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Chapter 6

Person-Based Structures

Chapter Topics
• Person-Based Structures: Skill Plans
• “How to”: Skill Analysis
• Person-Based Structures: Competencies
• “How to”: Competency Analysis
• One More Time: Internal Alignment Reflected in Structures
• Administering the Plan
• Evidence of Usefulness of Results
• Bias in Internal Structures
• The Perfect Structure
• Your Turn: Climb the Legal Ladder

• In today’s organizations, the work is analyzed with an eye
toward increasing competitiveness and success
• Routine work (transactional) is separated from more complex
(tacit) work
• The routine work generates lower revenues and requires less
• People doing this work are likely paid less than people doing
the more complex work that yields greater profits
• More complex work requires pay systems that support
continuous learning, improvement, and flexibility
• Exhibit 6.1 points out the similarities in the logic underlying
job-based versus people-based approaches

Person-Based Structures: Skill Plans

• The majority of applications of skill-base pay

have been in manufacturing, where the work
often involves teams, multiskills, and flexibility
• Advantage of a skill-based plan is that people
can be deployed in a way that better matches
the flow of work , thus
– Avoids bottle necks:
– Avoids idling:

• Bottle neck : is a stage is a something that
limits the capacity of a system .
• A bottle neck is a type of traffic jam when cars
get stuck or slowed down in a narrow part of
the road.
• Bottle neck is a static system .
• Idling can cost companies more money than
you know ,by GPS technology , you can
prevent idle time and wasting of resources.
What is a Skill-Based Structure?

Skill-based structures link pay to the depth or

breadth of the skills, abilities, and knowledge
person acquires that are relevant to the work.
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
• Skill plans can focus on
– Depth based: (Specialist)
• Specialists in corporate law, finance, or welding and hydraulic
• The pay structures for the elementary/high school teachers were likely
based on their knowledge as measured by education level
– Breadth based: (Generalist)
• Generalists with knowledge in all phases of operations including
marketing, manufacturing, finance, and human resources
• Employees in a multiskill system earn pay increases by acquiring new
knowledge, but knowledge is specific to a range of related jobs
• Pay increases come with certification of new skills, rather than with job
- Exhibit 6.2 shows the new structure and the skill blocks in
each level
• Balzer moved a skill- based plan for all its
hourly workers including administrative and
sales employees , it new structure include
four different type levels from fundamental to
advanced .New employees are hired into the
fundamental level . Fundamental skills
include familiarity with company forms and
procedure, basic product knowledge , safety ,
basic computer usage and so on .
• Fundamental level, pay increase of $.50
• Basic level employees can assigned to any of
the tasks for which they are certificated .
• The advance employees that the more learn
and more earn.

Exhibit 6.2: Skill Ladder at Balzer Tool Coating

Purpose of the Skill-Based Structure
• Supports strategy and objectives: the skills on which to base a
structure need to be directly related to the organization’s
objectives and strategy
• Supports work flow: skill-based plan facilitates matching
people to a changing work flow
• Fair to employees: by encouraging employees to take charge
of their own development, skill-based plans may give them
more control over their work lives
• Motivates behavior toward organization objectives: skill-based
plans permit encourage employees to take responsibility for
the complete work process and its results, with less direction
from supervisors
“How To”: Skill Analysis
• Exhibit 6.3 depicts the process for determining a skill-based
• It begins with an analysis of skills, which is similar to the task
statements in a job analysis
• Related skills can be grouped into a skill block; skill blocks can
be arranged by levels into a skill structure
• To build a structure, a process is needed to describe, certify, and
value the skills
• Exhibit 6.3 also identifies the major skill analysis decisions:
– What is the objective of the plan?
– What information should be collected?
– What methods should be used?
– Who should be involved?
– How useful are the results for pay purposes? 13
Exhibit 6.3: Determining the Internal Skill-Based

What Is Skill Analysis?

Skill analysis is a
systematic process of
identifying and collecting
information about skills
required to perform work in
an organization.

“How To”: Skill Analysis (cont.)
• What information to collect?
– Foundation skills: include a quality seminar, videos on
materials handling and hazardous materials, a three-day
safety workshop, and a half-day orientation
– Core electives: are necessary to the facility’s operations (e.g.,
fabrication, welding, painting, finishing, assembly, inspection).
– Optional electives: are additional specialized competencies
ranging from computer applications to team leadership and
consensus building
• Whom to involve?
– Employees and managers: are the source of information on
defining the skills, arranging them into a hierarchy, bundling
them into skill blocks, and certifying whether a person actually
possesses the skills
“How To”: Skill Analysis (cont.)
• Establish certification methods
– Organizations may use peer review, on-the-job
demonstrations, or tests, or formal tests to certify that
employees possesses skills and are able to apply them
– Leaders and peers are used in the certification process
• Guidance from the research on skill-based plans
– Design of certification process crucial in perception of
– Alignment with organization’s strategy
– May be best for short-term initiatives
• Exhibit 6.4 shows the equipment manufacturer
FMC’s technician skill-based structure
Person-Based Structures: Competencies
• As with job evaluation, there are several
perspectives on what competencies are and what
they are meant to accomplish
– Are they a skill that can be learned and developed or a trait
that includes attitudes and motives?
– Do competencies focus on the minimum requirements that
the organization needs to stay in business or focus on
outstanding performance?
– Are the characteristics of the organization or of the
• Exhibit 6.5 shows the process to determine the
internal competency-based structure
Exhibit 6.5: Determining the Internal Competency-
Based Structure

