Person Centered Pay

Nancy Brown Johnson © 2005

Person Centered Pay

• Pay-for-Knowledge

– Competency Based Pay

– Skill Based Pay

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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)

– 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 + 1.00/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

Level Phase Title

4 Expert Visionary

3 Advanced Coach

2 Resource Contributor

1 Proficient Associate

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