Top Signs that Your Compensation Plan is Broken

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The first inkling that your company’s compensation system is out of balance often comes when a key performer suddenly leaves to take more money somewhere else.

FourpeopleI have heard the same story many times in the years I have taught compensation management to experienced HR people as part of AIM’s HR Leve Two certificate series – a valuable performer is recruited to another employer, perhaps even a competitor, because the compensation program at your company has drifted away from the market.

What are the top signs that your pay and benefits are out of balance?

  • The company has no job descriptions or poorly written job descriptions.  Not knowing what the job is makes it impossible to know what to pay the job.
  • Title creep.  Companies often award titles, rather than compensation, so there is a disconnect when the employee compares her or his pay to others with the same title outside the company.
  • Lack of salary ranges. There is no understanding of the minimum or maximum value of a particular job.
  • When they do have salary ranges, companies often forego increasing those ranges when they have had a difficult year financially.  The market still moves ahead and so they find themselves out of sync with the market.
  • Lack of consistency among departments in the way in which employees are compensated.  One department is conservative when it comes to pay while another department looks for every opportunity to give money.
  • Across-the-board increases.  The company compensates high performers and low performers with the same percent of increase, leading to a culture of mediocrity.  High performers start to wonder why they put in superior effort when they receive the same increase as an employee who puts in half effort.
  • Failure to periodically check the internal equity of the pay structure.  Companies sometimes make the mistake of hiring people at or above the salaries of workers doing the same job and who have more experience.  This drives turnover.  It is a little like the bank that gives special rewards and rates to new customers, but existing customers are not eligible.
  • Lack of a well-defined pay philosophy.  How does the company want to pay in comparison to the general market?  Does the company want to be a market leader, pay the same as market or be a market laggard?  Having a plan and managing to the plan makes a company more likely to be in control of their compensation system.
  • Trying to manage compensation with people who don’t have expertise in compensation.  You would not go to a general practitioner if you needed back surgery.  Getting the right help is critical.

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Topics: Compensation, Management, Human Resources

Health Reform Change will Help Massachusetts Employers

Posted by Katie Holahan on Oct 2, 2015 1:21:00 PM

A rare show of bipartisanship in Congress appears likely to give Massachusetts the ability to sidestep a provision of federal health reform that threatened to boost premiums for companies with 51-100 employees.

USCapitol1The House of Representatives and Senate this week passed by voice votes a bill that would amend a provision of Obamacare forcing those employers into the merged health-insurance market for small companies and individuals. The shift would have raised rates for many employers with payrolls of 51 to 100 because they would subject to more stringent actuarial value, cost sharing and essential health benefit requirements, as well as state rating rules that have not applied to them.

Instead, the Protecting Affordable Coverage for Employees (PACE) Act will continue to classify 51-100 employee companies as large employers unless states decide to treat them differently.

The White House indicates that President Barack Obama plans to sign the bill.

“The opportunity for Massachusetts to maintain the current health-insurance rating system for employers with 51 to 100 workers is great news for the state economy at a time when health costs appear to be accelerating,” said Richard C. Lord, President and Chief Executive Office of Associated Industries of Massachusetts.

“The PACE Act promises to provide predictability and benefit-plan flexibility for employers moving forward.”

AIM has been pressing for more than a year for regulatory or legislative relief from the expansion of the small-group market. The federal government in August approved a transition period allowing the 51-100 companies to buy insurance under current rating system until October 1, 2016, instead of the January 1, 2016 date established by the Affordable Care Act.

The cost of health insurance is already showing signs of accelerating for small employers after several years of moderate increases. The Massachusetts Division of Insurance has approved premium increases averaging 6.3 percent for the first quarter of 2016 for companies with 1 to 50 employees. That’s more than double the 3.1 percent average increase that small business saw in the first quarter of this year.

PACE "is a smart health care bill aimed at protecting workers’ benefits, lowering premiums and reducing costs to taxpayers,” Senate Majority Leader Mitch McConnell, R-Ky., said after clearing the bill.

Jeanne Shaheen of New Hampshire, the Senate bill’s lead Democratic sponsor, also applauded the move in a statement. “While the Affordable Care Act continues to divide Congress, today we’ve made real progress towards improving this law,” she said.

