Under supervision of: DR.

Mahmoud El-Khateeb

Competency Based
Compensation

Prepared by:
1-Nourhan Ashraf Hamdy
2- Sara Adel AbdelAziz
3- Merna Hossam Radwan
4- Radwa Hesham Mohamed
5- Ahmed Mohamed Farghaly
Competency Based Compensation
Competency Based
Compensation
• What are Competencies?
• What is a Competency Model?
• How are Competency Models used?
• Competency Based Compensation objectives
• How are Competency based compensation Models linked to performance planning
and evaluation?
• How is Competency-based Compensation model evaluated?
• Case study
 Competency Based Compensation

• In the 1990s, a new idea gained acceptance in a number of organizations that more closely aligned human resource
practices with organizational strategies, missions and cultures. A number of organizations switched from a
traditional job-based structure to a competency-based structure .
• The focus of competencies is centered on characteristics of the employee.
• Competencies emphasize the attributes and activities that are required for an organization to be successful.
• Competency Models when implemented in totality can impact all of the agency’s human resource practices
• Competency-based System is fairly labor intensive and requires the agency’s commitment to designate the
necessary staff resources during the development stages.
What are Competencies?
What are Competencies?

• Competencies are identified behaviors, knowledge, and skills that directly and positively impact

the success of employees and the organization. Competencies can be objectively measured,

enhanced and improved through coaching and learning opportunities. There are two types of

competencies, Behavioral and Technical. Depending on the purpose of the Competency Model, one

or a combination of these competency types may be used.

 What are Competencies?

• A - Behavioral Competencies

Are a set of behaviors, described in observable and measurable terms that make employees particularly effective
in their work when applied in appropriate situations. Behavioral Competency Models may be designed to
describe common or “core” behaviors that are applicable to employees throughout an agency, or may be more
narrowly defined to reflect behaviors unique to an Occupational Family or Career Group.

• B - Technical- (Functional) Competencies

Are underlying knowledge and skills, described in observable and measurable terms that are necessary in order
for employees to perform a particular type or level of work activity. Technical Competencies typically reflect a
career-long experience in an agency.
7
What is a Competency Model?
A competency model is a collection of competencies that together define

successful performance in a particular work setting. Competency models

are the foundation for important human resource functions such as

recruitment and hiring, training and development, and performance

management.
What is a Competency Model?

Behavioral Competencies
• Agency (implies company) Mission Focus
• Customer Focus
• Teamwork
• Consultation
• Achievement Orientation
Technical (Functional) Competencies
•   Compensation Expertise
•   Recruitment/Selection Expertise
•   Employee Relations Expertise
•   Employee Benefits Expertise
•   Training and Development Expertise
How are Competency Models used?
How are Competency Models used?

• Training and Development – connection to agency business need is a major focus of Competency
Models. These models can serve as a tool to assess employees’ current behaviors, knowledge and skills;
identify learning areas for development and improvement and be used for career planning purposes.

• Recruitment and Selection – models can be developed to identify criteria for recruiting and assessing
applicants for agency positions.

• Performance Management – models can be used to support the assessment of employee performance.

• Compensation Decisions – models can be developed to determine internal alignment and how
compensation will be administered based on defined competencies (e.g. starting compensation,
promotions, in-band adjustments, etc.).
Competency Based Compensation

Defined as paying for the development and

application of essential skills, behaviors and
actions which support high levels of individual,
team and organizational performance.
Competency Based Compensation

Traditional system ignores value added by people and it fails to develop the right skills and knowledge. Now organizations need to

design compensation plans that not only reward performance, but also to improve it. Compensation has become a strategic issue, and

strategic compensation helps the organizations focusing on making them more competitive through improved future performance.

