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HomeMy WebLinkAbout07/02/1996, C-7 - PAY FOR PERFORMANCE PLAN council X7.2 -q(V agenda REpoRt CITY OF SAN LUIS O B I S P O FROM: Ann Slate, Personnel Director�' SUBJECT: PAY FOR PERFORMANCE PLAN CAO RECOMMENDATION Adopt a resolution approving the City's management compensation plan which includes a pay for performance program. DISCUSSION The City Council directed staff in 1995 "to develop a longer range comprehensive management compensation plan to be used in establishing managerial compensation in the future for the appointed officials and the department heads." Soon thereafter, in negotiations with the Mid-Management Employees' Association last December, the City and the employees agreed to explore the possibility of merging all management employees (excluding public safety managers) into one unrepresented group and developing a pay for performance plan that would govern salary adjustments. In Closed Session,on June 4, 1996, staff reviewed with the City Council a proposed pay for performance plan and a comprehensive program for management compensation that was conceptually approved. The Council requested that the plan be returned to a regular meeting for formal approval. Attached is the proposed Management Pay for Performance System. The program sets up a process for annually reviewing management salary ranges. Mid-Management salary ranges were adjusted in January of 1996 with an across the board increase of 3.5%. Appointed official and department head salary ranges were the subject of a consultant study earlier this year. In closed session in April this year, the City Council reviewed the findings of the study which looked at local labor market data as well as comparable cities' compensation and determined that a 3.2% increase to salary ranges was appropriate. While ranges were adjusted, that increase did not result in any actual increases to department head salaries since they are only eligible for salary increases based upon performance. Upon Council approval of the proposed pay for performance plan, staff will be authorized to conduct performance evaluations to determine appropriate salary increases effective April 4, 1996 for department heads and July 11, 1996 for mid-management employees. (Tbe Appointed Officials, the City Administrative Officer and the City Attorney, received salary increases in April.) This program presents a number of benefits to the City organization. The program will: 1. Provide for salary increases that are based solely on merit and performance and consistent with other City compensation programs; 2. Ensure that Council goals are fully integrated into managers' objectives from the CAO through Department heads to key management staff; f�-7 Council Agenda Report - Management Compensation Program Page 2 3. Enable management employees' performance to be measured similarly and consistently throughout the City organization; 4. Encourage and reward extraordinary performance while providing for no salary increases (or termination) for marginal or unacceptable performance 5. Strengthen the recruitment and retention of well-qualified and effective management employees; Staff is recommending that the Management Pay for Performance System be approved for a two year period. At the end of two years, in April of 1998, the Council will be presented with a comprehensive analysis of the program, with recommendations as to its continuation, modification or elimination. Besides the benefits listed above, staff views the Management Pay for Performance System as a significant step in building a more cohesive and professional management structure leading to a more effective and productive organization. CONCURRENCES The Mid-Management Employee Association has participated in the development of the proposed program and upon its adoption, agrees to disband their association, becoming part of the unrepresented management group that will be eligible to participate in the Management Pay for Performance System FISCAL IMPACT The Pay for Performance System does not determine increases in salary ranges. Rather, it will determine the rate at which employees will move through already established ranges. If, for example, of the 62 employees eligible for this program, 50% "meet expectations", 35% "exceed expectations" and 15% are judged to be "outstanding", a resulting 3.7% average salary movement through the range per year can be expected. This provides for less movement than the traditional salary step system. ALTERNATIVES Reiect the plan and direct staff to return with a new proposal This is problematic in that the plan proposed follows the criteria approved by the Council and the Association in the Memorandum of Agreement. To reduce further the percentages available through the plan would eliminate the appropriate distinctions between performance and some of the incentives to excel that are necessary for a pay for performance plan to be effective. Since the plan provides for salary increases that are in many cases lower than those available to non-management employees, it becomes more difficult to craft a new program that would provide for even less than what is proposed. To maintain the integrity of the City's compensation practices, equity among employee groups is important. ATTACIEIENTS Management Pay for Performance System Resolution 72 CITY OF SAN LUIS OBISPO MANAGEMENT PAY FOR PERFORMANCE SYSTEM PURPOSE Maintain management pay that is externally competitive and internally equitable and that rewards management employees based on their performance. OBJECTIVES • Compensate management employees solely according to their accomplishment of objectives and their job-related behavior • Attract and retain well-qualified management employees o Encourage consistent and objective evaluation and compensation of management employees • Keep procedures simple and understandable • Allow management employees to progress through their salary ranges • Maintain management pay ranges according to differences in duties, responsibilities, and job requirements APPLICABILITY This system shall apply to all management employees, which shall include appointed