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Chapter

66

Person-Based StructuresPerson-Based Structures

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Learning ObjectivesLearning ObjectivesAfter studying Chapter 6, students should be able to:After studying Chapter 6, students should be able to:

1.1. Discuss the differences and similarities between Discuss the differences and similarities between job-based plans, skill-based plans, and job-based plans, skill-based plans, and competency-based plans.competency-based plans.

2.2. Discuss the advantages and disadvantages of Discuss the advantages and disadvantages of employee involvement in the evaluation of work.employee involvement in the evaluation of work.

3.3. Explain the procedures necessary in order to Explain the procedures necessary in order to administer a job-based or skill/competency-based administer a job-based or skill/competency-based plan.plan.

4.4. Discuss the criteria used to evaluate the usefulness Discuss the criteria used to evaluate the usefulness of the job-based or skill/competency – based plan.of the job-based or skill/competency – based plan.

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Many Ways to Create Internal StructureMany Ways to Create Internal StructureBusiness and Work-Business and Work-

Related Internal StructureRelated Internal Structure

Person-based

Skill CompetenciesJob-based

Job analysisJob descriptions

Job evaluation: classes or compensable factors

Factor degrees and weighting

Job-based structure

PURPOSEPURPOSE

Collect, summarize work information

Determine what to value

Assess value

Translate into structure

(Chapter 5)(Chapter 5)

(Chapter 5)(Chapter 5)

(Chapter 5)(Chapter 5)

(Chapter 6)(Chapter 6) (Chapter 6)(Chapter 6)

(Chapter 4)(Chapter 4) Skill analysisSkill analysis

Skill blocksSkill blocks

Certification Certification processprocess

Person-based Person-based structurestructure

Core Core competenciescompetencies

Competency Competency setssets

Behavioral Behavioral descriptorsdescriptors

Person-based Person-based structurestructure

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Skill-based structuresSkill-based structures link pay to the depth or breadth of the link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that is skills, abilities, and knowledge a person acquires that is relevant to the work. Structures based on skill, pay individuals relevant to the work. Structures based on skill, pay individuals for all the skills for which they have been certified regardless for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of of whether the work they are doing requires all or just a few of those particular skills.those particular skills.

In contrast, a In contrast, a job-basedjob-based plan pays employees for the job to plan pays employees for the job to which they are assigned, regardless of the skills they which they are assigned, regardless of the skills they possess.possess.

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Types of Skill PlansTypes of Skill Plans

Specialist: In DepthSpecialist: In Depth

Generalist / Multiskill-Based: Generalist / Multiskill-Based: BreadthBreadth

Specialist: In DepthSpecialist: In Depth

Generalist / Multiskill-Based: Generalist / Multiskill-Based: BreadthBreadth

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Purpose of the Skill-Based StructurePurpose of the Skill-Based Structure

Support Work FlowSupport Work Flow

Fair to EmployeesFair to Employees

Directs Behavior Toward Directs Behavior Toward Organization ObjectivesOrganization Objectives

Support Work FlowSupport Work Flow

Fair to EmployeesFair to Employees

Directs Behavior Toward Directs Behavior Toward Organization ObjectivesOrganization Objectives

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Determining the InternalDetermining the InternalSkill-Based StructureSkill-Based Structure

Internal Internal alignmentalignment Skill analysis Skill blocks

Skill certification

Skill-based structure

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?

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?

Work relationships Work relationships within the within the organizationorganization

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How is SBP Different From aHow is SBP Different From aJob-Based Pay System?Job-Based Pay System?

Skill or skill units, rather than jobs are Skill or skill units, rather than jobs are compensable.compensable.

Mastery of skill units is measured and certified.Mastery of skill units is measured and certified.Pay changes do not necessarily accompany job Pay changes do not necessarily accompany job

changes.changes.There is little emphasis on seniority in pay There is little emphasis on seniority in pay

determination.determination.

