Honorable Board of Supervisors
County of Los Angeles
383 Hall of Administration
Los Angeles, California
At the Board meeting on November 29, 1966, your Board approved our Committee’s recommendation to hire an outside consulting firm to develop a compensation plan for County executives covering the department head, chief deputy and division chief levels. At that time you specified that your approval was subject to our naming a firm and a fee satisfactory to your Board.
Since that time, we have interviewed a number of consultants in the compensation field and have received twelve proposals. We have evaluated these proposals and have selected one firm whose proposal, we judge, is the most favorable in terms of both study approach and fee. The firm is one of the most reputable in the field. The total cost is $34,600, involving the assignment of two compensation specialists at full time for approximately four to five months. We believe this to be an extremely good price. A majority of the firms proposed fees between $40,000 and $50,000.
This report summarizes the reasons why we think this study is urgently needed.
Purpose of the Study
The sole purpose of the study is to develop a systematic and logical compensation plan for your Board to follow in setting executive salaries. Your Board is totally with- out such a plan now. As a consequence, the executive salary structure is in a state of utter confusion. Documentation supporting this statement is in the Committee files. To avoid prejudicing the proposed study as well as prevent embarrassment to concerned executives3 we do not include specific examples of major inconsistencies in this. report.
Mr. McClellan, Vice Chairman of our Committee, pointed out to your Board on November 29, that the County has an expenditure in the neighborhood of five million dollars a year invested in these executive salaries. We think their determination should be treated with the same care and attention which your Board gives to the annual expenditure of similar amounts in other budgetary areas.
Development of an Effective Plan
To develop an effective Compensation plan involves much more than a random look at the salary levels of Comparable Positions in a few other cities and counties. To do the job properly - as experience in both private industry and public agencies indicates - will require detailed analysis of the responsibilities of each of the 350 positions, personal interviews with at least 200 to 250 of the concerned executives, the development of accurate job descriptions, the evaluation of internal relationships between positions using appropriate factor measurement, the comparison of the responsibilities of these positions to the responsibilities of similar positions in industry and other governmental agencies, the establishment of a ranking system to place each job in its proper grade and, finally, the assigning of appropriate salary ranges to each grade.
There is nothing radical or new about this approach. Every major corporation in the country has such a plan.
We cannot predict what the results of the study will be, insofar as current salary levels are concerned. We would expect some salary levels to be reduced, some to be raised, some to remain the same. With such a study, how- ever, your Board for the first time will have before it a plan which will systematically evaluate and rank each executives job in the County in relation to all others and assign it an appropriate salary range. Such a plan will not preclude the possibility of your Board rewarding executives who do an outstanding job or denying increases to executives whose performance is marginal.
The l965 Salary Hearings
What can happen when an executive body attempts to operate without a consistent salary plan was illustrated most forcefully during the 1965 salary hearings. In two successive meetings, on May 25 and May 27, your Board raised the salaries of the Assessor, the District Attorney and the Sheriff three different times.
At the second meeting, your Board also raised the Chief Administrative Officer’s salary but voted down a motion to raise the County Counsel and the Director of Charities. A week later at the meeting on June 8, your Board reversed itself and voted the raise for these two officials. Between May 25 and June 8 your Board raised the salaries of these six County officials by a total of $28,372.
It was difficult for anyone observing these proceedings to understand on what basis your Board was making its decisions. In fact, after the third successive raise had been approved for the three elected officials, one member of your Board stated in the record that this action presented the Board "in a most ridiculous light in the public's eyes."
We should emphasize that we do not imply that these raises were necessarily exorbitant or unwarranted. Comparable raises are riot uncommon at this level in private industry. We cannot imagine, however, a private corporation taking such action without benefit of any plan and using only the most elementary ground rules.
Why Not a Survey of All Employees?
At the November 29 meeting in which your Board approved the study of executive salaries, the question was raised as to why we did not include all employees in our recommendation. Why just the top executives? The an3wcr is that in our report to your Board of November 22, 1966, we did recommend a separate study covering all employees. However, such a study will be far more complex and costly than a study limited to executive salaries. We recommended, therefore, that this study be postponed until the new personnel organization is well established and the proposed changes in personnel administration are operating smoothly. We had in mind in particular the establishment of an effective employee relations ordinance covering procedures for negotiation and the orderly settlement of employee grievances and disputes.
We should note here - since some misunderstanding has occurred on this point - that our recommendation for a study of the compensation system covering all employees in no way conflicts with our recommendation to establish an employee relations function in the new Department of Personnel, responsible for negotiating salaries and working conditions with union and employee representatives. However excellent its compensation plan may be, County salary proposals should be subject to negotiation In other words, County management, whatever its compensation plan, cannot rightfully assume a mantle of' infallibility. The better the County’s compensation plan is, however, the stronger is the County’s position for demonstrating fairness and validity in its salary proposals and the better the chance for reaching agreement with union and employee representatives.
