FastCat FINAL PRESENTATION

FastCat Compensation

SystemJared Simmons

Cody WatsonAbdulaziz Alquwaiz

FastCat Phase 1Internal Alignment

RECOMMEND STRATEGY AND OBJECTIVES Total Compensation Implications: FastCat’s business environment was analyzed for

organizational strengths, weaknesses, opportunities, and threats.

Strengths Challenges • Supports the work flow • Employees engagement • More creative and innovative. • HITECH legislation

RECOMMEND STRATEGY AND OBJECTIVES Compensation Objectives: Attract and retain talented Boost organizational commitment. Increase customer satisfaction. Place high value on Marketing and Engineering jobs.

RECOMMEND STRATEGY AND OBJECTIVES Internal Alignment, Strategic Choices, and Internal Structures:

Tightly Tailored, Hierarchical Structure: Advantage of being straightforward in the sense that employees

know what they are being paid for

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION

Job Evaluation: Determines the value of a job relative to other jobs within an organization Compares jobs to create a rational pay structure Job analysis is often used to gather information about different jobs

Job-Based Plan Processes and Concepts Develops a set of factors that are consistent among differing jobs Creates a sense of pay equity because employees understand how pay

is determinedDisadvantages Technical/labor jobs often cannot be evaluated the same way as

knowledge/administrative jobs as job requirements are vastly different

RECOMMEND A JOB STRUCTURE USING JOB EVALUATIONSingle or Multiple Plan?

Single Plan Multiple Plan

Advantage: Simple and uniform which leads to less implementation problems

Advantage: Allow jobs with similar characteristics to have their own pay plan

Disadvantage: It attempts to lump all jobs together, even those that are extremely dissimilar

Disadvantage: The difficulty of implementing two or more separate pay plans

RECOMMEND A JOB STRUCTURE USING JOB EVALUATIONCompensable Factors: Serve as a basis for job evaluation. Provide a rational system Good compensable factors are:

Easy to understand Measurable Aligned with the values and goals of the company

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION1. Formal Education Required:

a. Measures the amount of formal learning required by a job. b. Helps to serve the goal of recruiting top industry talent.c. Measures and discriminates between jobs very well.

None 0 pts.High School 10 pts.Associates Degree

50 pts.

Bachelor’s Degree

100 pts.

Master’s Degree 150 pts.

PhD 200 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION2. Experience Required:

a. Measures the years of direct experience with job tasksb. Serves to discriminate between jobs based on the number

of years of experience that each requires

None 0 pts.1-2 years 75 pts.3-5 years 150pts.6+ years 200

pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION3. Technical Skills Required:

a. Defined as a job relevant skill that has taken some amount of time to become proficient with

b. Measures the number of technical qualifications and competencies required by the job

0 0 pts.1-2 30 pts.3-5 60 pts.6+ 100

pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION4. Supervisory Responsibilities:

a. Measures the level to which the job requires the supervision of other employees

b. Serves to increase employee satisfaction by recognizing extra work required from supervisors

Font-line workers 0 pts.Team Leader 50 pts.Middle Management

100 pts.

Top Management 150 pts.Executive 200 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION5. Significance of Job:

a. Measures the impact of the job on the organizations success as a whole

b. Jobs that are important to the company and employ people who are difficult to replace should be valued higher

1 Very little impact 0 pts.2 Little impact 15 pts.3 Moderate impact 30 pts.4 High impact 50 pts.5 Extremely high impact

75 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION6. Degree of Client Relationships:

a. Measures the amount of interaction with clients required by the job

b. Customer service/customer satisfaction is extremely important to FastCat

c. Workers that directly deal with customers have a large responsibility to keep them happy1 No client interaction 0 pts.

2 Low client interaction 15 pts.3 Moderate client interaction

30 pts.

4 High client interaction 50 pts.5 Very high client interaction

75 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION7. Creativity/Innovation

a. Measures the amount of independent abstract and unique thinking required by the job

b. Creativity and innovation are at the forefront of what FastCat needs to achieve its goals

1 Minimal abstract thought required. 20 pts.2 Little abstract thought required. 40 pts.3 Moderate amount of abstract thought required.

60 pts.

4 High amount of abstract thought required. 80 pts.5 Very high amount of abstract thought required.

100 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATION8. Technical Responsibilities:

a. Measures the number of technical responsibilities required by the job• Defined as job tasks that are considered critical to

conducting the job well and require an amount of time to master

b. Serves as a way to gauge the amount of different tasks an employee is expected to keep up with

0 0 pts.1 10 pts.2 20 pts.3 30 pts.4 40 pts.5 50 pts.

