Broadbanding: Compensation of a "Different Color" in Term Paper

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Broadbanding: Compensation of a "Different Color"

In a 1997 survey reported by the American Federation of State, County and Municipal Employees, more than two-thirds of state government personnel managers indicated they "would like to change their state's salary and classification systems" (http://www.afscme.org/wrkplace/cbr2971.htm). They believed that their governments had far too many job titles, far too few people filling each title, and outmoded salary systems (some over two decades old). But what kind of solution would help companies win that "numbers game"?
Enter "broadbanding," the practice of structuring job classifications to have fewer "layers" than a traditional compensation system. For example, a company that starts out with eight layers compresses those layers to four broader ones, creating a new set of job classifications that grou p
similar skill sets and skilled personnel together. Overnight (or so it can seem), a company's entire compensation picture shifts, its grades change, and the "lay of the land" is a whole new territory. This new territory is both an individual challenge and a corporate one. Although the effect of a broadband can be, and sometimes is, a change in the salary range of a particular job, in reality its practical ramifications extend beyond individual job descriptions into a much wider picture. Examining that "bigger picture" in more detail reveals that broadbanding is a phenomenon with its own set of advantages and disadvantages.
From the employer's point of view, broadbanding has many clear positive effects. Since employees' "bands" are wider, with a larger range from minimum to maximum pay rates, individual jobs become multidimensional and even multifunctional. Employers enjoy a greater flexibility in assigning work and getting it done, which enables a company making the transition from traditional hierarchies to a more flattened organizational picture to have its compensation levels correspond to the new simplified corporate "map" (afscme.org). It simplifies the deployment of personnel without worry about "grade" issues, and it can even be one element in creating a work atmosphere in which employees have a more pivotal role in decision-making concerning their own career developments-thereby empowering a labor force which may have felt itself to have little control over its own destiny before, and improving labor-management relations in the process.
Even multiple layers of middle management, when broadbanded into fewer layers, can enjoy a "halo" effect of this simplification (http://www.auxillium.com/broabn2.shtml.). Reducing the number of layers within an organization, ideally, will streamline its operation in general, make communications easier, and-just as it does with the occupational labor force-give even low- to mid-level managers an increased sense of autonomy and control. Less layers mean less detail, less paperwork, fewer "premature" or "unnecessary" requests for raises and/or promotions (Jackson, Mathis, 423-4). . . thus accomplishing the goals of keeping the organization at a good competitive "fighting weight" in the marketplace, with less waste, duplication, and red tape to cut through to achieve company goals.
In actual practice, however, some of this "compression" is a little trickier to do well. Certainly, removing a slavish reliance on HR to set pay scales and policies can work to "free up" change in an organization. On the other hand, loosing those ties to a firm control by HR or any other centralized source within a company can blur both job description and compensation lines to the point where clear demarcations and standards are impossible to set. The issue of pay equity comes to mind immediately (auxillium.com). If two employees who share the same job title are suddenly within the same "band" together, and one is paid near the bottom of the range while the other is at the top, how does a manager justify either salary? Does the bottom range automatically move up by a given percentage? If not, does a broadened band mean a flattened top level for the best achievers? Hardly a way to find and keep good people!
A similar dilemma exists when broadbanding brings employees with diverse skill levels and sets together, then in effect positions them "against" each other. For example, if a file clerk becomes broadbanded into a level that includes not only clerks but expands up to executive secretaries, how long does the file clerk remain a file clerk before s/he thinks about upgrading a skill set to move up the administrative ladder-thereby posing a real threat to the "layers" above? Alternately, what happens to the executive secretary who now realizes s/he is only a matter of two "layers" from the "ceiling" of the band, but whose skills won't translate into another broad band within the company easily? In the old system, with an ally or mentor in the company, that executive secretary may have been able to segue into, say, an entry-level comptroller's assistant position, with the idea of eventually working his/her way up to a more responsible position in finance.

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However, in the new broadened compensation plan, the Finance band may now be such a distinct entity from the Administrative band-with such a difference in minimum to maximum grades-that an "entry level" executive secretary may have to take a substantial pay cut in order to "better" him/herself (not exactly a banner way to raise employee morale).
Of course, even in the old hierarchical system, many an upwardly-mobile employee was willing to accept a temporary setback in pay in order to learn a new job; this, in and of itself, isn't an "ailment" broadbanding would exacerbate. However, if that executive secretary pushes the envelope a bit, s/he could make a good case for starting out at a considerably higher "beginner" rate in the Finance band than legitimate Finance "beginners" are paid. Once again, this raises an issue of pay equity, the possibility of discrimination lawsuits, and could be seen to present more potential headaches than "promotion from within" ever used to cause; that anticipation of trouble could, in turn, lead companies to actually discourage people from wanting to explore different jobs within the same company or to refuse employee cross-band promotion requests or training beyond certain pay grade levels. In the long run, such a policy ends up sending some of the best and brightest out the door-once again, not the result broadbanding is intended to achieve!
These kinds of complications point out the obvious: broadbanding is not for everyone (Jackson/Mathis). Broadbanding, when misapplied, can induce management to think in terms of "numbers" and forget other more important priorities:

An example of this in the health care industry is ironically called "patient-focused care," under which many tasks associated with patient care are shifted from licensed to unlicensed staff. The unlicensed staff are "broadbanded" in that they must perform new responsibilities in addition to their regular tasks, often with little training or increase in pay. Licensed staff find that their contact with patients is limited through the erosion of their job duties, and thus their ability to provide quality care is hindered. Ultimately, unless protections are built in, this form of "broadbanding" is driven by the bottom line and provides no benefit for licensed staff, unlicensed staff, or patients. It is often a method of reducing and de-skilling the workforce. (afscme.org)

Another drawback to a broadbanding system may be less a "numbers" game than it is a "mind" game-i.e., dealing with employees who working in the midst of a new, flattened hierarchy, but whose conditioned response is still based on the older system where a promotion equals a pay raise (Jackson/Mathis, 424). Once again, an ironic backlash can occur in a company where an employee is asked to assume a different job, perhaps one involving many more complicated skills, without a compensatory raise in pay-and this is a definite possibility, since broadbanding overall works to reduce to total number of "promotions" available to the workforce. Under those conditions, employees may take one look at the new structure and decide there's no reason to try to move up, since they won't be paid any more for the increased value they provide to the company (auxillium.com). And if the "numbers" are played wrong, indeed, their feelings are entirely justified.
Perhaps one of the more obvious "land mines" inherent in this kind of system is the potential for abuse-especially in lean economic times, when companies are trying to get as much value as they can for a buck (afscme.org). An employer may be tempted to ask increasingly more and more of the workforce to the point where they're being stressed beyond reasonable limits-with the inevitable result of lowered morale, absenteeism, and errors.
Or, a perception may arise that "favored" employees get a "cushier" ride across that broad band than "ordinary worker bees" get; that they get all the "plum" chances for advancement and training-with a corresponding result of resentment and lack of cooperation among the rest of the staff.
Or, finally, employees may feel their new assignments are arbitrary, bear no resemblance to their actual skill set, and are simply a matter of exploitation for the sake of a "bottom line" from which they derive no benefit. In this case, they will quickly see the "dead end" sign….....

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