Source

� Milkovich (2013) 11th edition

� Chapter 6
Person-Based Structures
Dr. Hj. Agustina Hanafi, MBA
Learning Objectives

1. Discuss the differences and similarities between job-based structures, skill-based plans,
and competency-based plans.
2. Identify the major decisions involved in developing skill-based plans and competency-
based plans.
3. Discuss the advantages and disadvantages of employee involvement in the evaluation of
work.
4. Understand the key aspects associated with the administration of a job evaluation plan.
5. Describe the key criteria to assess the usefulness of the results of each of the approaches
to job evaluation.
Many Ways to Create Internal Structure
What is a Skill-based Structure?

Links pay to the depth or breadth of the skills, abilities,

and knowledge a person acquires that is relevant to the
work. Structures based on skill 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.
In contrast, a job-based plan pays employees for the job
to which they are assigned, regardless of the skills they
possess.
Types of Skill Plans
Purpose of the Skill-Based Structure

�
� Supports
Supports strategy
strategy and
and objectives
objectives
�
� Supports
Supports work
work flow
flow
�
� Fair
Fair to
to employees
employees
�
� Motivates
Motivates behavior
behavior toward
toward organization
organization
objectives
objectives
 Determining the
Internal Skill-Based Structure

Internal Skill analysis Skill blocks Skill Skill-based

alignment certification structure

Work relationships
within organization
Basic
Basic Decisions
Decisions
•• What
What is
is the
the objective
objective of
of the
the plan?
plan?
•• What
What information
information should
should bebe collected?
collected?
•• What
What methods
methods should
should be
be used
used to
to determine
determine
and
and certify
certify skills?
skills?
•• Who
Who should
should be be involved?
involved?
•• How
How useful
useful are
are the
the results
results for
for pay
pay purposes?
purposes?
What Is Skill Analysis?

Systematic process to
identify and collect
information about skills
required to perform work
in an organization.
“How To” – Skill Analysis

� What information to collect?

� Exhibit 6.4: General Mills’ Skill-Based Structure
� Exhibit 6.5: FMC’s Technician Skill-Based Structure

� Whom to involve?
� Establish certification methods
� Research on skill-based plans
How Is SBP Different From a
Job-Based Pay System?
� Skills or skill units, rather than jobs are compensable
� Mastery of skill units is measured and certified
� Pay changes do not necessarily accompany job changes
� Little emphasis placed on seniority in pay determination
Disadvantages of Skill-Based Pay

� Average pay of employees likely higher

� High labor costs, if productivity increases do not offset additional costs
� SBP systems more complex
� SBP systems require a major investment in training
So, What’s a Competency?

� Learned skill
� Traits such as behaviors and motives
� Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that
enable performance
� Characteristics of an organization
� Independent of a job or position
� An employee can transport
them from one job to another
 Determining the Internal
Competency-Based Structure

Internal alignment Core Competency Behavioral Competency –

competencies sets descriptors based structure

Work relationships
within organization
Basic
Basic Decisions
Decisions
•• What
What is
is the
the objective
objective of
of the
the plan?
plan?
•• What
What information
information should
should be
be collected?
collected?
•• What
What methods
methods should
should be
be used
used to
to determine
determine
and
and certify
certify competencies?
competencies?
•• Who
Who should
should be be involved?
involved?
•• How
How useful
useful are
are the
the results
results for
for pay
pay purposes?
purposes?
Terms in Competency Analysis

CORE COMPETENCY
Taken from mission statement; for example, “business
awareness.”

COMPETENCY SETS
Grouping of factors that translate core competency into
observable behavior; for example, cost management,
business understanding.

COMPETENCY
INDICATORS
Observable behaviors that indicate the
level of competency within a competency
set. For example, “identifies opportunities
for savings.”
Examples: Competency-Based Approaches

� TRW Human Resources Competencies � Sample Behavioral Competency

Description
Iceberg Model of Competency Levels

Knowledge
Skills

Self-Concepts
Traits
Motives
 Purpose of the Competency-Based Structure

◆Supports strategy and

objectives
⮚Frito-Lay Managerial
Objectives
◆Supports work flow
◆Fair to employees
◆Motivates behavior toward
organization objectives
“How To” – Competency Analysis

� Objective
� What information to collect?
� Scheme to classify competencies
� Personal characteristics
� Visionary
� Organization specific

� Examples
� Exhibit 6.10: 3M Leadership Competencies
� Exhibit 6.11: Behavioral Anchors for Global- Perspective Competency
� Exhibit 6.12: The Top Twenty Competencies
“How To” – Competency Analysis (cont.)

