Thursday, 20 June 2013

Job-family V career-family pay systems

The recurring reason why employers decide to introduce career-family pay systems is to avert the employee disappointment habitually caused by the implementation of broad-banded structures; these are indeed perceived by individuals as not based on a clear, structured and easy to understand pay progression mechanism. In many respects, this may be considered as the turn of the tide; employers after having broad-banded their pay systems, with the intention of establishing flatter structures and understating the importance of promotions, subsequently decide to introduce family-based pay arrangements with the contrasting aim of making employees aware of the prospects for professional growth and pay progression these can offer.
Job-family and career-family pay structures are both designed and developed grouping under the same family jobs which are connected the one with the others in that requiring the same set of skills, abilities and competencies in order to be properly carried out. The distinctive feature of this method is that a specific family is designed and developed for each organizational function (HR, Finance, ICT, Legal, Sales, Marketing, etc.) where a different degree of expertise and knowledge is required to assume the diverse levels of responsibility included within each family. Job families and career families essentially enable employers to group the jobs existing within a company in a more systematic and consistent way. The distinction between the two approaches is represented by the circumstance that whereas career families share exactly the same architecture, job-family arrangements do not.

In the case of career families, each family identified within the business should employ exactly the same grades and pay ranges for all of the levels included within it. This homogeneity amongst families enables employers, but indeed also employees to easily compare the different families or in the Armstrong words (2010) to “read-across” families.

A different approach is required for the development of job-family pay structures; in this case, each family has its own architecture based on the various functions peculiarities. Yet, pay rates are in this instance determined according to the trends emerging from the relevant external labour market. This entails that, differently from career families, the size and pay rate of the roles included in a job-family scheme may be completely different amongst the various families, precluding thus employers and employees from reading across them.

By defining the degree of knowledge and expertise required by the roles of the different grades existing within each organizational function, career-families practically help employers to introduce, outline and explain to employees what qualities and competencies are required and sought-after by their organization, and thus on the basis of which elements employers decide to offer individuals opportunities for career progression and development. Career families, like the pay structures based on the job levelling methodology, represent somewhat of career-maps enabling individuals to find out what skills and competencies are required within a function to progress, which prospects for growth and development might be offered within this and which level of pay is associated with every career stage included within a family.

Families can be related to organizational functions, occupations groups and business units (Reilly, 2004). Whether the functional or occupational groupings taken into consideration are associated with business units’ structures, families can provide vertical in addition to horizontal integration.

One of the most important decisions reward professionals need to make as regards the introduction of families concerns the identification of their number. In a bid to keep pay systems simple, employers habitually aim at maintaining the number of families as small as possible. Nonetheless, employers can introduce as many families as they consider appropriate to the circumstances. Also with reference to this particular aspect, hence, a universal recipe does not actually exist; the one-size does not really fit all.

The identification of the number of families represents a straightforward exercise for reward specialists, whether it has been decided to introduce as many families as the number of functions existing within the organization. This can actually mostly, but not necessarily exclusively be the case of career families, which are not based on the external market rates. Things can work differently when pay structures are based on job-families. Keeping in mind the aphorism “the simpler the better” and that the main aim of developing job-family systems is introducing pay arrangements as far as possible aligned with the external market rates, it can be argued that the most suitable number of families should be that enabling employers to consistently differentiate their employees pay according to the practical and real organizational needs.

In the event, for instance, an employer should plan to introduce a specific family so as to group together all the professional and specialist roles, this should duly consider that this family is highly likely to be transversal to the different organizational functions. In the labour market, nonetheless, there might be considerable differences between the pay rates of the different specialists comprised into a sole family, depending on the functions these activities are associated with. An ICT specialist pay, for example, is likely to be sensibly different from that of a HR specialist and, indeed, considerable differences may also be identified amongst the diverse specialisms existing within the ICT and HR functions; payroll, employment law, reward, L&D and R&S specialists are likely to receive different levels of annual pay. In such cases, the problem might be overcome introducing a given number of families covering the largest part of the employee population and a different system for those roles which can actually be considered more difficult to include in more generic and comprehensive families (Reilly, 2004).

