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HomeMy WebLinkAbout1984-11-06; City Council; 7939; Management Compensation PlanCIT'. IF CARLSBAD - AGENDI ilLL \B#a. I TITLE: HTG. 11/6/84 MANAGEMENT COMPENSATION PLAN IEPT. CM DEPT. HD.,% CITY MGR.% CITY Am& RECOMMENDED ACTION: Adopt Resoulution No. 7799 approving agreement with Arthur Young & Company and appropriating funds. ITEM EXPLANATION: At its July 10, 1984 meeting the City Council directed that a total compensation study be conducted for management personnel. Requests for Proposals were prepared and sent out to firms interested and experienced in conducting management compensation studies. A total of eight proposals were received. The proposals were screened by a staff committee composed of Marty Orenyak, Clifford Lange and Jim Elliott to select firms to be interviewed. On October 3, 1984, the three best qualified firms were interviewed by a panel consisting of Councilmember Dick Chick, Frank Mannen and Clifford Lange. The following list indicates the firms interviewed and the fee proposed for their services: Arthur Young & Company $16,850 Ralph Anderson & Associates $24,490 Gibson & Company $2 7,000 Representatives of the firms who will conduct the study were interviewed. The .interview panel felt that Authur Young & Company's proposal and the Ralph Anderson & Associates' proposal best met the needs of the city and were most responsive to the RFP. Reference checks were made of both firms and confirmed that both firms had good experience arid reputations, and were capable of conducting the study successfully. It is the interview panels recommendation that Arthur Young & Company's proposal be accepted. FISCAL IMPACT: No funds were included in the budget for this study. $16,850 will need to be appropriated from the contingency account to Personnel Department's Professional Services Account to fund this study. A balance of $1,002,023.00 will remain in the contingency account after this appropriation. EXHIBITS : 1. Resolution No. 779'3 2. Letter of Agreement dated November 7, 1984 L .. . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 7799 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING AN AGREEMENT WITH ARTHUR YOUNG & COMPANY FOR A MANAGEMENT COMPENSATION STUDY AND APPROPRIATING FUNDS. WHEREAS, the City Council has directed that a management compensation study be conducted in order to determine fair and equitable compensation levels for management personnel and, WHEREAS, proposals have been received and reviewed from firms capable of carrying out such a study and, WHEREAS, funds need to be appropriated to carry out the study; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad as follows: 1. That the above recitations are true and correct. 2. That the agreement between the City of Carlsbad and Arthur Young & Company to conduct a management compensation study attached hereto as Exhibit A is hereby approved. 3. That sixteen thousand eight hundred and fifty dollars ($16,850.00) is hereby appropriated from the contingency account (01-19-50-2499) to the Personnel Department Professional Services Account (01-15-10-2470) for the study. 4. That the Mayor is hereby authorized and directed to sign the agreement on behalf of the city. // // // // // h c' .I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a regular meeting of the City council of the City of Carlsbad held the 6th Novenj3er , 1984, by the following vote, to wit: day of AYES: Council Mi&ers Casler, Ikwis, Kulchin, Chick and Prescott NOES : None ABSENT: None ATTEST: %dL MARY H.FASLER, MAYOR ALETHA L. RAUTENKRANZ, City Csrk &itp of Garlsbab November 7, 1984 Arthur Young & Company 110 West "A" Street, Suite 1400 San Diego, CA 92101-3768 Attention: Jill A. Morton TELEPHCINE (61s) 438-5581 This letter along with the 'attached documents will serve as the agreement between your company and the City of Carlsbad for the Management Compensation study. You will conduct the study in accordance with the terms of the Request for Proposals (Attachment A) and your proposal dated August 17, 1984 (Attachment B). The city will compensate for the study in accordance with your fee proposal in an amount not to exceed $16,850. Please indicate your acceptance of this agreement by signing in the space indicated below. Sincerely, FhNX MANNEN Ass is tan t City Manager Arthur Young & Company Date: Date: November 7, 1984 EXHIBIT A +-i CITY OF CARLSBAD ATTACHMENT A I. REQUEST FOR PROPOSAL - MANAGEMENT COMPENSATION PLAN for Back round. wit - council/manager form of government. established a merit system for its employees in June 1970, concurrent with the adoption of a classification and salary plan. Subsequent to this the city established a management employee category. Management classifications are governed by a separate plan which prescribes management salary and benefit compensation. There are approximately 45 management employees in the city. With the exception of six police management employees, all of these employees are covered by the provisions of the Management Compensation Plan. Police management employees are covered by the Management Comgensation Plan and additional separate provisions. The City of Carlsbad is a general law city The city 11. Pur ose. The city wants the existing Management Compensation The review should produce hd classifications reviewed. the following recommendations not later than November 1, 1984. A. A performance based compensation plan with procedures for administration of the plan. B. Specific management salary recommendations for all management positions. C. Recommended management classification changes where appropriate. 