Performance Based Pay: Assessing the Effectiveness of

Performance Based Pay 1

Running head: PERFORMANCE BASED PAY: ASSESSING THE EFFECTIVENESS

Performance Based Pay: Assessing the Effectiveness

of Columbus Fire Rescue’s Step Pay Plan

Michael Ray Chandler

Columbus Fire Rescue

Columbus, MS

September 2009


Abstract

Prior to 2003, Columbus Fire Rescue (CFR) used an equal salary pay structure as a

means of compensating personnel. This system was attributed to causing several problems that

were hindering the quality of services being provided. In 2003 CFR implemented the Step Pay

Plan (SPP), a performance based pay system that awarded fixed percentage raises for meeting

performance, training, and educational benchmarks. The SPP was suspended in 2005 due to

financial constraints. In 2007 and 2008 raises were given using both pay methods. The problem

is that the use of two theoretically contrasting compensation systems has created an atmosphere

of animosity, low morale, and a return to the problems previously encountered.

Using descriptive research methods, the purpose of this paper is to assess the conceptual

soundness of the SPP and determine whether the plan accomplished its intended objectives by

identifying:

a.) The arguments for and against the use of performance pay

b.) The motivational theories that support or contradict the use of performance pay

c.) The pay strategies used by public service organizations

d.) The design elements used to develop performance pay plans

e.) The perceptions of CFR personnel regarding the SPP

Research findings of subject matter experts and the information gained from internal and

external questionnaires indicated that the SPP lacked conceptual soundness and accomplished

only one of its objectives. Dependent upon securing consistent funding, two options were

recommended that included amending the SPP to reflect needed changes or returning to the

previous equal pay compensation system taking into account external and internal salary

considerations.


Table of Contents

Abstract…………………………………………………………………………………… 2

Table of Contents…………………………………………………………………............. 3

Introduction……………………………………………………………………………….. 4

Background and Significance..…………………………………………………………… 5

Literature Review…………………………………………………………………………. 11

Procedures………………………………………………………………………………… 27

Results…………………………………………………………………………….............. 29

Discussion……………………………………………………………………………….... 39

Recommendations……………………………………………………………………….... 46

References……………………………………………………………………………….... 48

Appendix A – Step Pay Plan Benchmarks .…………………………………………….… 52

Appendix B – CFR Equal Pay / Step Pay Plan Comparison……………….…………….. 53

B.1 – External Salary Comparisons…….……………….....………………….….. 53

B.2 – Step Pay Plan Salary Scale: FY 2003 and FY 2008………………..……… 54

B.3 – Equal Pay / Step Pay Plan Comparison....…………..……………………... 56

Appendix C – Columbus Fire Rescue Questionnaire / Results..………...……………….. 57

Appendix D – Mississippi Fire Department Questionnaire /Results………………...…… 68

Appendix E – Out of State Online Questionnaire / Results…………………………...….. 71


Introduction

There is little debate that a correlation exists between the success of an organization and

the performance of its employees. For many years private sector organizations have held to the

supposition that increased employee performance can be achieved through financial incentives.

However, can this same strategy serve as a motivational tool in the public sector to encourage

personnel to excel beyond minimal job performance standards thereby increasing productivity

and enhancing the quality of services provided? This question is where consensus ends and

disagreement begins.

For fiscal year (FY) 2003, the City implemented a performance based compensation plan

that significantly differed from the equal salary and standard across-the-board pay raise structure

previously used. The Step Pay Plan (SPP) awarded fixed percentage raises based upon

performance, training, and educational benchmarks. Columbus Fire Rescue (CFR) sought to use

the SPP as a means of addressing several problems that were considered to be hindering the

services being provided by accomplishing the following objectives: (a) recruit personnel for the

department’s specialty teams, (b) promote technical/specialized training and certification, and (c)

encourage professional development.

The SPP was suspended in October of 2005 due to financial constraints being faced by

the city. When financial conditions improved for FY 2007, department personnel were given a

pay increase based upon the standard across-the-board raise in spite of the previously established

SPP. Personnel received another pay raise for 2008; however, this time the Fire Chief was given

the latitude to re-implement the step pay plan. The problem is that the use of two theoretically

contrasting compensation systems has sharply divided department personnel creating an

atmosphere of animosity, low morale, and a return to the conditions the SPP sought to correct.


The research purpose is to assess the conceptual soundness of the Step Pay Plan and

determine whether the plan accomplished its intended objectives. Based upon this assessment,

the Fire Chief may make a recommendation to City administrators regarding the SPP that

includes: (a) leave the Step Pay Plan in effect as is, (b) amend the Step Pay Plan to correct

identified deficiencies, or (c) return to the previous equal pay compensation structure. Using

descriptive research methods, this Applied Research Project (ARP) will address the following

research questions:

a.) What are the arguments for and against the use of performance based pay plans?

b.) What motivational theories support or contradict the use of performance based pay?

c.) What individual based pay strategies are applicable to public service organizations?

d.) What design elements comprise an effective performance based compensation plan?

e.) What are the perceptions of CFR personnel regarding the Step Pay Plan?

Background and Significance

Serving as the municipal seat for Lowndes County, the City of Columbus is located in

east central Mississippi covering 21 square miles. With a population of 24,500; Columbus is

primarily a residential community with the typical mix of business and industry. Columbus is

also home to Reneau University (formally Mississippi University for Women), a co-educational

institution having an on-campus enrollment of 2,500 students.

Operating from an annual budget of approximately $4.6 million, Columbus Fire Rescue

(CFR) is a career department that provides services and programs based upon an all hazards

approach. This approach includes fire suppression, non-transport basic life support medical

response, code enforcement, fire and life safety education, and specialty team response

consisting of structural collapse, hazardous materials, high angle/confined space, and dive


rescue/recovery. Responding from 5 stations and employing 71 personnel, each station has an

apparatus staffed with a crew of 3: a captain, an engineer, and a firefighter. The exception of this

staffing is the department’s main station in which the engine company has an additional engineer

and firefighter while the ladder company has an additional engineer. However, these extra

personnel are used to backfill positions at the department’s other stations due to vacation, sick

leave, and training. The department averages approximately 2,300 incidents per year with the

majority (64%) of these calls being medical response related. Columbus currently has a

Mississippi Fire Suppression Rating of Class 5.

In the late 1990s, several problems were being encountered that directly impacted the

department’s ability to provide quality services. First, CFR had problems maintaining practical

staffing levels on its specialty teams. All shifts experienced these shortages making team

response and mitigation efforts difficult with the use of on-duty personnel. Second, personnel

were not seeking technical training and certifications, especially those required for the next rank.

Department policy allows personnel to “ride up” or serve in the next higher position provided

they have met the training requirements and are on the promotional list for those positions. This

time provides valuable experience and lessens the learning curve for newly promoted personnel.

Finally, personnel were not taking advantage of professional development opportunities such as

those offered by the National Fire Academy (NFA), Mississippi State Personnel Board (MSSPB)

and institutions of higher learning. Wolfe (2006) recognized the importance of professional

development in preparing personnel for future leadership positions when he stated, “As the

employee advances in responsibility and rank, the focus should shift with less emphasis on

technical and generic competencies and more emphasis on conceptual competencies and

leadership development” (p. 1).


One major factor that was thought to be contributing to these problems was the

department’s pay structure. CFR personnel were compensated equally, according to rank, with

pay increases the result of a standard across-the-board percentage raise. Employees that went

above and beyond what was required received the same pay as those employees that performed

at a minimal level. As a result, personnel felt that their efforts were neither appreciated nor

valued by the department. To further compound this situation, there was little separation of pay

between ranks. Many within the department believed that the pay differential was not worth the

added responsibilities associated with promotion. In essence, this traditional based pay structure

promoted mediocrity and complacency of personnel.

CFR was not the only department having issues attributed to pay. As a result, City

administrators commissioned 2 studies to examine this issue. In 1998, the John C. Stennis

Institute of Government at Mississippi State University conducted a personnel and compensation

study that proposed the following recommendations: (a) adoption of a grade and step pay

structure, (b) update of the department’s job descriptions that reflected current responsibilities,

and (c) adoption of a performance appraisal system. Under the Stennis plan, personnel would be

placed in 1 of 20 pay grades established by a job ranking system and given annual step increases

based upon the results of performance appraisals. Personnel would also receive steps based upon

longevity (seniority). This plan also supported cost of living adjustments separate from the step

and grade performance plan to be given at the discretion of the City Council. Of interest was an

observation made by the study stating that if the plan was implemented but not funded to

maintain the merit and longevity increases, there would likely be strong feelings of

dissatisfaction among employees leading to a loss of productivity (John C. Stennis Institute of

Government, 1998). Second, the Operational Support Services, Inc. (OSS) performed an audit in


1999 to review and evaluate law enforcement services being provided to the City. Relevant to

this APR, the OSS study suggested an adoption of a new pay strategy that rewarded individual

performance and community service. Compensation would be based upon education, special

skills, continuing education, and tenure in position (Operational Support Service, 1999). The

OSS recommendation was very similar to the Stennis report.

Using recommendations from the two studies, the City Council authorized the

implementation of the Step Pay Plan (SPP) for all city departments for FY 2003. Unlike the

Stennis plan, the SPP condensed the number of pay grades by rank with 10 steps in each rank.

Steps were achieved by meeting specific performance, technical training/certifications, and

professional development benchmarks as well as biennial longevity (seniority) increases.

Appendix A lists the SPP benchmarks used by CFR personnel to achieve step increases. Each

step represented a 2% increase in base pay. Once personnel reached the top step of that salary

grade, pay would remain the same until promotion. From a departmental standpoint, CFR

sought to use the financial incentives offered by the SPP as a means of improving services by

accomplishing the following objectives: (a) recruit personnel for the department’s specialty

teams, (b) promote technical/specialized training and certification, and (c) encourage

professional development.

In addition to meeting performance appraisal requirements, three quality control

provisions were added to the SPP to ensure that the performance of personnel and quality of

services would be maintained. Step compensation was conditional upon personnel successfully

meeting annual physical fitness assessments and proficiency skill testing. Failure to meet any one

of these performance stipulations would disqualify personnel for compensation of steps accrued

during the previous year. The last quality control provision focused on removal of steps due to


resigning from specialty teams, losing technical certifications, or being removed from the

promotional list. Removal of steps would result in a loss of pay commensurate with the number

of steps lost.

During implementation of the SPP, several events occurred that influenced the

effectiveness of the SPP. First, a grandfather clause was granted by the City Council giving

compensation to personnel that had earned college degrees regardless of the specialty of their

degree. Second, the quality control provisions of physical fitness, proficiency skill testing, and

loss of steps were not implemented while performance appraisals had no impact on SPP

compensation. Finally, the SPP was viewed as being biased towards CFR by other departments

resulting in a lack of citywide support for the new system.

In fiscal years 2005 and 2006, the Step Pay Plan was suspended due to financial

constraints being faced by the City. During this time, performance benchmarks and longevity

steps attained by personnel were not compensated. For FY 2007, financial conditions improved

and a raise was authorized. The thought among personnel was the continuation of the SPP and

compensation for attained benchmarks. However, Columbus had undergone a change in

administration and, due to political reasons (opposition from other departments), the standard

across-the-board raise (3%) was given. Personnel that had achieved steps through hard work and

initiative felt betrayed. To further exacerbate this reaction, a number of personnel that should

have lost steps received the full raise percentage. The complaint was that minimal and even

substandard performance was being rewarded at the expense of those that had continued to excel.

Personnel were to receive another 3% across-the-board raise for FY 2008; however, this

time the Fire Chief was given the latitude to re-implement the SPP. With limited funding

available (funds allocated for the raise), personnel that had achieved steps from the previous


three years were compensated in full. Pay increases for these individuals ranged from 4% to 8%

depending upon the steps accrued. As a result, these individuals received the bulk of these funds.

