Job and Pay System Redesign Project Update Meeting January 25, 2007 Agenda

1. Job and Pay System Redesign Project Update MeetingJanuary 25, 2007Agenda Welcome/Remarks Steve Stevenson, GMS Commissioner Marion Fredrick, Assistant Commissioner Compensation & Benefits Frank Heiny, Assistant Commissioner Study Update Project Overview Patricia Kinard-Boutte’, Director Development Methodology Chad Roedder, Corporate Psychology Resources Questions and Answers Break Nuts and Bolts/Development Process John Roach and Berneda Simmons Closing Remarks Patricia Kinard-Boutte’ Job and Pay System Redesign Project

2. Job and Pay System Redesign Project Update Meeting Commissioner Steve Stevenson Georgia Merit System of Personnel Administration January 25, 2007

3. Compensation and Benefits Study Georgia Merit System of Personnel Administration Frank Heiny, Assistant Commissioner January 25, 2007

4. Project Objectives and ScopeHolistic view of compensation and benefit strategy and design • Structured Interviews • Web Survey of HR and Agency Leaders • Web Survey • Conjoint Analysis • Competitive Benchmarking • Cost Projections and Modeling Job and Pay System Redesign Project

5. Organizational ContextFive year workforce outlook suggests significant human capital challenges With respect to the 81,500+ workforce that Mercer is studying: • At current attrition rates, the State will hire over 66,000 employees in the next five years • 17,800 of these employees will leave voluntarily in their first year of employment • 39,500 of these employees will leave voluntarily within their first five years • As a result, only 26,500 of the 66,000 employees hired, or 40%, will work more than five years for the State. • Supply side workforce availability will tighten, adding additional pressure to successful attraction and hiring efforts • 12,500 employees will retire in the next five years, most of whom have higher than average skills and experience • The established practice of “building talent” internally rather than “buying talent” externally may be put at risk as employees with critical, internally developed skills leave faster than they can be “built and replaced” • Increasing healthcare cost trends will add additional budgetary pressure during this timeframe Job and Pay System Redesign Project

6. In the last two years, almost 19,000 employees have voluntarily left employment with the State • Attrition rates in the first six years of employment (20.6% average) are causing high levels of disruption . . . • . . . however, a 3.4% annualized voluntary turnover rate among those employees with more than 6 years of service does not suggest a retention problem for that segment of the workforce Retention – Short Term and Long Term: Does not include involuntary, retirement, death or reductions in force • Voluntary termination rates are 37.2% for first year employees and average over 15% for the five length of service years that follow Retention – Short Term: • Over 4,300 employees have retired in the last two years. On average, they are higher skilled and experienced employees with average salaries 30% higher than the average state employee • 33% of the workforce is currently over 50 years of age. We conservatively project that retirement rates will increase by 20% in the next five years with over 12,500 employees retiring Retiring Workforce – FY 2005 & 2006: Organizational ContextVarious views of workforce demographics impact long term strategy implications Job and Pay System Redesign Project

7. Employer Perspective Various views of workforce demographics impact long term strategy implications • Mercer is studying Compensation and Benefits for a population of 81,500+ employees across 7 different workforce groups • The fully loaded annual cost of this segment of the State’s workforce is approximately $5.0 billion The In Scope Workforce: The 50/50 Split: • Half of the workforce has been employed by the State for 6 years or less – on average 2.5 years • Half of the workforce has been employed by the State more than 6 years – on average 15.6 years Hiring: • 12% of the workforce has less than one year of service. Average entry level age is 36 . . . indicating a broad, and somewhat even distribution of new hires across age ranges Job and Pay System Redesign Project

8. Employer Perspective The Human Capital Scan identified three key human capital challenges and opportunities across Georgia’s state agencies • 29 State leaders participated in structuring interviews that focused on organizational strategy, hiring, performance, retention and the resulting implications on workforce strategy • 55 Agency/Division Heads and 38 HR Directors responded to a web-based questionnaire designed to capture business and human capital strategy contexts Attracting and retaining the best talent • Challenges in the hiring process and insufficient rewards (e.g., compensation, benefits, advancement opportunities) are making it difficult for Georgia’s agencies to attract and retain talent Ensuring the right skills and capabilities • The technology-driven, rapidly changing environment faced by Georgia’s agencies means new skills and competencies– particularly leadership development – will be required to meet future agency objectives Rewarding the required skills and capabilities • Agency heads and HR Directors sometimes have different perceptions on which attributes, behaviors, skills and knowledge should drive rewards Job and Pay System Redesign Project