111. Scope of the Study. The study should first determine the City Council and City Manager goals for a performance based management compensation plan. The current Management Comaensation Plan should be reviewed in detail. The manage- ment organization of the city should be reviewed. management employee should be interviewed. The comparison process should define the relevant labor market of the - City of Carlsbad for recruiting of management employees. Comparisons should be done using cities of comparable size, level of activity, functions, and quality of management. Each IV. The Proposal. The following should be included in your proposal. A. A narrative statement explaining how the above work B. The detailed schedule for the completion of the various will be conducted. phases of work,. Request for Proposal Page 2 July 13, 1984 V. VI. C. A total fee and a propos-9 schedule of p yments related to the work schedule. Provisions for final fee payment to be made subsequent to Carlsbad City Council acce'ptance of the consultant's report. D. A list of clients preferably in California for whom the consultant has provided similar services. The proposals submitted in response to this request will be evaluated by a committee composed of members of the city staff. Consideration will be given to the quali- fications of the consultant, manner in which the work will be organized and conducted, the work program schedule and the fee for the services provided. Follow- ing evaluation of proposals by the city staff, responding firms may be requested to make a verbal presentation to a city screening committee. Selection will be made by the screening committee subject to the approval of. the City Council. The City of Carlsbad reserves the right: to eject all proposals should none of them meet the qualifications sought by the evaluation committee. Criteria for Evaluation of Proposals. A. Responsiveness to the request for proposal. B. Practicality and logic of methodology. C. Competency of the study team. D. Fee. E. Comments from references. Deadline and Inquiry. is 5:OO p.m., August 10, 1984. should be submitted to the Personnel Director, City of Carlsbad, 1200 Elm Avenue, Carlsbad, CA 92008. Please direct any questions regarding this request for proposal to Jerome N. Pieti, telephone (619) 438-5583. The deadline for receipt of proposals Three copies of the proposal - TTACHMENT B A MEMBER OF ARTHUR YOUNG INTERNATIONAL - August 17, 1984 Mr. Jerome N. Pieti Personnel Director City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 Dear Yr. Pieti: 110 West A Street, Suite 1400 San Diego. California 9210f-3768 Telephone: (619) 238-1144 Arthur Young is pleased to respond to your Request for Proposal (RFP) for a management compensation study for the City of Carlsbad. In this letter, we have highlighted those aspects of . our proposal which we believe are of the greatest interest to you in selecting a qualified consultant to carry out this undertaking . Understanding of the Environment and Issues A project of this nature requires a full understanding of the key compensation issues that must be faced by any major employer in the 1980s and beyond. In this regard, Arthur Young can point to its: leadership in the field of compensation consulting broad and varied consulting experience in a considerable number of private and public sector organizations "hands-on'* experience in addressing the various key issues surrounding this project in a large number of private and public sector client organizations thorough understanding of the work performed by the city. Consequently, we bring a high degree of directly related skill and experience to the work required in the study. 