboratory analysis, stringent controls and high plant efficiencies.
The development of new products, through ongoing research and development
by a dedicated in-house division has helped maintain MMCs' leading position in
its field.
Cost-effective production facilities, advanced technology and vast ore reserves
have enabled MMC to achieve and maintain supply reliability throughout the
world. A modern and efficient rail network to the export-orientated ports of
3
Richards Bay, Durban, Port Elizabeth and Cape Town links both MMC plants.
Maputo in Mozambique is an added option.
1.2 Problem definition
1.2.1 MMC in a global environment
In recent years many South African companies made substantial progress in
penetrating the global market. This presented a vast array of opportunities, but
also fierce competition. This situation also confronted MMC. It was previously
sheltered by abundant resources, relatively cheap labour and benefits
experienced by weakening of the currency. However, the company is now faced
with expectations of positive growth (measured in US$) from international
shareholders in an environment of rapidly increasing competition from lower
cost and high quality producers. Price, marketing skills and long term
relationships no longer determine success in this highly competitive
international market.
Beyond the pressures from the global market is the challenge to survive within
the South African business environment. It is characterised by a large number
of different racial groups, cultures and entanglement of labour laws and related
problems. The lack of jobs, limited education and political workforce only
compounds to the problem.
The internal situation within MMC does not counteract the mounting pressure,
but rather adds to the problem. The prevalent negative attitude impacts on the
organisations' culture and climate and results in a downward trend in
productivity and competitiveness (Van Aardt, 1999). The investigation by the
author will also indicate that traits typical of a traditional organisation contributed
significantly to this. It was found that amongst others the traditional narrow job
classification system prevented employees from delivering a meaningful output
and also leads to rigidity which make it slow to respond to changing needs.
4
1.2.2 The need for change
It is evident that MMC would have to undertake several significant change
efforts to maintain profitability and growth. The challenge lies in breaking out of
the bureaucratic mould. To meet these challenges it was realised by MMC that
it is essential to:
Increase productivity: i.e. saleable tons/employee by introducing
teamwork, participative and flexible workforce;
Improve competitiveness: i.e. meets customer specification, on time
delivery at a competitive price. This implies improving quality, speed and
cost;
Empowerment of employees: Encourage growth and horizontal skill
development, redesign the cumbersome, top-heavy operation into
streamlined business units, flat management structures and
Out-source non-value added services.
1.2.3 Changing to a performance culture
The changes that are required represents a major shift towards a performance
culture. It is, however, important to recognised that any change effort would
succeed or fail based largely on employees' ability to adopt new roles, acquire
new skills, and change the behaviours that made them successful in the past.
Employees will determine if the organisation can adapt to the rapidly changing
global environment. For MMC this implies the need to undergo a significant
cultural change in the workplace.
Brown (1996:6) indicated that one method of clearly effecting a change in the
organisational culture is to change the systems people use; that is to change
the way people do things. The approach followed by MMC targets this aspect
and can be summarised as follows:
Explore the idea of forming self directed work teams operating as business
units;
5
• Re-tool of its classification and pay system to encourage growth and
horizontal skill development and establish a reward system to which
employees respond.
1.2.4 Rationale for choosing broad banding
"broad banding has the potential to change the way
people think about their careers, to change how
organisations manage pay and the factors they reward,
and to help change the culture of the organisation." William M Mecer Inc. (1996)
The rationale for broad banding is often limited to the end result or desired state
i.e. "the compression of a hierarchy of pay grades or ranges into a small
number, typically four or five, wide bands." (Ledford, 1995:4). However, in this
study the author will indicate that to establish a performance culture two
important aspect are fundamental i.e. the change process that must be followed
and the desired state. It is proposed that broad banding provides an effective
vehicle to facilitate the change process and it also provides a solid foundation to
support the desired state.
The problem statement can be defined as follows:
What can be expected from broadbanding as a
classification and remuneration system, what measures to
take and the process to follow to enhance success and
what is the future of broadbanding within the South African
industrial environment.
6
1.3 Objectives of study
It is the objective of this study to gain insight into broad banding from the South
African industrial perspective and the impact of organisational culture and
adjustments that are needed in order for broad banding to be successful. What
follows is a study based on actual experience, literature review and structured
interviews, that examines how broadbanding is introduced as part of major
changes to its overall compensation strategy. Specific reference is made to the
MMC plants.
The objectives of this research can be summarised as follows:
Understand the fundamentals of broad banding, review history, objectives
and recent changes in broadbanding practises.
Review strengths and weaknesses.
Review skill based remuneration and how the process stream concept is
applied to conduct work design and job analysis that supports broad
banding.
Review implementation of broad and indicate the road ahead.
Develop a generic model for successful implementation in industrial sector.
Review the future of broad banding in South Africa.
1.4 Methodology
A two-fold approach will be used in this research paper:
A detailed literature study from recent books publications, magazine
articles and Internet articles.
Structured interviews of amongst others key management officials, human
resources professionals and employees.
1.5 Restrictions
Sample population selected for structured interviews.
Chapter 3
Background
Design
Implementatio
Controlling Cost
BRO lt(DL
BANDING
Communicatio
Training
Chapter 4
Process
to Success
Measures
to
Success
Process
to
Success
Monitor Expectations
Future
Chapter 2
External
Internal
Forces
TRADITIONA L & .
MODERN
Change Proces
Chapter 5
7
• Focus is on specific experience at MMC plant within the Samancor group.
Reference is made to other centres where applicable.
1.6 Overview of study
Figure 2 provides an overview of the structure of the study. In chapter one the
Figure 1-1 Structure of study
traditional and modern organisations are compared, forces initiating change
reviewed and the change process discussed. Chapter 3 takes a literature
review of broadbanding and areas that are addressed include the following:
Background, design and implementation, cost control, communication and
training, monitoring the program and the future of broadbanding. In chapter 4
an example in the industrial sector is studied and chapter 5 presents the
conclusions and recommendations with the focus on providing what can be
expected of broadbanding, process and measures to follow to enhance success
and the future of broadbanding in South Africa.
External
Internal Forces
TRADITION AL
MODERN
Change Proces
Chapter 4
It ROA I) BANDINC IN
PRACTISE „ ........„„.
Chapter 5
Process nt
7% • •
Expectations
AI vas ores
to
SUMMA 12Y
Process
to
8
2. LITERATURE STUDY: THE MODERN QRGANISATION
Chapter 3
Background
Design
Inypirmrnttrtitr
Controlling
/ Cost
B RO A I)
Com municai lot Training
Monitor
Future
Chapter 2
2.1 Introduction
"What gets measured gets done.
What gets paid for gets done more" Barry Gibbons (1993, p.284)
This chapter highlights the contrast between the traditional and modern
organisation and emphasises the importance of the change process in
achieving the desired state. To arrive at this state a disciplined and logical
approach must be followed. Hence, the author highlights three important
aspects:
The driving forces acting on the current state which initiates the change
process,
The gap between the current and desired state and
9
The process that must be followed to derive at the desired state.
In the first section external and internal forces acting on the traditional
organisation to change is reviewed. The following section identifies the gap
between traditional organisation with the modern desired organisation. Specific
reference is made to changes in organisation structure and remuneration
systems. In the last section the change process required is presented and
fourteen impact factors provided to assess what impact change efforts will have
on the "targets".
From the next chapter it will be evident that broad banding aligns with the
concept of the modern organisation
2.2 Driving forces acting on the traditional organisation
Traditional organisations are experiencing tremendous pressure from external
market forces and internal organisational forces to change fundamentals such
as structure and compensation strategies in order to survive. In achieving a
competitive advantage it is important to understand/be aware of the two main
drivers:
Business environment (external): the specific industry in which a
company operates. This includes the important characteristics of the
industry and how an organisation successfully competes within this
environment. According to J D Callon (1996,p.6) the following are examples
of forces in the business environment:
Increasing number of competitors both domestic and foreign
New rules of competition: New strategies are innovated by
competitors.
Structural changes in industry: Traditional boundaries are broken
down and provide new opportunities and threats.
Increasing customer expectations: Better company performance
leads to higher demands from customers.
Political and social change that impacts on the organisation.
F Function
Communication Row At&
BoacordnsiFuutZionally
A MA 1 ■1 A II I WM I I E 11■\ Output
Product manufacturing/service delive process
makes its way through functional layers and activity
differentiated tasks
F v Function
aro ...„,,s,„... I
Core procees flowsuppsdpsf by requisite functions
Output
10
Enterprise environment (internal): The company itself, its major
characteristics, strength and weaknesses etc.
Reward system must acknowledge changes within the organisation.
Change in number, responsibilities and experience of employees as
result of restructuring and downsizing. New employees often
younger have new values and priorities.
New enabling technologies
2.3 The gap between the traditional and modern organisation
2.3.1 Organisational structure
Traditional organisations are used to functioning in a predictable, stable
environment. Work is often layered and levelled into functional divisions and
clear responsibilities due to the desire to effect control. Structure made it rigid
and slow to respond. A typical comparison between a traditional and modern
organisational structure is provided in figure 1.1 and 1.2.
Figure 2-2: Traditional hierarchical organisation. (Peters, 1996)
Figure 2-1 Process Optimised organisation. (Peters, 1996)
One of the main problems resulting from traditional structuring is a lack of focus
on the core process. The structure hides the underlying workflow and creates
11
conflict between different functions. It is often found that services become self-
serving i.e. the engineering department no longer sees the production
department as the main customer, but rather focuses on self-interest.
Furthermore, over specialisation of work results in "steep" organisations with too
many layers. This results in poor communication between functions and the
perception that all co-ordination and communication is management's
responsibility (Haslett, 1995).
A good perspective on the contrast between the modern and the traditional
organisation is provided by May (1997). Some of the traits of the modern
organisation included amongst others:
Flatter structures witch results in 'Lean' organisation, where fewer staff
members do enriched, expanded or changed jobs;
Increased spans of reporting with process accountability rather than
functional accountability,
Increasing emphasis on a systemic view of organisations results in
organising around processes rather than functions,
The focus is on key competitive advantages and alignment of individual
efforts;
"Learning" organisations and employees,
Employee participation, empowerment, and the "pushing down" of
responsibility,
Customer service focus.
Kruger (1997:70) also provided a summarised model of the traditional versus
the modern organisation in terms of structure, which is presented in Table 1.
From his discussion it follows that the major difference is, however, the primary
driving force. The traditional organisation is a mechanistic, hierarchical driven
system with profit as its main aim. The modern organisation is value driven ("a
common dream") — the aim is output and customer focussed flexibility.
Traditional Modern
Hierarchical
Stable environment
Individual instructions
Specialisation
Functional approach
Mechanistic/Control driven
Flat structure
Changing environment
Team work
Multiple competencies
Systems approach
Value driven
12
Table 2-1: The contrast in structure between the traditional and the modern organisation.
2.3.2 Remuneration system
A clear distinction between the traditional and modern organisation is the focus
on people. Employees are no longer a paid machine, but a living being
providing a positive contribution. Three indicative aspects include:
Efficiency measured by productivity — doings things better
Effectiveness by broadening the scope of individual tasks, jobs or
processes within an organisation — doing better things including what an
organisation could never do before.
Competitive advantage gained by the organisation: doing better and new
things for the customer.
The contrast between modern and traditional remuneration system is
summarised in Table 2 (Kruger, 1997). The modern organisation must
acknowledge this contribution and provide a flexible, nimble
reward/remuneration system to support the new organisation.
Traditional
Many hierarchical levels
Rigid salary structure
Reward individual performance
Reward position
Reward hierarchy movement
Reward hierarchy movement
Modern
Few and broad salary levels
Flexible salary structure
Team based reward
Reward individual performance
Reward lateral career development
Maximum management discretion
13
Table 2-1: The contrast in remuneration between the traditional and the modern organisation.
2.4 Change process
The greatest difficulty in the world is not for
people to accept new ideas, but to make them
forget old ideas" John Maynard Keynes, Economist
2.4.1 Kurt Lewin change model
Any change efforts would succeed or fail based largely on employees' ability to
adopt new roles, acquire new skills, and change fundamental behaviours. In
1958 Lewin developed a simple model to describe such a typical change. This
model is still considered to be one of the most accurate descriptions of how
change occurs.
Unfreezing
Refreezing
"P"
Creating the motivation to
Stabilising/Integrating change changes
Transition State
Present State
Desired State
Figure 2-1 The Kurt Lewin change model (0.D.Resources ,1995)
14
The model depicts change as a series of transitions between different states.