9. Competitive base pay Annual pay increase tied to performance Higher Higher Out-of-pocket healthcare costs Opportunities for promotion Importance Satisfaction Out-of-pocket healthcare costs Opportunities for promotion Lower Lower Competitive base pay Annual pay increase tied to performance Employee PerspectiveImportance and satisfaction side-by-side – all employees Rank 1 Competitive base pay Away Leave 2 Annual pay increase tied to performance Work-life balance 3 Pension (ERS) Core disability / life insurance 4 Out-of-pocket healthcare costs 401(k) / 457 5 Opportunities for promotion FSA / DCSA 6 Retiree medical insurance Retiree medical insurance 7 Work-life balance Pension (ERS) 8 401(k) / 457 Choice / cost of dental/vision 9 Away Leave Choice / cost of medical plans 10 Choice / cost of medical plans Out-of-pocket healthcare costs 11 Core disability / life insurance Opportunities for promotion 12 Choice / cost of dental/vision Competitive base pay 13 FSA / DCSA Annual pay increase tied to performance The importance scores are the ranks of conjoint analysis results. The satisfaction scores are the ranks of satisfaction results. Job and Pay System Redesign Project

10. Cost and Competitive PerspectiveRepresentative market data was compiled to provide insight into the competitive position of existing compensation and benefits The peer groups were developed to represent a group of Georgia “talent competitors: • The peers for benefit comparison have large concentrations of employees in the State and are comparable in aggregate size (on average approximately 75,000 employees with 10,000 in-State) • From industries with significant competitive presence – health care, consumer products, manufacturing, education, financial services, Federal government • With state-wide geographic dispersion • The cash compensation peer groups are more diverse and represent a broader cross section of large employers Compensation Benchmarking: • Data was compiled from published survey data for 55 benchmark jobs representing over 30,000 employees • As a group, the benchmark jobs were selected to fairly represent: • Positions with high concentrations of employees • “Hot" or key jobs identified by agency leaders • Roles found across all agencies • A cross section of vertical levels  • The process followed conforms to accepted compensation practices • All jobs were matched in published and proprietary survey sources based on job content and results are believed to reasonably represent prevailing market practices Benefits Peer Group: • Atria Senior Living Group • BellSouth Corporation • Coca-Cola Company, The • Georgia State University • IBM Corporation • International Paper Corporation • Lockheed Martin Corporation • Publix Super Markets, Incorporated • SunTrust Banks, Incorporated • Target Corporation, The • United Parcel Service • U.S. Office of Personnel Management • Wachovia Corporation Job and Pay System Redesign Project

11. HMO Plan (Most Competitive Single Plan) 95.0% Cost and Competitive PerspectiveActive programs deliver value well below competitive standards while retireeprograms far exceed typical market practice Current (Employees) • Compensation and employer paid benefits combined (approx. $5 billion in annual spend) are competitive with the peer group median at 98% • While fully competitive in aggregate, the combination of compensation and benefit programs has resulted in a plan of extremes • The competitiveness of individual programs varies widely ranging from a low of about 10% of the market median to a high of almost 200% • If the retiree medical programs are removed from the comparison overall competitiveness falls to 88% of the peer group median Compensation / Benefit Detail Element Compensation / Benefit Summary Element These comparisons do not include the value of the employee paid benefits like legal, life insurance, etc., except to the extent they are purchased by the employee with pretax dollars. Paid Time Off benefits are not included. Job and Pay System Redesign Project

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13. Project Overview Georgia Merit System of Personnel Administration Patricia Kinard-Boutte’, Director Compensation Division January 25, 2007

14. Job and Pay Systems RedesignProjectPhase II – Kick-OffThursday, January 25, 2007

15. State Goal • Become the Best Managed State Strategy • Compensation and Benefits Study • Job and Pay Systems Redesign • HR Initiatives Job and Pay System Redesign Project

