MSCALES -- A Broadbanding Approach for Information Technology Professionals (166173185)

7/29/2019 MSCALES -- A Broadbanding Approach for Information Technology Professionals (166173185)

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MSCALES (A Broadband Approach for Information Technology Professionals

This paper was presented at the 1996 CAUSE annual conference.It is part of the proceedings of that conference, "BroadeningOur Horizons: Information, Services, Technology --Proceedings of the 1996 CAUSE Annual Conference," page 6-3-1+. Permission to copy or disseminate all or part of thismaterial is granted provided that the copies are not made ordistributed for commercial advantage. To copy or disseminateotherwise, or to republish in any form, requires writtenpermission from the author and CAUSE. For furtherinformation, contact CAUSE, 4840 Pearl East Circle, Suite302E, Boulder, CO 80301; 303-449-4430; e-mail [email protected].

MSCALES(A BROADBANDING APPROACHFOR INFORMATION TECHNOLOGY PROFESSIONALS

Jeffrey M. TibbsITD Comptroller/Director of Management Strategies

Tina PryorCompensation Specialist

Pat SmalleganCompensation Specialist

University of Michigan - Information Technology Division4251 Plymouth RoadArbor Lakes, Bldg. #1, Ste. AAnn Arbor, MI 48105-2785

ABSTRACTThis paper focuses the compensation component of acomprehensive and integrated organizational change solution.Its purpose is to change IT organizations from technology tocustomer focused. MSCALES utilizes a broadbanding positionclassification strategy- and- a skills based compensationprogram which shifts the focus of compensation fromattributes of a given job to the skills/competencies ofpeople who are capable of performing various jobs.

It balances:

* Market conditions,

* Skills,* Competencies,

* Application of skills/competencies toproduce results,* Longevity,

* Education, and* Sharing of rewards

based on outcomes;

when making compensation decisions.



This presentation will describe:

* need for cultural change;* broadband construction;* skills/competency assessment with proficiencyratings;

* multi-directional assessment;* strategic skills development; and* consensus building.

NEED TO CHANGE

To be a 21st century world class organization, the Universityof Michigan's Information Technology Division, like most ITorganizations, needed to change. It needed to change from abureaucracy to a provider which emphasizes service andcustomer satisfaction. It needed to reduce its propensitytoward valuing technically elegant solutions for technology'ssake. Instead, it needed to focus more on providingcustomers with practical solutions to business problems. Theextent to which technology solves problems on campus, will

enhance the rendition of teaching, learning, research andadministrative services to the students/customers at UM. Ifthe centrally supported information technology provider isunable to satisfactorily harness the powers of technology tosolve the University's problems, other IT service providerswill.

The Information Technology Division (ITD) at the Universityof Michigan (UM) recognized the need to change and summarizesthese goals as indicated below:

FROM TO

Monopolistic-------------------CompetitiveTechnology focused-------------Customer focusedSole practitioner--------------Partner in business

solutionsServices when ready------------Services on demand,

when neededLaissez faire------------------Entrepreneurial

This ability to change, without wholesale replacement of thehuman resource base, will determine the extent to which ITorganizations will continue to provide value added serviceson University campuses across the country. The alternativeservice providers are already lining up at the University's

Purchasing Director's and Chief Financial Officer's doors tooffer outsourcing as the panacea. They say "we can solveyour problems, because we listen and work with users toprovide high quality business solutions at reasonable costs".They can. They have to, in order to survive. If the futureholds, as many believe, an assault on higher educationfunding, outsourcing of IT services will become a reasonable,achievable and cost effective option. The attractiveness ofoutsourcing will be enhanced by non-University providers whonimbly respond to customers' needs.



STRATEGY FOR CHANGE

The most valuable assets enjoyed by an organization are itshuman resources. Organizations pay the lion's share of theirbudgets for these resources which convert human capital intovalue added solutions - valued output to its customers. Howdo we convey, in no uncertain terms, the need to change?

By:* Broadbanding?* or Changing the organization structure to more

efficiently deliver services?* or Changing how much we pay?* or Changing the way we pay?

No to each, individually! By replacing or with and, we arenow embarking on the need to change the culture in ourinformation technology organizations. We must change ourrules of engagement, how we get thing done. This reflectsthe CULTURE CHANGE imperative that IT organizations face.

