Person Centered Pay Nancy Brown Johnson © 2005

Person Centered Pay Pay-for-Knowledge –Competency Based Pay –Skill Based Pay

Person Versus Job Based Pay Fredrick Taylor Scientific Management focused on the basic elements of the job Lead to job focused way of organizing work Criticisms of job based structure –Reduces flexibility –“Not my job” –Little reason to acquire information & skills outside of narrow job –Doesn’t help people understand what other people do

Skill Based Pay Pay is tied to skills, abilities, & knowledge that a worker possesses Manufacturing jobs Flexibility to reassign people to where work is needed Depth: pay for having a deep level of knowledge within a job e.g. teachers pay increases with amount of education: bachelors, masters, doctorate and increase pay more hours Breadth: Pay for generalist knowledge

Breadth Increased pay for more knowledge Pay increases come with certification of new skill –(e.g., Microsoft certification; SHRM Certification)Microsoft certificationSHRM Certification –Skill certification can come from internal assessment Employees then can be assigned to new jobs based upon certification Pay increases with the more certifications held For example: 7.50 base pay /hr for each machine

Why Skill Based Pay? Ensures workers have needed skills –Assumes good tests Supports the organizational work flow –Workers trained & ready to move to assignments as needed Fairness??? –Depends on how training allocated –Who pays for training –Means two people doing same task at different pays Motivation –Motivation is to get training, not necessarily to perform task well

Research Employees accept skill based pay (clear how to make more money) –Certification procedures must be viewed as fair Easy to communicate Productivity –Mixed results 61% of those implementing sbp were using it 7 years later Depends on strategy more compatible with innovation not low cost Usefulness varies based upon setting

Competencies Question: what are competencies? –Skill (demonstration of expertise) that can be learned & developed? –Knowledge (accumulated information) –Self concept (attitudes, values, self image) –Traits (general disposition to behave a certain way) –Motives (thoughts that drive behavior) Text: competencies as characteristics of the person – personality, attitudes, knowledge, skills & behaviors “…competencies can be a number of things; consequently they stand in danger of becoming nothing” Milkovich & Newman

Competencies: Fuzziness in Defining Them Knowledge & Skills: Essential characteristics for the job –Can be tested: Observable and Measurable Self concepts, traits, & motives Not Directly Measurable must be inferred from actions –Self concept (identifies with the team) –Trait (flexibility) –Motive (drive to produce results) Much more subjectively assessed

Core Competencies Derived from mission statement: values & attitudes JetBlue embraces five values that represent the company and create our unique culture: –Safety Caring Integrity Fun Passion –Exercise: Devise metrics to measure these traits

Competency Effectiveness Organization Strategy –Competencies are probably more likely to fit with the organization’s strategy Work Flow –Competencies are designed to convey values and enhance work flow –Effectiveness likely to depend upon culture Fair to Employees –Empower employees to take charge of own development –Subjective Motivation towards organization’s objectives

Key is the Assessment How do you certify that someone has these competencies & then how to tie to pay Justify in a court of law LevelPhaseTitle 4ExpertVisionary 3AdvancedCoach 2ResourceContributor 1ProficientAssociate

Pay for Knowledge Employee Advantages –Skill Variety –Task Variety –Autonomy –Feedback Employer Advantages –Communicates Culture –Product or Service qualities –Leaner Staffing cross usage –Flexibility

Disadvantage Increases training, hourly labor & overhead costs can rise May not fit with other incentive programs

Summary Pay for Knowledge programs have the potential to help employers compete in global environment Must give employees the opportunity to learn