Welcome

Person Based Structure

Chapter: 6
 Learning Objectives:
• Essential Terms
• Person Based Structures: Skill Plan
• Types of Skill Plans
• Purpose of Skilled Based Structure
• Difference of Skilled Based Pay from Job Based Pay
• Ways to do Skill Analysis
• Advantages of Skill-Based Pay
• Disadvantages of Skill-Based Pay
• Person Based Structures: Competencies
• Understanding the Term: Competency
• Skills and Competencies Summary
• Determining the Internal Competency-Based
Structure
• Terms in Competency Analysis
• Purpose of the Competency-Based Structure
• How To Do Competency Analysis
• Bias in Internal Structures
• Recommendations to Ensure Job
Evaluation Plans are Bias Free
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 Essential Terms

Job-based Compensation Structure
This is a structure of salary payments that is
built on compensable factors determined by
the job. In other words the salary for a job is
determined by its responsibilities, and
sometimes its work conditions. Most
companies' pay structures are job based pay. 
 Essential Terms
Person-based Compensation Structure
 Person-based pay structure is the payment
systems whereby the employee is rewarded
based on the person that he is at work and
not the job that he does. Person-based pay
structures generally aim at ensuring that
payment is done for the skill/competence
that the employee has
 Person-based pay structures are
simply payment systems whereby the
employee is rewarded based on the person
that he is at work and not the job that he
does
Designing Internally Consistent
Compensation Structure

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Person-Based structures: Skill Plan

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 Types of Skill Plans
 Specialist Based: depth
The pay structures of elementary or high
school teachers are likely based on their
knowledge as measured by education level.
A typical teacher’s contract specifies a
series of steps, with each step
corresponding to a level of education. To
advance to a step to higher pay requires
additional education. The presumption is
that teachers with more knowledge are
more effective and flexible.

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168
 Types of Skill Plans
 Generalists/Multi-skill Based—Breadth
Employees in a multi-skill system earn pay
increases by acquiring new knowledge, but the
knowledge is specific to a range of related jobs.
Pay increases come with certification of new
skills, rather than with job assignments.
Employees can then be assigned to any of the
jobs for which they are certified, based on the
flow of work.

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 Types of Skill Plans

Highly expert on one trade Moderately expert on

multiple trade

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Purpose of the Skill-Based Structure
 Supports the Strategy & Objectives
The skills on which to base a structure need
to be directly related to the organization’s
objectives and strategy

 Supports Work Flow

One of the main advantages of a skill based
plan is that it facilitates matching people to a
changing work flow (See the example in
Page No: 171)

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Purpose of the Skill-Based Structure
 Is Fair to Employees
Employees like the potential of higher pay that
comes with learning. By encouraging employees to
take charge of their own development, skill-based
plans may give them more control over their work
lives

 Motivates Behavior Toward Organization

Objectives
Person-based plans have the potential to clarify
new standards and behavioral expectations. It
encourages employees to take more responsibility
for the complete work process and its results with
less direction from supervisors

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Difference of Skilled Based Pay from
Job Based Pay
 Skills
or skill units, rather than jobs are
compensable
 Mastery of skill units is measured and
certified
 Pay changes do not necessarily accompany
job changes
 Little
emphasis placed on seniority in pay
determination

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 Ways to do Skill Analysis
Skill analysis is the systematic process of
identifying and collecting information
about skill required to perform work in an
organization

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 Ways to do Skill Analysis
Determining the Internal skill Based Structure

EXHIBIT 6.3 Determining the Internal skill Based Structure

 Skill based structure begins with an analysis of skills which is

similar to the task statements in a job analysis.
 Related skills can be grouped into skill blocks.
 Skill blocks can be arranged by levels into a skill structure.
 To build structure, a process is needed to describe, certify and
value the skills.
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 Ways to do Skill Analysis
 What information to collect? (Exhibit 6.4: FMC’s
Technician Skill-Based Structure)
 Foundation skills
 Core electives
 Optional electives
 Whom to involve?
 Employees and managers
 Establish certification methods
 Peer review, on-the-job demonstrations, or tests, or formal tests
 Many plans require that employees be recertified, since the skills
may get rusty if they are not used frequently.
 At some company, employees are required to recertify their skills
every 24 months
 Skill based plan become increasingly expensive as the majority of
employees become certified at the highest levels
 Ways to do Skill Analysis
FMC’s Technician Skill-Based Structure

EXHIBIT 6.4 FMC’s Technician Skill-Based Structure 17

174
 Ways to do Skill Analysis
Guidance from the Research on Skill-Based
Plan
 Designof certification process crucial in
perception of fairness
 Alignment with organization’s strategy
 May be best for short-term purposes

175
Advantages of Skill-Based Pay
 It enhances productivity and quality through
better use of human resources
 It facilitates technological change, which may
meet with resistance in a purely job-based system
 Job satisfaction is created through employees
having greater control over the planning and
implementation of their work
 It is an incentive for self-development
 It provides employment security through skills
enhancement
 Since the pay increases on account of skills which
are measurable standard, the criticism of
subjectivity associated with performance
appraisals is avoided
 It enables job rotation, and filling of temporary
vacancies
Disadvantages of Skill-Based Pay
 Average pay of employees likely higher
 System is more complex
 Require a major investment in training
 Employers may be paying for some skills that are
used infrequently
Person-Based structures: Competencies

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176
Understanding the Term: Competency
Competencies are a set of integrated
knowledge, skills, abilities and attributes that
translate into behaviors and help define,
what is needed to successfully perform
the job.

