Dow Chemical’s Salary Program: A Model for the Future?

Howard RisherCompensation and Benefits Review

May-June 2000

By: Stephanie Bridgewater

People Success1996

• Competency-based human resource tools

4 primary tools:

1. Performance Expectations

2. Employee Development

3. Job Opportunities

4. Compensation

Job Slotting

• Designed to provide internal equity throughout the world

• Starts with assignment of a job to a job family

• Then a career development stage

• Management’s responsibility

• Generally 2 job levels for each development career stage

Job Families• Global Leaders: establish the vision and

strategy for the future • Functional Specialists/Leaders: research,

analyze, develop, design, advise, teach, and communicate in their field

• Administrators: provide advice and consultation within established policies and procedures

• Technicians: knowledge and application of a para-professional, mechanical, or scientific discipline

Employee Development Stages

• Acquiring- starting career, learning and demonstrating basic, core and functional competencies

• Applying- apply competencies across projects, have a solid knowledge of specific functional areas

• Leveraging- leverage capabilities across business units, functions, and geographic areas, skills to guide, train, and coach others

• Visioning- lead organization in their area of expertise through their vision of the future

-Stages describe how people are expected to do their work and the contributions expected over time

Employee Development• “Dow has responsibility to provide the necessary

resources and tools for people to develop themselves professionally.”

• “Dow employees have a responsibility to use the resources and tools in the development of knowledge and skills that will make the company more competitive.”

• “Leaders have a responsibility to support employee development and to provide ongoing feedback and coaching to their employees.”

Market Strategy• In defining labor market, focuses on pay

levels of companies in its industry

• Define salary ranges for each of the 4 job families and for each job level

• Goal is to be at the median pay level for premier companies worldwide

• Focal point of each range is called the 100th pay position (100% of market median)

• Managers expected to distribute salaries so company average is 100%

Salary Management for New Graduates

• Need to know what they can expect in terms of both salary and career growth

• Development Curve- progression of salary steps

• Curve is based on assumed progression time of 8 years with 3 two-step promotions

Managing Pay for Experienced Employees

• Salaries managed within open ranges for 3 higher career stages

• Ranges span from 85% to 125% of the 100th pay position

• Managers asked to select a target pay position for each employee that is divisible by five- 85%, 90%, etc.-for a total of nine target pay positions within each job level

• Then select one of the increments as a target pay level for each subordinate

Role of Managers in Salary Management

• HR staff serves in an advisory role only

• Managers control slotting of all positions in their workgroups

• Responsible for determining base pay increases

• Company does not establish salary budgets

• Does not require managers to rely on a standard performance appraisal process

Performance Award Program

• aka Annual Incentive Plan

• Covers all salaried employees

• Involves goal setting and individual award determination

• Goal is to recognize and reward performance

• New program redefines manager’s role in compensation management

• HR no longer responsible for day-to-day salary management

• Unification and consistency a compensation goal for firm

• Most important characteristic: Open Nature