All other line personnel received a 1.5% raise, significantly less than their counterparts. This

time the tables were reversed with these individuals now feeling resentment. Again, the

longevity steps that were considered an integral part of the SPP were not compensated.

Moreover, staff personnel that had been previously included in the SPP received a 3% raise,

regardless of their performance. Not only did this situation pit line personnel against each other,

but also pitted line personnel against staff personnel. The SPP had now become the focal point of

discord that sharply divided the department creating an atmosphere of animosity and low morale.

The problems previously encountered prior to the implementation of the SPP have started to

resurface. Until a definitive compensation system is identified and supported by City

administration, this controversy will continue to adversely impact the quality of services being

provided by the department.

There were several units taught during the Executive Leadership course that applies to

this research paper. Unit 6, Being in Transition: Understanding Change During Midlife and

Beyond, discussed change. For many, change is seen as a challenge rather than an opportunity.

This belief is especially true for adaptive changes where a modification in an individual’s

behavior is often required. The SPP represented an adaptive change where minimal performance

was no longer rewarded at the same rate as those individuals that excelled. Unit 7,

Succession/Replacement Planning, emphasized the importance that personnel play in an

organization’s success. Part of this success lies in an organization’s ability to identify future

vacancies and to fill these positions with personnel that are competent and well trained. The SPP

sought not only to improve technical skills but also address professional development by


encouraging participation in educational opportunities required for future leadership positions

within the department (FEMA, 2005).

This ARP directly impacts Objective 4.1 of the United States Fire Administration’s Goals

and Objectives of enhancing the professionalism of fire and emergency service leaders (FEMA,

2009). In Mississippi, the fire service has lagged behind other public service agencies in

requiring our leaders to obtain formal education. The SPP offered additional steps for completion

of the MS Certified Public Managers curriculum, the Executive Fire Officer Program, and

degrees in fire or public management. It is these educational achievements that will change

Mississippi’s perception of the fire service as a purely technical trade rather than a profession

requiring formal education.

Literature Review

The theory behind performance pay is simple; employee performance dictates pay

increases. A resurgence of interest by public service administrators for performance pay is

supported by growing public demands for accountability and expectations for quality services.

These demands can be attributed to the negative perceptions of cultural entitlements (guaranteed

pay increases for minimal job performance) that are typical of public service agencies (Risher

and Fay, 1997). Governmental entities such as Charlotte, North Carolina; Shreveport, Louisiana;

and Fairfax County, Virginia (Dow, 2004; Risher, 2007) have successfully implemented

performance based compensation plans. Yet past failures such as the Performance Management

and Recognition System (Perry, Engbers, and Jun, 2009) or the poor review of the Pay and

Performance Management System used by the Senior Executive Service (Senior Executive

Association, 2006) continue to raise questions regarding the validity of performance pay in the

public sector.


For the purpose of this ARP, performance pay is a generic term used to describe a

variety of performance pay strategies that are based upon some type of performance criteria.

Dow (2004) aptly defined performance pay as “a system of employee compensation in which

pay and rewards are defined by individual behaviors and individual and organizational results”

(p. 2). Explaining further, Dow stated that most performance pay systems focus on three main

objectives: (a) improve efficiency and productivity, (b) improve constituent services, and (c)

create new organizational cultures. Risher (2004) supported these thoughts by indicating that the

goal of performance pay is “to use the prospect of monetary rewards as an incentive for

individuals to improve their contribution to improved or sustained agency performance” (p. 10).

Why has this concept met resistance in the public sector? Supporters and opponents used the

following arguments to support their position.

Advocates for performance pay offered three arguments. First, financial incentives have a

positive impact on employee productivity and effectiveness. With compensation linked to

performance, employees increase both the quantity and quality of their work. This increased

effort should equate into superior services being offered by the organization (Prentice, Burgess,

and Propper, 2007). Lavy (2007) concluded that productivity and efficiency could be improved

because financial rewards provide sufficient motivation for personnel to seek professional

development opportunities that otherwise might not have been pursued. Performance is improved

immediately because employees are working harder for these opportunities and in the future due

to gains in productivity attributed to staff development. Research findings collected by Perry,

Mesch, and Paarlberg (2006) found that financial rewards provided adequate motivation to

improve performance, especially when combined with other factors. The use of monetary

incentives equated into a 23% increase in task performance, whereas increases based upon social


recognition (17%) and feedback (10%) resulted in modest improvements. However, when all

three of these conditions were combined, the strongest effect was seen resulting in a 45%

increase in productivity. Risher (2004) supported this conclusion when he acknowledged that

performance appraisals provide feedback on employee performance and identify areas where

improvements are needed thereby improving both performance and effectiveness.

Second, performance pay supports the human resource needs of an organization. The

potential financial rewards associated with performance pay can be used to attract and recruit

talented, qualified workers as well as being used as a retention tool to keep top performers

(Prentice et al., 2007; Risher, 2007). Hiring and retaining qualified workers is especially

important in a labor market where personnel shortages are expected due to an aging public sector

workforce. This point is especially relevant when one considers the generational makeup of

today’s employees. Risher (2004, 2009) surmised that performance pay is a critical factor in

recruiting “Generation X and Y” workers because they are accustomed to immediate rewards

associated with good performance. These workers will not be content to wait on traditional,

tenure based pay and promotions. Prentice et al. stated that there is evidence indicating that

performance pay may result in poor performers leaving organizations rather than accepting lower

salaries; however, inadequate empirical evidence and external factors (poor job market and

required relocation) combine to limit the soundness of this effect in the public sector.

Finally, performance pay promotes positive changes to an organization’s culture.

Traditional automatic pay increases send the message that individual performance is not valued

and triggers a sense of entitlement in workers (Risher and Fay, 1997; Risher, 2007). Even Robert

Behn, a noted opponent of performance pay, conceded that longevity based pay has created the

wrong incentives (2004). Modern human resource management practices are replacing the


scientific management concepts that focused on the job rather than the human element. Today,

successful organizations value the contributions employees make and place an emphasis on an

individual’s knowledge, skills, and abilities. Through financial rewards, employees feel their

contributions are valued which leads to job satisfaction and increased effort and performance

(Risher, 2007).

Opponents counter the above arguments with three legitimate concerns of their own. First

and foremost, performance pay is counterproductive to teamwork. Teamwork is considered an

indispensable concept in current management literature, especially in public service

organizations. Risher (2004, 2007) noted that many performance pay systems rely on individual

accomplishments that promote an environment of competitiveness. This competitiveness limits

cooperation that, in turn, undermines teamwork. Emory (2004) noted that performance pay

systems are conceptually flawed because of this issue. Even though management principles are

placing increasing importance on teamwork, many pay for performance practices are becoming

increasingly individualistic. This individualistic behavior is contrary to teamwork. Behn (2000)

recognized this principle when he described the synergetic principle of teamwork. Simply, one’s

performance affects others and vice versa. If an individual’s performance is negatively affected

by performance pay, the entire team is prone to failure. Marsden (2004) revealed that teamwork

could be further undermined by divisive side effects caused by performance pay systems.

Second, the use of performance appraisals as the sole means of measuring performance is

questioned. Performance appraisals used in the private sector are often based on quantitative

results such as the number of items manufactured. These quantitative results are straightforward

and easily measured. However, public sector services are often measured in qualitative terms and

therefore more difficult to assess. Hays and Kearney (2003) noted that performance pay often


fails because “performance cannot be accurately and completely measured” (p.148). This

difficulty often leads to subjectivity by the evaluator, which renders the system unfair and

suspect (Behn, 2000; Risher, 2007). Adding further credence, Dow (2004) noted that invalid

performance appraisals directly influence the credibility of pay performance systems thereby

destroying the connection of improved performance for pay if the appraisal system is deemed

“bias or does not appraise actual performance” (p. 12). Patton, Witt, Lovrich, and Fredericksen

(2002) explained that performance appraisals have two flaws when used for performance pay

purposes. First, appraisal instruments that are not sufficient or valid cannot accurately distinguish

between high or poor performers. Second, supervisors have a tendency to rate the majority of

employees above average. Both of these situations question the validity of performance

appraisals.

Finally, critics argue that the financial rewards offered by performance pay in the public

sector has not established a correlation between pay and sustained performance periods (Perry et

al., 2009). Any previous success was based on short-term results and therefore failed to generate

the expected changes in perception needed to provide continued motivation. These shortcomings

may be based upon what Behn (2004) described as the core fallacy of performance pay in that

“most government employees do not work to maximize their income” (p. 2). Simply, money is

not a great motivator for sustained efforts.

Both groups listed motivational theories to support their position on performance pay.

Motivation is an internal force that directs one’s actions. Describing the relationship between

motivation and rewards, Lawler (2000) discussed three important considerations: (a) rewards

must be viewed by individuals as being important, (b) the importance placed on the reward by

individuals is relative, and (c) employees will be motivated to perform only if their efforts result


in desirable rewards. Theories that substantiate or disprove the use of performance pay can be

grouped by two common themes: extrinsic and intrinsic motivators.

Extrinsic motivators

Extrinsic motivators use work-related rewards such as monetary compensation and

promotion to influence specific employee behaviors necessary to achieve organizational goals.

While unable to produce direct utility, extrinsic rewards fulfill personal needs indirectly by

allowing individuals to acquire products they desire (Osterloh, Frey, and Homberg, 2007).

There are three theories that support the use of extrinsic motivators. First, Perry et al.

(2006) indicated that financial incentives are primarily based upon the principals of the

reinforcement theory that stresses the importance of strengthening desired behaviors with

rewards. Cascio (1992) explained reinforcement theory as operant conditioning, in essence the

Law of Effect based upon the fundamental principle of learning. Simply, rewarded behavior

tends to be repeated; behavior that is not rewarded is not repeated. However, one must

understand the risk associated with using this theory. Performance will not be sustained if worker

contributions are ignored.

Second, Katz (2000) supported the expectancy model as being the dominant theory for

understanding whether a reward will affect motivation and effort. Expectancy theory is based

upon an employee’s perception of three related factors: (a) expectancy, (b) instrumentality, and

(c) valence. Expectancy is the link between effort and performance. Instrumentality is the link

between performance and reward while valence is the value of the reward to the employee. In

layman terms, if employees believe that their effort increases performance and this performance

will lead to desirable rewards, employees will remain motivated to perform. Risher (2004)

reasoned that if workers expect their behavior will result in rewards they value as well as being


seen as adequate, their efforts will be directed towards increased performance. Confirming the

risk associated with this theory, Katz understood that a direct correlation exists between theory

effectiveness and the relative strength of each of the three factors identified when she noted, “If

any one of these factors is weak, the incentive system is not likely to have a meaningful positive

impact” (2000, p. 3)

Finally, the equity theory is based upon the premise that employees assess the fairness of

their rewards and base their efforts on this assessment. In other words, employees want to be

compensated for their efforts. The caveat of this theory is that employees also compare their

efforts and rewards to those of their peers and adjust their behavior based upon this observation.

If the perception exists that peers are receiving higher rewards for equal work or equal

compensation for less effort, workers will reduce their efforts (Risher, 2004). Adding to this

concept, Katz (2000) noted that not only do employees compare their efforts and compensation

to others but also assess their outcomes (rewards) against their inputs (efforts, talent, and tenure).

From this assessment, employees develop an outcome to input ration. If this ratio is smaller than

their peers, an inequity exists which employees seek to offset by decreasing their efforts.

Intrinsic motivation

Intrinsic motivators use internal values such as accomplishments, contributions to an

important mission, and opportunities to improve one’s knowledge, skills, and abilities to

generate job satisfaction. With intrinsic motivation, the reward comes from the satisfaction of the

activity itself (Osterloh et al., 2007).

