Mr. HICKMAN. You asked me earlier what I have been doing, and this is one of the things I have been doing. Mr. Hoy has copies of this, I believe, sufficient for most of the committee members. It contains a few simple charts. I would like you to look at those before I start this. I will begin to read this, if I may. The paper is entitled, "Employee Compensation-Salary and Nonsalary." In reviewing the program of salary and nonsalary benefits at the Federal Reserve Bank of Cleveland, I have reached the conclusion that the bank has done an effective job. On the whole, it has conducted a well-thought-out program which has achieved good results in terms of a low rate of turnover, at a cost which is in line with costs incurred by other organizations, including the Federal Establishment. Nonsalary benefits are an integral part of the personnel program of the bank aimed at enabling the bank to attract and keep qualified workers in a highly competitive market. In order to promote a high esprit de corps, efficient and productive operations, and a low turnover, the bank tries to be selective in its employment, thorough in its training, fair in its rewards, and to create the feeling that this is a good place to work. The expenditures for nonsalary benefits supplement a salary scale which is conservative but competitive in the local market. Chart 1 shows that the scale of salaries at the Federal Reserve Bank of Cleveland ranges slightly below the average of salaries paid for comparable jobs by employers participating in this bank's annual salary survey. The salary grade classification of jobs at the bank differs from that utilized by the civil service. Consequently, any comparison with Federal agency jobs must be made using job descriptions rather than job grade classifications. Our comparisons (chart 2), indicate that, except for those jobs in the lower and higher grades where our salaries are substantially under Government levels, average salaries paid for comparable jobs appear to be consistent with each other. A list of the benefits provided by the bank and of their cost is shown in table A. These benefits include such items as retirement and social security, sick leave, paid vacations, paid holidays, share of the cost of operating the cafeteria, hospitalization and medical expenses, educational opportunities, and a limited number of recreational activities referred to as "employee relations." You will observe that the total expenditures for employee relations account for less than 0.8 percent of the total cost of all benefits for the bank and is 0.2 percent of our payroll. This item includes recreational activities such as sports, and social activities such as our annual dinner dance. The employees contribute or pay for part of the cost of some of these benefits; for others, the bank pays the entire cost. In establishing these benefits, the bank is influenced to a great extent by community practices. The amounts shown in the table are the costs borne by the bank. While we have not seen actual figures for U.S. Government employees in the form in which figures for this bank are presented in table A, we do know that in some areas the Federal establishment has more generous provisions than we do. For example, vacations in 1963 averaged more than 40 percent longer than at our bank. (The comparison in annual leave policy of the Federal Reserve Bank of Cleveland with the U.S. civil service is shown in table B.) Moreover, it appears that retirement benefits furnished to Government employees are substantially more costly. Judging from the contributions which the Board of Governors has to make in order to finance benefits which are equivalent to those provided by the civil service retirement system on a fully funded basis (more than 16 percent of payroll), it would appear that the true cost of such benefits to the Federal Government for its employees would be substantially greater than the combined cost of the retirement system benefits and social security for a Federal Reserve Bank (approximately 12 percent of payroll). These items, retirement, social security, and vacations, account for more than half of our total benefit costs. It has been clearly demonstrated in study after study that turnover is one of the costliest problems with which any organization has to deal. Our bank has done a good job in keeping this turnover down. Turnover at the Cleveland Federal Reserve has generally been lower than in other banks in the same labor area. In recent years, our turnover has ranged between 15 and 16 percent. Turnover at other banks in Cleveland has ranged between 15 and 26 percent in the same period. For the Nation as a whole, turnover in banks has been estimated to average 30 percent or more. (From a report on a survey conducted in 1963 by a committee of the Minneapolis-St. Paul chapter of National Office Management Association and published in the August 1963 issue of Advanced Management-Office Executive.) It is my hope and my intention to keep our turnover low. Various types of nonsalary benefits have been tried by the bank's management over the years, and those now provided are judged to be most effective and worthwhile in supporting worker morale and in improving working relations and efficency. Having only recently become chief executive officer, I have not had time to review and form my own opinion on all of them. Whatever my final decision, it will be based on my judgment as to what is most worthwhile in achieving the results that we want-a spirit of loyalty and pride in the organization and willingness to work for the constant improvement of our operations and performance. We shall go after results rather than form, precedent, or appearance. We seek a staff of competent, satisfied workers, and a low rate of turnover. All this, I believe we have. Mr. WIDNALL. Mr. Chairman, at this point I suggest the rest of it be submitted for the record. The CHAIRMAN. Without objection, it is so ordered. (The charts referred to follow :) EXPLANATION OF CHARTS CHART 1 Over 8,400 rates on 53 clerical, maintenance, supervisory, and personnel jobs were obtained from 38 companies in the Cleveland area as of March 1, 1963. These 38 companies represented banks, utilities, government agencies, and industry. To determine a line of best fit, a second degree curve was established by using the method of least squares. This curve is depicted on chart 1 by means of a solid line. The dotted line represents the midpoints of the Federal Reserve Bank of Cleveland structure. As of January 1, 1963, the average salaries paid in the 16 grades were 3 percent below the midpoints. As of January 1, 1964, average salaries paid were 2 percent below midpoints. In order to avoid confusion with civil service salary grades, letters were used to denote the 16 salary grades of this bank (A=1, B=2, etc.) CHART 1 Federal Reserve Bank of Cleveland Comparison Between Bank Salary Structure and Average Rates Annual Salary $16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 A B C D E F G H I J K L M N O P Salary Grade Present Salary Structure of the Federal Reserve Bank of Cleveland 1963 Average Rates Reported by 38 Cleveland Companies CHART 2 As in chart 1 the dotted line represents the midpoints of the Federal Reserve Bank of Cleveland salary structure. The solid line is based on actual salaries paid to about 850 Federal employees in the Cleveland area. Instead of using the method of least squares for computing the salary curve, a line of best fit was established by plotting the average rates reported for the 850 workers and then drawing the curve freehand. It is estimated that for the reported jobs, average salaries paid by the Federal Reserve Bank of Cleveland were about 4.5 percent below the average salaries paid by Government agencies for the same jobs. |