11-14-2016 CC WS MinCITY OF SHOREWOOD
CITY COUNCIL WORK SESSION
MONDAY, NOVEMBER 14, 2016
MINUTES
1. CONVENE CITY COUNCIL WORK SESSION
5755 COUNTRY CLUB ROAD
COUNCIL CHAMBERS
6:00 P.M.
Mayor Zerby called the meeting to order at 6:02 P.M.
A. Roll Call
Present. Mayor Zerby; Councilmembers Labadie, Sundberg, and Woodruff, Administrator Lerud;
City Clerk Panchyshyn; and, Finance Director DeJong
Absent: Councilmember Siakel
B. Review Agenda
Sundberg moved, Labadie seconded, approving the agenda as presented. Motion passed 4/0.
2. COMPENSATION STUDY
Administrator Lerud stated the compensation study started before he joined the City. The City engaged
George Gmach to conduct a classification analysis and to evaluate the various staff positions.
Mayor Zerby introduced Mr. Gmach.
Mr. Gmach explained former City Administrator Bill Joynes had contacted him last spring regarding his
concern about the lack of a formal pay program for non -union City staff. Because a number of tenured
personnel planned on retiring in the next year or so, Joynes had concerns about the hiring process. Joynes
also had concerns about the pay equity which is a compliance issue. If the City has a pay program it is
much easier to comply with pay equity and to deal with hiring issues. In the spring Joynes was not as
concerned about the Public Works employees represented by AFSCME (American Federation of State,
County and Municipal Employees) Local 224. When he and Joynes discussed those employees at a later
date he explained to Joynes that it was necessary to create points for those union positions as well. If they
were not included in the study it would still be necessary to create points for them because the same
system needed to be used for all positions within the system. As part of the study the points were applied.
He clarified that the negotiations with that bargaining unit is a separate issue.
He provided an overview of what the process entailed.
➢ The current staff job descriptions were reviewed. They were used in the evaluation process.
➢ The jobs were rated using a point factor job evaluation system based on the following.
• Qualifications
• Decisions the jobs makes
• Problem solving
• Relationships — inside and outside of the work group with the public
• Effort — both physical mental (mental effort is dealing with deadlines and details; the
pressures that might be presented for certain jobs for accuracy, for speed and for timeliness)
• Working environment — the conditions employees might experience on the job (e.g.; working
outside in very cold or very warm weather conditions or dealing with disagreeable people
who might aggressively challenge the employee)
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• Work hazards — things that are unavoidable (i.e..; things that in spite of an employee's best
effort to follow all of the work safety rules are naturally inherent with the job)
➢ Market jurisdictions were selected for salary benchmarks. The jurisdictions were selected based
on geographic locations and similarity in size and financial measures. They included the Cities of
Medina, Minnetrista, Mound, Orono, Victoria, Waconia and Wayzata. Because he had recently
finished updating Minnetrista's plan there was current data available for the study for Shorewood
study. Also, the mix of cities for Minnetrista was similar to what would be used for Shorewood.
➢ Consideration was given to pay levels and service time, including the AFSCME contract
➢ Consideration was also give to the financial impact of the formal plan
He explained that when he did a comparison he assessed them individually rather than averaging them
together. When only a few jurisdictions are compared doing that individually provides better comparison
results.
For each comparison of Shorewood's information against another jurisdiction's, a regression line was
developed. On it the Shorewood points are the X axis and the Shorewood hourly rates are the Y axis. The
upper and lower control limits (the upper and lower lines) on the charts are the recommended range
points for the Shorewood jobs. Each job was given a number of points. On the charts the smaller lower
dots are the recommended minimum hourly rates and the upper dots are the recommended maximum for
Shorewood. The larger dots are the other jurisdictions' data; the larger red dots are the minimum and the
larger green dots are the maximum. Each large dot represents a job match (not an employee match). The
object is to determine if the job matches are in the ball park of where the structure will be set; what is the
pattern.
