Person-Based Structures

McGraw-Hill/Irwin

Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

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Chapter Topics

Person-Based Structures: Skill PlansHow to: Skill AnalysisPerson-Based Structures: CompetenciesHow to: Competency AnalysisOne More Time: Internal Alignment Reflected in Structures

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Chapter Topics (cont.)

Administering the Plan Evidence of Usefulness of Results Bias in Internal Structures The Perfect Structure

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Person-Based Structures: Skill Plans

Skill-based structures link pay to the depth or breadth of skills, abilities, and knowledge a person acquires that are relevant to the workIndividuals are paid for all their certified skills regardless of whether the work requires all or just a few of those skills

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Types of Skill Plans

Specialist: DepthPay is based on the knowledge of the individual doing the job rather than on job content or output Generalist/multiskill based: BreadthPay increases are earned by acquiring new knowledge specific to a range of related jobsPay increases come with certification of new skills, rather than with job assignments

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Purpose of the Skill-Based Structure

Supports the strategy and objectivesSupports work flowIs fair to employeesMotivates behavior toward organization objectives

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How To: Skill Analysis

Skill analysis is a systematic process of identifying and collecting information about skills required to perform work in an organization

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How To: Skill Analysis (cont.)

What information to collect?Specific information on every aspect of the production process Whom to involve? Employees and managers Establish certification methodsPeer review, on-the-job demonstrations, tests, or formal coursesScheduled fixed review points and recertification

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How To: Skill Analysis (cont.)

Outcomes of skill-based pay plans: Guidance from research and experienceDesign of certification process is crucial in perception of fairnessAlignment with organizations strategyMay be best for short-term initiatives

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Person-Based Structures: Competencies

Core competencies abstract the underlying, broadly applicable knowledge, skills, and behaviors that form the foundation for success at any level or job in the organizationCompetency sets translate each core competency into actionCompetency indicators are observable behaviors that indicate the level of competency within each set

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Defining Competencies

Organizations seem to be moving away from the vagueness of self-concepts, traits, and motivesGreater emphasis on business-related descriptions of behaviors that excellent performers exhibit much more consistently than average performers

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Defining Competencies (cont.)

Competencies are becoming a collection of observable behaviors that require no inference, assumption or interpretation

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Purpose of the Competency-Based Structure

Organization strategyWork flowFair to employeesMotivate behavior toward organization objectives

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How To: Competency Analysis

ObjectiveVagueness and subjectivity make competencies a risky foundation for a pay system What information to collect? Classification of competencies: Personal characteristics Visionary Organization specific

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Exhibit 6.11: The Top 20 Competencies

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How To: Competency Analysis (cont.)

Whom to involve?Competencies are derived from executive leaderships beliefs about strategic organizational intent Not all employees understand the connection

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How To: Competency Analysis (cont.)

Establish certification methodsConsultants are silent on objectively certifying whether a person possesses a competency Resulting structure Designed with relatively few levels and wide differentials for increased flexibility

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Exhibit 6.13: Toy Companys Structure Based on Competencies

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How To: Competency Analysis (cont.)

Competencies and employee selection and training/developmentCompetencies relate to individual characteristics of personality, motivation, and ability Failure to adequately screen employees: Puts more pressure on training and development De-motivates employees seeking to acquire and demonstrate these competencies

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Exhibit 6.14: Titles and High-Level Definitions of the Great Eight Competencies

Source: Dave Bartram, SHL Group, The Great Eight Competencies: a Criterion-Centric Approach to Validation, Journal of Applied Psychology 2005. Vol. 90, No. 6, pp. 11851203.

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How To: Competency Analysis (cont.)

Guidance from the research on competenciesManagers competencies are related to performance ratings No relationship to unit-level performanceSome competencies deliver greater returns than othersAppropriateness to pay for what is believed to be the capacity of an individual as against what the individual does

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Purpose of job- or person-based procedures:Design and manage an internal pay structure to help the organization succeed Reflects internal alignment policy Supports business operationsIn practice, the focus is on both job and person factors that create value for the organization

One More Time: Internal Alignment Reflected in Structures

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Administering the Plan

A crucial issue is the fairness of the plans administrationSufficient information should be available to apply the planCommunication and employee involvement are crucial for acceptance of resulting pay structures

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Evidence of Usefulness of Results

Reliability of job evaluation techniquesCan be improved by using evaluators familiar with the work and who are trained in job evaluation ValidityDegree to which the evaluation assesses what it is supposed to Measured in two ways:Degree of agreement between rankings from job evaluation with an agreed-upon ranking of benchmarks

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Evidence on Usefulness of Results (cont.)

Hit ratesdegree to which the job evaluation plan matches an agreed-upon pay structure for benchmark jobs Definition of validity needs to be broadened to include impact on pay decisions

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Evidence on Usefulness of Results (cont.)

AcceptabilityFormal appeals process allows employees to request reanalysis and/or skills reevaluationEmployee attitude surveys can assess perceptions of how useful evaluation is as a management tool

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Bias in Internal Structures

No evidence that job evaluation is susceptible to gender biasWages criteria biasJob evaluation results simply mirror bias in the current pay rates if:It is based on the current wages paid The jobs held predominantly by women are underpaid

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Bias in Internal Structures (cont.)

Recommendations to ensure job evaluation plans are bias free:Define compensable factors and scales to include content of jobs held predominantly by womenEnsure factor weights are not consistently biased against jobs held predominantly by womenApply plan in as bias-free a manner as feasible

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See text pages 182-183

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The Perfect Structure

The best approach may be to provide sufficient ambiguity to afford flexibility to adapt to changing conditionsToo generic an approach may not provide sufficient detail to make a clear link between pay, work, and resultsToo detailed an approach may become rigid

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Exhibit 6.15: Contrasting Approaches