It was common to see organizations abound with a variety of grades and scales prior to the 1980s with Information Technology yet to make its impact. This worked well in the past or possibly was the right answer to times when organization was focused on functional expertise and vertical organizational structure. In contrast with fast changes taking place organizations are faced with the predicament of what to do with a traditional pay system.
Broad banding is the compression of a hierarchy of pay grades or salary ranges into a small number (typically four or five) of wide bands. Each of the bands will therefore span the pay opportunities previously covered by several separate pay ranges. It reflects the new emphasis on horizontal processes, which is frequently a product of a business process re-engineering exercise. It enables processes originally created to sustain hierarchy and vertical movement to be replaced, support operational and role flexibility and team working. Thus it helps in providing a pay structure, which will fit delivered organizational structure. Broad banding facilitates lateral career moves and internal mobility by developing increasing levels of competence, skill acquisition in employees resulting in career development, continuous learning, adaptability and flexibility including lateral career moves. It has led to simplification of the administrative processes relating to wages and salary as it has reduced dependence on elaborate job evaluation systems.