 STRATEGIC COMPENSATION A Human Resource Management Approach Chapter 6 Person-Focused Pay 1 Prentice Hall, Inc. © 2006 Prepared by David Oakes Person - Focused Plans Ø Rewards employees for acquiring job - related ² Competencies ² Knowledge ² Skills Ø 2 main types Pay - for - knowledge ² Skill - based pay ² Prentice Hall, Inc. © 2006 2 Competency - Based Pay Programs Ø Pay - for - knowledge Ø Skills - based Ø A combination of both 3 Prentice Hall, Inc. © 2006 Pay Programs Ø Rewards employees for improving or acquiring new skills / knowledge Ø Horizontal ² Those at same level of responsibility or difficulty Ø Vertical ² Those at a higher level of responsibility or difficulty Ø Depth ² Level of expertise or specialization 4 Prentice Hall, Inc. © 2006 Competencies Ø Uniquely combined characteristics of the person that enables employees to fulfill job requirements well Ø Core competencies are derived from company’s strategic statements 5 Prentice Hall, Inc. © 2006 Vertical Skills Programs Ø Works well for work teams ² Service industry ² Manufacturing industry Ø Employees ² Learn functional skills ² Perform managerial tasks 6 Prentice Hall, Inc. © 2006 Pay - For - Knowledge Plans Ø Reasons for adoption ² Removes entitlement label ² Connects pay to job-related abilities ² Increases employee autonomy ² Technological innovations ² Increased global competition 7 Prentice Hall, Inc. © 2006 Pay-for-Knowledge Models Ø Stair - step Ø Skill - block Ø Job - point accrual Ø Cross - departmental 8 Prentice Hall, Inc. © 2006 Stair - Step Model Ø Jobs from same job family Ø Jobs differ in complexity Ø Higher the step, greater the skills Ø Companies use separate models Ø Models designed to match jobs 9 Prentice Hall, Inc. © 2006 Skill – Block Model Ø Applies to jobs in same job family Ø Employees expected to progress to increasingly complex jobs Ø Skills may not build on each other Ø Emphasizes horizontal & vertical skills 10 Prentice Hall, Inc. © 2006 Job - Point Accrual Model Ø Applies to jobs from different job families Ø Creates organizational flexibility Ø Points assigned to skills Ø Higher the number of points, the higher the core compensation level 11 Prentice Hall, Inc. © 2006 Cross - Departmental Model Ø Employees develop skills usable in other departments Ø Helps manage sporadic, short – term staffing shortages Ø Helps meet seasonal fluctuations 12 Prentice Hall, Inc. © 2006 Person - Focused Pay Ø Compensates employees for flexibility Ø Compensated for potential contributions ² Based on skills & knowledge Ø Used for jobs not easily assessed ² For skills and knowledge 13 Prentice Hall, Inc. © 2006 Job - Based Pay Ø Compensates employees for current jobs Ø Pay limits set for each job Ø Evaluations based on job descriptions & objectives Ø 2 main types ² Merit pay ² Incentive pay 14 Prentice Hall, Inc. © 2006 Employee Advantages Ø Can provide job enrichment Ø Can provide job security Ø Can make jobs more intrinsically motivating Ø Can make jobs more interesting Ø Increases employees’ flexibility 15 Prentice Hall, Inc. © 2006 Job Characteristics Theory Employees more motivated to perform jobs that contain Ø Skill variety Ø Task identity Ø Autonomy Ø Feedback 16 Prentice Hall, Inc. © 2006 Core Characteristics Ø Skill variety ² Requires using different abilities Ø Task identity ² Enables employees to do entire job Ø Autonomy ² Allows employees to choose Ø Feedback ² Provides clear communications 17 Prentice Hall, Inc. © 2006 Advantages To Employers Ø Leads to enhanced job performance Ø Leads to reduced staffing Ø Leads to greater flexibility Ø Improves quality Ø Increases productivity levels 18 Prentice Hall, Inc. © 2006 Disadvantages Ø Can increase hourly labor costs Ø Can increase training costs Ø Can increase overhead costs Ø May not mesh well with existing incentive pay systems 19 Prentice Hall, Inc. © 2006 Lowest - Cost Competitive Strategy Ø Lowers output costs per employee Ø Training should improve productivity Ø Improves product & service quality Ø Long - term gains should outweigh short - term costs 20 Prentice Hall, Inc. © 2006 Differentiation Competitive Strategy Ø Requires employees who are ² Creative ² Open - minded ² Risk - takers Ø Requires long - term focus Ø Pay - for - knowledge effective with work teams 21 Prentice Hall, Inc. © 2006 - Ajob-point accrual modelencourages employees to develop skills and learn to perform jobsfrom different job families. A company would benefit if its employees were proficient in a smallsubset of jobs. Companies usually limit the number of jobs employees are allowed to learn inorder to avoid having someone who can do "everything". Job-point accrual methods createorganizational flexibility and promote company goals by assigning a relatively greater number ofpoints to skills that address key company concerns. The higher the points the higher thecompensation.- Although the job-point accrual model and the cross departmental model are similar, there aredifferences. The job-point accrual model encourages employees to learn skills and acquireknowledge that bear directly on companies' attainment of competitive advantage.Cross-departmental modelspromote staffing flexibility by training employees in one department withcritical skills they would need to perform effectively in other departments. This method can helpproduction environments manage staffing shortages.Contrasting Person-Focused Pay with Job-Based Pay:- Companies institute job-based pay plans or person-focused pay plans based on very differentfundamental principles and goals.Job-based paycompensates employees for jobs they currentlyperform. |
What is the job point accrual model?
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