Grade Banding: The Model for Future Salary Programs?

• Author: Brigitte W. Schay,Howard H. Risher
• Date: 01 June 1994
• Published date: 01 June 1994
• DOI: 10.1177/009102609402300202
• Subject Matter: Special Symposium Part II—Emerging Role of the Human Resource Manager

Special Symposium Part II—Emerging Role of the Human Resource Manager

Grade

Banding:

The

Model

for Future Salary Programs?

Grade-banding

represents a break from the conventional salary management practices

that

have

prevailed since World

War

Π.

Interest in this innovative compensation

practice

is rising

in both the private and public sectors and has been prompted in

part

by a paradigm shift

toward

greater

flexibility, flatter organizations, and increased managerial control of and

accountability

for traditional human resource functions. Grade-banding has been tested in

the

federal government since 1980 and has more recently been adopted in the private sector.

This

article

reviews the experience with banding and discusses the implications of shifting to

a

banded

structure.

By

Howard

H. Risher

Brigitte

W.

Schay

Howard

W.

Risher

is

a

Principal

in

the

Conshohocken

(Philadelphia)

office

of

Godwins

Booke

&

Dick-

enson,

an

international

compen-

sation

and benefits consulting

firm.

He

has

been

a

consultant

to

OPM

and

was

responsible

for

the

study

that

led to

federal

pay re-

form.

He

also

served

as

a

member

of

the

NAPA

task

force

that

pro-

duced

the 1991

report,

Modern-

izing

Federal

Classification:

An

Opportunity

for

Excellence,

that

re-

viewed

the

government's

experi-

ence

with

banding.

He holds an

M.B.A

and

Ph.D.

in

industrial

re-

lations

from

the

Wharton

School,

University

of

Pennsylvania.

After

some

40

or more years of relying on the same concepts to design

and administer base salary programs, there is a mushrooming level of

interest in developing new program

concepts.

This interest has been driven

at least in

part

by the paradigm shift that is affecting all organizations and

line

management's concern that the traditional program concepts are no

longer

meeting organizational needs. One of the overriding issues is the

need for greater

flexibility

which is combined with increasing emphasis on

managerial control and accountability.

This

has resulted in a high level of interest in what has been referred

to as grade banding or broad banding. This simple concept was first

introduced in two federal research labs. In the past few years the concept

has been adopted by an increasing number of corporations and is now the

subject

of presentations at professional conferences and articles in a diverse

group

of publications. At this stage the concept is still being defined but

essentially

involves a new salary schedule, with fewer but broader or wider

salary ranges. In the corporate world, the model ranges from 60 percent

bands — that is to say,

60%

from the minimum to the maximum — to 200

percent bands. With the broader bands, there is increased

flexibility

to offer

starting salaries and to manage individual salaries.

The

purpose

of this article is to review experience with banding, to

consider

some of the issues involved in shifting to a banded structure, and

to review some of the pros and cons associated with the change.

Origins

of

Grade-Banding

in the

Federal Government

Almost

14 years ago, two naval research and development laborato-

ries

in China Lake and San Diego, California, pioneered the concept of

grade-banding in the federal government. Frustrated with the rigid federal

job

classification system and facing increasing difficulties recruiting and

Public

Personnel

Management

Vol.

23

No.2

(Summer

1994)

187