Need for Unanimous Board Support
If even one member of your Board is opposed to the use of an outside consultant for the executive salary study, the consultant’s chances of bringing the study to a successful conclusion are severely reduced - even though a majority of your Board supports the project. Such studies are difficult undertakings at best. They have small chance of satisfying everyone concerned, regardless of how skilled and experienced the outside consultant may be. If the study is criticized. from the outset by a member of your Board, it is obvious that those executives who do not like the results will be provided. with a base from which to attack the study. Therefore, if this report has not persuaded your Board to give unanimous support to the study, we would hesitate to recommend your spending money to bring in an outside consultant.
In this event, your Board may conclude that the Director of Personnel should then conduct the study using County personnel. We do not favor this alternative. A study using County personnel will take much longer and will place a heavy burden on the Department of Personnel at a time when it is deeply involved in correcting the abuses and red tape in the Civil Service system and working to develop effective and orderly employee relations procedures. In addition, it will place the Director of Personnel and his staff in a delicate position vis-a-vis their colleagues in other departments.
In contrast, outside consultants cannot be accused of bias or a personal interest in the results. In addition, they bring to the study the experience from similar studies in a wide variety of organizations, both private and public. For these reasons, private industry has found that outside consultants generally achieve much better results in conducting such studies.
For the above reasons, we believe a study conducted by an outside consultant is essential to the early correction of the present chaotic state of executive salaries. It will not interfere with the development of the employee relations ordinance, and will not have any effect on a later study covering all employees.
We therefore recommend:
Very truly yours,
A. C. RUBEL, Chairman
THEODORE BARRY AND ASSOCIATES
December 4, 1967
Honorable Board of Supervisors
County of Los Angeles
383 Hall of Administration
Los Angeles, California
In compliance with the stated instructions of the Chairman of the Board of Supervisors and other members, we are submitting directly to the Board our completed Executive Compensation Study.
This study was conducted at your authorization and at the recommendation of the Economy and Efficiency Committee. The purpose of the study was threefold:
We used all of the tools of the salary administration and job evaluation disciplines in conducting this study. We evaluated all positions using the point factor system we developed and are recommending for permanent use. We re-evaluated them using other systems, including factor comparison methods, as double and triple checks on our efforts. We assembled all of the salary survey data we could uncover. We searched out and found salary data in a very large sampling of public jurisdictions and were given extensive help by over fifty private sector companies.
Our study was performed with complete independence. These findings are ours alone and have not been influenced by any County department head or other employee group.
The findings have been audited by Sam Leask, Jr., former Los Angeles City Administrative Officer and current1y President of the State Personnel Board; and by George Shellenberger, former Executive Director of the Los Angeles Merchants and Manufacturers Association. These men were selected as being among the most knowledgeable men in the state in 'matters relating to salary surveys and job evaluation. Their reaction to this study was outstanding. Both men commented that they had never seen a more thorough job.
We have kept the Personnel Department posted throughout the study on how we were performing the job, The salary administration practices we recommend herein, and the job evaluation system we have developed, are acceptable to them as workable and as being compatible with other County practices.
The findings of the study are spelled out in detail in the report. Here are some significant highlights:
We have enjoyed this assignment very much and come away from this job impressed with the quality of government and administration which this County enjoys.
LOS ANGELES COUNTY
EXECUTIVE COMPENSATION STUDY
December 4, 1967
Table of Contents
Table of Contents
(Available with Hard Copy)
(Available with Hard Copy)
The Los Angeles County Citizens Economy and Efficiency Committee on August 31, 1966 reported to the Board of Supervisors on its overall study of County Compensation policies and practices. The portion of the Committee report devoted to Executive Compensation referred to approximately 350 county positions which were at the department head, chief deputy and division chief level.
The Committee report envisaged that a meaningful study of executive compensation should "include the gathering of prevailing salary data from private industry and from other governmental agencies for positions with similar responsibility. It should also include an evaluation of the relative responsibility of various County executives and recommendations as to proper sa1ary relationships."
The study, as vie conducted it, included the comparisons quoted above (and others discussed in later sections), with the objectives of (a) recommending salaries or salary ranges for all studied executive positions so they can be justified when compared with one another and with outside salaries, and (b) establishing an executive salary structure which would create incentives for high individual performance.
Because the "prevailing wage" policy exists in Los Angeles County, it is important that the authority be quoted. The Charter of the County of Los Angeles (1967 Edition) states in Article X (Labor), Section 47, "In fixing compensation to be paid to persons under the civil service, the Board of Supervisors shall, in each instance, provide a salary or wage at least equal to the prevailing salary or wage for the same quality of service rendered to private persons, firms or corporations under similar employment in case such prevai1ing salary or wage can be ascertained."
We recommend the salaries shown in Table 1 as being consistent with our findings, the recommendations of the committee to the Board of Supervisors, and within the intent of Section 47, Article X of the County Charter (1967).