"P" reflects the present state, for argument sake the traditional hierarchical
structure and remuneration system. When a force of change disrupts the
present state, it unfreezes. This unfreezing is accomplished by creating a
climate where people are motivated to discontinue the present state i.e.
opportunity for development and growth, a flexible, nimble reward/remuneration
system to support the new organisation etc.
The transition state "T' represents a phase in which change has disrupted the
present equilibrium but the desired state has not yet been formed. This
transition state embodies danger and opportunity for the person and the
organisation. Unfreezing invalidates established frames of reference and
accepted patterns of behaviour. The old methods become inoperative and this
in turn generates tension and a high need for a new operating framework. The
confusion that results from the inability to understand and control the
environment produces stressful situations, however the need to reduce this
anxiety promotes a powerful desire for seeking out, processing and utilising
information or create a new state of stability. These unpleasant aspects of the
transition make it possible for new learning to occur.
The uncertainty of this transition state, in conjunction with the need for stability,
begins a process of stabilising and integrating the change. This process of
learning new behavioural patterns is called freezing. If the unfreezing and
transition states are well managed, the result is the desired state "D". It is
important to realise that if these earlier phases are, however, not handled
appropriately, the people and organisation will refreeze, but not in the desired
state.
Once a change has been clearly defined, three major determinants govern its
successful implementation.
Organisational Readiness,
Implementation Plan and
Implementation Skills of the sponsor change agent and the target.
15
These factors function together and a weakness in any one can greatly
decrease the potential for successful change.
The Organisational Readiness is, in turn, dependent on the people and systems
affected by the change and their predisposition to support, ignore or resist its
implementation.
2.4.2 Predicting impact
In order to avoid the costly symptoms of change, managers responsible for the
implementation of major business decisions need to know what impact change
efforts will have on "targets". Tucker et al (1994) and Peters (1996) indicated a
number of impact factors that need to be assessed:
Amount: The amount of alterations required by the change
Scope: the range or span of the organisation affected by the change
Time: the amount of time the targets have to implement the change
Transferability: The degree to which the change is easy to communicate and
will be understood by targets
Predictability: How well the targets can accurately anticipate the effect of the
change on them
Ability: The degree to which targets feel they have or can attain the
knowledge and skills necessary to implement change
Willingness: How motivated the targets are to implement the change
Values the degree to which the targets must change some of their strongly-
held beliefs about the way they are operating
Emotions: The extent to which the change requires targets to feel differently
about people or operating procedures targets to learn
Knowledge: The degree to which the change requires new information or
view existing information differently than they have in the past.
Behaviour: The extent to which the change requires targets to modify their
daily routine of job-related activities
16
Logistics: The degree to which the change requires significant alteration in
the targets' job procedures, such as scheduling, time management,
equipment utilisation
Economics: The degree to which the change process requires targets to
operate differently regarding budgets, expenses or funding
Politics: The degree to which the targets must modify their current methods
of influencing others, utilising power, networking, and teamwork, dealing with
territoriality, protecting vested interests.
This assessment may be used to design implementation plans appropriate to
the level of disruption associated with the change the corporation wishes to
initiate. If a change is then determined to cause dysfunctional reactions,
managers may decide to either alter the change so that it has less disruptive
impact on targets or develop a sophisticated implementation plan aimed at
reducing high target resistance. If, on the other hand, the disruptive impact is
determined to be low, the risk of implementation failure is also low and therefore
requires a less sophisticated plan.
2.5 Summary
The traditional organisation must adapt to incorporate traits of the modern
organisation to remain competitive in a global market. It was identified in this
chapter that this is not an instantaneous "transformation", but rather a process,
which is initiated by distinct driving forces to close the gap between the current
and desired state.
The driving forces originate from the business environment (external) or the
enterprise environment (internal). These forces will act to close the gap, which
is present due to the contrast between the current traditional state and the
desired modern state. Two aspects are contrasted i.e. structure and the
remuneration system.
17
It is important to realise that this transition constitutes a change process as
indicated by the Lewin model. If not handled appropriately, the people and
organisation will "refreeze", but not in the desired state. Organisational
readiness, implementation plans and implementation skills are major
determinants for successful implementation. A number of evaluation factors are
provided to assist in "fine tuning" the transformation plan to enhance success.
Background Chapter 5
18
3. LITERATURE STUDY: BROAD BANDING
Chapter 3
Chapte
External
Internal Forces
HIADI ILONA A
iATTITTERIS
Change I' roses.
Design
Implementatio
Controlling Cost
L1 1/3AVD1 / - BANDING
Communicatio Training
Chapter 4
13 ROA I) NDINC IN
VILA CTISP:
Prow, to
pleasures to
fioL,N1
UNINIA ItY
P rocess to
Sum
INpeetn lions
3.1 Introduction
Monitor
Future
"Banding is more than a pay program - it is a way of managing a company's human
resources." LeBlanc and Ellis (1 995, p. 54),
The previous chapter reviewed the contrast between the traditional and modern
organisation and the eminent change process. In this chapter broad banding is
identified as a compensation system that not only facilitates the change process
to the modern organisation, but also provides a solid foundation to build upon.
Many of the questions surrounding broad banding is addressed and guidelines
provide for the design and implementation of broad banding. The chapter is
divided into the following sections:
• Background of broad banding.
19
Design and implementation aspects
Remuneration within bands and controlling cost
Monitoring, communication and training
3.2 Background
"the most progressive of compensation
solutions ... one of the most effective pay
tools to emerge in recent years." Hofrichter D. (1993)
3.2.1 What is broad banding?
Broad banding, which began as a major compensation innovation is now
evolving into a career development system. According to LeBlanc and Ellis
(1995:54), "banding is more than a pay program - it is a way of managing a
company's human resources".
The concept of broad banding is very simple. The traditional structures of 3 to 4
are collapsed into a single broad band. This implies that the traditional pay
ranges of 30-50% are increased to i.e. 100% or more. There are several
ramifications to this, but the most exciting is increased flexibility of the
remuneration system.
3.2.2 History
Broad banding did not gain popularity in the industrial sector until the 1990's. A
study by Towers Perrin in 1996 found that 19 percent of US companies were
using Broad banding programs, and 27 percent were planning to introduce or
extend them (Brown, 1996:43). Similar results were found in Britain where
recent surveys suggest that 25 percent of firms now use Broad banding with
more likely to join (Merrick, 1997:17). This was an increase from 1996, when
20 percent had changed to broad banding and 30 percent were planning it.
20
From this it is evident that after years of developing precise, control-orientated
administration system companies and unions are becoming more interested in
new, more flexible concepts. Among these broad banding presents a dramatic
shift in salary management and a shift away from job-based systems to more
flexible person-based systems.
3.3 To change or not to change?
3.3.1 Rationale for implementing broad banding
The traditional narrow pay grades are associated with centrally controlled salary
management and job evaluation procedures. The focus is on narrowly defined
duties with "precise" distinctions between many levels of work and
responsibilities rather than on an employee's contribution. While these salary
management practices were well suited to static traditional organisations they
no longer meet the needs to operate in fast changing and highly competitive
business environments.
Broad banding objectives have evolved during the past number of years from
an earlier focus on simplifying salary administration to assisting in driving
cultural change. The author identified that the reasons cited why organisations
are implementing or considering implementing broad banding fell into three
categories (Derived from Bussin (1995:17), Wagner (1994:27), Reissman
(1995:79) and Brown (1996:41)):
Business and organisational changes;
Supports more flexible and less hierarchical organisations which can
increase organisational effectiveness
Support culture change
Delayering increases customer service. The line or chain of command is
often a frustration to customers. By delayering the customer service, focus
and awareness is improved. New initiatives i.e. multiskilling puts pressure
on fine grade differentiation in a team environment.
21
Union pressure
Removing the fine distinctions between levels and encouraging new
initiatives like multiskilling encourages teamwork. The resistance to do work
on a higher "grade" also inhibited effective functioning.
Personal and career development patterns
The basis for pay progression is changed from longevity/attendance to value
adding. People who display exceptional performance or enhancement of
skills or competencies can now more readily be awarded without the
restriction of the narrow classification system.
Dual career ladders easier to support for technical and operational /
supervisors
Lateral mobility is encouraged i.e. artisan can apply for position in production
with greater ease.
Growth and horizontal skill development encouraged.
Human resources function (Administration of pay)
Delegate the human resource function to line managers: classification
authority and responsibility for cost control from, thus reducing conflict over
upgrades
Job classification and evaluation simplified by reducing the number of
distinctions between levels of work, which also reduces the need for
promotion
Provides flexibility to respond to market pressures and enable a company "to
pay top rates for top people";
De-emphasise complex and time-consuming methods of internal job
evaluation. Rate of changes in job content often can create a burn-out of
existing methods; and
Support a performance-related system of base-pay adjustment.
A study conducted by the ACA confirms the top 5 reasons for implementing
broad banding. The results are indicated in Figure 3-1. It is interesting to note
Primary Reasons for Implementing Broa,lbands
Create more organizational flexibility
Support a new culture/climate
Deemphasize traditional structure/hierarchy
Foster a flatter organization
Emphasize career development
Encourage skill development
Respond to changes in job/work design
0%
20%
40% 60%
80%
100%
(n = 113)
22
that the top 4 reasons focussed on organisational aspects. Organisation
flexibility (78%) and support for new culture/climate (61%) were cited as the 2
most significant reasons. In general it was found by this study that the broad
banding approach was not used to address changes in workforce
demographics, total quality initiatives or decentralised decision-making (not
indicated on the graph).
Figure 3-1 Primary reasons for implementing broad banding
From the above it is evident that companies that have adopted broad banding
view it as a major contributor to achieving flexibility. The study also confirmed
many authors' opinion that broad banding' focus shifted from an administrative
system to a tool that assists in culture and climate change initiatives. In the
South African environment this presents us with a powerful mechanism.
3.3.2 Implementing broad banding: The risks
Like anything new there are misunderstanding about what broad banding will or
will not accomplish. Some expect it to be the cure for all ailments and other
exaggerates the downside of adopting this approach. To ensure a successful
broad banding program it is necessary to possible hurdles and reasons why
organisation did not implement broad banding. (Bussin (1995:17), Wagner
(1994:27), Reissman (1995:79) and Brown (1996:41)):
23
Business and organisational changes;
Extensive planning required, careful design and commitment from the top
must be evident to all role-players.
It is not easy programs to explain to employees and therefore extensive
communication and training is essential.
Likely to be opposed by unions. It is vital to involve them throughout the
process to ensure buy-in. This is especially the case where broader work
definitions and systems like pay for performance will be implemented.
If not designed and administered correctly increased salary costs without
significant increases in productivity might be the result. In itself it will not
necessarily accomplish an improvement, but combined with other efforts it
can be a valuable tool.
Organisational change is not driven by broad banding but supported and
reinforced by broad banding.
Personal and career development patterns
Perceived fewer vertical promotional opportunities: Broad banding reduces
the opportunity for promotion to a higher salary range since there are fewer
salary ranges. Yet promotions are valuable. The number of promotions one
receives is a key component of their perception of the career advancement
opportunities offered by their employer. Typically, a professional will receive
two promotions within their first five years after graduation from university.
The frequency of promotions early in their career correlates with the
"steepness" of the new employee's learning curve, and complements their
increase in value to the company and attractiveness to competitors.
Slower salary progression at entry level due to fewer promotions perceived.
Promotions provide a vehicle for accelerating the salary of new employees
to help ensure their retention in the company.
Favouritism and subjective judgement may undermine broad banding. The
support system plays a vital role in combating discriminatory practises.
Human resources function (Administration of pay)
May make cost control more difficult as pay ranges expand: Salary ranges
provide a mechanism to control the salary growth of individual employees,
Primary Reasons for Not Implementing Broadbanding
Culture not receptive
Timing not right
No compelling reason to change
Other HR support systems not ready
Satisfied with current program
Currently too short-staffed
Veto by top management
Managers/supervisors unable to administer
Administrative costs too high
Negative results from focus groups, attitude surveys, etc.
Consultant recommendation
Unsuccessful pilot
0%
20%
40%
60%
80%
24
and thereby the salary costs of an organisation. With salary ranges, an
employee's salary stops at a certain point, until they acquire the skills
necessary for advancement to the next higher level position. Broad banding,
with its high salary range maximums, does not have the rigid salary control
feature of the traditional salary structure.
requires an effective performance management system
More difficult to establish external pay equity due to lack of accurate salary
survey data for broader job categories: Broad banding risk divergences from
market pay practices. Paying too little relative to the market could mean
higher employee turnover. Paying too much relative to the market could
mean higher product costs than competitors.
