5 - Person-Based Pay Systems

Question 1

the majority of applications of skill-based pay have been in ________, where the work often involves teams, multiskills and exibility. An advantage of a skill- based plan is that people can be deployed in a way that better matches the flow of work, thus avoiding _________ as well as idle hands.

Answer 1

manufacturing

bottlenecks

Question 2

skill plans can focus on _______, such as a specialist in corporate law, and/or _______, such as a generalist with knowledge in all phases of operations, including marketing, manufacturing, nance and human resources.

Answer 2

depth

breadth

Question 3

Skill-based structures link pay to the depth or breadth of the skills, abilities and knowledge a person acquires that are relevant to the work. Structures based on ______ 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 _______ structure pays employees for the job to which they are assigned, regardless of the skills they possess.

Answer 3

skill

job-based

Question 4

The pay structures for elementary or high school teachers are likely based on their knowledge as measured by ________. A typical teacher’s contract speci es a series of steps, with each corresponding to a level of education. A bachelor’s degree in education is step one and is the minimum required for hiring. To advance a step to higher pay requires additional education. Each year of seniority also is associated with a _______. The pay is based on the knowledge of the individual doing the job—measured by number of college credits and years of teaching rather than job content or output. The presumption is that the teachers with more knowledge are more effective and more exible.

Answer 4

educational level

pay increase

Question 5

Employees in a ________ system earn pay increases by acquiring new knowledge, but the knowledge is speci c to a range of related jobs. Pay increases come with certification of new skills, rather than with new job assignments. Employees can then be assigned to any job for which they are certified based on the workflow.

Answer 5

multiskill

Question 6

The usefulness of skill-based structures can be evaluated using the following four objectives:

(1) Does it support the _______ and objectives?

(2) Does it support the ________? One of the main advantages of a skill-based plan is that it can more easily match people to a changing work ow. Skill-based systems focus on _____, not results.

(3) Is it ______ to employees? Employees like the potential of higher pay that comes with learning. And by encouraging employees to take charge of their own development, skill- based plans may give them more control over their work lives. Unfortunately, favoritism and bias can play a role in determining who gets a first chance at the training necessary to become certified at higher paying skill levels. Also, employees who complain that they are forced to do the work of those who are out for training may not look favorably on skill-based plans. Additionally, the courts have not yet been asked to rule on the legality of having two people do the same task but for different (skill-based) pay.

(4) Does it _______ toward organization objectives? Person-based plans have the potential to clarify new standards and behavioral expectations. The fluid work assignments that skill-based plans permit encourage employees to take responsibility for the complete work process and its results, with less direction from supervisors.

Answer 6

1. strategy
2. workflow
   
   • inputs
3. fair
4. motivate behavior

Question 7

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

Answer 7

skill analysis

Question 8

The major skill decisions that must be made are similar to those for a job analysis structure, and they are:

(a) What is the objective of the ______?
(b) What _______ should be collected?
(c) What _______ should be used to determine and certify skills?
(d) Who should _______?
(e) How useful are the results for _____ purposes?

Answer 8

• plan
• information
• methods
• be involved
• pay

Question 9

Ways of certifying that employees possess the skills and are able to apply them vary widely. Organizations may use ______, on-the-job demonstrations or tests for certification. Leaders and peers often are used in the ________ process. Still other organizations require successful completion of formal courses. But that is no guarantee that anything was learned.

Newer skill-based approaches appear to be moving away from an on-demand review and toward scheduling fixed ______ in the year. Scheduling makes it easier to budget and control payroll increases. Other changes include ongoing recertifications, which replace the traditional one-time certification process and help ensure skills are kept current, and removal of certification when a particular skill is deemed obsolete. Many plans require that employees be recertified, since the skills may deteriorate if they are not used frequently.

Answer 9

peer review

certification

review points

Question 10

Skill-based plans are generally well accepted by employees because the connection between the plan, the work and the size of the paycheck is easily made. Consequently, the plans provide strong motivation for individuals to increase their skills. “_________” is a
popular slogan used in these plans.

Three studies examined the effect of a skills system on productivity. Two of the three studies found productivity is higher under skill-based pay; one of these studies found that most of the reported effect on productivity was because of higher worker ______. Another study found that younger, more educated employees with strong growth needs, organizational commitment and a positive attitude toward workplace innovations were more successful in acquiring new skills.

Research has shown that one of the key factors that determined a plan’s success was how well it was aligned with the ________. It has also been argued that the higher labor costs under skill-based pay (estimated at between 10% and 15%) mean that it may be a better fit to companies in industries where labor costs are a _______ of total costs.

