Broad Banding as a compensation plan involves combining a number of salary grades into a more condensed number of grades with wide ranges. In broad banding, jobs with similar responsibilities and skill requirements are grouped in "bands" of job families, and pay is linked to the market. There are a number of advantages to broad branding such as flexibility for the overall compensation program and the program encourages managers to assume broader responsibility for managing their people.
Broad banding can help encourage growth and career development and increase independent thinking amongst employees. When companies find it difficult to find people with needed skills they are able to efficiently develop those skills within their company. An emphasis is placed on career growth and cross-lateral promotions.
Although broad banding sounds great, it is not for every company. If salary ranges are too broad problems can arise. Salary ranges provide a way to control the salary growth of each employee, and thereby the salary costs of an organization.
With salary ranges an employee's salary tops out at a defined point unless they acquire the skills necessary for advancement to the next higher level position. Broad banding, with its high salary range maximums, does not have the salary control feature of the more traditional salary structure.
Another problem can develop with regard to equity of pay. If two employees are in the same salary broad band doing similar work, and one employee is paid near the bottom of the range, and the other is paid near the top of the range, how can an organization justify the salary differential between the two employees? Also, paying too low of a salary relative to the market could mean higher employee turnover, paying too much relative to the market could mean higher product costs than competitors.
Overall think broad banding can be successfully competitive in my current work environment. Broadband pay structures encourage the development of broad employee skills, because non-managerial jobs are appropriately valued and skill development is rewarded. Broad banding focuses employees on the changing needs of the organization and provides an opportunity for career growth without the necessity for promotion. My company would benefit from the development of broad employee skills where non-managerial jobs are appropriately valued and skill development is rewarded.
ReferencesBaker, Thomsen Associates. Retrieved May 26, 2007 fromhttp://www.btabta.com/index.cfm?fuseaction=Home.MainMilkovich, G. T., Newman, J. M., & Milkovich, C. (2008). Compensation (9th ed).
New York: McGraw-Hill.