7c supp
Item No. 7c_supp Meeting Date: April 12, 2016 Incentive Pay Plan Commission Briefing April 12, 2016 Incentive Pay Plan Results oriented Financial performance exceeds budget Payout is fully earned when two values driven, non-financial goals are met Self-funding and taxpayer oriented Financial performance must be above threshold before plan pays out At least half the positive variance is retained by the Port A portion is returned to the airport (required amount) A portion will go to the tax levy fund to help offset future increases Values driven, socially responsible Focuses on the triple bottom line Pays out to employees first, executive leadership follows Doesn't add to fixed salary costs Capacity building Makes the Port stronger over time Results oriented, self-funding and Century Agenda focused 2 Business Case Motivates exceptional performance Drives Century Agenda goals Supports working together as "One Port" Improves the Port's ability to compete for talent Makes the Port more competitive with private employers Differentiates the Port among public sector employers Is consistent with high-performing employers Benefits taxpayers, may help offset future levy increases One Port creating jobs in our community 3 Motivating Exceptional Performance TWO TYPES OF GOALS 1. Financial Self-funding 2. Values Driven, non-financial Focuses the Port on social responsibility and environmental sustainability commitments Results Oriented, Self-funding, Values Driven, Century Agenda Focused 4 Incentive Pool Funding Adjusted Revenue Higher than + Budget Expenses Lower than Budget = Total Positive Variance Qualified Employees Receive Incentive 50% Retained by the Port Incentive pool 50% to Incentive Pool Financial Non-Financial Goal Met Goals: 25% ea. Max 50% 50% Financial goals must be met to fund pool 5 Pool Funding Example PLAN FUNDS ITSELF 2016 Budget 2016 Actual* Variance Total Revenue $584.5m Less Aeronautical Revenue - $257.4m Adjusted Revenue = $327.1m $339.9m $12.8m Total Port Expense $336.1m $323.7m + $12.4m Total Variance = $25.2m 50% to the Payout Pool $12.6m *NOTE 2016 Actual is for illustrative purposes only, total variance supports maximum plan payout Incentive plan funded by positive budget variance 6 Payout Method Incentive Pool Employees Executives Step 5 (Max) Step 5.1 (Max) Step 4 Step 4.1 Step 3 Step 3.1 Step 2 Step 2.1 Step 1 Step 1.1 Minimum Incentive plan pays from the bottom up 7 Individual Payout Calculations Employees Earn Awards Based on Annual Performance Review Ratings Performance Rating Payout Minimum Step Step Step Step Step 5 - Rating Distribution Factor Payout* 1 2 3 4 Maximum Unsatisfactory 0% No Payout 0% 0% 0% 0% 0% 0% Contributing 0% 5% 1 X Payout 0.5% 1% 2% 3% 4% 5% Strong 65% - 70% 2 X Payout 1.0% 2% 4% 6% 8% 10% Highly 15% - 20% 3 X Payout 1.5% 3% 6% 9% 12% 15% Effective Exceptional 5% - 10% 4 X Payout 2.0% 4% 8% 12% 16% 20% Total Variance Needed to Fund $2.4M $25.2M NOTES payouts are based on employees eligible earnings during the plan year Payouts assume all goals, financial and non-financial, are met Funding step determined by the size of the payout pool 8 Variance Allocation Retained by the Port Airport Tax Levy Fund Executives Employees Incentive Pool Total variance shared with stakeholders 9 Values Driven Non-Financial Goals 1. Increase small business contracting participation across the Port to 35%, including an increase to 4% for Minority/Women-Owned Business Participation. 2. Define external customers, define customer satisfaction and develop and implement an external customer satisfaction survey. 3. Develop an environmental scorecard to reduce the Port's environmental footprint. Focusing the Port on the triple bottom line 10 Implementation June 1, 2016 Implementation Mid-year implementation will require adjustments Variance eligible to fund the payout pool will be pro- rated Earned awards based on employee earnings from June through December are eligible Port results and employee earnings reflect June 1 implementation 11
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