A final question is whether a multiskilled “jack-of-all-trades” might really be the master of none. Research suggests that the greatest impact on results occurs after just a small amount of increased _______. Greater increments achieve fewer improvements. Thus, more skills may not necessarily improve productivity. Instead, there may be an optimal number of skills for any individual to possess and beyond that number, productivity returns are less than the pay increases.

Answer 10

• “Learn to earn”
• flexibility
• organization’s strategy
• small share
• flexibility

Question 11

There is confusion over what competencies are and what they are supposed to accomplish.

• Are competencies a skill that can be learned and _____ or a trait more difficult to learn and includes attitudes and motives?
• Do they focus on the _________ that the organization needs to stay in business or on outstanding performance?
• Are they ______ of the organization or of the employee?

Unfortunately, the answer to all of these questions is yes. A lack of consensus means that competencies can be a number of things and, because of it, they may become nothing.

Answer 11

developed

minimum requirements

characteristics

Question 12

How is an internal competency-based structure created?

All approaches to creating a structure start by looking at the work performed in the organization. While skill- and job-based systems focus on information about specific tasks, competencies take the opposite approach. They look at the organization and try to abstract the underlying, broadly applicable _______, ______ and ______ that form the foundation for successful work performance at any level or job in the organization. These are core competencies. Core competencies often are linked to ________ that express an organization’s philosophy, values, business strategies and plans.

Competency sets begin to translate each core competency into ______. For the core competency of “business awareness,” for example, competency sets might be related to organizational understanding, cost management, third-party relationships and the ability to identify business opportunities.

Answer 12

knowledge

skills

behaviors

mission statements

action

Question 13

___________ are the observable behaviors that indicate the level of competency within each set. These may be used for staffing and evaluation as well as for pay purposes. They anchor the degree of competency required at each level of _______ of the work. Sometimes the behavioral anchors might include scales of intensity of action, the degree of impact of the action, its complexity and/or the amount of effort expended. Scaled competency indicators are similar to job analysis questionnaires and degrees of compensable factors.

Answer 13

Competency indicators

complexity

Question 14

Conceptions of competencies have mainly focused on five different areas. (how are they defined) These five areas are:

(1) _______—demonstration of expertise
(2) ______—accumulated information
(3) ________—attitudes, values, self image
(4) _______—general disposition to behave in a certain way
(5) _______—recurrent thoughts that drive behaviors.

As experience with competencies has grown, organizations seem to be moving away from the vagueness of self-concepts, traits and motives. Instead, they are placing greater emphasis on business-related descriptions of behaviors “that excellent performers exhibit much more consistently than average performers.” Competencies are becoming “a collection of _____________ (not a single one) that require no inference, assumption or interpretation.”

Answer 14

1. Skills
2. Knowledge
3. Self-concepts
4. Traits
5. Motives

“observable behaviors”

Question 15

do competencies help provide an internally consistent structure?

To evaluate their effectiveness, the previously described objectives discussed in Question 6 are considered again here:

(1) Do these competencies have a direct link to the organization’s ______? The process of identifying competencies starts with upper management identifying what will result in _______ for the company. This process resembles the similar process of identifying compensable factors as part of job evaluation.
(2) Do these competencies support ______? Competencies are chosen to ensure that the critical needs of the organization are met. While skill-based plans are tightly coupled to present work needs, competencies more loosely apply to work requiring more tacit knowledge such as in managerial and professional work.
(3) Are they _____ to employees? Advocates of competencies say they can empower employees to take charge of their own development. By focusing on optimum performance rather than average performance, competencies can help employees maintain their marketability. However, trying to justify pay differences based on inferred competencies creates risks that need to be managed.
(4) Do they motivate behavior toward organization _______? Competencies in effect provide guidelines for behavior and keep people focused. They can also provide a common basis for communicating and working together. This latter possibility has become increasingly important as organizations go global and as employees with widely differing viewpoints and experiences ll leadership positions in these global organizations.

Answer 15

1. strategy
   
   • success
2. workflow
3. fair
4. objectives

Question 16

What is the first, and the most important, decision in creating a competency-based structure?