Inconsistent pay decisions by managers may result in loss of internal pay
equity: Maintaining the perception of pay equity can be more difficult. If two
employees are in the same broad salary band doing similar work and one
employee is paid near the bottom of the range, and the other is paid near
the top of the range. How do you justify the salary differential to two
employees and how do you defend a discrimination charge?
Figure 3-1 Primary reasons for not implementing broad banding.
While it is difficult to find descriptions in the literature of failed Broad banding
systems, the two main reasons for not adopting Broad banding were corporate
25
culture that was not receptive (55%) and timing that was not right (43%) cited in
the ACA study (Abosch & Hand, 1994). Figure 3-2 indicates the results from
this study.
3.3.3 Two approaches to broad banding in industry
In the first major study of broad banding in the industrial sector, two types of
Broad banding approaches were identified (Abosch & Hand, 1994). The study
distinguished between broad-grade and career-band designs as indicated in
Figure 3-1.
Salary-Administration Spectrum
Control
Tradi Mnal Broad Ca cer
Salary Cr, des Bands
Administration
Figure 3-1: The salary administration spectrum indicating the difference between broad grades and career bands.
Broad-grade: Broad grades are closer to traditional pay practices. It uses
a small number of relatively wide pay levels but retains many of the range
controls, minimum's, maximums and midpoints, found in conventional salary
systems. Companies that use broad grades seem to be more concerned
with administrative streamlining than with career development. In essence
broad grades were defined as consolidated grades with salary ranges of at
least 75 percent (refer to figure 3.4).
Career-band: Career bands are a more radical departure from traditional
pay structures and more closely tied to career development. It uses very few
bands, often between one and three in each employee category, and very
wide salary ranges of 150 to 400 percent. The focus is on career
development, rather than on, 'How do I get to the next grade?' (Refer to
figure 3.4).
Ate. .nen two grades/ le. Ike executvel
GOler me or range (muds mectn as minimums, maximums and tom
Where ranges are used, spread. average 150% and can be as tut,. ■
as 300% to 400%
One or two executive bands
One to three bands for other exempts
Variation in range d..igns including minimum and maximum only, minimum and
no maximum. or ranges at all One or two
nonexempt bands
26
Both emphasise the new, flatter organisational structure. They eliminate
stringent, narrowly defined job titles and underscore the importance of cross-
trained employees. The typical approach to broad banding has been a hybrid of
the two.
Figure 3-2 Career band ranges Figure 3-3 Broad-grade ranges
The most significant career development advantage of banding is that it allows
both the company and the employees more flexibility in altering positions
because every modification doesn't need to be reclassified by the compensation
department. This encourage employees to think of their careers as ongoing
opportunities to learn, building in aspects such as breadth and depth. Banding
emphasises skill development and gives employees more freedom to move
laterally, up or down.
3.3.4 Union perspective of broad banding
Countries like Britain are also confronted with a strong unionised environment
and it is worthwhile to take note of some of the concerns. Broad banding usually
involves associated changes in performance management. One of the
obstacles is persuading unionised employees to accept pay-for-performance
systems. A study of Broad banding practices in Britain, which included a public
sector corporation and companies with unionised employees, cited similar
concerns. "Staff and union opposition to broad banding in the other companies
was based on a lack of confidence in these performance management
systems." (Brown, 1996:46). Opposition also appeared to derive from the
27
conflict of broad banding with the traditional attitudes that it is designed to help
remove - the so-called "grade and promotion mentality".
With the implementation of the new LRA it was acknowledged that for South
Africa to be competitive in the international markets it is essential that value
added products are produced and productivity improved. This implies large
scale restructuring. However, the hostile labour relations present a major
obstacle in this process. Hence, the concept of workplace forums that was
introduced by this act.
According to Backer and Olivier (1996:30) research indicated that in European
countries representative consultation and worker participation bring about the
following advantages:
Communication is improved between management and the workforce
Quality of decisions is enhanced because proposals are carefully
scrutinised, problems are discovered early and the range of alternatives
enlarged.
Decisions are actually implemented where these result from input by
management and employees
Managers and employees move closer to each other, as they share
common objectives and are fully informed.
Workers know their own job well and can therefore contribute to
improvements in productivity and efficiency.
Involvement promotes commitment and secures wide support for decisions.
Workers are more than a production factor; they are involved in issues which
directly affects them.
It is important to note that amongst others workplace forums is entitled to be
consulted by the employer about proposals regarding restructuring of the
workplace, changes in the organisation of work and job grading.
Workplace forums, if properly implemented can be valuable structures to ensure
the successful implementation of initiatives such as broad banding. The
28
effective functioning and development of workplace forums will depend on the
sincerity of both parties' intentions and the degree to which each side sees itself
as benefiting from the interactions.
3.4 Design and implementation aspects
Many lessons have been learned by organisations that have implemented
broad banding. These are summarised below, and some guidelines are
provided as well. But it should be kept in mind that all organisations are unique
and that there is no one panacea for implementing broad banding.
3.4.1 Design Teams and Coverage
Abosch pointed out that there are very different opinions of what broad banding
means, depending on an individual's role in the organisation. Organisations
need to be aware of these differences when designing and implementing the
program to gain acceptance of all interested parties. This is especially the case
in the unionised environment prevalent in South Africa. Even in non-unionised
organisations employee involvement is advisable to build ownership of the new
system.
From interviews with HR specialist the author identified three role-players,
which performs a different role in the process and differ of opinion:
Executives/Managers:
Opinion: They are concerned about establishing flexibility,
redirecting the culture, and flattening the organisation to be more
efficient.
Role: Feedback, communication, sign off and approval, ensure
program supports quality. Executive should lead the process and
not the HR department. According to Budman if managers are
brought into the loop, they won't assume they'll have more freedom
than broad banding actually gives them, and they won't necessarily
hate HR for giving them more responsibility to shoulder.
29
Human resources:
Opinion: More technical, identifying ways to better align
compensation programs with the vision for a reengineered
organisation.
Role: Broad banding design. Input from HR specialists and
compensation experts.
Employees:
Opinion: They are concerned about their security and role in this
future organisation, are very much fixed on developing the
appropriate skills and competencies that will allow them to continue
to be valued by the organisation and prosper within the
organisation's compensation environment. According to Abosch &
Hand [p14] only in 10 % of the studied organisation employees
were the "drivers" or "initiators" of this process. In 47% of the
organisation the decision not to implement came from this source.
Role: Ensure buy-in from employees/members. Important aspects
include amongst others affirmative action and equal opportunity.
Individuals knowledgeable about compensation, job evaluation,
performance management, employee development and labour
relations should be involved. Union shop stewards are usually a
good choice to represent the employees.
From the above it follows that the new broad banding program needs to be an
integrated system. Therefore, it is not a good idea to have sub-teams design
separate job classification or performance management systems. A single
"design team" consisting of representatives of the three roles must be formed.
Dedicated involvement by the "design team" is a prerequisite.
30
3.4.2 Time to Develop Broad banding
"Push too hard, too fast, and the wheels falls off."
Budman (1998)
By appropriately judging the organisation's readiness to restructure pay and
aligning the broad banding initiatives with much broader and longer-term
organisational and cultural change processes; the program can be achieved in
a reasonable time span.
According to the 1994 ACA study, the median time from initial discussions of
broad banding to rollout was nine months, and the range was 2 months to 2
years. The short-term changes that the survey participants have made may not
have been as broad or as flexible as expected, but at least successful.
Where legislation is involved or renegotiating employee/union agreements the
process can be delayed considerably. This is important to note in the South
African market where Labour legislation is rapidly increasing, placing
constraints on several initiatives.
The ACA study found that in general, career bands took longer to design and
implement than broad grades.
3.4.3 Readiness
In section 2.3 successful organisational change was defined as a function of
organisational readiness. The organisational readiness is, in turn, dependent
on the people and systems affected by the change and their predisposition to
support, ignore or resist its implementation. Therefore, it is important that
organisations should take more cognisance of readiness issues than to be
focussed on broad banding design. This includes determining if broad banding
must be pursued at all. The challenge is to match the organisation's readiness
to the design of a program that is not too radical or too conservative.
31
A number of options are available to assess readiness and can be divided into
two categories i.e. formal and informal. It is advised to use a combination of
methods to cross correlate results and create a holistic picture.
Formal methods that can be utilised to assess readiness in the organisation
includes amongst others:
Climate surveys: Consulting firms specialise in providing this service. It is
also a good barometer to compare before and after situation.
Interactive sessions: This includes focus groups, questionnaires, Indaba
sessions
Union interaction: Provide sample documentation of i.e. before and after
payslips. Union representatives and selected union members can provide
feedback on perception based on these real live examples.
Bussin (1995:16) indicated a number of informal "common sense" indicators,
which can be used to assess if an organisation is ready, or inherently moving
towards broad banding. The following summarises these indicators.
Business environment: Increasing competitive/cost pressures, Greater
focus on added value e.g., service.
Structure developments: Fewer levels in organisation, Emphasis on
informal/matrix structures, Increasing emphasis on teamwork, More broadly
defined roles
Culture of the organisation: Openness and quality of communication,
Level of employee involvement and empowerment, Trust in management,
Quality of teamwork, Prevalence of use of broad banding approaches in
local market, control/structure orientation
Changes in human resources: Increasing emphasis on personal/self
development, HR function playing facilitation not controlling role, Quality of
performance management processes.
Pay focus shifting: More emphasis on market than job evaluation, More
pay management responsibility devolved to line, Harmonised terms and
conditions, Greater level of openness on pay issues.
32
3.4.4 Organisational Culture
In the ACA study the primary reasons for not implementing broad banding was
due to "culture not receptive". Bussin (1995:16) also indicated that culture is one
of the most important aspects when assessing organisation readiness to adopt
broad banding. Implementing broad banding in such an environment could be a
disastrous and expensive exercise.
Most broad banding programs translate to a change from an entitlement culture
to a performance culture. Moving towards an empowered, open, and trusting
company culture happens gradually, and it takes time to build the level of
confidence needed to operate fully flexible pay management within broad pay
bands. It is also evident that the benefits of broad banding are far from being
immediately obvious to all employees.
Most companies in the industrial sector operate in an environment of strong
union polarisation. Many of the union members stemmed from a history of
discriminatory practises that left them amongst others with low levels of
education and with high levels of mistrust in management. In view of this
environment many employees base their opinions on "actual experience".
Therefore, it is of great importance to make them "feel" reassured on important
aspects. This can include the quality of the market data, the equity of the
appraisal process, and the opportunities for lateral development.
Broad banding not only produces a cultural shift, but also supports culture or
climate changes in an organisation. The contribution that broad banding can
make to cultural changes was successfully demonstrated in one financial
company. The company had been trying to move toward self-directed teamwork
in processing areas. Only after the company's hierarchical grading structure
was removed and broader bands introduced did teams start to genuinely co-
operate in improving performance, rather than constantly look for guidance from
their highest graded team member. (Schay, 1998:16)
33
3.4.5 Placing Positions into Bands
A thorough job analysis should precede the design of any banding system in
order to provide a legally defensible basis for pay differences. A variety of job
analysis procedures have been used in practise: factor evaluation, point-factor
evaluation, whole-job slotting and competency-based multipurpose job analysis.
Two approaches can be distinguished: Traditional approach and Modern
approach.
Traditional approach: Relying on existing, often-outdated job evaluation or
classification systems may perpetuate problems in those systems.
Modern approach: In designing new classification standards for the bands,
there are various menu-driven computer programs systems available to
assist in this. Some of the systems available in the local market include
JAS, SKAN. A number of factors are evaluated such as: knowledge,
supervisory controls, defines, complexity, scope and effect, personal
contacts, purpose of contacts, physical demands, work- environment. The
SKAN system uses a two factor grouping approach: (1) duties and
responsibilities, and (2) knowledge, skills and abilities. The resulting data,
tasks and competencies have been programmed into the software. The
software can be used for multiple HR applications, including selection, job
design, succession planning, career planning, and as a basis for designing.
