Management Essentials for Daily Use and Ongoing Improvement

1. Work Focused Improvement®
Management Essentials for
Daily Use and Ongoing Improvement
Module 12 of 44
Job Classification & Merit Increase Aligned Systems
By Sam Pratt
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

2. American Management’s Greatest Opportunity …
is where they’ve missed the mark, and that’s with Pay Systems:
1. Frederick Taylor’s scientific approach to incentives has been attacked by those who see
incentives as a cost and not an investment.
2. In the last 20 years many managers believed that “money doesn’t motivate” and sought
to enrich each job with inherently interesting work.
There is a solution:
1. Taylor’s scientific approach to incentives, with each human time studied as just another
machine, does not work. Work Focused Improvement’s Socio-Technical design adjusts
design factors according to the culture rating of the socio-technical work system.
2. Pay Systems must be designed so that if things stay the same, there is no bonus.
3. The notion that “money doesn’t motivate” springs from a corruption of Frederick
Herzberg’s writings. There are many linear jobs (comprised of mostly repetitive tasks)
that cannot be significantly enriched.
4. The number 1 motive for murder is money. Here is a point that has somehow been
missed. If people are willing to kill for money and risk their lives, it is likely that they
will work harder during their 8 hours at work for more money.
5. Even Millennials and X Y Generation People who sometimes adopt the Hollywood
motto of “take this job and shove it” respond to properly designed Pay Systems.
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

3. Role of Job Classification
& Merit Increase Systems
• All business mechanisms must work in concert
• If the Incentive Systems reward for excellent
performance that improves the bottom line, but
the Suggestion Program rewards for ideas that
do not advance performance, the inconsistent /
bad message is working against the overall goal
• Job Classification and Merit Increases must be
aligned with all other business mechanisms
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

4. Mission
Objectives
Goals
Alignment
Re-engineering
Gain Share & Direct Incentive
Mechanisms
Merit Increase System
Job Classification
Continuous Improvement
Work System Design
Values
Culture
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited
Key Systems & Mechanisms

5. Perfect Alignment
of Module Mechanisms
Mission
Objectives
Goals
Re-engineering
Gain Share & Direct Incentives
Mechanisms
Merit Increase System
Job Classification
Continuous Improvement
Work System Design
Values
Culture
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited
Key Systems & Mechanisms

6. Job Classification
& Merit Increase Opportunities
 Job Classification objectives
 Assure jobs are paid according to their worth as compared
with others in company and the market
 Provide a framework to control rates objectively over time
 Merit Increase objectives
 Optimize wage increases to reward performance and assure
they are fair to the organization and fair to individuals
 In mature organizations, correct the common problem of
having little (if any) correlation between pay and performance
in a given occupation
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

7. Factors:
1. Pre Employment Education / Training
2. On the Job Experience
3. Complexity of Analysis
4. Mental effort
5. Seriousness of Error
6. Decision Making Responsibility
7. Interpersonal Skills
8. Organizational Knowledge
9. Inside / Outside Contacts
10. Risk Safety Factor
11. Independence of Action
12. Innovation Required
13. Overall Impact
14. Type of Supervision
Example Communication for introducing the new system
Using the final Job Classifications along with a Pay Scale Matrix permitted us to
systematically determine where our wage rates should be for everyone in the
Company. The Pay Scale Matrix reflects market changes that have occurred over
the last two years. In reviewing each and every person, we considered.
1. The needs and competitive situation of the company
2. Fairness of implementing this Scale for each individual
3. These changes are individual, personal and confidential.
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

8. Wage Scale with Adjustable Buttons
$32.00
$30.00
=Calculation
Easy Adjust Buttons
$28.00
Inputs
Increase per Job Class $
0.34
Gap % for Lower to Upper Limit
136%
Lowest Job Class
31
Lowest Wage Rate $
8.75
Annual COL Adjustment
1.5%
$26.00
$24.00
$22.00
Upper Limit
Lower Limit
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
27
32
37
42
47
52
Job Class
57
62
67
72

9. © 1986-2014 Samuel H. Pratt / SHP Consulting Limited

10. Think in Thirds
• It is useful to picture
performance in thirds
• The thirds relate to
performance and value
of the people – not
literally the top 33.3%
• It is also useful to
think of the Groups as
A, B, and C
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited
A = Superior
B = Good
C = Struggling
Merit Increases

11. Merit Increase Thoughts
• Merit Increase Systems that essentially give
everyone the same annual increase of 3% or 5%,
or whatever, send the wrong message
• People perform differently
• For example, in the many organizations that have
little correlation between pay and performance,
give 0% increase to the bottom third, 4% to the
middle third, and 8% to the top third
• Over time, as the discrepancy is reduced and the
bell curve of performance becomes tighter, the
thirds can be 2.5%, 4% and 6.5% … for example.
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

