Managers Make Pay Decisions Through Job Families Structure

Like many large companies, Aetna Life and Casualty Co. in Hartford, Connecticut, always has relied on a highly stratified job-classification system. Everything is connected to job class, from salary levels and promotional opportunities to job descriptions and supervisory responsibility. “You know your job class, you know everything,” explains Mary Fitzer, Aetna’s director of base-salary development.

But this system no longer is working. As a diversified financial services company, Aetna operates in a fast-moving and increasingly competitive business environment. The existing job-classification and compensation system, however, doesn’t encourage employees to work any harder or respond any faster to market changes. Why not? Because if a task isn’t written into a job description, what incentive is there for an employee to take on added responsibility?

“There’s too much work to be done to spend our time continually rewriting 7,000 detailed job descriptions,” explains Fitzer. “We need to look at work in a much broader sense.”

For this reason, Aetna is in the process of identifying the major skills and competencies that are needed by employees, and grouping those skills into a broad job-family structure. “The entire point is to define work, not by what class it’s in, but by the actual functions performed,” Fitzer says. “Then, we will look at how the market prices that work, give that information to managers and let them make pay decisions based on an individual’s performance.” When Aetna completes this process, the company expects to have just 200 job families representing all of the company’s 42,000 employees.

Managers always have made the pay decisions at Aetna, but through this new structure, the compensation department will be able to provide them with more-specific information about what the market is paying for certain jobs. “Instead of saying to them, ‘Here’s a salary minimum and maximum and you shouldn’t pay above or below that,'” says Fitzer, “we’ll be able to give them some market guidelines that they can interpret in light of their own budgets and performance levels.” This effort, in turn, will force managers to clearly define employee performance expectations at the start of each business cycle.

With fewer promotional levels, the primary way for employees to get ahead at Aetna will be to earn bonuses by performing better. The company isn’t eliminating promotions altogether—there still will be layers, such as entry-level underwriter, underwriter, senior underwriter and underwriting manager, for example—but compensation decisions will be based on performance and market pricing, not job title.

Aetna realizes that not all employees will do well under the new system. Fitzer explains, “If employees have high security needs and are focusing on the old ways of doing things, it will be difficult for them in the new environment.”

Not only will the job-family structure change the ways in which employees are evaluated and managers set salaries, but it also will change the relationship between the HR department and line managers.

“With the job families, we’re trying to get rid of all the extraneous details and allow managers and their employees to do what is needed to serve their customers extremely well,” says Fitzer.