officials, department heads, and other managers. A listing of classifications covered is attached. ANNUAL PERFORMANCE EVALUATIONS Schedule A management employee must receive an annual performance evaluation in order to receive pay for performance. Annual performance evaluations for management employees shall take place in the following months: Appointed Officials: March Department Heads: April Other Managers: May Content Annual performance evaluations shall include review of the current yea's performance plan, completion of the current year's performance evaluation form, and preparation of the next year's performance plan. Rating Procedure Half of an employee's overall performance rating shall be based on five to eight job-related behaviors. All of the following five behaviors must be rated: 1 C-77-3 • Initiative: identifying problems and finding opportunities for innovative solutions • Customer Service: responding to the needs of external and internal customers; continually increasing the value of services delivered • Job Knowledge: demonstrating expertise; keeping skills current through professional development • Teamwork: communicating and collaborating well with others to solve problems and accomplish tasks • Stewardship: promoting the public trust by using city resources wisely, communicating honestly, and being accountable. And at least one and up to three of the following four behaviors must be rated: • Organization Development: improving organization responsiveness and productivity • Human Resources Management: encouraging excellent performance from employees • Leadership: defining and communicating overall issues and priorities for the organization The remaining half of an employee's overall performance rating shall be based on accomplishment of five to eight management objectives. These objectives shall be directly related to Council goals, program objectives, and personal objectives. Changing circumstances may require periodically adding, deleting, or altering the management objectives listed in an employee's performance plan. Rating Definitions On the performance evaluation each job-related behavior or management objective shall receive an individual performance rating based on the following scale: Unacceptable: Performance consistently fails to meet minimum requirements and expectations. Needs Improvement: Performance is inconsistent, only sometimes or partially meeting expectations. Sustained improvement is needed to fully meet expectations. Meets Expectations: Performance fully meets expectations, with only a normal amount of supervision or direction necessary. Performance reflects competent skills and a good attitude. Exceeds Expectations: Performance consistently exceeds expectations, with higher quality, more innovation, and less supervision or direction than typically required. Specific examples document this above- average achievement. 2 C�7� Outstanding: Performance is clearly superior. While specific examples document this superiority, achievement is usually self-evident to others because this level of performance is extraordinary. An example of the Management Employee Annual Performance Plan and the Management Employee Annual Evaluation for department heads and other managers is attached. ANNUAL SALARY INCREASES FOR PERFORMANCE Increases Available Each year an employee may receive a salary increase from two to seven percent based on the recommendation of the employee's evaluator. The recommended increase shall acknowledge the employee's overall performance during the preceding twelve months and shall correspond to the employee's overall annual performance evaluation as follows: Overall Rating: Salary Increase Available: Unacceptable None -- employee subject to termination* Needs Improvement None — employee subject to probation* Meets Expectations Two percent or three percent Exceeds Expectations Four percent or five percent Outstanding Six percent or seven percent *in accordance with the Personnel Rules and Regulations Schedule Salary increases for the three classes of management employees shall take effect with the first pay period in the months listed below: Appointed Officials: April Department Heads: April Other Managers: July Salary increases for management employees who are not appointed officials or department heads shall be reviewed and approved by the department head, the personnel director, and the city administrative officer. Lump Sum Payments in Lieu of Salary Increases An employee at the top of the salary range who receives an overall rating of "exceeds expectations" or "outstanding" shall receive a lump sum payment not to exceed $1,500. This payment shall be made in lieu of a salary increase in order to prevent the salary from exceeding the top of the salary range. This payment shall be calculated by multiplying the employee's existing annual salary times the percentage increase recommended. 3 Example: An employee's existing salary is $4,000 per month -- at the top of the salary range. The evaluator recommends a four percent salary increase based on an overall rating of "exceeds expectations". This increase is convened to a lump sum payment of$1,500 ($4,000 existing monthly salary X 12 months X .04 recommended increase = $1,920, which reverts to the $1,500 maximum payment allowable). An employee near the top of the salary range who receives an overall rating of "exceeds expectations" or "outstanding" shall receive a combination salary increase and lump sum payment not to exceed $1,500 in order to prevent the salary from exceeding the top of the salary range. Example: An employee's existing salary is $3,922 per month — two percent below the top of the salary range, which is $4,000. The evaluator recommends a four percent salary increase based on an overall raring of "exceeds expectations". A portion of the recommended adjustment increases the employee's monthly salary by two percent to the top of the salary range. The remaining two percent salary increase is converted to a lump sum payment of$958 ($3,922 existing monthly salary X 12 months X .02 remaining recommended increase). SALARY RANGE ADJUSTMENTS Each year in November, the City Council