The leadership at Michigan has faced up to this reality. It

must change its culture. Culture can be defined as"the cumulative perception of how the organization treatspeople and how people expect to treat one another. It isbased on consistent and persistent management action, as seenby employees, vendors, and customers."[1]

ITD as an organization is attempting to change. It has (orwill shortly) change the following management systems: Compensation - Reforming compensation as an enabler tosupport the attainment of the lofty goals described in thepreceding paragraph. The compensation system MSCALESdescribed herein is a movement to a skills and competency

based pay system which is intended to strategically alignwith the organization's objectives and to increase employeeeffectiveness. Hence, a major outcome is to structure skilland competency based pay to focus employees on learning andexhibiting skills that result in improved productivity andeffectiveness.

Employee-Organization Partners in Strategic Staff Development- Changing the employer and the employee relationship from anantagonistic and entitlement posture - where employees wantmore pay for their output; and employers want greaterproductivity in exchange for meager raises - to an employee-organization partnership. Both employees and employers

recognize that investments in staff development contribute toincreased staff value, improved performance and hence topay.[2]

Organizational Structure and Culture - Transforming from afunctional hierarchical structure to a cross-functionalproject oriented structure, that values its customers andworks with them to solve business problems.

Reengineering the Financial Architecture - Converting to a



product and service account structure with time reporting,cost accounting and modified billing practices.

This paper will focus on the first and second points,compensation and staff development components of acomprehensive and integrated organization change solution.

COMMUNICATING THE URGENCY FOR CHANGE

How did we communicate the need to change in the workplace?We knew that the paradigm that we embraced in the years pastwould not serve us well in the years to come. ITD hadclearly articulated its Mission, Purpose, and Values. Weinvested resources in developing and rolling out ITD'sManagement Expectations. We participated and trained staffin Total Quality Management and Managing Diversity. We begana comprehensive program of work-planning and performanceevaluation which emphasized not only _what_ staff were to do,but _how_ they were to perform their tasks. We even addressedand published a report on Recognition and Celebration.

All of the aforementioned changes were superimposed on afunctional, bureaucratic, hierarchical organizational

structure. We espoused lofty values and utilized a meagermerit increase program to reinforce and induce behaviorswhich we hoped would lead to the attainment of the necessary,albeit ambitious goals. The structures intended to enablethe change were insufficient to support this massive changeeffort. The leadership did not successfully communicate tostaff the immediacy and urgency of change.

We needed the staff at UM's Information Technology Divisionto pay attention. Our strategy was to reorganize from afunctional hierarchical, bureaucratic structure to a projectbased, matrix organization that facilitates the flexibledeployment of human resources, to nimbly respond to

satisfying customer needs. Changing the organization caughtthe staff's glance. Changing the compensation scheme is thecommunication tool that has focused and has held theorganization's attention.

ALIGNMENT

The changes that preceded MSCALES were necessary componentsfor organizational change, but they were not sufficient. Thekey attribute which would lead to the success of MSCALES isalignment. It has to be viewed as complementary to theorganization's scheme for success. It must direct how one

transforms the 'froms' to the 'tos' discussed earlier.MSCALES emphasizes the 3P's, changes to placement, pay, andpeople.

A technically able staff is necessary, although notsufficient, to meet the challenge of ITD's mission. Thestaff, in addition to having state of the art programming,consulting, analytical or technical writing skills, must alsoexhibit the requisite attributes or competencies, if ITD isto successfully live up to its mission. Once staff with the



desired skill sets and competencies are recruited, they mustbe trained and deployed strategically. This strategicdeployment, without bureaucratic delays, is most criticalwhen staff are needed for the numerous projects on which ITDsimultaneously works.

ITD is proposing a classification and compensation strategywhich offers the following advantages:

* customized or adjusted to align closely with thedivision's strategic goals and business objectives;

* utilized to deploy staff in a matrix manner acrossseveral projects requiring a variety of skills andcompetencies without bureaucratic paper shuffling;

* a communication tool which guides staff to focustheir career development efforts consistent with jobcharacteristics, rather than focusing their effortson justifying the attainment of higher salary gradesor titles; and,

* benchmarked to the current classification system asa foundation. However, when making compensation

decisions, the focus must be more on what the staffmember brings to the job and less on what the jobis.

MSCALES is a three tiered compensation strategy thatcontains:

I. Broadbanding - converts 140 position classificationsto five functionally defined broad bands.

II. Compensation Reform - moves the organization from amarginal pseudo-meritocracy to a compensation system whichplaces value on the skills and competencies exhibited by the

staff in the achievement of business successes for ITD, and

III. Strategic Staff Development - guides the staff tomake the necessary changes utilizing multi-directionalfeedback in conjunction with strategic investments in stafftraining and development. It directs the joint venture wherethe organization contributes resources and the staffcontributes "sweat equity" to create increased value, as they"partner" to satisfy customers.