The present 5-step standardization salary schedule has been retained for all studied positions except department heads, where annual salaries with provision for merit increases are recommended.
Our cost calculations are based on the assumption that salaries of those recommended for an increase would be at the 5th step and department heads at the base salary for their position. Furthermore; we assumed that the incumbents of positions recommended for decrease in schedule would not suffer a reduction of their present salary.
The 5th step (or flat salaries) and employee benefits of the studied executives on July 1, 1967, totaled $7, 325, 923. This represents 1.47% of all budgeted 1967-1968 County salaries and employee benefits. The salaries of all of the studied executives were "frozen" as of July 1, 1967, pending this review. If these salaries had not been held at this time, raises would have been granted at a probable average increase of one and one-half salary schedules, or 4% (based on the other salary increased granted). This would have represented an approximate annual cost of $293,000. Our proposals, which are adjustments representing 18 instances of decrease in salary schedule, 30 instances of no change, and 283 instances of increase, represent a maximum cost of approximately $547,000. This amount represents an average one-time only adjustment of 7.47% for the studied executives.
Examination of Tables 1 and 2 will reveal that various department heads have been recommended for salary increases while some executives (primarily) at divi3ion, chief deputy, assistant chief deputy and division head levels have been recommended for no change from their current schedule. These recommendations are made with the realization of their being misinterpreted. We a1so realize that the problems of salary compression between some superiors and their subordinates may not be alleviated and, in some cases, may even be compounded. As to the first point, regarding certain department heads, we recognize in their positions the demand and responsibility to warrant the recommended increases. We could not identify in tile chief deputy, assistant chief deputy, and certain division head positions the job demand and responsibility to warrant schedule increases to maintain so-called "traditional" schedule relationships. If the Board considers it important and necessary to maintain these relationships, the positions should be reorganized to increase the job demand and responsibility. Such a reorganization probably would result in consolidation of functions and elimination of some positions.
Concerning the second point, we carefully examined the problem of salary compression affecting surveyed executives. Our questionnaire, Appendix A, asked for information concerning compression problems. However, for us to make salary recommendations primarily for the purpose of easing the compression problem would imply that we evaluated the hundreds of subordinate positions which were not included in the survey. While our recommendations were made with the knowledge of the compression problem we could not consider it in our evaluation of the surveyed positions.
The compression problem is real and serious. It is a problem that apparently has grown acute due to increases granted annually at the lower levels. The effects on morale, motivation, and recruitment may not be measurable, but this should not deter the County in its attempts to solve the problem. We do not see how such a grave condition can be resolved without an evaluation and reclassification of all County positions that contribute to or are affected by the compression problem.
The methods employed in studying salaries and wages are standard, widely accepted procedures. Our approach, basically, was no different from that we have used successfully in industry.
Because we were dealing with top executives of a governmental entity, however, we supplemented, rather than substituted, the procedures normally followed in an industry study. The following sections describe these procedures in detail.
In our work we gave no consideration as to whether a position, function, or department was mandatory or non-mandatory - or whether programs are highly or not at all subvented by State or Federal funds - or whether departments or programs operate under their own tax levy or the general fund - or whether an executive be elected or appointed. We considered, insofar as was humanly possible, the position rather than the man filling the position. In doing so we were impressed with readily identifiable differences in position demand and responsibility even though the positions may now be compensated at the same salary schedule.
We drew heavily, but not solely, from our contacts in business and industry to assist us in determining prevailing wages as well as in evaluating relative importance of selected positions.
We studied relevant ordinances, State laws, Board actions, pertinent County budget messages, and various information (studies, articles, books, etc.) relating to the subject of governmental executive compensation.
On June 13, 1963, the Chief Administrative Officer reported to the Board on the comparability of police, fire, and related classifications in the City of Los Angeles and the County of Los Angeles. We assumed the comparability established by that report was not to affect our procedures, evaluations, or findings.
At the outset of the study we met with the affected executives to explain the purpose and approach of the study. At the meeting a questionnaire (Appendix A) was handed to each man to complete the form and return it to us through his department head. The questionnaire was especially designed to provide us some of the information we would need in our individual position evaluation. The questionnaire was designed for general County-wide use and was therefore not intended that the answers be complete in themselves. Instead. the questions and answers provided the basis for in-depth interviews which were later conducted by members of our firm.
We recognized from the beginning that County operations are complex and, on the whole, considerably varied as between departments as well as within many departments.
In order to gain the necessary understanding of the scope, responsibilities, and demands of the affected positions, we interviewed 70% of the executives. Each department head was interviewed, including those who retired after the start of the study as well as those planning to retire in the near future. Additionally, the newly appointed department heads were interviewed or reinterviewed in their new positions. To assure ourselves that all facets of a position were being investigated, we held numerous reinterviews or asked that specific additional information be furnished us.