16. Support for Long-Term Goals • Streamline State Job Classification System. • Update State Pay Structure. • Create a closer relationship between state and market pay. • Ensure that pay is based on performance and productivity, not tenure. Job and Pay System Redesign Project

17. Job and Pay System Redesign Project Phase I • Consolidate jobs • Map old jobs to new • Validate and distribute Phase II • Technical Competencies • Entry Qualifications • Career Development Increments Criteria Phase III • Benchmarking Job and Pay System Redesign Project

18. Phase I - Completed • Revised Job Data from Career Banding • March - July, 2006 • Focus Groups with Agency HR Staff to review jobs and proposed mapping • August – September, 2006 • Review of Proposed Job System with HR Directors • October, 2006 • Feedback from Agencies • October, – December, 2006 • Pilot Study - Career Development Increments • November,2006 – January, 2007 Job and Pay System Redesign Project

19. Accomplishments • GMS and agencies worked together to rapidly streamline 3,500 state jobs to 650 standardized descriptions. • We completed several levels of review and revision, incorporated changes, and finalized revisions. • If we maintain momentum we are now positioned to be able to rapidly develop entry quals, technical competencies, career milestones for all jobs. • Also positioned to benchmark state system to market. • New system will work efficiently with Peoplesoft modules. • More streamlined system and new amenities will facilitate initiatives. Job and Pay System Redesign Project

20. Next Step Development of: Entry Qualifications Technical Competencies Career Development Criteria

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32. Nuts and Bolts – Development Process Georgia Merit System of Personnel Administration John Roach and Berneda Simmons, Compensation Division January 25, 2007

33. 92 DAYS Phase 2 Scheduling Job and Pay System Redesign Project

34. THE TASK 200+ jobs • Entry Qualifications • Technical Competencies • Career Milestones • Learn the Process THE DEADLINE • End of may Job and Pay System Redesign Project

35. SMES • Focus groups (8-10+) • 3 hours • Typicality • High population jobs and agencies • Rely on supervisors, job experts Questionnaires (20-30) • Diversity/inclusiveness • Entry level • Specialized positions Job and Pay System Redesign Project

36. 43 JOB SERIES OR RELATED SERIES • SME’S FOR 43 FOCUS GROUPS/ QUESTIONNAIRES • 200 JOBS 43 Job and Pay System Redesign Project

37. 4/12/07 5/10/07 6/11/07 14 Groups 14 Groups 15 Groups Job and Pay System Redesign Project

38. Subject Matter Experts • (SMEs) • IDENTIFY • CLEAR • NOTIFY Job and Pay System Redesign Project

39. Identify – Clear -- Notify • Wave 1 SMEs ---1st 14 Groups • Wave 2 SMEs --- 2nd 14 Groups • Wave 3 SMEs --- Last 15 Groups • 2/14/07 • 3/14/07 • 4/11/07 Job and Pay System Redesign Project

40. JAN FEB MAR APR MAY JUN ID,CLEAR,NOTIFY SMES FOR 1ST 14 GROUPS BY 2/14/07 1ST 14 GROUPS COMPLETE BY 4/12/07 15 DAYS 2ND 14 GROUPS COMPLETE BY 5/10/07 ID,CLEAR,NOTIFY SMES FOR 2ND 14 GROUPS BY 3/14/07 35 DAYS LAST 15 GROUPS COMPLETE BY 6/11/07 ID,CLEAR,NOTIFY SMES FOR LAST 15 GROUPS BY 4/11/07 55 DAYS Job and Pay System Redesign Project

41. TOOLKIT DISTRIBUTION 3 DAYS • TOOLKIT COMPLETION 7 DAYS • FOLLOWUP CALL 7 DAYS 7 DAYS (2 per Day) • FOCUS GROUPS • DEVELOP VERIF Q 5 DAYS • VERIF Q DISTRIBUTION 2 DAYS 1st Posting • VERIF Q COMPLETION 7 DAYS • VERIF Q FOLLOWUP CALL 1 1 DAY 5 DAYS • VERIF Q LATE COMPLETION 1 DAY • VERIF Q FOLLOWUP CALL 2 2nd Posting • END Job and Pay System Redesign Project

42. Thank you for your attention Questions?? Job and Pay System Redesign Project

43. Closing Remarks Job and Pay System Redesign Project