This paper examines broadbanding, a compensation strategy that consolidates traditional job classification layers into fewer, broader pay bands. Beginning with the historical context of outdated salary systems in state government, the paper outlines how broadbanding benefits employers through greater personnel flexibility, streamlined management, and a flattened organizational structure. It then critically evaluates the drawbacks, including pay equity issues, employee morale problems, cross-band promotion difficulties, and the potential for workforce exploitation. The paper also addresses misapplication risks, using the healthcare industry as a cautionary example. It concludes with a practical model for implementing broadbanding effectively.
In a 1997 survey reported by the American Federation of State, County and Municipal Employees, more than two-thirds of state government personnel managers indicated they "would like to change their state's salary and classification systems." They believed that their governments had far too many job titles, far too few people filling each title, and outmoded salary systems — some over two decades old. But what kind of solution would help organizations win that "numbers game"?
Enter broadbanding, the practice of structuring job classifications to have fewer "layers" than a traditional compensation system. For example, a company that starts out with eight layers compresses those layers into four broader ones, creating a new set of job classifications that group similar skill sets and personnel together. Overnight — or so it can seem — a company's entire compensation picture shifts, its grades change, and the "lay of the land" becomes a whole new territory. This new territory is both an individual challenge and a corporate one. Although the effect of a broadband can be, and sometimes is, a change in the salary range of a particular job, its practical ramifications in reality extend beyond individual job descriptions into a much wider picture. Examining that "bigger picture" in detail reveals that broadbanding is a phenomenon with its own distinct set of advantages and disadvantages.
From the employer's point of view, broadbanding has many clear positive effects. Since employees' "bands" are wider — with a larger range from minimum to maximum pay rates — individual jobs become multidimensional and even multifunctional. Employers enjoy greater flexibility in assigning work and getting it done, which enables a company making the transition from traditional hierarchies to a more flattened organizational structure to have its compensation levels correspond to the new simplified corporate map. It simplifies the deployment of personnel without concern about "grade" issues, and it can even be one element in creating a work atmosphere in which employees have a more pivotal role in decision-making concerning their own career development — thereby empowering a labor force that may have felt it had little control over its own destiny, and improving labor-management relations in the process.
Even multiple layers of middle management, when broadbanded into fewer layers, can enjoy a "halo" effect from this simplification. Reducing the number of layers within an organization, ideally, will streamline its operations, make communications easier, and — just as it does with the occupational labor force — give even low- to mid-level managers an increased sense of autonomy and control. Fewer layers mean less detail, less paperwork, and fewer premature or unnecessary requests for raises and promotions (Jackson and Mathis 423–4), thus accomplishing the goals of keeping the organization at a good competitive "fighting weight" in the marketplace, with less waste, duplication, and red tape standing between the company and its goals.
In actual practice, however, some of this "compression" is trickier to execute well. Certainly, removing a slavish reliance on HR to set pay scales and policies can work to "free up" change in an organization. On the other hand, loosening those ties to firm central control — whether by HR or another centralized source — can blur both job description and compensation lines to the point where clear demarcations and standards become impossible to set. The issue of pay equity comes to mind immediately. If two employees who share the same job title are suddenly within the same "band," and one is paid near the bottom of the range while the other is at the top, how does a manager justify either salary? Does the bottom of the range automatically move up by a given percentage? If not, does a broadened band mean a flattened ceiling for the best achievers? That is hardly a way to find and keep good people.
A similar dilemma exists when broadbanding brings employees with diverse skill levels together, effectively positioning them against each other. For example, if a file clerk is broadbanded into a level that includes not only clerks but extends up to executive secretaries, how long does the file clerk remain a file clerk before considering upgrading their skill set — thereby posing a real competitive threat to the layers above? Conversely, what happens to the executive secretary who realizes they are only two "layers" from the ceiling of their band, but whose skills do not translate easily into another broad band within the company?
In the old system, with an ally or mentor in the company, that executive secretary might have been able to transition into, say, an entry-level comptroller's assistant position, with the idea of eventually working toward a more responsible role in finance. In the new broadened compensation plan, however, the Finance band may be such a distinct entity from the Administrative band — with such a difference in minimum to maximum grades — that an entry-level executive secretary may have to accept a substantial pay cut in order to advance. That is not exactly an effective way to raise employee morale.
Of course, even in the old hierarchical system, many upwardly mobile employees were willing to accept a temporary setback in pay in order to learn a new job; this, in itself, is not an ailment that broadbanding would uniquely exacerbate. However, if that executive secretary pushes the envelope, they could make a compelling case for starting at a considerably higher "beginner" rate in the Finance band than legitimate Finance beginners are paid. This again raises issues of pay equity, the possibility of discrimination lawsuits, and could present more potential headaches than traditional "promotion from within" ever caused. That anticipation of trouble could, in turn, lead companies to actively discourage employees from exploring different jobs within the organization or to refuse cross-band promotion requests and training beyond certain pay grade levels. In the long run, such a policy ends up sending some of the best and brightest out the door — once again, not the result broadbanding is intended to achieve.
These kinds of complications point to an obvious conclusion: broadbanding is not for everyone (Jackson and Mathis). When misapplied, broadbanding can induce management to think purely in terms of "numbers" and forget more important priorities. An example in the healthcare industry is ironically called "patient-focused care," under which many tasks associated with patient care are shifted from licensed to unlicensed staff. The unlicensed staff are "broadbanded" in that they must perform new responsibilities in addition to their regular tasks, often with little training or increase in pay. Licensed staff find that their contact with patients is limited through the erosion of their job duties, and their ability to provide quality care is hindered. Ultimately, unless protections are built in, this form of broadbanding is driven by the bottom line and provides no benefit for licensed staff, unlicensed staff, or patients. It is often a method of reducing and de-skilling the workforce.
Another drawback of a broadbanding system may be less a "numbers" game than a "mind" game — that is, dealing with employees who are working within a new, flattened hierarchy but whose conditioned response is still rooted in the older system, where a promotion automatically equals a pay raise (Jackson and Mathis 424). An ironic backlash can occur in a company where an employee is asked to assume a different job — perhaps one involving far more complex skills — without a compensatory raise. This is a definite possibility, since broadbanding overall works to reduce the total number of "promotions" available to the workforce. Under those conditions, employees may look at the new structure and decide there is no reason to strive for advancement, since they will not be compensated for the increased value they provide to the company. If the "numbers" are managed poorly, their feelings are entirely justified.
Perhaps one of the more obvious risks inherent in this kind of system is the potential for abuse — especially in lean economic times, when companies are trying to extract maximum value from every dollar. An employer may be tempted to demand increasingly more from the workforce to the point where employees are stressed beyond reasonable limits, with the inevitable results of lowered morale, increased absenteeism, and costly errors.
A perception may also arise that "favored" employees receive a far easier ride across the broad band than ordinary workers do — that they receive all the desirable opportunities for advancement and training, resulting in resentment and a lack of cooperation among the rest of the staff.
"Healthcare misuse, exploitation, and morale decline"
"Four-point framework for balanced broadbanding"
Jackson, John H., and Robert L. Mathis. Human Resource Management. 9th ed. South-Western Thomson Learning, 2000, pp. 422–424.
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