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)
– 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