Pay structure: job-, skill-, or competency-based?

Part one CH.1 The Pay Model

Compensation 定義：

financial returns ＆ tangible services ＆ benefits

employees receive as parts of an employment relationship

Forms of pay:
Total compensation (cash + benefit)
Relational returns (intangible)
Total compensation + relational returns = total return

Pay can influence employee motivation and behavior in two ways:

1. The incentive effect is the degree to which pay influences work motivation
2. The sorting effect（篩選作用） is the effect that pay can have on the

composition of the workforce.

 點樣比錢同比幾多錢會吸引到特定種類既員工留低（retained specific types of
employees）

Herzberg's motivation-hygiene theory (or two- factor theory) have on the composition of the
workforce.
Motivation factors: 可以 motivate 員工做得更好
Hygiene factors: the factors that cause dissatisfaction
** Compensation and benefit 算係 Hygiene factors

A Pay Model:
1. The compensation objectives (Efficiency /Fairness / Ethics/ Compliance)
2. The policies that form the compensation strategies

Internal alignment:
 comparisons among jobs or skill levels inside a single

organization
External competitiveness: pay comparisons with competitors
Employee contributions
Management: Right people get the right pay for achieving the right objectives in the
right way.
3. The techniques that make up the compensation system.

Part one CH.2 Strategy: The Totality of Decisions

The Alignment of Business Strategies and Compensation Strategies
 Cost cutter
• Tight control of labor cost
• Low compensation strategy

 Innovator
• High-powered incentives
• Pay for performance

The Pay Model Guides Strategic Pay Decisions

five strategic compensation strategies
1. Objectives

2. Internal alignment（聯合）

3. External competitiveness
4. Employee contributions
5. Management

These decisions, taken together, becomes the compensation strategy. Stated strategies
are written compensation strategies. Unstated strategies are inferred from the pay
decisions.
Pay structure：

1.traditional，呢種就係有好多個 job levels。Pay levels strictly based on job

levels。Little pay overlap among grades.

2.borad。呢種只有 2－3 個 job levels。Provide flexibility to define job

responsibilities more broadly。明顯 overlap among bands

Part two CH.7 Strategy: Defining competitiveness

External Competitiveness
External competitiveness (The pay relationships among organizations – the organization’s pay
relative to its competitors.)
Pay level (The average pay rates 可以係以下 pay forms：base + bonuses + benefits + value of
stock holdings)
Pay mix (The various types of payments/pay forms)

A single company may differ pay levels for different job families.

**What shapes external competitiveness?

1.Labor market factors (姐係 supply 同 demand)

From the supply side: If a job has negative characteristics, then employers must
offer higher wages.

negative characteristics include：

 training 貴（medical school）

  工作環境唔好

 dirty work
Additional factors affecting labor supply

 地域限制


 union requirements (e.g., minimum wage)

 少工作資訊

 有風險工作


 the degree of unemployment （外部經濟環境影響）

2.product market factors

 Product demand – reach maximum pay level？

 Degree of competition – 競爭大就難加價

3.organization factors

 睇行業前景及科技發展

• Labor intense industries pay lower than technology intense industries.

• New technology influences pay level（掌握高科技的人才有高人工）

 org. size


 • Large firms pay more than small firms in

 人們偏好
 • Difficult to measure

Competitive Pay Policy Alternatives

點解採用 match: 吸引同競爭對手相同既員工

點解採用 lead: reduce turn over。負面：員工可能會大 workload/ 依家既員工要

求加人工
點解採用 lag: 唔會吸引員工，除非有其他野（生活工作平衡/Desirable

location）

Pay-mix strategies:

1.performance driven


2.market match


3.work/life balance
4.security

Consequences of Pay-Level and Pay-Mix Decisions:

Guidance from the Research
Efficiency: 冇一種 pay-mix 策略 fit 所有情況，經理自己揀

Fairness：公平性係要比較其他人有幾多人工。滿意程度同 pay level 有直接連繫

Compliance(服從): 僱主一定要比最低工資。Prevailing wage laws and equal

rights legislation must be met. Pay forms are regulated

Part two CH.8 Strategy: Designing Pay Levels, Mix,

and Pay Structures

Three competitive pay policy alternatives:
1.lead
2.lag
3.match (pay with competition)

你如果想知公司用咩 pay policy，你需要用到 survey 黎收集數據。Survey 可

以 provide data into pay levels, pay mix and structures

Survey 有五個目的：

1. adjust pay level (How much to pay)

2. adjust pay mix (what forms)
3. adjust pay structure (Validate job evaluation results/ Establish internal structures)

4. Study special situations (E.g. Unusual increases in turnover in specific jobs)


5. Estimate the labor costs of competitors (same occupations, skills, geographic area,
products or services)

點樣設計 survey？（六何法）

Who should be involved?
 （compensation manager，employees）

How many employers?