Perry et al. (2009) suggested public service motivation and self-determination motivation

are more appropriate for improving performance in the public sector than the previously

described extrinsically supported theories. Public service motivation is a relatively new concept


that has gained momentum since the 1990s. Perry and Hodgendem (2008) referred to this

concept as the mechanisms (motivation and behavior) unique to public service organizations that

are intended to “do good for others and shape the well-being of society” (p. 3). They further

explained that public service motivation works in unison with the concepts of altruism and pro-

social behavior. Altruism refers to the values and attitudes (responsibility, sacrifice, sense of

duty, and selflessness) that are inherent in most public servants. Pro-social behavior is described

as actions performed by members of an organization with the intent of promoting the welfare of

others. In short, the naturally intrinsic values and attitudes inherent in public servants act as the

motivational catalyst to serve others and the community.

Self-determination theory (SDT) prescribes to the belief of self-motivation through

personal development and functioning within a social context. SDT is based upon the hypothesis

that individuals have three psychological needs that must be met. These needs are competence,

relatedness, and autonomy. First, individuals embrace challenges presented by their environment

and derive satisfaction from achieving success and being seen as competent. Second, individuals

want to be accepted and have a tendency to form relationships with the goal of enhancing the

welfare of others. Autonomy represents a freedom of choice and a willingness to help others

(Deci and Vansteenkiste, 2004; Ryan and Deci, 2000). SDT is very similar to the public service

theory in that the very nature of public service fosters an environment for individuals to satisfy

their psychological needs. The risk associated with both of these concepts is not complicated. If

employees do not share these intrinsic motivators, organizational performance will suffer

(Paarlberg, Perry, and Hodgendem, 2008).

The last intrinsic concept discussed is the goal-setting theory. Risher (1997, 2004)

explained that employees working towards high, specific, and self-accepted goals perform better


than those employees that have no goals or goals that are easily achieved. Workers are willing to

accept lofty goals as long as they are perceived as being fair and reasonable. The satisfaction that

comes from working towards and achieving these goals provides the intrinsic motivation to

perform. If goals are not met, employees will develop new goals and work harder to achieve

success. This concept is especially effective in team settings where a shared commitment to

achieve goals and the desire to support the team becomes the primary motivator.

To understand how these theories might apply to an organization, one must understand

the relationship between intrinsic and extrinsic motivators. Osterloh et al. (2007) cited theoretical

and empirical evidence demonstrating a dynamic relationship between the two in which extrinsic

motivators may have a negative effect on intrinsic motivation. This effect is known as the

crowding effect. This effect occurs when extrinsic rewards weaken intrinsic motivation. The

crowding effect has been shown to have several negative effects on intrinsic motivation. First,

extrinsic rewards take priority over the interest in accomplishing immediate goals, such as

providing services. Second, intrinsically motivated employees may feel that the use of money to

elicit performance trivializes their commitment to the organization and community (Deci and

Vansteenkiste, 2004; Ryan and Deci, 2000). In both cases, performance suffers and the quality of

services is lessened.

With arguments and motivational theories supporting both sides of the performance pay

issue, it appears that performance pay is an either/or proposition. However, Risher (2004) offers

a different perspective. Anecdotal evidence affirms that compensation was not a high priority

when public service employees choose their careers. This view supports intrinsic motivators.

However, it would be presumptuous to assume all public servants are strictly motivated by

intrinsic rewards. A likelihood exists that pay may very well become a factor due to family


obligations during the course of their careers. Couple this probability with statistical evidence

showing the disparity of pay between private and public sector organizations, compensation

becomes an issue and, ultimately, an extrinsic concern.

As previously stated, performance pay was used generically to describe a variety of

different pay strategies used by organizations to compensate their employees. In the 2007 Total

Compensation Benchmarking Survey sent to the membership of the International Public

Management Association for Human Resources (IPMA-HR), 78% of the 640 organizations

responding indicated they had a defined compensation system (2007). Compared to the survey

conducted in 2000, this total represented a 14% increase. There are a variety of compensation

strategies used to reward employees. Each strategy is unique in that each has specific criteria and

purpose. Several strategies have furthered evolved to form specialized subsets or hybrids of the

original. Even though performance pay involves both individual and group based concepts, only

individually based compensation strategies will be discussed due to the research parameters of

this APR. When discussing the various pay strategies, cited authors include IMPA-HR, 2007;

Marovich, Tackett, and Branson, n.d.; and Patton, et al., 2002. Additional insight provided by

others than those listed will be cited at that time.

Traditional pay systems use rank and seniority as the primary method upon which pay is

defined. This method has several variations. In some organizations, personnel that share the same

job classification or rank are paid equally. Pay increases are the result of across the board

percentage raises. Another method of traditional pay is the grade and step system. This method

establishes salary grades based upon job classifications with prescribed steps within each grade.

Grades have defined salary ranges while steps are usually formulated using a point system or

fixed increases. Employees typically move up one step per year through seniority adjustments


although other ways for step movement exist. The problem associated with this system is that

pay is usually based upon automatic pay increases and performance is not a factor. This creates

an organizational culture of entitlement previously discussed. Grade and step systems (64%) are

considered the most popular form of compensation systems used by public service (IMPA-HR,

2007).

Merit pay is based upon job performance and uses the criteria established by performance

appraisals as a means of rewarding pay increases. Merit pay, also known as pay for performance,

is the most advocated form of compensation according to human resource management literature

(Patton et al., 2002). One reason cited for the popularity of merit pay is political accountability.

Personnel having to meet performance criteria ease pubic perceptions of entitlements. However,

several problems exist with merit pay. The use of performance appraisals to determine merit

increases is suspect due mainly to the subjectivity of appraisal methods used. Furthermore,

meeting criteria one year does not guarantee performance will be met the next. Since merit pay is

predominately linked to base pay, employees continue to benefit from past performance.

In skill-based systems, the emphasis is not on the job but rather the improvements in an

employee’s knowledge, skills, and abilities. Employees are paid for the skills they can perform at

any given time. The advantages of this system are the flexibility that a multi-skilled, diverse

workforce provides as well as enhanced worker satisfaction. Disadvantages include the

additional training costs and personnel backfill associated with this training. Competency pay is

a form of skill pay that is based upon general behaviors rather than specific skill sets. These

behaviors include qualities such as leadership, communication, and integrity related with the job.

Core competencies are often aligned with an organization’s mission. The main problem

associated with competency pay is the difficulty in measuring qualitative behaviors.


Broadbanding removes the multiple level feature of a grade and step system by focusing

the salary “bands” on job families. Each job family may have several bands depending on

organizational needs. Even though the number of grades is reduced, the salary range is widened,

in some cases often double. Broadbanding is commonly incorporated with skill/competency pay

plans and works best in environments with flatter hierarchies that are utilizing work teams and

cross training approaches. This condition may be the reason this type of system is used the least

in public sector organizations. Each of the strategies described above have advantages as well as

disadvantages; however, organizations must decide which strategy best meets their needs in

achieving specific goals and objectives.

There are several important design elements that must be considered when developing a

performance pay plan if long-term success is to be achieved. Risher and Fay understood this

importance when they noted, “It is difficult to argue against the ideals of merit principles, but it

is also difficult to translate the principles into effective practices” (1997, p. 211). Patton et al

(2002) suggested that the soundness of a performance pay plan could be determined by

answering several questions. These questions are:

1. Why is there a need for a new plan and will performance pay support the organization’s

goals and mission?

2. What criteria will be used to measure performance?

3. Will pay increases be valued by the employee?

4. Are funds available to support the plan?

5. Is there support on a managerial level for performance pay?

These recommendations are closely tied to the attributes of a sound performance pay system

identified by Dow (2004). By combining these two works, a general guide may be developed


consisting of five design elements. These elements include: (a) strategic/human resource

planning, (b) job analysis, (c) salary management, (d) performance measurement, and (e)

stakeholder support. When combined, these elements should provide a foundation for continued

plan success.

How do organizations establish a link between the performance pay plan and its mission?

Strategic and human resource planning establishes this link by matching an organization’s

mission and resources with the community’s current and future needs. This assessment is

accomplished through a SWOT analysis that identifies the strengths, weaknesses, opportunities,

and threats faced by an organization based upon social/demographic, geographic,

economic/technological, and political/legal aspects. By collecting data from these facets,

organizations are able to identify and prioritize services while developing tangible goals and

objectives to support these services. The human resource factor recognizes the knowledge, skills,

and experience that are needed by personnel to accomplish these goals and objectives (Hays and

Kearney, Chap. 7, 2003; Patton et al., Chap. 6, 2002). Simply put, strategic planning identifies

the services that the organization should provide while human resource planning identifies

personnel roles and responsibilities and how these roles will contribute to organizational success.

Dow (2004) understood that the soundness of a plan is based on its ability to support services

provided by the organization.

The second design element is the job analysis process that defines the competencies

required by personnel to perform certain tasks. The job analysis process is closely linked to and

provides the basis for salary and performance management. The job analysis process identifies

the tasks needed to competently perform an activity (service). These tasks are then logically tied

to a particular position to form job descriptions. Job descriptions list the responsibilities and


duties of each job position as well as identifying the specific knowledge, skills, abilities, and

other characteristics (KSAOCs) required to competently perform these jobs. Job descriptions are

used to establish salary ranges by evaluating the relative importance for each position. Salary

ranges should be commensurate with the importance of each position. KSAOCs provide the

objective measurement criteria used by performance appraisals (Cascio, Chap. 4, 1992; Hays and

Kearney, Chap. 9, 2003: and Patton et al., Chap. 7, 2002). Dow (2004) emphasized the

importance of this element when she noted, “High performing organizations define the skills and

supporting behaviors that employees need to effectively contribute to organizational results”

(2004, p. 6).

Salary management lies at the heart of performance pay. Salary management focuses on

the compensation analysis used to develop salary scales. The Stennis Institute (1998) offered that

salary management is dependent upon the three factors: (a) external labor market, (b) internal

equity, and (c) organizational hierarchy. External equity compares the salaries paid by the

organization to that of other similar sized organizations. Internal equity examines the fairness of

an individual’s pay as well as comparing this pay to their peers. Organizational hierarchy relates

to the pay separation between rank or job positions. In determining salary management,

organizations must first consider external market data and what the organization can afford as

general guidelines. This monetary figure may be used as a starting salary or may be used as a

mid-point within a salary range/scale. Salary ranges are separated by fixed percentage amounts

depending upon the value of the job (relative importance as determined by job descriptions).

Increments within the salary scale may be based upon a point system or divided equally by the

number of increments desired. Pay increases are based on the pay strategy used (Cascio, Chap.

10, 1992; and Patton et al., Chap. 9, 2002). There are several points one must consider when


discussing salary management as it pertains to the effectiveness of performance pay. First, if a

perception of pay inequity exists, employees tend to lessen that inequity and productivity

decreases. Second, the rewards must be viewed as being important. Several theories

(reinforcement and expectancy) that supported performance pay are based upon the principle of

meaningful rewards (Katz, 2004; Risher, 2004). If the financial rewards offered by performance

pay are viewed as being inadequate, these theories will not provide sufficient motivation. Behn

(2000) supported this position when he noted that one of the deadly defects associated with

performance pay was that the amount of the reward often times was insignificant to provide

continued motivation. Appendix B contains external and internal pay equity comparisons.

