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The Redesign of a Decades-Old Pay Structure

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ArtBoyMB / iStock


Knowing when and how to refresh your compensation program is a challenge faced by all compensation professionals. It is especially challenging in a well-established organization where the program has been the same for years, or even decades.

 

That was the case for Mayo Clinic. Pondering the question, “Is our compensation program meeting the current needs of our organization and helping us to advance into the future?” led Mayo Clinic on a path to refresh a pay structure that had been in place for 20 years.

 
Catalyst for Change


Mayo Clinic is a nonprofit organization committed to clinical practice, education, and research. It employs more than 5,000 physicians and scientists, along with 64,000 allied health employees.

Mayo Clinic senior leadership expressed a desire for the allied health compensation program to be more flexible, agile, responsive to needs of the organization and easy to administer. With this feedback in mind, a diverse group of human resources professionals came together to consider refreshing the allied health compensation program. One specific consideration was the role of the allied health pay structure in supporting Mayo Clinic’s market philosophy and the compensation program pillars of flexible, agile, responsive, easy. 

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The allied health pay structure had been in place since early 2000. The pay structure had over 80 pay ranges, progression of 3% between midpoints and range spread of 30% at the lowest pay range with gradual increase to 50% range spread. More than half of the pay ranges had a 50% spread, resulting in 70% of Mayo Clinic’s 6,000-plus allied health jobs assigned to a range with the widest spread.

This pay structure design resulted in misalignment with the compensation market philosophy. Salaries at the bottom end of a pay range were generally below the market 25th percentile; salaries at the top end of a pay range were generally above market, in some cases exceeding the market 90th percentile. In addition, the compression and overlap created by a 3% midpoint progression caused internal competition for talent among departments with job openings for similar roles, but perhaps varied by one or two pay ranges on the pay structure.

These findings led to the conclusion that the pay structure design hindered rather than supported Mayo Clinic’s ability to carry out the compensation program components of being flexible, agile, responsive and easy.

Redesign Collaboration

Several teams were formed to coordinate efforts and manage the pay structure redesign project. 

Core Project Team
This team was formed with representatives from across HR, including the areas of compensation, HR advisory/business partners, recruitment and HR technology. A representative from public affairs was added later when there was a need for communications expertise as the project entered the execution phase.

At the beginning of the redesign, the core project team focused on benchmarking with other organizations and obtaining voice-of-the-customer feedback from areas across HR. Another important function of this team was to compare the current pay structure to the market data of Mayo Clinic’s jobs. This analysis framed the understanding that the pay structure was not a typical market-based pay structure, where you would find range minimums at the market 25th percentile and range maximums at the market 75th percentile. In fact, the analysis showed that on average, range minimums were around the 13th percentile and range maximums around the 86th percentile. This finding influenced the redesign, with a goal of bringing better market alignment to the pay structure. The ability to offer competitive pay on the lower end of a pay range was important, as was continuing to reward tenured employees with competitive pay and salary growth. 

To balance both extremes, a hybrid approach was used for the new pay structure design: a middle ground between the existing pay structure design and a strict market-based design with parameters of 25th and 75th percentiles. The pay structure progression was increased from 3% to 5% between midpoints. This reduced the number of pay ranges from over 80 to 45. Keeping the market analysis in mind as well as the goal of better alignment between the pay structure and market, the 45 ranges were divided into groups of 10 ranges with spreads of 30%, 35%, 40%, and 45%. A range spread of 50% was assigned to the top five ranges, those generally used by upper management roles.

The core project team facilitated leadership approval of the new structure design by providing data on the impact to employees. With most jobs landing in a pay range with a narrower spread than its current range, some employees would receive a pay increase to the higher range minimum. However, given the advanced tenure of Mayo Clinic’s workforce, many employees would see a lower pay range maximum. Leadership committed to maintaining current pay; no pay reductions occurred with the transition to the new pay structure.

Finally, the core project team also facilitated the implementation of the new pay structure. This involved liaising with technology teams, developing a communication timeline and executing the communication plan.

HR Oversight Team
Membership of the HR oversight team consisted of leaders from the following human resources functional areas: compensation, people services and people consulting, strategic projects, HR technology and recruitment.

This team met monthly and provided input and feedback on various aspects of the project including the project charter, technology and systems requirements, and the communication timeline and plan. Ultimately, the role of HR Oversight was to socialize the project with other leaders and keep their teams informed, and most importantly to be a sounding board for the core project team’s ideas and recommendations. They were called upon to ask probing questions and advise the core project team on potential barriers.

The HR Oversight team was critical in the early stages of the project, especially during pay structure design and communications development. The collective experience and organization knowledge of this team helped shape the recommendation and allowed the core project team to operate with an understanding of other HR and organization initiatives that could influence the project’s success.

