Director of Human Resources and Organisational development, Northamptonshire Healthcare NHS Trust

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1 Lunch Session, Examining pay review systems for executive pay Ms Bronwen Curtis CBE Director of Human Resources and Organisational development, Northamptonshire Healthcare NHS Trust

2 Executive Director Pay and Job Evaluation Framework June 2015

3 Project Background & Context The work in establishing a more flexible, robust and consistent approach for reviewing Executive Director reward at Northamptonshire Healthcare Foundation Trust (NHFT) happened against a backdrop of making cost savings and was focused on achieving three core objectives: COST SAVINGS OF 15% a) Help to facilitate and support the Remuneration Committee s recommendations on reward. b) Align Executive Director reward practices more closely with external best practices. c) Incorporate more rigour and less subjectivity, thereby reducing the risk of any discrimination or bias. The initial focus was on Executive Directors, but the approach will also be developed for the Deputy Director roles in NHFT. 3

4 Our Approach The following framework was used to guide our approach: 1) Internal job size & internal pay relativities JOB EVALUATION FRAMEWORK 2) Individual experience, performance and contribution Reward Decisions 3) Relevant external market positioning, and data PERFORMANCE MANAGEMENT BENCHMARKING Each of the components of the framework need to be considered in order to ensure a holistic approach. 4

5 The Process To Date We started our work in early 2013 and since that time have considered multiple inputs in developing the outputs listed below: PROCESS STEPS OUTPUTS Review of Organisational Strategy and Goals Discussions with Executive Directors & Team Meeting in Sep 2014 Assessment of Relevant External Best Practices & Pay Data Input from Remuneration Committee I. Reward Guiding Principles II. Benchmarking Assessment of Pay for Executive Director roles III. Job Evaluation Framework Design & Assessment (including development of new contribution-based role profiles) IV. Performance Management Process 5

6 1. Reward Guiding Principles The reward arrangements for Executive Directors at NHFT should: Be linked to the organisational strategy, values, performance goals and clinical priorities through relevant performance objectives Be aligned to the requirements of the role and be flexible to reflect differences in roles Be simple to understand and apply Satisfy public accountability and the need to demonstrate value for money Be transparent, fair and non-discriminatory Support team work Be benchmarked against a relevant comparator group Provide appropriate reward for performance 6

7 2a. Pay Benchmarking (Methodology) The worksteps associated with the benchmarking review were to: a) Gather and update base pay, bonus and benefits data from: External surveys covering NHS Foundation Trusts, Non- Foundation Trusts and the wider public healthcare sector The annual reports from NHS Foundation Trusts and Wider NHS and public sector bodies. Industry sources for information on private healthcare organisations. b) Determine the market range of salary and total cash compensation (salary plus any bonus) offered for each position match to NHFT roles. d) Compare NHFT pay levels with market comparator medians to develop a comp ratio (NHFT pay as a % of the market median) e) Assess the competitiveness of NHFT pay using the best practice guideline of ±15% of the market median as being competitive. MARKET RANGE Lower Quartile (25 th Percentile) -15% COMPETITIVE +15% Median (50 th Percentile) Upper Quartile (75 th Percentile) 7

8 2b. Pay Benchmarking Outcomes The key findings from the benchmarking were that: 1. The overall picture is that NHFT pay levels are aligned (±15%) with the market median, and for most roles are closest to Foundation Trusts of a similar size. 2. Pay levels at NHFT are either below or are aligned with the wider public healthcare sector and are further below the private healthcare sector. 3. Annual bonus and benefit practices at NHFT are aligned with the public sector but differ from the private sector, particularly from an annual bonus perspective

