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Home My WebLink About17 - Approval of Comparator Agencies for the Fox Lawson & Associates Classification and Compensation Study041. = CITY OF NEWPORT BEACH COUNCIL STAFF REPORT Agenda Item No. 17 August 13, 2013 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Managers Office Dave Kiff, City Manager 949 - 644 -3002, dkiff(Wriewportbeachca.cov Human Resources Department Terri L. Cassidy, Deputy City Manager /Human Resources Director 949 - 644 - 3303, tcassidv ()newportbeachca.cov PREPARED BY: Terri L. Cassidy, Deputy City Manager /HR Director Maggie Williams - Dalgart, Senior Human Resources Analyst APPROVED: TITLE: Approval of Comparator Agencies for the Fox Lawson & Associates Classification and Compensation Study ABSTRACT: In August 2012, the City launched a comprehensive study of its classification and compensation system in an effort to modernize job classifications and pay practices and bring the City into the broader world of work. The City hired Fox Lawson & Associates (FLA), a division of Gallagher Benefits, Inc., a well - established firm with a wide range of public and private sector clients, to conduct the study. FLA is nearing completion of the first phase of the study, the job classification review, and before proceeding with the compensation review, staff requests the City Council provide direction on the comparison agencies ( "comparator agencies ") Fox Lawson & Associates should include for the purpose of conducting pay and benefits surveys. Use the comparator cities of Carlsbad, Chula Vista (new), Costa Mesa, Fullerton, Huntington Beach, Irvine, Oceanside, Orange, Santa Ana, Santa Monica (new) and Torrance for the remaining FLA compensation review. No longer use the cities of Anaheim and Long Beach as comparator cities. FUNDING REQUIREMENTS: There is no direct financial impact to the above recommendation. Approval of Comparator Agencies for FLA Study August 13, 2013 Page 2 DISCUSSION Since 2009 the City has undergone significant organizational change through downsizing, restructuring and department consolidations. The dynamics of the City's employee workforce have changed as the number of full -time employees has shrunk from 833 in FY08 -09 to 736 in FY13 -14, without impacting public safety services. However, the City's classification and compensation system has not changed: it is burdened with too many narrow job classifications, limitations on cross- training /cross- functionality, and a pay structure that is fairly inflexible. In order to continue providing high levels of customer service with a smaller workforce, the City recognized it would need to change its approach to how it classifies and pays employees. In June 2011 the City Council addressed the issue through adoption of a Total Compensation Philosophy that provided a vision for the future of the City's classification and compensation system (Resolution No. 2011 -55, Attachment A). In the Philosophy the City Council laid out a framework for a structure designed to meet changing workplace demands, provide greater flexibility, is forward- thinking and long- lasting. Resolution No. 2011 -55 specified how the City should approach pay, and included an expansion of labor market survey practices. Instead of using only local comparison agencies in Orange County, which had been the City's practice for many years, the new approach included a range of public agencies and private sector comparisons. The Total Compensation Philosophy identified the following set of goals: • A job evaluation system that is consistent and equitable across all departments and with a reliable and objective methodology (philosophy #3) • Market competitiveness that includes examination of public and private sector data, as appropriate, and that generally compensates at market median (or within the second and third quartile) (philosophies #1 and #2) • A simplified job classification and pay structure that provides greater management flexibility in job assignments, better comparability to market surveys, and fewer and broader job classifications (philosophy #6) A big step toward a new system was to contract with Fox Lawson & Associates, with Principal Bruce Lawson serving as project manager, to review and assess the City's structure. FLA initiated this process with a total compensation study of Executive level positions in 2011 (including City Manager, City Attorney, City Clerk, public safety chiefs, and department directors). As is standard with pay and benefits surveys, the FLA Executive Total Compensation study compared Newport Beach pay and benefits against other public agencies. At City Council's direction, eleven (11) agencies, including several outside of Orange County, were selected to compare salary, retirement benefits, healthcare and other fringe benefits. Approval of Comparator Agencies for FLA Study August 13, 2013 Page 3 Beginning with the Executive group was logical because several positions had experienced turnover, and the group would serve as a small sample of the technique and approach FLA would use for developing a new classification and compensation system for the entire City. The list of approved agencies for the Executive Compensation study has been the standard group for conducting pay and benefits surveys ( "total compensation" surveys) since 2011. With changing demographics and shifts in local economies, staff has proposed the consideration of alternate or replacement agencies before FLA initiates the City -wide compensation study phase of the project. Attachment B provides a comparison of agency characteristics for select municipalities within the Orange, Los Angeles, and San Diego counties. The list consists of predominantly medium -sized cities that have one or more characteristics similar to Newport Beach (coastal /beach community, comparable population size, provides similar public services, full range of governmental services offered). Attachment C provides the list of comparator agencies used in the Executive Compensation study (Column 1) and a possible alternate grouping of agencies for the City-wide study (Column 11). Professional compensation practices support the philosophy that organizations use a minimum of five data samples when conducting comparison surveys. However, larger sample size increases validity of the data and helps to minimize any skewing effects of anomalous data (high or low) from one particular agency. For these reasons, Fox Lawson & Associates recommends a sample size of ten when conducting benchmark salary surveys. The options presented to Council maintain that standard /best practice. In conjunction with analyzing public sector data, and consistent with the City Council's Total Compensation Philosophy, the FLA compensation review will include private sector pay data from published sources. To provide a broad representation of private sector pay trends FLA will compile salary data from multiple survey sources, including Towers Watson, Mercer, Gallagher Surveys, among others. These companies are governed by different regulations concerning confidentiality of the data and follow professional standards. These surveys are also conducted annually so that the data is current and they use benchmark job classifications common among certain industries. Following City Council approval of the comparator public sector survey agencies, Fox Lawson & Associates will initiate the compensation review of the classification /compensation study. Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) Approval of Comparator Agencies for FLA Study August 13, 2013 Page 4 of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted b J&L- Terri L. Cassidy Deputy City Manager /HR Director Attachments: A. Resolution No. 2011 -55, Total Compensation Philosophy B. Cities in Orange /Los Angeles /San Diego Counties — Agency Characteristics C. Potential Group of Comparator Agencies for FLA City-wide Study ATTACHMENT A RESOLUTION 2011 -55 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH RELATING TO A TOTAL COMPENSATION PHILOSOPHY WHEREAS, the City is desirous of attracting, motivating, and retaining a highly competent, efficient and effective workforce at all levels; and WHEREAS, the City also seeks to maintain its fiscal condition by appropriately compensating its employees as well as maintaining strong reserves, infrastructure, programs and services; and WHEREAS, the City appreciates the strong partnership it has had with its employees and employee associations as employees and management have stepped forward to address rising pension obligations through additional employee contributions and a "2nd Tier' for new employees; and WHEREAS, the City believes that its compensation should be measured and compared in terms of "Total Compensation" (not salary alone) cost to the City, including salaries, performance -based incentives and other short-term cash compensation, deferred compensation, special incentive pays, and other benefits including but not limited to medical, post- retirement medical and pension contributions; and WHEREAS, the City Council is desirous of adopting and following a Total Compensation Philosophy and approach that would guide the Council and the City into the future, an approach that should be regularly reviewed over time to ensure that it meets the needs of the City, the employees, and residents; now, therefore be it: RESOLVED by the City Council of the City of Newport Beach that it adopt and memorialize the following Total Compensation Philosophy: 1. Total Compensation for individual positions will be measured with respect to market surveys, including both municipal and relevant private sector comparisons as appropriate. 