Whereas in the case of a job-family system the number of levels can vary from a family to the other, that defined for the families of a career-family scheme is maintained invariably the same, habitually six to eight. Families can be essentially considered as pay structures having a single grade, where each family practically represents the different levels of pay included within the grade. Taken in isolation, each family can be rather regarded as a pay band where the different roles are associated with the various pay levels.

Differently from what occurs in more conventional pay structures, where the definitions provided for each grade are broadly the same, in family-based structures diverse definitions are introduced to outline the skills and competencies required by individuals in order for these to progress within each family (Armstrong, 2010). Job families can thus reveal to be particularly useful when broad-banded pay systems are in place in order to establish a more structured approach to pay progression within a single band.

Benefits and likely pitfalls associated with the introduction of families
Designing and developing pay systems adopting this approach can unquestionably enable employers to attain a wide range of objectives. Family-based pay structures can first and foremost effectively and successfully help employers to develop a “common language” to reward, whilst differentiating the different functions the one from the others. Yet, families can also enable businesses to develop pay systems taking heed of the different market rates existing for the different job groups (Reilly, 2004).

According to the Herts County Council (UK), the introduction of job families can also favour employee mobility amongst the different departments and contrast the formation of organizational silos (Personnel Today, 2002). Moreover, job families can reveal to be particularly helpful in order to harmonize a business pay structure following the merger of two or more companies. The National Australia Group Europe (IRS, 2001) and Abbey (IDS, 2001), which both introduced a family-pay system after having merged with other companies, represent two good examples of successful introduction of this method under such circumstances.

Whereas career families are more internal-relativities centred, job-families are mostly focused on labour market rates. Aiming at mirroring and reproducing internally external pay rates trends, job-families tend to differentiate pay amongst the different families. This circumstance actually allows employers to attain some additional wider benefits. One of these is associated with the enhancement of the firm recruitment and retention practices. Employers whose pay structure is constantly kept in line with external market rates should potentially be able to more straightforwardly attract quality staff and talents, whereas improving the effectiveness of their retention practices.

An additional distinctive benefit provided by families is the reduction of the administrative burden typical of the job evaluation exercise. Pay structures based on families are designed and developed by associating jobs with grades on the basis of the jobs description. Especially in the case of career families, the exercise can be conducted taking as a reference the competency framework already existing within the organization for each function. This will clearly enable reward managers to more faithfully and swiftly complete the evaluation process, whereas establishing a more reliable and consistent link amongst career progression, the skills and competencies required to move up the career ladder and the salary associated with the different steps of the career pathway.

The description of career-families levels is in general more reliable and consistent compared with that provided by more traditional pay structures. The former relate to roles sharing the same features, albeit with different levels of responsibility, rather than summarizing the different skills and abilities required throughout the whole organization, which may sometimes also be difficult to amalgamate (Armstrong, 2010).

Career-family structures developed according to the same grading system, especially when based on the job evaluation exercise, are fairly defensible and sustainable in case of equal pay claims. These are indeed developed emphasizing the importance of internal relativities insofar as enabling to read-across the grades of the different families. In contrast, job-families structures, mainly focused on considering the impact of the external labour market, are prone to expose employers to equal pay legislation complaints. In the case of job-families, jobs of the same value could actually be paid differently as a consequence of the influence exerted by the external labour market. The fact that these differences are very likely involving the overall family, rather than a single level of the family, can only contribute to eventually make pay differences even more unjustifiable and unsustainable before a Court (Armstrong, 2010).

To resolve the problem, reward specialists should do their utmost to collect reliable and accurate external data on the basis of which defining the internal rates. Performing this activity may sometimes prove to be a daunting feat, especially for public sector employers (Reilly, 2004). For reliable the data gathered in the external market might show to be, it is unlikely that these may accurately take heed of and reflect the local equal pay legislation tenets. That is why job-family structures are more often than not less likely to be defensible in case of equal pay legislation claims.

The problem associated with accessing reliable market data is clearly also important in order for employers to maintain the internal rates of pay in line with those offered by the other employers operating in the same market. External data collection is hence of paramount importance for two different reasons: equal pay legislation compliance and talent acquisition and retention practices effectiveness.