12. Aligned Core Worker Rating & Merit Increase System
Personnel Rating Matrix
Subjective /
Objective
Weight
© 2004, 1986-2014 SHP Consulting Limited
Job 1 Job 1 Job 2 Job 1 Job 1 Job 2 Job 1 Job 1 Job 1 Job 2 Job 2 Job 1 Job 1 Job 2 Job 2 Job 1 Job 1 Job 1 Job 1 Job 2 Job 1 Job 1
Merit % 6% 6% 6% 6% 6% 6% 6% 3% 3% 3% 3% 3% 3% 3% 0% 0% 0% 0% 0% 0% 0% 0%
Throughput & Quality are entered as a copy and
past (transposed) from 12 month averages. Impact
as a Positive Force is entered below. Weighting of
final scores is automatic.
Using the automated color assignment below, determine the logical borders for the 3 groups
ABC BCD CDF DEF EFG FGH GHI
20 Calc Direct Incentive Modifier (TP & Q)
8 Calc Impact as a Positive Force
Calc Final Combined Score
Performance Data
Input Direct Incentive Modifier (Throughput and Quality)
Calc Direct Incentive Score
Calc Impact as a Positive Force
Calc Score (Average, Leveled
Calc Score (Total, Differentiated)
Scoring
5 Excellent
4 Good
3 Average
2 Below Average
1 Unsatisfactory
Input
Input
Input
Input
Input
Input
Calc
Step 4: Final Merit Increase Percent
88.0
29.3
86.0
25.3
80.0
24.0
72.0
24.0
70.0
24.0
66.0
24.0
64.0
24.0
HIJ
62.0
24.0
IJK
JKL
62.0
24.0
58.0
24.0
KLM LMN MNO NOP OPQ PQR QRS RST STU TUV UVW VWX
52.0
22.7
52.0
24.0
46.0
24.0
44.0
24.0
38.0
24.0
34.0
24.0
34.0
24.0
30.0
24.0
28.0
24.0
28.0
24.0
26.0
22.7
22.0
17.3
117.3 111.3 104.0 96.0 94.0 90.0 88.0 86.0 86.0 82.0 74.7 76.0 70.0 68.0 62.0 58.0 58.0 54.0 52.0 52.0 48.7 39.3
158.6% 157.0% 150.6% 144.4% 141.5% 137.6% 136.2% 134.1% 134.0% 131.1% 125.9% 125.3% 120.6% 118.3% 113.7% 110.3% 109.3% 106.9% 105.1% 104.3% 103.3% 94.1%
4.4
4.3
4.0
3.6
3.5
3.3
3.2
3.1
3.1
2.9
2.6
2.6
2.3 Step 3: Final Combined Score
2.2
1.9
1.7
1.7
1.5
1.4
1.4
1.3
1.1
3.7
3.2
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
2.8
3.0 Once calculated and sorted by score, conditional
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
2.8
2.2
4.0
3.7
3.5
3.3
3.3
3.2
3.1
3.1
3.1
3.0
2.7
2.8 formatting assigns 2.5 to each perosn. 2.3
2.7
2.6
2.4
2.4
2.2
2.2
2.1
1.6
color
Step6.6 Direct Incentive Modifier 6.1 5.9 5.4 5.6 5.3 5.2 4.9 4.7 4.7 4.5 4.4 4.4 4.1 3.3
1: 6.5 6.3 6.2 6.1
8.1
7.5
7.0
This score, which is Throughput + Quality, is the totally
objective yearly average. As such, it is highly weighted.
Impact as a Positive Force includes:
Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score
Leads by Example
5
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2
3
3
3
2
Step 2:3 Impact as a3Positive Force 4 3 3 5 3 3 3 5 3 3 3 3 4 3
Shares knowledge and helps other people improve
3
4
3
3
2
3
Takes action to improve the work system
3
3
4
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2
These 64 scores3 are defaulted3to 3 (Average)3and can
Cooperates with all levels of organization
4
3 adjusted up3 or down. As a generally subjective 3
3
3
3
3
3
3
2
3
3
3
3
2
3
3
3
3
2
3
be
Step 5: 3Calculating New Wage Rate 3 2 1
Is promotable
4
3
3
3
3
2
3
3
1
3
3
2
3
3
3
Factor,2it has a low weighting3 value.4
Follows company rules and procedures
3
3
3
3
2
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2
This is automatically done using linked3 Merit 4
Increase above.
Average
3.7
3.2
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
2.8
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
2.8
2.2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2013 Wage Rate $14.96 $16.80 $15.32 $14.15 $17.00 $18.55 $13.88 $14.51 $14.68 $19.99 $15.55 $17.33 $14.92 $18.17 $14.33 $16.22 $16.22 $16.87 $14.99 $15.82 $20.38 $17.61
2014 Wage Rate $15.86 $17.81 $16.24 $15.00 $18.02 $19.66 $14.71 $14.95 $15.12 $20.59 $16.02 $17.85 $15.37 $18.72 $14.33 $16.22 $16.22 $16.87 $14.99 $15.82 $20.38 $17.61
Lower Job Class Limit $14.11 $14.11 $14.46 $14.11 $14.11 $14.46 $14.11 $14.11 $14.11 $14.46 $14.46 $14.11 $14.11 $14.46 $14.46 $14.11 $14.11 $14.11 $14.11 $14.46 $14.11 $14.11
Upper Job Class Limit $19.19 $19.19 $19.67 $19.19 $19.19 $19.67 $19.19 $19.19 $19.19 $19.67 $19.67 $19.19 $19.19 $19.67 $19.67 $19.19 $19.19 $19.19 $19.19 $19.67 $19.19 $19.19