Interviews with department heads ranged in length from two hours to five. All other interviews lasted an average of two hours.
Initial selection of those to be interviewed was on a random basis, except that regardless of the number of affected executives in a department, the department head was selected and, where possible, interviewed first in his department. Department heads were apprised of subordinates selected for interview and their advice solicited as to which additional positions in their department should be interviewed. Their suggestions were heeded in all cases where possible within time limits imposed.
Information sought in interviews was structured to provide us with an in-depth picture of the position as well as "outside" forces, rules, laws, and influences significantly affecting the person, whomever now or in the future he might be, filling the position. Additionally we were interested in learning something about the qualifications, titles, responsibility and authority of the persons, especially in business, industry, or the professions, with whom the affected executives had to deal on a regular basis. This information helped us gauge the skills necessary to effectively conduct personal contacts on the part of the executive.
Upon completion of scheduled interviews we began ranking, in effect evaluating the relative job demand and responsibility of the affected positions. We began with the premise that no county position is automatically higher or lower than another, except within a department, where the department head was ranked higher than all of his subordinates. Our initial assumption as we considered each department was that all men with the same title would not automatically be equally ranked. In other words, we would evaluate the relative job demand and responsibility of each of the affected County executives regardless of position title, organizational level, or superior-subordinate relationships.
Ranking was accomplished employing well-established position evaluation procedures. In evaluating the relative worth of the affected county positions each was gauged against three Master Factors: Knowledge, Position Demand, and Real Responsibility. Each of these Master Factors was subdivided into a schedule of logically related sub-factors designed to bring into sharper focus the various executive skills upon which the overall relative worth of the executive position could be determined.
To accomplish our objective, points were assigned to each Master Factor, the maximum achievable being as follows:
Knowledge: up to 100 points (20%) Position Demand: up to 200 points (40%) Real Responsibility: up to 200 points (40%) Maximum possible: 500 points (100%)
Appendix B (Position Evaluation Guide) is a complete description, including definitions and points assigned sub-factors, of the procedure followed in arriving at our recommended rankings.
Federal Civil Service Assistance
To provide additional input to our ranking procedure, we asked various classification offices of Federal Civil Service Commission to determine the GS level for selected benchmark positions. We were primarily interested in the relative levels, as expressed in CS classifications. Because we realize that in classification work, especially on positions at the higher levels, much depends on the classifier's evaluation of information provided him, we first asked the local office of Federal Civil Service Commission for their assistance. Then, for a broader analysis, we repeated the procedure with civil service classifiers in Washington, D. C.; Philadelphia, Pa.; Frankfurt, Germany; Albany, Georgia; El Toro (Santa Aria), and Long Beach, California. Naturally the same positions and data were used in all locations.
Cross Check Of Similar Type Positions
During the course of our interviews we became acutely aware of inequities of responsibility and job demand existing in several positions, all with the same or similar titles. This situation is especially acute in Executive Assistant and similar positions existing under other titles. Therefore, prior to setting a final ranking of all positions we reevaluated each position with respect to other positions of a similar demand, responsibility, or title and made adjustments as appropriate.
The positions cross-checked were:
Head, Administrative Services
Selected Division Chiefs
Although members of our firm conducted the interviews and determined relative rankings of affected positions, we felt the importance of this study warranted an independent review of our work. An evaluation committee of three knowledgeable, well-respected and mature men, selected because of their reputation, competence, and broad understanding of industry and governmental operations, served without pay in this public service.
The men were Mr. Samuel Leask, Jr., President, State Personnel Board, with extensive knowledge and experience in the public sector, and Mr. George Shellenberger, former Executive Director of Merchants and Manufacturers Association of Los Angeles, with broad knowledge and experience in the private sector. Mr. Robert Mitchell, Chairman of the County Economy and Efficiency Committee, sat in on part of the meeting solely as an observer of the operations of the Evaluation Committee.
This portion of the study was designed to yield the optimum data on selected benchmark positions shown below. Additional positions were initially included, but sufficient usable salary data was not available to include them as true benchmark positions. Those yielding enough valid data for our purposes were:
General Storekeeper (Purchasing and Stores)
Chief, Purchasing Division (Purchasing and Stores)
Chief, Shop and Garage Division (Mechanical)
Head, Administrative Services, (Flood Control)
Fiscal Officer II
Division Engineer (Design), (County Engineer)
Deputy Director of Personnel (Class. & C6mp.)
Director, Real Estate Management
Director of Personnel
In addition to gathering current salary data for benchmark positions, we obtained information on numerous additional positions. These latter p6sitions were those of affected executives who, at our request, indicated positions in the public or private sector as being comparable. (It must be emphasized that we did not take at face value the data available for positions which the affected executives considered comparable. We carefully compared and evaluated the county position with the one(s) suggested by the executive. In many cases we could not accept the suggestion that the positions were sufficiently comparable to be valid and useful to the study but we did investigate each and every position suggested by an executive).
