5.2. ERMUSR 07/09/2019 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission ERMU Wage & Benefits Committee
MEETING DATE: AGENDA ITEM NUMBER:
July 9, 2019 5.2
SUBJECT:
Wage & Benefits Committee Update
ACTION REQUESTED:
Receive update, provide direction/take action on benchmarking report.
BACKGROUND/DISCUSSION:
The Wage & Benefits Committee (W&BC) has two updates for the commission:
First, at the June 27 W&BC meeting, the committee reviewed a number of requests from
employees regarding benefits. These included numerous requests regarding vacation time,
such as larger/earlier vacation accrual rates and pre-loaded vacation rather than
earned/accrued. The W&BC discussed employee questions regarding hours of operation,
including the request to run in four 10 hour days and another request to eliminate breaks for
field staff, resulting in a 3:00 p.m. end of workday. The W&BC also evaluated employee
requests for flexible work hours and work-from-home options. All of these requests have been
previously discussed and evaluated by the W&BC. Unless the commission has any interest in
exploring any of these requests further, the committee had consensus to not recommend
commission adoption of any of these requests at this time.
Second, at the November 2018 commission meeting, the commission directed the committee
to benchmark the management pay group. In March the utilities entered into an agreement
with Current Compass, a consulting firm from the Twin Cities area, to perform the
benchmarking. The W&BC received an update from Current Compass during the June 27
meeting. Mark Fritsch of Current Compass will be in attendance to present the report to the
commission and answer questions.
ATTACHMENT:
• Management Pay Group Compensation Study
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Mark Fritsch smio, mot,
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4563 Birchbark Trail North 612-799-3523 11 ammo
Lake Elmo, MN 55042 mark@currentcompass.com
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Table of Contents
I. Introduction 3
II. Executive Summary 3
Ill. Project Scope and Work Plan 4
IV. Compensation Study Parameters 4
V. Survey Results 6
VI. Recommendations 19
VII. Summary 20
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I. Introduction
Current Compass was retained by Elk River Municipal Utilities (ERMU), to
conduct a compensation study for ten leadership positions. The objective of the
study was to determine how competitive the utility is by collecting and analyzing
base salary compensation data within its labor market of Minnesota municipal
utilities, national municipal utilities and cooperative utilities. ERMU provided
most of the study data.
This Compensation Study contains compensation results for ten classifications
included in the survey, outlines the project scope and work plan, describes the
methodologies utilized in data collection and analysis, and provides an overview
of the study results. The study report also contains Charts 1 through 10, which
present the study results by positions and ERMU's current compensation rates.
II. Executive Summary
When compared to local, state and national averages for the size and ranking of
a municipal electric and water systems, Elk River Municipal Utilities (ERMU),
rates for their top ten leadership salaries fall considerably short. Top rates for
most of the senior leadership positions at ERMU are below average reported
salaries in Minnesota Municipal Utility Association (MMUA), and American
Public Power Association (APPA) national survey for comparable positions.
Non-competitive compensation makes it very difficult to attract highly qualified
leaders for the organization. A municipal utility is an enterprise and must be
able to attract and retain talented leaders to oversee and improve the utility. A
continuation of this trend will render ERMU, at best, a good place for young,
talented individuals to gain experience before moving on to more lucrative
opportunities.
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Ill. Project Scope and Work Plan
In order to complete this study, Current Compass completed the following tasks:
■ Reviewed job descriptions and verified key tasks and responsibilities so
correct market comparisons could be achieved.
■ Determined appropriated markets for each of the ten leadership positions.
■ Obtained ERMU's approval of the surveys used.
■ Compared market data to current ERMU base salaries.
■ Analyzed ERMU's compensation for salary compression.
■ Developed recommendations based on this study.
IV. Compensation Study Parameters
The first step in conducting a compensation survey is to determine the basic
parameters for the survey. These parameters included:
■ Confirmation of the utilities labor market position
■ Labor market surveys
■ Survey classifications
Labor Market Position
Current Compass provided a labor market data analysis based on a top five
Minnesota Municipal Utilities Association (MMUA), utilities match and American
Public Power Association (APPA), 3rd Quartile, fully competent match for a
customer size of 10,000 to 20,000. Using MMUA's top five salaries for
comparison most closely matches ERMU market competition, based on size,
budget, utility results and reputation. APPA's salary data for customer size of
10,000 to 20,000 and 3rd Quartile ranking was used as a best match. Third
quartile is defined as meets preferred qualifications, demonstrated ability to
perform duties independently and a seasoned professional in their mid-career.
Current Compass prefers to use the top five municipals and 3rd Quartile data as
being market competitive rather than labor market median data.
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Labor Market Surveys
The surveys used comprise the agreed upon MMUA 2019, APPA 2018 and
Owatonna Public Utilities (OPU), 2019 General Managers survey.
