Person-Based Structures

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1 6-1 Chapter 6 Person-Based Structures

2 Learning Objectives After studying Chapter 6, students should be able to: 1. Discuss the differences and similarities between job-based based plans, skill-based plans, and competency-based plans. 2. Discuss the advantages and disadvantages of employee involvement in the evaluation of work. 3. Explain the procedures necessary in order to administer a job-based based or skill/competency-based plan. 4. Discuss the criteria used to evaluate the usefulness of the job-based based or skill/competency based plan. 6-2

3 Many Ways to Create Internal Structure Business and Work- Related Internal Structure 6-3 Person-based PURPOSE Job-based Skill Competencies (Chapter 6) (Chapter 6) Collect, summarize work information Job analysis Job descriptions (Chapter 4) Skill analysis Core competencies Determine what to value Job evaluation: classes or (Chapter 5) compensable factors Skill blocks Competency sets Assess value Factor degrees and weighting (Chapter 5) Certification process Behavioral descriptors Translate into structure Job-based structure (Chapter 5) Person-based Person-based structure structure

4 6-4 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. Structures based on skill, 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. In contrast, a job-based based plan pays employees for the job to which they are assigned, regardless of the skills they possess.

5 6-5 Types of Skill Plans! Specialist: In Depth! Generalist / Multiskill-Based: Breadth

6 6-6 Purpose of the Skill-Based Structure! Support Work Flow! Fair to Employees! Directs Behavior Toward Organization Objectives

7 6-7 Skill analysis is a systematic process to identify and collect information about skills required to perform work in an organization.

8 Determining the Internal Skill-Based Structure 6-8 Internal alignment Skill analysis Skill blocks Skill certification Skill-based structure 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?

9 6-9 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.

10 6-10 How is SBP Different From a Job-Based Pay System?!Skill Skill or skill units, rather than jobs are compensable.!mastery Mastery of skill units is measured and certified.!pay Pay changes do not necessarily accompany job changes.!there There is little emphasis on seniority in pay determination.

11 Why Use a Skill-Based Pay System? From the firm s perspective, SBP can:!encourage employee flexibility!reinforce Reinforce a high-involvement involvement organization design!support Support the compensation strategy in ways that hold down costs 6-11

12 6-12 Effects of a Skill-Based System! higher productivity! lower costs! higher quality! lower staffing levels! lower absenteeism! lower turnover! improved relations with labor union

13 6-13 Disadvantages of Skill-Based Pay! Average pay of employees likely higher! Excessive labor costs, if productivity increases don t offset additional costs! SBP systems more complex! SBP systems require a major investment in training

14 Determining the Internal Competency-Based Structure 6-14 Internal alignment Core competencies Competency sets Behavioral descriptors Competency based structure 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 competencies? Who should be involved? How useful are the results for pay purposes?

15 6-15 Purpose of the Competency-Based Structure! Support Work Flow! Fair to Employees! Directs Behavior Toward Organization Objectives

16 6-16 So, What s 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.

17 6-17 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.

18 6-18 The Top Twenty Competencies 1. Achievement orientation 2. Concern of quality 3. Initiative 4. Interpersonal understanding 5. Customer-service service orientation 6. Influence and impact 7. Organization awareness 8. Networking 9. Directiveness 10. Teamwork & cooperation 11. Developing others 12. Team leadership 13. Technical expertise 14. Information seeking 15. Analytical thinking 16. Conceptual thinking 17. Self-control 18. Self-confidence 19. Business orientation 20. Flexibility

19 6-19 How well do they achieve their objectives Reliability of Job Evaluation Techniques Criteria for Evaluating the Usefulness of Pay Structures Acceptability Validity / Usefulness

20 6-20 Illustrations of Audit Indexes A. Overall indicators. 1. Ratio of number of current descriptions to numbers of employees. 2. Number of job descriptions evaluated last year and previous year. 3. Number of jobs evaluated per unit. a) Newly created jobs b) Re-evaluation of existing jobs

21 6-21 Illustrations of Audit Indexes (continued) B. Timeliness of job descriptions and evaluations. 1. Percent of total jobs with current descriptions. 2. Percentage of evaluation requests returned within 7 working days, within 14 working days. 3. Percentage of re-evaluation evaluation requests returned with changed (unchanged) evaluations.

22 6-22 Illustrations of Audit Indexes (continued) C. Workability and acceptability of job evaluation. 1. Percentage of employees (managers) surveyed who know the purposes of job evaluation. 2. The number of employees who appeal their job s evaluation rating. 3. The number of employees who receive explanations of the results of their re-evaluation evaluation requests.

23 Recommendations to Ensure that Job Evaluation Plans are Bias Free 1. Define the compensable factors and scales to include the content of jobs held predominantly by women. 2. 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? 3. 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. 6-23

24 Contrasting Approaches (1 of 2) 6-24 Job-Based Skill-Based Competency-Based What is valued Compensable factors Skill blocks 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

25 Contrasting Approaches (2 of 2) 6-25 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

26 Summary! The importance placed on internal alignment in the pay structures is a basic strategic issue.! The premise underlying internal alignment is that 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.! The work relationships within a single organization are an important part of internal alignment. Structures that are acceptable to the stakeholders affect satisfaction with pay, the willingness to seek and accept promotions to more responsible jobs, and the effort to keep learning and undertake additional training. 6-26

27 Summary (continued) 6-27! The techniques for establishing internally aligned structures include job analysis, job evaluation, and person-based approaches for skill/competency-based plans.! These techniques can aid in achieving the objectives of the pay system when they are properly designed and managed.! Without them, the pay objectives of improving competitiveness and fairness are more difficult to achieve.

28 6-28 Review Questions 1. What are the pros and cons of having employees involved in compensation decisions? What forms can employee involvement take? 2. Why does the process used in the design of the internal pay structure matter? Distinguish between the process used to design and administer the structure and the techniques or mechanics used. 3. If you were managing employee compensation, how would you recommend that your company evaluate the usefulness of its job-based based or person-based plans?

29 6-29 Review Questions (continued) 4. Based on the research on job evaluation, what are the sources of possible gender bias in skill/competency- based plans? 5. How can a manager ensure that job-based based or skill/competency-based plans support a customer- centered strategy? 6. How would you decide to use job-based based or person- based structures?

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