2. Total Compensation brackets for individual positions will be set with reference to the median compensation for each position, generally falling within the second and third quartiles. 3. The City will seek to establish and maintain compensation practices that are comparable and consistent across all departments. 4. The City's goal is to limit annual increases in its compensation structure (including its union contracts) to a maximum of the rate of consumer inflation. 5. The retirement benefits portion of Total Compensation will be structured over time to achieve a 50/50 cost sharing between the City and the employees, including the implementation of defined contribution programs in the event such programs are authorized for the City's use. 6. The City will seek to simplify its job classifications and pay practices over time to achieve greater flexibility in job assignment, better comparability to market surveys, fewer and broader job classifications and minimal special pay complexities. 7. Pay for individual employees will be established and maintained based on qualifications, experience and job performance as reflected in regular and timely performance evaluations. 8. The City's compensation structure will be reviewed and revised from time to time to assure competitiveness versus the relevant market. 9. The City's Compensation Philosophy will be publicly reviewed from time to time, to assure meaningful public input and maintain relevance as circumstances change. 10. The City will aggressively advocate for legislative and regulatory changes necessary to maximize the tools available to achieve the principles embodied herein. ADOPTED this 14" day of June, 2011 4"- MICHAEL F. HENN Mayor of Newport Beach FiIMY]F 0�k- 9 k. a�. LEILANI I. BROWN City Clerk Attachment B Cities in Orange /Los Angeles /San Diego Counties - Agency Characteristics • FullAime equivalent positions (all full-time position and part -time positions converted to full -time) 8/13/13 Proximity General Fund City County to NB (in Services Provided Budget FY13 -14 Population miles) tParksyRec (in millions) Police, Fire, Moline Safety, Newport eeoch Orange — 86,464 Harbor, Water, Library, $161.3 Police, Fire, Water, Anaheim Orange 20 341,034 1,856.0 Electric/1.1litles, Library, $251.0 Parks Rec Conventn Ctr Carlsbad San Diego 46 160,888 811.5 Police, Fire, Water, library, $115.8 Parks /Rec Chula Vista San Diego 86 228,000 1,067.0 Police, Fire, Recreation, Library, $127.4 Animal Care Costa Mesa Orange 6 113,143 543.8 Police, Fire, Water, Parks /Rec $115.6 Encinitas San Diego 55 65,000 239.0 Fire, Marine Safety, Water $499 District, Parks /Rec Fullerton Orange 23 137,183 706.2 Police, Fire, Airport, Water, $75.9 Library Huntington Beach Orange 10 189,707 979,8 Police, Fire, Marine Safety, $193.5 Harbor, Library, Parks /Rec Irvine Orange 8 223,729 952,8 Police, Water, Animal Srycs, $143.7 Parks /Rec, Great Park Laguna Beach Orange 7 24,800 247,0 Police, Fire, Marine Safety, $48.5 Commty Services /Cultural Arts Long Beach Los Angeles 25 492,912 4,968.0 Police, Fire, Water, Health, $396.0 Gas /Oil, Library, Parks/Rec Manhattan Beach Los Angeles 41 35,135 265.0 Police, Fire, Parks /Rec $53.1 Oceanside San Diego 43 169,350 915.0 Police, Fire, Harbor, Water, $121.0 Library, Parks /Rec Orange Orange 14 140,849 763.0 Police, Fire, Water, Library, $91.7 Parks/Rec Redondo Beach Los Angeles 40 66,748 397.0 Police, Fire, Marine safety, $63.7 Harbor, Water, Library, Parks /Rec Santa Ana Orange 11 353,428 1,050.0 Police, Water, Library, Parks /Rec $205.7 Police, Fire, Recreation, Library, Santa Monica Los Angeles 53 89,736 2,162.0 Community/ Cultural Services, $306.1 Transit Torrance Los Angeles 38 147,020 1,480.5 Police, Fire, Water, Transit, $177.9 Library, Parks /Rec • FullAime equivalent positions (all full-time position and part -time positions converted to full -time) 8/13/13 Potential Group of Comparator Agencies for the FLA City -wide Study Column I Agencies Used in the Executive Compensation Study Anaheim Carlsbad Costa Mesa Fullerton Huntington Beach Irvine Long Beach Oceanside Orange Santa Ana Torrance Attachment C Column II Agencies to Consider for City-wide Study Carlsbad Chula Vista (added) Costa Mesa Fullerton Huntington Beach Irvine Oceanside Orange Santa Ana Santa Monica (added) Torrance Removed: Anaheim Long Beach 8/13/13