RECOMMEND A JOB STRUCTURE USING JOB EVALUATIONThe Job Evaluation Manual: Detailed description of each factor along with the point values

associated with the degrees of each factor Includes a sample job evaluation form to be used when

conducting a job evaluation

IMPLEMENTING THE JOB EVALUATION PLAN Conducting Job Evaluation: Holds up pretty well though it may place a little too much

emphasis on experience Job descriptions for FastCat are good overall “Some experience”

EVALUATION Consistent with Fastcat’s strategy and objectives Jobs that require more education and experience are at the top of

the structure Values jobs that require creativity and innovation above those

that are clearly support only jobsCompensable factors : Designed so that marketing and engineering team members are

highly valued Boost organizational commitment because it is understandable

and fair, and jobs with similar work have similar point values

APPENDIX IJOB STRUCTURE JOB EVALUATION MANUAL

FastCat Phase 2Designing a Compensation System at FastCat

Effects of Differential Pay Policies

Can help to control labor costs through lower salaries for less valued jobs Can increase competitiveness in multiple ways

Can allow for lower pricing of products because overhead costs are lower if salaries are below market

Can help to recruit top level talent if salaries are above market If choosing to pay above market, workers can feel more appreciated and

therefore be more productive Organizational outcomes can be bettered by:

Obtaining higher talent employees Lowering unnecessary labor costs for jobs that are not valued Increasing customer satisfaction through better products and customer service

because employees are more satisfied

Pay Policy Decision

We recommend that FastCat pay above market As a small company, FastCat can use this to set itself apart from its

competitors Pay for performance

Pay for performance will be big part of FastCat’s pay policy because FastCat values innovation

A PFP plan will help FastCat further differentiate itself from competitors

Benchmark Jobs

Defined-a common job that remains consistent across many different organizations or even industries. Characteristics-consistent between organizations, data easy to identify, ex.

Administrative aide

Benchmark Jobs Contd.


Administrative Aide No experience Duties include furnishing office

supplies, data entry, working office equipment, preparing PowerPoint presentations, and data entry

Requires High School Diploma

Office Support 1 No experience Duties include furnishing office

supplies, handing out messages, working office equipment, and delivering mail

Requires no formal education Purely a support position with

few skills required (only basic word processing and email)

FastCat JobBenchmark Job


Administrative Assistant II Requires knowledge of Word,

Excel, PowerPoint, and Access Track expenses and develop

budget reports. Requires 1-2 years office

experience

Office Support 2 Requires knowledge of Word,

Excel, and PowerPoint Duties include data entry,

creating presentations using a template, and answering telephones

Requires 1 year office experience



Project Support Analyst Track time and expense

allocations Schedule meetings with clients Requires 2-4 years experience High School Diploma

Office Support 4 Level of Department Head Setup and maintain schedules

and appointments Manages teams and ensures

communication flow Requires at least 4 years

experience



Marketing Support Assist marketing services

representatives Assist in tracking data for

possible marketing leads Bachelors Degree or “equal job-

related experience”

Marketer 1 Provides support for other

marketing team members Deals with less complex issues Requires a Bachelor’s degree

and 2 years experience



Visionary Champion Planning of overall strategy Ensure marketing material is up

to date and accurate Guide FastCat marketing group

Marketing Manager 3 Creates and manages

strategies for a large portion of company offerings

Forward looking focus and manages overall company marketing strategy

Manages over 25 multi-discipline employees



Technician Keep records of test results Perform general support duties Assist with testing software High School Diploma

Technician 1 Entry level No experience Assists in testing procedures



Software Engineer Involved in entire project cycle Design and create engineering

specs Collaborate with other

development teams Requires Bachelor’s degree

Engineer 2 Develops, tests, and

documents difficult software programs

Assists in designing schedules and developing assignments

Requires a Bachelor’s degree in a technical field with 4 years experience OR a Master’s degree with 2 years experience



Software User Interface Architect Recommend new directions to

engineering management Technical lead on large,

complex projects Minimum Bachelor’s degree in

Computer Science Supervise software developers

Engineer 5 Provides long range direction

and advice to management Designs and develops new

systems and directs support staff

Bachelor’s degree in Engineering or Computer Science and 10 years experience OR Master’s degree and 6 years experience



