PersonBased Structures

1

• Person-Based Structures

2
Skill-based structures link pay to the depth or
breadth of the skills, abilities, and knowledge a
person acquires that is relevant to the work.
Typically applies to operators, technicians, and
office work where work can be specified and
defined.
3
Determining the InternalSkill-Based Structure
Internal consistency
Skill certification
Skill-based structure
Skill analysis
Skill blocks
Work relationships within the organization

• Basic Decisions
• What is the objective of the plan?
• What information should be collected?
• What methods should be used to determine
• and certify skills?
• Who should be involved?
• How useful are the results for pay purposes?

4
Skill analysis is a systematic process to
identify and collect information about skills
required to perform work in an organization.
5
SKILL CATEGORY
Grouping of related skill blocks of varying
skill levels that represent all activities of a
single job family or steps in a process for
example, production technician.
SKILL BLOCK
Grouping of skills, activities, or behaviors for
example, bearing housing assembly.
SKILL
Smallest unit of analysis, a specific statement
of what a person does for example, inspect oil
levels and all filters.
6
What Is a Skill-Based Pay System?

• A skill-based pay (SBP) system is one in which
  employees are paid for the range, depth, and
  types of skills they are capable of using, rather
  than for the job they are currently performing.

7
How is SBP Different From aJob-Based Pay System?

• Skill or skill units, rather than jobs are
  compensable.
• Mastery of skill units is measured and certified.
• Pay changes do not necessarily accompany job
  changes.
• There is little emphasis on seniority in pay
  determination.

8
Effects of a Skill-Based System

• higher productivity
• lower costs
• higher quality
• lower staffing levels
• lower absenteeism
• lower turnover
• improved relations with labor union

9
Advantages to EmployeeFrom SBP

• higher average pay
• job stability
• understanding
• empowerment
• higher satisfaction
• more commitment

10
Disadvantages of Skill-Based Pay

• Average pay of employees likely higher
• Excessive labor costs, if productivity increases
  dont offset additional costs
• SBP systems more complex
• SBP systems require a major investment in training

11
So, Whats a Competency?

• Demonstrable characteristics of the person,
  including knowledge, skills, and behaviors, that
  enable performance.
• Competencies are independent of a job or
  position.
• An employee can transport them from one job to
  another.

12
CORE COMPETENCY
Taken from mission statement for example,
business awareness.
COMPETENCY SETS
Grouping of factors that translate core
competency into observable behavior for example,
cost management, business understanding.
COMPETENCY INDICATORS
Observable behaviors that indicate the level of
competency within a competency set. For example,
identifies opportunities for savings.
13
Defining Competencies
Knowledge
Skills
Self-Concepts
Traits
Motives
14
Competency Assessment Levels

• Basic - able to perform the general functions of
  the required tasks
• Proficient - able to perform all functions with
  appropriate speed and accuracy
• Mastery - able to perform the functions at a
  level that reflects complete knowledge of the
  concepts, principles, and applications

15
Comparing Pay Structures Based on Jobs, Skills,
and Competencies
16
Job-Based

• Pay structure
• Based on job performed and market
• What is valued
• Compensable factors
• Quantify the value
• Factor degree weights
• Mechanisms to translate into pay
• Assign points that reflect criterion pay structure

17
Job-Based (continued)

• Procedures
• Job analysis
• Job evaluation
• Advantages
• Clear expectations
• Sense of progress
• Pay based on value of work performed
• Limitations
• Potential bureaucracy
• Potential inflexibility

18
Skill-Based

• Pay structure
• Based on skills certified and on the market
• What is valued
• Skill blocks
• Quantify the value
• Skill levels
• Mechanism to translate into pay
• Certification and market pricing
• Pay increases
• Skill acquisition

19
Skill-Based (continued)

• Advantages
• Continuous learning
• Flexibility
• Reduced work force
• Limitations
• Potential bureaucracy
• Requires cost controls

20
Competency-Based

• Pay structure
• Based on competency development and the market
• What is valued
• Competencies
• Quantify the value
• Competency levels
• Mechanisms to translate into pay
• Certification and market pricing
• Pay increases
• Competency development

21
Competency-Based (continued)

• Advantages
• Continuous learning
• Flexibility
• Lateral movement
• Limitations
• Potential bureaucracy
• Requires cost controls

22
Pay Administration

• How will manage and evaluate the system?
• Pay communication
• Budgeting
• Extent and formality of a appeal process
• Evaluating the system

23
Pay Administration

• I. Participation in the Plan
• II. Administrating the Plan
• III. Evaluate Usefulness

24
PARTICIPATION

• Managers and Employees
• Job Evaluation Selection, compensable factors,
  job analysis, actual evaluation, appeals
• Committee, Teams, or Task Forces
• Level of Involvement
• advisory vs. decision authority

25
Participation

• Pros increase acceptance, trust, commitment,
  turnover improvement, satisfaction with pay,
  satisfaction with pay administration, enhanced
  equity perceptions, union/management tension
  reduced
• Cons conflict due to different perspectives,
  more expensive, longer time to reach consensus

26
Does Process Matter

• Procedural Justice
• Distributive Justice

27
Procedural Justice

• The fairness of the design process
• increase trust in the structure
• avoid the things would have been better if I was
  involved attitude.

28
Distributive Justice

• Techniques or mechanics of the plan influence
  perceptions of distributive justice or pay
  fairness.

29
ADMINISTRATING THE PLAN

• Pay Structure Manual
• Appeals/Review Procedures
• Training
• Control Approval and Certification
• Upper management review
• Managing Expectations Employee Communications

30
Pay Structure Manual

• Contains all information necessary to apply the
  plan
• Definition of compensable factors
• Training (who and what type)
• Appeals process
• Employee communications

31
Appeals/Review Procedures

• Implementation Problems
• Primarily Evaluation Ratings
• Appeal Administration
• What can be appealed
• Who decides
• Appeals committee
• Compensation Manager

32
Evaluate Usefulness

• Reliability
• Validity
• Costs

33
EVALUATE USEFULNESS

• Reliability - Consistency of Results
• Do different evaluators in different
  circumstances obtain different results?
• Enhance reliability via training, using
  evaluators familiar with work, and group
  consensus.

34
EVALUATE USEFULNESS

• Validity Extent the evaluation achieves the
  desired results
• Assessed by
• Agreement with predetermined benchmark structure
  (s)
• External Market
• Convergence of results from different methods
• Employee acceptance
• Employee Surveys
• Number/types of appeals

35
Cost

• Design and administrative costs
• Labor costs
• How does the structure control labor costs?
• Do the number of plans, number of levels and the
  differentials between jobs lead to over-pricing?

36
Compensable Factor Definitions

• Education/Experience The formal and informal
  training required for successful job performance
• Communication Skills The written, spoken, and
  interpersonal skills required of successful job
  performance
• Creativity/Innovation the required level of
  thought and creativity necessary in a job a
  broad measurement of cognitive thought

37
Levels of Creativity/Innovation

• 1 Requires direct application of instructions
• 2 Requires application of existing ideas
• 3 Requires synthesis of existing ideas
• 4 Requires development of new ideas
• 5 Requires synthesis and application of
  
  
  new ideas