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Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Person-Based.

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Presentation on theme: "Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Person-Based."— Presentation transcript:

1 Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Person-Based Structures

2 6-2 Exhibit 6.1: Many Ways to Create Internal Structure

3 6-3 Person-Based Structures: Skill Plans Advantage of a skill-based plan is that people can be deployed in a way that better matches the flow of work Advantage of a skill-based plan is that people can be deployed in a way that better matches the flow of work

4 6-4 Skill-based structures link pay to the depth or breadth of the skills, abilities, and knowledge persons acquire that are relevant to the work. In contrast, a job-based plan pays employees for the job to which they are assigned, regardless of the skills they possess. What is a Skill-Based Structure?

5 6-5 Types of Skill Plans Skill plans can focus on Skill plans can focus on –Depth based  Specialist –Breadth based:  Generalist/ multiskilled based

6 6-6 Purpose of the Skill-Based Structure Supports strategy and objectives Supports work flow Fair to employees Motivates behavior toward organization objectives Supports strategy and objectives Supports work flow Fair to employees Motivates behavior toward organization objectives

7 6-7 Exhibit 6.3: Determining the Internal Skill-Based Structure

8 6-8 “How To” – Skill Analysis To build a structure, a process is needed to describe, certify, and value the skills To build a structure, a process is needed to describe, certify, and value the skills What information to collect? (Exhibit 6.4: FMC’s Technician Skill-Based Structure) What information to collect? (Exhibit 6.4: FMC’s Technician Skill-Based Structure) –Foundation skills –Core electives –Optional electives Whom to involve? Whom to involve? –Employees and managers Establish certification methods Establish certification methods –Peer review, on-the-job demonstrations, or tests, or formal tests

9 6-9 Exhibit 6.4: FMC’s Technician Skill-Based Structure

10 6-10 “How To” – Skill Analysis (cont.) Guidance from the research on skill-based plans Guidance from the research on skill-based plans –Design of certification process crucial in perception of fairness –Alignment with organization’s strategy –May be best for short-term initiatives

11 6-11 How is SBP Different From Job-Based? Skills or skill units are compensable, rather than jobs (although note that job-based pay does typically involve skill as compensable factor) Skills or skill units are compensable, rather than jobs (although note that job-based pay does typically involve skill as compensable factor) Mastery of skill blocks measured and certified Mastery of skill blocks measured and certified Pay changes don’t necessarily accompany job changes Pay changes don’t necessarily accompany job changes Little emphasis placed on seniority in pay determination Little emphasis placed on seniority in pay determination

12 6-12 Potential Effects of Skill-Based System Higher productivity Higher productivity Lower costs (???) Lower costs (???) Higher quality Higher quality Lower staffing levels Lower staffing levels Lower absenteeism Lower absenteeism Lower turnover Lower turnover Improved relations with labor union Improved relations with labor union

13 6-13 Disadvantages of Skill-Based Pay Average pay of Ees likely higher Average pay of Ees likely higher High labor costs, IF productivity increases do not offset additional costs High labor costs, IF productivity increases do not offset additional costs SBP systems more complex SBP systems more complex SBP systems require major investment in training SBP systems require major investment in training

14 6-14 Person-Based Structures: Competencies Several perspectives on what competencies are and what they are meant to accomplish Several perspectives on what competencies are and what they are meant to accomplish –Skill that can be learned and developed or a trait that includes attitudes and motives? –Focus on the minimum requirements that the organization needs to stay in business or focus on outstanding performance?

