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5.4 ERMUSR 08-13-2019Elk River .. Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: ERMU Commission ERMU Wage & Benefits Committee MEETING DATE: AGENDA ITEM NUMBER: August 13, 2019 5.4 SUBJECT: Wage & Benefits Committee Update ACTION REQUESTED: Approve all action items as outlined to be effective August 13, 2019. BACKGROUND: At the November 2018 commission meeting, the commission directed the Wage & Benefit Committee (W&BC) to benchmark the management pay group of the ERMU pay plan. The intention of the initiative was to address salary compression issues with the Electric Superintendent and the Assistant Electric Superintendent, and to review data to determine if other inequities existed within the manager pay group. In addition to the Electric Superintendent and the Assistant Electric Superintendent, this group includes eight other management positions. In March 2019, the utilities entered into an agreement with Current Compass, a consulting firm from the Twin Cities area, to perform the benchmarking. Mark Fritsch of Current Compass presented the report to the commission at the July commission meeting. The commission did not agree with the benchmarking philosophy used. The commission expressed consensus that the identified inequities should be addressed, but it was noted that they believed that the benchmarking was not "apples to apples" and that the differentials would be at a smaller magnitude. The commission considered the information in the report and directed the committee to develop a plan to address pay inequities in the identified manager positions. Additionally, the commission directed the committee to develop a plan to address organization reporting structure consistent with the discussion and consistent with some of the recommendations in the report. DISCUSSION: The commission gave the committee direction to further analyze the inequities for the following positions: General Manager, Electric Superintendent, Technical Services Superintendent, Finance & Office Manager, and the Assistant Electric Superintendent. The Current Compass report noted that the Technical Services Superintendent position was being benchmarked against positions requiring a four-year engineering degree. The position at ERMU does not require the engineering degree. The committee determined that the inequity in the Page 1 of 4 103 position pay identified in the Current Compass report was related to that difference in minimum position requirements and that the ERMU position's pay did not need to be adjusted at this time. The committee also noted that if the Technical Service Superintendent had interest earning the applicable four-year engineering degree, the committee would support the re- evaluation of that position's pay, but earning the degree would not be required. With consideration for commission's direction regarding "apples to apples" comparison utilities, the committee reviewed a "Muni 7" benchmarking analysis philosophy. This methodology benchmarked ERMU against similar Minnesota municipal utilities with consideration to population, number of meters, services, governance, generation, employee unions, and growth rate. This differs from the Current Compass benchmarking philosophy which compared ERMU management positions to the top five Minnesota salaries regardless of utility similarity. The Muni 7 methodology also intentionally excludes Rochester Public Utilities. The Muni 7 benchmarking identified similar inequities to the Current Compass report; however, the magnitudes of the differences were significantly lower. The results of this benchmark and the potential Utility Performance Metrics & Incentive Compensation (UPMIC) 2% incentive were considered and factored into the recommendations of the committee. The commission also gave direction to develop an implementation plan to add an additional layer of leadership within the existing organizational chart. The consideration of an additional layer of leadership would provide an opportunity to structure ERMU for the future. The committee discussed options and had consensus on a proposed plan to create two director positions: an Operations Director and an Administration Director. The terminology used during the commission meeting was chief operations officer (COO) and chief financial officer (CFO); however, the term director was selected as a better fit for use in the municipal business model. This change to the organizational structure creates pathways within the organization for succession planning, one of the initiatives yet to be completed as a result of the adoption of the new governance policies. This proposed structure allows for the two directors to gain needed cross -departmental experience to be better positioned for succession into the general manager position. And, the director role also creates multiple pathways for the managers to be successors to the director. This structure increased the potential for managers to develop and advance over their careers to potentially fill the general manager position. The proposed change in structure also creates the opportunity to address the pay inequities identified. In