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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/27/2007 - CITY MANAGER UPDATE ON THE PERFORMANCE MANAGEMENT DATE: February 27, 2007 WORK SESSION ITEM STAFF: Darin Atteberry FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION City Manager Update on the Performance Management System. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED This work session provides City Council with an update on pay for performance initiatives currently underway. Council will receive information on how the City will evaluate employee performance and manage employee pay under this new model. Staff would appreciate feedback related to the system outlined by WisdomNet, Inc.: 1. Does Council agree in concept with the Performance Management system as outlined? 2. Does Council agree with the Pay philosophy presented? 3. What questions or general comments does Council have? ATTACHMENTS 1. PowerPoint presentation. City of Fort Collins Pay for Performance & Performance Management Project Findings and Summary Presentation February 27 , 2007 Brian E . Wilkerson , CEO and Sue Bohline , Principal Consultant � ■ WisdomNet , Incorporated Agenda I. Project Background and Context Total Rewards Framework Recommendations : Performance Management Recommendations : Pay for Performance Implementation Plan Performance Management & Pay for Performance Project 2 Project Objectives �- Design a performance management process ( or processes ) that can be deployed across the City of Fort Collins that truly measures performance Design a Pay for Performance plan that is in alignment with the performance management approach Develop an implementation plan and coach the City of Fort Collins staff through the initial implementation activities Performance Management & Pay for Performance Project 3 Key Design Principles �- Create sustainable model Fiscal responsibility and stewardship of constituent interests Appropriate funding model Appropriate market linkage Flexible and Simple Enhance alignment Link individual performance to organizational objectives Effectively manage performance Support data - driven , results - oriented organization Link pay to performance Differentiate (while at the same time reinforcing team performance ) Build future capacity Focus on development Performance Management & Pay for Performance Project 4 Summary Feedback from City Manager & ELT �- Pay strategy needs to support the City ' s strategic objectives and be appropriate for its economic environment The City needs to clearly articulate it ' s new employment relationship What is expected of employees What employees get for working here — the total package City Manager & ELT is committed to doing this in a timely manner Employment relationship will look different , but Fort Collins is still committed to : Having the best people Being an Employer of Choice This is an important issue and the City Manager & ELT wants to ensure we " get it right " while also responding to Council ' s desire for action Continued commitment to involving the employee population Performance Management & Pay for Performance Project 5 Summary Feedback from Employees & Managers �- Organizational climate is suffering People are " tired " - workload is high Change is " big " and constant City not perceived to be employee -focused Rewards are important " Rewards " doesn ' t necessarily equate to money " Star" performers deserve additional rewards Fund this in a meaningful , sustainable manner " Don ' t do this if we can ' t fund it" Beware of the potential for unintended consequences Will differentiation impact teamwork? Will "the bell curve " de - motivate good performers Give us the " real story" Why , what , how Why so fast? Follow through Performance Management & Pay for Performance Project 6 Market Realities �- Average pay raises over the past 5 years in the private sector have ranged from M % ( in the past 2 years , trend has been towards 4 % ) Actual Pay Difference between 50th and 70th percentiles is M % ( depending on position ) Pay for Performance in Public Sector Many public sector organizations are refining their previous Pay for Performance implementations after years of working with them More are adopting Private Sector models Use of private sector style Variable Pay is still rare Principles and processes recommended for the City of Fort Collins have worked in other public sector organizations Performance Management & Pay for Performance Project 7 City of Fort Collins Business Strategy & Desired Culture Human Capital Strategy/ Employee Value Proposition Attract & Retain Motivate & Reward Build Capability Engage Base Pay Variable Pay Career Paths Work Environment Benefits Recognition Tech Training Communications Premium Pay Prof. Development Team Effectiveness Performance Management Cost of Doing Business IF 1 1 1 :90619 11r. 1 11848 Degree of on performance Key Recommendations �- Using this Total Rewards Framework , we are recommending a Performance Management and Pay for Performance approach that we believe to be : Fiscally responsible and able to adjust to changing economic conditions More appropriately aligned with market pay practices Effective at differentiating performance and recognizing contribution Appropriate to attract and retain the talent that the City needs to achieve its mission Realistic in terms of the organization ' s capability to implement Redefinition of the Employment Value Proposition is critical to ensuring the success of this approach long -term Performance Management & Pay for Performance Project 9 Recommended Performance Management Framework Manage