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Establishing and Maintaining Pay Equity in a Changing Market Environment

The 2019 Pay Equity Symposium in Philadelphia was chock full of presentations that touched on the legislation, statistics and concepts surrounding pay equity. However, there was one session that featured compensation practitioners who have absorbed all the resources and put the methodology to work within their own organization.

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John Konicek, executive director of total rewards, and his colleague at Froedtert Health in Wisconsin, Theresa Sieg, director of compensation, shared their story of what has so far been a successful implementation of pay equity practices on the final day of the symposium, Oct. 9.

Konicek and Sieg both started at Froedtert, a health network that includes three hospitals and has 13,000 in staff, around the same time three years ago. Their task was to evaluate the compensation strategy currently in place and to find ways to fix it. When they looked under the hood, they found a formula that lent itself to disaster in the area of pay equity across the organization.

As constructed when they found it, experience and performance were not directly correlated to placement within pay range. There were pay range adjustments without any re-stratifying of the current staff and the promotional increases, known informally as the “Froedtert Four,” were capped at 4%. Additionally, new hires started at the bottom end of their position’s pay range, regardless of prior experience.

Konicek and Sieg described the organization’s overall compensation practices as the “Wild West” because there was meddling and bias from senior management in pay decisions, complications from previous mergers and acquisitions, confusing pay structures and an underestimation of financial resources needed to maintain pay equity.

This, Konicek and Sieg surmised, was causing the organization to lag behind competitors in the marketplace, which created difficulties with recruiting and retaining employees. Consequently, displeasure permeated throughout the staff when it came to their pay and the rationale behind it.

Fixing the Problem
Before Konicek and Sieg could tackle the problems at Froedert, they had to have buy-in from senior leadership. That meant senior leadership needed to trust Konicek and Sieg to develop a philosophy of standard processes and methodology and then adhere to what was established. It also meant senior leadership had to invest the time and money necessary to accomplish this and the recruitment team would have to enforce the new process.

Lastly, and perhaps most importantly, there needed to be an understanding from senior leaders that there would be less exceptions to the standard practice.

“Just because you did it before, doesn’t mean you’re going to continue to do it,” Konicek said.

Once Konicek and Sieg gained the organization’s trust, they began creating a fundamental compensation philosophy. This involved the creation of a standardized approach to internal staff movement, which assessed promotions on a case-by-case basis and brought an end to the “Froedert Four” philosophy. On the flip side, the same principles needed to be applied to lateral moves or demotions, which should mean pay decreases.

Konicek and Sieg also implemented a standard approach to market pricing, updated the philosophy of movement through pay range and designed a new pay structure that was transparent, ensuring that staff could understand their jobs and how they relate to those around them. Increasing transparency around pay, Sieg said, was critical.

“Comp was always deemed as the team behind the black curtain,” she said. “We wanted to make sure people understood the ‘why’ behind our pay recommendations.”

Applying the Philosophy
To apply their new compensation formula, Konicek and Sieg had to create the market and equity review process within Froedert. They then had to commit to systematically reviewing every job and every staff member in the organization over a multi-year period. Konicek and Sieg said they entered into this review process with a focus on the mission-critical jobs first, along with those that needed significant adjustments.

To establish market and equity review at the company, they:

  • Engaged with leaders and updated job descriptions, market pricing and pay structure.
  • Placed staff within pay ranges by collecting experience data, grids and range movement philosophy.
  • Utilized methodology to incorporate both experience and performance into equitable placement within pay range.
  • Provided transparency to leaders throughout the process and to staff regarding the results.

Perhaps the most interesting component of the duo’s compensation overhaul process was a spreadsheet they created that was disseminated to staff. Rather than have employees send their resume, which could lend itself to inconsistent data for job pricing, they had them fill out this specific spreadsheet that captured their relevant work experience as well as any higher education or certifications they might have.

While there might be some skepticism to this approach, Konicek said the staff “loved” this, because it made them feel involved in the process of determining their pay. These spreadsheets were sent at different times to different segments of the organization’s workforce and required 100% response rate before they could move forward with pay decisions. Konicek and Sieg said they’re able to keep this information current by having employees inform them if they’ve earned a new certification or a higher level of education.

From this information, they developed experience grids to provide more detail on how to price these jobs. And, when it came to interviewing candidates for jobs, they used the entire pay range for offers to ensure equity in pay based on experience level coming into the organization. This runs counter to how some companies operate, as they might tell recruiters they can’t hire above the 75th percentile of the pay range for a job.

The Results
The advantages to Konicek and Sieg’s approach include:

  • An increased ability to recruit and retain staff.
  • It eschews the need to play catch-up in the future.
  • It provides consistency and decreases the opportunity for disparate impact to creep in.
  • It’s easier for leaders and staff to understand.
  • Experienced staff members are paid what they’re worth.
  • It keeps the organization competitive in the market.
  • It can easily adapt to change in the market.

Konicek and Sieg acknowledged that their approach requires a large investment up front, less flexibility for recruitment to negotiate offers, labor intensive cleanup work and they’ve had to change the skillset of some of their compensation team members.

“They have to be able to handle the task of saying ‘no’ a lot more often and that hasn’t been easy to do,” Konicek said.

As of today, 90% of Froedert’s jobs and staff have been reviewed and people are placed appropriately; it took two-and-a-half years to get this far. The remaining jobs are scheduled to be completed within the next two years and they are on schedule for a plan to increase the lowest minimum wage in anticipation of Wisconsin raising the minimum wage to $15 an hour in the near future.

Sieg noted that it’s important to keep the recruitment team abreast and properly educated on the compensation philosophy during turnover, as well as leadership and staff.

Sieg and Konicek said the most important takeaway from their journey was that transparency — with employees especially — is key during the compensation process.

“Be visible and get out from behind the black curtain,” Sieg said. “Actually pay attention to what your workforce is doing and educate yourself on the jobs that you’re pricing.”

About the Author

Brett Christie Bio Image

Brett Christie is a staff writer at WorldatWork.


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