7 - -- ArnURWW Mr. Jerome N. Pleti Page two August 17, 1984 Thoroughness of Technical Approach The types of research, surveys, and analyses required for this project, together with the issues which must be addressed, indicate the need for the application of a proven methodology. Our technical approach reflects these requirements in the following: We have proposed a team of senior specialists in the field of classification and job evaluation. We believe the credentials that this team possesses cannot be matched by any of our competitors. We will apply proven methodologies and techniques in all- aspects of the project. These include already developed and tested research and data gathering instruments,. computer programs for managing and analyzing data, and the use of an established job evaluation methodology, the Declslon Band Method, a hlghly innovative method- ology to which Arthur Young has sole proprietary rights. Our prior experience has helped us to understand the complexities of such issues as "comparable worth." It has also helped us to develop the best approaches and techniques for dealing with the data which must be collected and analyzed to provide the desired results. We have cited several examples in Section 111, Firm Experience and Qualifications and we encourage you to contact the client references provided. In summary, we welcome the opportunity to submit this proposal and look forward to working with the City of Carlsbad on this important project. If you have any questions concerning our proposal, please contact Ys. Jill Morton at 238-1144. Very truly yours, .- TABLE OF CONTENTS _- Page I. STUDY APPROACH A. Background B. Key Factors Influencing our Approach C. Scope of Work D. Project Approach and Workplan I1 . PROJECT TEAM A. Organizational Issues B. Staffing 111. FIRM EXPERIENCE AND QUALIFICATIONS A. Our San Diego Office B. Areas of Relevant Management Consulting Capability C. Decision Band Method Experience D. Other Relevant Personnel Experience E. References IV. COST AND SCHEDULE A. Cost E. Schedule APPENDIX DBY Overview Job Evaluation Systems: The Search for a Better Approach 12 13 21 22 22 27 30 31 32 Automated Pay Planning System -- I. STUDY APPROACH 4 1. STUDY APPROACH A. Background and Objectives The City of Carlsbad is interested in retaining a qualified consulting firm to conduct a management classification and compensation study. The study will include 33 job classifi- cations, and a total of 45 individual positions. It has been approximately thirteen years since the manage- ment compensation plan was introduced at the City. Over the years interpretation of the plan has varied by department and individual position. The City would now like a comprehensive review of its management classification and compensation plan. The objectives of the study are to 1) determine if the classi- fication relationships within the management group are equit- . able, 2) to assess the competitiveness of salaries and benefits paid by the City to its management employees, and 3) provide procedures for the administration of the findings and recom- _. mendations resulting from the study. I B. Key Factors Influencing our Approach Our approach to this project is based on several key factors inc 1 ud in g : The basis for determining the value of a job must be directly related to that job. Further, the basis must be perceived as being fair by both employees and man- agers. In similar studies we have conducted using DBM, we have found that employees readily understand and accept the methodology. The system used must be flexible and responsive to changing needs. It should not require continuing outside assistance each time changes are needed. However, for those rare occasions when a question does arise assistance should be readily available. -1- Most evaluation methodologies, including point factors systems, are highly subjective Since they lack de- finitive criteria. Consequently, grading consistency is difficult, if not impossible. Our proposed method- ology, the Decision Band Method of job evaluation, uses decision making responsibility as the primary factor. Other criteria, including skill, education, working conditions, complexity and variety of tasks are taken into account, but to a lesser degree. The system must be effective for all jobs. Since decisions are made by all employees at all levels, it is the one factor that is universal. The system must be easy to implement and maintain. The system should provide for participation by em- ployees. The system must have built-in controls against manipula- tion. Because decision making responsibility is the primary factor considered, the system cannot be man- .. ipulated. The system must be well documented and provide protec- tion against discriminatory effects. Our proposed methodology most effectively fulfills the City's stated objectives and the requirements of the key considera- tions outlined above. C. Scope of Work From our discussions with you, we understand that the scope of the study is: To determine and document the goals of a performance based management compensation plan. To review and analyze the duties of 45 employees. To revise or create job descriptions, including appro- priate minimum and desirable qualifications. To evaluate the relative internal relationships of the different management jobs within the organization. -2- To obtain and provide accumte and verifiable compensa- tion and benefit iPfOrmatiOn to assist the City in determining the appropriate compensation levels for the posit ions being studied. To recommend compensation levels for each of the