AIM continues to lobby for the same sort of state flexibility on a separate provision of federal health reform affecting rates for smaller employers. Massachusetts has for many years used 11 rating factors in its merged individual and small-business health insurance market, but federal health reform is phasing that number down to four, a change that is adding significant turbulence to the small-group health market.

Topics: Health Care Reform, Health Care Costs, U.S. Congress

Infographic: The Cost of Electricity in Massachusetts

Posted by Robert Rio on Sep 29, 2015 12:39:33 PM


"Today, Massachusetts has taken a giant step forward toward a clean energy future. This legislation will reduce electric bills, promote the development of renewable energy, and stimulate the clean energy industry that is taking root here in the Commonwealth…" , Governor Deval Patrick as he signed the Green Communities Act in 2008.

Boston Herald in 2011 reveals a staggering $4 billion dollars in extra cost to Massachusetts ratepayers by the Green Communities Act.  Boston Herald November 10, 2011, "Martha Coakley: ‘Green’ act costs $4B."

Remember the Ratepayer

Posted by John Regan on Sep 28, 2015 10:20:45 AM

A manufacturing company in Berkshire County pays an average of 12.87 cents per kilowatt hour for electricity.

ElectriclinessmallMove that company several miles to the west, over the New York border, and the cost drops by more than half, to 6.15 cents per kilowatt hour.

Remember those numbers when someone tells you that electricity costs don’t affect where companies locate and create jobs. The difference can add up to millions of dollars per year and hundreds of jobs.

The corrosive impact of high electricity costs on the state economy will be front and center tomorrow as Associated Industries of Massachusetts testifies on multiple bills pertaining to solar power and hydro power. The hearing underscores the responsibility of policymakers to refocus Massachusetts energy policy around the one figure largely forgotten in the often esoteric political debates over power – the ratepayer.

It’s the same ratepayer who foots among the highest electricity bills in the country. The same customer whose rates have surged 56 percent during the past decade versus 38 percent for the nation as a whole. The same employer and citizen who have suffered massive increases for several years in winter electric rates because the commonwealth lacks adequate infrastructure for natural gas and hydro power.

“High energy costs have real consequences for some of the most important industries in Massachusetts, from advanced manufacturing to hospitals to colleges and universities,” says Robert Rio, Senior Vice President of Government Affairs for AIM, who will testify before the Legislature’s Joint Committee on Telecommunications, Utilities and Energy.

“Energy policy must fundamentally be about cost and competitiveness. Massachusetts must use competitive market forces to determine the most efficient and cost-effective methods for generating and transporting power to the Bay State.

AIM will oppose five bills that would force Massachusetts employers and consumers to purchase significant amounts of electricity generated under long-term contracts with hydro, wind and solar generators. Employers generally support diversification of energy sources and use of renewable energy, but none of the six bills alone will increase the reliability of the electric system at the lowest possible cost to consumers.

All of the bills in one way or another establish long-term contracts for large hydropower or other renewables. The bills together would authorize nearly 2,700 megawatts of power - more than four times the electricity generated by the Pilgrim nuclear power plant – to come from renewables and hydro power under long-term deals without adequate protection for ratepayers.

The impact of long-term contracts on electricity prices could be severe and lead to unintended detrimental changes in the way customers use electricity

Given the large amount of power, even small price discrepancies would have large economic consequences. For instance if just 1,700 megawatts are contracted and the difference is 6 cents per kWh average the additional burden is nearly $1 billion per year to ratepayers.  

AIM will also oppose a Baker Administration proposal to expand the commonwealth’s dysfunctional solar-energy subsidy program. The measure would add $600 million to ratepayer bills by 2020 on top of the $4 billion that business and residential customers are already paying to subsidize solar installations.

The solar program, referred to as net metering, creates a system in which virtually all the savings (except for wholesale fuel costs) attributable to solar installations are a transfer from non-participating ratepayers to those who have solar, increasing costs for those who may not be able to take advantage of solar programs. If everyone took advantage of solar programs, there would be no ratepayers left to pay the cross-subsidy.

