6-1

Chapter

6
PersonPerson-Based Structures

McGraw-Hill/Irwin

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

6-2

Learning Objectives
After studying Chapter 6, students should be able to:

Discuss the differences and similarities between jobjob-based plans, skill-based plans, and skillcompetencycompetency-based plans. 2. Discuss the advantages and disadvantages of employee involvement in the evaluation of work. 3. Explain the procedures necessary in order to administer a job-based or skill/competency-based jobskill/competencyplan. 4. Discuss the criteria used to evaluate the usefulness of the job-based or skill/competency ± based plan. job1.
McGraw-Hill/Irwin
© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

All rights reserved. Inc. . summarize work information Determine what to value Job analysis (Chapter 4) Job descriptions Job evaluation: (Chapter 5) classes or compensable factors Factor degrees and weighting (Chapter 5) Job-based structure (Chapter 5) Skill (Chapter 6) Competencies (Chapter 6) Skill analysis Core competencies Competency sets Skill blocks Assess value Certification process PersonPerson-based structure Behavioral descriptors PersonPerson-based structure Translate into structure McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.6-3 Many Ways to Create Internal Structure Business and Work-Related WorkInternal Structure Person-based Job-based PURPOSE Collect.

McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. and knowledge a person acquires that is relevant to the work.6-4 SkillSkill-based structures link pay to the depth or breadth of the skills. . Inc. abilities. a job-based plan pays employees for the job to jobwhich they are assigned. In contrast. pay individuals for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of those particular skills. All rights reserved. Structures based on skill. regardless of the skills they possess.

All rights reserved. . Inc.6-5 Types of Skill Plans  Specialist: In  Generalist / Depth Multiskill-Based: Multiskill- Breadth McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.

Inc.6-6 Purpose of the Skill-Based Structure Skill Support Work Flow  Fair to Employees  Directs Behavior Toward Organization Objectives McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. . All rights reserved.

6-7 Determining the Internal SkillSkill-Based Structure Internal alignment Skill analysis Skill blocks Skill certification Skill-based structure Work relationships within the organization Basic Decisions ‡ What is the objective of the plan? ‡ What information should be collected? ‡ What methods should be used to determine and certify skills? ‡ Who should be involved? ‡ How useful are the results for pay purposes? McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. . Inc.

rather than jobs are compensable.6-8 How is SBP Different From a JobJob-Based Pay System?  Skill or skill units. . McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. Inc. All rights reserved.  There is little emphasis on seniority in pay determination.  Pay changes do not necessarily accompany job changes.  Mastery of skill units is measured and certified.

if productivity increases don¶t offset additional costs systems more complex systems require a major investment in training  SBP  SBP McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. Inc. .6-9 Disadvantages of Skill-Based Pay Skill Average pay of employees likely higher  Excessive labor costs.

10 Determining the Internal CompetencyCompetency-Based Structure Internal alignment Core competencies Competency sets Behavioral descriptors Competency ± based structure Work relationships within the organization Basic Decisions ‡ What is the objective of the plan? ‡ What information should be collected? ‡ What methods should be used to determine and certify competencies? ‡ Who should be involved? ‡ How useful are the results for pay purposes? McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. Inc.6 . .

Inc.6 . All rights reserved.11 Purpose of the CompetencyCompetency-Based Structure  Support Work Flow  Fair to Employees  Directs Behavior Toward Organization Objectives McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. .

What¶s a Competency?  Demonstrable characteristics of the person. are independent of a job or  Competencies position. .  An employee can transport them from one job to another.6 . All rights reserved. and behaviors. McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. that enable performance. Inc.12 So. including knowledge. skills.

³business awareness. for example. .´ COMPETENCY SETS Grouping of factors that translate core competency into observable behavior.6 . ³identifies opportunities for savings. for example. COMPETENCY INDICATORS Observable behaviors that indicate the level of competency within a competency set. cost management.13 CORE COMPETENCY Taken from mission statement. Inc. For example.´ McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. business understanding.

14 Iceberg Model 1.6 . 2. Acquired through training and development 1. Inferred only for developmental purposes 11. 12. Inc. 11. Skills Knowledge SelfSelf-concepts Traits Motives McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. . 13.