classifications identified To provide a methodolwp that can be used by the City in future years to conduct management compensation and c 1 ass i f i cat ion reviews . To involve appropriate City personnel In the development and implementation of the findings and recommendations. To provide a plan for Implementation of the study's results. E. Project Approach and Work Plan The foundation for I valid compensation study Is current job descriptions for the positions under study. Most firms will use a similar technical approach in conducting classifica- tion and compensation studies. However, the validity of the job description is essential if we are to make meaningful comparisons with positions in the designated survey organiza- tions. Accordingly, we do not believe that "off the shelf" job descriptions should be used. In addition, ne believe the ability to develop recommendations regarding such Issues as minimum qualif ications and promotional opportunities requires a comprehensive understanding of technical, managerial and administrative jobs. A sensitivity to the concerns of employ- ees and management regarding the study is equally important. We 8180 believe that the rationale for the pay plan we recom- mend must be understandable to employees, and we expect to explain 8nd show justification for our recommendations. Based on our discussion with you, we have developed a two- phased proposal that is fully responsive to the City's needs. The first phase would involve a review of the 45 positions included in the study. This process would include preparation -3- of generic job descriptions that Can be used for1 job ranking, salary survey comparison and doc-entlng the organizational rel8tlonuhips of each position. This phase will produce descriptfons for all management jobs and recommended int8rMl relationshSp8 between each Job. Phase I1 of the study is the sal8ry and benefit survey. The product of this phase will be recommended total compensation levels. The tasks identified in this section are required to fulfill all of the study objectives. PHASE I: JOB EVALUATION STUDY TASK 1 - Project Initiation and Administration On projects of this type, we work closely with client person- nel. Comprehensive review of the study plan and objectives, orientation in the Arthur Young approach to the project, and careful pre-planning are invaluable in developing a basis for successful and timely completion of the project. Some elements of this task, principally project administration, will continue through the course of the project. In this task, we will undertake the following steps: 1.1 Meet with Key Permonnel In initial meetings with City personnel, we will establish the basic lines of communication between the project team and the personnel designated to play a role in the project. The overall work plan will be reviewed to ensure a correct interpretation and agreement as to the approach to be followed throughout the project. A master schedule of progress status meetings rill be developed at this time. We will conduct group meetings with management employees to inform them of the workplan and the study objectives. 1.2 Complete Project Planning We rill complete a detailed outline of the work plan, -4- establish specific time tables and schedules, and assign consultants to specific tasks. 1.3 Collect and Review Existing Documentation We will collect data essential to evaluating the present salary schedules and classification plans. 1.4 Review City's Current Management Compensation Plan We will meet with the Personnel Director for dis- cussion regarding the City's current management compensation plan and the philosophy behind it in order to develop a complete understanding of that philosophy. This understanding will be the basis of our assessment of the credibility, practically, and currency of the plan. TASK 2 - Determine Goals for Management Compensation Plan The purpose of this task is to define and document the goals of the City's performance based management compensation system, . as viewed by the City Council and City Manager. This process requires the following tasks: 2.1 Meet with City Council and City Manager to discuss the goals and objectives of tbe management compensa- tion plan. 2.2 Make specific recommendations on these goals and objectives, based on experience with other organiza- tions. 