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Is Public Power Compensation Competitive?
June 22, 2004Presented by:John HankersonPractice Leader, Strategic Rewards206/[email protected]
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The AnswerThe Answer
Not really...Not really...
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How Do We Know?How Do We Know?
Identify labor marketsIdentify labor markets– Recruit labor talentRecruit labor talent– Lose labor talentLose labor talent
Identify level of talent needsIdentify level of talent needsCollect compensation dataCollect compensation dataAssess gaps between target Assess gaps between target
competitive level and current competitive level and current practicepractice
Balance talent needs, affordability Balance talent needs, affordability and competitivenessand competitiveness
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Base PayBase PayBase pay is not competitive...Base pay is not competitive...
Public Power $5-$50M Base Pay
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 $90,000 $95,000
Job Size
Bas
e P
ay
Public Power Coop/IOU Avg
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Base Pay Base Pay (continued)(continued)
Base pay compared to published industry data Base pay compared to published industry data is even less competitiveis even less competitive
Public Power >$50M Base Pay
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$50,000 $70,000 $90,000 $110,000 $130,000 $150,000 $170,000
Mkt Avg APPA
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Public Power TCC
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$50,000 $100,000 $150,000 $200,000 $250,000 $300,000
Job Size
To
tal C
ash
Public Power TCC Mkt Avg TCC
Total Cash CompensationTotal Cash Compensation
Total cash compensation is NOT competitive...Total cash compensation is NOT competitive...
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Medical BenefitsMedical Benefits
Medical benefits are competitive...Medical benefits are competitive...
$5,374
$5,743
$5,560
$6,198
$5,642
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000
25th %
50th%
Avg
75th%
Non-public Pow er
Value
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Dental BenefitsDental Benefits
Dental benefits are competitive...Dental benefits are competitive...
$1,008
$1,252
$1,225
$1,381
$1,252
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
25th %
50th%
Avg
75th%
Non-public Pow er
Value
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RetirementRetirement
Retirement benefits are competitive... Retirement benefits are competitive...
11.6%
13.4%
13.2%
14.0%
13.2%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
25th%
50th%
Avg
75th%
Non-public Pow er
Value (% of pay)
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Life InsuranceLife Insurance
Life insurance benefits are not competitive...Life insurance benefits are not competitive...
0.76%
1.26%
1.25%
1.51%
0.74%
0.00% 0.50% 1.00% 1.50%
25th%
50th%
Avg
75th%
Non-public Pow er
Value (% of pay)
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Long-Term DisabilityLong-Term Disability
Long-term disability benefits are competitive...Long-term disability benefits are competitive...
0.02%
0.18%
0.13%
0.19%
0.13%
0.00% 0.05% 0.10% 0.15% 0.20% 0.25%
25th%
50th%
Avg
75th%
Non-public Pow er
Value (% of pay)
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Retiree MedicalRetiree Medical
Retiree medical benefits are competitive...Retiree medical benefits are competitive...– Not common in public utilitiesNot common in public utilities– Not common in private utilitiesNot common in private utilities
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Total RemunerationTotal Remuneration
$80,000
$0
$5,560$1,225
$10,560
$1,000$104
$89,741
$1,000
$5,642
$1,252
$11,837
$663
$117
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Public Power Non-public Utilities
Base Incentive Medical Dental Retirement LTD Life Insurance
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ConclusionsConclusions
Opportunity to improve cash Opportunity to improve cash compensationcompensation– Base pay and/orBase pay and/or– Incentive/variable compensationIncentive/variable compensation
Benefit programs in general are Benefit programs in general are similar and changes will not similar and changes will not create significant leverage in create significant leverage in attracting labor talentattracting labor talent
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Option: Increase Base PayOption: Increase Base Pay
ProsPros Immediate Immediate
competitive competitive improvementimprovement
Attractive in this Attractive in this environmentenvironment
Easier to Easier to manage in terms manage in terms of perceptionsof perceptions
ConsCons Increased fixed Increased fixed
costscosts Higher costs do Higher costs do
not translate into not translate into performance performance gainsgains
Public Public perceptionperception
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Option: Adopt Incentive PayOption: Adopt Incentive Pay
ProsPros No increase to No increase to
fixed costsfixed costs Consistent with Consistent with
market trendsmarket trends Performance Performance
focusfocus Potential for Potential for
improved improved performanceperformance
ConsCons Cultural changeCultural change Requires Requires
managers to managers to manage manage performanceperformance
Mistrust of Mistrust of employeesemployees
Skeptical Skeptical stakeholdersstakeholders
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Variable Pay ModelVariable Pay Model
Individual
Organization
Beh
avioral/A
bilities
Op
erat
ion
al/F
inan
cial
What to pay for?What to pay for?
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Variable Pay ConceptVariable Pay ConceptTied to organizational resultsTied to organizational resultsAffected by individual performanceAffected by individual performance
Example planExample plan
Income (orExpenses)
Min Target MaxMin 0% 5% 10%
Target 5% 10% 13%
Reve
nue
s (o
rP
rod
uct
ivity
)
Max 10% 13% 16%
Exceptional performance = 1.25Competent performance = 1.0Developing performance = 0.5
