Competency-based Pay
Establishing a competency framework
- individual interviews with senior managers to obtain their views on the current and future key issues and challenges facing the organisation
- individual or group interviews with some other managers, to identify the characteristics associated with under- and high-performance of individuals
- focus groups of managers and/or other staff, again to help identify key competencies
- benchmarking the draft competencies against the competency frameworks of relevant external competitor
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Question?
Conclusion
Potential problems and pitfalls
- They can be time-consuming and expensive to implement.
- There is a risk of pay drift without performance improvement.
- Make considerable demands on managers, who require considerable training and support
- Risk of gender and ethnic favor
- Risk of manipulation in score
- The objective measurement of competencies is difficult to achieve
Final frontier; after recruitment, training and development
Competency-based pay may therefore be suitable in organisations where:
- there is an over-emphasis on outputs
- how you do the job is as important as the results
- fit with a performance appraisal is required
- a new values system has been introduced
- cultural change towards greater flexibility is seek
Problems with individual
performance-related pay
Where can be use competency-based pay?
- Link to business strategy
competitive advantage through the way people perform
- Importance of people development
provides encouragement for development, especially where role definitions are flexible
- Replacement for performance-related pay
PRP has proved problematic and inappropriate in some settings
- Organisational re-positioning
structurally or culturally
- Difficulties in setting measurable performance targets for factors (such as team-building)
- Difficulties in converting variable performance into a single assessment rating
- Problems in taking into account factors outside of the individual’s control in the achievement of targets
- Manipulation of the system by employees to ensure that they receive high levels of performance pay
- Opposite impact on team work objectives.
How effective is competency-based pay?
- promote need for greater competence
- encourage staff to take responsibility for own career development
- boost co-operation and teamwork
- provide a framework for salary progression where promotion opportunities are limited
- ease career development
- provide a link between reward strategy and overall corporate objectives
- increase employee satisfaction through the provide of development opportunities
What is competency-based pay?
Brown and Armstrong‘s (1999) definition:
‘Competency-based pay can be defined as paying for the development and application of essential skills, behaviours and actions which support high levels of individual, team and organisational
performance.’
Benefits of competency-based pay
What is competency-based pay?
- It is based on an agreed framework of competencies
- It is not based on the achievement of specific results, such as targets or projects completed. However, it is concerned with the succes in reaching of agreed standards of performance.
- the need to increase flexibility amongst the workforce
- to change behaviour and make greater motivation
- giving employees access to job progression
- assisting with the introduction of multi-skilling
- providing greater fairness in pay determination