National Institutes of Health Human

National Institutes of Health

Human Resource Audit on Compensation Policies

The Human Resources (HR) Audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organization's HR functions. The audit determines if HR is doing what it is supposed to be doing, if compliance is met, and to discover any potential problems. Indeed, the HR audit is a diagnostic tool used to identify areas of improvement. A good HR strategist will not be satisfied, ever. An initial audit and subsequent ongoing assessment of the results will help the HR strategist in using the audit tool to best effect. In this paper, an HR audit of the National Institutes of Health is performed, focusing on the human resource area of Compensation and Benefits. The audit performed herein will define the desired practices of the organization, analyze the current practices of the NIH compensation policies, address a core set of questions regarding this HR function area for analysis and review, identify potential problems, and offer solutions to those problems.

A General Review of Best Practices in Human Resource Compensation Policies

The effective management of human capital is the primary determinant of whether or not an organization is effective (Youndt, Snell, Dean, & Lepak, 1996). Physical capital is not the most important factor in organizational success, rather, it is the ability of the organization to not only garner but also maintain a human talent element that adds value to the business endeavor. Compensation is the means through which human capital is obtained. Indeed, compensation is one of the major elements in employee satisfaction and dissatisfaction in a job.

According to the Saratoga Institute, 'compensation' is one of the top reasons that people leave their job (Branham, 2004). Accordingly, a whole new genre of employee compensation management companies has arisen, filling the market need in human resources management to help companies effectively meet and maintain employee's compensation needs and desires. This new technology is called Enterprise Compensation Management. ECM solutions help organizations optimize workforces (Dobbs, 2004). The need is clearly evident in the current organizational environment for the latest, excellent technology in managing compensation concerns of organization.

The Saratoga Institute, a division of the PricewaterhouseCooper Unifi Network, is a world leader in quantitative measurement of human capital. It has established within its service division, a set of core compensation policies based upon rigorous and trusted employee research. Key areas of compensation that serve as industry benchmarks as well best practices for organizations in forming their compensation policies are:

1. Base pay

2. Annual incentives

3. Long-term incentives

4. Stock options

(Source: PricewaterhouseCooper Unifi, 2010).

These are general areas that require much attention to detail and must be tailored to the organization. Indeed, the recognition of these areas as core domains in establishing successful compensation policies is becoming the industry norm.

National Institutes of Health -- Relevant Background for Audit

The National Institutes of Health is a government agency of the United States Department of Health and Human Services. It is the primary agency for the U.S. Government for biomedical and health research. The NIH is divided into two parts, the 'extramural' part which is responsible for outside funding and outside research, and the 'intramural' part which is responsible for in-house research. The mission of the NIH is to discover new knowledge leading to better health for everyone. It is an incredibly robust agency, with multiple institutes and centers as part of its organizational makeup. The Office of the Director is the central office of the NIH, and sets policy, strategy, and planning for the agency. There are multiple offices within the Office of the Director, including the Office of Human Resources, which manages and administers the human resource needs of the agency. (National Institutes of Health, 2010).

The Office of Human Resources advises the NIH Director and staff on human resource management, directs central management of human resource services, and provides NIH leadership and planning on human resource development. The OHR vision is to recruit and maintain a highly skilled workforce for the NIH, and their mission is to "To make the NIH Human Capital Organization the best and most valued provider of HR strategies and services within the Federal Government. As such, NIH managers work in partnership with their Office of Human Resources (OHR) staff to meet the needs of their employees and to meet the unique mission of the NIH" (Office of Human Resources for the National Institutes of Health, 2010).

Audit Criterion for the NIH

In keeping with the Saratoga/PricewaterhouseCooper models, the following criteria for the purposes of this audit are used as benchmarks, addressed through a series of questions.

Compensation - Core Areas for Audit

1. Is there a formal compensation program?

2. How are wages set?

3. How are jobs rated?

4. Are salary surveys used?

5. Who administers the compensation program?

6. Are Cost of Living adjustments given?

7. Are merit increases given?

8. Is there a bonus system?

9. How is the compensation program communicated to employees?

10. Are health insurance and other benefits given, if so, what are they?

11. Are there paid holidays, and who is eligible for them?

12. Is there a Paid Time Off system?

13. What is the vacation schedule and how is it earned?

14. Are there stock options or other equity options for employees, if so, what are they?

Results of the NIH Audit

Compensation - Core Areas for Audit

NIH Results

Is there a formal compensation program?

Yes

How are wages set?

By the General Service locality pay rates and the Federal Wage Program

How are jobs rated?

Through the Department of Defense Civilian Personnel Management Service

Are salary surveys used?

Yes

Who administers the compensation program?

The Office of Compensation Administration

Are Cost of Living adjustments given?

Yes, in qualified areas as determined by the COLA program.

Are merit increases given?

Yes

Is there a bonus system?

Yes

How is the compensation program communicated to employees?

Through the Office of Personnel Management and the OHR of the NIH.

Are health insurance and other benefits given, if so, what are they?

Yes. Benefits include Health Insurance, Life Insurance, Dental and Vision coverage, Flexible Spending Account, Retirement Account, and Thrift Savings Plan.

Are there paid holidays, and who is eligible for them?

Yes. Permanent employees are eligible for paid holidays.

Is there a Paid Time Off system?

Yes, including Sick Leave, Family Leave, Court Leave, Military Leave, Funeral Leave, Annual (vacation) Leave, and Volunteer Leave.

Who is eligible for vacation leave?

The vacation schedule depends on length of service and is available to full time federal employees.

Are there stock options or other equity options for employees, if so, what are they?

Yes

Sources: (Office of Personnel Management, 2010), (Department of Defense Civilian Personnel Management Service, 2010), (National Institues of Health Office of Human Resources, 2010).

Analysis of the Results

The National Institutes of Health is a large federal government agency, with an internal and supporting Office of Human Resources. Compensation policies are not only available for viewing through an employee online portal at the OHR webpage for NIH employees, but are also available through the federal agency that administers the compensation program for federal and civilian employment -- the Office of Personnel Management.

Changes/surveys in compensation policies are administered by the Department of Defense Civilian Personnel Management Service. In toto, the National Institutes of Health has a robust and energetic mechanism to administer their human resource strategy, with duties on different core areas of human resource management supported through symbiotic federal agencies, including compensation policies.

Additionally the webpage of the Office of Human Resources of the National Institutes of Health has several user-friendly features to facilitate information dissemination and troubleshooting. Indeed, the fact that the OHR has these online features for employees is a testament to keeping the process of compensation and benefits questions and issues one of easy access and administration. Employees do not have to navigate the rather complicated structure of the various agencies that work with the OHR of the NIH in order to answer questions on compensation -- it is a 'one stop shop.' This is a very desirable feature for employees, and is a definite boon that employees will subjectively recognize as a positive retention factor, as well as word of mouth recruitment factor (Office of Human Resources for the National Institutes of Health, 2010). The HR audit of the National Institutes of Health compensation policy revealed a closed-loop structure, with no outstanding items of great concern that need addressing.

Room for Improvement?

The Human Resource Compensation Audit of the National Institutes of Health revealed an overall positive structure with several employee-friendly features built directly into the Office of Human Resources of the NIH website. Moreover, the audit detailed the various offices involved in administering different aspects of the compensation program. Having most if not all employee questions and needs addressed in one 'place' is a desirable and positive morale-boosting retention factor in maintaining human capital. This use of High Performance Work Factors by the National Institutes of Health reveals the positive relationship between a desirable set of work factors (wage included) and employee retention (Huselid, 1995).