The analysis drilled down to the job on hand. For example, if a job requires a high school education and
no previous experience it would get a certain number of points. As the education and experience
requirements increase a job is assigned more points. That same thing applies to the nature of decisions a
person in a job has to make and the impact of those decisions on the City. Therefore, jobs in management
will get more points on decision making. For problem solving, the technical skills and knowledge are
considered. Sometimes in those cases for positions reporting upward those individuals may be almost as
technical as the job supervising them. Relationships deal with who the person has to work with. For
example, the person who would normally score the highest on relationships would be the city
administrator because they deal with elected officials, other jurisdictions, the public as a whole and in the
event of an issue the media. For a water treatment position or public works position, most of their
contacts would be with a homeowner of a residential property.
Mayor Zerby asked how the points were set. Mr. Gmach responded by the consultant and explained they
were based on the consultant's assessment of what the content of the job is.
Mr. Gmach stated there is a tendency for the points for benchmark jobs (e.g.; public works jobs) from
one jurisdiction to the next to be somewhat similar. But, others might be different. He explained that a
good example might be the Shorewood Director of Public Works position which has a PE (professional
engineer) requirement. That is a higher qualification requirement than for a public works director in some
other cities which do not require the PE.
Mayor Zerby asked how the points were set for the Shorewood Director of Public Works job, for
example.
Mr. Gmach explained the points for the Shorewood jobs were set based on current requirements. He set
the classifications and discussed them with former Administrator Joynes. Later he and Joynes reviewed
them with Administrator Lerud. In response to a question from Mayor Zerby, he noted that Joynes agreed
with the classifications Gmach presented.
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Mr. Gmach stated that during this process there is an opportunity to take a second look at the
classifications. He noted the classifications are dynamic; there are not set in stone.
Mayor Zerby asked Mr. Gmach how many times he has done a points assessment for staff positions for
various jurisdictions. Mr. Gmach stated he has done that for approximately 15 percent of the counties in
Minnesota and for quite a number of cities. Locally, for example, he has done it for the Cities of Edina
and Eden Prairie and for the executive team at the City of Minneapolis. He has also done it for many of
smaller cities.
In response to a question from Councilmember Woodruff, Mr. Gmach noted that in the group of cites for
the Shorewood study he has only done a similar study for Minnetrista; Minnetrista has had this system
for more than 10 years.
Mayor Zerby stated he read that Mr. Gmach had been a member of the Corcoran City Council for a
number of years. Mr. Gmach confirmed that and noted that he still provides pro bono support for
Corcoran's job evaluations. He noted that he retired in 2012 from that Council after serving for 20 years.
Mr. Gmach provided a synopsis of his background. After being in the service and after college he started
out working at Federal Cartridge and did so for 11 years while working his way up through management
and employee training. He then went to work for Stanton. Stanton used to do the survey for the
metropolitan area. For about 10 years he was the manager in charge of conducting the metro survey.
After he left Stanton that process was moved to an online system with a different vendor. He consulted
for over 30 years. He is currently semi - retired; he still provides services for existing clients. He is not
seeking more business. This opportunity with Shorewood came about because he worked with former
Administrator Joynes about 25 years ago.
He displayed the comparison charts for each of the seven cities. He made the following comments.
Waconia is located in Carver County, it has a larger population and it is further away of the metro area to
the west. It is in a slightly different market than Shorewood. The Minnetrista pattern is relatively close.
Minnetrista has a lot of build out to do yet. Medina is a little smaller and typically the positions are a
little lower paid especially for the top management positions. It is pretty strong at the lower end. The data
for Orono is a little older than some of the other data used. The Wayzata pattern is relatively close.
He explained the chart titled Current Pay Compared to Plan Design. He pointed to the dots representing
the four AFSCME positions. When reviewing the overall level of pay it was important to make sure that
there would be some linearity between that group and the other staff. He paid a lot of attention to the first
level of Public Works position which is the light equipment operator (LEO) position. Some of the higher
level Public Works positions have a minimum, a maximum and steps as well as some provisions for extra
premium pay for getting certain licensure. The proposed system should be able to accommodate that.
