Branding Update
March 8, 2016
Transparency in Salaries and Compensation
Utility
managers often grapple with being transparent about salaries and compensation. Transparency
in public agencies is mandatory because they are typically monopolies
and chartered with protecting the public interest. But crafting a successful
approach to transparency in the area of compensation requires a clear
understanding of what influences people’s thinking about utilities and public-employees.
The Relevant Issues
Customer Choice and
Competition
– In most cases, utility customers cannot choose another service provider, so they
clearly deserve to know whether the utility is well run and the public interest
is being served. This no-choice circumstance is married to the idea that utilities
have “no competitors,” which for some means that they are less efficient. Whether
competition actually leads to greater efficiency is debatable, but it probably
doesn’t matter. The inefficient government bias is actively reinforced in
politics and the media.
The Brand of Public
Employees
– Lack of competition and the inefficiency brand can lead to perceptions that
public employees are less qualified, less motivated, or underperform those who
work in the private sector. This undeniably affects opinions about compensation.
The Efficiency Enigma
and Investment
– Despite the need for utilities to be efficient and build a reputation for
efficiency, the efficiency issue is actually a red herring when contemplating the
need to invest in water resources and infrastructure. The potential to increase
efficiency, even in an “inefficient” organization, may only be a 10%
opportunity. The real question is whether inefficiency is used as an excuse to
oppose rate increases, leading to under-investment. Since reliable water services
are essential for a strong economy and quality of life, system failures or
resource shortages can cost the community many times more than the entire
operating budget of the utility. This means that policy makers should be less
focused on efficiency and more concerned about the liabilities that arise from under-investment.
The people of Flint Michigan are experiencing these liabilities today.
Appropriate
Investment Begins with the Employees – In order to adequately serve the public
interest, utilities must invest in a management team and employees that are
highly qualified and well trained, especially in the areas of planning, technology,
and finances. People may believe that a utility general manager making $250,000
per year is overpaid. However, even skeptics might think differently when they
realize that the performance of the utility affects the viability of hundreds
of companies which employ thousands of people. Clearly, dollars invested in water utilities
are highly leveraged dollars.
A Strategy
Be Very Transparent – Utilities should
make it very easy for people to get access to information on salaries and
compensation. But this transparency should be enhanced by providing a
meaningful context for evaluating this compensation.
Create a Compensation
Strategy Brief –
An ongoing effort to build a strong brand with policy makers and the
influential public certainly helps to alleviate concerns about employee
compensation. More specifically, the utility can create a brief that outlines
the thinking behind the utility’s compensation strategy. This brief should
highlight the utility’s fundamental role in maintaining the local environment,
quality of life, and economy. It should also communicate key workforce
standards, the commitment to sound planning and efficient operations, and the
need for compensation that will attract and retain quality employees.
Don’t Be Apologetic – Utilities need
strong leaders who are committed to protecting the public interest, securing
investment, and delivering high standards of service. If challenged, emphasize
your workforce standards and stand behind your compensation strategy.