Transcript Merit Pay Pay for Performance

Collective Bargaining Training
Webinars, February 25 and 28, 2011
The Economic Context
An Overview
Ken Peres, CWA Research Economist
Company Financial Statements
An Overview
Irvin Stout, CWA Research Economist
What are Financial Statements?
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Financial statements are formal records of the financial activities
incurred by a business during a given period.
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Financial statements provide detailed information about the financial
position, financial performance and changes in financial position of
an enterprise over time.
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Financial statements are used by a wide range of individuals making
economic decisions.
3 Major Financial Statements
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Balance Sheet
Income Statement
Cash Flow Statement
The Balance Sheet
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The Balance Sheet reports the financial position of a company at a
specific point in time, usually at the end of a month or year.
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The Balance Sheet is broken out into 3 sections: Assets, Liabilities
and Shareholders Equity.
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Assets: Economic resources that are expected to produce future
benefits.
Liabilities: Financial obligations (debt) that a company owes to its
creditors.
Shareholders Equity: Stockholders ownership claim or rights to a
company’s assets.
The Balance Sheet Con’t
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Assets (What the Company has)
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Liabilities (What the Company owes)
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Current Assets: Cash or can be converted into cash within one year.
Long-term Assets: Have a value or life of more than one year.
Total Assets: Current Assets plus Long-term Assets.
Current Liabilities: Obligations that must be paid within one year.
Long-term Liabilities: Obligations that mature in more than one year.
Total Liabilities: Current Liabilities plus Long-term Liabilities.
Shareholders Equity (What the Stockholders own)
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Represents the Shareholders’ stake/ownership in the business.
Total Assets minus Total Liabilities equal Shareholders Equity.
Also known as Net Worth.
The Income Statement
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The Income Statement (also called the profit & loss statement) reports
revenues earned and expenses incurred by a business over a period of
time.
 Operating Revenues or Sales
 The amounts earned from selling products; services.
 Operating Expenses
 Costs incurred in operating a business.
 Includes costs for employee salaries and benefits, supplies, lease/mortgage payments,
utilities, advertising, administrative, depreciation, etc.
 Operating Income/Profit
 The amount of income generated by business operations.
 Key measure of profitability
 Operating Revenues minus Operating Expenses equal Operating Income.
 Non-Operating Expenses/Income
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Expenses and/or income that are not directly associated with core business operations.
Includes interest payments made on debt, interest income earned on investments.
 Net Income/Profit
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The amount left over after all expenses have been deducted.
The Cash Flow Statement
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The Cash Flow Statement reports the sources (inflows) and uses
(outflows) of cash over a period of time.
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The Cash Flow Statement is divided into 4 main sections:
1.
Cash provided by operating activities
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2.
The amount of cash that was generated by company operations.
Cash used in/provided by investing activities
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3.
The amount of cash utilized for investment purposes (e.g. capital
expenditures, disposition of assets.)
Cash used in/provided by financing activities
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4.
The amount of cash utilized for financing purposes (e.g. borrowing and
repaying loans, withdrawals from/to shareholders)
Cash at end of year
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The amount of cash that was left over at the end of the year.
Additional Financial Information
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Management’s Discussion and Analysis
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Section of a Company’s Annual Report that provides an in-depth review and
analysis of the past year’s financial and operating results and offers a comparison
of these results over prior periods.
Notes/Footnotes to the Financials
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A detailed set of notes immediately following the financial statements in an annual
report that explain and expand on the information in the financial statements.
The Notes also provide additional information that is not directly found in the
financial statements such as the accounting methodologies used for recording
and reporting transactions, segment data, pension plan details, debt maturity
schedules, etc.
Comparative Trend Analysis
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A comparative analysis of a Company’s financial information over
common periods.
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Changes in financial statement line items are analyzed to detect
trends.
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Basic financial trend analysis involves comparing dollar and
percentage changes over set periods.
Calculating Dollar and Percentage Changes
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2.
Subtract the old value from the new value. This will give you the
dollar or amount change.
Divide the dollar or amount change by the old value and multiply by
100 and add a % sign. This will give you the percentage change.
Example
Line Item
Sales
Year 2010
Year 2009
$200 (New Value)
$150 (Old Value)
$200 minus $150 = $50: This is the Dollar or Amount Change.
$50 divided by $150= 0.33.3 multiplied by 100 = 33.3%: This is the Percentage
Change.
