Broadbanding is a strategy that consolidates many traditional pay grades into a few wider salary ranges or "broad bands" in order to support more agile and flexible organizational structures. It reduces the number of salary grades by half to two-thirds and increases the spread between minimum and maximum pay to 75-125% to facilitate lateral moves, career development, and quicker responses to change. Most companies use 10 broadband levels, with 2 for executives, 4 for managers, and 4 for non-managers. While broadbanding aims to empower managers and focus on competencies over jobs, its success requires strong management training and commitment, and it risks employees rising too far above market rates without precise controls.

2. Definition:
Broadbanding is defined as a strategy for salary
structures that consolidate a large number of pay
grades into a few "broad bands.“
Broadbanding (or 'broad grades') is the consolidation
of traditional pay structures, consisting of many,
narrow pay ranges into a few, wider ranges or bands.

3. Purpose:
Broadbanding is intended to support agile, flatter,
faster-paced, de-bureaucratized organizational
cultures

4. In a broadband pay structure, the numbers of salary
grades are consolidated into fewer, but broader, pay
ranges.
In broadbanding, the spread of the pay ranges is wider
and there is less overlap with other pay ranges.
Broadbanding evolved because organizations want to
flatten their hierarchies and move decision-making
closer to the point where necessity and knowledge
exist in organizations.

5. Use:
Broadbands are imperative for companies with
competency-based pay programs, but are also used in
companies with longevity- and performance-based pay
programs. Companies employ broad banding to:
facilitate change
avoid multiple pay structures
drive pay decision-making downward (empowering
managers)
provide greater latitude in management pay decisions

6. promote lateral moves or in-grade promotions
reduce use of promotions to increase pay
promote career development / learning
reduce the need for precise job analysis/evaluation
promote fewer, broadly-defined jobs
focus on the person instead of the job
facilitate quick responses to changing goals and
circumstances

7. Structure:
Companies adopting a broadband structure generally
reduce the number of salary ranges by one-half to two-
thirds. The broadband range spread is generally 75% to
125%. It may be greater.
Most broadbanding companies use 10 bands:
2 for the executive level
4 for the managerial and professional level
4 for the non-managerial or hourly level

8. Midpoints:
Broadbands typically do not have a single midpoint;
they have a minimum and maximum. Broadbanding
companies use a range of techniques for control
purposes, including a series of reference points
relating to career levels in a job family, market based
zones linking a group of benchmark jobs to anchor the
structure to the market, and so-called shadow ranges.

9. Wide (or Fat) Grades:
Some organizations use wide grades (also called fat
grades). These are simple traditional pay ranges that
have been modified so that there are fewer of them
than previously used. Their minimum-to-maximum
spread is greater than tradition-bound ranges of the
last century. These structures may help to counter
grade creep and make for a more realistic approach to
pay decision-making, but, typically, do not free a
company from traditional pay administration
practices.

10. Prevalence:
Broadbands (and career bands) are still viewed as a
novel approach to pay, yet to be proven workable.
While companies continue to move to broadband pay
programs, anecdotal reports indicate that many early-
adopters are returning to more traditional (albeit
relatively wide) pay structures.

11. Success:
Successful use of broadbanding requires that:
top management has a clear goals, understands the
pros and cons, commitment
all managers are mature and highly trained in HRM
and compensation

12. Pitfalls:
Before moving to broadbanding, companies should consider
the following:
Broadbanding demands that managers are aware of, and
can interpret, market pay data
Broadband control points are not precise for individual
jobs
Broadbanding increases the potential for employees to
float to the top of the band, way out of sync with the
market
Broadbands lack the automatic cost-control mechanism
inherent in narrow pay ranges
Broadbanding eliminates the possibility for precise job
analysis/evaluation