Published on Wednesday, Oct 31, 2007
The corporate world is witnessing a surge of flatter organisational structures. Traditionally large and hierarchical organisations are moving away from their inherent rigidity and are seeking to flatten themselves. The multi-tier pyramidal framework gives way to a more horizontal set up by eliminating the myriad management levels.
Consequently, a flexible compensation concept called ’Broadbanding’ has also come into vogue. This salary structure strategy takes the flat organisation model a step further by consolidating a large number of pay grades into fewer ‘broadbands’. Therefore, there is a wider salary range for each band or level.
For instance, if an organisation earlier had a graded pay structure with 50 narrow ranges, now they are clubbed together into say, 10 broad ones.
For such broadband classifications, diverse jobs with similar responsibilities, accountability, knowledge and skill requirements are grouped together after a thorough job analysis.
The bands of job families carry generic job titles describing the general body of work, and not pertain to the specific duties of all the jobs included under a classification.
By reducing the job taxonomy into fewer categories with a broader scope, there are less chances of overlap with other pay ranges.
Consequently, a flexible compensation concept called ’Broadbanding’ has also come into vogue. This salary structure strategy takes the flat organisation model a step further by consolidating a large number of pay grades into fewer ‘broadbands’. Therefore, there is a wider salary range for each band or level.
For instance, if an organisation earlier had a graded pay structure with 50 narrow ranges, now they are clubbed together into say, 10 broad ones.
For such broadband classifications, diverse jobs with similar responsibilities, accountability, knowledge and skill requirements are grouped together after a thorough job analysis.
The bands of job families carry generic job titles describing the general body of work, and not pertain to the specific duties of all the jobs included under a classification.
By reducing the job taxonomy into fewer categories with a broader scope, there are less chances of overlap with other pay ranges.
Development-‘wise’
Broadbanding brings into play a performance-based salary structure wherein compensation is based on job complexity, responsibilities and skills. This approach values the role of employees and lays emphasis on skill enhancement to perform the job successfully.
Employees are paid on the basis of the skills they develop rather than just the individual work they perform. Management rewards employees for substantial capability improvement with salary increases, thus encouraging them to broaden their skills and abilities
By focussing on performance and rewarding employees for their competencies, the accent shifts to individual career growth as opposed to mere promotional advancement.
Broadbanding brings into play a performance-based salary structure wherein compensation is based on job complexity, responsibilities and skills. This approach values the role of employees and lays emphasis on skill enhancement to perform the job successfully.
Employees are paid on the basis of the skills they develop rather than just the individual work they perform. Management rewards employees for substantial capability improvement with salary increases, thus encouraging them to broaden their skills and abilities
By focussing on performance and rewarding employees for their competencies, the accent shifts to individual career growth as opposed to mere promotional advancement.
Employee-‘wise’
The grouping of numerous jobs in a single salary range with large mid-point differentials creates more income opportunities for employees. Managers get the latitude to determine pay raises within salary bands with or without the ‘vital’ promotion.
Whilst employees get pay raises even while moving within the same salary band, there is still scope for staggered promotions. But the advancement criteria are based on attainment of a broad set of skills.
The grouping of numerous jobs in a single salary range with large mid-point differentials creates more income opportunities for employees. Managers get the latitude to determine pay raises within salary bands with or without the ‘vital’ promotion.
Whilst employees get pay raises even while moving within the same salary band, there is still scope for staggered promotions. But the advancement criteria are based on attainment of a broad set of skills.
Employer-‘wise’
Broadbanding is a panacea for companies as it simplifies the compensation structure and facilitates organisational flexibility. Managers can make compensation decisions faster and better administer team rewards.
Not only does the streamlined mechanism result in lower salary administrative costs, but management can also control the salary growth of individual employees. Then again, employers can cash in on the benefits of flexibility in fixing salary levels for new hires.
Broadbanding is a panacea for companies as it simplifies the compensation structure and facilitates organisational flexibility. Managers can make compensation decisions faster and better administer team rewards.
Not only does the streamlined mechanism result in lower salary administrative costs, but management can also control the salary growth of individual employees. Then again, employers can cash in on the benefits of flexibility in fixing salary levels for new hires.
Market-‘wise’
Collapsing group work and pay also establishes a consistent and common pay standard that is closely aligned with the market conditions.
Management can easily capture appropriate market pay differentials and become nimbly responsive to the dynamic business environment. Such a compensation system can be easily maintained and flexibly adapts to the competitive pressures of a changing marketplace.
According to compensation specialists, Keith Fortier and Christopher, in their Salary Structures white paper on www.salary.com, “Whereas the design characteristics of traditional structures emphasise internal equity and focus the employee’s attention on the world inside the firm, broadbanding focuses employees on the changing needs of the organisation and helps them experience an internal culture that more closely reflects the external business environment and the competitive recruiting market.”
With these advantages, broadbanding has become a recognised practice for corporate compensation. A top salary consultant encapsulates it as, “Broadbanding broadens the focus from job content and scope to include the knowledge, skills and abilities of the individual doing the work, thus enhancing the pay for performance system; better maintains a competitive job and compensation structure to aid in recruitment and retention; and, streamlines administrative processes.”
Yet, the inherent difficulties like widespread allegations of pay discrimination within the same band and fewer promotion opportunities will rear their head sooner or later. If unchecked, they can even translate into morale and productivity issues.
Therefore, management should step up to the plate and try to absorb the benefits of traditional salary structures into a predominantly broadbanding framework.
Collapsing group work and pay also establishes a consistent and common pay standard that is closely aligned with the market conditions.
Management can easily capture appropriate market pay differentials and become nimbly responsive to the dynamic business environment. Such a compensation system can be easily maintained and flexibly adapts to the competitive pressures of a changing marketplace.
According to compensation specialists, Keith Fortier and Christopher, in their Salary Structures white paper on www.salary.com, “Whereas the design characteristics of traditional structures emphasise internal equity and focus the employee’s attention on the world inside the firm, broadbanding focuses employees on the changing needs of the organisation and helps them experience an internal culture that more closely reflects the external business environment and the competitive recruiting market.”
With these advantages, broadbanding has become a recognised practice for corporate compensation. A top salary consultant encapsulates it as, “Broadbanding broadens the focus from job content and scope to include the knowledge, skills and abilities of the individual doing the work, thus enhancing the pay for performance system; better maintains a competitive job and compensation structure to aid in recruitment and retention; and, streamlines administrative processes.”
Yet, the inherent difficulties like widespread allegations of pay discrimination within the same band and fewer promotion opportunities will rear their head sooner or later. If unchecked, they can even translate into morale and productivity issues.
Therefore, management should step up to the plate and try to absorb the benefits of traditional salary structures into a predominantly broadbanding framework.
PAYAL CHANANIA
Hi,
ReplyDeleteThanks for the beautiful post. I just have a question for you. I feel that none of the Indian It companies follow Broadbanding. Will you be able to provide a reason for not using this?
Thanks in anticipation