1. Managing Employee Performance and Reward
Concepts, Practices, Strategies
2nd edition

2. Person-based base pay Skill-based base pay: Job family structures
Skill sets and skill-based pay progression
Competency-based base pay:
Broad-banded structures
Competency-based/related pay progression
Strategic alignment with base pay options

3. Options for base pay Competency zones/levels Competency assessment
Broad bands
Competency-based/related pay
Seniority and/or ‘merit’ based increments and promotion
Market surveys and/or
job evaluation
Job-based/position-based pay
Modes of pay progression
Evaluation techniques
Structures
Options
Position-based systems:
Person-based systems:
Skill sets
Skill assessment
Broad grades/job families
Skill-based pay
1. Pay spines/ladders
2. Narrow grades

4. Skill-based pay: from narrow grades to broad grades

5. Skills analysis: skill dimensions for an administrative support role
Breadth skills:
Client reception
File management
Inquiry processing
Word-processing
Memos, letters and forms
Invoicing
Minute-taking
Equipment purchase
Depth skills:
Office finance and accounting
Electronic records management
Spreadsheet software
Vertical skills:
Office management
Task scheduling
Team leadership

6. Skill-based pay progression in a broad graded structure
1. ‘Stair-step’ model: sequential skill sets for an administrative support role
Broad grade entry point
Training entry point
Word-processing
Producing memos, letters and
forms
$35,000
Minute-taking
Office accounting
Set 1
(breadth skills)
Computer records management
$41,000
Invoicing and purchasing
Work scheduling
Set 2
(breadth/depth skills)
Team leadership
$48,000
Office management
Administrative support broad grade
Set 3
(vertical skills)
$30,000

7. Skill-based pay progression in a broad graded structure
2. Non-sequential (breadth) skill sets for an administrative support role
Broad grade entry point/minimum = $30,000
Minute-taking
Petty cash
Word-processing
Client reception
File management
Equipment purchase
Memos and letters
External inquiries
Staff attendance and leave
and/ or
Invoicing
Forms
Staff inquiries
Record-keeping
Office finance
Document production
Office communication
+$2,500
+ $2,500

8. Skill-based pay Advantages:
Allows organisations to ensure employees have the appropriate type and level of skills before they are assigned to a position
Facilitates functional flexibility through multiskilling and teamworking
Facilitates systematic organisational learning and continuous improvement
Encourages strategically aligned skill development
Multiskilling allows rapid response to technological and product market change
Encourages a participative work culture by allowing for the devolution of decision-making tasks to line employees
Supports skill-based career paths for blue- and pink-collar workers

9. Skill-based pay Disadvantages:
Rewards skill accumulation rather than skill application
Training bottlenecks
Increased training costs
‘Topping out’
Skill obsolescence

10. Fully broad-banded pay structure: example

11. Modified broad-banding – with market-based zones or ranges
Broad-banding with pay zones
Broad-banding/broad-grades with internal pay ranges

12. Developing a competency-based pay system (within a broad-banded structure)
Main steps:
1. Competency analysis (as for competency-based performance management)
Determine the organisation’s ‘core competencies’
Determine which roles will be covered by the system
Identify a sample of superior performers in each of these roles
Collect data on what characteristics distinguish superior performers from average performers in each role (i.e. ‘differentiating competencies’)
Develop behavioural descriptors and the overall competency model
Test the model to ensure the chosen competencies do predict superior performance

13. Developing a competency-based pay system (within a broad-banded structure)
2. Configuring competency levels
Life-cycle model: ‘learning’, ‘applying’, ‘guiding’, ‘shaping’ (typically three or four levels)
3. Pricing bands and zones
The major challenge!
Benchmark jobs and ‘high/low’ market pricing
4. Assessing and rewarding individuals for competencies
Behavioural observation and assessment
Assessment centres

14. Example of competency-based progression in a broad band
Combination of core and role competency assessment determines each individual’s pay level in the broad band
Multi-source competency assessment (e.g. supervisor, two peers, two subordinates)
Decline in competency profile may result in reduction in base salary (or freeze)

15. Example of competency-based progression in a broad band

16. Pay for competencies plus results (= competency-related or ‘contribution-based’ pay) in a modified broad-banded structure

17. Competency-based/related pay (with broad-banding)
Advantages:
Encourages career development within role
Seeks to establish a guaranteed link between base pay and high-performance capability
Has universal application since ‘core competencies’ are applicable to every job and every employee in the organisation
Unlike skill-based pay, not just applicable to routine (manual, technical and administrative) work
Allows scope to reward knowledge workers without the need for promotion to management level

18. Competency-based/related pay (with broad-banding)
Disadvantages:
Absence of conceptual clarity. What are ‘competencies’?
Distinction between ‘core’ and ‘role’ competencies unclear
Emphasis on ‘soft’ competencies as opposed to ‘hard’ technical skills may result in invalid assessment
Are high-performance competencies appropriate for routine non-managerial and manual work?
Competencies do not equal results; may be little more than a circuitous way of paying for individual performance
Excessive emphasis on individual (cf. group) contribution
Can degenerate into a system for assessing personality and rewarding personality traits
Problem of pricing competencies – no agreed or reliable way to price them
Must be developed in conjunction with a broad-banded structure and consequently involves radical organisational change

19. ‘Strategic alignment’ base pay options
Service work; knowledge work; managerial roles
Roles:
High involvement; non-unionised
Culture:
Organic
Structure:
Prospector
Strategy:
Broad bands and competency-based (or -related) progression
Process; technical; maintenance; administrative
Semi-high involvement; some unionisation
Semi-organic
Quality defender; analyser
Broad grades and skill-based progression
Line- and middle-level positions
Traditional; unionised
Mechanistic
Cost defender
Pay scales and narrow grades