HomeMy WebLinkAbout11/06/2001, C20 - MANAGEMENT COMPENSATION council °°°°�
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CITY OF SAN LUIS O B I S P O
FROM: Ann Slate,Director of Human Resource
SUBJECT: MANAGEMENT COMPENSATION
CAO RECONEUENDATION
Adopt a resolution revising the Management Pay for Performance System
DISCUSSION
In January of 2000,the City Council approved a two-year management pay for performance program.
It is now time for Council to reconsider the program and direct staff to establish a system for the
future.
Staff is recommending:
(1) The management pay for performance system be renewed for a one year tern and the lump
sum payments for employees at the top of the salary range be changed to a percentage amount
that would otherwise be earned through the performance review;
(2) Management employees, department heads and appointed officials receive a cost of living
adjustment of 4.75%effective the first full pay period in January,2002;
(3) A 360 degree feedback system be developed that would provide meaningful added input to
employees about their performance;
(4) The unrepresented management employees be allowed to participate in any retirement
enhancements that may be agreed to by the City and the San Luis Obispo City Employees'
Association(SLOCEA)during 2002.
Pay for.Performance Plan
The pay for performance plan as originally designed in 1996 requires staff to conduct performance
evaluations to determine appropriate annual salary increases effective in April for department
heads and appointed officials and July for other management employees. Annual salary increases
in the form of cost of living adjustments was added and became a part of the pay plan in 2000.
This program was designed to provide a number of benefits to the City organization. The program:
1. Provided for salary increases that are based on merit and performance and consistent with
other City compensation practices;
2. Ensured that Council goals are fully integrated into managers' objectives from the CAO
through Department heads to key management staff;
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Council Agenda Report—Management Compensation
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3. Enabled management employees' performance to be measured similarly and consistently
throughout the City organization;
4. Encouraged and rewarded extraordinary performance;
5. Strengthened the recruitment and retention of well-qualified and effective management
employees.
The Management Pay for Performance System has been in place for six years. Both department
heads and managers are satisfied with the process; but staff is recommending a change that will
recognize and reward strong performance similarly for all management employees regardless of
where they might be in the salary range.
Lump Sum Payment in lieu of Salary Increase
Currently, the pay for performance system provides for a lump sum payment in lieu of pay for
performance for those at the top of the range. An employee at the top of the salary range who
receives an overall rating of"exceeds expectations"or"outstanding"receives a lump sum payment
not to exceed$2,000.
Council adopted modifications to the pay for performance system in 2000 to ensure that employees
could reach top of the range. At this point, 62% of the management employees are at the top of
their salary range. Regardless of their level of performance they are only eligible to earn the $2000
lump sum This equates to a percentage amount that is lower than the employee's performance
would merit if the employee were not at the top of the range.
The fundamental principle underlying "pay for performance" systems is that links between
compensation and performance are important to motivating and sustaining high performance
levels. With 62% of the management employees at the top of their salary ranges, the majority of
them are receiving performance pay that is significantly lower than other managers who are still
progressing through the range. It has created a sense of inequity and undermines the goals of
motivating and sustaining high performance.
Expanding the lump sum to be the percentage amount an employee at the top of their range is
eligible to receive based on their performance will promote the pay for performance concept of
distinguishing performance at all levels of management. It will enable the City to recognize and
reward top performers regardless of where they fall in their salary range.
Cost of Living_Increase
A cost of living adjustment for managers, department heads and appointed officials of 4.75%,
effective the first full pay period of January, 2002, is being recommended. This is in line with
what other City employee groups have received. The one-year term makes sense by limiting salary
increases to a shorter term in the face of economic uncertainty. In this way, managers can receive
similar raises to other city employees without having the City commit to a longer term liability
should the economic conditions become drastically worse.
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Council Agenda Report—Management Compensation
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360-Degree Feedback System
The development of a 360-degree feedback system is also being proposed. Benefits of such a
system to the City include a closer alignment'between organizational values and job performance,
enhanced performance, and improved communication between all levels of the organization.
Benefits to the employees include giving and receiving meaningful feedback, strengthening work
teams, heightened self-awareness, clarifying performance expectations and professional
development that enhances one's contribution to the organization.
Currently employees receive formal feedback from basically one source heir supervisor. A.360-
degree program would enable an employee to receive feedback about their performance from
others in the organization who are "above and below" them as well as from their peers. By
receiving broader feedback, an employee with his supervisor can design a professional
development plan that should make them more successful and satisfy their various"customers."
A committee will be charged with developing a model system that will be reviewed with the
employees whose input will go into the final design. Because of the extreme importance of
employee/stakeholder involvement in the development phase for the program to ultimately
succeed, staff has not placed many parameters on how the program should work, except that
feedback should be meaningful, given and received safely, and not be linked to pay for
performance. The system should not be viewed as punitive but rather as a resource for employees
to strengthen their performance and guide them in establishing professional development goals.
