Software Levels Paying Field

For naysayers, the computer age is one step closer to George Orwells 1984. For business owners, this era is one of streamlined results and free-flowing data.

The principals at DB Squared LLC in Fayetteville hope to make sure their software is a business engine with enough human control to keep thoughts of Big Brother at bay.

Their product, JESAP ??” short for Job Evaluation and Salary Administration Program ??” is database-driven software that gives companies a systematic, objective way to evaluate employee pay scales for everyone from janitor to chief financial officer.

The group officially released a commercial version of JESAP on June 6 and will begin to persue clients locally and nationally for licensing fees between $10,000 and $50,000. They have sales projections of $250,000 for the six months remaining in 2005 and plan to generate revenue of more than $1 million in 2006.

We feel really good about those numbers based on discussions weve had with current clients, Blair Johanson said.

DB Squared has four principles: Mike Gibbs, president and CEO; Dale Oliver, chief information officer; director Bruce Johanson, former CEO of Johanson Group, a 33-year-old Fayetteville management consulting firm; and director Blair Johanson, current CEO of Johanson Group.

The DB Squared group said they couldnt estimate how much it has cost to develop the software. But its true value may be incalculable if it indeed helps businesses retain and attract quality employees, at least one benefit the principals claim.

JESAP already has a proven track record. It was developed specifically for, and mostly by, the Johanson Group.

Oliver, who is also the president of Applied Computer Technology, a software consulting firm, has been working on the code since 2001, while the dynamic duo Bruce and Blair Johanson, have supplied the concept and vision of the system.

Since its beginning, the software has been used in about 100 different studies through the proprietary consulting services of the Johansons firm.

DB Squared was formed in March 2005 to market the software to human resource departments of businesses everywhere with 100 or more employees.

The Market

Basically, the software gives a ratings system for a company to internally evaluate each job, and it takes into account a market comparison of up to eight competitors or like companies. It automatically crunches the numbers through a set of weighted values and outputs an ideal starting point of pay for any one given job.

Blair Johanson said the premise of JESAP is to institute a compensation system that identifies inequities among workers and sets up a structure for fairness.

Because youre internally building a system that evaluates and rates jobs from the position with the highest amount of points that might have the most complexity, the most amount of responsibility, accountability, educational requirements, Blair Johanson said.

Then the system also compares the external market factors to create a compensation scale that is internally equitable and externally competitive.

Most business owners know high employee turnover can drive up the cost of doing business, so the focus on a companys salary scale is important, the group said, because it helps attract and retain employees.

A company with a systematic and reliable pay scale can also reduce intra-company friction between workers when those employees know theyre being paid fairly according to the market and fairly according to co-workers.

Real-World Tests

Tom Richardson, chief operating officer with First Federal Bank of Arkansas in Harrison, said his company has used the JESAP system to evaluate its pay scale.

FFB hired Johanson Group in the fall of 2003 to do a comprehensive study of its compensation and incentives program and now has the firm on an annual retainer to do follow-up market analysis and lead training seminars, Richardson said.

The bank, which has 14 offices in six counties, employs about 250 full-time-equivalent people.

He said the JESAP system, as performed by Johanson Group, did what it was supposed to do. His company was slightly out of line in its pay scale for the marketplace. JESAP helped the company get back in line, he said.

The Northwest Arkansas market has been inundated with new banks and additional branches over the last two years, and some bank presidents complain that salaries for qualified employees have risen quickly and are hard to keep up with. Some banks take huge staffing hits when a competitor enters the market or opens new branches. Loan officers in particular, with their Rolodexes full of contacts, are highly sought-after.

I contribute the JESAP, combined with an incentive program and the benefits [the bank offers] as a major factor in allowing us to maintain most of our loan staff. Weve lost relatively few compared to other banks, Richardson said.

Little Rock-based investment banking firm Stephens Inc. hired Johanson Group to do a pay scale study in the summer of 2002.

Marty Floyd, vice president and associate director of human resources with Stephens, was impressed with the JESAP results.

We love it, she said

At the time, Stephens had some salary ranges dating from the late 1980s. Those salaries were often based on what the previous person in any one position earned, rather than on any objective data about the job, its requirements or what the market outside paid, Floyd said.