The fourth design principle involves performance measurement. The premise of

performance pay is rewarding employees for behaviors that enhance performance. These

behaviors are identified though the use of performance appraisals that evaluate the job related

strengths and weaknesses of an employee. Organizational performance is improved by correcting

identified weaknesses. While there is no agreement as to which specific appraisal system is the

most effective, a consensus exists that any appraisal system should be comprehensive, objective,

measurable, and aligned to the organization’s mission. Based upon the above criteria, Hayes and

Kearney (2003) would have excluded appraisals based upon written essay, graphic rating scales,

checklists, or forced choice appraisals due to the trait based, subjective nature associated with

each. There are two appraisal instruments that meets the above criteria and warrant due

consideration. Focusing less on traits and characteristics, behaviorally anchored rating scales

(BARS) use specific criteria identified from the job analysis and job position description

(KSAOCs) as the basis for performance measurement. BARS provides a standard reference

framework for the evaluator by defining the behavioral terms measured as well as describing


various levels of performance thereby removing subjectivity. Management By Objectives

(MBO) uses the objectives set by both the evaluator and employee as the determining appraisal

criteria. MBO does not measure employee behaviors, only the employee’s contribution to the

organization. This instrument is dependant upon both the evaluator and employee agreeing upon

major objectives, completion dates, and measurement factors that require periodic meetings and

constant communication between the employee and the evaluator. In recent studies, 68 out of 70

MBO appraisals showed increase productivity (Cascio, Chap. 8, 1992; Edwards, Chap. 8, 2000;

Hays and Kearney, Chap. 11, 2003; and Patton et al., Chap. 11, 2002). The key to any appraisal

system is objectivity and credibility. Dow (2004) noted that if a perception exists that an

appraisal system is biased or does not reflect actual performance, all credibility is lost and

destroys the performance connection for the employee.

The final design element is the support infrastructure required by the performance plan.

Internal and external stakeholder support is crucial for plan success. Research indicated that by

involving stakeholders in the design phase of the plan, a sense of ownership is established. This

ownership is further facilitated when stakeholders are involved in the minute details of the plan

and allowed to provide feedback. This process fosters an understanding of how the performance

plan supports organizational goals and objectives in meeting community needs, thus satisfying

the needs of both groups (Dow, 2004; Risher, 2009). Budgetary support is another critical

infrastructure need for plan success. To be effective, performance plans must have a reliable

revenue stream. This stipulation not only requires consistent funding but also full funding for

personnel that have met performance standards. Even though administrators support the basic

principles of performance pay, they are less enamored with the associated budget implications.

Simply put, full funding in the first years of existence does not guarantee continued funding in


future years. This statement is especially true when transitions occur as a result of legislative

elections (Behn, 2000). Dow noted that the ultimate success of any performance plan was

dependent upon continual funding. Plans in which rewards are “in jeopardy or are inconsistently

available due to fiscal constraints undermines employee confidence in and commitment to the

program” (p. 12, 2004). Another issue that undermines performance pay is the practice of payroll

cost containment. This practice limits the number of people that could receive compensation.

In summary, performance pay is not a new concept. This strategy has been used many

years with documented success in the private sector. However, limited success has questioned

the validity of its use in the public sector. Both advocates and opponents made logical arguments

to support their position. These arguments extended to the various intrinsic and extrinsic

motivational theories that substantiated or disproved the use of performance pay. Organizations

have several options regarding pay strategies depending upon their specific needs. Finally, five

design elements were recommended when developing an effective performance pay system.

While no system is guaranteed long-term success, these elements improve the likelihood of

performance pay continuance.

Procedures

The objective of this paper was to investigate, through the descriptive research method,

five research questions (RQ) that would be used to determine the soundness of CFR’s Step Pay

Plan and determine its overall effectiveness. To meet this objective, two methods of discovery

were used. The primary means of discovery was a literature review for pertinent material. A

literature review was conducted using three resources: (a) the National Fire Academy’s Learning

Resource Center (LRC), (b) Reneau University’s research database, and (c) the Internet. The

LRC was used while attending the Executive Leadership course. The results of this visit revealed


books, magazine and journal articles, and Executive Fire Officer (EFO) research papers that

were applicable to the research topic. A literature review was continued at Reneau University

using their database to obtain magazine and journal articles. Reneau University also assisted in

the acquisition of additional material through the Inter-Library Loan (ILL) system. The Internet

was accessed for general topic articles, reports, and private organizational information. The

literature review revealed what subject matter experts suggested or concluded regarding the

arguments for and against the use of performance pay (RQ 1), the motivational theories that

substantiated or disproved the use of performance pay (RQ 2), which individual based pay

strategies were applicable to public service organizations (RQ 3), and the design elements that

comprise an effective performance pay system (RQ 4).

The second discovery method was through the use of 3 questionnaires. An internal

questionnaire was developed to reveal the perceptions of CFR’s line personnel regarding the

Step Pay Plan (RQ 5). Questions 1 through 19 were multiple choice responses while Questions

20 through 39 were based upon a statement where personnel could choose one of five responses

that ranged from strongly agree to strongly disagree. The questionnaire was distributed to 60 of

65 line personnel. Personnel not given questionnaires were absent due to training, vacation, and

sick leave. External questionnaires were developed to provide a range of information that

included the pay strategies employed, why performance pay was used or not, external pay

comparisons, and to identify positive or negative experiences with performance pay. Using the

Mississippi Municipal League Directory to provide contact and population information, a

questionnaire was mailed to 38 departments in the state that served a population over 10,000. An

online survey site, SurveyMonkey.com, was used to gather and analyze information from out of

state departments using a network of peers established at the National Fire Academy. No


stipulations were placed on municipal population or the size of the department. The results from

these questionnaires may be found in Appendix C, D, and E.

Limitations

Several limitations were noted during this research project. First, the use of fire

departments in Mississippi comparable in size with regards to both department personnel and

municipal population was preferred due to similar economic and employment conditions. In

order to generate an adequate number of responses, questionnaires were mailed to municipalities

that did not fall within the desired parameters. Even though the number of questionnaires

returned exceeded the normal response rate, the low number of responses may not provide

enough information from which data may be extrapolated and possible trends identified. Also,

the distribution of questionnaires was time consuming (reproducing questionnaires and the

mailing process) and costly (self-addressed stamped envelopes). While receiving an adequate

number of responses from which data may be analyzed, the online questionnaire presented

compatibility issues as well. Finally, several articles pertaining to performance pay were

identified during the literature review process but were inaccessible due to being stored in a

subscription depository. This limited potential information that might have proved useful.

Results

This section will examine the research questions posed and document the results of the

questionnaires which were developed to be used as a comparative instrument to verify the

findings and conclusions of the subject matter experts. This information will be used in the

Discussion section to satisfy the research purpose of assessing the soundness of the Step Pay

Plan and determine whether or not the plan accomplished its intended objectives. First, the return

rate of the questionnaires will be documented. The department questionnaire was distributed to


60 line personnel with 58 completing the questionnaire for a return rate of 97%. Of the 38

questionnaires mailed to in-state departments, a total of 22 were returned for a response rate of

58%. The online survey provided 118 responses. These responses were separated into 2

groupings to ascertain whether being union or non-union affiliated made a difference in the

responses provided. Union affiliated departments accounted for 72% (85) of responses while the

remaining 28% (33) represented responses from non-union affiliated departments.

RQ 1: What are the arguments for and against the use of performance based pay plans?

One of the main arguments supporting performance pay was that by offering financial

incentives, employee productivity would be increased thereby improving the quality of services

provided (Prentice, et al., 2007; Perry, et al., 2006). The internal questionnaire was used to

determine the effectiveness of the Step Pay Plan by examining its effects on specialty team

participation (Q 3 through 7), department services (Q 8 and 9), technical certifications achieved

(Q 10 through 15) and professional development sought (Q 16 through 19). When comparing the

perceptions of CFR personnel against the findings in the literature review (Q 20 – 39), the totals

represented combining like responses. Strongly agree and agree are combined while strongly

disagree was combined with disagree.

Prior to the implementation of the SPP, 66% of department personnel (38 of 58)

participated on at least one specialty team. After SPP implementation, 9 personnel have resigned

from specialty teams compared to the 2 that have joined to take advantage of step compensation.

Examining another aspect of specialty team participation, 13 currently serve on specialty teams

even though no compensation was being received opposed to 6 that would participate if

compensation were available. CFR offers other services to meet the needs of the department

(apparatus pump repair and specialty team leaders) as well as the community (car safety seat


installations). A total of 14 personnel are receiving compensation for these extra tasks while 16

are performing these tasks without SPP compensation. When the SPP was implemented, 12

employees were working towards the certifications required for being on the promotional list.

When this benchmark was removed from step compensation in FY 2008, only 6 employees

continued to pursue these certifications. When asked about training received at the NFA, 11

employees had participated in curriculum courses prior to the SPP. After implementation, 9

employees have attended NFA courses with 8 of these individuals noting that their attendance

was due mainly for professional development and knowledge rather than SPP compensation.

Lavy (2000) suggested that both work quantity and quality would be increased due to employees

seeking professional development opportunities as a result of performance pay. Prior to SPP

compensation, 14 employees had already earned a college degree. After plan implementation, 3

employees have earned degrees with 2 acknowledging that these degrees were the result of SPP.

Asked about plans to pursue a fire service or management degree in the future, 13 personnel

indicated that they were; however, none acknowledged that this pursuit was due to SPP

compensation. Asked about other professional development opportunities such as the Certified

Public Managers (CPM) curriculum or the Executive Fire Officer Program (EFOP) course, 6 of

21 company officers and battalion chiefs have participated in the CPM curriculum and only 1 in

the EFO curriculum.

The last two arguments supporting the use of performance pay focused on the human

resource aspects of the organization. First, performance pay may be used as a tool to attract and

retain a Generation X and Y work force (Prentice et al., 2007; Risher, 2007, 2009).

Approximately 70% of line personnel are classified as either Generation X or Y employees.

Second, performance pay removes the stigma of pay entitlements while creating a culture where


an individual’s contributions are valued (Risher, 2007). CFR personnel were asked if they

believed their contributions to the department were valued (Q 23). Combined, 46 % of personnel

felt that their contributions were valued compared to 26% that felt their contributions were not

valued. Of interest was the 59% favorable response given by firefighters. This contrasted

significantly with the negative response given by engineers (40% disagreed).

Opponents countered with the argument that performance pay is counterproductive to

teamwork by creating an environment of competitiveness (Emery, 2004; Risher, 2004, 2007).

Marsden (2004) lamented that teamwork could be undermined by several divisive side effects

caused by performance pay. When asked if the SPP had created an atmosphere of competition

that was detrimental to teamwork (Q 22), 31% agreed while 43% disagreed. Another argument

cited by opponents was the use of performance appraisals to determine pay increases. Appraisal

instruments that cannot accurately measure employee performance, the inability of the evaluator

to distinguish good performance from marginal performance, and the tendency of evaluators to

rate all employees equally challenge the validity of the performance appraisal process (Behn,

2000; Hays and Kearney, 2003; and Patton, et al., 2002). Questions 35 through 37 focused on

CFR’s performance appraisal system. Personnel were split when asked if performance appraisals

were based upon objective criteria (26% agreed, 31% disagreed). Disagreement noticeably

increased (50% disagreed, 10% agreed) when asked if the current appraisal instrument was

appropriate for measuring employee performance. When asked if their performance was

accurately reflected by the appraisals, 30% agreed while 34% disagreed. Of interest was the

breakdown of the disagreement responses. A noticeable difference existed in the responses given

by firefighters and engineers (21% and 20% disagreed) compared to those given by captains and

battalion chiefs (63% disagreed).


The last argument used by opponents was that performance pay does not sustain

intermediate or long-term productivity (Perry et al., 2009). Behn (2004) suggested that one

reason for this inability was attributed to intrinsic values as well as the idea that money is not a

great motivator. When asked if money was an effective motivator for continued performance (Q

33), an overwhelming number of personnel (78%) agreed, particularly firefighters (95%) and

engineers (85%).

Did the external questionnaire responses confirm or refute the arguments used to support

performance pay? The objectives listed were taken from the arguments supporting performance

pay. When asked what objectives the performance pay system was intended to accomplish, the

following responses were received:

MS Dept Out –of –State Objectives Union Non-Union 1. Improve employee productivity/efficiency 75% 72% 75% 2. Improve constituent services 12% 32% 25% 3. Employee contributions are valued 25% 32% 38% 4. Reward exemplary performance 40% 56% 75% 5. Promote professional development 63% 40% 56%

Improving employee productivity and efficiency provided the highest response while improving

constituent services was the least selected choice. Departments were then asked which

objectives, if any, were met as a result of the performance pay plan.