Senior Fellow Plan and direct major projects Oversee project managers PhD in computer science Identify new directions for

existing products

Engineering Manager 3 Develops long range strategy

including marketing and pricing Manages engineering group to

ensure on time delivery of quality products

Manages over 25 multi-discipline employees


External Labor Market Comparisons

Company Size Because FastCat is a small company it should be compared to other small

companies Larger companies are often able to pay higher salaries Larger companies ore often able to provide better benefits

Product FastCat should compare itself to companies that are in the same industry

(Software) Comparing a software firm to other types of firms where employees may require different

types of skill, levels of education, or experiences could lead to bad data Focus

FastCat should focus on similarly sized software companies to keep the analysis accurate

Analysis of Salary Data and Statistics To update our salary data, we used data found in the BLS database Change in wages for goods-producing industries was 2.1% in 2014 Should have aged this number further, to the implementation date (7-

1-2015), which would have yielded an update percentage of 3.33%.

Analysis of Salary Data and Statistics We believe the nine benchmark jobs we selected were pretty good

matches to FastCat jobs Lack-luster market job descriptions (i.e. education and experience

requirements) Our sample size was plenty large for some jobs, but rather small for

others We were forced to remove several outlier companies from the sample

data

FastCat’s Pay Policy

Lower Level Jobs are paid at the market rate Keeps costs down for easily replaceable jobs

Mid Level Jobs are paid at 5% above market Helps to recruit high level talent for the majority or organizational jobs Helps to boost organizational commitment

High Level Jobs are paid at 7% above market Critical decision making jobs are of high importance and therefore FastCat

should do everything it can to recruit top tier talent for these positions. Increases organizational commitment Increases customer satisfaction through boosting organizational

commitment

Pay Grades

Eight Pay Grades Hierarchical structure Keep similar jobs together Avoid reporting relationships in the same grade

Pay Ranges

Developed using market norms Lower level jobs having a narrower range Higher level jobs having a broader range

Overlap Little to no overlap between Grades 1, 2, and 3 serves to motivate higher

level employees to move up within the company instead of staying stationary

Overlap in mid level jobs serves to increase flexibility, job movement, and cross training without employees taking pay cuts

Issues Overlap can lead to superiors making less than subordinates under certain

circumstances

Pay Grades & Ranges

Evaluation

GradeLower JE Points

Upper JE Points

Range Jobs

Grade 1 100 250 15Administrative Aide, Administrative Assistant II, Technician, Travel Coordinator, Project Support Assistant, Marketing Support

Grade 2 251 400 15 Programmer Analyst, Quality Assurance Analyst, Administrative Leader, Graphics Designer, Training Assistant

Grade 3 401 480 20 Clinical Liason, Quality Assurance Analyst A, Marketing Services Rep.

Grade 4 481 560 20 Senior Quality Assurance Technicial, User Interface Designer

Grade 5 561 640 20 Implementation Consultant, Software Engineer, Software Solutions Consultant, Software User Interface Architect

Grade 6 641 750 20 Project Leader, Client Account Leader

Grade 7 751 850 25 Visionar Champion, Senior Fellow

Grade 8 851 1000 25 None

FastCat Phase 3Performance and Management

STRATEGY FOR RECOGNIZING PERFORMANCE The objective of our merit pay and balanced scorecard system is to

reinforce the major objectives that we outlined in Phase I: Organizational Commitment

Employees agree that good performance should be rewarded Employees in pay grades 5 or higher will be eligible to receive bonuses

Attract and Retain Qualified Candidates Pay system sets us apart from competitors

Increase Customer Satisfaction Employees incentivized to make customer satisfaction a priority

Value Marketing and Engineering Jobs Most upper-level marketing and engineering jobs will be eligible to receive bonuses

Is PFP Right for FastCat? Yes.

Helps employees to understand their pay level

The most important employees (everyone besides grade 1) will be rewarded based on their performance appraisals If these performance appraisals are good, they will be aligned with

FastCat’s strategy and goals.

Going Forward FastCat should pay for performance to a certain extent

Basing too much of pay on performance is risky

Bonuses and merit increases should be large enough to be considered significant

Equal emphasis on individual and team performance; Overall emphasis on company performance

Accurate performance appraisals will be crucial We recommend 360-Degree feedback

“Merit & scorecard” method is consistent with FastCat’s strategy and goals, but could be improved upon considerably

Assessing Present Salaries(Green Circle Policy) Our policy for out-of-range employees was to first re-analyze those

jobs and correct any under or over-valued jobs.