� Whom to involve?
� Competencies are derived from executive leadership’s beliefs about strategic intent
� Product Development Competency for Marketing Department at a Toy Company
� Establish certification methods
� Resulting structure
� Exhibit 6.14: Toy Company’s Structure Based on Competencies
� Research on competencies
The Top Twenty Competencies

�
� Achievement
Achievement orientation
orientation �
� Developing
Developing others
others
�
� Concern
Concern of
of quality
quality �
� Team
Team leadership
leadership
�
� Initiative
Initiative �
� Technical
Technical expertise
expertise
�
� Interpersonal
Interpersonal understanding
understanding �
� Information
Information seeking
seeking
�
� Customer
Customer service
service orientation
orientation �
� Analytical
Analytical thinking
thinking
�
� Influence
Influence and
and impact
impact �
� Conceptual
Conceptual thinking
thinking
�
� Organization
Organization awareness
awareness �
� Self-control
Self-control
�
� Networking
Networking �
� Self-confidence
Self-confidence
�
� Directiveness
Directiveness �
� Business
Business orientation
orientation
�
� Teamwork
Teamwork &
& cooperation
cooperation �
� Flexibility
Flexibility
One More Time: Internal Alignment Reflected
in Structures
� Purpose of job- or person-based plan
� Internal pay structure to help achieve organizational objectives
� Aligned with internal alignment policy
� Supports business operations

� Administering the plan

� Manual
� Communication to foster employee acceptance
� Appeals process
 Results: How Useful?
Reliability of job
evaluation
techniques
Criteria to
Evaluate
Usefulness Validity
of Pay
Structures

Acceptability
 Results: How Useful?

� Reliability
� Different evaluators produce same results
� Validity
� Degree to which evaluation
achieves desired results
� Acceptability
� Formal appeals process
� Employee attitude surveys
� Audits
� Illustrations of Audit Indexes
Bias in Internal Structures

� Gender bias
� Gender of an individual jobholder does not influence evaluation of a job
� Job evaluator’s does not affect results
� Compensable factors related to job content – contact with others and judgment – does
reflect bias
� Compensable factors related to employee requirements – education and experience –
does not reflect bias
� Wages criteria bias
� Job evaluation results may be biased if jobs held predominantly by women are incorrectly
underpaid
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
� Ensure job descriptions are bias free
� Exclude incumbent names from job evaluation process
� Train diverse evaluators
 Contrasting Approaches
(1 of 2)
Job-Based Skill-Based Competency-Based
What is valued Compensable factors Skill blocks Competencies
Quantify the value Factor degree weights Skill levels Competency levels
Mechanisms to Assign points that reflect Certification and price skills in Certification and price
translate into pay criterion pay structure external market competencies in external
market
Pay structure Based on job Based on skills certified/ Based on competency
performed/market market developed / market
Pay increases Promotion Skill acquisition Competency development

Managers’ focus Link employees to work Utilize skills efficiently Be sure competencies add
Promotion and placement Provide training value
Cost control via pay for job and Control costs via training, Provide competency –
budget increase certification, and work developing opportunities
assignments Control costs via certification,
and work assignments
 Contrasting Approaches (2 of 2)

Job-Based Skill-Based Competency-Based

Employee focus Seek promotions to Seek skills Seek competencies

earn more pay

Procedures Job analysis Skill analysis Competency analysis

Job evaluation Skill certification Competency
certification

Advantages Clear expectations Continuous learning Continuous learning

Sense of progress Flexibility Flexibility
Pay based on value of Reduced work force Lateral movement
work performed

Limitations Potential bureaucracy Potential bureaucracy Potential bureaucracy

Potential inflexibility Requires cost controls Requires cost controls