MS Dept Out –of –State Objectives Union Non-Union 1. Improved employee productivity/efficiency 37% 26% 29% 2. Improved constituent services 12% 13% 14% 3. Employee contributions are valued 12% 23% 14% 4. Rewarded exemplary performance 50% 19% 52% 5. Promoted professional development 50% 35% 38% 6. Did not accomplish any objectives 37% 55% 29%


While some success was recognized, responses indicate that performance pay did not produce

the intended results (met objectives).

RQ 2: What motivational theories support or contradict the use of performance based pay?

The basic premise of extrinsic motivators is the use of work related rewards to influence

desirable employee behaviors (Osterloh, et al. 2007). The reinforcement theory supported by

Perry, et al. (2006) suggested that rewarded behaviors tend to be repeated. The expectancy model

supported by Katz (2000) noted that motivation would be sustained if employees believed their

efforts increase performance and this increase will result in rewards. There is mixed evidence

supporting extrinsic motivation. A total of 42 personnel currently fill 72 of the department’s

allotted 78 specialty team positions. Personnel were also attending certification courses when

compensation was being given for promotional list eligibility. On the other hand, 9 employees

resigned from specialty teams even though compensation was being given (Q 5) and 6 positions

remain unfilled. Risher (2004) advanced this theory one step further when he reasoned that not

only must the reward be valued but also seen as being adequate if performance is to be sustained.

Question 27 asked if the compensation received for individual steps was adequate. Collectively,

personnel disagreed (44%). Individually, firefighters (47%) and engineers (45%) responded more

negatively than company officers and battalion chiefs (36%).

The final theory used to support extrinsic motivation was the equity theory. The equity

model operates on the premise that employees assess the fairness of the rewards and that they

compare their rewards against those received by their peers. When asked if compensation was

proportionate with the contributions made (Q 26), the combined responses indicated that 44%

disagreed. Of interest was the firefighter response in which 64% disagreed. This response was

significantly higher than that of engineers (35%) and company officers and battalion chiefs


(26%). When asked if their peers were compensated more for performing the same work (Q 31),

39% agreed with the statement compared to 21% that disagreed. Engineers (50%) represented

the group that disagreed with the statement the most.

Intrinsic motivation emphasized the internal values one possesses as the driving force to

perform. Both public service motivation and self-determination theories stressed internal values

as being the driving force that influences performance (Perry and Hodgendem, 2008; Perry, et

al., 2009). Department personnel supported these theories in several ways. First, 80% of

personnel responded overwhelmingly that if the SPP were discontinued they would continue to

serve on specialty teams or perform other tasks that supported the department’s mission to

provide quality services (Q 34). Second, the number of personnel that serve on specialty teams

(13) and perform other tasks (16) without compensation supports intrinsic theories as does the

number of individuals who attend the NFA for the knowledge and professional development

rather than step compensation.

RQ 3: What individual based pay strategies are applicable to public service organizations?

The literature review identified five pay strategies most often used by public sector

organizations. Non-performance pay strategies (traditional compensation models) included equal

compensation and grade and step pay systems. Pay increases for non-performance based

strategies were often the result of automatic increases usually based upon across the board raises

or longevity. The performance pay related pay strategies included merit, skill/competency, and

broadbanding. One important aspect brought to light was the use of pay strategies to meet the

needs of the organization. The result of this need often translated into the development of hybrid

systems that incorporated several pay philosophies. Table 1 records the responses given by

departments regarding the types of pay strategies being used.


Table 1

Pay Strategies Employed: Mississippi/Out of State Comparison

Out of State Departments

Types of strategies Mississippi Departments Union Non-Union

Equal Compensation 55% 22% 15%

Grade and Step 9% 52% 15%

Merit 18% 9% 40%

Skill/competency 9% 3% 9%

Broad-banding 0% 0% 0%

Other 9% 14% 21%

Collectively, out-of-state responses indicated that 62% of departments prefer non-performance

based strategies with a noticeable difference between union and non-union responses. Equal

compensation and grade and step systems were used 74% of the time by union departments

compared to 30% for non-union departments and 64% for in-state departments. The majority of

these departments (68% out-of-state, 75% of in-state) have not considered the use of

performance pay strategies. Several departments have considered using this pay strategy (25%

out-of-state, 18% in-state) but do not because of a lack of support by either department personnel

or city administrators. A total of 7 departments (4 out-of-state, 3 in-state) attempted performance

pay systems at one time but returned to the previous non-performance system. Regarding

performance pay systems, non-union departments used performance pay the most (70%)

compared to MS departments (36%) and union departments (26%). Merit based pay was used the

most by non-union and instate departments (40%, 18%) compared to union departments (9%).


Hybrid systems were the next most popular choice followed by skill/competency models. The

Step Pay Plan is a hybrid system incorporating the broadbanding features ( fewer grades based

on job families) with skills/competency performance requirements.

RQ 4: What design elements comprise an effective performance based compensation plan?

Many performance pay plans fail as a result of poor design (Risher and Fay, 1997).

Understanding how these failures occurred, Dow (2004) identified five design elements that

increase the likelihood of long-term performance pay success. Effective strategic planning

involved establishing a link between performance pay and the department’s mission by

identifying the services that are or will be needed and how personnel will contribute to this

process. Examining this issue, personnel were asked if the services being provided by the

department supports community needs (Q 20). Personnel wholeheartedly agreed (91%) that the

services being provided meets community needs. Only 1% of personnel disagreed with the

statement. The next issue was whether personnel agreed in principle with the SPP concept.

Personnel were asked if performance measures such as performing extra duties (Q 28),

completion of technical certifications (Q 29), and completion of professional development

benchmarks (Q 30) should be compensated. Again, a majority of personnel agreed (73%) that

compensation should be given for performing/completing these benchmarks. However,

personnel were asked if there was a link established between the SPP and the quality of services

being provided (Q 21). Personnel were equally split between those that agreed (32%) and those

that disagreed (32%).

The second design element recognized the importance of a job analysis that identified the

tasks and competencies (KSAOCs) required of personnel. The Stennis report (1998) updated

department job descriptions and responsibilities that supports current needs.


Salary management focused on both the external and internal aspects of compensation.

Question 25 asked personnel if they thought their pay was competitive with other similar sized

departments. A significant number of personnel (59%) felt that their pay was comparable to

other departments compared to 19% who did not share this view. The external survey provided

salary information so that a comparison could be made. The departments selected for salary

comparison (10 in-state, 5 out-of-state) were based upon those that came closest to Columbus in

the context of department size and population served. The following information was taken from

Appendix B.1.

Firefighter Engineer Captain Batt. Chief Median 32,016 36,720 41,600 47,934 Columbus, MS 31,615 37,048 42,137 47,472

The internal equity results have already been discussed in RQ 2. However, another aspect

concerning internal equity must be discussed. The SPP is a grade and step system based upon

rank with salary ranges that overlap (refer to Appendix B.2). While rare, there are several

instances where lower ranking personnel that have reached the top of their pay scale are paid

more than personnel of a higher rank (refer to Appendix B.3).

Hays and Kearney (2003) noted that appraisal instruments that rely on trait-based

measurements are prone to subjectivity, thereby raising concerns over the validity of the system.

Both the behaviorally anchored rating scale (BARS) and management by objective (MBO)

methods were preferred over other appraisal instruments (Hays and Kearney, 2003; and Patton et

al., 2002). CFR’s current appraisal instrument is a trait-based graphic rating scale. Personnel

perceptions regarding performance appraisals have already been discussed in RQ 1.

The final design element focused on the infrastructure needed to support the performance

plan. Concerning stakeholder support, Dow (2004) and Risher (2009) emphasized participation


and input from all levels of the organization to develop a sense of ownership as well as gaining

an understanding of how the performance plan operates. When developing the SPP, there was

minimal participation at the line level of the organization. Personnel were asked if they

understood the SPP and the benchmarks used for step compensation (Q 24). Only 26% of

department personnel stated that they understood the plan and its components compared to 46%

that did not. Regarding external support, it must be noted at this time that support for the SPP

from other departments had, at best, nominal backing. Support from City administration also

changed as a result of municipal elections in the SPP’s third year. Dow (2004) and Behn (2000)

noted that one of the most critical elements that must be accounted for is a reliable revenue

stream that ensures continual funding. Prior to the SPP being implemented in FY 2003, the City

had financial reserves of approximately $11 million. When the City suspended the SPP in FY

2005, Columbus was operating in a deficit due to what can best be described as an overly

ambitious spending agenda with poor accountability. In recent years the economic downturn has

caused concerns. Like many municipalities, Columbus’ main revenue source is through property

and sales tax. As a result of this downturn, sales tax collections this year have been $800,000 less

than last year. Another budgetary concern noted by Behn (2000) was the issue of cost

containment that limits the number of personnel that receive compensation. The SPP utilized cost

containment measures such as limiting the number of compensated steps for specialty team

participation, removal of compensated steps, and some tasks not being compensated at all.

All of these issues had a significant impact on the SPP and will be discussed in the next section.

Discussion

This section will assess the conceptual soundness of the Step Pay Plan and determine

whether the plan accomplished its intended objectives by using information provided by the


Results section. The soundness of the SPP will be evaluated using the performance plan design

criteria suggested by Dow (2004) and Patton et al. (2002). Data collected from Questions 3

through 19 of the internal questionnaire will provide the criteria for determining whether or not

the plan was effective and accomplished its intended objectives.

First, did a need exist for a new pay plan and if so, did the SPP support the department’s

mission and services? The equal compensation system used by CFR was attributed to creating

several problems that were considered to be hindering the quality of services being provided. A

common perception was that this system stifled initiative by fostering mediocrity and

complacency. In other words, why should I apply myself if I will receive the same pay as those

that do the same or less? The need for change existed. The second part of the question was

whether the new plan supported the organization’s goals and mission. The SPP provided

benchmarks for meeting performance, training, and professional development benchmarks that

were directly linked to department services and, if utilized fully by personnel, would have

enhanced the quality of services being provided. On this aspect of plan soundness, the SPP

passed.

The next elements to be reviewed involve job descriptions and how performance will be

measured. Prior to the SPP, the department had updated its job descriptions and incorporated a

performance appraisal instrument as a result of the Stennis study. In the design phase of the SPP,

three quality control provisions were added to supplement performance appraisals. Step

compensation was dependant upon passing these provisions and steps would be removed for

poor performance. Personnel recognized the importance of the appraisal process in the context of

SPP integrity and supported each quality control measure as evidenced by their responses. These

provisions alone would have more than adequately provided valid performance criteria and


maintained SPP integrity. However, these provisions were not part of the SPP and as a result, left

performance appraisals as the only method in which performance could be measured. CFR’s

appraisal instrument would not have supported the SPP due to issues brought to light by Dow

(2004), Hays and Kearney (2003), and Patton, et al. (2002). The appraisal instrument used by the

department was based upon a generic, trait based system that depended upon the subjective

opinions of the evaluators. Personnel recognized this fact due to the negative responses when

questioned about instrument objectivity and appropriate performance criteria. The most telling

sign of appraisal weakness was verified when personnel indicated that the appraisals did not

accurately reflect their performance. Company officers and battalion chiefs responded more

negatively than firefighters and engineers. One probable explanation is that the close working

relationship between the company officers and their crew influenced the appraisal ratings. The

tendency to rate personnel above average or the inability to distinguish between high and poor

performers compromises appraisal validity and destroys the performance/reward connection.

On this aspect of plan soundness, the SPP failed.

Salary management focused on the external and internal equity perceptions of personnel.

Personnel felt that their pay was competitive with other similar sized departments. The results of

the external salary comparison (Appendix B.1) confirmed this belief. All positions listed were

within $500 of the median pay of their counterparts. Internal equity was based upon the fairness

of the individual reward and the fairness of their reward compared to that of their peers.