According to the IPM study a two-stage approach is often followed where the
existing grade structure is converted directly to bands in the initial stage of a
project. This eases the conversion and encourages acceptance of a new
approach. Over time this practise for band classification is replaced by more
modern approaches such as whole-job slotting or market based approach. In
the ACA study direct conversion was applied in 52% of the organisations
studied. Whole job slotting and market value slotting followed with 35% each.
It is interesting to note is that in career-band companies the latter two methods
for placing positions into bands were much more prominent.
34
Method(s) Used to Place Positions Into Bands
Translation of jobs from c urrent grades
Whole job slotting using band descriptions
Market values slotting
Pre-existing job evaluations
Skill requirements
Reporting relationship
Competency requirements
Figure 3-1 Methods used to place positions into bands
Brown (1996:41) indicated that a balance must be maintained between flexibility
of the organisation and structure. To enhance flexibility, few enough bands
must be developed to:
Reduce status differentials
Encourage teamwork
Reflect market variations and trends
Reward individual performance
Encourage/reward job flexibility and growth in the job
Encourage/reward lateral development
It is also important that structures cannot be abandoned totally. Enough grades
in the structure must be left to:
Provide a realistic opportunity to progress to the higher part of the pay range
Continue to recognise major differences in accountability
Recognise specialities
Demonstrate specifically how the market impacts on pay levels
Demonstrate structure/consistency in performance appraisal process
Show what the specific rewards are for acquiring additional responsibilities
and skills
Approach to Job Evaluation Used Before and After Broadbanding
No formal system
Market pricing
Whole-job slotting
Hay point factor
Other point factor
Factor companion
Rank to market
Paired comparison
0%
20%
40%
60%
Before Bands r--) After Bands II
(n 110)
35
• Show that development and growth opportunities still exist and are rewarded
Most companies reduced the number of job titles. This is consistent with the
objective to streamline the salary administration process and creating a more
flexible work force. There is no notable difference in the impact of titles between
effective and less effective companies (ACA, 1996:21).
3.4.6 Administration of bands
Job evaluation
According to Brown (1996) a significant movement toward market pricing and
whole-job slotting is evident in companies that implement broad banding while
some organisations have continued to rely on traditional tools such as the point
factor, factor comparison and paired comparison methods. This correlates with
Figure 3-1 Job evaluation methods used before and after broad banding.
the results in figure 3.7 (ACA). In career band companies a general movement
to market pricing is more dominant compared to broad grade companies.
Market pricing and coinciding salary surveys seems to be a prominent method
in the UK and USA. However, in South Africa it is difficult in many industries
36
due to limited data available. Compounding to this is the question that has been
raised whether broad banding and the fast changing nature of jobs make salary
surveys impossible to do. The problem with salary surveys is that they don't
offer accurate job matches for broad band jobs. Some experts predict that the
levels of a job for which salary surveys gather data are likely to be reduced to
typical three levels i.e. entry level, professional level and senior professional
level (Mays, 1997). However, salary surveys will meet a continuing need for
information that allows companies to be competitive and to maintain a legal
basis for their pay decisions.
Promotion
Fewer grade jumps makes promotion more difficult in the traditional sense.
Promotion can be defined in two ways:
Movement between bands: This is a more traditional approach where a
jump from one band to another constitutes a promotion. There is a distinct
sense of change in status.
Movement within a band and between bands: Both inter and intra band
movements are defined as promotion. This is a more in line with the modern
approach to banding. For example a technical expert might be in a specific
band for a lifetime, but still experience numerous promotions within this
band.
Career development
This is one of the primary goals of broad banding. Although from the ACA and
IPM studies it is evident that it does not get the deserved attention. Few
companies implemented fully functional formal career planning systems in
conjunction with the broad banding program. Most companies developed
systems after implementation.
Broad banding emphasises the involvement of line management and
employees in career development with HR in a consulting role. The joint
responsibility increases with the movement to more flexible salary admin
37
systems with wider bands (career-bands). There is no consensus to the
importance of formal career planning to the success of the broad banding
program. Career band companies are more positive towards the importance of
this aspect.
3.5 Remuneration within bands
One of the concerns raised by broad banding systems is the potential of rising
salary costs since the broader salary ranges provide increased pay potential for
employees. The 1994 ACA study reported increased payroll costs for only 8
percent of broad-banding participants. In the 1996 study of 7 British
organisations, Broad banding was implemented on a cost-neutral basis. A
study by Mercer Inc, modelling the impact of proposed and actual Broad
banding designs, actually found that employees' long-term earnings
opportunities were reduced by 10 to 50 percent due to the failure to replace
promotional increases with some other form of compensation (Jacobs, 1997).
3.5.1 Changes in broad banding practises towards competencies
"We're no longer paying you for what your job
is and what it's worth, but rather what you
know and what you can do with that
knowledge." LeBlanc (1994:78),
Broad banding can no longer be viewed as a compensation system. Recent
studies indicate that the general trend in organisations is to combine broad
banding with skill based pay or employee competencies. This is also the trend
within Samancor and other South African based organisations. A powerful and
effective compensation strategy and culture change tool emerges from this,
capable of driving performance and managing change.
38
A competency is defined as any underlying characteristic of an individual or
team that can be shown to predict effective or superior job performance.
Competency-based pay is seen as a performance management and reward
system that can support acquisition of new skills and competencies.
McClelland already in 1973 distinguished between essential competencies (can
be acquired through training and development) and differentiating competencies
which encompass self-concepts, traits and motives (e.g., flexibility, drive for
results). The latter are more difficult to identify and develop.
A competency model should include a definition of the competency, behavioural
examples, and benchmarks for acceptable and superior performance.
Competency models are no longer used just for selection, but for the entire
range of HR decisions, succession planning, career development, performance
management and compensation. Competencies typically expand the focus
from technical abilities to leadership, customer orientation and communication
skills (LeBlanc & Ellis, 1995).
Research by Spencer and Spencer (1993) has shown that in complex jobs,
competencies are more likely to predict success than technical skills. At Xerox,
for instance, 50 percent of performance assessments are based on progress in
acquiring and demonstrating competencies, such as understanding corporate
visions, goals and objectives, creativity and leadership. Employees are
assessed on a set of skills clusters: business skills, technical skills, and
leadership skills.
A survey by Buck Consultants found that roughly one third of U.S. companies
are considering, using or implementing skill- or competency-based pay
(Sammer, 1997). O'Neill and Doig (1997) covered 104 private and 46 public
sector organisations, this time in Australia. They found that 18 percent of the
organisations had linked competencies to pay.
39
Competencies and results are not necessarily linked, however. Many
organisations prefer to pay for results and believe that they are indirectly paying
for competencies, which lead to results. An alternative to linking competencies
and merit pay is to tie annual increases to performance and promotional
increases to competencies. Although competencies are generally viewed as
inputs and performance as the output, Tucker and Cofsky (recommend
providing incentives not just for results but also for competency development.
Ledford (1995) recommends the use of bonuses to reward needed skills to offer
employees an incentive to continuously upgrade their skills. This way
employer's do not run the risk of increased base pay for competencies that may
become outdated. More flexible than base pay plans, companies can change
skills or competencies every year to stay abreast of changing business needs.
3.5.2 Methods of paying within bands
Successful Broad banding systems have moved from longevity-based or
seniority-based pay progression to performance-based systems. The choice of
what to pay for depends on how much emphasis an organisation wants to place
on competencies vs. performance. If an organisation views competencies as
providing a competitive edge, it may pay above market for them.
An effective way to control costs is to mix base and variable pay, which can
include skill-based pay and a bonus system. Organisations that are concerned
about rapid base pay growth can reward employees with lump sum bonuses, or
a combination of the two.
Although the majority of employees have accepted pay-for-performance
systems, there is widespread dissatisfaction with pay-for-performance systems
that rely on a single individual, the supervisor, to rate an employee's
performance and determine that individual's pay. New systems are being
designed incorporating multi-rater feedback or 360-degree appraisal to ensure
greater rating reliability and employee acceptance.
40
In the industrial sector, skill-based pay has been used in a variety of industries
and technologies, although supervisors and managers tend to be excluded.
Problems with skill-based pay include cost escalation and paying employees for
skills not actually used (Ledford, 1996). Skill-based pay also makes market
comparisons difficult. Competency-Based Pay is sometimes used
interchangeably with skill-based pay. Pay applications of competency-based
Broad banding systems are still relatively new. Tucker and Cofsky (1994) and
Ledford had several suggestions for linking competencies to pay. For instance,
salary increases can be linked to any or a combination of the following three
criteria: development of competencies, achievement of annual performance
goals, or market pay. If there is concern about overpaying for competencies
that may become obsolete, bonus pay can be used to reward acquisition of new
competencies.
Traditional tools i.e. Midpoint Principle and Zones are also still applied in many
companies with broad banding implemented. The mid-point principle and the
use of the within-band zones limits advancement to the top of the band to top
performers. The use of zones is basically a system of sub-grading that
establishes ranges for different positions within a band. This approach has
been criticised as reflecting traditional, hierarchical mind sets.
3.5.3 Cost control factors
Cost increases under banding were the result of certain choices made by the
designers. By carefully choosing among the various options, less costly
banding systems could be designed. In the OPM study six factors are with
important cost implications for Broad banding systems:
Method of conversion to bands: The most common way to control costs
under banding is to convert employees at their current pay and to establish
salary guidelines and budgets for pay increases.
size of salary and bonus budgets
policy on starting salaries (i.e. cash recruitment bonuses vs. higher
starting salaries),
41
System of performance management (magnitude of incentive pay
increases linked to ratings).
Choice of full performance-level bands (banding full performance and
senior expert levels together results in upward migration of all employees).
and
Overall position management (using an appropriate mix of professional
staff and technical and support staff for lower level duties can save on total
payroll costs).
3.5.4 Pay equity
Another important concept is pay equity. Wallace & Fay (1988) and Tucker and
Cofsky (1994) suggest that broad banding competency-based system, can be
designed to focus on any or all of the three types of pay equity:
Internal equity: is a fairness criterion that involves setting pay rates for jobs
that correspond to the relative internal value of each job. Internal equity
refers to the value of the work performed on a job to the employer. Internal
equity is unrelated to external equity.
External equity: demands that employers pay a rate that correspond to
rates prevailing in external markets for the employee's occupation.
Individual equity: refers to the payment of wages or salaries based on
variations in individual merit. Merit factors include job performance, tenure
or experience, and skills or competencies.
3.6 Communication, Training and Monitoring
"...Broad banding initiatives can succeed only if they are instituted in an integrated, strategic
manner and accompanied by high communications and involvement that is
designed to reinforce the broader cultural changes necessary for long-term success"
Brown, 1996
42
3.6.1 Communication
Communications is the key to getting the mind-set right. Extensive and regular
communications are required to keep reinforcing the business and cultural
messages and to build understanding, support, and trust in the new pay system.
At all stages the emphasis must be on line management, staff, and union
involvement. Many companies would devote even more resources to
communicating the changes to staff if they could repeat the exercise again.
It is best to be proactive and over-communicate. Emphasis must be placed on
the reasons for the change, benefits to the organisation and its employees and
the to answer all employee.
Methods of communication should include the entire range of communication
tools: newsletters, e-mail, WEB pages, oral briefings and training sessions,
videos, brochures and manuals. LeBlanc, however, recommends giving
employees a printout of what the old system looked like and how they'll fare
under the new one. "Don't bother with the videotape and all the meetings--the
important thing is that piece of paper," he says. "People just want to be treated
fairly. They want to know that, if the rules have changed, the rules are still going
to be fair."
3.6.2 Training
Individuals who had been involved in the design teams and are able to answer
employee questions should do training. Included in the training should be
information on the new system and how it operates, and employee and
supervisor rights and responsibilities. Management training in compensation
management as well as involvement in the establishment of the new system is
prerequisites for successful change. The new systems require a much higher
degree of sophistication because increased discretion is replacing rigid rules
and the transfer of responsibilities previously carried out by HR specialists
43
3.6.3 Monitoring
Monitoring and evaluating the change program provides the designers with
information on how it is working and the opportunity to fine-tune or change the
program if it does not accomplish its goals. Employee surveys provide an
effective means to track attitudes toward the changes (Schay, 1996). Similar
tools that was used to assess readiness can also be useful to monitor the
process (Section 3.4.3.)
3.7 Feedback from broad banded companies
3.7.1 The trade-off between hierarchy and flexibility
The two main objectives of broad banding centred on hierarchy and flexibility.