Additionally, as solar programs increase, there are fewer customers to pay the cost associated with maintaining the distribution and transmission system, which is still required to be ready willing and able to serve the customer when the sun is not shining. Solar customers also fail to pay their fair share of social costs embedded in distribution rates, causing a massive shift in who pays for programs that serve low-income customers.

“Reducing the cost of solar programs and electricity should be the highest priority. Massachusetts ratepayers are not only spending an enormous amount of money for solar power, we are spending at rates double any other state,” Rio says.

AIM seeks a market-based approach once Massachusetts hits its objective of 1,600 megawatts of solar generation.

Topics: Energy, Business Costs, Charlie Baker

A Welcome Political Consensus on Manufacturing

Posted by Rick Lord on Sep 25, 2015 5:10:22 PM

The commonwealth’s top political leaders agree that manufacturing has a bright future in Massachusetts - and that’s great news for the state economy.

manufacturingGovernor Charlie Baker, House Speaker Robert DeLeo and Senate President Stanley Rosenberg today joined a bipartisan group of business leaders, cabinet secretaries and legislators to kick off Manufacturing Month in Massachusetts from now through the end of October.

The event was organized by the Legislature's Manufacturing Caucus, chaired by Rep. John V. Fernandes, D-Milford, and Senator Eric Lesser, D-Longmeadow.

The observance is intended to highlight the importance of the manufacturing sector; to encourage students and workers to consider manufacturing as a pathway to a successful career; and to recognize the world-class companies, maker spaces and startups that make up the manufacturing sector from Boston to the Berkshires.

For me, as the CEO of the state’s largest employer association, the sight of elected officials from both parties standing together at the State House to celebrate the 7,500 manufacturing establishments in Massachusetts was heartening. Some political leaders may dismiss manufacturing as a dying industry, or overlook it entirely in the pursuit of the “technology sector,” but there is a clear and unified view in Massachusetts that manufacturing and technology are part of the same equation for success in creating jobs.  

More than 250,000 Massachusetts residents work in manufacturing businesses, which accounted for more than 10 percent of gross state product (GSP) - $45.06 billion - in 2013, the most recent year for which numbers are available. Manufacturing workers in Massachusetts earn an average pay of approximately $93,862 per year, among the highest in the country.

And manufacturers invest a far higher percentage of sales in research and development than non-manufacturing companies.

The six companies that took part in today’s ceremony underscore the diversity and promise of making things in Massachusetts – from biopharmaceutical leader and AIM member Biogen to clean-tech startup Greentown Labs, to Maybury Material Handling to grinding firm Boston Centerless to contract machining company Accurounds to another AIM member, officer furniture maker AIS.

The State House event is the first in a series of events scheduled throughout the month of October that will highlight best practices in workforce training, showcase programs that are available to employers and workers, and advance dialogue to address current work force challenges.

The observance will be broken up into five weeks, representing five regions of the state. AIM encourages manufacturers to participate in the celebration by hosting a tour, making a presentation at a local school, or attending one of the many events scheduled across the commonwealth. The weeks will be assigned as follows:

  • Week 1 (September 27-October 3): Central Mass/495/MetroWest 
  • Week 2 (October 4-10): Western Mass/Berkshires/Pioneer Valley
  • Week 3: (October 11-17): Northeast
  • Week 4: (October 18-24): Southeast/Cape & Islands
  • Week 5: (October 25-31): Greater Boston

Employers or school districts interested in participating in an open house in October can visit the following sites for more information, including guidance on how to successfully host an event.

Announcement of Manufacturing Month came one day after Governor Baker and several key administration officials discussed the challenges of training and educating the next generation of manufacturing workers during a meeting of the Massachusetts Workforce Professionals Association. I had the opportunity to introduce the governor at that event and to talk about AIM’s Blueprint for the Next Century, which recommends elevating the role vocational education and other steps to close the skills gaps that threatens to impede the growth of manufacturers in years to come.


Topics: Manufacturing, Massachusetts Manufacturing

AIM to Honor iRobot, Crane, Larson at Centennial Gala

Posted by Christopher Geehern on Sep 24, 2015 10:00:00 AM

Robotics leader iRobot Corporation, U.S. currency maker Crane and Company and Bentley University President Gloria Cordes Larson will be honored for contributions to the Massachusetts economy at the centennial celebration of Associated Industries of Massachusetts (AIM) on November 16.