Collectively, a perception of internal inequity exists. Firefighters (64%) responded that their pay

was not proportionate with the contributions made. This statistic is supported when reviewing the

median pay for firefighters in FY 2008 (Appendix B.3). The median pay was approximately half

way between the high and low salaries for each rank except firefighters. Firefighter median pay


is only $1,200 above the low salary and $5,400 below the high salary. This disparity is explained

by the fact that approximately 50% of firefighters receive one step or less, which lowers their

median pay level. This fact is attributed to the cost containment measures (specialty team

limitations, removal of EMT-B benchmark, removal of promotional list eligibility) previously

discussed. Considering that all firefighters are classified as Generation X or Y, this internal

inequity issue must be addressed. The most logical solution is the removal of these cost

containment measures. The SPP was also scrutinized from the aspect of being fair. Step

compensation results in increases in base pay. As a result, captains received more pay than

engineers and engineers more than firefighters for performing or accomplishing the same work.

This reason explains why personnel felt others were compensated more for performing the same

work. Based upon the results of the external and internal aspect of plan soundness, the SPP

neither passed not failed.

The final element examined is the infrastructure support needed for plan success. Did

department personnel support the SPP? Personnel fell into three basic groups: (a) those that

supported the plan, (b) those that accepted the plan, and (c) those that rejected the plan. The

number of personnel that supported the plan might have increased had a sense of ownership been

established. The largest margin of support was lost in FY 2005 when the SPP was suspended.

This lack of support was especially evident by those that had applied themselves, the main

supporters of the plan. Further support was lost in FY 2008 due to cost containment measures

and partial compensation of the longevity step. Longevity is a crucial part of the plan that allows

personnel that choose not to participate in the performance benchmarks a means of achieving

salary increases. So far, the longevity steps have been missed twice and only awarded at a partial

level the remaining time. The lack of support for the SPP is confirmed by the number of


responses given by personnel to either return to the equal compensation system previously used

(24%) or amend the SPP incorporating needed changes (55%). External support faired no better.

Starting out as a compensation strategy for the fire department, City administrators demanded a

performance plan for all departments. Even though the police department had benchmarks

capable of supporting their services and sufficient opportunities for compensation, the

department never embraced the SPP. The SPP did not translate well in the public works

department that was limited by performance, training, and educational opportunities. The main

opportunity for pay increases for many workers was through longevity steps, which were

awarded every two years. The lack of support by both departments was the main reason that

across-the-board-raises were given in FY 2007 in lieu of continuing with the established SPP.

How did this lack of support influence the decision not to re-implement the SPP? This decision

can be summed up in one word, politics. The majority of fire department personnel live outside

city limits compared to the majority of law enforcement and public works personnel that live

inside the city limits. Those that live within the City vote, those that live outside the City do not.

The final infrastructure support discussed is consistent funding. Dow (2004) and Behn (2000)

contended that long-term success for any performance plan was dependent upon consistent

funding. Once it was evident that consistent funding would be a problem under the current

system, could the city have used alternative funding mechanisms to support the SPP? Several

options were available. The department could have used monies collected from fines (fire zone

violations, building code violations, fire alarm response fees) to supplement the plan. However,

this option is the least desirable from the position that if the public discovered that these fines

were used to support employee pay increases, the political ramifications would be severe.

Another option is to use permit fees as a funding source. By itself, the amount collected would


not sustain the required funding of the SSP. The final option is the use of State fire rebate money

to augment the SPP. Each year the department receives approximately $130,000 from the MS

Department of Insurance that is given by insurance companies that practice within MS. This

money is based upon a percentage of premiums paid by the citizens of that municipality.

Typically this money is used for capital improvements or for the purchase of apparatus. This

amount would easily support continual funding for the plan based upon the premise that $15,000

would be paid each year for step compensation and $80,000 would be paid every other year for

step compensation and longevity pay. Step compensation was based upon awarding 20

individual steps per year. Longevity pay was calculated using total department salaries paid

multiplied by 2%. Since the City did not seek alternative funding mechanisms, the lack of

funding has created problems that have cascaded into a compensation nightmare. On this aspect

of plan soundness, the SPP has failed. Based upon the totals determining the soundness of the

plan, the SPP passed once, failed twice, and had one draw.

The second purpose of the ARP was to determine the effectiveness of the SPP by

determining whether the plan accomplished its intended objectives. The SPP was also used to

correct an internal pay issue the Stennis report referred to as organizational hierarchy, the

separation of pay between ranks. Prior to the implementation of the SPP, vacancies existed of the

department’s specialty teams. After implementation, vacancies still exist. The SPP failed to

accomplish its first objective. The second objective was to promote technical certifications and

specialized training. Prior to being removed from step compensation, 12 employees were seeking

certifications for the next rank. After the step was removed, only 6 continued to seek these

certifications. This fact supports the position that the SPP was having a positive effect. On the

other hand, the SPP had no effect on personnel attending the NFA to complete technical


curriculums. The effectiveness of the SPP on this objective is considered a draw. The third

objective of the SPP was to promote professional development. As a result of the SPP, only 2

employees have earned a college degree. Continuing on the same path, only 25% of company

officers and battalions chiefs have taken advantage of other professional development

opportunities (CPM and EFO curriculums). The SPP has not had the positive effect of promoting

professional development in light of additional steps given for these benchmarks. On a positive

note, the SPP did manage to increase the pay differential between ranks. Prior to SPP

implementation, the pay differential between ranks was approximately $2,250. In FY 2008, the

pay difference between ranks increased to $5,000 (Appendix B.3). This difference should

encourage personnel to seek promotional opportunities and by extension, obtain certification

classes required for that position. Based on these results, the SPP accomplished only one of four

objectives. However, it must be noted that the failure of the SPP to accomplish the objectives

identified were most likely influenced by plan instability and uncertainty, inadequate step

compensation, the question of whether money is an effective motivator, or the intrinsic values

possessed by personnel. It is difficult to determine which factor impacted the plan the most.

Likewise, it would be equally difficult to determine if the SPP would have accomplished its

objectives had the plan been financially sustained.

Based upon the facts presented, the plan failed during both the implementation and

maintenance phases. The following is a list of factors that contributed to plan failure.

Implementation Phase

1. Lacked a consistent revenue stream

2. Lacked city-wide support for the plan

3. Failed to implement adequate performance criteria


4. Granted ineligible benchmarks that impacted plan effectiveness

5. Incorporated cost containment practices

Maintenance Phase

1. Continued to compensate personnel for ineligible benchmarks

2. Continued to use the practice of cost containment

3. Failed to secure support from a new administration

Recommendations

On paper, the SPP failed miserably. However, this analysis is somewhat misleading. By

making minor adjustments, many of the problems identified can be corrected and the purpose

and integrity of the SPP re-established. The following recommendation endorses two options

based upon whether consistent funding can be achieved.

Option One

If funding can be secured, the recommendation is to amend the Step Pay Plan to reflect needed

changes by addressing internal equity and design flaw issues. These changes include:

1. Re-instate and enforce the quality control provisions

2. Switch to a behaviorally anchored rating scale or management by objectives appraisal

instrument

3. Add benchmarks for the following specialty team or department service

- Rescue technician (Structural collapse, Overland search and rescue, Surface water

rescue)

- Car safety seat installations

- Shift fire investigators

- Re-instate the promotional eligibility list benchmark


Option Two

If consistent funding cannot be achieved, the recommendation is to return to an equal

compensation system that supports internal pay equity issues, namely an increase in the

separation of pay between ranks. This increase is coupled with a new promotional system that,

when combined, should support quality services being provided. These changes include:

1. Develop a new pay scale with adequate separation of pay between ranks

2. Switch to a behaviorally anchored rating scale or management by objectives appraisal

instrument

3. Develop a weighted promotional system that incorporates the following:

- Performance (specialty team participation, performance of other services)

- Training certifications/Professional development

- Seniority

- Promotional exam

- Interview process

In summary, the advice given by Risher and Fay held true. The principles and ideals of

merit pay make its use attractive, but it is difficult to put the concept into effective, sustained

practice. The stark reality is that performance pay works in the private sector because they are

not constrained by the fiscal limitations and responsibilities demanded by the general public.

However, research by subject matter experts and findings of this APR suggest that a well-

designed performance plan is a feasible option for salary management practices. Risher (2004)

summed it up best when he used an old adage to describe the contrasting ideals between

traditional pay systems and performance pay when he said, “You get what you pay for” becomes

“You get what you reward” (p. 14).


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Appendix A

Step Pay Plan Benchmarks

Step Criteria Number of steps achieved

Performance Steps

Specialty team participation 1 (per specialty team)

Specialty team shift leader 1

Apparatus pump Repair 1

Specialty instructors (extrication, medical) 1

Emergency Medical Technician – Basic * 1

Training / Certification Steps

National Fire Academy curriculums completed 1

Promotional Eligibility List ** 1

Certified Advanced Rescue (CARs) Technician 1

Professional Development

Certified Supervisory Manager (MS CPM curriculum) 1

Certified Public Manager (MS CPM curriculum) 1

Executive Fire Officer Program (NFA) 2

Associates Degree 2

Bachelors Degree 4

Masters Degree 5

Longevity / Seniority

Every 2 years of service 1

* Emergency Medical Technician – Basic was not included in 2008 re-implementation because certification is now a department requirement. **Promotional Eligibility List step was removed from 2008 re-implementation because of funding limitations.


Appendix B: CFR Equal Pay / Step Pay Plan Comparison

B.1: External Salary Comparisons

Stennis Report: 1998 External Salary Comparison Municipality Firefighter Engineer Captain Fire Chief Auburn, AL 28,112 34,016 41,160 53,500 Clarksdale, MS 17,829 24,970 28,200 39,540 Greenwood, MS 24,682 28,982 43,202 Grenada, MS 20,790 28,178 37,835 Laurel, MS 20,895 23,662 26,524 37,190 Moss Point, MS 29,120 38,500 Natchez, MS 19,443 23,810 28,661 49,500 Northport, AL 25,500 27,000 29,600 45,000 Pascagoula, MS 25,317 31,523 34,756 50,126 Southhaven, MS 25,418 30,264 43,014 48,506 Starkville, MS 18,869 22,551 28,493 41,226 Tupelo, MS 34,000 40,000 50,484 Vicksburg, MS 29,764 45,000 Median 21,923 27,327 29,360 45,000 Columbus, MS 24,803 27,654 29,736 47,514

MS Fire Department: 2009 External Salary Comparison

Municipality Firefighter Engineer Captain Batt. Chief Brandon, MS 25,544 32,500 38,000 42,000 Clinton, MS 33,000 37,000 42,000 48,000 Corinth, MS 23,491 32,176 40,481 46,445 Greenwood, MS 26,784 29,923 35,009 38,685 Horn Lake, MS 34,295 38,117 42,538 48,127 Oxford, MS 32,016 35,745 38,175 43,252 Pascagoula, MS 36,417 38,017 39,942 48,665 Pearl, MS 27,092 36,720 39,732 47,868 Tupelo, MS 32,500 39,000 41,600 51,000 Vicksburg, MS 28,938 35,470 39,730 La Grange, GA 39,016 42,655 53,068 64,255 Kinston, NC 30,000 40,000 45,000 50,000 Lumberton, NC 36,000 41,800 46,100 Monroe, NC 32,000 36,000 42,000 46,000 Greeneville, TN 35,355 49,834 52,202 Median 32,016 36,720 41,600 47,934 Columbus 31,615 37,048 42,137 47,472


B.2: 2003 Step Pay Plan Salary Scale

Firefighter Engineer Captain /

Pub. Educator Battalion Chief /

Fire Marshal Chief of Training Fire Chief

25,867.30 26,384.64 26,912.33 27,450.57 27,999.58 28,559.56 29,130.75 29,130.75 29,713.36 29,713.36 30,307.62 30,307.62 30,913.77 30,913.77

