Welcome
Person Based Structure
Chapter: 6
Learning Objectives:
• Essential Terms
• Person Based Structures: Skill Plan
• Types of Skill Plans
• Purpose of Skilled Based Structure
• Difference of Skilled Based Pay from Job Based Pay
• Ways to do Skill Analysis
• Advantages of Skill-Based Pay
• Disadvantages of Skill-Based Pay
• Person Based Structures: Competencies
• Understanding the Term: Competency
• Skills and Competencies Summary
• Determining the Internal Competency-Based
Structure
• Terms in Competency Analysis
• Purpose of the Competency-Based Structure
• How To Do Competency Analysis
• Bias in Internal Structures
• Recommendations to Ensure Job
Evaluation Plans are Bias Free
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Essential Terms
Job-based Compensation Structure
This is a structure of salary payments that is
built on compensable factors determined by
the job. In other words the salary for a job is
determined by its responsibilities, and
sometimes its work conditions. Most
companies' pay structures are job based pay.
Essential Terms
Person-based Compensation Structure
Person-based pay structure is the payment
systems whereby the employee is rewarded
based on the person that he is at work and
not the job that he does. Person-based pay
structures generally aim at ensuring that
payment is done for the skill/competence
that the employee has
Person-based pay structures are
simply payment systems whereby the
employee is rewarded based on the person
that he is at work and not the job that he
does
Designing Internally Consistent
Compensation Structure
169
Person-Based structures: Skill Plan
7
Types of Skill Plans
Specialist Based: depth
The pay structures of elementary or high
school teachers are likely based on their
knowledge as measured by education level.
A typical teacher’s contract specifies a
series of steps, with each step
corresponding to a level of education. To
advance to a step to higher pay requires
additional education. The presumption is
that teachers with more knowledge are
more effective and flexible.
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168
Types of Skill Plans
Generalists/Multi-skill Based—Breadth
Employees in a multi-skill system earn pay
increases by acquiring new knowledge, but the
knowledge is specific to a range of related jobs.
Pay increases come with certification of new
skills, rather than with job assignments.
Employees can then be assigned to any of the
jobs for which they are certified, based on the
flow of work.
170 9
Types of Skill Plans
Highly expert on one trade Moderately expert on
multiple trade
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Purpose of the Skill-Based Structure
Supports the Strategy & Objectives
The skills on which to base a structure need
to be directly related to the organization’s
objectives and strategy
Supports Work Flow
One of the main advantages of a skill based
plan is that it facilitates matching people to a
changing work flow (See the example in
Page No: 171)
171 11
Purpose of the Skill-Based Structure
Is Fair to Employees
Employees like the potential of higher pay that
comes with learning. By encouraging employees to
take charge of their own development, skill-based
plans may give them more control over their work
lives
Motivates Behavior Toward Organization
Objectives
Person-based plans have the potential to clarify
new standards and behavioral expectations. It
encourages employees to take more responsibility
for the complete work process and its results with
less direction from supervisors
12
Difference of Skilled Based Pay from
Job Based Pay
Skills
or skill units, rather than jobs are
compensable
Mastery of skill units is measured and
certified
Pay changes do not necessarily accompany
job changes
Little
emphasis placed on seniority in pay
determination
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Ways to do Skill Analysis
Skill analysis is the systematic process of
identifying and collecting information
about skill required to perform work in an
organization
172 14
Ways to do Skill Analysis
Determining the Internal skill Based Structure
EXHIBIT 6.3 Determining the Internal skill Based Structure
Skill based structure begins with an analysis of skills which is
similar to the task statements in a job analysis.
Related skills can be grouped into skill blocks.
Skill blocks can be arranged by levels into a skill structure.
To build structure, a process is needed to describe, certify and
value the skills.
172 15
Ways to do Skill Analysis
What information to collect? (Exhibit 6.4: FMC’s
Technician Skill-Based Structure)
Foundation skills
Core electives
Optional electives
Whom to involve?
Employees and managers
Establish certification methods
Peer review, on-the-job demonstrations, or tests, or formal tests
Many plans require that employees be recertified, since the skills
may get rusty if they are not used frequently.
At some company, employees are required to recertify their skills
every 24 months
Skill based plan become increasingly expensive as the majority of
employees become certified at the highest levels
Ways to do Skill Analysis
FMC’s Technician Skill-Based Structure
EXHIBIT 6.4 FMC’s Technician Skill-Based Structure 17
174
Ways to do Skill Analysis
Guidance from the Research on Skill-Based
Plan
Designof certification process crucial in
perception of fairness
Alignment with organization’s strategy
May be best for short-term purposes
175
Advantages of Skill-Based Pay
It enhances productivity and quality through
better use of human resources
It facilitates technological change, which may
meet with resistance in a purely job-based system
Job satisfaction is created through employees
having greater control over the planning and
implementation of their work
It is an incentive for self-development
It provides employment security through skills
enhancement
Since the pay increases on account of skills which
are measurable standard, the criticism of
subjectivity associated with performance
appraisals is avoided
It enables job rotation, and filling of temporary
vacancies
Disadvantages of Skill-Based Pay
Average pay of employees likely higher
System is more complex
Require a major investment in training
Employers may be paying for some skills that are
used infrequently
Person-Based structures: Competencies
21
176
Understanding the Term: Competency
Competencies are a set of integrated
knowledge, skills, abilities and attributes that
translate into behaviors and help define,
what is needed to successfully perform
the job.