Current governmental salary data was obtained from the ten largest counties in California, the State of California, the City of Los Angeles, Cook County (Illinois), New York City and State, and the federal government. Data also were provided by California State Universities, the University of Southern California, several local small private colleges, Harvard University, Duke University, and various accredited Institutes.
Previous surveys which we investigated and, as appropriate used were those made by the following:
Merchants and Manufacturers Association
American Management Association
California State Personnel Board
Municipal Year Book
International Association of Fire Chiefs
National Recreation and Park Association
Fort Wayne and Allen County Public Library
Enoch Pratt Free Library
Stockton (Calif.) Public Library
American College of Hospital Administrators
Washoe Medical Center
Engineering Manpower Commission
Alameda County Taxpayers Association
Special position descriptions were prepared for each of the benchmark positions. The descriptions were expanded to provide sufficient information for a person knowledgeable in salary administration to intelligently price the position. (See Appendix C for sample). In addition to this format, we prepared for six County positions "constructive" position descriptions. Positions selected for constructive treatment were those that, because of their being somewhat unique in government may not be found in industry. For example, there is a high degree of commonalty in the functions and responsibilities of a personnel officer in government and industry. However, there is little commonalty in government and industry in such positions as the County Engineer, or the Treasurer-Tax Collector, or the Chief Administrative Officer. Therefore, for surveying these latter named positions we devised a different type position description, a sample of which is at Appendix D. It is our conviction that nearly all governmental executive positions can be described in business terms with sufficient accuracy to permit realistic pricing of those positions.
How The Survey Was Conducted
The most important and extensive part of the salary survey was conducted in person by members of our firm in Los Angeles, Chicago, Oakland, San Francisco and New York. (Less than 5% of the survey was conducted by mail, although the mail portion resulted in a 90% return of acceptable information).
Private enterprise surveyed consisted of two groups: (a) those companies having positions comparable to that of an affected executive and where suggested by the county executive, and (b) those companies selected by our firm.
Companies selected by our firm were those we have served in consulting assignments or where top management of the company is personally known to us. Companies were selected on the basis of size (as it or its subdivisions relate to the county as a whole or to specific departments); function and product(s) (as they relate to functions within appropriate departments of the county); our degree of familiarity with top management; and location.
The success of our approach in determining prevailing executive salaries, especially where constructive descriptions were used, rested on our being able to elicit the support of imaginative and cooperative company officials. We asked these men, in effect,
"Assuming your company had a requirement for an executive with the experience, qualifications, responsibility and authority as delineated in this constructive position description, how would he be compensated?"
A partial list of the companies that participated in the survey can be found at Appendix E. Other companies freely participated in this public service but asked not to be acknowledged because of company policy regarding executive compensation. Also included in Appendix E is a table of industry coverage.
Our ranking procedure resulted in the relative positioning of each of the affected executive jobs. With a maximum of 500 factor points possible, positions scored between 70 and 375 points. It is important that the reader understand that these points are for determining relative positions only and do not, under any circumstance, mean that a position with, say, 300 points is twice as valuable as or should be paid twice as much as one receiving 150 points.
As stated earlier, we believe it best to continue with the present standard1/~tion salary schedule. Therefore, we took the affected executive position currently on the lowest schedule and extended the salary "curve" upward to reflect the maximum number of ranking points received by an executive. Schedules were separated vertically and at any one step by the standard 2.75%. On the horizontal axis, schedules were grouped by fours into 12 grades each grade representing a ranking point range of 25 points. The four schedules within each grade were then separated from the lower to a higher schedule number, by 6, 6, 6 and 7 points. This was done as a convenience in assigning positions to schedules, but it represented, as is usual in business studies of this type, an approximate differential between schedules of about 6.5%.
Our next step was to select a "key" benchmark position which had an adequate amount of valid salary data. The "prevailing wage" for this specific position was then determined by averaging all salary survey data. (In this case the position was Chief, Purchasing Division, and the average was determined from salary figures from 61 positions in both government and business). The "key" benchmark position was then pegged to the schedule with a 5th step dollar amount closest to the determined prevailing salary.
The same procedure was used for other benchmark positions for which we had an acceptable amount of valid survey data. - Those positions were Director, Real Estate Management, County Counsel, and Deputy Director of Personnel. In each case the survey data and new schedule position assigned (based on ranking points) closely coincided, thus fully supporting, for these positions at least, the validity of our ranking factors, weights and procedures and of salary survey procedures and data.
We then determined, department by department, the proper salary for each affected executive position. based on the ranking earlier determined. Each executive position was then checked against any salary data available for that position and adjustments made when dictated. Because of the prevailing wage policy and the effectiveness of our salary survey procedures, we generally gave greater credence to survey information than to our ranking when an adjustment was indicated.