15 6-15 Exhibit 6.5: Determining the Internal Competency-Based Structure

16 6-16 Terms in Competency Analysis Core competencies Core competencies –Related to mission statements expressing organization’s philosophy, values, business strategies, and plans Competency sets Competency sets –Translate each core competency into action Competency indicators Competency indicators –Observable behaviors that indicate the level of competency within each set

17 6-17 Competency-Based Approaches Exhibit 6.6: TRW Human Resources Competencies Exhibit 6.6: TRW Human Resources Competencies Exhibit 6.7: Sample Behavioral Competency Indicators Exhibit 6.7: Sample Behavioral Competency Indicators

18 6-18 Exhibit 6.6: TRW Human Resources Competencies

19 6-19 Defining Competencies Organizations seem to be moving away from the vagueness of self-concepts, traits, and motives Organizations seem to be moving away from the vagueness of self-concepts, traits, and motives Greater emphasis on business-related descriptions of behaviors “that excellent performers exhibit much more consistently than average performers” Greater emphasis on business-related descriptions of behaviors “that excellent performers exhibit much more consistently than average performers” Competencies are becoming “a collection of observable behaviors that require no inference, assumption or interpretation” Competencies are becoming “a collection of observable behaviors that require no inference, assumption or interpretation”

20 6-20 Exhibit 6.7: Sample Behavioral Competency Indicators

21 6-21 Exhibit 6.8: Frito-Lay Managerial Competencies

22 6-22 “How To” – Competency Analysis What information to collect? What information to collect? –Examples  Refer Exhibit 6.9, Exhibit 6.10, and Exhibit 6.11

23 6-23 Exhibit 6. 9: 3M Leadership Competencies

24 6-24 Exhibit 6.10: Behavioral Anchors for Global-Perspective Competency

25 6-25 Exhibit 6.11: The Top 20 Competencies

26 6-26 Exhibit 6.12: Product Development Competency for Marketing Department at a Toy Company

27 6-27 Exhibit 6.13: Toy Company’s Structure Based on Competencies

28 6-28 “How To” – Competency Analysis (cont.) Whom to involve? Whom to involve? –Competencies are derived from executive leadership’s beliefs about strategic organizational intent Establish certification methods Establish certification methods Resulting structure Resulting structure –Designed with relatively few levels Guidance from the research on competencies Guidance from the research on competencies –Appropriateness to pay for what is believed to be the capacity of an individual as against what the individual does

29 6-29 Purpose of job- or person-based plan Purpose of job- or person-based plan –Design and manage an internal pay structure to help achieve organizational objectives  Reflects internal alignment policy  Supports business operations In practice, during evaluation of higher-value, nonroutine work, distinction between job- versus person-based approaches blurs In practice, during evaluation of higher-value, nonroutine work, distinction between job- versus person-based approaches blurs One More Time: Internal Alignment Reflected in Structures

30 6-30 Administering the Plan A crucial issue is the fairness of the plan’s administration A crucial issue is the fairness of the plan’s administration Sufficient information should be available to apply the plan (i.e., ‘manual’) Sufficient information should be available to apply the plan (i.e., ‘manual’) Communication and employee involvement are crucial for acceptance of resulting pay structures Communication and employee involvement are crucial for acceptance of resulting pay structures Appeals process Appeals process

31 6-31 Evidence on Usefulness of Results Reliability of job evaluation techniques Reliability of job evaluation techniques –Can be improved by using evaluators familiar with the work and who are trained in job evaluation Validity Validity –Degree to which evaluation achieves desired results Acceptability Acceptability –Formal appeals process –Employee attitude surveys

32 6-32 Bias in Internal Structures Gender bias Gender bias –No evidence that job evaluation is susceptible to gender bias –No evidence that job evaluator's gender affects results –Compensable factors related to job content – contact with others and judgment – does reflect bias against work done predominantly by women –Compensable factors related to employee requirements – education and experience – does not reflect bias

33 6-33 Bias in Internal Structures (cont.) Wages criteria bias Wages criteria bias –Job evaluation results may be biased if jobs held predominantly by women are incorrectly underpaid

34 6-34 Recommendations to Ensure Job Evaluation Plans Are Bias Free Define compensable factors and scales to include content of jobs held predominantly by women Define compensable factors and scales to include content of jobs held predominantly by women Ensure factor weights are not consistently biased against jobs held predominantly by women Ensure factor weights are not consistently biased against jobs held predominantly by women Apply plan in as bias free a manner as feasible Apply plan in as bias free a manner as feasible –Ensure job descriptions are bias free –Exclude incumbent names from job evaluation process –Train diverse evaluators

35 6-35 Exhibit 6.14: Contrasting Approaches


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