The most striking finding is that organisations continued to operate with greater
structure and definition in their pay arrangements after introducing broad
banding than the theorists would have us believe. The actual practice tends to
fall somewhere between traditional pay management and how broad banding
works in theory. "Bands within bands" were operated by a number of companies
studied by Brown (1995:48).
Individual pay management within the new bands was in general more
constrained and structured than in theory. Not many organisation gave line
managers the complete freedom to manage pay covering annual reviews,
individual performance payments, job growth, and career moves. HR function
still provided managers with the traditional type of guidance and recommended
particular increases for individuals according to their performance rating and
existing pay-range positioning. Employees also had no freedom to the
unrestricted opportunity to progress within the full range of each new pay band.
3.7.2 Training and communication dictates success
The ACA study strongly emphasised the importance of training and
communication. Following are comments from company surveys after banding
was implemented (Abosch & Hand, 1994):
44
Need better communication from top management showing support and
commitment.
Tie communication directly to long-range corporate strategy.
More communication and involvement from front line; there was no real buy-
in.
Much more communication to managers and employees. There were many
negative rumours about the program.
Take more time to educate employees and leadership up front.
Spend more time designing the system with input from affected areas.
Would have spent more time up front communicating "why" we are
implementing broad banding.
Establish a more definitive salary administration program before
implementation.
The ACA study concluded that organisations that are considering broad
banding need to give as much attention to their education and promotional
efforts as they do to the design process.
3.7.3 Benefits achieved from broad banding
The "promise of broad banding" expressed in the ACA and IPM study included:
Administrative cost savings. Cost savings of .80 percent of payroll were
realised from reduced paper work and less time spent on job classification.
Reduced turnover of high performers. Turnover among high performers was
reduced by 50 percent in the Navy demonstration labs under Broad banding
and pay for performance. Between 1984 and 1992 turnover of top-rated
scientists averaged 3.5 percent at the demonstration labs, compared to 5.5
percent at the comparison sites which used traditional grades and longevity-
based pay progression.
Increased turnover of low performers. Over a 10-year period, turnover of
marginal and unacceptable performers ranged from 20 to 50 percent. Those
who were not separated improved their performance.
45
Increased pay satisfaction. Pay satisfaction was significantly higher under
broad banding and pay for performance.
Increased managerial authority over HR functions, especially classification
and pay.
Increased organisational performance.
3.8 Future of Broad banding
Will Broad banding continue to spread? To the extent that Broad banding
systems facilitate the shift from job-based systems to person-based systems
that focus on skills, knowledge and competencies, the trend is likely to continue.
Flatter high-performance organisations require pay systems that match their
organisational structures. Ledford (1995) points out that compensation has long
been one of the most precise, complex and quantitative of HR practices and
that job evaluation is becoming obsolete because it cannot keep pace with
organisational change. The precision and complexity inherent in job evaluation
systems assures that they are continually out of alignment with changing
business needs. Ledford actually advocates the use of "sloppier", simpler pay
systems, such as Broad banding and competency-based pay but warns that
even the most innovative pay practices must be designed to make them nimble
and flexible rather than static and rigid.
Broad banding is an attractive alternative to rigid, structured, specialised, and
hierarchical organisations. A solution that captures the benefits of both broad
banding and traditional salary structures includes:
3.9 Summary
Broad banding developed from a major compensation into a career
development system. It is spreading at a significant rate and it is evident that
more than 20% of companies in major countries implemented broad banding
and 30% are considering it. It can therefore not be ignored.
46
The rationale to implement must be weighed against the risks identified for the
specific organisation. Three aspects are indicated by the author that directly
impacts on the decision i.e. business, employee and human resources function.
It was also identified that it is not a single generic system that can be applied to
any organisation. Two distinct approaches are identified i.e. broad-grading and
career-banding which provides more control or more flexibility respectively. The
best fit might be a hybrid of two approaches.
The unionised industrial environment in South Africa presents a major obstacle
in the broad banding process. To overcome this it is important to involve the
stakeholders from the conceptual phase to final completion. Workplace forums
are presented as a mechanism to enhance interaction.
Successful broad banding is a change process. Therefore it is important to
provide attention in the design and implementation stage to aspects such as the
design team and coverage, the timing, readiness and culture. If the organisation
is not ready or the implementation plan is not thorough there is reason to be
cautious. With the placing positions into bands the above aspects can provide
valuable guidelines to decide between a traditional approach or more modern
and complex computerised methods. Whichever one is opted for a balance
must be struck between flexibility and structure to suit the culture of the
organisation.
Remuneration within bands and controlling cost are often raised as concerns
due to the potential of inflated salary budget presented by broader salary
ranges. Cost control factors are identified and method's for paying within bands
indicated. Competency based pay emerges as a major trend within broad
banded system.
Monitoring, communication and training are essential throughout the broad
banding process. It is indicated that the chance for success can be greatly
enhanced by communicating thoroughly and regularly with all stakeholders.
Emphasis must be placed on the reasons for the change and benefits.
47
The last section in this chapter reviewed feedback from companies that
implemented broad banding. From this it is evident that a conservative
approach is followed in minimising the structure and maximising the flexibility.
When broad banding is implemented as a strategic HR system that integrates
key functions, such as performance management, classification, career
development and organisational design, the results can be very positive
(Bussin, 1995:20).
Chapte
External
Internal
Forces
DITIONA
Change Proccs•
Chapter 3
Background
Design
lyidrnrentatirn
Controlling Cost
BROA I)
71-fitttNe-- -
Coln mun icatio l
Trainino
Monitor
Foto re
48
4. IMPLEMENTATION OF BROAD BANDING
Chapter 5
/ Process
to
Chapter 4 • Som.,.
Measure, to
/ / Sot sass
BROAD BANDING IN
PRACTISE SUMMARY
/
Process to
tlx peon, tions
4.1 Introduction
In this chapter the broad banding process followed by MMC is reviewed. MMC
followed a phased approach in implementing broad banding. Phase 1 is
completed and forms the basis of the review. Phase 2 is due for
implementation at the end of the year and is reviewed under future prospects.
Drivers from the external and internal environment initiate this process. These
drivers are discussed and resulting remuneration strategy presented. A review
of the three-stage process follows which constitutes a pre-implementation,
implementation and post-implementation phase.
The above process is scrutinised and a number of learning points developed by
the author. Reviewing future prospects closes the chapter.
49
The results were obtained from experience of author in this process, available
literature, and structured interviews with key role players, HR consultants, line
managers and employees within the organisation.
4.2 The process followed
4.2.1 The two phased approach
MMC followed a phased approach in implementing broad banding. Two distinct
phases can be distinguished. Phase 1 was initiated in 1996 and was
implemented over a 2-year period. In this phase the hierarchical Paterson
grading system was collapsed from 20 traditional bands to 10. This was the first
step in the process to introduce a performance culture change initiative with the
primary focus on the levels from the C5 downward. The approach corresponds
in many ways that followed by companies introducing broad grades as
discussed in the previous chapter. Only basic compensation is addressed in this
stage.
In phase 2 the focus is to further develop the compensation system to include
skill-based pay and performance based pay. Phase 2 is still in a conceptual
phase and it is anticipated that this phase will start middle-1999. Skill-based
pay is based on developing whole-jobs from the "process stream" concept.
This ensures that skills are developed around the core business and provide a
value adding function. This also provides the opportunity for future reduction in
the number of levels towards "career-bands".
4.2.2 The process
50
No formal model was initially developed to guide role-players to what the
process will look like. From discussions and interviews Figure 4.1 was
compiled which represents the steps that took place in the change process.
Forces Initiating Change
Determinants * Remuneration
Strategy vi---
Establish Representative Team
Preparation Phase *
Design & Evaluate
*
Implementation
0 .512 c.) (13 V) JD 0
Prepare Stakeholders
2 0 co .0 0
* Establish
Agreements *
Raise Awareness
*
Implement
*
Monitor & Feedback
Post-Implementation iv
Training
Figure 4-1 Outline of initial process followed in broadening of bands
It comprises out of four steps and can be summarised as follows:
1. Determinants: Certain forces initiated changes and a strategy was
developed to support the new organisation and human resources goals.
51
Preparation phase: A representative team acted upon this strategy. The
design and evaluation of the remuneration strategy followed.
Implementation: A process was initiated where the proposed changes were
communicated and inputs received. The team reviews inputs and after
approval from all stakeholders, agreements were established. The
stakeholders were made aware of aspects pertaining to implementation and
the changes implemented.
Post-implementation: The process was constantly monitored and feedback
provided to all role-players. Training is an ongoing process that plays an
important role to provide employees the knowledge to perform new tasks
allocated to them. The change itself, if successful, improves organisation
effectiveness and addresses the issues brought about by the determinants.
It is important to realise that change does not take place in a vacuum. A
change in one area of the organisation is likely to initiate new forces for other
changes. The feedback loop acknowledges that this is a dynamic process. The
need for change is presumed to be both inevitable and continual.
4.3 Forces initiating change
Times have changed and international pressure quantum leaped. Traits like the
following prevented MMC from breaking from the "comfort zone" and realising
full potential:
Low mutual trust between management and employees.
Low level of empowerment on lower levels — the supervisor takes
all the decisions they must just act on instructions.
Cumbersome decision making channels with many reporting levels.
Warning signs in the market indicated that a new approach is essential for
survival. To remain a world class competitor the traditional must make way for a
flexible organisation. The focus must shift to customers, core competencies and
people. A performance culture must be developed with involvement, co-
operation, participation, innovation and teamwork from all the stakeholders;
52
even the lowest paid employee. This implies a flexible organisation, which
focuses on the customer, core competencies and people.
In view of the above the stakeholders deem it necessary to change job
structures and uplift the skills of employees. Accordingly in one of the
agreements between the union and management that was developed in this
process it was stated that "The purpose is to implement the right structure,
manned by the right people in order to secure higher levels of productivity
resulting in growth of the company to the benefit of all stakeholders."
4.3.1 Broadbanding driving forces
Numerous reasons can be quoted which initiated the process of adapting a
broadbanding strategy. The core driving forces established by the author is as
follows:
Business and organisational drivers:
Market share declined (Volumes): Chinese producers rapidly gained
market share in the past few years by expanding production, improving
quality and reducing cost. The "rigidity" of MMC prevented it from
responding to this thread effectively.
Customer complaints increased (Quality): Customers were lost on a daily
basis mainly due to out of specification material dispatched. Some of these
complaints included contamination by cigarette stubs, floor sweepings, bolts
etc. This indicated that employees (especially the worker on the lower level)
were not customer focussed and were not affected by the abundance of
complaints and problems. The responsibility and accountability stopped
higher up in the hierarchy.
Competitiveness declined (Price): The product carried a considerable
price premium due to the high quality, volumes and consistency of supply.
However, a decline in these aspects relative to overseas competitors eroded
this price premium. Customers' perception is that they can get a better
53
quality product on a consistent basis at a much lower cost from Chinese
producers.
Pressure to contain remuneration cost: Comparative studies indicated
that on average labour cost per unit produced far exceeded competitor
prices and represented a significant fixed cost expenditure. In the past
emphasis was placed on labour cost vs. productivity improvement.
However, without introducing effective mechanisms to achieve a major
culture shift it will not happen by only working harder or smarter.
Personnel and career development drivers:
Encourage growth and horizontal skill development: Slow employee
development and often stagnation in lower levels due to narrow job content
had a negative impact on the company as a whole. It was realised that to
develop a performance culture human potential needs to be explored to its
full extent. By encouraging horizontal skill development and employee
empowerment, increased productivity can be obtained. It is also envisaged
to link pay to skills applied.
Encourage teamwork and flexibility: People on different levels are
hesitant to do work on a higher grade or even work on the same grade
without monetary recognition. This also impairs on the job transfers of
practical skills and knowledge. This can be attributed to the narrow job
content and job description that was introduced in the past. Flexibility and
teamwork must be emphasised to obtain a customer orientated value-adding
organisation.
Management reluctant to empower people: Workers do not show initiative
and are considered not effective by management.
Lack of trust between departments and levels: Conflicting objectives
between departments and lack of team motivation within departments
prevents synergy in the organisation.
Administration of pay
Change the basis for pay progression: South Africa created a "comfort
zone" of longevity based pay progression. To be competitive the emphasis
54
must be placed on progression based on value adding i.e. skills applied and
competencies obtained. It is, however, realised that it is difficult to reward
performance.
Discrimination/racial division: The current structure still reflects these
inequalities.
Empowerment of line management: They must play a more prominent
role in decisions affecting their employees. Labour represents a major
expense and must be managed effectively. This also presents the
opportunity to outsource the HR function.