The first basic decision that must be made is to clarify the _______ of the competency system. Competencies may have value for personal development and communicating organization direction. However, the vagueness and subjectivity continue to make competencies a risky foundation for a _______. The competency structure may exist on paper by virtue of the competency sets and scaled behavior indicators but bear little connection to the work employees do

Answer 16

objective

pay system

Question 17

A number of schemes for classifying competencies have been proposed. One of them uses three groups:

(1) __________—In business settings, the relevant characteristics might be personal integrity, maturity of judgment, exibility and respect for others. Newly hired employees are expected to possess these characteristics and then develop and demonstrate them in increasingly complex and ambiguous job situations.
(2) _________—These are the highest level competencies. They might be expressed as possessing a global perspective, taking the initiative in moving the organization in new directions, able to articulate the implications for the organization of trends in the marketplace, in world events, in the local community.
(3) _________—Between the first two groups are those competencies that are tied specifically to the particular organization and to the particular function to which they are being applied. These generally include leadership, customer orientation, functional expertise, developing others and re ecting the company’s values, culture and strategic intent.

Although core competencies stem from each organization’s mission statement or its strategy to achieve competitive advantage, they are not unique for each company. One analysis showed that most organizations appear to choose from the same list of ____ core competencies. What does appear to differ among organizations is how they operationalize and apply competencies.

Answer 17

1. Personal characteristics
2. Visionary
3. Organization-specific

20

Question 18

Competencies are derived from the executive leadership’s ______ about the organization and its strategic intent. Anecdotal evidence indicates that not all employees understand that connection. A common approach to gaining the understanding and acceptance of the pay structure by the stakeholders is to include representative managers and employees on committees in advisory or actual decision-making roles. _______ is likely to increase trust in the structure and acceptance of it.

Answer 18

beliefs

Participation

Question 19

What factors should be considered to determine the usefulness of pay structures at achieving their objectives?

• (1) Reliability of__________—Reliability refers to the consistency of results. A reliable one is where different evaluators produce the same results. One way to improve reliability includes using evaluators who are familiar with the work and trained in the job evaluation process. Group _____ is another practice to attempt to increase reliability.
• (2) ______/Usefulness— refers to the degree to which the evaluation achieves the desired results. It can be measured by the “hit rates” or agreement of results with a pre- determined benchmark structure.
• (3) ________—Several methods are used to assess and improve employee acceptability including a formal appeals process. Employees who believe their jobs are evaluated incorrectly should be able to request reanalysis and/or skills reevaluation. Employee attitude surveys can assess perceptions of how useful evaluation is as a management tool.

Answer 19

1. job evaluation techniques
   
   • consensus
2. Validity
3. Acceptability

Question 20

The continuing differences in jobs held by men, women and people of color, and the accompanying pay differences, have focused attention on internal structures as a possible source of discrimination. _______ has been directed at job evaluation as both a potential source of bias against women and a mechanism to reduce the bias. However, despite speculations that job evaluation is susceptible to gender bias, the evidence does not support that the gender of an individual jobholder or the gender of the job evaluator influences the ______ of the job.

The second potential source of bias affects job evaluation indirectly, through the _________ paid for jobs. A wage criteria bias may distort the evaluation if the current wages paid for jobs are inequitable. For instance, if jobs held predominantly by females are currently underpaid, a new evaluation may simply reflect past inequities.

Recommendations seeking to ensure that job evaluation plans are bias-free include the following recommendations:

(a) Define the ______ factors and _____ to include the content of jobs held predominantly by women. For example, working conditions should include the noise and stress of office machines and the repetitive movements associated with the use of computers.
(b) Ensure that factor ______ are not consistently biased against jobs held predominantly by women.
(c) Apply the plan in as ______ a manner as feasible. Ensure that the job descriptions are bias-free, exclude incumbent names from the job evaluation process and train diverse evaluators.

Answer 20

Attention

evaluation

current wages

• compensable / scales
• weights
• bias-free

Question 21

Three contrasting approaches to internal pay systems are job-based, skill-based and competency-based; the latter two belong to the _______ approach.

Under the ______ structures, pay increases are gained by promotions to more responsible jobs, while under the _______ structures, they are gained by acquiring more valued skills/competencies. Logically, employees will focus on how to get promoted or on how to acquire the required skills or competencies.

A _______ approach controls costs by paying only as much as the work performed is worth, regardless of any greater skills the employee may possess. So costs are controlled via job rates or work assignments and budgets.

In contrast, ______ plans pay employees for the highest level of skill/competency they have achieved regardless of the work they perform. This maximizes flexibility, but it also encourages all employees to become certi ed at top rates. Unless an employer can either control the rate at which employees can certify skill/competency mastery or employ fewer people, the organization may experience higher ______ than competitors using the job-based approach. The key is to offset the higher rates with greater _______.

Answer 21

• person-based
• job-based
• person-based
• job-based
• person-based
• labor costs
• productivity