Person - Focused Plans

Rewards employees for acquiring job - related

– Competencies– Knowledge – Skills

2 main types– Pay - for - knowledge – Skill - based pay

Pay - For - Knowledge Plans

Reasons for adoption– Removes entitlement label

– Connects pay to job-related abilities

– Increases employee autonomy

– Technological innovations

– Increased global competition

Pay-for-KnowledgeModels

Stair - step

Skill - block

Job - point accrual

Cross - departmental

Person - Focused Pay

Compensates employees for flexibility

Compensated for potential contributions

– Based on skills & knowledge

Job - Based Pay

Compensates employees for current jobs

Pay limits set for each job

Evaluations based on job descriptions & objectives

2 main types– Merit pay– Incentive pay

Job Characteristics Theory

Employees more motivated to perform jobs that contain

Skill variety

Task identity

Autonomy

Feedback

Employee Advantages – Pay for Knowledge

Can provide job enrichment

Can provide job security

Can make jobs more intrinsically

motivating

Can make jobs more interesting

Increases employees’ flexibility

Advantages To Employers

Leads to enhanced job performance

Leads to reduced staffing

Leads to greater flexibility

Improves quality Increases productivity levels

Disadvantges

Can increase hourly labor costs

Can increase training costs

Can increase overhead costs

May not mesh well with existing incentive pay systems

Lowest - Cost Competitive Strategy

Lowers output costs per employee Training should improve productivity Improves product & service quality Long - term gains should outweigh short - term costs

Differentiation Competitive Strategy

Requires employees who are– Creative– Open - minded– Risk - takers

Requires long - term focus

Pay - for - knowledge effective with work teams