© 2010 McGraw Hill Ryerson 6-1 COMPENSATION Third Canadian Edition Milkovich, Newman, Cole

© 2010 McGraw Hill Ryerson

6-1

COMPENSATIONThird Canadian Edition

Milkovich, Newman, Cole


6-2

Many Ways to Create Internal Structure

Business and Work-Related Business and Work-Related Internal StructureInternal Structure

Person-based (Chapter 6)Job-based(Chapters 4-5)

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

Skills Skills CompetenciesCompetencies

Skill blocks Competency sets

Certification process

Skill analysis Core competencies

Competency indicators

Person-based structure

Person-based structure


6-3

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

Skill-Based Pay Structures


6-4

Types of Skill-Based Pay Plans

1. Specialist: In-Depth

2. Generalist / Multiskill-Based: Breadth


6-5

Purpose of the Skill-Based Structure

support the strategy and objectives

support work flow

fair to employees

motivate behaviour toward organizational objectives


6-6

a systematic process to identify and a systematic process to identify and collect information about skills collect information about skills required to perform work in an required to perform work in an organization.organization.

Skill Analysis


6-7

Determining the InternalSkill-Based Pay Structure

Skill analysis Skill blocksSkill 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?


6-8

Determining the InternalCompetency-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?


6-9

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)


6-10

CORE COMPETENCY

COMPETENCY SETS

COMPETENCY INDICATORS

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

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

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

Competency-Based Pay Terminology


6-11

Competency Analysis

a systematic process to identify and collect information about the competencies required for successful work performance

collect information on:personal characteristicsvisionary competenciesorganization-specific competencies

establish certification methods


6-12

Top Twenty Competencies• Achievement orientation

• Concern of quality

• Initiative

• Interpersonal understanding

• Customer service orientation

• Influence and impact

• Organization awareness

• Networking

• Directiveness

• Teamwork & cooperation

• Achievement orientation

• Concern of quality

• Initiative

• Interpersonal understanding

• Customer service orientation

• Influence and impact

• Organization awareness

• Networking

• Directiveness

• Teamwork & cooperation

• Developing others

• Team leadership

• Technical expertise

• Information seeking

• Analytical thinking

• Conceptual thinking

• Self-control

• Self-confidence

• Business orientation

• Flexibility

• Developing others

• Team leadership

• Technical expertise

• Information seeking

• Analytical thinking

• Conceptual thinking

• Self-control

• Self-confidence

• Business orientation

• Flexibility


6-13

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

Internal Alignment: Job- or Person-Based Structures


6-14

Avoiding Bias in Pay Structures

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.


6-15

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 workPromotion and placementCost control via pay for job and budget increase

Utilize skills efficientlyProvide trainingControl costs via training, certification, and work assignments

Be sure competencies add valueProvide competency – developing opportunitiesControl costs via certification, and work assignments


6-16

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 analysisJob evaluation

Skill analysisSkill certification

Competency analysisCompetency certification

Advantages Clear expectationsSense of progressPay based on value of work performed

Continuous learningFlexibilityReduced work force

Continuous learningFlexibilityLateral movement

Limitations Potential bureaucracyPotential inflexibility

Potential bureaucracyRequires cost controls

Potential bureaucracyRequires cost controls


6-17

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

Documents

© 2010 McGraw Hill Ryerson 6-1 COMPENSATION Third Canadian Edition Milkovich, Newman, Cole