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Understanding the Term:
Competency
Skill → The WHAT → A specific ability
that can be applied in a specific setting in
order to accomplish a predefined desired
result.
Competency → The HOW → The
combination of skills, knowledge and
behavior that is exercised in order to
effectively perform the duties of a job
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Understanding the Term: Competency
Competencies are the demonstrable and
transportable employee characteristics that are
independent of a specific job or position
Competency includes knowledge, skills and behaviors
that enable performance
There is lack of true consensus regarding exactly what
the term Competency means as such there is much
debate as to whether Competencies can be translated
into a measurable factor or in objective basis for
determining pay decisions
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175
Determining the Internal Competency-
Based Structure
Exhibit 6.6 Determining the Internal Competency-Based Structure
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177
Terms in Competency Analysis
CORE COMPETENCY
Taken from mission statement; for example,
“business awareness.”
COMPETENCY SETS
Grouping of factors that translate core
competency into observable behavior; for
example, organizational understanding, cost
management, third party relationships, and ability
to identify business opportunities.
COMPETENCY INDICATORS
Observable behaviors that indicate
the level of competency within a
competency set. For example,
“identifies opportunities for
savings.”
TRW Human Resource Competency
Change management is the process, tools
and techniques to manage the people side
of change to achieve the required business
outcome
Employees should use this model as
a guide to understand what
capacities organization wants
people to develop
EXHIBIT 6.7 TRW Human Resource Competency
178
Competency: Impact and Influence
5 Levels of Indicators basing on complexity of work
EXHIBIT 6.8 Sample Behavioral Competency Indicators
179
Purpose of the Competency-Based
Structure
Supports Organization Strategy
Supports Work Flow
Is Fair to Employees
Motivates Behavior Toward Organization
Objectives
180 29
How to Do Competency Analysis
Objective: Paying for competencies is only
way to get people to pay attention to them
What information to collect: A number of
schemes for classifying competencies have been
proposed. One of them uses three groups as
follows:
Personal Characteristics
Maturity of judgment
Flexibility
Analytical ability
Respect for others
How to Do Competency Analysis
Visionary: These are highest level competencies
Global perspective
Moving the organization in new direction etc
Organization Specific
Leadership
Customer orientation
Functional expertise
How To Do Competency Analysis
Leadership Competencies
183
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EXHIBIT 6.10 3M Leadership Competencies
How To Do Competency Analysis
Behavioral Anchors for Global-
Perspective Competency
Exhibit 6.11: Behavioral Anchors for Global-Perspective Competency
184
How To Do Competency Analysis
The Top 20 Competencies
184
Exhibit 6.12: The Top 20
How To Do Competency Analysis
Product Development Competency for
Marketing Department at a Toy Company
Exhibit 6.13: Product Development Competency for Marketing Department at a
Toy Company 186
How To Do Competency Analysis
Toy Company’s Structure Based on
Competencies
Exhibit 6.14: Toy Company’s Structure Based on Competencies
187
How To Do Competency Analysis
Whom to involve?
Like compensable factors, competencies are derived from
executive leadership belief about the organization and its
strategic intent.
Managers
Exparts
Employees in case of 360 degree approach
How To Do Competency Analysis
Establish certification methods
Employees get paid for the relevant skills or
competencies they possess whether or not those
skills are used
Resulting structure
Designed with relatively few levels
Guidance from the research on competencies
Appropriateness to pay for what is believed to be
the capacity of an individual as against what the
individual does
Administering the Plan
A crucial issue is the fairness of the plan’s
administration
Sufficient information should be available
to apply the plan (i.e., ‘manual’)
Communication and employee
involvement are crucial for acceptance of
resulting pay structures
Appeals process must exist
Evidence on Usefulness of Results
Reliability of job evaluation techniques
Can be improved by using evaluators familiar with the
work and who are trained in job evaluation
Validity
Degree to which evaluation achieves desired results
Acceptability
Formal appeals process
Employee attitude surveys
Bias in Internal Structures
Gender bias
No evidence that job evaluation is susceptible to
gender bias
No evidence that job evaluator's gender affects
results
Contrasting Approaches
EXHIBIT 6.17 Contrasting
Approaches 194
Recommendations to Ensure Job
Evaluation Plans are Bias Free
Define compensable factors and scales to include
content of jobs held predominantly by women
Ensure factor weights are not consistently biased
against jobs held predominantly by women
Apply plan in as bias free a manner as feasible
Ensure job descriptions are bias free
Exclude incumbent names from job evaluation process
Train diverse evaluators
Summary
• Essential Terms
• Person Based Structures: Skill Plan
• Types of Skill Plans
• Purpose of Skilled Based Structure
• Difference of Skilled Based Pay from Job Based Pay
• Ways to do Skill Analysis
• Advantages of Skill-Based Pay
• Disadvantages of Skill-Based Pay
• Person Based Structures: Competencies
• Understanding the Term: Competency
• Skills and Competencies Summary
• Determining the Internal Competency-Based
Structure
• Terms in Competency Analysis
• Purpose of the Competency-Based Structure
• How To Do Competency Analysis
• Bias in Internal Structures
• Recommendations to Ensure Job
Evaluation Plans are Bias Free
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Next Class
Lecture: 7
Leftover Part of Lecture-6
&
Compensation Strategy: External
Competitiveness
Book Chapter: Part of:6 &7
Reference :
Book: Compensation
Author: George T Milkovich, Jerry M Newman & CS Venkata Ratnam
& Other sources
Thank You
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