Which kinds jobs to include?


 Benchmark-Job Approach（有 stable job content／大量員工）

  Low-high approach（最高同最低人工既 benchmark jobs 用作 anchors）

 Benchmark conversion/survey leveling（不同的地方會量化 when job

content does not sufficiently match survey jobs）

What information to collect?

 Organization data (financial data, turnover rate, revenues)
 Total compensation data (base pay, total cash, total compensation)

A pay range:


當一份工作有兩個或以上的 paid salary rates

容許經理根據員工個人表現黎決定佢地人工係幾多
Group jobs into grades


 requires an understanding of career paths and work flow in the organization

有機構用 market pricing which emphasize external competitiveness and deemphasize

internal alignment. 目的係為左 internal pay structure 可以最大化咁根據 external

rate. 同埋令到 pay structure 與競爭者睇齊。

Part three CH.3 Defining Internal Alignment

Internal Alignment(多數叫 Internal equity ) 代表在同一間機構內不同工種的 pay

structure

Internal pay structure 由三樣野決定：

1.no. of job levels

2.differentials in pay between job levels(人工差異)

3.the criteria used to determine those differences (job-based 定係 person-based)

Higher pay 既原因：

1.require more skill/knowledge (internally)

2.add more values to company (internally)
3.performed in unpleasant work conditions (externally)
Content vs Value:
Content work performed in a job and how it gets done
Value The worth of the work

Job-based structure = based on content of the work, expected outcome

Person-based structure = based on value focuses on the relative contribution of
employees.

Strategic choices in designing internal pay structures

首先，tailored or loosely coupled?

Tailored: very small differentials among jobs

Loosely coupled: Pay structures are more loosely linked to the organization to
provide flexibility.

其次，Egalitarian or Hierarchical ?

Egalitarian(平等主義的)：All employees are valued equally

Hierarchical：評價員工從 work content, skills and contribution 等方面的不同

Importance of internal alignment:

1. Efficiency
 (imply future returns/ lead to better performance)

2. Fairness (fair differentials motivate)

3. Compliance (Comply with regulations of the country)

Determining the Internal Job Structure

reasons of job analysis:

 研究 work contents 既相同與不同

 之後先可以建立一個 internally fair 既 job structure（job-based structure/

Skill- and competency-based structures）

how to conduct job analysis:

 收集 specific tasks or behaviors 既資訊

 相同的 positions  make a job

大量相似的 jobs 組合成 a job family.

Part three CH.5 Job-based structures and Job

Evaluation

Job evaluation:

系統化地決定一份工作的 relative value ，然後幫助 org 決定 job structure（最

終目標）
方法係根據 job content，所需的技能，對 org 的價值，org 文化以及 external

market

 決定 relative value 的過程

Defining Job Evaluation: Content and Value

Content refers to what work is performed and how it gets done（expected outcome/

standards）

Structure based on job content orders jobs by: skills, duties, responsibilities
Structure based on job value orders jobs: on the basis of the relative contribution of
the skills, duties, and responsibilities.

Job content 工種的價值是根據呢份工作係 external environment 有幾大需求

Major decisions in job evaluation:

1. Establish the Purpose
2. Single vs Multiple Plans
3. choose evaluation method
 Ranking
 Classification
 Point Method

Establish the Purpose:

幫助確認該 evaluation 係有效的

A structure is aligned(校準的)，如果果個 structure 有以下條件：

1.support organization strategy

 2.supports work flow
3.fair to employees, and
4.motivate behavior toward organization objectives

Single vs Multiple Plans:

好多僱主設計唔同既 evaluation plans for 唔同工種，但其實可以 start with

sample of benchmark jobs.

好既 benchmark jobs 有以下 features：

 contents are well-known and relatively stable

 job is common across employers, not unique to only 1 employer

 sufficient proportion of the work force is employed in this job（有足夠多

既 sample）

Ranking:
Orders job descriptions from highest to lowest based on relative value.
好壞處上面睇

Classification:

A series of classes covers the range of jobs 


Job description 會同 class description 比較跟住決定 class level


每個 class 入面既 jobs 會被視作相等以及 有同等薪酬

Point Method:

 Compensable factors based on 該工作如何對公司 objectives 有貢獻

Compensable factors are those characteristics in the work that the organization values, that
help it pursue its strategy and achieve its objectives.
 Factor degrees numerically scaled
 Weights reflect the relative importance of each factor