shall review management salary ranges and shall adjust them as necessary to keep them competitive and maintain distinctions in compensation levels between management employees and represented employees. Factors to be considered in adjusting salary ranges will include local labor market data, compensation in comparable cities, recent wage settlements for represented City employees, and statewide cost-of-living indices. A salary range adjustment shall become effective on January 1 following the November review. A salary range adjustment shall not affect individual salaries, which can only be adjusted based on other provisions of this pay for performance system. ANNUAL PAY FOR PERFORMANCE SYSTEM MMESTONES March The City Council evaluates appointed officials and recommends pay adjustments. April Pay adjustments for appointed officials take effect with the fust full pay period. The city administrative officer evaluates department heads and recommends pay adjustments. Pay adjustments for department heads take effect with the first full pay period. May Department heads and other supervisors evaluate other managers and recommend pay adjustments. 4 C 7-�0 June The personnel director and the city administrative officer review pay adjustments and performance plans for other managers to ensure consistency from employee to employee and department to department. July Pay adjustments for other managers take effect with the first full pay period. November The City Council reviews management salary ranges. January Any approved salary range adjustments take effect. 5 e 7- 7 RESOLUTION NO. (1996 Series) A RESOLUTION OF THE CITY COUNCIL OF SAN LUIS OBISPO ESTABLISHING A MANAGEMENT COMPENSATION PLAN FOR APPOINTED OFFICIALS, DEPARTMENT HEADS AND OTHER MANAGEMENT PERSONNEL AND SUPERSEDING PREVIOUS RESOLUTIONS IN CONFLICT WHEREAS, the City Council is committed to a comprehensive policy that strengthens the recruitment and retention of well qualified and effective appointed officials and management personnel; and WHEREAS, the Council is committed to a compensation plan which reflects the differences between duties, responsibilities and job requirements; and WHEREAS, the Council determines that merit and performance shall be the sole basis for Appointed Official and Management compensation; and WHEREAS, consistent with Section 701 of the City Charter, the City Council is the appointing authority for the City Administrative Officer and the City Attorney (Appointed Officials), and the City Administrative Officer is the Appointing Authority for Department Heads; and WHEREAS, consistent with Section 2.36.090 "A" of the Personnel Rules and Regulations, department heads and division heads are the Appointing Authority for certain management positions: and WHEREAS, the appointing authority is responsible for the selection, evaluation and the level of compensation for the appointed employee; and WHEREAS, the Mid-Management Employees' Association agrees to join the Appointed Officials and department heads in an unrepresented management group; and WHEREAS, the Council believes that all management employees' performance should be measured and rewarded in a consistent and equitable manner. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Luis Obispo hereby adopts a Management Compensation Plan as follows: SECTION 1. A salary schedule for Appointed Officials, Department Heads and other Management Employees shall be established. Resolution No. (1996 Series) Page 2 APPOINTED OFFICIALS AND MANAGEMENT SALARY SCHEDULE GROUP MANAGEMENT POSITION SALARY RANGE I City Administrative Officer $6841-8872 II City Attorney $5930-7678 ID Assistant City Administrative Officer $5582-7197 Community Development Director Fmmee Director Fire Chief Police Chief Public Works Director Utilities Director IV City Engineer $4992-6414 Parks and Recreation Director Personnel Director V City Clerk $3996-5195 VI Assistant City Attorney $3916-5156 Development Review Manager Long Range Planning Manager Public Works Manager Wastewater Division Manager Water Division Manager VII Chief Building Official $3592-4938 Economic Development Manager Fut Marshall Natural Resources Manager Principal Transportation Planner Supervising Civil Engineer Utilities Engineer VIII, Accounting Manager $3299-6622 Assistant to the CAO Information Systems Manager Parking Manager Police Support Services Manager Revenue Manager Risk Manager Transit Manager Wastewater Treatment Plant Supervisor Water Treatment Plant Supervisor DC Administrative Analyst $3068-6359 Fire Protection Specialist GIS Coordinator Industrial Waste Coordinator Neighborhood Services Manager Personnel Analyst Principal Recreation Supervisor Supervising Mechanic Wastewater Collection Supervisor Wastewater Reclamation Coordinator(contract) Water Distribution Supervisor Water Supply Supervisor iC -7 Resolution No. (1996 Series) Page 3 x Accounting Supervisor Arborist $2837-4023 Building Maintenance Supervisor • Communications Supervisor Customer Services Supervisor Golf Course Supervisor Packs Supervisor Police Records Supervisor Recreation Supervisor Streets Supervisor Water Conservation Coordinator Annually, in November, the Council may adjust the salary ranges to keep pace with the market place which is defined by local labor market factors (public and private sector employers) and external comparisons with comparable California cities. SECTION 2. The Appointing Authority, or City Administrative Officer shall determine compensation within the designated range, after evaluating performance in accordance with the Management Pay for Performance System. SECTION 3. The City shall continue to provide employees in those classifications listed in Section 1 certain fringe benefits as set forth in Resolution No. 8412 (1995 Series) and Resolution No. 8476 (1996 Series). SECTION 4. The Director of Finance is authorized to adjust the operating budget as appropriate in accordance with these provisions. Upon motion of seconded by on the following roll Call vote: and AYES: NOES: ABSENT: the foregoing resolution was adopted this day of 1996. ATTEST: City Clerk Mayor (Mayor's Name) APPROVED AS TO FORM: Jeffrey Lry. Jorgensen