It is important to remember the relative size of the group of executives covered in the study. Out of approximately 54,000 employees, the 338 executives represent 0.625% of all those in county public service, while department heads account for only 0.088%! This small group, however, includes those responsible for important policy making and for planning, organizing, directing and controlling the activities of the departments of the County government.
The typical studied executive is a career employee who has come up through the ranks. The average department head has been in the County service for more than 28 years while the remainder of the group have had nearly 20 years service. This group is, on the whole, well educated with four out of five being college graduates. Many have one to three degrees even where such are not required by current civil service class specifications.
In the course of our interviews we heard a great deal about the problems caused by compression of salaries, i.e. the lower level subexecutive with smaller responsibilities and job demands being treated better (from the compensation standpoint) than the executive group. These comments led us to investigate salary trends for the past 20 years. This period of time was selected because of availability of data but primarily because a large majority of surveyed executives have at least 20 year’s County service.
In order to evaluate County salary trends, eighteen departments which have been in existence since 1947 were selected for study. These departments are listed below and3 for purposes of this study, we believe may be regarded as a representative sample of all County departments.
We studied three groups of individuals: department heads, subordinate managers (those included in the executive compensation study) and journeymen. The departments studied were:
Chief Medical Officer-Coroner
Los Angeles County Flood Control District
Parks and Recreation
Purchasing and Stores
Registrar of Voters
Weights and Measures
For these selected groups we used the 1947-1948, 1957-1958, and 1967- 1 968 Salary Ordinances and extracted salary data for each of the department heads and their subordinate managers. From the same Ordinances we also gathered salaries for 41 representative journeyman positions. These data, and data obtained from the Budget Messages for the same years, enab1ed us to consider a hypothetical "average" County department. Figure 1 summarizes some of the statistics computed for this "department".
1947 1957 1967 Department Head (No.) 1 1 1 Subordinate Managers(No.) 3.8 4.8 5.9 Budgeted Positions 351.0 619.0 990.0 Department Budget $1,586,995 $6,039,129 $12,741,347 Dept Head Salary $10,532 $19,535 $26,374 Sub Mgr Salary 6,914 12,288 18,650 Journeyman Wage 3,619 5,999 9,370
Figure 1. Statistics of "Average" county department for years 1947, 1957, 1967.
For each of the three stated years we computed state and federal income taxes in order to detect a relative change in rates between organizational levels since 1947. For simplicity, a man and his wife with no children were used for personal exemptions and the standard deduction was taken. As expected, the journeyman "loses" or pays a smaller percentage of his salary in taxes than does the subordinate manager or department head and, consequently, retains a higher percentage as disposable or after-taxes income. These relationships are shown graphically in Figure 2.
We found, as depicted in Figure 3, that the compounded annual increases in salaries for the three types of positions are comparable, as well as the compounded annual increase in taxes as a percent of gross income. Based on Consumer Price Index data provided by the Bureau of Labor Statistics, we calculated the compounded annual growth in the cost of living as 2.0% since 1947. The net annual change in salary position after taxes and cost of living adjustment is a 1.7% increase for the department head and journeyman and 1.9% for the subordinate manager. These figures show that the percentage annual increases in salary, taxes and cost of living are essentially the same regardless of organizational level.
Figure 4 graphically depicts the relationship between salaries using the journeyman as the base in each year. The subordinate manager has remained at a salary level approximately 190 - 210% that of the journeyman, while the department head has varied over a broader range of approximately 280% - 315% of a journeyman’s salary and has sharply declined in relation since 1957.
The factor that Figure 4 does not show (but which we feel is extremely important) is the growth in department head and subordinate manager responsibility over the 1947-1967 period. Figure 5 depicts this very dramatically in terms of personnel growth and department budget. From 1947 to 1967 the budgeted personnel in the departments studied increased an average 183% and the department budget 700% while the department head1s and subordinate manager's salaries increased 150% and 170%, respectively. Over the same period the journeyman 5 salary increased 158% but his responsibilities, on an individual basis, have increased very little, if any. In other words, the department head and his subordinate manager are responsible for a budget eight times greater and manage a staff 2. 8 times greater than in 1947, yet their salaries have remained at essentially a constant multiple of the journeyman's whose responsibility has not significantly increased.
The 700% increase in department budget arises from an average budget of $1,536,995 in 1947 to an average budget of $12,741,347 in 1967. These figures are in the same ratio as the total County budget of $148, 087, 734 in 1947 and $1, 223,251, 469 in 1967 which gives validity to the selection of the sampled departments as representative.
We feel that an executive's title is a very important matter to the individual and should reflect, when feasible, the main duties or responsibilities of the individual. In our interviews this point was most frequently expressed by those executives below the Chief Deputy level. In addition, there are numerous positions in the broad "executive assistant" category with seven different titles.