But, it may require that the maximum be set a little lower than what is shown on the chart in order to
accommodate the premium pay while keeping everything linear for pay equity purposes. That extra
premium pay is going to be counted when pay equity is reported. The objective of these types of systems
is to keep them as linear as possible in order to provide the best chance of having compliance with pay
equity. He suggested there be discussion with AFSCME personnel about whether or not licensure should
become a requirement. For a number of cities he has worked with licensure is a requirement. It is not
always a requirement at the time of hire but may be required within one or two years on the job. At
Shorewood licensure is more of an incentive. The lighter green dots represent current actual pay.
Shorewood has some senior staff; some of them might be leaving within the next year or so. For some of
those positions the new maximum might be lower than their current rate of pay. In those instances the
City may want to continue to give them normal cost -of- living- adjustments (COLA) but when the new
person is hired they should comply with the new program.
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One of the purposes for having a system like the one proposed is to put some controls on the upper level
pay. With the system the only way for a person to earn more than the maximum for their position would
be to increase the responsibilities for the position; they would need to get a promotional increase and an
increase in the points for the new responsibilities.
Councilmember Labadie stated if an employee went back to school or got additional training she asked if
doing that would affect the position's points. Mr. Gmach noted that would depend on whether or not the
City needs that level of skill. He explained if the employee added to their skill sets and that qualifies
them to work in a higher level position the City has available the points would increase because of a
promotion. But, an individual is not typically paid more because they have more education or skills than
are required for the job. If the degree is unrelated it does not count.
Mr. Gmach explained the chart titled Plan Structure. There were grade numbers of the left chart. There
are 20 grades with one being the lowest. The highest grade filled at Shorewood is grade 19. There is an
extra one (grade 20) just in case something happens in the future. A couple of the lower grades are
focused mostly on part-time positions. Ordinarily part-time staff would not be reported on pay equity
unless they work they requisite number of hours. Whether that would be 14 hours a week (or about 60+
days a year); for students it would be 100 days in a year. If a person works over that they need to be
reported.
For the lower level positions that would be occupied by part-time people the range spread was changed to
50 percent. For grades 4 — 13 the range spread is 25 percent and for grades 14 — 20 the spread is 20
percent. The 50 percent for grades 1 — 3 means that the maximum was divided by 1.5 to get the
minimum. The wider the spread the lower that minimum will be. The higher grades, those near the top of
the structure, most of those positions will be higher level professionals or department heads. It would be
very rare to hire those positions at the low end of the market rate. For that reason it does not make sense
to have a wide spread because the bottom of that structure would not be used. For the grade 19 position,
the maximum hourly rate is $59.96, the maximum spread is 20 percent and the minimum hourly rate is
$49.96.
The max spread column reflects the max spread between that grade and the next higher grade. It is 8
percent through grade 11. It is 7 percent for grades 12 — 16 and 6 percent for grades 17 — 20. There are
opportunities in the future to adjust those percentages. Minnetrista has done that a couple of times over
the last 10 years. The City of Vadnais Heights also did that.
Columns B — F on the Plan Structure chart represent steps. It is not necessary that an employee land on
those steps. In the implementation process there is an option to move people into the structure based on
what they are currently paid. If an employee's pay is between the minimum and the maximum hourly rate
their pay may not equal one of those steps. For new hires an attempt should be made to have their starting
pay be equal to one of the steps. Each of the steps for one grade is of equal value. The step value starting
with grade 5 is larger than the previous grade's step.
Councilmember Woodruff stated if the Plan Structure is competitive with the market he asked where
those competitive market numbers came from. Mr. Gmach explained they came by assessing how the
other jurisdictions individually fit in the relationship as well as factoring in the bargaining rates for the
union employees and the current rates of pay.