the field, the plan to add the director position would be accomplished through the internal promotion of the Electric Superintendent to the Operations Director. The Operations Director would oversee all field operations, including electric, water, and technical services. The Assistant Electric Superintendent was originally created as a temporary succession planning solution in preparation for an anticipated future retirement of the Electric Superintendent. In the proposed plan, the Assistant Electric Superintendent would be promoted to the Electric Superintendent position and the Assistant Electric Superintendent position would be left unfilled indefinitely. Through action of the commission, the proposed organizational restructuring can be done without requirement for posting or interviews. Page 2 of 4 104 The plan would also require changes to a number of the field positions' responsibilities including the Line Crew Foreperson, Field Crew Foreperson, System Engineer, and OT Superintendent. The foreperson and engineer positions would have added responsibilities for work direction and performance evaluation. These changes also contribute to succession planning by developing leadership skills in first line supervision type positions. Consistent with the recommendations of the Current Compass report, the OT Superintendent position is proposed to be modified to an IT/OT Manager position which would directly report to the General Manager rather than be an assistant to the Technical Services Superintendent. When filled, the proposed IT/OT Manager position would be posted and applicants would be interviewed. And, this position would be advertised externally. In the office, the plan to add the director position would be accomplished through the internal promotion of the Finance & Office Manager to the Administrations Director. This position would oversee finance, customer service, conservation, and key accounts. Through action of the commission, the proposed organizational restructuring can be done without requirement for posting or interviews. The Finance & Office Manager position currently includes responsibilities for human resources and oversight of customer service. The then vacant Finance & Office Manager position would be changed to a Finance Manager which would only be responsible for finance. The proposed plan would be for this Finance Manager position to initially be vacant with the intent of filling through internal promotion in 2019. This proposed position would be internally posted and applicants would be interviewed. If this were to occur in 2019, the position vacated for the promotion to the new Finance Manager position would not be filled at this time resulting in net zero change in full time equivalents in staffing levels. If there is not internal qualified applicant interest in the proposed Finance Manager position, filling this proposed position would be delayed until 2020 or later and would become a personnel addition request for commission approval at that time. The proposed plan also identifies future personnel additions for a second Line Crew Foreperson and a Human Resources Manager. The additional foreperson position is intended for future, but not intended to be included in the 2020 budget. The Human Resources Manager addition would be a new position request included with the 2020 budget. When filled, this proposed position would be posted and applicants would be interviewed. The Human Resources Manager position would be advertised externally. The proposed changes to the organizational structure result in changes to position points which align with results from the Muni 7 benchmarking conducted by the committee. The changes to the management pay group are indicated on the attached current and proposed management pay group tables. The added responsibilities to the Line Crew Foreperson, Field Crew Foreperson, and System Engineer result in a 1% increase. The proposed changes to the organizational structure would maintain the current 45 full time equivalent staffing levels as currently approved, so no additional staffing included as proposed. These changes are indicated on the attached current and proposed organizational charts. Because there are no personnel additions, the workload for employees would remain similar, if Page 3 of 4 105 not slightly more, to that of current workloads. The proposed changes impact reporting lines, titles, and pay, but they do not appreciably change the amount of work. Excluding the Human Resources Manager or any cost of living adjustment (COLA) approved by the commission for 2020, the proposed changes would result in an approximate $49,000 labor increase for 2020. Because of the labor saving realized due to the vacant budgeted OT Superintendent position included in the 2019 budget, the proposed plan implemented now would result in a net savings approximately $59,000 for 2019. These values reflect estimated placements at varying and experience appropriate pay steps. ACTION REQUESTED: The committee recommends the commission take the following actions: • Approve the proposed organizational chart and the implementation as outlined. • Approve the internal promotion of