Broadbanded Salary Structures became all the rage, at least in the literature and on the consultant/guru rubber chicken circuit in the '90s. This was a huge swing of the pendulum from compensation programs featuring a zillion narrow pay grades -- an even greater swing when one considers the Texas-sized "career bands" that some companies adopted.
After all the hype, it turns out that not that many organizations thought broadbanding is their silver bullet. At the close of the 90s, a Wyatt survey of 1,300 companies found that less than one in ten used broadbands. If one removes the larger companies from the survey (5,000 employees or more), only 6% to 7% used this approach.
A few companies find that it works for them, but most are redesigning their structures to allow pay ranges to reflect the market. The trend is toward common-sense salary structures, with plenty of room to compete for talent and continue to reward stars without busting through a pay grade ceiling.
A lot of lessons have been learned the hard way. Now compensation folks can move on to other challenges.
This week, Compensation-L subscribers were asked, "Whatever happened to broadbanding?" Our reply:
Broadbanding is still around, although it is getting far less press than it did in the nineties. Like all tools, it's great for achieving specific outcomes, but can cause great damage when misapplied.
Broadbanding (or 'broad grades') is the consolidation of traditional pay structures, consisting of many, narrow pay ranges into a few, wider ranges or bands.
Broadbanding is intended to support agile, flatter, faster-paced, de-bureaucratized organizational cultures.
Broadbands are imperative for companies with competency-based pay programs, but are also used in companies with longevity- and performance-based pay programs. Companies employ broad banding to:
Companies adopting a broadband structure generally reduce the number of salary ranges by one-half to two-thirds. The broadband range spread is generally 75% to 125%. It may be greater.
Most broadbanding companies use 10 bands:
Broadbands typically do not have a single midpoint; they have a minimum and maximum. Broadbanding companies use a range of techniques for control purposes, including a series of reference points relating to career levels in a job family, market based zones linking a group of benchmark jobs to anchor the structure to the market, and so-called shadow ranges.
Some organizations use wide grades (also called fat grades). These are simple traditional pay ranges that have been modified so that there are fewer of them than previously used. Their minimum-to-maximum spread is greater than tradition-bound ranges of the last century. These structures may help to counter grade creep and make for a more realistic approach to pay decision-making, but, typically, do not free a company from traditional pay administration practices.
Broadbands (and career bands) are still viewed as a novel approach to pay, yet to be proven workable. While companies continue to move to broadband pay programs, anecdotal reports indicate that many early-adopters are returning to more traditional (albeit relatively wide) pay structures.
Successful use of broadbanding requires that:
Before moving to broadbanding, companies should consider the following:
As with all compensation methods, companies should carefully weigh broadbanding's pros and cons to ensure to it fits with their organizational culture and business goals.