Skill/Knowledge Based Pay Competency Modeling

1. Skill/Knowledge Based PayCompetency Modeling MANA 5322 Dr. Jeanne Michalski michalski@uta.edu

2. Skill Based Pay • Rewards employees for the sets of skills they acquire rather than for the job they are performing at a point in time. • A job-based plan pays employees for the job to which they are assigned, regardless of the skills they possess.

3. Skill Based Pay • Skill breadth – learning all the different positions in a team • Skill depth – increasing expertise as in an apprenticeship ladder • Vertical skills – management skills and knowledge of the business

4. Common Applications • Base-pay systems • Non-exempt employees • Manufacturing sector • Enhances employee involvement (such as self-managed teams)

5. Results Skill Based Pay Plans (SBP) • Study of 97 skill based pay plans found 66% were successful • Increased workforce flexibility • Reduced staffing requirements • Increased productivity (58% improvement in productivity in one plant) • Longitudinal study 61% firms continued using SBP • Impressive results when using SBP but other factors play a part: • extensive training • engagement of employees in business • high level of communication

6. Critical Factors for long-term Success of Skill Based Pay • Sound customization of the SBP design to address the organization’s specific business conditions, technologies and work systems • Solid hiring, training, job rotation and certification systems • Skill recertification processes • Renewal processes that adapt to changing conditions • Leadership that supports the plan • Competitive wage assessment

7. Biggest Downside to Skill Based Pay?

8. Competency Models Competency models identify the knowledge, skills, and abilities necessary to successfully perform critical work functions across an organization, industry, or occupation.

9. Competency Definition/Example • A competency is a personal characteristic (skill, knowledge, trait, motive) that drives behavior leading to outstanding performance. An example of a competency is "conceptual thinking", defined as: finding effective solutions by taking a holistic, abstract or theoretical perspective. A person demonstrating this competency would probably be able to: • Notice similarities between different and apparently unrelated situations • Quickly identify the central or underlying issues in a complex situation • Create a graphic diagram showing a systems view of a situation • Develop analogies or metaphors to explain a situation • Apply a theoretical framework to understand a specific situation

10. Competency Models • “Core Competencies” for sustainable competitive advantage. • More general descriptions that cut across many categories of jobs. • Integrated with selection, training, and performance management. Competencies Behavioral indicators Validation

11. Elements of Competency Model • Depends on Purpose – no agreement, but generally include: • Significance of meeting organization’s strategies (sometimes implied in the development of core competencies) • Expected outputs or results of performance • Competencies for fully successful performance • Competencies that distinguish exemplary performance (if identified) • Behavioral indicators that describe when competence is being used appropriately

12. Steps in Developing Competency Models • Gather Background Information • Catalog and review existing resources • Decide for each job family how to gather data • Comprehensive job analyses • Expert panel • Structured interview • Identify set of generic competencies, if possible

13. Steps in Developing Competency Models • Collect and Analyze Data • Identify themes • Develop draft model • Competencies • Clusters • Indicators or levels

14. Steps in Developing Competency Models • Review with sponsors/key leaders • Discuss each competency • Names and definition • Specific behaviors used to describe competency • Elimination of any competency • Additional competencies • Revise model • Communicate Model and Uses

15. Anheuser-Busch Competencies • Task force (HR staff and facilitator) identified key business imperatives. • HR Staff and consultants • Company strategy and business objectives • Mission and values • Focus groups of managers reviewed competencies • Narrowed and prioritized list • Confirm or edit 4-5 specific employee behaviors for each competency

16. Anheuser-Busch Competencies • Questionnaires sent to supervisors who were asked to rate the frequency that each behavior was exhibited by: • Top performers – “role models” • Satisfactory or competent employees • Employees who need improvement • Completed competencies integrated with selection and performance management system.

17. I. Achieving Competitiveness Customer Focus: Aggressively monitors and anticipates customer requirements and responds to them in an appropriate manner. Business Focus: Strategically monitors business performance and environment to enhance competitive position. Innovation and Change: Actively seeks out new ideas and displays creativity in adapting to changing conditions. Results Orientation: Demonstrates the drive and persistence to meet and exceed job goals for self or other. Analysis and Planning: Uses critical thinking to solve problems and develop effective work plans. Systems Thinking: Improves and integrates business process to meet organizational strategic goals. Technical / Functional Expertise: Demonstrates, enhances, and shares job-related knowledge and skills.

18. II. Succeeding Through People Valuing people: Demonstrates respect for others regardless of personal background. Commitment to Development: Develop own and others’ capabilities to better meet organizational needs. Professionalism: Demonstrates candor, composure, and commitment to obligations in work relationships. Empowerment: Delegates or accepts responsibility to expand own capabilities to take appropriate risks and make decisions. Influence: Uses appropriate methods to motivate others. Team orientation: Accepts the team approach and takes necessary action to support its processes and goals.

19. Uses for Competency Models • Selection • Training • Performance Management • Developmental Planning • Career Pathing • Compensation

20. Common Barriers to Success of Competency Models • Lack of expertise in building models • Complexity of some models seems confusing • Limited support by top management • Competing priorities • Lack of resources • Lack of linkage with organizational strategy • Lack of ongoing evaluation • Not integrated with all HR processes

21. Sample Competency

22. Class Exercise • Break into groups of no more than 6 • Review Working together as a team competency and identify performance criteria and examples of evidence • Turn in results with names of all in the group

24. Advantages of competency models • Disadvantages of competency models

25. Advantages of competency models • Flexibility • Integration • Cultural fit • Disadvantages of competency models • Vague • Less defensible • Harder to justify paying someone for what they are capable of doing vs. what they do

26. Purpose of Job- Person- Based Pay Structures • Design and manage internal pay structure that helps the organization to succeed • Reflect internal alignment • Support business operations • More research on job evaluation • Reliability – high agreement on job ranking (.85-.90) • Validity – usually compares structure to benchmark jobs (studies show similar job ranking but different pay rates)

27. Homework • Review any available sources i.e. Bureau of Labor Statistics, Chamber or Commerce, Business and Professional Organization Data to compile pay information for multiple level of Accountant positions (Accountant, Sr. Accountant) and Systems Developer positions (programmer, systems analyst, senior systems analyst). • Be sure to get rates from 3 different sources for at least 3 levels of a position (e.g. if you pick Accountant get 3 levels of Accountant data) and include a description of the position from each source to show how the position is similar across the 3 sources. • Include survey date or effective date if available • Include mean and median or percentile data if available

28. Example of one Level of Job