4.3.2 Remuneration Strategy
The drivers mentioned in the previous section can be translated into a number
of organisation and human resources goals. According to the Armstrong and
Murlis (1994,p25) remuneration model, these goals must be supported by the
remuneration strategy. From figure 4.2 it follows that the remuneration strategy
consists of three main components i.e. philosophy, strategic goals and
processes.
Organisation and Human Resources Goals
Remuneration Strategy
/ Philosophy
Strategic
Remuneration Goals
Processes
Figure 4-1: Remuneration strategy
With this model as a reference the remuneration strategy is derived as follows:
Philosophy:
Flexible
55
Cost effective: The cost must be offset by productivity improvements
Development of people
Transparent
Goals:
The goals can be viewed as the long-term objectives of the total remuneration
strategy.
Stronger link between HR strategic plan and Core business plan
Unlock potential of employees by creating a learning culture and motivating
development. This includes focus on:
Structure
Moving focus from generic training to operational training and
multiskilling/multitasking of employees
Improve training and training resources and align with NQF
Fair treatment of employees
Develop a remuneration model linked to productivity and performance (skill-
based pay combined with performance based pay)
Management succession planning
Process:
The process indicates what must be done to achieve goals and can include
numerous efforts
Self directed work teams & business units
Remuneration agreements (Basic pay)
Performance based pay scheme
Workplace change (Broadbanding )
Process stream & whole job classification (Skill based pay)
Outsourcing of non-core activities
It is important to note that the strategy is not a unilateral concept developed by
management. It is developed over a period of time by joint discussions
56
between all the relevant role players. Constant review is required to adapt to
the dynamic environment.
4.4 Pre-implementation phase
Most aspect in this section also pertains to phase 2. The design however is
discussed in section 3.
4.4.1 Establish representative team
The first step in the process was to establish a representative team to ensure
buy-in from all stakeholders. This team was compiled from members of senior
management, human resources and representatives of each union as indicated
in the table below:
Representatives
Human resources
1 Members
I HR managers of both plants
of which one acted as
chairman.
Senior management Managing director & Plant
managers of both plants.
Numsa (Majority union) Chairman and secretary
MWU Chairman and secretary
Seawusa Chairman and secretary
Table 4-1: Representative design team
4.4.2 Time span
The agreed time span was a two-year period commencing on 1 July 1996 and
ending 30 June 1998. This was contingent upon training, multiskilling,
multitasking, mechanisation and redeployment of personnel. The rationale
behind this was to prevent inflation of the wage bill without a significant
improvement in productivity. During this period prior A3 employees for instance
57
will be provided with the opportunity to receive training to enhance and broaden
their skills to warrant the "promotion" to Level 1 (refer to Figure 4-3).
This time span, however, proofed to be inadequate and this resulted in many
A3's populating Level 1 without any improvement in productivity. The following
contributed to this situation:
HR support system inadequate to cope with increased demand of training
Career path and skills framework not in place, which created confusion
regarding the training curriculum.
Literacy levels of employees within the prior A and B levels very low.
Employees were compelled to attend ABET training for an extensive period,
which further delayed process.
Parallel route not provided to people with "hands-on" ability, but literacy
disadvantage.
Line managers was not prepared for new HR role they had to fulfil.
Stipulations of agreement not adhered to i.e. incorrect job classification and
insufficient skills.
Subsequent union opposition regarding multiskilling due to inadequacy in
remuneration system.
The well-designed program was delayed by an extensive period due to
numerous "minor" irritations that were not clarified beforehand.
4.4.3 Design
The first step in the design phase was to "group" the Paterson bands into levels
according to specified criteria. These levels are then benchmarked and career
path developed. The primary focus was on levels within the bargaining unit i.e.
Level 1 to C Upper.
Reduction of levels
On implementation of the new structure, the current relevant Patterson levels
were grouped into 10 bands on the following basis.
58
From middle management upward the former sub-grades are abandoned
and left with only the job grades i.e. D1, D2 and D3 are replaced by D-
Lower.
The supervisory management levels of C4 and C5 are collapsed to C-upper.
The range from skilled to unskilled labour (C3 to A3) is replaced with the 6
OLD PATERSON STRUCTURE
E3 E2 El
D4 D3
D2 D1 F.-
C5 C4 1---
C3 I.--
C2 1--
Cl
[ B7 .."
B6 B5 1.--
B4 B3
B2 B1 A3
NEW BROADBANDED STRUCTURE
E Lower
D-Upper
D Lower
C-Upper
Level 6
Level 5
Level 4
Level 3
Level 2
Level 1 .••
FUTURE STRUCTURE
........
........
..•••"*.
Figure 4-1 the phase 1 conversion of Paterson bands to broad bands
level skill structure. The artisan operator at level 5 and level 6 for the highly
skilled artisan operator. A temporary entry level 0 (not indicated) was also
created to facilitate the transfer and prevent inflation of salary budget.
The objective of these broadly defined skill levels is to create a flexible, efficient
and multiskilled workforce by allowing employees to move from the current
inflexible job descriptions to a situation where they are permitted and able to
perform a variety of tasks grouped into six skill levels. It was realised that this
59
process might present a number of problems and therefore the following
provisions apply to this process:
Incorrect job classification: It is accepted that the long-term process of
reconstruction may classify certain jobs currently placed in one level, in
another level. An employee, who is i.e. placed on job level 3 on
implementation of the new structure, may in terms of appropriate skills only
qualify for job level 1 in the long term. Such an employee will, after
counselling, be placed on the applicable job level. The employee's current
remuneration will remain unchanged until such time as their remuneration is
in line with other job incumbents on the same level.
Insufficient skills: Employees who are not competent in a job level will be
given three opportunities to obtain the applicable competencies or skills.
However, after three attempts the employee is tested not to be competent,
will after counselling, be placed on the appropriate job level. Remuneration
will remain unchanged until such time as his remuneration is in line with
other job incumbents, or the employee is certified competent.
Benchmarking
Supervisory and management levels are not as prone to pay equity (refer to
previous chapter for definition) problems as the lower levels due to the internal
and external qualification and legislative requirements. However, in industry the
lower levels often did not provide pay equity due to a qualification framework
that was not formalised and often biased, discriminatory practises (race and
gender).
In order to establish internal equity the existing artisan position is graded at
level. This is used as a benchmark job, against which all other jobs in the
engineering discipline is measured. A similar approach is followed for an
operator position at level 5 (similar skills level to the artisan), is used as a
benchmark job against which all other jobs in the Production discipline is
measured (Benchmark jobs will have to be determined for other disciplines).
Each of the job levels consists of a skill framework, which comprise of Generic
Skills, Core Job Skills and Plant Specific Skills.
60
Generic skills refer to those skills required for all jobs, irrespective of the
chosen field or discipline, i.e.: Literacy, numeracy, business principles, shop
floor management principles etc.
Core skills refer to those skills, which are required for the chosen field or
discipline: Artisan or Production skills for which national industry
accreditation and recognition is given.
Plant skills refer to skills/knowledge of the specific unique equipment/
process used at the plant, to enable the employee to function/work
independently.
Career paths
Career paths for each discipline will be developed to enable employees to
acquire the necessary skills to function optimally on the defined job levels and
where applicable to progress. As a consequence of individual development
interviews, a skill matrix will be drawn up for each employee and will form the
basis of the employee's training.
An employee will only qualify for promotion to level 2 and upwards once a
vacancy exists and the required generic education, core and plant specific skills
have been completed successfully in terms of the appropriate competency
tests. Employee performance records will form part of the selection criteria.
To facilitate the acquisition of skills required in a level, a 6 month probationary
period for new employees and a 3 month probationary period for current
employees will be introduced to allow for training and testing. Employees who
have satisfied all the skill criteria need not work a probationary period.
Employees' skills will be uplifted commensurate with the right structure based
on the operational requirements of the company.
4.4.4 Remuneration within bands
One of the main objectives of the reduction in job levels is to enable the
company to remain a world competitor. It is therefore accepted that this
programme must lead to higher productivity levels and improve the standard of
61
living of its employees and that the programme should be implemented without
additional cost to the company.
Remuneration strategy must take into account the employees broadened
enhanced skills basis, while at the same time the funds needed to implement a
new remuneration strategy must be obtained through improved productivity. A 3
component reward system is therefore implemented based on:
Basic compensation:
The wide spread of pay in a level through no apparent good reason will be
reduced over time through future appointments made on scale minimum's,
natural turnover and the consideration for quantum increases during the annual
wage review.
Skill based pay:
Payment for additional skills obtained within a level will be recognised. This
payment will be capped at 8% of the minimum base pay in a level. A skills
profile for each "whole job" needs to be developed, consisting of core skills,
generic skills, plant specific skills and additional skills (This will be the focus of
phase 2 skills can be grouped together and recognition will be given in
increments of, say, 2% at a time.
Performance based pay
A pool is generated as a result of savings expressed as cost per ton produced.
This pool is distributed to the teams on the basis of quality, speed and
functioning of the self directed teams in terms of implementation of best
practice. Individuals qualify for the bonus based on attendance and safety (i.e.
one day absent = 50% bonus, two days absent = 0% of bonus)
62
4.5 Implementation phase
4.5.1 Prepare stakeholders
Preceding this change process a number of steps were taken to evaluate the
climate and possible acceptance of change.
Measurement of organisational and labour relation climate: Information
was gathered by means of qualitative, quantitative and supporting
documentation. The data was statistically analysed to identify the main
problem areas. In general the results were not supportive of change efforts
due to the overall low score. However, at that stage these results did not
play a significant role in the process and served only as information.
Briefs were sent to employees to explain process.
Interactive sessions were held with middle and lower management to
explain content of agreements.
Unions general meetings: were provided with several general meetings
with members to explain agreements before final approval.
Sample documentation of old vs. new: Sample pay slips indicating level
and rate were generated to explain this new concept compared to previous
concept and how the change will affect their bottom line.
4.5.2 Establish agreements (Influences on the broadbanding process)
Several initiatives proceeded the implementation of broadbanding. Although
many of these concepts were clear to the steering committee and employee
representatives, it failed to prepare the lower level employees for the process to
follow. The following were important aspects:
Workplace change: An agreement was negotiated with reference to the
work change process anticipated. This agreement constituted the
foundation of the whole process. In essence it was negotiated to uplift skills
of employees, ensure right structure manned by the right people in order to
secure higher levels of productivity resulting in growth of the company to the
benefit of all stakeholders. The workplace change process involved shop-
floor employees to re-design new structure and whole job grouping.
63
Negotiation of a remuneration agreement/philosophy: In essence this
classifies movement from Paterson to new structure for bargaining unit and
other principles. Relevant to movement between bands, flexibility, minimum
wages.
Self-directed work teams. Underlying the principles of flexible workforce
and flatter structure is the principle of self-directed work teams. This
provides an ideal system to apply innovative reward systems, flexibility, and
horizontal job enrichment and provides a customer-focused approach.
Bonus system. Negotiated to include lower levels. Although this is not
implemented yet due to a difficult process of negotiations it will provide a
good system to apply variable pay strategies. Senior management variable
pay parameters altered. Emphasis is placed on group dynamics and
achieving goals.
Repositioning of the front line supervisor:
4.6 Post-implementation
4.6.1 Monitoring
In terms of the Workplace Change Agreement the MMC Steering Committee
will be responsible for monitoring progress on a quarterly basis and provide
feedback. The progress will then be communicated on a quarterly basis in a
joint brief to all stakeholders at MMC following each Steering Committee
meeting.
4.6.2 Training
With the new structures in place it is important to provide employees with the
essential skills needed to perform to the required work. To bridge the gap
formal on-the-job training is provided. Due to the vast number of employees
that required training affordability, available training resources, production
targets and available manpower limited the rapid progress required.
New unskilled employees who do not comply with the skills requirements of
level 1, will be placed on probation on level 0 for a training period of not longer
64
than 6 months, at 13% below the rate of level 1. During this period such
employees must perform satisfactorily and acquire and demonstrate the core,
generic and plant specific skills pertaining to level 1 in terms of the appropriate
competency tests.
The principle of recognition of prior learning will apply, with the proviso that such
recognition will only be granted once an employee has been assessed and is
found competent in terms of the standards set for plant specific training, core
training and generic/educational training.