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Disadvantages of Skill-Based PayDisadvantages of Skill-Based Pay

Average pay of employees likely higherAverage pay of employees likely higher

Excessive labor costs, if productivity increases don’t Excessive labor costs, if productivity increases don’t

offset additional costsoffset additional costs

SBP systems more complexSBP systems more complex

SBP systems require a major investment in trainingSBP systems require a major investment in training

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Determining the InternalDetermining the InternalCompetency-Based StructureCompetency-Based Structure

Internal Internal alignmentalignment

Core competencies

Competency sets

Behavioral descriptors

Competency – based structure

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

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

Work relationships Work relationships within the within the organizationorganization

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Purpose of thePurpose of theCompetency-Based StructureCompetency-Based Structure

Support Work FlowSupport Work Flow

Fair to EmployeesFair to Employees

Directs Behavior Toward Directs Behavior Toward Organization ObjectivesOrganization Objectives

Support Work FlowSupport Work Flow

Fair to EmployeesFair to Employees

Directs Behavior Toward Directs Behavior Toward Organization ObjectivesOrganization Objectives

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So, What’s a Competency?So, What’s a Competency?

Demonstrable characteristics of the person, Demonstrable characteristics of the person,

including knowledge, skills, and behaviors, that including knowledge, skills, and behaviors, that

enable performance.enable performance.

Competencies are independent of a job or Competencies are independent of a job or

position.position.

An employee can transport them from one job to An employee can transport them from one job to

another.another.

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CORE COMPETENCYCORE COMPETENCY

COMPETENCY SETSCOMPETENCY SETS

COMPETENCY COMPETENCY INDICATORSINDICATORS

Taken from mission statement; for example, “business awareness.”

Grouping of factors that translate core competency into observable behavior; for example, cost management, business understanding.

Observable behaviors that indicate the level of competency within a competency set. For example, “identifies opportunities for savings.”

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Iceberg ModelIceberg Model

1.1. Acquired through training Acquired through training and developmentand development

1.1. SkillsSkills

2.2. KnowledgeKnowledge

1.1. Acquired through training Acquired through training and developmentand development

1.1. SkillsSkills

2.2. KnowledgeKnowledge

11.11. Inferred only for Inferred only for

developmental purposesdevelopmental purposes

11.11. Self-conceptsSelf-concepts

12.12. TraitsTraits

13.13. MotivesMotives

11.11. Inferred only for Inferred only for

developmental purposesdevelopmental purposes

11.11. Self-conceptsSelf-concepts

12.12. TraitsTraits

13.13. MotivesMotives

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Example of competenciesExample of competencies

Personal characteristicsPersonal characteristicsOrganization specific - what’s needed in the Organization specific - what’s needed in the

organization?organization?Visionary Visionary

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Levels of competencyLevels of competency

Basic or fundamentalBasic or fundamentalProficientProficient<asteru<asteru

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Criteria for Evaluatingthe Usefulness of

Pay Structures

How well do they How well do they achieve their achieve their

objectivesobjectives

Reliability of Job Reliability of Job Evaluation Evaluation TechniquesTechniques

Validity / Validity / UsefulnessUsefulness

AcceptabilityAcceptability

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Recommendations to Ensure that Job Recommendations to Ensure that Job Evaluation Plans are Bias FreeEvaluation Plans are Bias Free

1.1. Define the compensable factors and scales to include Define the compensable factors and scales to include the content of jobs held predominantly by women.the content of jobs held predominantly by women.

2.2. Ensure that factor weights are not consistently biased Ensure that factor weights are not consistently biased against jobs held predominantly by women. Are against jobs held predominantly by women. Are factors usually associated with these jobs always given factors usually associated with these jobs always given less weight?less weight?

3.3. Apply the plan in as bias free a manner as feasible. Apply the plan in as bias free a manner as feasible. Ensure that the job descriptions are bias free, exclude Ensure that the job descriptions are bias free, exclude incumbent names from the job evaluation process, and incumbent names from the job evaluation process, and train diverse evaluators.train diverse evaluators.

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Contrasting Approaches Contrasting Approaches (1 of 2)(1 of 2)

Job-BasedJob-Based Skill-BasedSkill-Based Competency-BasedCompetency-Based

What is valuedWhat is valued Compensable factorsCompensable factors Skill blocksSkill blocks CompetenciesCompetencies

Quantify the valueQuantify the value Factor degree weightsFactor degree weights Skill levelsSkill levels Competency levelsCompetency levels

Mechanisms to Mechanisms to translate into paytranslate into pay

Assign points that reflect Assign points that reflect criterion pay structurecriterion pay structure

Certification and price Certification and price skills in external marketskills in external market

Certification and price Certification and price competencies in external competencies in external marketmarket

Pay structurePay structure Based on job Based on job performed/marketperformed/market

Based on skills certified/ Based on skills certified/ marketmarket

Based on competency Based on competency developed / marketdeveloped / market

Pay increasesPay increases PromotionPromotion Skill acquisitionSkill acquisition Competency Competency developmentdevelopment