Survey Classifications
The survey classifications for the study are presented in Table 1 , organized by
highest to lowest paid salary. Position descriptions are not included in this
report.
Table 1
Elk River Municipal Utilities — Survey Classification
General Manager
Electric Superintendent
Technical Services Superintendent
Finance and Office Manager
Assistant Electrical Superintendent
Customer Service Manager
Water Superintendent
Operational Technology Superintendent
Conservation and Key Accounts Manager
Executive Administrative Manager
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V. Survey Results
As indicated in the previous section, the survey involved the collection of base
compensation data for Elk River's survey's classifications from each of the
selected labor market agencies and detailed results of the analyses were
prepared. These results are presented as follows:
• Table 1A provides the utility with a summary of study results. This is a
base salary table representing all ten leadership positions with salary
results compared to the average of the top five municipal utilities, the
number of comparable classes identified, and the percentage ERMU's
yearly salary for the survey classification that is above or below the top
five average.
• Charts 1-10 presents base salary data for the designated positions as
compared to the top five municipal utilities and a national survey (APPA)
and Cooperative survey (APPA) when applicable.
When conducting a salary survey, the intent is to provide general market trends
by comparing the span of control, duties and responsibilities, and knowledge,
skill and ability requirements to determine whether these are comparable
enough to utilize as a match. With a balance labor market and the use of whole
job analysis, it is reasonable to assume that while some matches will have
slightly higher responsibilities and some matches will have slightly lower
responsibilities, the overall scope of duties and responsibilities of the combined
matches will be balanced.
When reviewing the data, it is important that Elk River Municipal Utilities be
aware of the following:
• Current Compass has not included any salary increases for the APPA
2018 survey. MMUA's survey collected data from mid-March to the end of
April 2019. OPU's General Manager survey includes 2019 actuals.
• APPA's salary data for customer size of 10,000 to 20,000, and 3rd Quartile
ranking was used as the best match. Third quartile is defined as meets
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preferred qualifications, demonstrated ability to perform duties
independently and seasoned professional/mid-career. First quartile is
meeting minimal qualifications. Second Quartile is having previous
experience, demonstrated ability to perform duties, and may need
additional training to perform duties independently. Fourth quartile
indicates a subject matter expert, exhibits broad and deep knowledge of
job-related areas and senior-level job experience.
• When obtaining data from APPA, the job positions were matched to job
position descriptions given in their report. MMUA job positions were
matched based on descriptions as well as Current Compasses
background and experience with similar municipal utilities.
• Current Compass kept data from each utility confidential, so each Muni 1
through 5 are listed by highest salary to lowest instead of a utility
designation.
• In most studies, it is common to have some classification for which limited
market data exists. Because a compensation plan is developed through
analysis of external market data and internal relationships, the absence of
sufficient labor market data for a particular class does not mean that no
salary recommendation can be developed, since many salary
recommendations are ultimately based upon internal equity with other
classes.
Some specific comments with respect to the job matching strategy and/or
results for some job classifications is presented below:
• General Manager- Salary matches were obtained through an OPU survey
completed this spring. That survey is not included in this report.
• Assistant Electrical Superintendent - There is not any comparable data for
this position in the national survey. Market driven lineworker pay results in
this position being above average to the top five municipals.
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• Water Superintendent - The best MMUA survey match used was the
Water Supervisor classification. There is not any comparable data for this
position in the national survey.
• Executive Administrative Manager - This position is usually a highbred
and is based on the skills and abilities of the employee. Only two
municipals surveyed had similar duties and responsibilities. APPA's
closes match was the Communications Director Position and the
Marketing Director classifications. Unfortunately, they were more focused
and didn't have the broad responsibilities of ERMU's classification.
Table 1A
Elk River Municipal Utilities - Base Salary Survey Results
ERMU Base # of % Utility is
Salary Matches Above or
Top Five Below Top
Classification Muni Average Five Average
General Manager $ 165,277 7 $ 196,495 -18.9%
Electric Superintendent $ 125,050 7 $ 134,692 -7.7%
Technical Services Superintendent $ 116,480 6 $ 133,303 -14%
Finance and Office Manager $ 116,480 7 $ 144,476 -24%
Assistant Electrical Superintendent $ 105,414 4 $ 100,537 4.9%
Customer Service Manager $ 102,336 6 $ 100,414 1.9%
Water Superintendent $ 102,330 5 $ 103,339 -1%
Operational Technology Superintendent $ 102,336 6 $ 108,843 -6.4%
Conservation and Key Accounts Manager $ 94,141 6 $ 89,652 5%
Executive Administrative Manager $ 94,141 3 $ 84,464 11.5%
Average Above or Below Top Five Municipals -4.87%
Note: Base salaries shown for ERMU do not include the potential 2% Utilities
Performance Metrics-based Incentive Compensation (UPMIC).