Where to Find Financial Information
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Company Websites
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SEC Edgar Database
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SEC Filings (10-K,10-Q)
Financial News/Research Websites
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Investor Relations Page
Yahoo Finance, Reuters
Other
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Hoovers, Dun & Bradstreet
Wage Negotiations and
Compensation Designs
An Introduction
Bob Patrician, CWA Research Economist
Principles of a
Fair Compensation System
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A fair day’s pay for a fair day’s work
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An equitable share of the revenue and profits
the employer receives
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Quality benefits including medical and retirement
benefits
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Opportunity to move into higher skill jobs at
higher pay, with experience.
Human Resources View
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Compensation systems further the goals of the
employer:
 Recruit and retain employees
 Increase or maintain morale
 Reward or encourage peak performance
 Reduce turnover and encourage loyalty
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Compensation will be perceived as fair if its
components are developed to maintain internal
and external equity.
Types of Pay Systems
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Hourly Pay
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Variable Pay Plans
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Commission Plans
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Merit Pay/Pay for Performance
Merit Pay/Pay for Performance
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Rationale:
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pay should be based on performance
better performance should get higher pay
Reward good work and motivate more
Periodic appraisals done by supervisors
Morale, productivity, retain valued ‘ees
Arguments against
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Poor design can backfire, reward wrong behavior
Bias and favoritism. Fear and distrust
Commission Sales Plans
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Sales
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Good service drives profit and growth
Worker earnings flow directly from service
Arguments against
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Retail stores, Customer service jobs
Plans change regularly
Employer controls plans and targets
Is the “earnings opportunity” real?
How to insure pay for time not worked
Union needs to understand and police the rules
Probably cannot negotiate what the rules will be
More detail on some of these issues . . .
Variable Pay
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Incentive Plans
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Group Plans
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Individual bonus
Engineered rates
Group Incentives
Gainsharing
Team Awards
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Tied to overall corporate performance
Dealing with Variable Pay
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Union Goals
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Fair targets
Fairly applied
Changes regulated
Contract language to govern plan
Union Oversight
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Time Study Steward
Gainsharing committee
Access to company financial information
12
12
10
10
8
8
Years oi Service
Years oi Service
Which Graph Fits Our Goals?
6
4
6
4
2
2
0
$10 $12 $14 $16 $18 $20
0
$10 $12 $14 $16 $18 $20
Wages
Wages
Hourly Pay, Progression Schedules
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Driven by seniority
Predictable and Dependable
Options as to how to spread money over the
schedule
An exponentialized Schedules has equal
percentages between steps
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Calculator on the Intranet
In a later webinar we’ll discuss costing,
slotting, red circling and lump sums
Background for the Homework Exercise
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The Gotham Company is a business services
outsourcer. CWA Local A represents 250 workers at
the Company. The Union is currently negotiating a
new 3 year contract with the Company.
There are three job titles:
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30 Clerks who make between $8.25 and $15.35 per
hour.
200 Customer Service Reps who make between
$10.00 and $17.35 per hour.
20 Technical Service Reps who make between $15.00
and $22.35 per hour.
Wages for the Homework Exercise
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In our earlier contract, we
achieved wage
progressions but they have
the same increases
between the steps for each
of the jobs and the greatest
money at the highest steps.
They are also 7 year
schedules. These are the
current schedules:
Step
Service
Clerk
CSR
TSR
Start
0
8.00
10.00
15.00
1
6
8.20
10.20
15.20
2
12
8.45
10.45
15.45
3
18
8.75
10.75
15.75
4
24
9.10
11.10
16.10
5
30
9.50
11.50
16.50
6
36
9.95
11.95
16.95
7
42
10.45
12.45
17.45
8
48
11.00
13.00
18.00
9
54
11.60
13.60
18.60
10
60
12.25
14.25
19.25
11
66
12.95
14.95
19.95
12
72
13.70
15.70
20.70
13
78
14.50
16.50
21.50
14
84
15.35
17.35
22.35
Further Information for the
Homework Exercise
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The members are looking for annual wage increases of 4.0% in
each of the next 3 years.
In our last contract, they received annual wage increases of 3.0%
in each year.
They also want to reduce the wage schedules to 5 years (10
steps, 60 months).
At the time of the last contract three years ago, there were 350
CWA represented employees at the company.
Management’s position:
The Company cannot afford to give the proposed wage increase.
Union’s position:
The Company can afford to give the proposed wage increase.
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Everything you need for the homework
exercise is available on this webpage:
http://cwa-union.org/cbtraining
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Contact Information:
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Ken Peres, 202/434-1185, [email protected]
Irvin Stout, 202/434-1197, [email protected]
Bob Patrician, 202/434-1183,
[email protected]