Mr. Gmach stated it is up to Council to decide if the proposed Plan Structure is correct or if it should be
slightly lower or slightly higher.
Councilmember Woodruff explained that the last time the compensation structure was evaluated was five
or six years ago and that was done based on data from the League of Minnesota Cities (LMC). The first
challenge was in trying to find relatively equivalent jobs in the LMC's data. For each position the high
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and the low rates were taken out of the evaluation. Upper and lower limits were set up for pay. He
thought that is what Mr. Gmach did using a different process.
Mr. Gmach noted he provided Administrator Lerud and former Administrator Joynes with analysis on the
individual jobs as well. He explained that in terms of setting up a structure it is sometimes best to get past
the individual jobs.
Councilmember Woodruff stated that ultimately the proposed pay structure has to make Shorewood
competitive in the labor market.
Mr. Gmach stated that any time there is turnover in a job it is prudent to assess if the qualifications for
and responsibilities of the job reflect what the City currently needs and wants and to decide what the pay
grade should be for the job. That is up to the city administrator and possibly a few others on staff to
determine. It should be done before the position is advertised for hire. He noted Shorewood's
qualifications for the building inspector position are quite light.
Mayor Zerby stated that once this Plan Structure is implemented he asked if there is a way for the City to
determine a point structure for a new position. Mr. Gmach noted that he had provided Administrator
Lerud with a copy of the evaluation system. He stated City staff can always call him and noted there are
other people qualified in the use of the system who can consult on it. He noted the City has control over
the system.
Zerby noted that there are a number of websites that offer similar assessments. He asked Mr. Gmach if
his system was similar.
Mr. Gmach explained that when he designed the system he uses in about 1998 he researched websites in
almost every English speaking country. He assembled everything that he could find on job evaluations.
The classic one was the Hay System which has been around for a number of years. There are also a
number of other systems. He has implemented a number of other legacy systems in other jurisdictions.
His system recognized all of the key components but did not overlap. He noted there is nothing in his
system for supervision because supervision is built in to things such as qualifications, decision making,
problem solving, relationships and so forth. Adding another factor for supervision would double it up.
He reviewed the implementation steps which are as follows
➢ Negotiate with AFSCME for public works jobs including the issue of licenses. One option is to
leave those positions in their own structure. The other is to try and roll them into the same
structure as the other employees. Either would probably be successful with pay equity.
➢ Consider whether to place current employees on a step or use step values. The cost
implementation would be higher if they had to be put on a step.
➢ Place new hires on a step based on qualifications and recruiting need.
➢ Generally, each year provide a step increase. If starting at a minimum rate use a six moth step
increase as in the AFSCME contract. The annual increased would be given after that for five
years. The rationale for the five years is that is where the current contract is at for those
employees represented by AFSCME. One of the questions asked on pay equity is how long does
it take to reach the maximum rate of pay which is considered to be market.
➢ Adjust the Plan Structure at the beginning of each year to keep up with the marketplace.
Typically that results in the employees getting a market rate increase plus their step increase. For
the first six years of a person's employment they would receive nice increases. After their pay
reaches the maximum (i.e.; market) then they are limited to the market adjustment. Market data
for other cities is usually available to use. He also likes to use the federal employment cost index
because it provides another way of looking at pay increase trends.
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➢ Do a more in -depth market evaluation every three years or so. That depends on the volatility of
the market. If the City pays attention to the LMC survey each year doing that in -depth evaluation
every three years may not be necessary. Before doing the recent update to the Minnetrista
structure its last update of the entire structure was done before the recession. Doing the in -depth
evaluation could be limited to doing that when there is employee turnover.
➢ Test for pay equity each December prior to the reporting year.
Mr. Gmach encouraged Council to decide if it thinks the structure he proposed is correct for the City.
That could be done now or during a future meeting. He stated it would be helpful for Administrator
Lerud to know if Council likes the concept in general without getting specific about the details so he can
have specific discussions with the bargaining unit.