MSCALES and the changes in our workplace culture that lead tosuccessful business outcomes are a joint development -- ajoint venture between the staff of ITD and its leadership.

The process for implementing this initiative is the key pointof this paper. The _what_ is clearly non trivial; but _how_ to put it into play, is key. The compensation componentsoutlined herein are both sound and revolutionary. Feworganizations have a systemic solution for skills andcompetency based compensation that effectively integrates theattainment of skills and competencies with theirdemonstration.



STAFF INVOLVEMENT IN PROGRAM DEVELOPMENT

MSCALES has gone through four drafts. Each has been impactedby the comments received from both customers and peers. Thepeer review process includes members of the University'sHuman Resources and Affirmative Action (HR/AA) ManagementTeam and ITD's Operations Lead Team (OLT). The customerreview process includes those impacted by the program - thestaff of ITD. Staff involvement in the development ofMSCALES is critical and has been extremely valuable.

During the second week of July 1995, this draft programproposal was released to the peer reviewers and comments weregathered through the second week of August. Five focus groupmeetings were held in various ITD locations during the lasttwo weeks of July, which attracted over two hundred attendees(approximately one third of ITD staff).

The major objective of the focus group meetings was topresent the program at its current phase of conception. Anyinitial impressions or reactions of attendees were recorded.Input gained from these focus groups molded subsequent draftsof the document.

Volunteers were solicited to participate on a BandingAdvisory Team, which helped refine the program design. Theywere also expected to act as change agents in the staff roll-out process. This team, a cross-functional group of thirtystaff members worked from November 1995 through March 1996 torefine the processes outlined within this document.

Their charge was to formulate guidelines, validate and helpto roll out the MSCALES program. More specifically, the BATmembers provided key input to the process which defines,categorizes and assigns to salary band zones the requisitecompetencies which provide entry into the zones (currentlyconceived as band quartiles). In addition, the BAT was asked

to provide a recommendation to the ITD OLT regarding equityrelated guidelines and timelines for correcting salary levelswhich fall outside of their appropriate zone within thesalary band. These outliers will be identified afterperforming analyses of salaries utilizing the newcompensation principles.

Much of their thoughtful efforts is reflected in thisdocument.

The actual processing of the changes proposed for fiscal year1996-97, including Broadband assignments were performed withan effective date of September 1996. The validation of the

final design of the compensation related components, based onthe findings of the BAT, and finalized by the Office ofManagement Strategies in conjunction with the Office of HumanResources and Affirmative Action (HR/AA), will be competed byJanuary 1, 1997.

MSCALES - DEFINED

MSCALES has three principle components to the program. It



has a Broadbanding scheme for position classifications,compensation reform for salary setting, and strategic staffdevelopment for salary enhancement. While intended to workin tandem, these principle components can stand alone and canbe implemented in a phased manner.

As a classification/compensation system, MSCALES balances: * Market conditions,* Skill sets of staff,* Competencies of staff,* Application of skills and competencies to produce

outcomes,* Longevity,* Education and reward,* Sharing based on organizational performance.

when making compensation decisions.

Simply put, MSCALES is a people-based pay system which payson the basis of what the person brings to the job and howthey perform, not simply based upon what position the staffmember occupies. It is a system which combines the threetraditional human resources (HR) measurement processes - job

analysis, job evaluation and performance appraisal. While itis true that MSCALES utilizes the traditional HR measurementprocesses, these processes are modified to be consistent withprinciples of Total Quality.

PERSON VERSUS JOB ANALYSIS

Job analysis is the least modified process; it is alsorelegated in importance. The status-quo, which endorsesmaking the bureaucratic investment in creating new positions,processing reclassification paperwork, etc. hopes to providethe staff incremental career progression.

Career progression, in this manner, is often divorced fromquality principles and detracts from customer satisfactionand respect for people and ideas. The emphasis of effort ismisplaced, focusing on bureaucracy, rather than focusing onthe quality of each person's skills and competencies asapplied to the value of the work performed.

Much effort is expended in pursuit of differentiating aposition's task set from one which is lower classified (andlower paid) and molding the language of the job descriptionto match more closely those of higher classified positions.The current job classification scheme causes hiring managers

to try to put different sized pegs into a fixed, often wrongsized set of holes.