There appears to be little uniformity or relationship of titles between department heads and their immediate subordinate - regardless of the responsibilities or position demands of the subordinate. There are the position titles of Assistant Chief, Chief Assistant, Deputy Director, Assistant Director, Chief Deputy, and Assistant, Executive Director, all describing the position of the number 2 man of a department. The same situation exists in varying degrees in other positions. We feel it would be a worthwhile project for the County to review all executive position titles to improve inter-departmental job content comprehension.
Although our study legally was limited to the 338 executive positions selected by the County, we could not, and would not as a matter of professional standards, examine and evaluate these positions in a vacuum. We made it a point to learn where the executive stood, from the salary and organizational standpoint, with respect to his subordinates. Additionally, we were interested in learning of any compensation problems in the department, bureau, division or section reporting to the executive. We realize that the County is aware that such problems exist and probably well aware of the magnitude. However, we are compelled to emphasize the matter. Except in the smallest of the surveyed departments, not a single executive queried failed to cite problems of real concern to them. These invariably were related to inequitable classification and compression of salaries at nearly all levels and having effect on morale, recruitment, promotion, and transfer associated with promotion.
The C. A. 0. 's salary should be periodically and automatically adjusted in such a way that his compensation will not become a "lid" on other County executive compensation. Such lids on top executive salaries have, for the main part, been primarily responsible for problems of compression. While this is not unique in government some relief might be obtained through a formula arrangement for the County's top paid official.
We have considered various formulae, ranging from those tied solely to compensation of similar business executive positions to combinations of salaries of business leaders, governmental executives, and professional men and educators. We have also considered formulae which include consideration of population changes, tax rate changes, county employment figures, etc. The one we propose would be simple to administer and is relevant because it is a function of salaries of executives whose duties are governmental and at the same time reflects the concept of prevailing wage. We recommend that the C.A.O.'s base salary for any succeeding fiscal year be determined, after other salaries are set for that next year, in this manner:
C.A.O.'s Salary = 1.02427 x Average of latest approved top step salaries of the ten (10) highest paid department heads
The factor 1.02427 was arrived at by our evaluation and survey process and., we find, properly reflects the prevailing wage" for the position in November 1967. The C. A. 0. should be eligible for "above average" and "outstanding" pay, as later described, just as is any other department head.
Keeping Salary Plan Current
Next to setting adequate salaries, the most important part of a Salary Plan are the procedures adopted for keeping the plan current.
Los Angeles County government is a viable, changing organization, as it indeed must be to keep pace with the needs and desires of a rapidly increasing population.
In government as in business, the executive to a large extent "makes the position". Any significant change in executives, or organization, or objectives or role of a department, or a decision by the Board of Supervisors, or a change in educational requirements usually causes change in emphasis, priorities and relative importance of executive positions. (The proposal to have one man as head of the Registrar of Voters department and the Recorder department is such an example; changing County voting procedures is another). Additionally, forces outside the County government may demand changes in responsibility or emphasis of County positions (Air pollution control problems and public welfare programs, are examples). Continuing inflationary changes in our economy seem to be of such magnitude that wages that prevail today may not be valid in a year.
To keep this plan current, we recommend, first, that position descriptions (Appendix F) be kept up-to-date. We recommend that each executive be charged with the responsibility of notifying the Personnel Department, through his department head, when significant changes in his position have taken place or have been officially directed. Upon receipt of notification of changes the Personnel Department should re-evaluate the position based on procedures described in Appendix B, Position Evaluation Guide.
Secondly, unless sufficient, current, and valid salary data are available with respect to the positions being re-evaluated, it will be necessary to conduct a special, but limited, salary survey. For governmental executives we feel strongly that a combination of current data from other appropriate governmental agencies, from industry, and from appropriate professional salary surveys should be considered in determining the proper salary level.
Thirdly, because the County is growing rapidly and projections indicate continued rapid growth, there is bound to be constant change, even if very small and hardly discernible, in the operations of the County departments. Changes like these only gradually begin to show their effect on position demand or responsibility. To assure that the new plan, once installed, remains current and responsive to the desires of the populace that prevailing wages be paid, every three or four years all executive positions should be completely re-evaluated and surveyed. (Perhaps Z5% every year). If half of the positions are studied in one year and the remainder the following year, it probably would not place an unacceptable burden on the staff of the Personnel Department.
Furthermore, the value of the Consumer Price Index is high as a toolin keeping the plan current. It can be helpful as a factual basis upon which to make sound judgments, but neither it nor salary surveys should be used as sole sources of data for compensation adjustments.
In a large number of our interviews we discussed the question of incentive, primarily the fundamental differences between those things in business and those in government that create or tend to create incentive, and what properly could be done in government to bring the varying opportunities c1oser together. Every interviewee agreed that while managers in business and in government do very similar things in performing their jobs, the managers in business must be guided in every decision and action by the need to emphasize economic performance, the need to innovate (whereas in government it is not the primary purpose to innovate change) and the need for profits to offset the costs of risk.