If still under-range (green circled), we either added JE points or gave them a raise Raises implemented over a 4-year span

If the job did not justify a raise or pay-cut, we adjusted JE points and/or grades to fit them in the appropriate pay grade

Assessing Present Salaries(Red Circle Policy)

Our policy for over-range employees was to freeze that employee’s pay

One one instance of this (employee involved deserves promotion)

Grade 1

Grade 2

Grade 3

Grade 4

Grade 5

Grade 6

Grade 7

Adjustments’ Effect on Employees

None of our adjustments included reductions in pay Anticipate positive changes in pay satisfaction and employee

motivation resulting from the increases in pay.

Issues of Discrimination in Pay Structure

Issues of Discrimination in PFP

Merit Pay Plan The logic of the merit grid is to reward employees for scoring highly

on performance appraisals

Employees who “did not meet some requirements” are not given merit increases

Employees in quartiles 3 and 4 who only “met some requirements” were not given merit increases

Employees in quartile 4 who only “met requirements” were not given merit increases

Employees that exceed requirements are guaranteed a merit increase Exception: Pay grade 1 employees

Jared Simmons

Balanced Scorecard Employees eligible for bonuses:

Pay grades 5 and above Tenure of 5+ years

The goals (again): Boost organizational commitment Attract and retain talent Increase customer satisfaction Place high value on marketing and engineering jobs

Benefits We plan to match the market in benefits

Little evidence to back up the true importance of benefits

We predict little effect on costs and employee behavior

Developing a benefits-to-base-pay ratio: Analyzed the same competitors from Phase II Found the average ratio was around 20% of base salary

Annual Compensation Budget

Further Evaluation of Results Final compa ratios for the 25 individuals were a little disappointing

Intended to match the market for jobs in grades 1, 2, and 3 and lead the market for jobs in grades 4 or above

Seemed to fall short of this goal for most of the low-to-mid level jobs Brought our final average compa ratio below market (.98)

We think this is mostly due to misevaluation of FastCat and/or benchmark jobs

We believe Graphics Designers at FastCat are currently being paid far below the market

The jobs where we succeeded the greatest were jobs at the top of the pay structure Many now have compa ratios above 1.07

Managing the system Administration and Communication:

Company-wide meetings with the following objectives:1. Explain the new compensation system (compensable factors, grades/ranges,

merit and bonus plans, etc.)2. Answer any questions and alleviate any concerns regarding the new system

Supervisors will meet with each employee to discuss how their pay will be impacted by the new compensation system

JE Manual will be provided to all employees, along with the evaluation form for their respective jobs

Employees should be given all of the tools to understand how their pay is determined

Managing the System Securing Acceptance:

Should be easy because nearly everyone’s total compensation is going to increase as a result of the new system

Upper management will probably have an issue with increasing costs To overcome this, run utility analysis

Securing Understanding: Crucial in boosting organizational commitment Need our employees to understand: This system was neither easy nor cheap to develop It is going to increase labor costs (at least in the short-term This system was designed with the employee and the customer in mind. We need better productivity and innovation from our employees

Managing the System (cont.) Any appeals will go through the following process:

1. Appeal given to immediate supervisor stating reason for appeal2. If necessary, supervisor forwards appeal to Director of HR for review3. If employee is unsatisfied with the Director’s decision, he/she may appeal to the Board of

Governors, who will have final authority

The system should be updated annually for inflation.

A team should audit the system on a yearly basis. Analysis should consist of the following:

Test for evidence of discrimination Check for strategic alignment of the system (internal and external) Check for correct implementation of the system Other FLSA compliance tests (minimum wage, overtime, deductions, FMLA, etc.)

Monitoring the System Organizational Commitment:

Pay Satisfaction Questionnaire (PSQ) Track number of promotions

Place High Value on Marketing and Engineering Jobs: PSQ analyzed in greater detail for engineering and marketing jobs Compa ratios

Customer satisfaction: Surveys and Questionnaires

Attract and Retain Talent: Turnover ratios Number of employees promoted

Monitoring the System (cont.)

Labor costs CPI Compare with average

salaries

External competitiveness Compa ratios

Legal compliance Statistical analysis

Pay-for-performance system Comparing merit/bonus

payouts with the CPI

The system's impact on employee attitudes Pay Satisfaction Questionnaire

(PSQ)

FastCat FINAL PRESENTATION

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