Chapter6

Person-Based Structures

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
 Chapter Topics

❖ Person-Based Structures: Skill Plans

❖ “How to”: Skill Analysis
❖ Person-Based Structures:
Competencies
❖ “How to”: Competency Analysis
❖ One More Time: Internal Alignment
Reflected in Structures

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 Chapter Topics (cont.)

❖ Administering the Plan

❖ Evidence of Usefulness of Results
❖ Bias in Internal Structures
❖ The Perfect Structure

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Exhibit 6.1: Many Ways to Create
Internal Structure

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Person-Based Structures: Skill Plans

❖ Skill-based structures link pay to the

depth or breadth of skills, abilities,
and knowledge a person acquires that
are relevant to the work
❖ Individuals are paid for all their certified
skills regardless of whether the work
requires all or just a few of those skills
❖ The wage attaches to the person

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 Types of Skill Plans

❖ Specialist: Depth
❖ Pay is based on the knowledge of the
individual doing the job rather than on
job content or output
❖ Generalist/multiskill based: Breadth
❖ Pay increases are earned by acquiring
new knowledge specific to a range of
related jobs
❖ Pay increases come with certification of
new skills, rather than with job
assignments
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Purpose of the Skill-Based Structure

❖ Supports the strategy and objectives

❖ Supports work flow
❖ Is fair to employees
❖ Motivates behavior toward
organization objectives

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 Exhibit 6.3: Determining the
Internal Skill-Based Structure

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 “How To”: Skill Analysis

❖ Skill analysis is a systematic process

of identifying and collecting
information about skills required to
perform work in an organization

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 “How To”: Skill Analysis (cont.)

❖ What information to collect?

❖ Specific information on every aspect of
the production process
❖ Whom to involve?
❖ Employees and managers
❖ Establish certification methods
❖ Peer review, on-the-job demonstrations,
tests, or formal courses
❖ Scheduled fixed review points and
recertification
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 “How To”: Skill Analysis (cont.)

❖ Outcomes of skill-based pay plans:

Guidance from research and
experience
❖ Design of certification process is crucial
in perception of fairness
❖ Alignment with organization’s strategy
❖ May be best for short-term initiatives

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Exhibit 6.5: Determining the Internal
Competency-Based Structure

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 Person-Based Structures:
Competencies
❖ Core competencies abstract the
underlying, broadly applicable
knowledge, skills, and behaviors that
form the foundation for success at any
level or job in the organization
❖ Competency sets translate each core
competency into action
❖ Competency indicators are observable
behaviors that indicate the level of
competency within each set
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Exhibit 6.6: TRW Human Resources
Competencies

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 Exhibit 6.7: Sample Behavioral Competency
Indicators

Source: Reprinted from Raising the Bar: Using Competencies to Enhance Employee Performance with permission from the American
Compensation Association (ACA), 14040 N. Northsight Blvd., Scottsdale, AZ USA 85260; telephone (602) 483-8352. © ACA.

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 Defining Competencies

❖ Organizations seem to be moving

away from the vagueness of self-
concepts, traits, and motives
❖ Greater emphasis on business-related
descriptions of behaviors “that
excellent performers exhibit much
more consistently than average
performers”

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 Defining Competencies (cont.)

❖ Competencies are becoming “a

collection of observable behaviors that
require no inference, assumption or
interpretation”

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 Purpose of the Competency-Based
Structure
❖ Organization strategy
❖ Work flow
❖ Fair to employees
❖ Motivate behavior toward organization
objectives

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 “How To”: Competency Analysis

❖ Objective
❖ Vagueness and subjectivity make
competencies a “risky foundation for a
pay system”
❖ What information to collect?
❖ Classification of competencies:
❖ Personal characteristics
❖ Visionary
❖ Organization specific

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Exhibit 6.11: The Top 20
Competencies

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 “How To”: Competency Analysis
(cont.)
❖ Whom to involve?
❖ Competencies are derived from executive
leadership’s beliefs about strategic
organizational intent
❖ Not all employees understand the
connection

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 “How To”: Competency Analysis
(cont.)
❖ Establish certification methods
❖ Consultants are silent on objectively
certifying whether a person possesses a
competency
❖ Resulting structure
❖ Designed with relatively few levels and
wide differentials for increased flexibility

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 Exhibit 6.13: Toy Company’s
Structure Based on Competencies

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 “How To”: Competency Analysis
(cont.)
❖ Competencies and employee selection
and training/development
❖ Competencies relate to individual
characteristics of personality, motivation,
and ability
❖ Failure to adequately screen employees:
❖ Puts more pressure on training and
development
❖ De-motivates employees seeking to acquire
and demonstrate these competencies

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 Exhibit 6.14: Titles and High-Level Definitions
of the Great Eight Competencies™

Source: Dave Bartram, SHL Group, “The Great Eight Competencies: a Criterion-Centric Approach to Validation,” Journal of Applied
Psychology 2005. Vol. 90, No. 6, pp. 1185–1203.
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 “How To”: Competency Analysis
(cont.)
❖ Guidance from the research on
competencies
❖ Managers’ competencies are related to
performance ratings
❖ No relationship to unit-level performance
❖ Some competencies deliver greater
returns than others
❖ Appropriateness to pay for what is
believed to be the capacity of an
individual as against what the individual
does

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One More Time: Internal Alignment
Reflected in Structures
❖ Purpose of job- or person-based
procedures:
❖ Design and manage an internal pay
structure to help the organization
succeed
❖ Reflects internal alignment policy
❖ Supports business operations
❖ In practice, the focus is on both job
and person factors that create value
for the organization
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 Administering the Plan

❖ A crucial issue is the fairness of the

plan’s administration
❖ Sufficient information should be
available to apply the plan
❖ Communication and employee
involvement are crucial for acceptance
of resulting pay structures

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 Evidence of 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 the evaluation assesses
what it is supposed to
❖ Measured in two ways:
❖ Degree of agreement between rankings from
job evaluation with an agreed-upon ranking
of benchmarks

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Evidence on Usefulness of Results
(cont.)
❖ “Hit rates”—degree to which the job
evaluation plan matches an agreed-upon pay
structure for benchmark jobs
❖ Definition of validity needs to be
broadened to include impact on pay
decisions

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 Evidence on Usefulness of Results
(cont.)
❖ Acceptability
❖ Formal appeals process allows employees
to request reanalysis and/or skills
reevaluation
❖ Employee attitude surveys can assess
perceptions of how useful evaluation is as
a management tool

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 Bias in Internal Structures

❖ No evidence that job evaluation is

susceptible to gender bias
❖ Wages criteria bias
❖ Job evaluation results simply mirror bias
in the current pay rates if:
❖ It is based on the current wages paid
❖ The jobs held predominantly by women are
underpaid

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 Bias in Internal Structures (cont.)

❖ 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

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 The Perfect Structure

❖ The best approach may be to provide

sufficient ambiguity to afford flexibility
to adapt to changing conditions
❖ Too generic an approach may not
provide sufficient detail to make a clear
link between pay, work, and results
❖ Too detailed an approach may become
rigid

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Exhibit 6.15: Contrasting
Approaches

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