The Merger Integration Challenge

1
EMPLOYEE PREFERENCE ANALYSIS USING CONJOINT
ANALYSIS TO SUPPORT LABOR NEGOTIATIONS AND
COMPENSATION PLAN DESIGN
2
I - INTRODUCTION
3
Every year school districts make decisions that
have significant implications for the district
and its employees without the benefit of basic
information on employee preferences and priorities
Introduction

• In two areas in particular - labor negotiations
  and the design of employee compensation and
  benefits plans - decisions are often made without
  adequate information
• While districts make a significant effort to
  understand employee priorities before entering
  labor negotiations or designing benefits
  packages, the results of these efforts tend to be
  qualitative and anecdotal
• In the absence of quantitative information
  information on employee needs and priorities,
  district managers have little choice but to defer
  to labor leaders to accurately represent the
  views of employees
• While most labor leaders work diligently to
  fairly reflect the views of the workers they
  represent, in many cases they too would benefit
  from a more detailed analysis of employee
  preferences and priorities
• Given the costs and operational consequences
  associated with labor contracts and benefits
  packages negotiating agreements without a firm
  understanding of employee preferences and
  priorities should be avoided if possible

4
Conjoint analysis provides a powerful tool for
addressing the need to better understand employee
priorities
Introduction

• Conjoint analysis is a statistical tool that
  market researchers have used for more than 30
  years to help private sector companies understand
  how to develop products and services that are
  valued by customers
• The results of conjoint analysis are used to
  answer two basic questions
• What product or service attributes do my
  customers care about?
• What are the most preferred service attributes?
• Conjoint analysis can also be used to support
  labor negotiations and to design compensation and
  benefits packages that reflect employee
  preferences and priorities
• For example, conjoint analysis can be used to
  gather quantitative information on how rank and
  file employees value various issues being
  considered as part of a labor negotiation
• Likewise, conjoint analysis results can be used
  to structure compensation and benefit packages
  that best reflect how workers value the
  individual components of their total compensation

5
II - USING THE CONJOINT ANALYSIS PROCESS
6
The conjoint analysis process consists of a
number of steps
Using The Conjoint Analysis Process

• The first step consists of defining the key
  attributes or features of the the activity being
  evaluated
• For example, for employee compensation and
  benefits each type of benefit being evaluated
  would be identified (e.g., wages and salary, life
  insurance, disability insurance, health
  insurance, etc.)
• After defining the key features or attributes of
  an activity, values or options for each feature
  or attribute will be selected
• In the employee compensation and benefits example
  different salary levels would be listed as would
  options for various types of benefits
• For example, different prescription co-payment
  options, out-of-pocket expenses and provider
  options might be included for employee health
  benefits
• A survey instrument will then be prepared and
  administered that asks employees to express their
  preferences for various alternatives

7
Conjoint analysis will then be used to quantify
employee preferences
Using The Conjoint Analysis Process

• Conjoint analysis will then be used to evaluate
  survey results
• The value employees place on an attribute will be
  calculated.
• This value can be used to compare the importance
  of the attributes
• Information on the relative value of various
  alternative can then be compared to their costs
• In particular, options that are costly but are
  not valued by employees can be discarded
• In addition, options for which differences in
  cost seem disproportionate to differences in
  value would be subject to scrutiny
• For example, if the difference in cost between
  one option and another is 50 percent but the
  difference in value is only 15 percent providing
  the higher priced option may not be sound
• On the other hand, if the difference in cost is
  15 percent but the difference in value is 50
  percent pursuing the option may be worthwhile

8
III - HOW BERKSHIRE ADVISORS CAN SUPPORT EFFORTS
TO USE USE CONJOINT ANALYSIS TO SUPPORT LABOR
NEGOTIATIONS AND THE DESIGN OF COMPENSATION AND
BENEFITS PLANS
9
Berkshire Advisors supports efforts to use
conjoint analysis to support labor negotiations
in a number of ways
How Berkshire Advisors Can Support Efforts To Use
Conjoint Analysis To Support Labor Negotiations

• Assist in identifying key options to be assessed
  using conjoint analysis
• Develop survey instrument
• Administer the survey
• Analyze and document survey results
• Assist in using conjoint analysis results to
  assess options
• Conduct follow-up conjoint analysis surveys as
  needed