13. The preceding slide (Core Worker Rating
& Merit Increase system) has a section
which automatically calculates the new
wage rate
The following slide is then automatically
generated and is very helpful in verifying
that the outcome is fair to individuals and
fair to the organization … and strongly
aligned with the objectives of a
Performance Organization

15. Master List of People, Jobs,
Job Rates, Job Ranges
Note on the following Slide
1. This Master List when coupled to related
graphs is useful for identifying needs and
issues with jobs and wages
2. It is both a tool and a report
3. It is especially useful when designing
Wage Policy, rules, and budgets
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited

16. Supvr Accounts
39.6
Process Team Lead
38.1
Process Team Lead
38.1
Data Specialist
37.2
Parts Team Lead
36.8
Compliance Analyst
35.7
Compliance Analyst
35.7
IT Specialist
35.5
IT Specialist
35.5
Accounts Technician
35.2
Service Liaison
35.0
Marketing Liaison
35.0
Quality Analyst
34.2
Accounting Specialist
33.6
KPI Specialist
33.2
KPI Specialist
33.2
Flow Analyst
33.1
Info System Specialist
32.7
Info System Specialist
32.7
Service Engineer
32.6
Service Engineer
32.6
Service Engineer
32.6
Sales Engineer
32.3
Product Team Lead
Product Team Lead
JC
Job
Index
No
Job Title
Total
Master Summary Jobs, Wage Rates & Employees
Group
Wage
Rate
Lower
Limit
Upper
Limit
Low, OK, High
(logic formula)
40 Acc
38 Prc
$15.72 $ 14.50
$ 20.88
$15.77 $ 14.00
$ 20.16
38 Prc
37 Acc
$15.77 $ 14.00
$ 20.16
$18.41 $ 13.75
$ 19.80
37 Ser
36 Qua
$14.71 $ 13.75
$ 19.80
$16.77 $ 13.50
$ 19.44
36 Qua
36 ITS
$19.08 $ 13.50
$ 19.44
$19.52 $ 13.50
$ 19.44
36 ITS
35 Acc
$19.98 $ 13.50
$ 19.44
$18.74 $ 13.25
$ 19.08
35 Ser
35 Mkt
$13.57 $ 13.25
$ 19.08
$18.04 $ 13.25
$ 19.08
34 Qua
34 Acc
$15.99 $ 13.00
$ 18.72
$20.24 $ 13.00
$ 18.72
33 Acc
33 Prc
$16.91 $ 12.75
$ 18.36
$15.20 $ 12.75
$ 18.36
33 Prc
33 ITS
$12.85 $ 12.75
$ 18.36
$16.35 $ 12.75
$ 18.36
33 ITS
33 Ser
$13.87 $ 12.75
$ 18.36
$15.01 $ 12.75
$ 18.36
33 Ser
33 Ser
$19.47 $ 12.75
$ 18.36
$16.89 $ 12.75
$ 18.36
$16.32 $ 12.50
$ 18.00
32.1
32 Mkt
32 Prc
$12.37 $ 12.50
$ 18.00 Low
32.1
32 Prc
$12.79 $ 12.50
$ 18.00
OK
OK
OK
OK
OK
OK
OK
© 1986-2014 Samuel H. Pratt / SHP Consulting Limited
18 are Low
173 are OK
40 are High
231 Total
High
High
OK
OK
OK
OK
High
OK
OK
OK
OK
OK
OK
High
OK
OK
OK
Wage Rates

17. Objectives of Job Classification
1. Objectively determine value of each job
2. Group jobs in a way that optimizes flexibility,
costs, and employee retention
3. Provide graphics that clearly communicate the
system and wage analysis process
4. Develop charts and matrices that facilitate creation
of Wage Administration Rules and Guidelines
5. Use Wage Ranges & Occupational Rates (Incentive
Baselines) in a way that produces the best overall
outcome

18. Wage Administration Rules & Guidelines
1.
2.
3.
4.
5.
6.
Red Circled Employees (above Upper Limit) can receive up to an average
increase if performance is in top 1/3 of occupation
Red circle employees can receive Cost of Living increase if performance is
in middle 1/3 of occupation
Employees below Lower Limit and on the job for over 1 year can receive
raises up to COL if performance is in lower 1/3 of occupation & above
100% for Direct Incentive
Annual raises for Jobs with purely objective performance criteria can be
apportioned into thirds with different wage increase percents for each
group: 6% 3% 0% for example
Occupational Wage Rates (incentive base rates) will be linked to the Lower
Level of the wage range and adjusted annually along with Cost of Living.
Over time, an outcome of the process will be that employees are below the
upper limit of their job and that there will be a strong correlation between
Pay &Performance