An additional means to curtail the negative impact produced by family-based pay structures could apparently be that to reduce base pay and balance up the difference offering pay supplements. In this instance, notwithstanding, employers should be prepared to face the likely individual unwillingness to accept a pay reduction whether supplements should subsequently be withdrawn; albeit this would affect additions, rather than basic pay. Yet, the longer the period of time individuals have benefited of such supplements, the harder it will prove to be for employers to remove these. With the passing of time, supplements tend to consolidate or to be perceived by individuals as consolidated into their base pay and managers usually feel uncomfortable whether asked to support employers in this type of move (Reilly, 2004).

One of the most significant downsides provided by family-based structures, notwithstanding, is that these are perceived as divisive by individuals and in open contrast, for instance, with the “single status” tenet fostered by the National Joint Council for Local Government Service (Armstrong, 2010). The harshest opponents of the family-based pay structures in unionized organizations are in fact Unions. These schemes are openly contrasted by these in that potentially or even practically justifying differences in pay for jobs of equal value. This should not indeed come as a surprise, these systems are opposed by Unions as are opposed in general by these the rates of pay based on market rates, rather than on internal relativities and length of service.

The disadvantages of career-families are not limited to the legal problem and to the Unions opposition; career- and job-families systems pose serious problems also in terms of practical design, development and execution.

At development level, albeit being less demanding than job evaluation, families require a lot of work and efforts to be accurately designed. It clearly depends on the number of jobs which need to be evaluated and on the difficulty encountered by the reward professionals concerned on matching jobs with families and with the grades within these. To favour accuracy, this activity may be performed using a template enabling reward specialists to evaluate jobs and allot hence these into the relevant family and grade.

As contended by Reilly (2004), also the implementation phase represents everything but a straightforward process. Individuals are all too often disappointed about the family their job is included into. In some cases, that is, when a job is characterized by features making it objectively difficult for evaluators to determine the most suitable family, it might even be harder resist individual disagreement. In general, the reasons for employees’ complaints about their job allocation may concern either the status or the level of pay. In both instances their feeling is that of having undergone somewhat of a downgrade for which they ask for remedy.

It is supposed, albeit not by common consent, that family-based pay structures can also negatively impact internal mobility policies within a business. As discussed earlier, some employers consider that families, clearly outlining the requirements necessary to fill a position, favour internal mobility, whereas others note that these actually contribute to favour progression only within functional or occupational silos. Whether clear skills and level of expertise are described for each family and for each grade within this, individuals may actually find it difficult, if not impossible, accessing most of the roles allotted in families different from that where their role is allocated. This actually depends on the circumstances and more in particular in the way internal mobility is fostered and intended within a business. This should be essentially intended as an opportunity by employees and indeed by employers, too. It has to be used as a means of recognition and as a way to encourage individual professional growth. Depending on the circumstances and on the specific roles in question, barriers should be definitely removed and individuals put in a position to gain different skills and a broader knowledge of the business roles and activities; which will in turn also certainly contribute, in the mid to long term, to the attainment of organizational success.

Despite this aspect is not strictly associated with pay, reward managers and specialists have to be aware of all of the possible consequences and pitfalls typically associated with the introduction of family-based pay structures. Another crucial aspect reward specialists need to duly consider concerns how pay progression has to be managed within the business once this approach has been introduced. As discussed earlier, both career-family and job-family structures practically endorse transparency and clarity about the skills, knowledge and expertise required to progress within a family. Career progression, however, is clearly associated with pay progression so that since decisions about these aspects usually rest with line managers, before introducing this approach, employers need to ensure that all of the managers with responsibility for their direct reports career have received the necessary training to effectually manage this type of scheme. The risk being that, efforts and hard work notwithstanding, inequalities, bias and pay drifts occur or continue to occur within the business.

The reasons why employers introduce family structures
Albeit family structures at large cannot be considered completely flawless, many organizations have decided to adopt these over time in order to attain their specific aims and objectives. The circumstance that the companies which have introduced family-based structures still use these clearly entails that the schemes have enabled them to meet their expectations and have proved to fit the business needs, corporate culture and reward strategy and philosophy.

The pre-set objectives can be fairly different, but properly designed, developed and monitored family structures can effectually help employers to attain their intended aim. What certainly matters is that before introducing such schemes employers ensure that these are suitable for their organization. The final decision has to be invariably made according to the existing circumstances and not just in that this approach has proved to be successful elsewhere.

Longo, R., (2013), Job family Vs career family pay systems; Milan: HR Professionals [online].