Performance with Consistent Elements across the City Job Performance Core Competencies/ City Values Management/ Leadership Competencies ( as appropriate ) Optional review elements can be incorporated based on the needs in each area Job - specific Competencies Development Planning Performance Management & Pay for Performance Project 10 Draft Compensation Principles �- Total Rewards The City of Fort Collins ' compensation program will be competitive in attracting and retaining the caliber of employees the City needs to execute its vision and mission Compensation is one component of the City ' s total employment package Benefits Opportunities for Growth & Development Supportive Work Environment Opportunity to do Meaningful Work and Serve the Community Performance Management & Pay for Performance Project 11 Draft Compensation Principles ( continued ) �- Pay Structures Pay structures may vary by occupational group or specific jobs based on differences in the nature of the work Pay structures will be reviewed annually and adjusted as appropriate to remain competitive ; however , pay structure adjustment does not imply adjustment in individual salaries Average Salaries are targeted to be competitive with salaries in the applicable labor market , with opportunity to progress to the upper end of competitive levels based on competency/skills , performance and contributions Performance Management & Pay for Performance Project 12 Draft Compensation Principles ( continued ) �- Pay for Performance Pay increases will be linked to the market and reflect individual and , if appropriate , team performance It is appropriate to provide differentiated rewards for employees who demonstrate outstanding performance It is important to hold those who are not meeting expectations accountable Special adjustments will be used if necessary to ensure appropriate internal and external alignment ( e . g . scarce skills in the marketplace ) If financial constraints prevent meaningful pay-for- performance differences , an across -the - board increase may be appropriate . However , we will not back off our commitment to pay-for- performance over the long term Performance Management & Pay for Performance Project 13 Draft Compensation Principles ( continued ) �- Reinforcing Our Values It is important to invest in the development of our people to ensure that we have the right skills for the future We seek to build a culture of recognition , in which all employees know they ' re valued , and we celebrate individual , team and organizational success Performance Management & Pay for Performance Project 14 Draft Compensation Principles ( continued ) �- Accountability We will be fiscally responsible , monitoring our total compensation program to ensure it is consistent with our strategic objectives and financial strength , and that resources are being allocated as effectively as possible We will provide supervisors the training and tools to administer performance management and compensation effectively and hold them accountable for doing so Performance Management & Pay for Performance Project 15 Recommended Compensation Structures �- 3 Compensation Structures that reflect the needs of widely varying Occupational Groups Average Salaries in each structure will be linked to the 50t" percentile of the appropriate Market Segment Each differentiates pay for various performance levels and ensures that High Performers are appropriately rewarded while the pay overall stays competitive Structures will include Salary Bands for most positions Skill - Based Pay with Performance Elements Career Bands for Professional Positions with wide scope Performance Management & Pay for Performance Project 16 Recommended Implementation �- NOW 2007 2008 StageSetthe Focus on Measurement and Building Capabilit for • Align/cascade objectives Communicate Verify/streamline metrics IL desired future On -going state Build management and employee capability alignment , discussion , Communicate Provide recognition tools measurement roadmap Coach on differentiating and recognizing First pay-for- Implement performance performance performance Recalibrate with market and design pay mechanics review is year- management end 2008 process Update skill ladders to include performance factors Define pay Define career paths for key job families philosophy Use current method to determine pay increases Build trust and confidence by executing against roadmap and communicating Performance Management & Pay for Performance Project 17 Next Steps �- Finalize the mechanics of the Pay system as it applies to various Occupational Groups Train and coach employees and managers on Performance Management process Implement automated Performance Management system to improve efficiency Report back to Council in late Summer timeframe and present Council Financial Policy changes Performance Management & Pay for Performance Project 18 Appendix : Performance Management and Pay for Performance Process Materials Performance Management & Pay for Performance Project 19 Recommended Performance Management Framework ( detailed ) Consistent review elements Job Performance Core Competencies/City Values Management/ Leadership Competencies ( as appropriate ) Performance Summary & Overall Rating 3 - point rating scale Employee involvement Periodic ( e . g . , quarterly ) checkpoints plus year-end review Optional review elements Job -specific Competencies Objectives Development Planning " Plug and Play" approach Alternative formats available to recognize differences in nature of the work , individual goals and needs , different approaches to employee involvement , etc . Performance Management & Pay for Performance Project 20 Performance Management Elements ( detailed ) �- On -going Job Responsibilities ( Required ) ( Including service delivery , operations , reporting , management , etc . ) Job Description Approach Identify the three to five key accountabilities of this position - those that make up the core part of the job 1 . 