31,532.04 32,162.68 32,805.93 32,805.93 33,462.04 33,462.04 34,131.28 34,131.28 34,813.90 34,813.90 35,510.17 36,220.37 36,944.77 36,944.77 37,683.66 37,683.66 38,437.33 38,437.33 39,206.07 39,206.07 39,990.18 40,789.98 41,605.78 41,605.78 42,437.88 42,437.88 43,286.64 43,286.64 44,152.36 44,152.36 45,035.40 45,936.10 50,717.13

46,854.82 51,731.47

47,791.91 52,766.09

48,747.74 53,821.40

49,722.69 54,897.82

55,995.77

57,115.68

58,257.98

59,423.14

59,423.14


B.2: 2008 Step Pay Plan Salary Scale

Firefighter Engineer Captain /

Pub. Educator Battalion Chief /

Fire Marshal Chief of Training Fire Chief

26,644.80 27,168.96 27,722.24 28,275.52 28,857.92 29,411.20 29,993.60 29,993.60 30,605.12 30,605.12 31,216.64 31,216.64 31,857.28 31,857.28

32,468.80 33,109.44 33,808.32 33,808.32 34,448.96 34,448.96 35,147.84 35,147.84 35,875.84 35,875.84 36,574.72 37,302.72 38,059.84 38,059.84 38,816.96 38,816.96 39,603.20 39,603.20 40,360.32 40,360.32 41,175.68 42,020.16 42,864.64 42,864.64 43,709.12 43,709.12 44,582.72 44,582.72 45,456.32 45,456.32 46,388.16 47,290.88 52,241.28 48,280.96 53,260.48 49,212.80 54,337.92 50,202.88 55,415.36 51,222.08 56,551.04 57,686.72 58,851.52 59,987.20 61,181.12 62,404.16


B.3 – Equal Pay / Step Pay Plan Comparison

Equal Pay: Across the Board Raise

Rank Pay – 2002 2003 Raise 2004 Raise 2007 Raise 2008 Raise Battalion Chief 34,222.78 35,249.46 36,306.94 37,396.15 38,518.03 Captains 31,532.01 32,477.97 33,452.31 34,455.88 35,489.56 Engineers 29,469.74 30,353.83 31,264.44 32,202.37 33,168.44 Firefighters 26,692.70 27,493.48 28,318.28 29,167.83 30,042.86

Step Pay Plan

Firefighter Engineer Captain BC 2003 SPP Adjustment

High 30,307.62 33,462.04 36,944.77 40,789.98 Low 26,384.64 29,713.36 33,462.04 39,206.07

Median 27,450.57 32,162.68 34,813.90 39,997.99

2004 SPP Adjustment High 30,913.77 34,131.28 38,437.33 41,605.78 Low 26,384.64 29,713.36 33,462.04 39,206.07

Median 27,999.58 32,162.68 34,813.90 40,405.92

2008 SPP Adjustment High 37,048.38 40,910.31 45,164.99 48,896.01 Low 30,408.68 34,921.05 39,306.63 46,048.65

Median 31,615.49 37,048.38 42,137.63 47,472.33


Appendix C

Performance Pay Questionnaire

The following questionnaire will be used to evaluate the conceptual validity of the Step Pay Plan (SPP) and to support or disprove research completed by subject matter experts regarding performance pay. This Applied Research Paper satisfies the requirements of the National Fire Academy’s Executive Fire Officer Program – Executive Leadership course. Your honest responses are important and greatly appreciated. Department totals are placed in the corresponding spaces. Responses by rank are in tables. General Information 1. Current rank in the department:

a. firefighter [ 19 ] b. engineer [ 20 ] c. captain / battalion chief [ 19 ]

2. Employment date at CFR: a. Prior to October, 2004 [ 47 ] b. After October, 2004 [ 11 ] Performance 3. I participated on a specialty team(s) prior to the implementation of the SPP. [ 38 ] Yes [ 7 ] No [ 11 ] Not Applicable

Firefighter Engineer Captain/Batt. Chief Yes 5 16 17 No 2 3 2 Not Applicable 11 1 0

4. I joined a specialty team to receive step compensation after implementation of the SPP. [ 2 ] Yes [ 35 ] No [ 11 ] Not Applicable



5. I resigned from a specialty team(s) after implementation of the SPP. [ 9 ] Yes [ 38 ] No [ 11 ] Not applicable If yes, how many _____


6. I would like to participate on a specialty team but do not because I will not be compensated

for it (limitations placed on team participation). [ 6 ] Yes [ 37 ] No [ 15 ] Not applicable


7. I participate on a specialty team(s) even though I am not compensated for it. [ 13 ] Yes [ 32 ] No [ 13 ] Not applicable


8. I perform other tasks that I receive compensation for. [ 14 ] Yes [ 41 ] No [ 3 ] Not applicable



9. I perform other tasks that I am not receiving SPP compensation for. [ 16 ] Yes [ 37 ] No [ 5 ] Not applicable


Training 10. I completed / was working towards the certification requirements for the next rank because of

SPP compensation (being on the promotional list). [ 12 ] Yes [ 39 ] No [ 7 ] Not applicable


11. I am not working towards certification requirements for the next position because being on

the promotional list is no longer a compensated step. [ 6 ] Yes [ 40 ] No [ 12 ] Not applicable


If Question 12 applies, answer question then skip to Question 16. If you have attended the National Fire Academy, go to Question 13 and continue questionnaire.

12. I have not / do not attend courses at the National Fire Academy because: [ 20 ] I do not meet course requirements [ 24 ] I have no interest in attending the National Fire Academy

Firefighter Engineer Captain/Batt. Chief Do not meet req. 15 3 1 No interest 4 14 7


13. I attended courses at the National Fire Academy prior to SPP implementation. [ 11 ] Yes [ 3 ] No

Firefighter Engineer Captain/Batt. Chief Yes 0 2 9 No 0 1 2

14. I attend(ed) courses at the National Fire Academy after SPP implementation mainly for

professional development / knowledge. [ 8 ] Yes [ 5 ] No


15. I attend(ed) courses at the National Fire Academy after SPP implementation mainly to

achieve step compensation. [ 1 ] Yes [ 12 ] No


Education 16. I had already earned a college degree prior to SPP implementation. [ 14 ] Yes [ 44 ] No


If yes, was this degree fire service related (i.e. fire science or business/management) [ 2 ] Yes [ 12 ] No



If no, do you plan on completing a degree that is fire science or management related [ 3 ] Yes [ 9 ] No


17. I earned a college degree after implementation of the SPP. [ 3 ] Yes [ 41 ] No


If yes, was it to receive SPP compensation. [ 2 ] Yes [ 1 ] No


18. I am working towards or am planning on pursuing a fire/business management degree. [ 13 ] Yes [ 28 ] No


If yes, is it to receive SPP compensation. [ 0 ] Yes [ 5 ] No



19. I have completed or currently working towards other professional development opportunities such as the Certified Public Managers curriculum or National Fire Academy’s Executive Fire Officer Program.

[ 6 ] Yes [ 13 ] No [ 39 ] Not applicable for my position


If yes, was / is it to receive SPP compensation. [ 0 ] Yes [ 7 ] No


The following questions are based upon general statements. Please place an X underneath the column that best describes how you feel about the statement. Survey Key SA Strongly Agree A Agree N Neutral D Disagree SD Strongly Disagree SA A N D SD 20. Services and programs provided by CFR supports 26% 65% 7% 1% 0% community needs

SA A N D SD Firefighter 37% 63% 0% 0% 0% Engineer 10% 80% 5% 5% 0% Captain / Batt. Chief 31% 53% 16% 0% 0%


SA A N D SD 21. There is a link established between the SPP and 10% 22% 36% 22% 10% the quality of services being provided


22. The SPP has created an atmosphere of competition 12% 19% 26% 33% 10% that is detrimental to teamwork


23. I feel that my contributions are valued by the 5% 41% 28% 21% 5% department


24. I understand the SPP principle and am aware of 0% 26% 28% 31% 15% the benchmarks used for step compensation



SA A N D SD 25. CFR’s pay is competitive with other similar sized 5% 54% 22% 10% 9% departments


26. I am compensated at a level that is proportionate 0% 24% 34% 28% 14% with the contributions I make


27. The amount of compensation received for individual 5% 22% 29% 28% 16% steps is adequate and worthwhile


28. Personnel should be paid extra for performing 38% 38% 18% 1% 5% tasks above what is required by their job description (specialty team, pump repair, car seat install. Etc.)


29. Personnel should be paid extra for completion 33% 38% 17% 3% 9% of technical certifications (CARs, NFA, promotional list)



SA A N D SD 30. Personnel should be paid extra for educational / 36% 36% 14% 5% 9% professional development (degrees, CPM, EFO)


31. Others are compensated more for performing 17% 22% 40% 21% 0% the same work that I do


32. SPP has influenced my job satisfaction in a positive 0% 26% 44% 14% 16% manner


33. Money is an effective motivator for continued 26% 52% 5% 16% 1% performance



SA A N D SD 34. If the SPP were discontinued, I would serve on a 28% 52% 5% 16% 1% specialty team(s) or other tasks to support CFR’s mission to provide quality services


35. Performance appraisals used by CFR are based 0% 26% 43% 22% 9% primarily on objective criteria


36. The appraisal tool currently being used by CFR 0% 10% 40% 38% 12% is appropriate for measuring performance


37. My performance has been accurately reflected by 0% 30% 36% 22% 12% performance appraisals



SA A N D SD 38. SPP step compensation should be conditional 9% 50% 22% 16% 3% upon meeting/passing performance appraisals


39. Physical fitness and proficiency testing should 12% 48% 29% 8% 3% become part of the appraisal process


40. I believe that CFR should: a. Return to the equal salary management system (personnel paid by rank) [ 24% ] b. Keep the SPP as is [ 21% ] c. Keep the SPP, but make needed changes [ 55% ]

Firefighter Engineer Capt. / Batt. Chief Return to equal compensation 18% 20% 26% Keep SPP as is 18% 30% 16% Amend SPP 64% 50% 58%

If you selected C, what changes would you recommend?

1. Consistent funding 2. Include additional benchmarks

- Re-instate promotional eligibility list as compensated step - Add new benchmarks to include car seat installation, shift fire investigation,

structural collapse rescue technicians, overland search and rescue technician, and surface water rescue technician

- Provide some form of compensation for personnel that have same knowledge and skills but not on specialty teams due to limitations

3. Step compensation dependant upon proficiency testing 4. Remove step compensation if ineligible to receive 5. Ensure longevity step is compensated 6. Increase amount of compensation for benchmarks


Appendix D

Performance-based Compensation MS Fire Department Questionnaire

1. Department Information Department: ___________________________________

Completed by: _________________________________

Contact number: ___________________ Personnel on department: _______

2. Type of compensation system used: a. [ 12 ] Each rank is compensated equally (increases based upon across the board raises) b. [ 2 ] Grade and step (increases based upon automatic step raises) c. [ 4 ] Merit based (increases based upon meeting performance appraisal criteria) d. [ 2 ] Skill / competency based (increases based upon acquisition of skills / behaviors) e. [ 0 ] Broad-banding (fewer grades/wider salary range than grade and step) f. [ 2 ] Other (please explain)

If equal compensation was selected (a) and department has never used performance based compensation proceed to Question 6. If plan was discontinued, proceed to Question 5.