2.3 Document findings regarding the goals of the plan, and review with the City Council and City Manager. TASK 3 - Conduct Job Analysis 3.1 Job Analysis This task is critical to the evaluation of the posi- tions included in this study. In conducting this task, our extensive experience in both government and personnel will enable us to efficiently and accurately develop job descriptions. To accomplish this task, we will distribute position questionnaires to the management employees to solicit information regarding: -5- . .. a. Organizational relationships - Title of their position. - Place of their position in the organizational structure of the City. - Supervisor-subordinate reporting relationships. - Channels of communication. - Coordination responsibilities with other positions. b. Duties, responsiblities and authoriites - Inventory of responsibilities and authorities. - Significant duties performed, whether on a - Supervisory responsibilities. - Administrative responsibilities. regular basis or at intervals. - Types of decisions required by the job. - Requirement for confidence and trust. c. Contact - Contact with clients, outside organizations, etc. - Contact within the City. d. Environmental conditions - Working conditions. - Hours of work. e. Requirements of the position - Educational skill and experience requirements - Other pertinent information. of the job. Throughout this job analysis stage, we will emphasize that our procedures are designed to obtain information that will allow analysis of the job, not the person occupying the Bosition. The completed questionnaires will be reviewed by both the immediate supervisor and the department manager for verification and comment. -6- Following a review of the completed questionnaires, interviews will be held with all management employees to help assure understanding of each job and to verify the validity of questionnaire responses. 3.2 Prepare Job Descriptions and Specifications Based on the information gathered in subtask 3.1, we will prepare job descriptions to reflect current job content. Employees will be asked to review and comment on the draft job description so that there is agreement, to the extent possible, regarding current duties and responsibilities. Although there will normally be some number of employees who will not sign off on the job descriptions, our experience has been that the vast majority will. This process facilitates employee acceptance of the study results since the job descriptions serve as the basis for the job evaluation (next task) and any subsequent compari- son study. 3.3 Evaluate Management Positions Using DBY In this subtask we will apply the principles and techniques of the Decision Band Method of job evalua- tion. Each job will be evaluated. The evaluation process will produce a value for each job, and it is this value that will be the beginning point for determining the appropriate internal relationships of the positions and the allocation of the positions to salary grades within the salary structure. This subtask will include training of the Personnel Dir- ector and up to two other staff members in the use of DBY so that the City will be capable of revising and maintaining the plan in the future. However, we will also be available to assist the City at any time should the need arise. Because DBM is a proprietary methodology, we will also issue the necessary license to the City. An overview of the Decision Band Method of job evaluation is included in Appendix A of this proposal. 3.4 Review Findings The Personnel Director will be asked to review and comment on the findings and preliminary recommenda- tions prior to finalization and submission of re- commendation to the City Council. 3.5 Prepare and Submit Report A draft report outlining our findings and recommenda- tions regarding position classification, internal -7- relationships, and implementation Will be prepared and submitted to the Personnel Director. Follow- ing his review, we will make any changes which are appropriate and then finalize the report. 3.6 Present Recommendations' This task includes briefing the City Management and City Council as appropriate on the outcome of the study. PHASE 11: COMPENSATION SURVEY TASK 1 - Identify Study Participants and Benchmark Positions The organizations to be used as participants in the compensa- tion survey will be determined by the City. We will identify organizations which we believe to be comparable in size, level of activity, functions and quality of management. However, the designation of an organization as a survey participant will - require approval by the Personnel Director. TASK 2 - Develop Survey Questionnaire We will develop the survey questionnaire format, including descriptions of positions and compensation and benefits questions, for review by the City. It is our practice to gather data based on job content rather than job title since organizations will normally have different organization struc- tures that result in jobs having different combinations of duties and levels of responsibility. TASK 3 - Conduct Survex We will contact up to 10 organizations indicated by the City to obtain the data needed to complete the questionnaire developed in the previous task. TASK 4 - Analyze Results We will analyze survey results and determine the competitive- ness of the City's compensation and benefits program relative to the insights we have gathered in respect tP the City's management compensation philosophy (Phase I, Task 1.5). To accomplish this task, we will use our Automated Pay Planning Syetea (APPS). APPS is a microcomputer based system