6 . Inc.15 Example of competencies  Personal characteristics  Organization specific . All rights reserved. .what¶s needed in the organization?  Visionary McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.

Inc.16 Levels of competency  Basic or fundamental  Proficient  <asteru McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. . All rights reserved.6 .

All rights reserved. .6 . Inc.17 How well do they achieve their objectives Criteria for Evaluating the Usefulness of Pay Structures Reliability of Job Evaluation Techniques Acceptability Validity / Usefulness McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.

2. Define the compensable factors and scales to include the content of jobs held predominantly by women. 3.6 . All rights reserved. Ensure that factor weights are not consistently biased against jobs held predominantly by women. Ensure that the job descriptions are bias free. and train diverse evaluators. McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. Inc. exclude incumbent names from the job evaluation process. . Are factors usually associated with these jobs always given less weight? Apply the plan in as bias free a manner as feasible.18 Recommendations to Ensure that Job Evaluation Plans are Bias Free 1.

19 Contrasting Approaches (1 of 2) JobJob-Based What is valued Quantify the value Mechanisms to translate into pay Pay structure Pay increases Managers¶ focus Compensable factors Factor degree weights Assign points that reflect criterion pay structure Based on job performed/market Promotion Link employees to work Promotion and placement Cost control via pay for job and budget increase SkillSkill-Based Skill blocks Skill levels Certification and price skills in external market Based on skills certified/ market Skill acquisition Utilize skills efficiently Provide training Control costs via training. . certification. and work assignments Competency-Based CompetencyCompetencies Competency levels Certification and price competencies in external market Based on competency developed / market Competency development Be sure competencies add value Provide competency ± developing opportunities Control costs via certification. All rights reserved. and work assignments McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.6 . Inc.

All rights reserved. Inc. .6 .20 Contrasting Approaches (2 of 2) JobJob-Based Employee focus Procedures Seek promotions to earn more pay Job analysis Job evaluation Clear expectations Sense of progress Pay based on value of work performed Potential bureaucracy Potential inflexibility SkillSkill-Based Seek skills Skill analysis Skill certification Continuous learning Flexibility Reduced work force Potential bureaucracy Requires cost controls Competency-Based CompetencySeek competencies Competency analysis Competency certification Continuous learning Flexibility Lateral movement Potential bureaucracy Requires cost controls Advantages Limitations McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.

 The premise underlying internal alignment is that internal pay structures need to be aligned with the organization¶s business strategy and values. and a concern for the treatment of employees.  McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. Inc. . All rights reserved.21 Summary The importance placed on internal alignment in the pay structures is a basic strategic issue. the willingness to seek and accept promotions to more responsible jobs. Structures that are acceptable to the stakeholders affect satisfaction with pay.6 . and the effort to keep learning and undertake additional training. the design of the work flow.  The work relationships within a single organization are an important part of internal alignment.

. All rights reserved.  McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies.  Without them.22 Summary (continued) The techniques for establishing internally aligned structures include job analysis. job evaluation. Inc. skill/competency These techniques can aid in achieving the objectives of the pay system when they are properly designed and managed. and person-based personapproaches for skill/competency-based plans. the pay objectives of improving competitiveness and fairness are more difficult to achieve.6 .

2. how would you recommend that your company evaluate the usefulness of its job-based or person-based plans? jobpersonMcGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. All rights reserved. 3. If you were managing employee compensation. .23 Review Questions 1. Inc.6 . What are the pros and cons of having employees involved in compensation decisions? What forms can employee involvement take? Why does the process used in the design of the internal pay structure matter? Distinguish between the process used to design and administer the structure and the techniques or mechanics used.

6 . 5. . Based on the research on job evaluation. All rights reserved.24 Review Questions (continued) 4. what are the sources of possible gender bias in skill/competencyskill/competencybased plans? How can a manager ensure that job-based or jobskill/competency-based plans support a customerskill/competencycustomercentered strategy? How would you decide to use job-based or personjobpersonbased structures? McGraw-Hill/Irwin © 2002 by The McGraw-Hill Companies. 6. Inc.

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