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Chart 1: General Manager
GENERAL MANAGER BASE SALARY
Coop's
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000
• This chart reflects compensation for the highest paid member of ERMU.
• The top five municipals, APPA, and Cooperatives surveyed all have base
salaries above ERMU's.
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Chart 2: Electric Superintendent
ELECTRIC SUPERINTENDENT BASE
SALARY
Coop's
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000$100,000$120,000$140,000$160,000$180,000
• The top four municipals, and Cooperatives surveyed all have base
salaries above ERMU's.
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Chart 3: Technical Services Superintendent
TECHNICAL SERVICES
SUPERINTENDENT
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
I
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000$100,000$120,000$140,000$160,000$180,000
• The top three municipals, and APPA surveyed all have base salaries
above ERMU's.
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Chart 4: Finance and Office Manager
FINANCE AND OFFICE MANAGER
Cop
's
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000$100,000$120,000$140,000$160,000$180,000
• The top five municipals, APPA, and Cooperatives surveyed all have base
salaries above ERMU's.
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Chart 5: Assistant Electrical Superintendent
ASSISTANT ELECTRICAL
SUPERINTENDENT
Elk River
Average Muni
Muni 4
Muni 3
Muni2
Muni 1
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000
• Only one utility has a base salary higher for this position.
• There is not any comparable data for this position in the national survey.
• Market driven lineworker pay results in this position being above average
to the top five municipals.
• There is a significant salary compression issue, as this position is only
1 .1 % above lineworkers being supervised. Correcting that will also cause
salary compression with their supervisor.
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Chart 6: Customer Services Manager
CUSTOMER SERVICES MANAGER
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000
• Only two municipals have a base salary higher than ERMU's. APPA's
fully qualified survey is above ERMU's.
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Chart 7: Water Superintendent
WATER SUPERINTENDENT
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000
• The average of the top five municipals surveyed is very close to ERMU's
base salary.
• There is not any comparable data for this position in the national survey.
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Chart 8: Operational Technology Superintendent
OPERATIONAL TECHNOLOGY
SUPERINTENDENT
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000
• The top four municipals surveyed all have base salaries above ERMU's.
• APPA's fully qualified surveyed was also above ERMU's.
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Chart 9: Conservation and Key Accounts Manager
CONSERVATION AND KEY ACCOUNTS
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 5
Muni 4
Muni 3
Muni 2
Muni 1
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000
• Only one of the municipals surveyed has a base salary above ERMU's.
• APPA's fully qualified surveyed was also above ERMU's.
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Chart 10: Executive Administrative Manager
EXECUTIVE ADMINISTRATIVE
MANAGER
APPA Fully Qualified
APPA Mean
Elk River
Average Muni
Muni 2
Muni 1
$- $20,000 $40000 $60,000 $80,000 $100,000 $120,000
■ Only one municipal surveyed was above ERMU's base salary.
• APPA's utilities surveyed was also above ERMU's.
• This position is usually a highbred and is based on the skills and abilities
of the employee.
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VI. Recommendations
Current Compass has several recommendations based on findings, analysis
and our experience with utility compensation:
• Increase compensation on positions that are below market. This can
be done over a two-year period of time.
• The Technical Services Superintendent position normally requires a
four-year degree.
• Consider hiring an HR Manager responsible for Human Resources,
Safety, Compensation and Succession Planning. This position should
report to the General Manager.
• Fill the Operational Technology Superintendent position and have it
report directly to the General Manager.
• The Finance and Office Manager or CFO is usually the second highest
paid employee in utilities.
• Consider a salary range of 85% to 120% of midpoint. Midpoint being
defined as fully qualified.
• Consider using the top five average for Municipals as the midpoint.
• A typical employee will reach midpoint in 3-5 years.
• Fix compression issues. Compression differential should be a minimum
of 10% with minimal overtime and 15% with overtime.
• Positions without a comparable market should be given a salary
midpoint that doesn't result in compression issues.
• One option to fix the salary and compression issues with the Electrical
Superintendent and Assistant Line Superintendent is to make the
Electrical Superintendent an Operations Director (COO), and the
Assistant Line Superintendent an Electrical Superintendent. The COO
would report to the GM and be responsible for all field staff.
• Use of a salary point system such as "Riley, Dettmann & Kelsey" is also
an effective approach to salary determination when market data isn't
available.
• Similar titles should be in the same pay range.
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VII. Summary
This report provides detailed information concerning the scope of the project,
the methodology used to complete the compensation study, as well as the
results of the study which show where the utility stands in comparison to the
labor market. Should you require any further information, or have questions
and comments with respect to this report, please do not hesitate to contact
Current Compass, Mark Fritsch, at 612-799-3523 or via email at
mark@currentcompass.com
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