There are about 950 people on Stephens payroll nationwide, she said, including the investment bank and a couple of other businesses, but not including Stephens Media Group of Las Vegas. The Johanson Group helped identify about 100 unique jobs initially and that has grown to about 250 now, she said. Each one of those has to have a job description and a competitive starting point for compensation.

They take all the guesswork out of it, Floyd said.

Both Floyd and Richardson said theyve experienced greater employee retention as a result of the Johanson Groups study, which in turn means the JESAP system.

They both feel the system has made their companies more competitive in the market and attractive to potential employees.

Though neither First Federal Bank nor Stephens has been approached to purchase the software by DB Squared, Floyd said her firm might consider it.

And there are other benefits, too.

As far as lawsuits and problems with regulations and things of that nature, this is a great way to circumvent a lot of that because you have a system in place, Oliver said.

With JESAP, an employer has a defendable system that shows they didnt offer favoritism to one employee or discriminate against another, Oliver said.

Federal law requires that you not discriminate on a list of about a dozen different things, Gibbs said. And so, when you take it out of perspective of a person or individual, and you focus on the job ??” jobs dont have age, they dont have race, they dont have sex, they dont have disabilities ??” none of those things, none of those discriminable factors exist in the job itself, theyre all people blamed.

So this system is about focusing on the job ??” figuring out what the job requires ??” and then bringing the person in, Gibbs said.

Oliver said that in any one instance where an employee leaves a company, there are at least two to three main reasons.

Theres several different factors that will cause a person to want to leave an organization. Were trying to reduce or eliminate pay as one, Blair Johanson said.

Another factor is fairness, Gibbs said, and if JESAP is in place, a company presumably has a fair pay scale that is determined by specific factors and not a good ol boy network.

The Software

But how does computer software ??” essentially a series of virtual ons and offs, yeses and nos, ones and zeros ??” determine something so important as a salary?

The JESAP interface is a basic Microsoft Access screen running on any Windows XP-capable machine. The screen has pull down menus from top to bottom where a user navigates the program.

When Oliver demonstrates the software, it is virtually 100 percent point-and-click. The only time he has to use a keyboard is to change the file name or save a new sub-group name.

Oliver and Gibbs said the software will run on almost any modern laptop and doesnt require a significant amount of hard disk space, gear-grinding processing speed or an enormous office server.

JESAP has a job evaluation worksheet with 15 different rating factors ranging from general experience level to physical demand, from supervision responsibility to analytical requirements.

Two of the 15 factors have three sub-factors each, for a total of 19 variably weighted evaluation factors. A company using the software will establish a board of managers who will be asked to rate a job on a scale of degrees weighted for each category. Experience might have eight degree points, education might have 12.

Theoretically, there could be an unlimited number of managers rating jobs, but First Federal Bank used five senior staff, Richardson said, and the dummy examples from DB Squared uses seven raters.

An average number of points for a given job is determined and a list can be compiled for the entire company. A chief engineers position, say, could be worth 1,592 points and a shop mechanics might be worth 687 points.

That data is matched to an internal pay line, or midpoint, which is an average of like salaries within the company, and a visual graph called a scattergram of actual pay can be made of points, or jobs, that are above and below the line.

In a sales example given by DB Squared, most people at the lower end of the pay scale are close to the pay line, but at the mid-range, there are several, both above and below, that are farther from the pay line.

One point is wildly overpaid for the number of points the job has assigned to it. Its in the $52,000 range with a job rating of only 500 or so points. Most jobs with that number of points at the sample company are paid in the mid- to upper-$20,000 range.

This could be indicative of an employee who needs a promotion, or a job that needs to be more closely evaluated, the group said.

In other exhibits, the software can supply a snapshot of comparable salaries at other companies and dollar variances and percent variances.

In a glimpse, an HR manager can see how the entire organization ranks in terms of payroll dollars, or if certain jobs, or even certain departments, are out of line with like companies.

The bottom line aim is to generate an informed pay scale for the company and set up parameters for the scale.

Obviously the data that goes into the comparison fields is a key to making the software work properly.

Market analysis and comparison will be a huge must-have to any firm purchasing their software. Of course, companies can outsource this to consulting firms like the Johanson Group, or conduct their own market analysis.

The genesis for the software comes from the Johansons father and founder of the consulting firm, Richard Johanson, who has worked in human resources and compensation for more than 40 years.

The process, the Johansons said, has been part of the consulting business practice since about 1985 but has just recently become more user-friendly.