which enables us to develop compensation schedules and to determine the cost of Implementing compensation recommendations. An overview of APPS is provided in Appendix B of this proposal. A copy of the APPS software will also be provided to the City for future use. TASK 5 - Report to Participants While some organizations may be reluctant to share data, it is our experience that they are more willing to do so if they receive something in return. Therefore, with the City's approval, the participants will be fbnished a completed survey report TASK 6 - EV8lUatiOn Positions Not Included in Survey In this task, we will use the relationships identified in Phase I of the project in determining pay levels for any positions not included in the survey. The process requires the follwlng main steps: 6.1 Align benchark jobs by level of pay indicated from survey data. 6.2 Align nonsurveyed jobs to reflect the appropriate i n t e r na 1 re la t ion& ips. 6.3 EV81Uate relative pay acros8 the organization and recommend adjustments in relative pay levels, if neceesary, based upon the City's current pay plan, the understanding we have gained of relative job complexity and responeibility and the underatanding we have gained of the marketplace pricing of jobs. 6.4 Present and discuss evaluation results with the Personnel Director. At this stage in the project, the alignment of jobs will not include assignment to specific pay grades, steps or dollar amounts. Rather, we will - -. -9- TASK 7 - In this present rough estimates of necessary pay movements to the City. These estimates rill be refined in the next project task. Porition Assignment to the Proposed Management Compen- sation Pay Plan task, we will develop recommendations assigning all positions studied to the proposed pay plan. From prior task work we will have: 0 Analyzed positions, resulting in validated position desc r ip t ions e Surveyed pay and benefit practices, resulting in competitive pay rate determination for benchmark jobs (jobs comparable to those in the survey population) 0 Evaluated positions, resulting in an internal ranking of all positions (including benchmark and nonbench- mark jobs). We will merge the job evaluation results with the survey results statistically to determine the best fit of internal and external management compensation considerations. Because our study addresses total compensation, our recommendations will also address employee benefits including insurance, leaves and other significant benefits to the extent that market data is ava i 1 ab1 e. TASK 8 - Prepare and Submit Final Report A draft final report outlining our findings and recommendations regarding management compensation and benefit levels, along with procedures for implementing these recommendations will be prepared and submitted to the Personnel Director. Follow- ing his review, we rill make any changes which are appropriate and then finalize the report. TASK 9 Present Recommendations This task includes briefing the City Management and City * 10 - Council as appropriate on the outcome of the study to explain the final recommendations Of the study and to respond to any qU88tiOB8 Which my arise. f - 11 - -- I- IV. COST AND SCHEDULE This section describes the proposed costs and our anticipated project schedule. This proposal will be valid for sixty days. A. Cost - Quality deliverables do not result from "low-budget, cut- corner" approaches; nor do they result from assigning in- experienced or underskilled consultants to do complex and sophisticated technical work. As can be seen from our tech- nical proposal, we have developed a comprehensive, rigorous work plan, which will be carried out by senior personnel. We estimate that our assistance on this project will require. 285 hours of consultant time. Based on the estimated hours, our fees for this assistance will be $15,400 plus an additional $1,450 to cover out-of-pocket expenses. Our fees are based on the hours of consulting assistance provided times the applicable hourly billy rates of the consultants providing the assistance. If we are able to complete the work In fewer hours, you will be billed only for the actual time expended. If we are asked to perform additional work beyond that de- scribed under Project Methodology, we would advise you of additional fees for such work before proceeding. In no case will you be billed for more than $16,850 unless you approve an expansion of the scope of work. As is our standard practice, we will bill you monthly for actual fees and expenses incurred to date. B. Schedule We are prepared to commence work on this study within ten days of receiving authorization to proceed. Re estjmate that the project will take -between six and eight weeks to complete. Subject to the availability of data and tjmely access to City personnel, and a start date of no later than September 1, 1984, we are prepared to complete the study and deliver final products according to the schedule set forth in the RFP. - 32 -