The number of pegs is conceivably as different as the numberof permutations of the number of employees, theirskill/competency sets, and the number of discrete jobrequirements. Job analysis, as a process, is a good test toensure that certain types of jobs are compensated reasonably,relative to other types of jobs. The job analysis functionof making market comparisons for salary setting are valid for



a class of employees in the aggregate, but less significantfor any given individual staff member.

Job/person evaluation is best described as the staff member'sreadiness to perform the requirements of the job. Itincludes an analysis of the what the person brings to the jobin terms of skills (e.g. programming, consulting, analysis)and competencies (i.e., requisite qualities such as;entrepreneurship, customer service orientation, empowerment,etc.).

Like traditional compensation systems, salary levels are setbased upon the results of the job/position analysis and thejob/person evaluation. Salary levels are set, usually basedupon sources such as resume review, interview results, andthe checking of references. Changes in salary levels,require an evaluative process that contains both thejob/position and job/person analytical components. Thisevaluation process is not designed to be unilateral, frommanager to employee, but rather as a multi-source/multi-directional assessment process. Under MSCALES, this multi-directional feedback mechanism considers input from the staffmember, those to whom the staff member reports, those who thestaff member serves (customers) and colleagues.

Salary increases are based on the results of a work planningprocess, setting of organization targets/goals or qualityindicators, performance appraisals, and measurement ofquality indicators. This is a pay for performance systemthat has traditional merit components providing sufficientflexibility to incorporate variable pay options andorganizational gain sharing. While group reward systems aredesired and may be appended to the architecture of MSCALES,this document focuses on individual compensation as itrelates to the staff member's contribution to theorganization's work. The goal is to tie salary increases tothe enhancement of human capital, as this capital is applied

to the performance objectives of ITD.

MSCALES - PROGRAM DESIGN

Broadbanding

ITD currently has 140 position classifications for itsapproximately 605 staff members. The proposed bandingstructure collapses these 140 position classifications intofive career broad bands. They are functionally describedbelow and contain the following breakdown of positionclassifications and staff contained within the bands:

CAREER BAND DESCRIPTION # CLASSIFICATIONS # STAFF

Managerial (Exempt P&A S.G. 8-UG) 39 95Technologist (Exempt P&A S.G. 6-15) 50 344Technical Support 22 68(NonEx Tech S.G. 6-19; P&A2-6)Administrative (Exempt P&A S.G. 6-14) 10 24Administrative Support



(NonEx Office S.G. 1-11 P&A 3-6) 19 74TOTALS 140 605

P&A stands for the Professional and Administrative job familywhich houses most programmers, systems analysts, teamleaders, etc...Tech. stands for the Technical job family, which houses lowerlevel technical positions which can be described as para-professional.Office stands for the office job family which housesprimarily clerical positions.S.G. stands for salary grade.Non-Ex. stands for non-exempt (as opposed to exempt) statusunder the Fair Labor Standards Act.

Salary Bands

This proposal would map the seven career bands to threerespective salary bands

Salary Band One $25,000 - $137,500 Applies to the ManagerialBand & Technologist Band

Salary Band Two $22,500 - $ 90,000 Applies to theAdministrative Band

Salary Band Three $15,000 - $ 60,000 Applies to the SupportBands-Administrative & Tech

No member in any salary band is permitted to enter the fourthquartile of the compensation range without approval of the UMChief Information Officer and Executive Director-ITD.

Congruence Of Salary Bands To Career Bands

This salary band structure allows for an equal opportunity toearn regardless of which career track a staff member maychoose. In salary bands one and three there is wage parityin both the technical and administrative/managerial careertracks. ITD believes that there is a need for senior/gurulevel technical staff. It is contrary to the organization'smission to force such staff members into a managerial trackwhich may be contrary to both their proclivities and careerobjectives. It should be understood, however that the valueof one's work and hence, their salary, will be based upon amarket comparison. Market norms for comparable facilities,based upon sources such as Mercer Group studies, Big Ten

comparisons and other sources held in ITD-Human Resources orthe University's Office of Human Resources and AffirmativeAction, will impact salary determination under MSCALES.

MSCALES - COMPENSATION REFORM

Current Situation - Setting Salaries



In the current environment, salaries are set based upon thehiring manager's assessment of the employee's education andexperience, utilizing these factors as supported throughinterviewing interactions and reference checking to evidencea candidate's perceived ability to perform the requirementsof the position. The salary is then set based upon comparingthe successful candidate's experience (measured in years) andeducation to those holding a similar position.