3. A performance based compensation plan was implemented to accomplish the following: (Check all that apply) a. [ 6 ] Improve efficiency and productivity of personnel b. [ 1 ] Improve constituent services c. [ 2 ] Create new organizational culture where individual contributions are valued d. [ 5 ] Promote professional development e. [ 1 ] Support external pay equity issues (pay similar to other sized departments) f. [ 1 ] Support internal pay equity issues (compensate top performers) g. [ 0 ] Other (please explain) 4. The performance based compensation plan has accomplished the following: (Check all that apply) a. [ 3 ] Improved efficiency and productivity of personnel b. [ 1 ] Improved constituent services c. [ 1 ] Creation of a new organizational culture where individual contributions are valued d. [ 4 ] Promoted professional development e. [ 1 ] Supported external and internal pay equity issues f. [ 3 ] Did not accomplish any of the intended objectives g. [ 0 ] Other (please explain)


If performance pay was discontinued, proceed to Question 5. If still being used, proceed to Question 7. 5. Performance based compensation was discontinued because of the following factors: 4 a. [ 1 ] inconsistent funding b. [ 0 ] counter-productive to teamwork c. [ 0 ] was not supported by department personnel d. [ 1 ] was not supported by city administration e. [ 1 ] no link established between performance plan and increased performance f. [ 1 ] other (please explain) 6. A performance based compensation system has: a. [ 9 ] not been considered b. [ 4 ] been considered but not implemented due to concerns over: [ 3 ] funding issues [ 1 ] support by department personnel [ 2 ] support from city administration [ 0 ] no link between performance pay and increased performance [ 0 ] other (please explain) 7. Salary Information Position Firefighter Engineer Captain Battalion Chief Pay

Thank you for your assistance.


External Questionnaire Point of Contact Information

MS Departments

Point of Contact Municipality Contact Number

A. Wagner Biloxi, MS 228.435.6203 R. Fortune Brandon, MS 601.824.4636 B. Burnside Clinton, MS 601.925.1010 R. Price Corinth, MS 662.286.2213 L. Griggs Greenwood, MS 662.453.2246 M. Gray Gautier, MS 228.219.7030 H. Simpson Grenada, MS 662.227.3447 P. Sullivan Gulfport, MS 228.518.2038 D. Webster Hattiesburg, MS 601.582.3311 H. Jones Hernando, MS 901.496.8491 D. Linville Horn Lake, MS 662.342.0858 J. Homan Meridian, MS 601.485.1822 R. Lavinghouse Moss Point, MS 228.366.0364 J. Ponson Ocean Springs, MS 228.872.4407 M. Hill Oxford, MS 662.232.2418 R. O’Sullivan Pascagoula, MS 228.366.1308 R. Martin Pearl, MS 601.939.7240 S. Tittle Southhaven, MS 662.393.7466 T. Walker Tupelo, MS 662.841.6439 A. Doyle Vicksburg, MS 601.634.4500 J. Littlefield West Point, MS 662.494.2105 E. Smith Yazoo City, MS 662.746.2841


Appendix E

Performance-based Compensation Out of State Fire Department Questionnaire

Union responses are on the left side, non-union responses are on the right side. Page 1: General Department Information

1. Department Information Name: Department name: City/town: State: Population served: Contact number: 2. Department type: a. [ 85 ] Union affiliated b. [ 33 ] Non-union affiliated 3. Type of compensation system used: a. [19/5] Each rank is compensated equally (increases based upon across the board raises) b. [44/5] Grade and step (step increases are based upon automatic raises) c. [8/13] Merit based (increases are based upon performance appraisal criteria) d. [2/3] Skill/competency based (increases are based upon acquiring new skills/behaviors) e. [0/0 ] Broadbanding (fewer grades/wider salary ranges) f. [12/7] Other If a was selected, responders were directed to Page 3 via the logic survey function Page 2: Departments that use Performance Pay 1. The performance based compensation system was implemented to accomplish the following

objectives: a. [18/12] Improve efficiency and productivity of personnel b. [8/4] Improve constituent services c. [8/6] Create a new organizational culture where individual contributions are valued d. [14/12] Reward exemplary performance e. [13/9] Promote professional development


2. The performance based compensation system accomplished the following objectives: a. [8/6] Improved efficiency and productivity of personnel b. [4/3] Improved constituent services c. [7/3] Created a new organizational culture where individual contributions are valued d. [6/11] Rewarded exemplary performance e. [11/8] Promoted professional development f. [17/6] Has not accomplished identified objectives to date 3. List any positive or negative comments regarding the use of a performance pay system. Responders were directed to Page 4 upon completion of Question via the survey logic function. Page 3: Departments that do not use performance pay systems 1. A performance based compensation system has: a. [30/6] Not been considered b. [12/1] Considered but not implemented c. [3/1] Suspended or discontinued 2. A performance based compensation system has been considered but not implemented due to: a. [18/3] Not applicable b. [1/0] Consistent funding issues c. [10/0] Not supported by department personnel d. [1/1] Not supported by municipal administrators e. [3/0] No link established between pay and performance 3. A performance based compensation system was suspended or discontinued due to the

following factors: a. [24/3] Not applicable b. [2/0] Inconsistent funding

c. [0/0] counterproductive to teamwork d. [4/0] Not supported by department personnel

e. [0/1] Not supported by municipal administrators f. [1/0] Did not increase performance of personnel g. [2/1] Did not accomplish its intended objective(s) 4. List any positive or negative comments associated with performance pay. Page 4: Salary Information 1. Please complete the salary information for the following positions: Firefighter: Engineer: Captain: Battalion Chief:


External Questionnaire Point of Contact Information: Out of State Departments - Union

Point of Contact Municipality Contact Number Pete Webb Dothan, AL 334.798.3696 Frank Byrd Mobile, AL 251.454.3646 Jim Jobusch Gilbert, AZ 480.503.6320 Richard Upham Scottsdale, AZ 480.312.1810 Steve Irr Yuma, AZ 928.373.4880 Michael Boyle Irvine, CA 949.854.1894 Ken Waldvogel Los Gatos, CA 408.341.4411 Rick Ortega Millbrae, CA 925.575.0732 Rick Robinson Orange County, CA 949-347.2273 Niko King Sacramento, CA 916.616.4551 Matthew Ernau San Marcos, CA 760.744.1050 David Daley Centennial, CO 720.989.2302 Wayne Zygowicz Littleton, CO 303.795.3800 Larry Coapland Thornton, CO 303.538.7652 John Blaschik East Haddam, CT 860.685.8380 Chris Hurlburt Hamden, CT 203.407.5880 Michael Sinsigalli West Hartford, CT 860.561.8320 Julie Shockley Johnson Broward County, FL 954.381.8910 Mark Smith Gainesville, FL 353.384.3101 James Warman Largo, FL 727.587.6714 Frank Vrklan Miramar, FL 954.602.4801 Ray Hansen Pinellas Park, FL 727.541.0713 John Jurgle Pompano Beach, FL 954.786.4510 Greg Hoggat Orlando, FL 407.246.3992 Jeff Buchanan Oviedo, FL 407.971.5613 George Bessler Seminole, FL 727.393.8711 Don Triana West Palm Beach, FL 561.804.4732 Darren Rosario Hawaii, HI 808.938.6442 Robert Wilson Sioux City, IA 712.279.6376 Matt Sonnenburg West Des Moines, IA 515.222.3420 Randy Jaeger Des Plaines, IL 947.391.5336 Spencer Kimura Glenview, IL 847.724.2141 Jim Ramer Goshen, IL Craig Haigh Hanover Park, IL 630.736.6801 Todd Allen Moline, IL 309.797.0416 Tom Ebsen Oak Park, IL 708.358.5609 Carey Slauter Greenwood, IN 317.339.2612 Rick Russell Noblesville, IN 317.770.5105 Craig Leu Sedgwick County, KS 316.660.3433 Steve Kyle Paducah, KY 270.444.8521 Darian Baton Rouge, LA 225.454.6550


Merriek Tassin Mandeville, LA 985.626.8671 D. Brady Rogers Centerville, MA 508.790.2375 Tom Bogart Lynn, MA 781.334.3171 Jerome Lamoria Prince George County, MD 301.904.0376 John Piper Coon Rapids, MN 763.767.6478 Sal Scarpa N. Kansas City, MO 816.274.6025 Troy Negrete Oak Grove, MO 816.690.6990 Scott Avery O’Fallon, MO 636.262.4202 Paris Jenkins St. Joseph, MO 816.271.4606 Barry McLamb Chapel Hill, NC 919.968.2781 Rick Bergeron Claremont, NH 603.542.5156 Mike Gagnon Derry, NH 603.432.6121 Steven Marsar New York, NY 576.409.6850 Albert Bragg Akron, OH 330.375.2411 David Whiting Columbus, OH 614.645.7859 Homer Jones Oklahoma City, OK 405.297.3321 Scott Clark Tulsa, OK 918.596.9410 Tom Bohm Hermiston, OR 541.567.8822 Don Baker Lincoln City, OR 541.996.2233 Ernst Hargett Philadelphia, PA 215.686.1302 Steve Dirksen Sioux Falls, SD 605.373.6957 Mark Finucane Johnson City, TN 423.975.2844 Mark Klingele Denton, TX 940.349.8832 Jerald Ziller Orange, TX 409.988.7359 Benjamin Barksdale Arlington, VA 703.228.4640 Tony McDowell Henrico, VA 804.310.1984 Bruce Evans Norfolk, VA 757.441.2421 Jeff Terwilliger Portsmouth, VA 757.393.8765 Patrick Humphries Virginia Beach, VA 757.478.1254 Mark Correira Edmonds, WA 425.771.0215 Jeff Griffin Issaquah, WA 425.941.4293 Mike Scott Kent, WA 253.856.4308 Phil Jurmu Longview, WA 360.442.5500 Karl Rufener Renton, WA 253.797.1511 Grant Baynes Richland, WA 509.628.0269 Gordi Olsen South King, WA 206.510.3192 Mike Charter Spokane Valley, WA 509.879.4910 Mike Senchyna Vancouver, WA 360.487.7231 Theonita Cox Kenosha, WI 262.653.4410 Jim Ley Milwaukee, WI 414.545.6958 Harry Barger Verona, WI 608.845.9401 Martin King West Allis, WI 414.302.8904 Kenny Cline Charleston, WVA 304.483.2615 Tim Cortez Casper, WY 307.235.0365 Jim Wamsley Rock Springs, WY 307.389.2309 Steven Warrington Victoria, Australia 0419.399.503


External Questionnaire Point of Contact Information: Out of State Departments – Non-Union

Martin deMasi Payson, AZ 928.474.5242 Michael Smith Highland, CA 909.864.6928 Chuck Baird Cobb County, GA 770.590.5662 Chris Smith LaGrange, GA 706.883.2651 Kenneth Chadwick Lawrenceville, GA 678.873.0763 Dean Maggos LaGrange Park, IL 708.354.0225 Joe Krueger McHenry, IL 815.669.5451 Mike Vaughn Washington, IL 309.444.4650 Lonny Owens Lenexa, KS 913.477.7921 Bill Park Olathe, KS 913.205.9091 Dan Clark Washington, KY 502.376.5878 Ernst Mitchell Greenwood, LA 318.938.5290 Ray Hasil Pentwater, MI 231.869.5987 Pat Parker Traverse City, MI 231.947.3000 Brad Weber Lexington, MO 816.419.9330 Kent Davis Charlotte, NC 704.650.2196 Bill Johnson Kinston, NC 252.939.3222 Mike Cox Lumberton, NC 910.671.3860 Chris Griffin Monroe, NC 704.282.4726 William Hunt Shelby, NC 704.669.6602 Frank Blackley Wilmington, NC 910.343.3939 David Greene Colleton, SC 843.539.1960 David Cooler Hilton Head Island, SC 843.682.5160 Mark Foulks Greenville, TN 423.823.2317 Richard Lieder Cypress, TX 281.894.0151 Scott Mitchell Flower Mound, TX 972.874.6270 Lee Glover Frisco, TX 972.292.6330 Robert Fox Victoria, TX 361.485.3457 Gil Rodriguez Murray, UT 801.264.2781 Rick Edinger Chesterfield, VA 804.748.1821 Mike Armstrong Roanoke, VA 540.853.2415

Documents

Performance Based Pay: Assessing the Effectiveness of