More than 1,500 business and civic leaders are expected to attend the event at the Boston Convention and Exhibition Center. AIM is the largest employer association in Massachusetts, representing the interests of more than 4,500 companies from every sector of the Bay State economy.

“iRobot, Crane and Gloria Larson exemplify in diverse ways the transformative and lasting power of economic opportunity. Their vision and leadership have allowed thousands of Massachusetts residents to work, support families and build lives for themselves while making this commonwealth a wonderful place to live,” said AIM President and Chief Executive Officer Richard C. Lord.

“Associated Industries of Massachusetts is pleased to inaugurate its next century by recognizing such distinguished people and companies.”

iRobotiRobot has defined a growing robotics industry in Massachusetts that is helping people to do more while defining the future of the state economy.

Founded in 1990 by Massachusetts Institute of Technology roboticists, iRobot has grown into a $557 million enterprise. The company's home robots help people find smarter ways to clean, its defense and security robots protect those in harm's way, and its remote-presence robots enable virtual presence from anywhere in the world. iRobot's consumer and military robots feature proprietary technologies incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence.

iRobot is also committed to building a future for Science, Technology, Engineering and Math (STEM) education in the United States. The company’s multi-faceted outreach program is a resource for students, parents and educators to share in the excitement of the robotics industry and get an inside look at what iRobot does.

CraneCrane and Company is 200 years older than iRobot, but shares the same passion for success and commitment to its employees. Crane paper products have been closely woven into the fabric of American history, from 19th century stock certificates to correspondence between Franklin and Eleanor Roosevelt.

Crane is perhaps best known for its role as the exclusive supplier of US currency paper since 1879. Since first embedding silk threads in banknote paper in 1844, Crane has been a leader in developing paper-based counterfeit deterrents, such as advanced security threads, watermarks, security fibers, special additives, and fluorescent and phosphorescent elements.

The company has also set an example in minimizing its environmental footprint. Long before it became fashionable or required by law, Crane undertook aggressive and expensive environmental initiatives that have been recognized by environmental organizations and the Commonwealth of Massachusetts.

LarsonFew individuals have left a more significant mark on the Massachusetts economy than Gloria Cordes Larson, who has spent a career serving the public interest as a cabinet secretary, lawyer, senior Federal Trade Commission official, and now, president of Bentley University.

An advisor to governors of both parties, Larson led the commonwealth through a period of breathtaking economic growth as Secretary of Economic Affairs from 1993-1996 before returning to the private sector and undertaking community and economic development roles that included chairing the Massachusetts Convention Center Authority during construction of the $800 million Boston Convention and Exhibition Center.

Larson has led the transformation of Bentley from a college to a university and established new programs focused on the value of a business education.  At the undergraduate level the school expanded its commitment to a “fused” curriculum with additional courses co-taught by business and arts and sciences faculty.  One of its most recent innovations, the Bentley MBA, is an 11-month global program where students pursue four 10-week modules in a collaborative, studio-based setting.

A group of 27 visionary Massachusetts industrialists formed Associated Industries of Massachusetts in 1915 to work with government to advance economic opportunity for the people of the commonwealth. The association now represents organizations from every sector of the economy in what has become a unique and enduring example of employer engagement in public policy.

AIM and its member employers are observing the organization’s centennial by developing the Blueprint for the Next Century, a plan to ensure the long-term economic future of Massachusetts. The Blueprint maintains that economic opportunity will depend Massachusetts’ ability to create the best system in the world for educating and training workers; to ensure a competitive cost structure across all industries; to reform the regulatory system; and to moderate the burdens of high costs for health care and energy.

Register for the AIM Centennial Gala

Topics: Associated Industries of Massachusetts, AIM Centennial

Attorney General Cites Dysfunctional Health-Care Market

Posted by Katie Holahan on Sep 21, 2015 9:25:00 AM

A continued migration of patients to high-priced doctors and hospitals means that Massachusetts is unlikely to meet its benchmark for health-care cost increases in 2015, according to a new report by Attorney General Maura Healey.