Councilmember Sundberg asked Administrator Lerud if he likes the concept of what is being proposed.
Lerud stated there was a similar structure at his previous employer. Lerud explained what has been
proposed is consistent from top to bottom and from side to side. He thought the valuation of the jobs was
quite comprehensive.
Councilmember Woodruff stated for 10 years the City's policy has been to pay for performance. But, that
was never properly implemented. The proposed structure abandons pay for performance. He noted one
item in the step plan considerations slide states the performance reviews would be focused on personal
growth rather than pay. There is no direct connection between performance and pay other than a binary
one. He then stated if the maximum rate in the structure is considered to be the market rate then an
employee would never be paid above the market rate. That is a policy decision Council has to make. He
thought the system would be relatively straight forward to administrator (it may not be straight forward to
update) and would be easy for employees to understand.
Mayor Zerby questioned if it would be easy for employees to understand. Will they be able to understand
how the points for their job were determined? An employee may believe their job's challenges and
responsibilities are different than what the person determining the points did.
Mr. Gmach stated that if an employee thinks their job points are too low they can discuss that with their
supervisor or the City Administrator and ask them to review the points rating. Ultimately the points
rating is a management decision. The employee has an argument if the understanding management has of
the employee's job is not accurate. That might mean that the employee's job description does not
accurately reflect what they do. For union employees their rate of pay is negotiated. For non -union
employees their rate of pay is determined by the policy Council adopts.
Councilmember Sundberg noted one item in the step plan considerations slide states performance failure
is dealt with by termination if the performance is not remedied.
Mr. Gmach explained after working in this business for 30 years and working with the private sector
companies that had merit systems in place he has found that what often happens in pay for performance
systems is the documentation about an employee's performance might not allow the employer to make
enough differentiation to really make a difference in an employee's performance. In other words, if all
there is to work with is the difference between 2 percent and 4 percent there is not a lot of motivation in
that differentiation. The more psychological motivation comes from the feedback they receive about how
they are doing in their job. That counseling activity associated with the review is still valuable.
Documentation is required when there is an employee who is not going to perform up to expectation and
they need to be terminated. Employees do not generally change their behaviors very much based on
whether they get a 2 percent or 4 percent pay increase. But, performance reviews could.
Councilmember Sundberg stated she thought the City needs to do a better job with performance reviews
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November 14, 2016
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Councilmember Woodruff stated the City's Employee Policy Manual needs to be significantly revised to
reflect the new pay system.
Councilmember Sundberg stated there are fresh perspectives that need to be taken into consideration. She
stated that she would like to ensure that the expectation of quality performance is not diminished in any
way. She noted there needs to be a way to deal with poor performance.
Mr. Gmach stated there has been a lot of discussion in the private sector about performance reviews. He
explained General Electric, one of the companies that was most famous for performance reviews, has
changed its approach entirely. It realized that a performance meeting once a year was not getting the
results it was looking for. Employee performance should be discussed on a regular basis. If there is an
issue that should be discussed when it happens. Performance feedback is a process and not an event. He
stated that for a private sector company if there is, for example, an engineer who is developing patents
and the company is trying to keep from losing that employee to another company the employers is going
to give that engineer a significant increase to keep them rather than adhering to the pay policy.
Councilmember Sundberg stated she preferred to have pay and performance separated. But, performance
must be evaluated. She noted that performance reviews can be a disincentive.
Mr. Gmach stated sometimes performance reviews can discourage an employee more than motivate
them.
Mayor Zerby stated that what Mr. Gmach has presented provides a great foundation.
Councilmember Sundberg asked about the Personnel Committee. Mayor Zerby stated that typically those
appointments are made at the beginning of the year.
3. ADJOURN
Sundberg moved, Woodruff seconded, Adjourning the City Council Work Session of November 14,
2016, at 6:58 P.M. Motion passed 4/0.
RESPECTFULLY SUBMITTED,
Christine Freeman, Recorder
ATTEST:
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Jean Panchyshyn, City Cler