Understanding a Broadbanding Option

By: Steven P. Rosenthal, President
The Training Tree, Inc.

Broadbanding - an option that is becoming very popular is one that will simplify the pay plan substantially using bands.  In the past decade much discussion has been given to using a broadbanding approach to meet compensation challenges.  Broadbanding is defined as a strategy for salary structures that consolidate a large number of pay grades into a few "broad bands."  Broadbanding has been successfully implemented in large, hierarchical organizations that attempted to flatten their organizations and remove levels of management and small organizations where there are good controls and a desire to be an attractive alternative to larger competitors.

Broadbanding has become in the last two to three years of great interest to the public sector.  For example, organizations that had ten levels of management could compress them, widen the salary ranges of the remaining five levels, and simply slot each manager into one of these newly created bands.  A broadbanding pay plan takes more narrowly spaced ranges and makes mega-ranges or bands that are between 75%-125% from minimum to maximum pay.  The Training Tree, Inc. typically employs a 100% spread between minimum and maximum pay.  The wider bands lessen the focus of those employees that become fixated on having their position constantly reevaluated to see if their position can be moved up a range upon the addition of any new duties.  In some organizations the range or grade number has become a status symbol.  Broadbanding positively negates this issue.  New job duties can be more readily integrated into positions in a broadband without the push for a job audit.

With broadbanding, a manager can more easily encourage his/her employees to broaden their skills and abilities.  This is valuable to organizations because employees with broad skills and abilities are critical for the success of organizations that foster a total quality/continuous improvement environment.  In contrast, the jobs in traditional organizations are narrow and specialized.  In order for employees to advance in pay and responsibility, they have to further develop their specialized skill.   That additional skill is included in a job category in the next higher range or grade.  Thus a bias exists against the broadening of skills.

• The broad band focuses an employee or prospective employee on salary enhancements into the future.
• The band gives an indication of where a salary can go if the individual stays with the employer.
• It becomes an incentive to both attract and retain employees.

How a person's salary moves within a band is critical to whether a band configuration is controllable for an organization.  There are many reasons why a broad band would be ideal for a particular organization. Having controls as part of the broadband plan is essential.  Such controls can be as simple as the implementation rules for the broadband.  It may include a limited number of increases per year, a maximum on the percent allowable in a year, a review when reaching the 3rd quartile of the band or a host of other controls specific to the client.  Controls need to be specific to each organization and each plan and can work in union or non-union environments.