Dow Chemical’s Salary Program: A Model for the Future?

1. Dow Chemical’s Salary Program: A Model for the Future? Howard Risher Compensation and Benefits Review May-June 2000 By: Stephanie Bridgewater

2. People Success1996 • Competency-based human resource tools 4 primary tools: 1. Performance Expectations 2. Employee Development 3. Job Opportunities 4. Compensation

3. Job Slotting • Designed to provide internal equity throughout the world • Starts with assignment of a job to a job family • Then a career development stage • Management’s responsibility • Generally 2 job levels for each development career stage

4. Job Families • Global Leaders: establish the vision and strategy for the future • Functional Specialists/Leaders: research, analyze, develop, design, advise, teach, and communicate in their field • Administrators: provide advice and consultation within established policies and procedures • Technicians: knowledge and application of a para-professional, mechanical, or scientific discipline

5. Employee Development Stages • Stages describe how people are expected to do their work and the contributions expected over time • Acquiring- starting career, learning and demonstrating basic, core and functional competencies • Applying- apply competencies across projects, have a solid knowledge of specific functional areas • Leveraging- leverage capabilities across business units, functions, and geographic areas, skills to guide, train, and coach others • Visioning- lead organization in their area of expertise through their vision of the future

6. Employee Development • “Dow has responsibility to provide the necessary resources and tools for people to develop themselves professionally.” • “Dow employees have a responsibility to use the resources and tools in the development of knowledge and skills that will make the company more competitive.” • “Leaders have a responsibility to support employee development and to provide ongoing feedback and coaching to their employees.”

7. Market Strategy • In defining labor market, focuses on pay levels of companies in its industry • Define salary ranges for each of the 4 job families and for each job level • Goal is to be at the median pay level for premier companies worldwide • Focal point of each range is called the 100th pay position (100% of market median) • Managers expected to distribute salaries so company average is 100%

8. Salary Management for New Graduates • Need to know what they can expect in terms of both salary and career growth • Development Curve-progression of salary steps • Curve is based on assumed progression time of 8 years with 3 two-step promotions

9. Managing Pay for Experienced Employees • Salaries managed within open ranges for 3 higher career stages • Ranges span from 85% to 125% of the 100th pay position • Managers asked to select a target pay position for each employee that is divisible by five- 85%, 90%, etc.-for a total of nine target pay positions within each job level • Then select one of the increments as a target pay level for each subordinate

10. Role of Managers in Salary Management • HR staff serves in an advisory role only • Managers control slotting of all positions in their workgroups • Responsible for determining base pay increases • Company does not establish salary budgets • Does not require managers to rely on a standard performance appraisal process

11. Performance Award Program • aka Annual Incentive Plan • Covers all salaried employees • Involves goal setting and individual award determination • Goal is to recognize and reward performance

12. New program redefines manager’s role in compensation management • HR no longer responsible for day-to-day salary management • Unification and consistency a compensation goal for firm • Most important characteristic: Open Nature