AG.Maura.HealeyThe report finds that widely disparate prices paid to medical providers – differences unexplained by provider quality – have created a market in which patients continue to utilize higher cost providers, driving up health care costs.  The effects of the market dysfunction, coupled with anticipated growth in pharmacy costs and utilization of health care services, raise serious concerns about the commonwealth's ability to meet the 3.6 percent benchmark for increases in health costs.

“Not enough has changed and it certainly has not changed fast enough,” Healey said Friday during a meeting with the Associated Industries of Massachusetts Board of Directors.

“We need to do more. We have to act now.”

The report finds that the most highly-paid doctors and hospitals continue to grow market share, further increasing costs. And global payments, while having positive effects, have tended to lock in historic payment differentials, thus sustaining disparities in the resources available to different providers to carry out their mission.

The report recommends encouraging innovation in the health-care industry and strengthening and expanding consumer incentives - initiatives that will necessarily involve employers.

The report points to the importance of simplifying the cost and quality information provided to employers when they are choosing coverage, especially across providers. Clear information should also be provided to employees during enrollment and when they are choosing their primary care group.

On the "supply side" – doctors, hospitals and insurers -  the attorney general’s report suggests implementing incentives and penalties evenly by giving efficient providers more room to grow (under the benchmark) than less efficient providers. The report also points to different ways of monitoring and understanding disparities in health care resources, whether that be directly regulating variation in provider prices or tracking income/health adjusted status by zip code.

“This latest in a series of reports on health-care by the Massachusetts attorney general raises concerns about rising costs for employers who provide health insurance to workers,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts and a member of the Massachusetts Health Policy Commission.

“The data and graphs in the report have real consequences for real employers and real workers. The cost of health insurance remains a central issue for the Massachusetts economy.”

The report found that enrollment in tiered insurance products has increased, but the presence of these products has not resulted in an overall shift in patient volume away from higher priced providers. Current approaches appear hampered by inconsistent incentives for consumers to obtain care at higher value providers.

The Health Policy Commission will conduct its annual hearing on health-care costs in Massachusetts October 5 and 6.


Topics: Health Care Costs, Health Insurance, Attorney General Maura Healey

Gillette Observes Labor Day with Videos Featuring Employees

Posted by Christopher Geehern on Sep 7, 2015 10:01:28 AM

AIM-member Gillette is observing Labor day with a series of videos entitled The Faces Behind the Blades, looking at the men and women whose passion turns out blades and razors at the company's plant in Boston.

Topics: Massachusetts employers

Attorney General Certifies Graduated Tax Amendment

Posted by Brad MacDougall on Sep 2, 2015 12:53:56 PM

Massachusetts employers are profoundly disappointed that Attorney General Maura Healey today certified an ill-considered proposed amendment to the state constitution that would impose a surtax on incomes of more than $1 million.

statehousedomeAssociated Industries of Massachusetts (AIM) believes the proposal would cripple a state economy that relies heavily on tens of thousands of subchapter S corporations and other entities that pay taxes at individual rates. The association also argued before the attorney general that the proposal violates the state constitution’s prohibition against ballot questions creating specific appropriations.

An Initiative Petition for an Amendment to the Constitution of the Commonwealth to Provide Resources for Education and Transportation through an additional tax on incomes in excess of One Million Dollars represents an appropriation, according to AIM, because it requires the legislature to use revenues from the surtax exclusively for transportation and education. The proposal could appear on the statewide election ballot in 2018.

Healey certified one other constitutional amendment and 20 referendum questions this morning. The referendum proposals, which could appear on the 2016 ballot, include ones calling for the expansion of dysfunctional renewable-energy targets and financial penalties for retail stores or fast-food restaurants that change an employee’s schedule within 14 days of a shift.

The attorney general did not certify several versions of a proposed constitutional amendment specifying that corporations are not people and asserting the right of the courts to limit political contributions.

Proponents of the $1 million earnings surtax will have to collect 64,750 signatures from registered voters to move the process forward. Then one-quarter of the state Legislature must vote to advance the proposal, in two consecutive legislative sessions, before it can go to the voters in November 2018.