The parties furthermore agree to develop standards as required by the NOF
and that such registered standards will eventually replace the existing standards
where applicable. It is furthermore agreed that all employees will be re-
assessed in terms of registered standards by an accredited assessor. In this
case, recognition for prior learning will only be granted where an accredited
assessor declares an employee competent in terms of the registered standards.
It is agreed that, from the date of the signing of this agreement, no regrading in
terms of the existing Patterson job grading system will take place.
4.7 Learning points from this process
The seemingly straightforward process proved to be difficult to implement and
to sustain momentum over the prolonged period. In retrospect it is important to
learn from this process and problems encountered.
4.7.1 Pitfalls
Numerous obstacles were encountered during the design and implementation
phases. Some of these seemed to be unimportant, however, in many instances
the small issues created the biggest upset amongst employees.
Design
• Inflated salary cost: Former A3-level employees were "promoted" to Level
1 without the required skills. This employee will consequently still function as
a "A3-level" employee. The result is an inflated salary bill.
65
Line mangers are not prepared for the new responsibility. Involvement
of line mangers is an essential. Due to background, training and experience
this is not part of their knowledge base. A paradigm shift is required to
involve them in the process. Effort must be in place to educate them.
Human resources are one of their major budgetary items and it is vital that
they get more involved in what effects their bottom line.
Literacy levels & training: This was not considered to be an obstacle when
the process was initiated. However, the reality was that it is extremely
difficult, time consuming and expensive to uplift employees to a level where
value-added training can be provided. For example an artisan assistant
without any prior formal training or qualification (i.e. st.5) will take a minimum
of 2 years to fulfil the basic requirements set for a Level 1 in the broad
banded structure. During this period 20% of his time will be spend on
training. If he is not successful, the labour cost will exceed the benefit and
compound to an inflated salary budget. To address this problem, it is
essential that agreements must be in place providing a reasonable, but
limited window of opportunity to obtain the required skills required for the
specific level. If he fails his services will automatically be terminated. This
type of agreement must be an agenda point on a monthly union and
management forum or meeting and painstakingly adhered to.
Implementation
Lack of guidance through implementation phase provided by
management. The high level of confusion amongst employees indicated
that the communication and preparation were not effective. Beyond this it
was apparent that intense guidance is also required on a regular basis to
guide employees through this process.
Lost focus created by divided attention with implementing agreements.
The implementation of the fourth shift agreement in parallel with the
workplace change agreement created confusion. Changes in rate of pay as
a result of this agreement negatively reflected on the broad banding
process.
66
Union
Failed to inform members adequately. The trade unions undertook to use
their best endeavours to ensure that their members are aware of the
implications of the new job and wage structure and their obligation as
employees having agreed to enter the new structure, to undertake a broader
range of work. The union failed to clearly convey the message and
members consequently opposed numerous changes.
Management failed to ensure that union delivered correct message to
union members. It is important to realise that one must "sell" the system to
all employees. This is where the unions' input is absolutely essential. They
often have a better feel for what will work.
Employee
Lack of internal equity. With the grouping of i.e. level A3 to level B2 into
level 1 and the rate adjustment due to the fourth shift system, internal equity
disappeared. In some instances highly skilled and experienced employees
earned less than lower skilled employees on level 1 did. This was due to the
overtime history that was also included to calculate the new pay rate. Lost
within a band perception: The scope for climbing levels diminishes with
reduced number of levels. For example with the grouping of i.e. Level A3 to
Level B2 into Level 1, B2 employee's experienced a perception of "reduced
status". On the other hand A3 employee's experienced a lack of career
path, because they have to compete with former B3 employees on the same
level. The perception remained that a movement from one band to another
constitutes a promotion. This is however not the objective of broad banding.
It is important to replace this with some other form of career path. There are
endless ways on approaching this by acquiring additional skill and
responsibilities in terms of breadth and depth of tasks.
Employees associate broad banding with immediate increase in their
pay. In the way that this system was implemented this was the case with
some of the employees - especially on the A3 level where the minimum rate
of pay increased from R9.15 to R10.35. According to the agreement no loss
of income would be incurred.
67
4.7.2 Impact of organisational climate
Lack of role clarification: Lack of understanding of what is expected from
them in new level structures. Role clarification is of utmost importance in
any organisation because it explains exactly to every member what is
expected of him. With the implementation of broad banding a lot of
uncertainty surrounded their new roles resulting in responsibilities and
accountabilities not being established effectively.
High level of commitment: Although employees do not identify themselves
with the prevailing values in the organisation, it should be noted as an
extremely important aspect that the level of commitment amongst
employees is relatively high. One of the most promising findings is the fact
that employees expressed a sincere need to change the company's low
level of performance around
Lack of trust: The lack of trust is identified between management and their
direct supervisors, supervisors and subordinate workers as well as between
different departments. The effect of this will surely have a negative impact
on the organisational performance, as integration of functions will be
influenced. This may be one of the reasons why employees do not regard
the Mission Directed Work Team's initiative as very successful.
Unfavourable evaluation of communication: Although a number of
communication channels and forums exist, employees tend to evaluate
communication itself as key problem areas. Inconsistent communications
from Union and management and the problem of union reps not ensure that
members fully understood process and implications only compounded to the
problem. The unfavourable evaluation of communication is most likely to be
the result of other factors i.e. the low levels of trust. Organisations are often
tempted to fall in the trap of launching communication initiatives without
dealing or taking note of the underlying factors leading to poor
communication.
Two key findings are that broadbanding initiatives can succeed only if they are
instituted in an integrated, strategic manner and accompanied by high
68
communications and involvement that is designed to reinforce the broader
cultural changes necessary for long-term success.
4.7.3 Strategic factors in the process
Broadbanding initiatives will almost certainly fail if they are treated as one-off,
quick fix, pay redesign exercises. The approach to broadbanding has to be
strategic in three senses.
Clear business purpose: If employees cannot see the business necessity
of behaving in new ways, or if senior managers continue to behave in a
traditional top-down style, then employees will view any grade delayering as
cosmetic and hypocritical.
Changes to related pay programs and other HR practices: broadbanding
relies heavily on changes in these practices, which are generally much more
difficult to achieve. For example defined job responsibilities is restricting the
potential benefits of broadbanding greater work and pay flexibility.
Investment in personal and career-development systems is essential.
Phased and long-term approach: Although there is danger of losing
momentum and continuity, the most successful companies adopted this
approach. Third, the changes required to operate broadbanding systems
effectively have to be pursued over many years. They do not just happen
after the grading structure has been redesigned. As one participant put it,
"You never get it right; you have to make incremental improvements every
year."
69
4.8 Future prospects: The process stream concept and skill- based pay.
For any company operating in the industrial environment the process stream
concept, which translates to whole job development, is essential to maximise
potential. For Greenfield projects this must be the first option not only to
enhance competitiveness, but also create a flexible workforce with a broad
band structure. Consequently, it is the authors' opinion that there is only one
route ahead for MMC and that is to apply the process stream concept.
The "process stream" concept provides the vehicle for skilled-based pay. It also
addresses amongst others the shortcomings of phase one by focussing in
optimising labour within the broader bands. Aspects that was not addressed by
the first phase includes amongst others:
Eliminating the Tailoristic approach of one step equals one job.
Decision making is still exclusive to those in authority
Duplication of functions/exclusive task allocation not addressed.
In Figure 4-3 the author indicated the two step migration from the Paterson
grading system to envisaged structure with the application of the process
stream concept. The functional job title and nature of work caters for a wide
and flexible responsibility. The following paragraphs provide a brief description
of the steps to follow and how this system and how it can be applied to MMC.
4.8.1 Steps in applying the process stream concept at MMC
Stepl: Develop whole jobs from the core process flow
In the industrial sector the prominent method to develop a skill based pay
system is to apply the "process stream" concept. A process stream
describes the core business of an organisation and usually can be
derived from the mission statement.
70
Support Activities
INPUT CORE PROCESS FLOW Work cycles*Core Transformations*Tasks
OUTPUT
Support Activities
Figure 4-1: The industrial process can be defined in terms of input, transformation and output.
A process stream constitutes a number of work cycles. Work cycles
focus on a group of core competencies that are required to turn inputs
into outputs (core transformations, services, and work domains). Tasks
that are required in the work cycle are identified and grouped into new
whole jobs. From this process and equipment analysis phase the
foundation is laid for developing the skill based system which is briefly
described below:
Step 2: Competency analysis
The tasks are clustered to form competencies and a competency matrix
developed from this. The purpose of the competency matrix is to identify
the competencies required to successfully complete a task.
Competencies consist of skills and knowledge. (Skill is the ability to put
knowledge into practice and knowledge is theoretical base that creates
understanding)
Step 3: Structure analysis
In essence this involves career path analysis and Job title optimisation: A
vast array of job titles narrows the responsibilities that can be assigned to
an employee, i.e. forklift driving. To ensure effective multiskilling and
broadbanding the job titles must be optimised. It is necessary to move
away from descriptive and functional titles to generic job titles. In the
following diagram an example is presented where levels below the
advisory level is collated into three generic jobs.
Section Controller
Section
Controller
Equipment Controller
Equipment Controller
Section
Loading
ontrolle) ontroller Controller Process) quipmen
Powder > Mill
Transport
Equipment Controller
Section Controller Controller
Section
Arntla
.Complexity
Frequency Criticality Duration
ontroller Controller
\\Controller// Section Section
Team ,
ywV"
/Equipment nt
ontroller
Equipme Controller
Section /
Process Controller
Section
AControlleA
Control operation
Nature of work Generic ob Title
perations Manager
Functional Job Title
Plant Manager
quipmen Controller
Control Equipment as part of a section. i.e. Cranes, Forklifts
Slinger, Forklift driver, Strapper,Packer
CH Manager, OSS Manager Control production unit
CH Team Leader I, Control Operational CH Team Leader 2 team Ida unit
Furnace operator, Milling section operator
(Controller
Process
Drum filter operator, SO2 plant operator, \Controller)
Control Sections of a Process as an
independent Work Boundary
Section
Control Integrated Processes
Unit Manager
71
(a) Process & Boundaries
(b) Operational Team
(c) Flexibility & Skill Density
Figure 4-1: Illustrative example of the process stream concept applied to a powder milling operation
Step 4: Work design analysis
In order to derive required compliment an analysis must be made on the
skills required to provide the required competencies. Competencies are
evaluated in terms of complexity, frequency, criticality and duration. From
this a match can be made to ensure optimum manpower for the process
(Figure 3-9(a))
Figure 4-1: Structure indicating all proposed levels within MMC
Step 5: Team-based structure design
Should allow for optimal overlap, ensuring team flexibility. It is not
feasible to implement a concept of absolute multiskilling in the team
72
context i.e. costly to train all employees to operate mobile crane and be
paid accordingly. Another concern is that employees will not utilise a
particular skill or competency often enough to remain competent. Optimal
overlap therefore implies sufficient overlap to ensure team flexibility. In
Figure 2-9(b) an operational team based structure is indicated. It is noted
that 1 x process controlling, 3 x section controlling, 2 x equipment
controlling are required to man the operation effectively. To ensure
flexibility each member is trained to be able to swap duties. This rotation
is done on a planned cycle to ensure they remain competent. It is
important to note that integration is essential on various levels.
There are three levels of integration that can be distinguished:
job level : Line personnel physically do tasks and duties which
were traditionally done be service personnel,
Domain level: specialised skills and knowledge i.e. electrician
reports directly to domain manager.
Work cycle level: where single domain does not warrant a position
i.e. instrument technician. Such a position reports directly into a
work cycle.
It is positive that most employees wants to be part of solving the company's'
problem. The climate survey indicated that lack of role clarification,
communication, commitment and trust posed the biggest threat to new
initiatives. These "activators" also negatively impacted on teamwork, training,
discipline which is essential in assisting a successful transfer to a new
classification system. This was evident with the broad banding and self-directed
work team implementation.
4.9 Summary
A model was compiled to display the actual process that took place within
MMC. From this model it follows that four phases can be identified i.e. the
determinant, preparation, implementation and post implementation phases.
73
The determinants indicate the forces that initiated changes. The forces
originated mainly from three sources i.e. business environment, employees and
administration of pay. From this the resulting strategy was developed to
support the new organisation and human resources goals. This strategy
addresses the philosophy it is based upon, the strategic goals it is aiming to
achieve and the processes that will be followed to achieve this.
