Transcript Chapter 06
COMPENSATION Third Canadian Edition Milkovich, Newman, Cole 6-1 © 2010 McGraw Hill Ryerson Many Ways to Create Internal Structure Business and Work-Related Internal Structure PURPOSE Person-based (Chapter 6) Skills Competencies Job-based (Chapters 4-5) Collect, summarize work information Job analysis Job descriptions Determine what to value Job evaluation: classes or compensable factors Skill blocks Assess value Factor degrees and weighting Certification process Translate into structure Job-based structure Person-based Person-based structure structure Skill analysis Core competencies Competency sets Competency indicators 6-2 © 2010 McGraw Hill Ryerson Skill-Based Pay Structures link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that is relevant to the work pay individuals 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 those particular skills very different approach compared to a job-based plan, which pays employees for the job to which they are assigned, regardless of the skills they possess 6-3 © 2010 McGraw Hill Ryerson Types of Skill-Based Pay Plans 1. Specialist: In-Depth 2. Generalist / Multiskill-Based: Breadth 6-4 © 2010 McGraw Hill Ryerson Purpose of the Skill-Based Structure support the strategy and objectives support work flow fair to employees motivate behaviour toward organizational objectives 6-5 © 2010 McGraw Hill Ryerson Skill Analysis a systematic process to identify and collect information about skills required to perform work in an organization. 6-6 © 2010 McGraw Hill Ryerson Determining the Internal Skill-Based Pay Structure Skill analysis Skill blocks Skill certification Skill-based pay 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? 6-7 © 2010 McGraw Hill Ryerson Determining the Internal Competency-Based Pay Structure Core competencies Competency sets Behavioural descriptors Competency – based pay 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? 6-8 © 2010 McGraw Hill Ryerson Competencies underlying, broadly applicable knowledge, skills, and behaviours that form the foundation for successful work performance (exhibited by excellent performers more consistently than average performers) 6-9 © 2010 McGraw Hill Ryerson Competency-Based Pay Terminology Taken from mission statement; for example, “business awareness.” CORE COMPETENCY COMPETENCY SETS Grouping of factors that translate core competency into observable behaviour; for example, cost management, business understanding. COMPETENCY INDICATORS Observable behaviours that indicate the level of competency within a competency set. For example, “identifies opportunities for savings.” 6-10 © 2010 McGraw Hill Ryerson Competency Analysis a systematic process to identify and collect information about the competencies required for successful work performance collect information on: personal characteristics visionary competencies organization-specific competencies establish certification methods 6-11 © 2010 McGraw Hill Ryerson Top Twenty Competencies • Achievement orientation • Concern of quality • Initiative • Interpersonal • Developing others • Team leadership • Technical expertise • Information seeking understanding • Customer service • Analytical thinking orientation • Conceptual thinking • Influence and impact • Organization awareness • Self-control • Self-confidence • Networking • Business orientation • Directiveness • Teamwork & cooperation • Flexibility 6-12 © 2010 McGraw Hill Ryerson Internal Alignment: Job- or Person-Based Structures Purpose of job- or person-based pay plans Internal pay structure to help achieve organizational objectives Aligned with internal alignment policy Supports business operations Managing the plan Manual Communication to foster employee acceptance 6-13 © 2010 McGraw Hill Ryerson Avoiding Bias in Pay Structures 1. 2. 3. Define the compensable factors and scales to include the content of jobs held predominantly by women. Ensure that factor weights are not consistently biased against jobs held predominantly by women. Are factors usually associated with these jobs always given less weight? Apply the plan in as bias free a manner as feasible. Ensure that the job descriptions are bias free, exclude incumbent names from the job evaluation process, and train diverse evaluators. 6-14 © 2010 McGraw Hill Ryerson Contrasting Approaches (1 of 2) Job-Based Skill-Based Competency-Based What is valued Compensable factors Skills Competencies Quantify the value Factor degree weights Skill levels Competency levels Mechanisms to translate into pay Assign points that reflect criterion pay structure Certification and price skills in external market Certification and price competencies in external market Pay structure Based on job performed/market Based on skills certified/ market Based on competency developed / market Pay increases Promotion Skill acquisition Competency development Managers’ focus Link employees to work Promotion and placement Cost control via pay for job and budget increase Utilize skills efficiently Provide training Control costs via training, certification, and work assignments Be sure competencies add value Provide competency – developing opportunities Control costs via certification, and work assignments 6-15 © 2010 McGraw Hill Ryerson Contrasting Approaches (2 of 2) Job-Based Skill-Based Competency-Based Employee focus Seek promotions to earn more pay Seek skills Seek competencies Procedures Job analysis Job evaluation Skill analysis Skill certification Competency analysis Competency certification Advantages Clear expectations Sense of progress Pay based on value of work performed Continuous learning Flexibility Reduced work force Continuous learning Flexibility Lateral movement Limitations Potential bureaucracy Potential inflexibility Potential bureaucracy Requires cost controls Potential bureaucracy Requires cost controls 6-16 © 2010 McGraw Hill Ryerson Conclusion internal pay structures need to be aligned with the organization’s business strategy and values, the design of the work flow, and a concern for the treatment of employees techniques for establishing internally aligned structures include the job-based approach (job analysis and job evaluation) and person-based approaches (skill/competency-based plans) these techniques can aid in achieving the objectives of the pay system when they are properly designed and managed 6-17 © 2010 McGraw Hill Ryerson