The initiative would scrap Massachusetts’ current flat income tax under which everyone pays at a rate of 5.15 percent — and create a two-tiered system, with all income above $1 million taxed at four percentage points more. The result would be an 80 percent tax increase on that income.

Massachusetts voters have repeatedly rejected efforts to impose a graduated income tax. The last effort, in 1994, lost by a two-to-one margin.

“We believe that ballot questions are a clumsy and inefficient way to make public policy,” said John Regan, Executive Vice President of Government Affairs at the association.

“Employers remain particularly concerned about a constitutional amendment that would limit the ability of employers to create jobs by draining investment capital out of the private sector and into bureaucratic government programs.”

Proponents argue that the tax will target people whose paychecks top $1 million annually. But the change will also effect capital gains, interest, wages, business and other types of taxes on individual company owners. Among the companies affected would be partnerships, limited liability corporations, sole proprietorships and subchapter S corporations.

The amendment would make Massachusetts’ top rate one of the highest in the country, according to figures compiled by the Tax Foundation, a non-partisan think tank based in Washington.

Promoters of the initiative include some of the most powerful unions in the state: SEIU, the Massachusetts Teachers Association, the American Federation of Teachers-Massachusetts, and the Massachusetts AFL-CIO.

AIM members interested in learning more about the proposed amendment may contact AIM Government Affairs at 617.262.1180.


Topics: Massachusetts employers, Taxes, Ballot Questions

Health Spending Surpasses Benchmark

Posted by Katie Holahan on Sep 2, 2015 7:10:00 AM

Health-care spending growth in Massachusetts surged past the commonwealth’s cost-control benchmark in 2014 as the MassHealth program for the poor spent billions to care for people left without coverage by problems at the Health Connector.

MassMedSpending2015The Massachusetts Center for Health Information and Analysis (CHIA) will today report that total health-care expenditures rose 4.8 percent in the Bay State last year. The increase far exceeds both the 2.4 percent increase for 2013 and the 3.6 percent benchmark for 2014 established under the state health cost-control law, which seeks to limit increases in health spending to the overall economic growth rate.

Total medical spending among commercial payers rose a more modest 2.9 percent. Health-insurance premiums for fully insured employers increased at the inflation rate of 1.6 percent, while premiums for self-insured companies jumped 3.4 percent.

Massachusetts patients spent $54 billion - that's $8,010 per person – on medical care last year, according to the CHIA report. Massachusetts employers, meanwhile still pay some of the highest health-insurance premiums in the country.

The overall 4.8 percent growth rate allows the Massachusetts Health Policy Commission (HPC) to require performance improvement plans from doctors, hospitals or insurers that “threaten the Commonwealth’s ability to meet the benchmark.” The commission will make final decisions on requiring any performance improvement plans during the next several weeks.

Richard C. Lord, President and CEO of Associated Industries of Massachusetts, serves as a member of the Health Policy Commission. 

The report was the second indication in as many weeks that the health insurance premium costs paid by employers may be accelerating after several years of moderate increases. The Massachusetts Division of Insurance last month approved premium increases averaging 6.3 percent for the first quarter of 2016 for companies with 1 to 50 employees - more than double the 3.1 percent average increase that small business saw in the first quarter of this year.

Health spending nationally is projected to grow from about 17 percent of US economic output in 2013 to nearly 20 percent in 2024, according to federal government estimates.

“The spending increases in the commercial sector were modest, but the cost of health insurance remains a key challenge for Massachusetts employers,” said John Regan, Executive Vice President of Government Affairs at AIM.

“We remain concerned about the acceleration of costs in the next several years."

MassHealth spending grew 19 percent, or $2.4 billion, last year as enrollment increased 23 percent. Persistent problems with the Health Connector in 2014 led to more than 325,000 residents being enrolled in a “transitional” MassHealth program without the normally required eligibility determinations.

Spending increases in the commercial sector were driven by rising pharmaceutical expenditures. The CHIA report says that pharmacy spending grew at 12.5 percent for commercial full-claim and 14.4 percent for MassHealth.

Topics: Health Care Costs, Health Insurance

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