 經過 job analysis  job description  job evaluation 呢幾個過程，最終產出

 既就會係一個 structure（a hierarchy of work）

 公司通常會有幾個 structures，因為由幾個唔同既方法 gen 出黎，又或者係

應用於唔同既 functional groups

Part three CH.6 Person-based structure

Job redesign 令到 workflow 重新編排，結果導致工作複雜化。所以我地需要有

一個新既 pay structure（person-based structure）可以有更大的 flexibility。

Person-Based Structures: Skill-based pay，當有以下呢幾種情況就會使用 skill-

based pay
 teams
 multi-skills
 flexibility

你有幾多錢人工同你 skills 既 depth or breadth 有關

types of skill plans:

· specialist（pay is based on knowledge of the person doing the job, rather than on job

content or output）

· generalist（salary increases by acquiring new knowledge，responsibilities 改變好快，

今日去 a 部門，下個月 b 部門）

鼓勵員工學習新技能，之後賺得多，有 motivation（learn more ,earn more）

Purpose of the Skill-Based Structure：

1. Supports the org strategy and objectives

2. Supports work flow—a main advantage 


3. fair to employees 

Procedures of determining the internal skill-based structure:
點樣做 skills analysis？

 收集 every aspect of the production process

 問 employees＆managers

 建立 certification methods（peer review/on-the-job demonstrations/tests）

outcomes of skill-based pay plans:

 well accepted by employees

Part four: Reward Systems and Legal Issues

External competitiveness and internal alignment 解決左 compensation rate 同建

立 structures 既問題，例如：

• Compensation rates: lead, match, lag, or hybrid?

• Pay structure: job-, skill-, or competency-based?
• What are the strategic choices of pay structure?

 Tailored vs. loosely coupled

 Layered vs. delayered
 Hierarchical vs egalitarian

解決上述問題之後就要解決「比幾多錢員工」同埋「應該用咩方法比錢員

工」既問題
呢個問題係 related to pay for performance , performance appraisal and

performance management 既問題

Reward systems:
1. contingent pay(CP) plans, （又叫做 pay for performance ）/ 2. putting pay in context

CP

 based on job performance 加人工

 可以 incentive effect 同埋有 sorting effect（top performers 會有最高收入，

呢個制度可以令佢地留低）

 有一個好既 corporate image（fair compensation）

 Type of CP Plans: individual（記三個，piece rate, commissions, skill-based

pay） / team（記兩個）
Team/Unit/Organization-Level CP Plans：

好處：團隊合作

壞處：個人責任減少／increase turnover among top performers

Selecting a CP (contingent pay) Plan: Issues to Consider

 Culture of organization


 Strategic direction of organization

睇下間公司係偏向 productivity/ customer service/ teamwork/ employee

development

Characteristics of Legal CP and Pay management (PM) Systems:

1.有以下兩種情況先係 legal：

 Procedures are standardized

 相同 procedures are used with all employees

 for org:
 已經完整地向員工解釋系統

procedures 已經標準化 同埋 基於在相同 job group 內已經統一

 for management:

supervisor 有受過訓練

多方面收集 performance 既資訊

 for employees:
 Within the control of the employee.
 Employees are given a voice in the review process

以下呢個重要：
CP and PM systems（reward systems） have unintentional impact on a protected

class (for example, women).女性的表現評分通常低於男性。舉例：physical

strength for firefighters

Part four: Measuring Results & Behaviors

大概呢課既架構：

Approaches to Measure Performance:

 Results Approach(睇員工 produce 左咩出黎？／expected outcome)

好處：straight-forward

適用於：1. Workers are skilled in necessary behaviors

2. work behaviors or processes are not important

Risk: 1.員工會揀 easy targets ／避免接受挑戰

 Behavior Approach（睇員工 produce 的過程）

適用於：1. Behavior 同 result 中間既連結唔明顯

2. 成績差由於員工不可控的因素（beyond employee’s control）

Measuring Results:
1. Accountabilities


收集關於工作的資訊(job description)

 決定 task 的重要性

level of accountabilities(自己/team/the department/whole organization)，咩

人負責咩野？

Measurement of results must match the level of accountabilities

2. Objectives

 identify key outcomes(特定數量且重要的 key outcomes)

Set S.M.A.R.T. Goals/Objectives

記得呢 3 款 objectives（MBO/KPI/OKR）

**OKR 係 Objectives and Key Results

MBO (Management by Objectives) and KPI (Key Performance Index)

freq. of review: annual
purpose: determining compensation
definition of success: 100% completion

壞處：員工會揀易 d 既目標，咁就可以拎 100％ completion

Objectives and Key Results 係 OKR 全寫

3. Performance Standards


好既 Performance Standards 有六個特質：

1. Related to the Position

2. Concrete, Specific, and Measurable
3. Practical to Measure

4. Meaningful

5. Realistic and Achievable


6. Reviewed Regularly

S=Specific、M=Measurable、A=Attainable、R=Relevant、T=Time-based （smart

standard）

Measuring Behaviors
1.Identify competencies


Measurable clusters of Knowledge, Skills, Abilities (KSAs)

