Broadbanding

1. Broadbanding

2. Definition: Broadbanding  is defined as a strategy for salary structures that consolidate a large number of pay grades into a few "broad bands.“ Broadbanding (or 'broad grades') is the consolidation of traditional pay structures, consisting of many, narrow pay ranges into a few, wider ranges or bands.

3. Purpose: Broadbanding is intended to support agile, flatter, faster-paced, de-bureaucratized organizational cultures

4. In a broadband pay structure, the numbers of salary grades are consolidated into fewer, but broader, pay ranges. In broadbanding , the spread of the pay ranges is wider and there is less overlap with other pay ranges. Broadbanding evolved because organizations want to flatten their hierarchies and move decision-making closer to the point where necessity and knowledge exist in organizations.

5. Use: Broadbands are imperative for companies with competency-based pay programs, but are also used in companies with longevity- and performance-based pay programs. Companies employ broad banding to: facilitate change avoid multiple pay structures drive pay decision-making downward (empowering managers) provide greater latitude in management pay decisions

6. promote lateral moves or in-grade promotions reduce use of promotions to increase pay promote career development / learning reduce the need for precise job analysis/evaluation promote fewer, broadly-defined jobs focus on the person instead of the job facilitate quick responses to changing goals and circumstances

7. Structure: Companies adopting a broadband structure generally reduce the number of salary ranges by one-half to two-thirds. The broadband range spread is generally 75% to 125%. It may be greater. Most broadbanding companies use 10 bands: 2 for the executive level 4 for the managerial and professional level 4 for the non-managerial or hourly level

8. Midpoints: Broadbands typically do not have a single midpoint; they have a minimum and maximum. Broadbanding companies use a range of techniques for control purposes, including a series of reference points relating to career levels in a job family, market based zones linking a group of benchmark jobs to anchor the structure to the market, and so-called shadow ranges.

9. Wide (or Fat) Grades: Some organizations use wide grades (also called fat grades). These are simple traditional pay ranges that have been modified so that there are fewer of them than previously used. Their minimum-to-maximum spread is greater than tradition-bound ranges of the last century. These structures may help to counter grade creep and make for a more realistic approach to pay decision-making, but, typically, do not free a company from traditional pay administration practices.

10. Prevalence: Broadbands (and career bands) are still viewed as a novel approach to pay, yet to be proven workable. While companies continue to move to broadband pay programs, anecdotal reports indicate that many early-adopters are returning to more traditional (albeit relatively wide) pay structures.

11. Success: Successful use of broadbanding requires that: top management has a clear goals, understands the pros and cons, commitment all managers are mature and highly trained in HRM and compensation

12. Pitfalls: Before moving to broadbanding , companies should consider the following: Broadbanding demands that managers are aware of, and can interpret, market pay data Broadband control points are not precise for individual jobs Broadbanding increases the potential for employees to float to the top of the band, way out of sync with the market Broadbands lack the automatic cost-control mechanism inherent in narrow pay ranges Broadbanding eliminates the possibility for precise job analysis/evaluation