Current University compensation systems combine an assessmentof the person's education, experience and their achievementof a "management defined" skill threshold to determine astaff member's placement in a position classification,associated salary grade and salary range. After placementinto the right "position classification", the setting ofsalaries becomes somewhat mechanical, unless tampered with.Examples of tampering which introduce some bias into thesystem include:

* an individual's ability to negotiate persuasivelyand aggressively;

* the hiring manager's persistence in pressing for ahigher salary when working with human resourcesstaff;

* the urgency of the need to fill the position; and,* the financial condition of the hiring unit.

Current Situation - Internal Equity

While this method has produced reasonable internal equity,(administratively defined as unexplained variances betweencomparable staffs' salaries not exceeding five percent), thesystem is far from perfect.

This system is based upon equity viewed from a narrowprospective - that which can be objectively measured.

Unfortunately, what is usually most significant in terms ofimpacting an organization's success is not what the staffmember did in the past, but rather what they are _now_ doingto contribute to the achievement of the organization'sobjectives. Most significantly, it has been determined thatthe _what_ that an individual staff member achieves is oftenoutweighed by the _how_ the achievement is effected.However, it is usually the _how_ which contributes ordetracts from team building and customer focus needed toproduce the necessary synergy that thrusts an organizationforward.

Schuster and Zingheim in their work on The New Pay would say

that "the only situation in which some of the "old' solutions--such as internal equity driven point factor plans, cost ofliving increases disguised as merit plans, and goals such asbeing a 75th percentile payer of base pay without concern forthe ability to pay are appropriate is in organizations thatneed not compete for business and are not interested inencouraging employee excellence." (emphasis added)

New View - Internal Equity



The belief advanced through this document is that differencesin salary levels between staff are not bad, as long as theyare explainable and not contributed to by biases. The bestexplanation for Person A earning more than Person B isbecause they contribute more effectively to theorganization's objectives. In a sales organization, ifPerson A sells more widgets than Person B, then A earns agreater commission. Assuming other factors being equal, suchas the size of the territory and marketing support, thisdifference is not deemed to be "inequitable". Since ITD isnot purely a sales organization, there must be other ways ofdifferentially compensating for differential contributions.Hence, the concept of possessing and demonstrating differentskill and competency levels.

How MSCALES Relates To Current University CompensationProcesses

MSCALES is a skills based compensation program. It isintended to shift the focus from attributes of the job toattributes (skills and competencies) of the person. Theapproach which is advanced in this document is intended to

add value to the traditional job analysis or Hay pointscoring approach. MSCALES, in order to yield the desiredresults, must systematically bridge the gap betweenobjectively analyzing the duties or activities performed tolinking the skills, competencies, and other attributes whichshould impact compensation. The rationale for thisadditional rigor is to customize the compensation settingprocess for today's information technology environment at theUniversity of Michigan.

MSCALES maps current position classifications to broad bands,based upon the functional nature of the positions. Thismapping reflects the results of Hay point scoring which uses

the following factors to determine a point count which leadsto the assignment of a salary grade:

The factors are:

Knowledge RequiredOrganizational BreadthAmount and Nature of Human ContactIndependence of ActionDifficulty of Thinking and Decision MakingResponsibility and Impact

The objective is to adapt this form of position analysis toan analysis of the skills required to perform the tasksscored utilizing Hay points. This process is used to definea scoring methodology for assigning value to skills andcompetencies. Hay point analysis is a means for comparingeach classification to all other classifications on amethodical and objective basis. It is not designed forevaluating individual jobs or positions, nor is it designedfor evaluating the performance of any individual person.MSCALES is designed to provide an objective basis for



comparing a portfolio of skills and competencies to all otherportfolios of skills and competencies. In so doing,individuals with their unique combinations ofskills/competencies can be compared to one another to form abasis for discussing differences in compensation levels.

This approach utilizes the appendix of the MSCALES documentwhich maps UM positions and their respective classificationsto the bands and displays the mean salaries for each of thepositions. This mean salary provides a metric which reflectsthe relative value which ITD has placed on a given task set,as described by a job description. If one is to assume thatthe incumbent of each position is fully capable to performthe task set, then one should be able to infer the neededskills, competencies, education and experience that a fullycapable person would need in order to adequately do the job.

Hence, it is necessary to review each job description toharvest the skills and competencies from the job description.There should then be some ranking protocols which reflect therelative values of certain skills relative to others. Apoint scoring methodology can be used to link point counts toquartiles or zones within the bands which can then be mappedto dollar values which can be pegged to points, and hence,

dollar values across the salary band.

