Your long-serving manager retires. Seeking a replacement, you interview three excellent young applicants, but all of them earn 20% more than the man who’s retiring. Then one of your supervisors asks you why she’s being paid less than a man doing the same job in another section. You look into it, and find that there’s no logical explanation. If this is happening to you, you’ve got a problem with your key hygiene factor – pay – and that’s bad news.
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Do you remember the lessons of Frederick Herzberg? Fairly structured, competitive pay rates never motivate, but unfair low rates always demotivate. Mess up with pay and you’ll never build a truly motivated team. It’s easy to establish what the competitive pay rates are in your industry and area. Ask around.
Read the adverts and see what people are offering. It’s bad management to pay too little, but it’s also not clever to pay too much. If you don’t pay competitively you’ll never get true motivation from your staff. And if you really want trouble, discriminate on the basis of sex or race or have no answer when someone challenges your rate for the job.
It’s impossible to avoid making decisions on pay rates. If they’re not negotiated, pay decisions will be made on the basis of beliefs or assumptions about where the job fits into the organisation, the contribution of the job holder, the market rate for the job or the market worth of the individual in the job. All managers have to evaluate jobs, but it all falls down if this isn’t followed up with proper job grading.
If you’ve only a few employees, you’ll get away with a simple system like the one I suggested in my most recent column.
If you have more than say 10 staff members at different levels, you’ll need a more formal grading system to classify their jobs.
You might know of the Paterson system, which is widely used in South Africa, and grades jobs on the basis of the decisions made by the job holder. Then there’s Hay, Peromnes and others. These allocate points to jobs for elements like expertise required, accountability, education and experience, functions performed, consequences of error, number of staff supervised, working conditions, pressure of work and so on.
Alternatively, you could work with your staff and develop your own system. We started with Paterson but, over time, together with the union and staff association, developed our own system, which we called USHMOED (Unskilled, semi-skilled, highly skilled, managerial, operational management, executive management and directors). It really doesn’t matter too much which system you use, as long as your employees understand and support it.
Job grading will provide a credible rationale for pay structures and reduce inequities. It creates a logical, defensible hierarchy, where wage and salary administration is seen to be fair. Also of crucial importance is how you go about selecting a system and introducing it. If you think the boss can make all the decisions, it’ll cause more harm than good. When you raise the idea for the first time, it will be viewed with great suspicion by management and workers alike. It’s probably best to use an outsider to help sell the need to your employees.
There’s lots of hard work involved. Job descriptions have to be written and grading committees appointed and educated. Finally, there’s doing the job grading itself. And it doesn’t stop there. Jobs change, job descriptions need to be updated and jobs re-graded. Then there are always people who feel their jobs are graded one slot too low, and request a re-grading.
When we decided to put a system in place, I sometimes felt that we had a tiger by the tail. But we persevered and today it’s part of life on the farm. If you were to suggest it be dropped now, there would be a howl of protest.
Contact Peter Hughes at [email protected]. Please state ‘Managing for profit’ in the subject line of your email.
This article was originally published in the 14 September 2012 issue of Farmer’s Weekly.