9 3a. Job Evaluation Framework Design The job evaluation framework outlined below was used as a basis for determining the relative weight of the Executive Director roles. The framework is based on 5 factors, each of which has 4 defined levels. Job Factor 1. Applied Knowledge and Expertise 2. Decision Making & Problem Solving 3. Resource Management 4. People Leadership/ Development 5. Influencing and Managing Relationships Overall Description The skills, knowledge and expertise that need to be applied to be an effective performer in the role. The decisions or actions taken by the role holder and / or the advice given to others that has an effect on the performance and results of the organisation and the associated delivery of high quality patient care. This includes the level of autonomy to make decisions on behalf of the organisation. The responsibility for managing financial and physical (but not human) resources to deliver organisational objectives. The extent to which the role is required to plan, organise, direct and control resources to achieve outcomes and objectives. The degree of challenge associated with leading or developing people in terms of inspiring, deploying, guiding, directing, and raising levels of performance. The requirement to establish and maintain effective relationships across the Directorates and outside of the organisation and to work with others internally and externally to gain co-operation and influence them to achieve organisational objectives and raise the profile of the organisation. Role profiles were also developed to reflect the framework. 9

10 3b. Job Evaluation Framework Process The job evaluation methodology was based on a number of steps that were focused on providing a high level of rigour and which utilised multiple inputs. 1. Independent Review of Job Profiles created by NHFT by QCG Consultants 2. Refinements to NHFT Job Profiles 3. Independent QCG assignment of a level and associated score to each factor (for each role) 4. Group Validation of level assignment (scores) by QCG consultants 5. Review of Scores by NHFT with HR, the Chief Executive and all of the other Executive Directors The scores will also be validated by a NHFT job evaluation panel, described in more detail on the next page. 10

11 3b. Job Evaluation Framework Process continued For going forward, the process of job evaluation will be managed and owned by NHFT as follows: 1. Creation of Job Profile by Role Holder or HR 2. Refinements to Job Profile by HR as necessary 3. Assignment of a level to each factor (for each role) and overall score by HR 4. Validation of Scores by Panel, including NED with HR expertise, HR Director and Chief Executive 5. In the event of an appeal, final arbitration by NHFT Chair 11

12 3c. Job Evaluation Framework Outcomes The evaluation of NHFT s Executive Director roles resulted in the following ranking of roles : Higher Roles SCORE Chief Executive Deputy Chief Executive & Chief Operating Officer Lower Finance Director, HR Director, Medical Director, Nursing Director The scorings will likely change as the roles evolve and will be reviewed annually as a matter of course and also in response to key changes in roles. 12

13 4a. Performance Management Process 1 Externally set Board responsibilities 2 Three Elements 3 Application Strategic goals and objectives Individual objectives If element 1 is not achieved, nil reward is triggered If 1 is achieved, performance is measured against 2 and 3 Salary is then determined by considering all elements of the triangle Non recurrent cash award can be made for exceptional performance 13

14 Overall Outcomes With the outputs from the benchmarking, the current job evaluation and the performance management rating, the ranking of each role could be compared to highlight any key differences as outlined below in the illustrative example: Ranking Based on Current Salary ILLUSTRATIVE EXAMPLE OF OUTPUTS Ranking Based on Job Evaluation Ranking Based on Benchmarked Salary Ranking Based On Performance DIRECTOR A DIRECTOR D DIRECTOR D DIRECTOR D DIRECTOR B DIRECTOR A DIRECTOR A DIRECTOR C DIRECTOR C DIRECTOR B DIRECTOR B DIRECTOR A DIRECTOR D DIRECTOR C DIRECTOR C DIRECTOR B For the NHFT, this type of ranking comparison highlighted a couple of anomalies that were discussed with the RemCo. 14

15 Next Steps 1. Roll out the framework to Deputy Directors 1) Job Evaluation Ranking 2) Performance Ratings Executive Reward Decisions 3) Benchmarked Salary Data 2. Continue to review the rankings with updated market pay data and revised role evaluations (as needed if the roles change). 3. Continue to review the effectiveness of the framework in light of any organisational changes. 15

16 Any Questions? Bronwen Curtis Vicki Badham Head of QCG s Reward Practice 16

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