A point scoring methodology can be used which demonstrates astatistical relationship which correlates (does not conflict)with the position classification methodology utilized by theUniversity (Hay system). Currently, ITD and HR/AA are in theprocess of reviewing the scoring algorithm for validity.This validation will occur prior to implementation.

SKILLS, COMPETENCIES AND ZONES

The bands are divided into four zones representing a salary

range (currently assumed to be quartiles). Each zone willhave a separate set of skill sets (as exhibited in the jobdescription for the position held) and which are validated bythe Banding Advisory Team. The criteria for entering a zonerequires that an employee has the requisite skill set and candemonstrate the acquisition and consistent application ofcompetencies.

Therefore, setting salary levels, and increasing them has toinclude more than a simple, albeit objective, analysis ofone's education and experience. To do so successfully, onemust also introduce an analysis of the skills andcompetencies that a staff member brings to the employment

relationship. Employees will increasingly be compensated forthe acquisition and application of skills and competencieswhich produce added value and achieve favorableorganizational outcomes. Put another way, the exchange thatwill occur between the organization and the staff member ismeaningful pay for meaningful work produced through theacquisition and application of valued skills andcompetencies.

Analysis of staff skills, abilities or proficiencies -



expertness that comes from training, practice, and practicalapplications is not new. Current compensation systems, oftencontaining a performance evaluation component (whether formalor informal) include an assessment of the skills which astaff member applies when doing the organization's work. Forexample, programming skills, technical writing skills,consulting skills, and financial analysis skills can becategorized as novice level, mid-level, or guru level,admittedly with some degree of subjectivity or measurementbias. The categorizing scheme which MSCALES utilizes todescribe employees and their placement within the quartiles(or zones) of the broad bands are:

Zone One

Meeting baseline expectations - The staff member isrelatively new and is actively learning.

Zone Two

Competent/Proficient - The staff member reflects the fullproficiency in a broad range of their skills andcompetencies. They also work independently (without activesupervision).

Zone Three

Advanced/Coach - The staff member exhibits a depth andbreadth of the knowledge, skills, and competencies pertinentto their given discipline/profession. They coach others(participating in knowledge transfer) and handle multiple,complex products/projects.

Zone Four

Expert/Mentor - The staff member is a role model within theirprofession and the University community. They are active

participants and often drivers in the development oforganizational strategies.

ADDING COMPETENCIES AND PROFICIENCY LEVELS TO THE SALARYSETTING PROCESS

Competency development is crucial to an organization'ssuccess. Many organizations, especially those in high techindustries, often have highly skilled staff members. Skills,like programming, consulting, technical writing, accounting,repairing hardware, engineering systems and pulling fiber,etc. are necessary for the success of the Information

Technology Division - the enterprise. Necessary are theseskills, but they are not sufficient for the success of ITD.There are certain behavioral traits which are necessary forITD staff to exhibit in order to facilitate successfulservice provision for its customers.

Many of these competencies are considered core, that is, tobe exhibited by all staff irrespective of their particularskill set. Development of these competencies is involuntary- required to be a productive member of the ITD team. This



approach links the achievement of these core competencies tothe proficiency assessment of the staff member's skill level.

This component of competency formation differs from thevoluntary component, in which staff members contract with theorganization to develop more personally specific competencieswhich are non-core. The Professional Development Contract,its role in skill and competency development and ultimateimpact on compensation will be discussed in the next section.First, we will look at core competency formation and skillproficiency assessment.

The skills analysis process and its associated point countsare based on an assumption that the incumbent is a fullycapable staff member. There is a need to develop an indexwhich normalizes based upon the incumbents actual proficiencylevel and degree of competency development. The followingscale which adapts the scale to encompass ITD's corecompetencies is suggested for use.[3] The ratings whichshould be assigned to each skill area are:

0 Can't do1 Can do; needs supervision and some assistance2 Can do satisfactorily; needs periodic supervision and

some assistance3 Can perform (individually or collaboratively); withcustomer focus; with acceptable speed and quality;without supervision or assistance

4 Can perform (individually or collaboratively); withcustomer focus; with more than acceptable speed andquality; without supervision or assistance

5 Can perform (individually or collaboratively); withcustomer focus; with more than acceptable speed andquality; with initiative and adaptability for dealingwith special problems; without supervision orassistance

6 Can perform (individually or collaboratively); with

customer focus; with more than acceptable speed andquality; with initiative and adaptability for dealingwith special problems; with the ability to lead anddevelop others; without supervision or assistance

This scale will hereinafter be referred to as the MSCALESInverted Pyramid of Performance Capability. This ratingsystem is linked to an index which adjusts the skills pointcount upward to reflect a premium which ITD is willing to payfor competencies and proficiency which exceeds the fullycapable level (defined as level 3). Likewise, a rating ofless than three discounts the compensation level, reflectingthe discount which the organization expects for employing a

less than fully capable skill set.