the current Electric Superintendent to the Operations Director. • Approve the internal promotion of the current Finance & Office Manager to the Administrations Director. • Approve the internal promotion of the current Assistant Electric Superintendent to the Electric Superintendent. • Approve the proposed management pay group revisions. • Approve a 1% pay increase for the Line Crew Foreperson, Field Crew Foreperson, and System Engineer positions. ATTACHMENT: • Current Manager Group Pay Plan • Proposed Manager Group Pay Plan • Current Organizational Chart • Proposed Organizational Chart Page 4 of 4 106 ERMU Pay Plan Management Group Effective 1/1/2019 Position Position Title Points Grade JE Point Spreads by Grade Step 5 (hourly) Step 5 Annual Base Salary Step 5 Annual Salary (Including 2% UPMIC Potential) General Manager 1598 N/A N/A N/A $ 79.46 $ 165,276.80 $ 168,582.34 M11 1341 1473 $ 60.12 $ 125,049.60 $ 127,550.59 Electric Superintendent 1235 M10 1218 1340 $ 56.00 $ 116,480.00 $ 118,809.60 Finance and Office Manager 1150 M9 1105 1217 $ 52.19 $ 108,555.20 $ 110,726.30 Technical Services Superintendent 1116 Assistant Electric Superintendent 1069 M8 1001 1104 $ 50.68 $ 105,414.40 $ 107,522.69 Customer Service Manager 982 M7 906 1000 $ 49.20 $ 102,336.00 $ 104,382.72 Water Superintendent 959 OT Superintendent 918 M6 819 905 $ 46.63 $ 96,990.40 $ 98,930.21 Conservation & Key Accounts Manager 813 M5 740 818 $ 45.26 $ 94,140.80 $ 96,023.62 Executive Administrative Manager 755 M4 668 739 $ 42.90 $ 89,232.00 $ 91,016.64 M3 603 667 $ 39.19 $ 81,515.20 1 $ 83,145.50 M2 544 602 $ 35.79 $ 74,443.20 $ 75,932.06 M1 491 543 $ 32.68 $ 67,974.40 $ 69,333.89 107 10 ERMU Pay Plan Management Group Proposed Changes 8/1312019 Proposed Step 5 Proposed Proposed Step 5 JE Point Spreads Step 5 Annual Salary Position Title Position Grade Annual Base by Grade (Hourly) Including 2% Points Salary UPMIC Potential General Manager 1662 N/A N/A N/A $ 80.45 $ 167,336.00 $ 170,682.72 M11 1341 1473 $ 61.60 $ 128,128.00 $ 130,690.56 Operations Director 1369 Administrations Director 1361 Electric Superintendent 1229 M10 1218 1340 $ 56.00 $ 116,480.00 $ 118,809.60 Technical Services Superintendent 1129 M9 1105 1217 $ 52.19 $ 108,555.20 $ 110,726.30 Finance Manager 1082 M8 1001 1104 $ 50.68 $ 105,414.40 $ 107,522.69 IT/OT Manager 1027 Customer Service Manager 982 M7 906 1000 $ 49.20 $ 102,336.00 $ 104,382.72 Water Superintendent 959 M6 819 905 $ 46.63 $ 96,990.40 $ 98,930.21 Conservation & Key Accounts Manager 813 M5 740 818 $ 45.26 $ 94,140.80 $ 96,023.62 Executive Administrative Manager 755 M4 668 739 $ 42.90 $ 89,232.00 $ 91,016.64 M3 603 667 $ 39.19 $ 81,515.20 $ 83,145.50 M2 544 602 $ 35.79 $ 74,443.20 $ 75,932.06 M1 491 543 $ 32.68 $ 67,974.40 $ 69,333.89 10 Electric & Water Customers Elk River Municipal Utilities Utilities Commission 2019 Organizational Chart General Manager Updated: June 7, 2019 — 45 FTE Executive Administrative I Administrative Manager Communications &Admin Coordinator Water Technical Services Electric Finance & Office Conservation & Key Accounts Superintendent Superintendent Superintendent Manager Manager Lead Water �OT Superintendent AssisjElectric Customer Service Operator (Vacant) SupeManager Credit & Water Operator System Engineer Lead Lineworkerineworker Billing Specialist Collections i Specialist GIS/Mapping Customer Service Customer Service Water Operator Technician Lead Lineworker Lead Lineworker Representative Representative i Electrical Customer Service Customer Service FLeadLineworker Lineworker Technician Representative Representative Electrical Lineworker Lineworker Accountant Technician Locator � Lineworker Lineworker Accountant i Line Crew AP/PR Specialist Locator Foreperson Meter ReaderH Field Crew Foreperson Inventory & Procurement Foreperson Lead Bore Rig Operator Bore Rig It NATURE P—. Eo To S—, 109 Elk River .� Municipal Utilities Proposed Organizational Structure Changes August 13, 2019 45 FTE Electric & Water Customers Utilities Commission Manager _ customerservicej Representative ' 1 Operations Meter Reader Field Crew Admimstratiorx Director i Key 04ectcr Water Technical Services' Electric HR Manager Finance Manager Conservation & Customer Service Superintendent Superintendent IT/OT Manager Superintendent (Future) Key Accounts Manager 2019 Change in Responsibilities —(Future) Exee Manager Lead Water System Engineer Line Crew Accountant Billing Specialist g pec' Operator Fore erson p Line Crew Credit & Water Operator GIS/Mapping Foreperson AccountantI[L Collections Technician (Future) Specialist I Electrical T Lead Lineworker Lineworker / Specialist AP PR Customer Service Water Operator Technician / Representative Electrician Electrical Lead Lineworker Lineworker Customer Service Technician Representative Lee d Lineworker M Lineworker H Customer Service Locator J' I Representative Lead LineworkerLineworker Locator customerservicej Representative ' Lead Lineworker . Lineworker Meter Reader Field Crew Foreperson Key Lead Bore Rig Bore Rig Operator Operator Existing Existing Management Inventory & Procurement Foreperson 2019 Internal Promotion / Backfill 2019 Change in Responsibilities Future Addition 110