Leadership Steering Team
The pay structure redesign project was driven by feedback from leaders across Mayo Clinic; it was important to have engagement and buy-in from a cross-functional team so that the change was not viewed as driven by HR, but rather as an organizational initiative. Several senior leaders from finance and IT departments joined HR leaders to form a leadership steering team.

Membership was chosen based on departments with the most employees transitioning to the new pay structure.

The leadership steering team was charged with these objectives:

  • Champion the new pay structure.
  • Participate in the development of an effective change management, communication, and implementation plan.
  • Facilitate connections across all departments for consistency in messaging and implementation.
  • Ensure solutions are scalable and transferable for use within other departments. 
  • Advise on and facilitate approvals regarding implementation tactics and timeline.

To be successful, members of this team needed the following skills:

  • Excellent communication and interpersonal skills. 
  • Business influence and credibility with employees, both below and above them in the organization; be trusted and have proper authority.
  • Commitment to the change and demonstrated ability to effectively manage change within their department. Believe in the value of the new pay structure and share a vision of the desired future state.
  • Awareness of department-specific strategic initiatives; ability to provide guidance to the project team on how to integrate the pay structure change in with other strategic priorities.

As with the HR Oversight team, engagement of the Leadership Steering team was critical in the development of communications. These leaders have their finger on the pulse of their respective departments. They provided important direction on what to communicate and how, so that the project would be successful. Their engagement in the project also reinforced their understanding of the why’s and what’s of the new pay structure, positioning them as ambassadors of the change and a trusted source of information and education for employees.

New Pay Structure Roll-out

The new pay structure was designed for Mayo Clinic allied health shared services departments, which represents about 15% of the organization’s allied health workforce. Therefore, the roll-out was a targeted effort. The communications goal was two-fold: 1) be transparent, and 2) educate managers to be change champions.

Multiple communication vehicles were employed:

1. HR Education

Not only were HR professionals affected by the change as an employee themselves, many were also affected in how to perform their role. This group received information early, so they could prepare for new ways of performing their role.

2. Live Supervisor Town Hall

A conversation was hosted by senior leaders explaining the why’s and what’s of the new pay structure and how the change fit into the bigger picture of Mayo Clinic’s strategy for shared services departments. Supervisors were able to submit questions after the live event; answers to those questions were later posted along with other resources. The intent was to educate all leaders first, so that they could in turn educate their employees.

3. Email From Senior Leaders to All Shared Services Employees

As a follow-up to the Town Hall, this announced the change to all affected employees and included links to the Town Hall recording and other written educational resources.

4. HR Connect

Mayo Clinic’s employee intranet site was a one-stop shop for comprehensive educational materials, including a Frequently Asked Questions guide and pay structure crosswalk showing the old and new pay ranges.

5. Supervisor Newsletter

Several months passed from the initial announcement of the pay structure change to the implementation date. An article in the supervisor newsletter served as a reminder of the upcoming change.

6. Employee Statement

Each employee received an individual statement with their new pay range minimum, midpoint, ad maximum values and new pay rate.

The pay structure implementation coincided with Mayo Clinic’s allied health annual salary increase. This helped to minimize the impact to employees who were being moved into a pay range with a lower maximum because most employees still received the annual salary increase at the time of the transition. 

Lessons Learned

 

1. Use your compensation philosophy as guardrails.

Changes to your compensation program should align with your compensation philosophy and organizational strategy. Mayo Clinic did not change the compensation philosophy, rather the new pay structure will better support the market-based philosophy and the current and future needs of the organization.

 

2. Aim big but start small.

The undertaking of a project this size, especially in a large organization, requires thoughtful planning and a team that is engaged and supportive of the end goal. Mayo Clinic implemented the new pay structure for a small percentage of the allied health workforce; this was a manageable scope given the available resources. Starting with a smaller group paves the way for similar redesign efforts to be considered and planned for the remaining allied health workforce. Use the plans and tools already created and adapt as needed for future iterations.

 

3. Avoid extremes.

There was likely a bona fide reason for Mayo Clinic’s original allied health pay structure design with tight range progression and a wide range spread. However, as the business evolved that design hindered the ability to provide competitive pay offers to new talent and meaningful pay increases for internal promotions.

 

4. Be transparent.

Compensation programs are often kept secret from most employees. Being transparent about program elements and clearly communicating changes will establish trust within the organization. While transparency may not necessarily equate to agreement, it will lead to greater understanding and acceptance. Equip your management team to be a trusted partner in delivering and supporting the message.

 

About the Author

 

Erin Berg, CCP, GRP is the human resources manager at the Mayo Clinic.


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