Competencies are underlying characteristics, traits orbehaviors of an individual or team that can be shown topredict effective or superior performance in a job orsituation. Effectively defining competencies and rewardingemployees for consistently demonstrating these behaviorsenables the organization to be successful to accomplish itsmission, business and customer service objectives. ITDbelieves that its performance will be enhanced by including



within its compensation policy the clear definition of andanalysis of competencies. To do so will help to predict theemployee's ability to achieve the outcomes for which they andthe organization are held accountable.

The advantages derived from integrating competencies intoMSCALES (ITD's Broadbanding compensation system) are that it:

a. helps to target and control pay within bands - itmakes pay differentials rationally based;

b. promotes the value of superior job performance; andc. communicates the organizationally determined

indicators of success to staff.

SALARY ADMINISTRATION - RECOMMENDED PRACTICES

This recommendation results from negotiations between ITD andHR/AA. Discussions have been held with BAT members. Furtherdiscussions will be held to more fully develop andoperationalize these recommendations if they are deemed to beacceptable.

* No one will lose money as a result of converting to

MSCALES.

* Those staff members whose salaries are deemed throughformulaic algorithm (developed jointly by ITD and HR/AA andhoused in HR/AA) to be unreasonable will be determined tohave a GAP.

* A gap, which implies an actual salary is unreasonably set,is defined as differing from the formulaic determined salaryby a determined threshold value. While this threshold hasnot yet been finalized, (i.e. still under negotiation withHR/AA), the current proposal would set the reasonablenessthreshold at 1/16 of the dollar value between the minimum and

maximum range of the applicable salary band.

* Where a gap exists, and the staff member's actual salary ishigher than the threshold of reasonableness, then the staffmember's salary will be "red circled", and no increase willbe made to the staff member's salary, until their appliedskill/competency set would show their salary to fall withinthe range of reasonableness.

* Conversely, where the staff member's actual salary is lowerthan the formulaic determined salary, considering thethreshold of reasonableness, the staff member willparticipate in a supplemental pool of salary increase dollars

earmarked for "closing the gap". The staff member willcontinue to participate in the "Gap Adjustment" pool for asmany periods as a gap exists AND the staff member continuesto receive a merit increase.

* This provision is believed to moderate massive changes insalary levels, and to ensure that massive influx of dollarsis not required to implement MSCALES.

* The salary increase pool would consist of at least three



components. The components are: the traditional merit, theProfessional Development Contract payment, and the gapadjustment The budget for the sum of the pools would be thebudgeted increase in annual salaries within ITD (less areserve held in anticipation of exceptions). Traditionalsources of salary increases within ITD have been merit/salaryprogram increases, reclassification or promotional increases.The setting of these pools would be variable, depending uponareas which ITD leadership wishes to emphasize, subject tobudgetary realities. Details of each year's plan would bedetermined as a part of the annual budget process, whichprecedes each fiscal year.

SALARY ADMINISTRATION - A SHARED RESPONSIBILITY

Salary administration in an MSCALES environment is a sharedresponsibility. Functional Managers, ProfessionalDevelopment Managers, HR/AA staff must work together toensure that the following outcomes are achieved:

Functional Managers must help to identify functionalcompetencies and skill sets that will contribute to superiorperformance of their desired task set. An assessment of the

project's difficulty or risk elements should be specified ashigh risk projects may justify pay differentials (combatpay).

Professional Development Managers must ensure that workplanning, successful formation of professional developmentcontracts, multi-directional performance evaluations andcoaching are performed to create an environment whereachievement or competencies is possible and where exhibited,appropriately rewarded.

HR/AA, as co-sponsors of this program, must providetheir expertise to ensure that our program design is rational

and its application is in compliance with the EqualEmployment Opportunity Commission (EEOC) standards and theFair Labor Standards Act (FLSA).

MSCALES - STRATEGIC STAFF DEVELOPMENT

Work Planning, ProfessionalDevelopment Contracts AndMulti-Directional Assessment

ITD will continue to employ its work planning process. The

current work planning tools will be modified to more clearlymatch the principles contained within this program, onceapproved.