2.Identify indicators (behaviors)


 Observable behaviors

 Used to measure the extent to which competencies(本領) are present or not

 Describe competencies 必要的 elements：

 Definition

 Description of specific behaviors (Competency 幾時會展現／不展現)

 發展該項 competency 的建議

3.Choose a measurement system

 Comparative system （拉 curve）

1. Simple rank order（簡單地將僱員由最好至最差排）

2. Alternation Rank Order （list all employees, 第一步揀最好同最差，第二步揀

第二好同第二差，直至揀完）

3. Paired Comparisons （將僱員兩個一組，揀出好 d 果個，評分的標準就係睇

下員工有幾多次「好 d」既次數。）

4. Relative Percentile

5. Forced Distribution （姐係正態分佈）

好處：easy to explain／straightforward 壞處：Evaluative, rather than developmental

特別係針對 forced distribution 既壞處：

1.正態分佈 always true？

2. 不能評估 teamwork
3. 有“Labeling effect” and 減低員工動力（demotivating）

 Absolute system（水平參照）pre-specified performance standards

1.Essays
 (由 supervisor 寫篇文講述員工優缺點 and make suggestions 等佢地

進步)

2.Behavior checklists（根據制定的行為評分，very good/satisfactory…）

3.Critical incidents
4.Graphic rating scales

Absolute system 好壞處：

好處：大小公司都可以用／Evaluations more widely accepted by employees

壞處：評分時間用得多過 comparative system.

Measuring Performance
Here is a Case Study: Norm-Based VS Criterion-Based Assessment

Norm-based assessment（係 Comparative system ）

Similar to forced distribution

假設學生表現係根據正態分佈

Forced distribution of grades

Criterion-based assessment （係 absolute system ）

 Using “rubrics,” similar to BARS

反映學生的真正表現，並非相對 competency and performance

 In extreme cases, the whole class can get

 A (leniency)
 D, or even F (severity)
 B (central tendency)

Part four: Gathering Performance Information

 Appraisal Forms（評估表格）:

1.Basic Employee Information （name／employee no.／dept.）

2.Signatures

3.Accountabilities, Objectives, and Standards (The results approach)

4.Competencies and Indicators (The behavioral approach)
5.Major Achievements and Contributions

6.Stakeholder Input


7.Employee Comments

8.Developmental Achievements

9.Developmental （needs/plans/goals）

第兩 parts 係「basics」，第三至七 parts 係「review」，第八至九 parts 係

「preview」

Appraisal Forms（八個特質）：

Simplicity VS. Comprehensiveness

 concise：easy and quick to complete

 包括所有主要項目的表現

Relevancy VS. Adaptability


 相關的表現資訊直接連繫到工作需要完成的 tasks

 呢個方法可以用於不同部門（只要佢地制定自己既 appraisal forms）

Descriptiveness, clarity, Communication

Time orientation（past & future）

Determining Overall Rating

Judgmental strategy


 考慮每方面的表現

 有 defensible（合乎情理的）的 summary

Mechanical strategy


 Consider scores assigned to each section，之後可以加 weighing，obtain final

score。

Appraisal Period

No. of meetings: 最好係 quarterly，因為咁樣係「frequent check-in」

Who Should Provide Performance Information?

1. self

好：good position to track activities during review period

壞：more lenient and biased

點樣 improve self-appraisals 質素：允許員工練習 self-appraisals

focus 未來（developmental needs）

2.supervisors

好：best position to evaluate performance in relation to org. strategic goals

壞：未必可以觀察到員工的全部行為

3.peers

好：評價 teamwork／identify poor team players

壞：有 friendship bias／ less discriminating（大家都比大家最高分，分唔到高下）

4.subordinates

好：準繩度高如果目的係 developmental purpose／可以檢測到邊個最有領導力

壞：準繩度低如果目的係 administrative purposes ／ 如果唔係 confidential 員工

唔夠膽講

5. Customers (External and Internal)

好：鼓勵員工達到顧客期望

壞：time＆money
Types of Rating Errors
Intentional errors
 Rating inflation
 Rating deflation

Unintentional errors
 Complexity of task

Motivations for Rating Inflation（比高 d 分既原因）

1. Maximize merit raise/rewards
2. Encourage employees
3. Avoid creating written record

4. Avoid confrontation（對抗／爭論） with employees

5. Promote undesired employees out of unit

6. Make manager look good to his/her supervisor

Motivations for Rating Deflation

1. Shock employees
2. teach a lesson
3. send a message to employee