Retirement Enhancements
Earlier this month, the Governor signed AB616, which provided local agencies the prerogative to
negotiate new and improved retirement formulas for miscellaneous employees. Costs of the improved
retirement benefits are unknown at this time. However, the General employees, who expressed an
interest in AB616 more than 10 months prior to its passage,have a reopener in their current MOA that
requires the City to meet and confer with them about the new formulas.
Because amendments to the miscellaneous PERS contract that would implement new retirement
formulas require all miscellaneous employees to participate,the management employees are willing to
pay fora new formula if the City and SLOCEA reach an agreement. Until we know the costs of the
new formulas, no agreement can be reached about changes to the retirement plans. If the costs for
improved retirement formulas are"affordable"and employees are willing to.absorb those costs in the
short term and come up with a reasonable cost sharing strategy for the long term, the City Council
may be asked to consider implementing a new retirement formula for the miscellaneous employees.
Fiscal Impact
Total compensation for the management group is $6,100,000. The cost of the program as outlined
above is approximately $319,000 or 5.22%of total compensation for one year. Funding for this has
been set aside and is available as part of the current two-year financial plan.
ATTACHMENTS: Resolution
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RESOLUTION NO. (2001 Series)
A RESOLUTION OF THE CITY COUNCIL OF SAN LUIS OBISPO REVISING
THE MANAGEMENT PAY FOR PERFORMANCE SYSTEM 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, in 1996 the City Council established the Management Pay for Performance
System for a two year period,revised it in 1998 and again in 2000 for another two year period; and
WHEREAS, that system provides that the City Council biannually reviews the system;
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 basis for
Appointed Official and Management compensation;
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Luis
Obispo hereby revises the Management Pay for Performance System as follows:
SECTION 1. The Management Pay for Performance System will be renewed for another
one year term, and revised to provide for lump sum payments in a percentage amount based upon
performance for employees at the top of the salary range.
SECTION 2. The cost of living adjustments will be applied across the board and will be
4.75%of salary effective the first full pay period in January,2002 as shown in Exhibit "A".
SECTION 3. 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 on a scale of 1-6%.
SECTION 4. If during 2002 the San Luis Obispo City Employees' Association and the
City agree to amend the PERS miscellaneous contract to provide the 3% at 60 or another formula.
that has become available through A13616, management employees will participate as required by
PERS. Any cost of participation will be cost neutral to the City and borne by the management
employees through payroll deduction.
SECTION 5. The City shall continue to provide employees in those classifications listed
in Exhibit "A" certain fringe benefits as set forth in Resolution No. 8412 (1995 Series) and
Resolution No. 8476 (1996 Series)..
SECTION 6. The Director of Finance shall adjust the appropriate accounts to reflect the
compensation changes. -
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Resolution No. (2001 Series)
Upon motion of seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of ,
2001.
ATTEST:
City Clerk Lee Price,CMC Mayor Allen Settle
APPROVED AS TO FORM:
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G:Agenda reports-MGMTRES02001
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APPOINTED OFFICIALS AND MANAGEMENT SALARY SCHEDULE EXHIBIT A
Effective January 2,2002
SALARY RANGE
SALARY GROUP CLASSIFICATIONS Bottom Top
I City Administrative Officer 9,681 12,104
11 City Attorney 8,842 11,055
III Assistant City Administrative Officer 7,482 9,352
Police Chief
Public Works Director
IV Community Development Director 7,133 8,916
Finance Director
Fire Chief
Utilities Director
V Director of Human Resources 6,755 8,445
Parks and Recreation Director
VI Deputy Public Works Director-City Engineer 6,210 7,762
VII Assistant City Attorney 5,914 7,392
City Clerk
Deputy CDD-Development Review
Deputy CDD-Long Range Planning
Deputy Public Works Director
VIII Economic Development Manager 5,297 6,621
Natural Resources Manager
Wastewater Division Manager
Water Division Manager
IX Accounting Manager 5,074 6,342
Chief Building Official
Fire Marshall
Information Systems Manager
Revenue Manager
Supervising Civil Engineer
X Assistant to the CAO 4,749 5,936
Parking Manager
Principal Transportation Planner
Recreation Manager 11
Risk Manager
Transit Manager
Wastewater Treatment Plant Supervisor
Water Treatment Plant Supervisor
Utilities Engineer
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XI Administrative Analyst 4,479 5,598
Communication Manager
Fire Protection Specialist
GIS Manager
Human Resources Analyst
Industrial Waste Coordinator
Neighborhood Services Manager
Public Safety Information Systems Coordinator
Recreation Manager I
Utilities Conservation Coordinator
Wastewater Collection Supervisor
Water Distribution Supervisor
Water Supply Supervisor
XII Accounting Supervisor 4,133 5,166
Arborist
Building Maintenance Supervisor
Customer Services Supervisor
Golf Course Supervisor
Parks Supervisor
Police Records Supervisor
Recreation Supervisor
Streets Supervisor
Supervising Mechanic
G:MgiCompA08Management Salary Schedule
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