There are several things that could be done within the County that would possibly provide greater incentive to executives:
Establish a Merit Salary Increase System
The consensus of those executives interviewed about incentives was that it is virtually impossible for a man who is truly outstanding in his performance to be rewarded with greater pay than anyone else. They stated that very obviously not all men were alike in drive, efficiency and general performance, yet the man who just passably performed his duties has, in the past, received periodic schedule increases at the same rate as anyone who performed in an outstanding manner. A spot check by us of 50 positions in two classes confirmed that all the men received identical periodic schedule increases. In governmental organizations, where long and relatively secure tenure exists, we believe that a definite program .to more adequately reward the outstanding executive is needed - and is feasible. Such programs exist in industry and we know of no reason why with proper modification they cannot be made to work in government. We strongly recommend the County study this important opportunity to recognize sustained differential performances of incumbents.
Extended Step Raises for Department Heads
We recommend placing all department heads on a flat salary, as is now the case with the Chief Medical Officer-Coroner, the County Counsel, and elected officials, but with provision for merit increases. We believe such a change would help solve problems of compression within a department.
We feel there should be the machinery 0within the County to permit above-the-average and outstanding department heads to be rewarded for sustained above-the-average and outstanding performance. Therefore, we propose two additional salary steps for surveyed department heads. To prevent these additional steps from becoming somewhat automatic or routine (as appears to be the case now, with department heads being advanced to the 5th step after six months in office), we recommend that County regulations implementing this proposal provide for sustained above-the-average or outstanding performance for minimum of one (1) year and the new increase become effective only by a unanimous vote of the Board of Supervisors following annual review and with approval of the Personnel Director, the CAO and the Supervisor who is Chairman of the Department concerned. Since it is natural for human beings to operate at varying levels of interest and efficiency over a period of time, County rules regarding this proposal should provide for annual performance review and for withdrawing the extra compensation when (or if) performance no longer meets the definition adopted for above-the-average or outstanding performance.
Table 2 shows the three steps proposed for department heads. We strongly feel that in County department head positions requiring the high caliber of person now generally found and the high quality of man still to be needed as County government operations grow, the spread at the department head level is necessary to create and maintain incentive values - especially' in the face of higher income taxes.
We have carefully examined the value of fringe benefits of affected County executives and corresponding executives in industry. Our conclusion is hat, on the whole, County executives compare favorably with corresponding executives in industry, excluding considerations for stock options and profit sharing. (Incidentally, from an absolute standpoint, the counter-parts of most of the surveyed County executives do not qualify for stock options and a smaller number participate in company profit sharing plans). Our salary recommendations have taken this into consideration.
In computing the value of fringe benefits, we used the following: Hospitalization and Major Medical Plans, County Retirement Plan, annual Vacation, holidays (11), sick leave provisions and Workmen's Compensation premiums. Non- safety personnel only were considered.
The "composite" department head mentioned earlier earns $26, 374 per year salary and contributes 7.5% of his salary to his fringe benefits program, while the other surveyed executives (the composite subordinate who earns $18,650 per year) contribute 8.4% of their salary. This compares to about 4.5% for all executives in industry.
The composite department head receives County fringe benefits valued at 27.2% of his base salary) and other executives, 30.4%. The median and average in surveyed industry was 26%. Taking into consideration the amount of employee contribution, the total approximate value of fringes as a percentage of base salary would be:
Department heads 34.7%
Subordinate executives 38.8%
One of the problems of major concern to us was that in our evaluation of positions in engineering departments we did not find that all Division eng1nccrs or all Assistant Chief Deputies were of equal rank. We therefore completely rechecked our own procedures, factors and factor weights, and studied in greater depth each of the positions. In addition, we discussed this problem with numerous top executives in industry. The results verified our original conclusions. We are convinced that there is a clear cut difference in the job requirements, the level of skill, and the responsibility among these jobs of like title. We think it is significant that some of the County executives interviewed (including department heads) stated to us that they, too, recognize these differences.
Despite the differences in individual jobs, the practice of rotating individuals among these jobs requires that rates be "averaged out" and a single salary. range applied for all positions of like title. We are recommending such a single rate in recognition of the operational practice. We conclude that the most feasible alternative at this time is to compensate the above positions at a common rate even though it will result in the undercompensation of some jobs and the overcompensation of others.
We were asked to examine the salary relationship between Hospital Administrators and Medical Directors of hospitals and to make appropriate recommendations.
The division of the County hospitals into three levels is clear albeit the basic missions are different within institutions of the same level.
In the course of examining the prevailing practices in both private and publicly owned hospitals, we found no consistent pattern with respect to relative basic compensation of lay administrators and full-time medical directors. The inclusion of the value of fringe benefits in the comparison complicated the picture even more.
The College of Hospital Administrators pointed out to us that an increasing number of hospitals are requiring lay administrators with advanced degrees.