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 Understanding the Term:
Competency
 Skill → The WHAT → A specific ability
that can be applied in a specific setting in
order to accomplish a predefined desired
result.
 Competency → The HOW → The
combination of skills, knowledge and
behavior that is exercised in order to
effectively perform the duties of a job

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Understanding the Term: Competency
 Competencies are the demonstrable and
transportable employee characteristics that are
independent of a specific job or position
 Competency includes knowledge, skills and behaviors
that enable performance
 There is lack of true consensus regarding exactly what
the term Competency means as such there is much
debate as to whether Competencies can be translated
into a measurable factor or in objective basis for
determining pay decisions

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175
Determining the Internal Competency-
Based Structure

Exhibit 6.6 Determining the Internal Competency-Based Structure

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177
Terms in Competency Analysis
CORE COMPETENCY
Taken from mission statement; for example,
“business awareness.”

COMPETENCY SETS
Grouping of factors that translate core
competency into observable behavior; for
example, organizational understanding, cost
management, third party relationships, and ability
to identify business opportunities.

COMPETENCY INDICATORS
Observable behaviors that indicate
the level of competency within a
competency set. For example,
“identifies opportunities for
savings.”
 TRW Human Resource Competency

Change management is the process, tools

and techniques to manage the people side
of change to achieve the required business
outcome

Employees should use this model as

a guide to understand what
capacities organization wants
people to develop

EXHIBIT 6.7 TRW Human Resource Competency

178
Competency: Impact and Influence

5 Levels of Indicators basing on complexity of work

EXHIBIT 6.8 Sample Behavioral Competency Indicators

179
Purpose of the Competency-Based
Structure

 Supports Organization Strategy

 Supports Work Flow

 Is Fair to Employees

 Motivates Behavior Toward Organization

Objectives

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How to Do Competency Analysis
 Objective: Paying for competencies is only
way to get people to pay attention to them
 What information to collect: A number of
schemes for classifying competencies have been
proposed. One of them uses three groups as
follows:
 Personal Characteristics
 Maturity of judgment
 Flexibility
 Analytical ability
 Respect for others
How to Do Competency Analysis
 Visionary: These are highest level competencies
 Global perspective
 Moving the organization in new direction etc
 Organization Specific
 Leadership
 Customer orientation
 Functional expertise
 How To Do Competency Analysis
Leadership Competencies

183

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EXHIBIT 6.10 3M Leadership Competencies

How To Do Competency Analysis

Behavioral Anchors for Global-

Perspective Competency

Exhibit 6.11: Behavioral Anchors for Global-Perspective Competency

184
How To Do Competency Analysis
The Top 20 Competencies

184
Exhibit 6.12: The Top 20
 How To Do Competency Analysis
Product Development Competency for
Marketing Department at a Toy Company

Exhibit 6.13: Product Development Competency for Marketing Department at a

Toy Company 186
How To Do Competency Analysis

Toy Company’s Structure Based on

Competencies

Exhibit 6.14: Toy Company’s Structure Based on Competencies

187
 How To Do Competency Analysis

 Whom to involve?
Like compensable factors, competencies are derived from
executive leadership belief about the organization and its
strategic intent.
 Managers
 Exparts
 Employees in case of 360 degree approach
 How To Do Competency Analysis
 Establish certification methods
 Employees get paid for the relevant skills or
competencies they possess whether or not those
skills are used
 Resulting structure
 Designed with relatively few levels
 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
 Administering the Plan
 A crucial issue is the fairness of the plan’s
administration
 Sufficient information should be available
to apply the plan (i.e., ‘manual’)
 Communication and employee
involvement are crucial for acceptance of
resulting pay structures
 Appeals process must exist
 Evidence on Usefulness of Results
Reliability of job evaluation techniques
 Can be improved by using evaluators familiar with the
work and who are trained in job evaluation
Validity
 Degree to which evaluation achieves desired results
 Acceptability
 Formal appeals process
 Employee attitude surveys
 Bias in Internal Structures
Gender bias
 No evidence that job evaluation is susceptible to
gender bias
 No evidence that job evaluator's gender affects
results
Contrasting Approaches

EXHIBIT 6.17 Contrasting

Approaches 194
 Recommendations to Ensure Job
Evaluation Plans are Bias Free

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
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
 Summary
• Essential Terms
• Person Based Structures: Skill Plan
• Types of Skill Plans
• Purpose of Skilled Based Structure
• Difference of Skilled Based Pay from Job Based Pay
• Ways to do Skill Analysis
• Advantages of Skill-Based Pay
• Disadvantages of Skill-Based Pay
• Person Based Structures: Competencies
• Understanding the Term: Competency
• Skills and Competencies Summary
• Determining the Internal Competency-Based
Structure
• Terms in Competency Analysis
• Purpose of the Competency-Based Structure
• How To Do Competency Analysis
• Bias in Internal Structures
• Recommendations to Ensure Job
Evaluation Plans are Bias Free
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 Next Class
Lecture: 7
Leftover Part of Lecture-6
&
Compensation Strategy: External
Competitiveness

Book Chapter: Part of:6 &7

Reference :
Book: Compensation
Author: George T Milkovich, Jerry M Newman & CS Venkata Ratnam
& Other sources
Thank You

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