2 . 3 . 4 . 5 . Results : Performance Rating 0 Rating Scale Approach Below Meets/Exceeds Far Exceeds Job Key responsibilities are Performs all core job Consistently surpasses Responsibilities executed in less than responsibilities effectively expectations satisfactory manner Balances efforts to handle Finds ways to contribute Productivity or Quality is low unexpected tasks to the work of others Job Knowledge Does not keep up with changes Demonstrates well-rounded Is sought out by others as in work procedures or understanding of job relative to an expert in the area or technology City operations responsibility Performance Management & Pay for Performance Project 21 Performance Management Elements ( detailed ) �- Core Competencies ( Includes organizational values , job- related competencies , leadership/management) Organizational Values ( Required ) Representative Behaviors Observed Behaviors Teamwork Willing shares information and resources Handles conflicts in positive manner Customer Assumes personal accountability for solving Service customer problems Performance Rating 0 Job -Specific Skills (Optional ) Skill Block 1 Skill Block 2 Skill Block 3 Comments : Performance Rating 0 Performance Management & Pay for Performance Project 22 Performance Management Elements ( detailed ) �- Objectives (Optional ) ( Includes special projects , process improvement , individual development , specific to the performance period . My also include shared team objectives ) Individual/Team Objectives Goal How Will Performance Be Results Measured ? Performance Rating 0 Cascading Objectives Objective Service Area Weight Metrics and Specific Steps Results Goal ( Optional ) Targets to Achieve Supported Performance Rating Performance Management & Pay for Performance Project 23 Performance Management Elements ( detailed ) �- Development Planning ( Optional ) ( Includes individual development plans , succession planning , etc . ) Individual Development Plan Development Support Needed Success Measures Target Results Goals Completion Career Plan Career Goals : Potential Career Target Time Development Action Plan Results Transition Frame Needed Performance Management & Pay for Performance Project 24 Performance Management Cycle �- Establish Org Goals ' Establish ' Objectives Monitor Performance Self-Assessment Check Point & Revise Supervisor Evaluation Objectives as needed Next level Mgr Conduct Review Approval * Inform HR Objective Setting Ongoing Feedback Evaluation Review * At discretion of Supervisor, Next level Mgr or HR Performance Management & Pay for Performance Project 25 Compensation Structure 1 : Salary or Performance Bands Market Control (50th %) $ Entry Target Premium $ Merit Merit or Principles Lump Sum • " Default" pay structure Merit Matrix Pay increases based on merit only — no ( Example) automatic adjustment if pay range moves • Average merit increase must exceed Merit Budget = X% range move or people will not progress Entry Target Premium through range • Career progression is vertical — generally , to a distinctly different job in a higher salary Superior f-g % d-e % b-c% or band Performance Lump Sum Full d-e % b-c% Up to a % or Performance Lump Sum Not Meeting 0 — a % 0 % 0 % Requirements Performance Management & Pay for Performance Project 26 Compensation Structure 20. Skill - Based �- • Appropriate for jobs with relatively Market Control ( 50t" %) narrow range of performance once full proficiency is attained • One step per defined skill block Superior Opportunity for lump sum award if Performers exceeding performance expectations Skill - based Pay Steps Lump Sum Skill - based pay increases must include performance assessment • Incorporated in standard review format , or Example - Plant Operator Performance requirements incorporated in skill block definitions $3430 $4665 Lump # of skill steps and increase Sum between skill steps may vary by job � :�7 14 0 N 0 • Specific criteria for structure Skill - based Pay Steps t design will be defined $ 5131 Steps reviewed annually and adjusted as needed to maintain target competitive position • Individual salaries adjusted accordingly if meeting performance expectations Performance Management & Pay for Performance Project 27 Compensation Structure 30. Career Bands �- • Appropriate where there is a broad Entry Journey Senior Chief range of potential contributions Merit within a given classification • Career progression is horizontal • Nature of the work remains essentially $ $ the same but knowledge/skill , complexity , independence , level of f responsibility are significantly different • Pay increases within a career level Market Control (50t" %) based on merit only — no automatic adjustment if pay range moves • " Promotional " increase between career levels Civil Civil Civil Will likely be smaller than "vertical " Engineer I Engineer II Engineer III promotional increases $50 ,440 $58 , 000 $72 , 500 $90 , 000 Implications : • Narrower range of pay for individual career levels Current Structure Opportunity for " promotion " without an open position Civil Engineer 1 $ 50 , 440 = $685588 May be more upside potential at Civil Engineer II $55 ,484 = $755452 higher skill levels Civil Engineer III $ 619048 = $ 82 , 992 Performance Management & Pay for Performance Project 28