Managers’ focusManagers’ focus Link employees to workLink employees to workPromotion and Promotion and placementplacementCost control via pay for Cost control via pay for job and budget increasejob and budget increase

Utilize skills efficientlyUtilize skills efficientlyProvide trainingProvide trainingControl costs via training, Control costs via training, certification, and work certification, and work assignmentsassignments

Be sure competencies Be sure competencies add valueadd valueProvide competency – Provide competency – developing opportunitiesdeveloping opportunitiesControl costs via Control costs via certification, and work certification, and work assignmentsassignments

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Contrasting Approaches Contrasting Approaches (2 of 2)(2 of 2)

Job-BasedJob-Based Skill-BasedSkill-Based Competency-BasedCompetency-Based

Employee focusEmployee focus Seek promotions to Seek promotions to earn more payearn more pay

Seek skillsSeek skills Seek competenciesSeek competencies

ProceduresProcedures Job analysisJob analysisJob evaluationJob evaluation

Skill analysisSkill analysisSkill certificationSkill certification

Competency analysisCompetency analysisCompetency Competency certificationcertification

AdvantagesAdvantages Clear expectationsClear expectationsSense of progressSense of progressPay based on value of Pay based on value of work performedwork performed

Continuous learningContinuous learningFlexibilityFlexibilityReduced work forceReduced work force

Continuous learningContinuous learningFlexibilityFlexibilityLateral movementLateral movement

LimitationsLimitations Potential bureaucracyPotential bureaucracyPotential inflexibilityPotential inflexibility

Potential bureaucracyPotential bureaucracyRequires cost controlsRequires cost controls

Potential bureaucracyPotential bureaucracyRequires cost controlsRequires cost controls

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SummarySummary The importance placed on internal alignment in the pay The importance placed on internal alignment in the pay

structures is a basic strategic issue.structures is a basic strategic issue. The premise underlying internal alignment is that internal The premise underlying internal alignment is that internal

pay structures need to be aligned with the organization’s pay structures need to be aligned with the organization’s business strategy and values, the design of the work flow, business strategy and values, the design of the work flow, and a concern for the treatment of employees.and a concern for the treatment of employees.

The work relationships within a single organization are an The work relationships within a single organization are an important part of internal alignment. Structures that are important part of internal alignment. Structures that are acceptable to the stakeholders affect satisfaction with pay, acceptable to the stakeholders affect satisfaction with pay, the willingness to seek and accept promotions to more the willingness to seek and accept promotions to more responsible jobs, and the effort to keep learning and responsible jobs, and the effort to keep learning and undertake additional training.undertake additional training.

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Summary Summary (continued)(continued)

The techniques for establishing internally aligned structures The techniques for establishing internally aligned structures include job analysis, job evaluation, and person-based include job analysis, job evaluation, and person-based approaches for skill/competency-based plans.approaches for skill/competency-based plans.

These techniques can aid in achieving the objectives of the These techniques can aid in achieving the objectives of the pay system when they are properly designed and managed.pay system when they are properly designed and managed.

Without them, the pay objectives of improving Without them, the pay objectives of improving competitiveness and fairness are more difficult to achieve.competitiveness and fairness are more difficult to achieve.

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Review QuestionsReview Questions

1.1. What are the pros and cons of having employees What are the pros and cons of having employees involved in compensation decisions? What forms can involved in compensation decisions? What forms can employee involvement take?employee involvement take?

2.2. Why does the process used in the design of the internal Why does the process used in the design of the internal pay structure matter? Distinguish between the process pay structure matter? Distinguish between the process used to design and administer the structure and the used to design and administer the structure and the techniques or mechanics used.techniques or mechanics used.

3.3. If you were managing employee compensation, how If you were managing employee compensation, how would you recommend that your company evaluate the would you recommend that your company evaluate the usefulness of its job-based or person-based plans?usefulness of its job-based or person-based plans?

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Review Questions Review Questions (continued)(continued)

4.4. Based on the research on job evaluation, what are the Based on the research on job evaluation, what are the sources of possible gender bias in skill/competency-sources of possible gender bias in skill/competency-based plans?based plans?

5.5. How can a manager ensure that job-based or How can a manager ensure that job-based or skill/competency-based plans support a customer-skill/competency-based plans support a customer-centered strategy?centered strategy?

6.6. How would you decide to use job-based or person-How would you decide to use job-based or person-based structures?based structures?