Note that there will be incremental movement along the bandwhile within a zone. It is anticipated that there will be atleast two work planning session per year which include aperformance assessment component that will provide coachingand will lead to an annual compensation adjustment decision.



That is, feedback is provided twice a year, salaryadjustments will occur once per year under MSCALES. Thecomponents which comprise the salary increase pool, discussedabove, will be impacted by ITD's present and future processesof Work Planning, Professional Development Contracts andMulti-Directional Assessment.

The assessment process is a multi-source process. It isproposed that during the twice a year periods (in January andin July), a tool (yet to be designed) will be completed by:

a. the employee being reviewed;b. at least three peers agreed to by the Professional

Development Manager and employee;c. the Professional Development Manager, who will

summarize the periodic project related evaluationssecured from functional managers; and,

d. customers of the employee.

The major focus of this assessment is to determine whetherthe skills and competencies consistently exhibited meet orexceed the targeted achievement levels as articulated in theemployee's work plan.

Three hundred and sixty degree feedback is a multi-directional (rater) process for gaining information that canbe utilized to tie our demonstrated competencies toorganizational needs.

This feedback correlates with broadbanding in the followingmanner:

1) creates a means to provide data that can be used forour professional development and work planning;

2) broadens the scope from which data can be obtained;

3) is focused on proficiency and performance, ratherthan exposure to new skills;

4) enables us to minimize, yet not totally remove,subjective perceptions of our strengths andweaknesses; and,

5) focuses on connections between our performance andorganizational needs.

Although 360 degree feedback will initially heighten ourawareness of developmental needs, it's impact on individualmarketability and value to the organization is an ultimate

outcome. While broadbanding increases individualresponsibility for career development, ITD does not diminishit's responsibility to provide feedback that will assist inmeeting our mutual needs (individual career andorganizational). Three hundred and sixty degree feedbackrepresents the means to that end.

Any feedback instrument has the potential to create anxiety,but the choice of instrument and resultant process, will takeinto consideration the impact of data on motivating a self-



directed developmental plan, improving self-awareness andlearning from experiences. Consequently, several instrumentswhich are currently being used for a variety oforganizational settings will be examined, rather thancreating our own.

Credibility, impact and integrity in the instrument'simplementation will be important for our success. An initialpilot process which includes members of the ITD SeniorManagement Team, the Professional Development Managers andCentral Administrative Staff is currently under way. Thecurrent instrument being utilized is a product calledBenchmarks, developed by the Center for Creative Leadership.

CONCLUSION

ITD has concluded that the currentcompensation/classification system of the University does notmeet its needs. It does not encourage skills enhancement.Its rigidity of position classifications restrictsflexibility in the deployment of human resources. It focusesmore on internal equity based upon the education and years ofexperience that the holder of a position has, rather than on

the individual's skills, competencies and their applicationto the organization's work. It encourages movement from thestaff member's desired career track (often from technical tomanagement) in order to enhance salary levels. It does notadequately support variable pay or differential paystrategies (especially in a project environment).

ITD believes that MSCALES addresses those deficiencies andenhances the current compensation/classification scheme.

MSCALES balances:

* Market conditions,

* Skill sets of staff,* Competencies of staff,* Application of skills and competencies to produce

outcomes,* Longevity,* Education and reward,* Sharing based on organizational performance when making

compensation related decisions

Once implemented, staff members will be encouraged tocontinually develop their skills and competencies, as theirdevelopment will greatly influence their pay. Since MSCALESis a pay for performance system, compensation decisions

affecting an employee are impacted by that employee'sapplication of their skills and competencies to add value tothe organization.

MSCALES, as a part of a comprehensive and integratedorganizational change solution will help to transformUniversity of Michigan's Information Technology Division intoa 21st century world class organization. Through MSCALES,ITD will become the competitive, customer focused, partnerwho provides business solutions contributing to the



University's mission.

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=============================================================

ENDNOTES

[1] Jay R. Schuster's and Patricia K. Zingheim's The New Pay- Linking Employee and Organizational Performance, LexingtonBooks, 1992, pages 42-43

[2] Marshall Sashkin & Kenneth Kiser, Putting Total QualityManagement to Work, Barrett-Koehler Publishers, 1993, page111

[3] The AMOD scale was originally created in 1968 by RobertE. Adams as the DACUM rating scale. Also contributing to itscreation were LeBlanc Sweeny, Lantz Doucet West and Shaw.

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