Resumo de Broadbanding, A Strategy For Salary Structures

Broadbanding is defined as a strategy for salary structures that consolidate a large number of pay grades into a few "broad bands." This article covers:
1. The Benefits of Broadbanding
2. Potential Problems with Broadbanding, and
3. Conclusions and Recommendations
Benefits of Broadbanding
Broadbanding has been successfully implemented in large, hierarchical organizations which attempted to flatten their organizations and remove levels of management. For example, organizations that had eight levels of management could eliminate four levels, widen the salary ranges of the remaining four levels, and simply slot each manager into one of those ranges.
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 in 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. Thus a bias exists against the broadening of skills.
Potential Problems with Broadbanding
Broadbanding is not a panacea. Problems can arise if salary ranges are too broad:
? Salary ranges provide a mechanism to control the salary growth of individual employees, and thereby the salary costs of an organization. With salary ranges, an employee's salary stops at a certain point, until they acquire the skills necessary for advancement to the next higher level position. Broadbanding, with its high salary range maximums, does not have the salary control feature of the traditional salary structure.
? Maintaining the perception of pay equity can be more difficult. If two employees are in the same broad salary band doing similar work, and one employee is paid near the bottom of the range, and the other is paid near the top of the range, how do you justify the salary differential to two employees? A pay discrimination charge could be difficult to defend.
? Broadbanding reduces the opportunity for promotion to a higher salary range since there are fewer salary ranges. Yet promotions are valuable. The number of promotions one receives is a key component of their perception of the career advancement opportunities offered by their employer. Typically, a professional will receive two promotions within their first five years after graduation from college. The frequency of promotions early in their career correlates with the steepness of the new employee's learning curve, and complements their increase in value to the company and attractiveness to competitors. Promotions provide a vehicle for accelerating the salary of new employees to help ensure their retention in the company.
? Broadbanding risks divergence from market pay practices. Paying too little relative to the market could mean higher employee turnover, paying too much relative to the market could mean higher product costs than competitors.
Conclusions and Recommendations
Broadbanding is an attractive alternative to rigid, structured, specialized, and hierarchical organizations. A solution that captures the benefits of both broadbanding and traditional salary structure includes:
? Salary ranges with a 50% to 60% spread between the salary range maximum and minimum.
? A limited number of broad and general job descriptions.
? A flat organization structure with a limited number of pay levels.
? Advancement criteria which includes the attainment of a broad set of skills.

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