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What is "Competency"?

  • Competency is typically referred to as uniquely combined characteristics of the person, including personality, attitudes, knowledge, skills, and behaviors that allow an employee to fulfill their job requirements well.

Reasons to Adopt Person-Focused Pay Programs

Person-Focused Pay

  • Removes feelings of entitlement within employees; employees should instead treat compensation as a reward earned for acquiring and executing job-related knowledge and skills.
  • Advocates of person-focused pay developed two key reasons that companies should adopt person-focused pay programs: Technological Innovation and Increased Global Competition.

What is a "Competency"?

Increased Global Compensation

Technological Innovation

  • Has influenced the U.S. to become more productive, thus resulting in companies providing their employees with leading-edge skills and encouraging employees to apply their skills proficiently.
  • Research shows that foreign workers are better skiled and able to work more productively than U.S. employees which has forced the U.S. to sustain competitive advantage.
  • Companies strive to market the highest quality of products and services in the face of increased global compensation.
  • In an age of technological innovation, technology leads to automation of more tasks.
  • Robots, telecommunication, artificial intelligence, software, and lasers perform routine tasks.
  • The expanding range of tasks and responsibilities within many manufacturing companies demand higher levels of reading and writing skills due to new machinery and being able to properly read operating manuals for when problems arise.
  • Competency is typically referred to as uniquely combined characteristics of the person, including personality, attitudes, knowledge, skills, and behaviors that allow an employee to fulfill their job requirements well.

By: Stephanie Justiniano

Usage of Person-Focused Pay Programs

Three Major Skills

  • The three major skills that employees must acquire include horizontal skills, vertical skills and depth of skills.

Depth of Skills

(Depth of Knowledge)

Horizontal Skills (Horizontal Knowledge)

  • Companies of various sizes use person-focused pay programs.
  • More than half of the companies known to be using this pay system employ between 150 and 2,000 employees.
  • This programs is most commonly found in manufacturing companies that use assembly lines where one employee's job depends on the work of at least one other employee.
  • Refers to the level of specialization or expertise an employee brings to a particular job.
  • Refer to similar skill sets or knowledge.

Vertical Skills

(Vertical Knowledge)

  • Skills traditionally considered supervisory such as scheduling, coordinating, and training and leading others.

Person-Focused Pay (Competency-Based Pay)

Varieties of Person-Focused Pay Programs

Pay-for-Knowledge Plans

  • Reward managerial, service, or professional workers for successfully learning specific curricula.
  • There are four different varieties of person-focused pay programs which include stair-step model, skill blocks model, job-point accrual model, and cross-departmental models.
  • Person-Focused Pay was adopted in the 1990s.
  • Rewards employees for acquiring job-related competencies, knowledge and skills rather than for demonstrating successful job performance.
  • Two basic types of

person-focused pay:

pay-for-knowledge and

skill-based pay.

Skill-Based Pay

Works Cited

  • Rewards employees who do physical work. This pay system increases workers' pay as they master new skills.

Stair-step Model

Cross-Departmental Models

Martocchio, J. J. (2011). Strategic Compensation: A Human Resource Management Approach. Upper Saddle River, NJ: Pearson/Prentice Hall.

  • Resembles a flight of stairs and each step represents jobs from a particular job family that differ in terms of complexity.
  • In terms of stairs, higher steps represent jobs that require more skills than lower steps.
  • Promote staffing flexibility by training employees in one department with critical skills they would need to perform effectively in other departments.
  • This model helps production environments manage sporadic, short-term staffing shortages.
  • Cross-training can also help companies meet seasonal fluctuations in demand for their products or services.

Skill Blocks Model

Job-Point Accrual Model

  • Also applies to jobs from within the same job family, except skills do not necessarily build on eachother in a skill blocks program.
  • Emphasizes both horizontal and vertical skills.
  • Encourages employees to develop skills and learn to perform jobs from different job families.
  • Employees generally not allowed to learn as many jobs as they would like.
  • Companies limit the number of jobs employees are allowed to learn in order to avoid having them become "jacks of all trades."

Contrasting Person-Focused Pay with Job-Based Pay

Disadvantages of Person-Focused Pay Programs

  • There are four limitations of adopting the Person-Focused Pay Programs.
  • Job-based pay compensates employees for jobs they currently perform, whereas person-focused pay rewards employees for acquiring new skills, knowledge, and job-related competencies.
  • Person-focused pay also compensates employees for developing the flexibility and skills to perform a number of jobs effectively, where as job-based pay plans reward employees for the work they have done as specified in their job descriptions or periodic goals, such as how well they have fulfilled their potential to make positive contributions in the workplace.

1. Employers feel that the main drawback of this pay system is that hourly labor costs, training costs, and overhead costs can all increase.

2. Person-focused pay systems may not fit in well with existing incentive pay systems.

3. Effective person-focused pay systems depend on well-designed training programs.

4. Companies struggle with determining the monetary value of skill and knowledge sets.

Advantages of Person-Focused Pay Programs

  • Case studies suggest that employees and companies enjoy the advantages of this pay program because well-designed person-focused pay programs provide both employees and employers with distinct advantages over traditional pay systems.

S.P.J

Advantages for Employers

Advantages for Employees

  • Employers like person-focused pay systems because, when properly designed and implemented, these programs can lead to enhanced job performance, reduced staffing, and greater flexibility.
  • Person-focused pay systems provide companies with greater flexibility in meeting staffing demands at any given time.
  • Person-focused pay programs can provide employees with both job enrichment and job security; job enrichment referring to a job design approach that creates more intrinsically motivating and interesting work environments.
  • These programs can actually provide better job security for employees because person-focused pay programs create more flexible workers.
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