It is essential to establish a representative design team to ensure buy-in from all
the stakeholders. In the preparation phase a representative team acted upon
this strategy. The time span in which the process had to be completed was set
at 2 years. This, however, was insufficient due to numerous problems
experienced with HR support systems, literacy levels and preparation of line
manager's. With designing the system a simple approach of grouping levels
into bands was followed and aspects pertaining to the reduction in levels,
benchmarking of jobs and developing of a career path for employees.
Remuneration within bands were designed to acknowledge the broadened skill
base and a three component remuneration proposed which consist of basic
pay, skill based pay and bonus pay.
A process was initiated where the proposed changes were communicated,
inputs received and after approval from all stakeholders, agreements were
established. The effective preparation and communication are key aspects in
the process. A number of options were pursued of which sample pay slips
proved the biggest impact in understanding the new system. The process was
constantly monitored and feedback provided to all role-players.
The process followed cannot provide a significant improvement if each job is not
also critically evaluated and skills required stipulated to ensure effective
functioning of the skill-based pay. The process stream concept is consequently
discussed to develop whole jobs. The proposed structure and functioning is
also indicated.
Chapter 3
Chapte
External
Internal
Force:
FRAI)ITI()N,‘
/CIVIITERNly
Background
Design
&
dement:an,
Controlling
Cost
BROAD
C'ommunicatioi
Trainino
Monitor
Chapter 4
BROA I)
BANDING IN
PRACTISE
Chapter 5
Process
to
Success
Measures
to Success
SUMMARY
Process
to Success
Expectations
5.1 Introduction
In this last chapter the findings of the research project is provided and
conclusions drawn from this. In the first section the findings from the literature
research and the implementation example is combined to provide guidelines on
what to expect and what to do to enhance success. In the following section a
recommended implementation model is provided for implementation of broad
banding. The chapter closes with suggested future research.
5.2 Fundamental aspects of a broad banding program
Change Proces
Future
74
5. CONCLUSIONS AND RECOMMENDATIONS
5.2.1 Expectations of broadbanding
Changes are not as broad or as flexible as anticipated from theory. By
appropriately judging the organisation's readiness to restructure pay and
aligning the broadbanding initiatives with much broader and longer-term
75
organisational and cultural change processes realistic "expectations" (goals)
can be achieved.
What are realistic expectations of a broadbanding system? There are mainly
three areas affected i.e. Business, people and human resources function.
Broadbanding will present certain expectations to these areas. From the study
it could be established that there are 5 major realistic expectations:
Business
FLEXIBILITY Increased flexibility which can increase
organisational effectiveness.
STRUCTURE Structure is de-emphasised. Combined initiatives
i.e. multiskilling puts pressure on fine grade
differentiation in a team environment. Teamwork
is encouraged
CULTURE/CLIMATE Organisational change is not driven by
broadbanding but supported and reinforced by
broadbanding
CUSTOMER FOCUS Improve customer focus. By delayering the
customer service/focus/awareness is improved.
Due to delayering the line/chain of command is
often a frustration to customers.
PEOPLE FOCUS Encourage growth and horizontal skill
development, dual career ladders, lateral mobility.
Human resources function and administration of pay
Larger pay ranges May make cost control more difficult as pay
ranges expand: Salary ranges provide a
mechanism to control the salary growth of
individual employees, and thereby the salary
costs of an organisation. With salary ranges, an
employee's salary stops at a certain point, until
76
they acquire the skills necessary for advancement
to the next higher level position. Broadbanding,
with its high salary range maximums, does not
have the salary control feature of the traditional
salary structure.
Movements through
pay ranges
Based on skill acquisition and not necessarily on
job description. Policy on pay-for-skills to be
developed.
Pricing of skills Well established guidelines
Line management
involvement
Fringe benefit policies
External equity More difficult to establish external pay equity
due to lack of accurate salary survey data for
broader job categories: Broadbanding risks
divergence from market pay practices. Paying too
little relative to the market could mean higher
employee turnover, paying too much relative to
the market could mean higher product costs than
competitors.
Inflated Salary bill Will increase before it decreases.
Internal pay equity: Inconsistent pay decisions by managers may
result in loss of internal equity. Maintaining the
perception of pay equity can be more difficult. If
two employees are in the same broad salary band
doing similar work, and one employee is paid
near the bottom of the range, and the other is
paid near the top of the range, how do you justify
the salary differential to two employees? A pay
discrimination charge could be difficult to defend.
77
People
Perceived fewer vertical
promotional
opportunities:
Broadbanding reduces the opportunity for
promotion to a higher salary range since there are
fewer salary ranges. Yet promotions are valuable.
The number of promotions one receives is a key
component of their perception of the career
advancement opportunities offered by their
employer. Typically, a professional will receive
two promotions within their first five years after
graduation from college. The frequency of
promotions early in their career correlates with
the steepness of the new employee's learning
curve, and complements their increase in value to
the company and attractiveness to competitors.
Promotions provide a vehicle for accelerating the
salary of new employees to help ensure their
retention in the company.
5.2.2 Measures to enhance the chances of success
1) Before you start
determine readiness
Successful Organisational Change is a
function of Organisational Readiness. The
Organisational Readiness is, in turn,
dependent on the people and systems
affected by the change and their
predisposition to support, ignore or resist its
implementation. Methods that can be
utilised to assess readiness in the
organisation includes amongst others:
78
Climate surveys: Numerous consulting
firms specialise in providing this service.
It is also good barometer to compare
before and after situation.
Interactive sessions: This includes
focus groups, questionnaires, Indaba
sessions
Union interaction: Provide sample
documentation of i.e. before and after
payslips. Union representatives and
selected union members can provide
feedback on perception based on these
real live examples.
In the study 5 factors were also indicated to
provide good "common sense" indication for
readiness i.e.:
Business environment
Structure
Culture of the organisation
Human resources management
Pay focus
Predicting impact In order to avoid the costly symptoms of
change, managers responsible for the
implementation of major business decisions
need to know what impact change efforts
will have on "targets". The 14 impact
prediction factors of chapter 1 can be
revisited.
Follow integrated The process must form part of the
approach remuneration strategy and support human
resources and organisation goals. It must
be evident to role-players that this is not just
79
a "quick fix", but rather a strategic process to
ensure long term viability and survival of the
organisation as a whole.
4) Involve all
stakeholders in
process
the
the
Three role-players (stakeholders) were
identified i.e. management, human
resources and employees. It is important to:
Realise that they have different views on
the process and will play different roles.
Involve representatives of all these role-
players.
Do not "fragment" the team — the core
team must function as a team
throughout.
Team members must be dedicated to the
process throughout.
Design conservatively It is important to find the optimum balance
between maximum flexibility provided by
"career bands" and maximum control
provided by the traditional hierarchical
structure. No two companies are the same
— a specific approach might be excellent for
one, but disastrous for another. The
common advice is to follow a conservative
approach. Depending on the readiness and
culture of the organisation the process can
be achieved in a reasonable time span.
Prepare all the
stakeholders sufficiently
(Over-communicate)
Why: Most of the resistance originates from
amongst others misconceptions, rumours
and lack of understanding of the process.
By sufficiently preparing and informing
stakeholders this can be eliminated and
success enhanced considerably. It is not a
once-off phase — it is a continuo process
80
throughout the program.
Who: From top management to show
support and commitment for process and
explain link to corporate strategy. From
front-line management and union
representatives to ensure buy-in.
What: The communications must:
Clearly indicate the reasons why we are
implementing broadbanding.
What the benefits are for all the
stakeholders.
Provide answers to all questions!
Methods of communication includes:
Printed media: Newsletter, brochures,
manuals, permanent agenda point on
meetings etc.
Electronic media: E-mail, Web page,
videos
Interactive: Briefing sessions, training
sessions, workshop, industrial theatre,
mass meetings, workplace meetings.
7) Train and re-train A good option is to involve individual
members of the design team to present the
training or at least be present to answer
question that might arise.
WhO: Managers, supervisors and
employees
What: Should include
Information on system
How it works
Rights and responsibilities
No uncertainties must exist on factors that
influence individuals' income position within
81
a band.
Establish agreements In the unionised environment it is a basic
necessity. This might delay the process, but
it provides a solid base to implement from
and resolve any disputes that may arise.
Remember both parties must honour this
agreement.
Review human resources
system
System to be able to cope with more flexible
remuneration system. A new cost control
model must be developed. Implementation
often involves the installation of software to
track skill acquisition, schedule training and
provide information on who is able to do
what.
10)Monitor effectiveness to
stay on track
Monitor the system and track effectiveness
of the process. This involves setting some
base, preferably financial and physical i.e.:
Revenue versus labour bill
Productivity improvement
(units/employee)
This provides information on how it is
working and indicates opportunities to fine
tune. Throughout the process this should
be communicated to employees. Employee
surveys to track attitude is one method of
monitoring effectiveness.
Preparation Phase
Com
mu
nic
ate
Establish Representative Team
+ Develop
Skills Matrix
+ Develop new
Structure
+ Raise Awareness & Understanding
+ Establish
Agreements
+ Develop
Training system
Hi
82
5.3 Proposed broad banding process to follow
There are many approaches to design and implementation of such a system.
From the literature review and practical experience the following process model
is presented:
Implementation
Com
mu
nic
ate
V
Prepare Stakeholders
iv
Implement
i
Monitor & Feedback
4'
Post-Implementation Training
Figure 5-1 Proposed process to follow
83
Establish
representative team
Form steering or working committee that is
representative of all stakeholders
Develop skills
matrix
Develop skill matrix by evaluating the core business
flow and conducting a thorough work design and job
analysis. The following questions must be
addressed:
What is the process flow?
What removes customer service "irritators"?
How many employees relevant for the work
domain?
What should employees be doing in the domain?
What tasks and skills are required?
Develop new
structure
Compare existing grading system (structure) with
the business requirements according to step 2.
After careful consideration decide on the number of
bands required. Calculate the cost implications of
adjusting and modifying the pay system according to
the skills matrixes developed in 2. This often
requires a skills audit of the current workforce.
Raise awareness &
understanding
Inform all role-players on the concept of
broadbanding utilising all possible means of
communication. Interactive sessions are very
important to establish concerns and receive as
much as possible feedback This is fundamental to
success and if necessary the loop to Step 3 must be
repeated until a reasonable compromise has been
achieved.
Establish
agreements
With all parties in agreement policy guidelines and
rules can be formalised on i.e. transfer from old to
new, how to move through the broadbands, training
and competency test to verify proficiency.
84
Develop training
system
Develop training system to cope with the new skills
matrices and conform to agreements.
Prepare
stakeholders
The focus is on preparation of managers and
supervisors that must manage system. Employees
are prepared for transfer to new system by
extensive communication — each employee will
receive a personalised letter indicating amongst
others new position, level and rate of pay. Training
sessions are held to prepare incumbents for the
application of skills matrix and broadbanding. A
program is provided to set out the time frame and
steps in process.
Implement Reclassification of positions within broadbands.
This is a mechanistic phase of applying the
designed system according to the agreements.
Monitor & Feedback Monitor the system and track effectiveness of the
implementation. This involves setting up some base
statistics, both financial and physical i.e. (example) It
is important to track skills acquired, schedule
training and know who is able to do what at any
time. Communicate throughout and provide regular
feedback on progress. This helps to manage
expectations and creates a mutual feeling that we
are moving forward. Remember that it does not
happen overnight
10)Training A surge in training will be experienced in the
beginning to develop incumbents to their full
potential within their newly defined roles. Training
will be an ongoing process to make full use of the
broadbanding design of horizontal development.
85
5.4 Future of broadbanding
Will Broadbanding continue to spread? To the extent that Broadbanding
systems facilitate the shift from job-based systems to person-based systems
that focus on skills, knowledge and competencies, the trend is likely to continue.
Flatter high-performance organisations require pay systems that match their
organisational structures. Ledford (1 995) points out that compensation has
long been one of the most precise, complex and quantitative of HR practices
and that job evaluation is becoming obsolete because it cannot keep pace with
organisational change. The precision and complexity inherent in existing job
evaluation systems assures that they are continually out of alignment with
changing business needs. Ledford actually advocates the use of "sloppier",
simpler pay systems, such as Broadbanding and competency-based pay but
warns that even the most innovative pay practices must be designed to make
them nimble and flexible rather than static and rigid.
5.5 Future research
The emerging process stream concept and development of whole job provides
a good foundation for restructuring and especially for broad banding. This
research project did not provide detail into the content and practical design of
this principle. Future research can explore this concept providing specific detail
on the process to be followed and practical design aspects.
86
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