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HomeMy WebLinkAbout11/06/2001, C20 - MANAGEMENT COMPENSATION council °°°°� ac Enaa REpoat c z O 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; cao- � 1 Council Agenda Report—Management Compensation Page 2 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. G aD�d �1 Council Agenda Report—Management Compensation Page 3 360-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 c,an-3 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. - caD - !� 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: ti i ttor eyrJor en G:Agenda reports-MGMTRES02001 cao- �� 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 CaD-�w 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 I cao- 7