Effective compensation for performance requires two processes, compensation management, and Performance management. But the

real challenge is how to integrate these two processes. Compensation management cannot fully realize its potential without accurate

assessment of employee which comes from a good performance management system. Similarly, performance management cannot fully

realize its potential without a well administered compensation system. Traditional compensation systems cannot bring in this

integration and hence there is a need for designing a better system to meet this challenge.
Competency Based Compensation

This can help organizations in accomplishing two objectives:

• First it will have a positive effect in motivating individuals to learn the skills and knowledge to perform in their

current role

• Second they will raise the compensation of the individuals as they become more valuable in the external labor

market. This helps in creating a learning organization.

• Experts also supporter that competency based compensation empower employees to take charge of

their own development. By focusing on optimum performance rather than average performance, competencies

can help employees maintain their marketability.

How are Competency based compensation Models linked
to performance planning and evaluation?
How are Competency based compensation Models linked to
performance planning and evaluation?

provide the supervisor and employee with a clear understanding of performance expectations, and address
training and development activities necessary for successful performance. Models that include specific
performance criteria ensure that supervisors and employees share the same understanding of performance
expectations
Most Competency Models require an employee self-assessment of their performance that provides input to
the supervisor in their appraisal of the employee. Additionally, some may elicit performance feedback from
other internal and external peers, direct reports and customers.
How is Competency-based Compensation System
evaluated?
How is Competency-based compensation model evaluated?

The final step in the development of a Competency-based compensation model is the design and
implementation of an on-going evaluation plan to measure the effectiveness of the model’s content and
usage. It must be reviewed and modified periodically to reflect changes in desired behaviors and technical
knowledge and skills that result from an evolving work environment. The evaluation plan, at the minimum,
should include the individual(s) responsible for evaluating it , evaluation timelines and may follow the same
process used to develop the original Competency-based compensation model .
Case Study

Mondi Świecie SA
Profile of the company

• Mondi Świecie SA is one of the five major manufacturers of industrial packaging assortments for the
industry of bags and corrugated board in Europe. In 2010, the company produced 1,313 tons of paper.

• Mondi Świecie SA is now part of Mondi Group, which was formed from the merger of Frantschach
Group and Mondi Packaging Europe. Mondi Group operates in 31 countries in Europe and South Africa
and is listed on the London and Johannesburg stock exchange. It is comprised of the following divisions:
Corrugated, Bags and Specialities, Uncoated and Fine Paper, and Forests. Since 2008, all of them have
been operating under one common Mondi logo.
The Mondi way

21
The Mondi way
Competency-based remuneration

The remuneration system in Mondi Świecie SA is not directly related to competency appraisal. The motivation system is
based on the methodology of Management by Objectives. Base salary is derived from a more comprehensive appraisal,
and competency is one of its components. Additionally, each manager has a pay-rise fund at their disposal, which is
distributed according to a uniform percentage rate among all employees, and an additional pool of funds that is managed
on a discretionary basis. Pay-rise is customarily granted once a year, but in exceptional cases, an employee may be
reclassified for extraordinary work performance. This is done at the request of the superior. The appraisal of
competencies and employee development objectives has not directly translated into higher wages so far. For managers, a
solution that combines bonus management with the appraisal of competency development has been used. It assumes
annual appraisal of performance and competencies. In order to obtain a bonus, it is necessary to plan the development of
one soft competency, record the plan in the personal development documentation, and then fulfil and account for the
obligation undertaken.

23
Incorporating the lifelong learning perspective in competency-based human
resources management in Mondi
Świecie SA

All corporate actions related to the competency model and its use in human resources management are in line with the
assumptions of lifelong learning. The fact that the company is aware of the importance of this idea is reflected in the
naming of the tools used – Competency Development System and Development Assessment. By adopting the above
terminology, the company emphasizes the importance of development in the human resources management process.
Unified approach to all employees, regardless of their position, age or gender, is essential. In all jobs it is required to
constantly improve competencies in a way that it is consistent with the preferences of the company. Regular reporting on
the development tasks executed and establishing new ones is particularly valuable. Although development programs
cover all employees, the broadest range of activities is designed for managers, i.e. the group of employees that is faced
with the highest and most varied requirements.
THANK YOU