Terms in Competency Analysis
• Core competencies
– Related to mission statements expressing organization’s
philosophy, values, business strategies, and plans
• Competency sets
– Translate each core competency into action
– For the core competency of business awareness, for
example, competency sets might be related to organizational
understanding, cost management, third-party relationships,
and ability to identify business opportunities
• Competency indicators
– Observable behaviors that indicate the level of competency
within each set
– These indicators may be used for staffing and evaluation as
well as for pay purposes 21
Competency-Based Approaches (cont)
• TRW’s competency model for its human resource management
department, shown in Exhibit 6.6, includes the four core
competencies considered critical to the success of the business
• All HR employees are expected to demonstrate varying degrees
of these competencies
• However, not all individuals would be expected to reach the
highest level in all competencies
• Rather, the HR function should possess all levels of mastery of
all the core competencies within the HRM group
• Employees would use the model as a guide to what capacities
the organization wants people to develop

Competency-Based Approaches (cont)
• The competency indicators anchor the degree of a
competency required at each level of complexity of
the work
• Exhibit 6.7 shows five levels of competency
indicators for the competency impact and influence
• These behavioral anchors make the competency
more concrete
• The levels range from “uses direct persuasion” at
level 1 to “uses experts or other third parties to
influence” at level 5

Defining Competencies
• Early conceptions of competencies focused on five areas:
- Skills (demonstration of experience)
- Knowledge (accumulated information)
- Self-concepts (attitudes, values, self-image)
- Traits (general disposition to behave in a certain way)
- Motives (recurrent thoughts that drive behaviors)
• Organizations seem to be moving away from the vagueness of
self-concepts, traits, and motives
• Greater emphasis on business-related descriptions of behaviors
“that excellent performers exhibit much more consistently than
average performers”
• Competencies are becoming “a collection of observable
behaviors that require no inference, assumption or interpretation”
Purpose of the Competency-Based Structure
• Competencies help support an internally aligned structure. The
purposes are as follows:
• Organization strategy
- The main appeal of competencies is the direct link to the organization’s
- The process of identifying competencies starts with the company
leadership deciding what will spell success for the company
- It resembles identifying compensable factors as part of job evaluation
- Exhibit 6.8 shows that Frito-Lay used competency-based structures
• Work flow: competencies are chosen to ensure that all the critical needs of
the organization are met
• Fair to employees: advocates of competencies say they can empower
employees to take charge of their own development
• Motivates behavior toward organization objectives: competencies in
effect provide guidelines for behavior and people focused 27
“How To”: Competency Analysis
• The bottom part of Exhibit 6.5 shows the basic decisions in
creating a competency-based structure
• Objective: competencies may have value for personal development and
communicating organization direction

• What information to collect?

– One scheme to classify competencies includes
• Personal characteristics: trust-worthy, loyal, courteous, personal integrity,
maturity of judgment, flexibility, respect for others
• Visionary: highest level competencies, possessing a global perspective,
taking initiative in moving the organization in new directions
• Organization specific: leadership, customer orientation, functional expertise
– Examples
• Refer Exhibit 6.9, Exhibit 6.10, and Exhibit 6.11

Exhibit 6.10: Behavioral Anchors for Global-
Perspective Competency

Exhibit 6.11: The Top 20 Competencies

“How To”: Competency Analysis (cont.)
• Whom to involve?
– Competencies are derived from executive leadership’s beliefs about
strategic organizational intent
– Exhibit 6.12 shows part of the competencies used by a major toy
• Establish certification methods
- Heart of the person-based plan is that employees get paid for the relevant
skills or competencies they possess whether or not those skills are used
• Resulting structure
– Designed with relatively few levels
– Exhibit 6.13 depicts the toy company’s structures based on the four
phases/levels shows in Exhibit 6.12
• Guidance from the research on competencies
– Appropriateness to pay for what is believed to be the capacity of an
individual as against what the individual does 33
Exhibit 6.13: Toy Company’s Structure Based
on Competencies

One More Time: Internal Alignment
Reflected in Structures
• The purpose of job- or person-based plan is to
– Design and manage an internal pay structure to help
achieve organizational objectives
• This structure should reflect the organization’s internal
alignment policy, and
• Support its business operations
• Managers must ensure that the structure remains internally
aligned by reassessing work/skills/competencies when
• In practice, during evaluation of higher-value,
nonroutine work, distinction between job- versus
person-based approaches blurs
Administering the Plan
• Whatever plan is designed, a crucial issue is
the fairness of the plans administration
• Sufficient information should be available to
apply the plan
• Communication and employee involvement
are crucial for acceptance of resulting pay

Evidence on Usefulness of Results
• Reliability of job evaluation techniques
–Different evaluators produce same results
–Can be improved by using evaluators familiar with
the work and who are trained in job evaluation
• Validity
–Degree to which evaluation achieves desired
–Validity of job evaluation is measured in two ways

Evidence on Usefulness of Results (cont.)
• Validity (cont.)
– Validity of job evaluation is measured in two ways
• Degree of agreement between rankings; ranking of
• ‘Hit rates’; pay structure for benchmark jobs as criterion
– Definition of validity needs broadening to include impact in
pay decisions
• Acceptability
– Formal appeals process: employees who believe their jobs
are evaluated incorrectly should be able to request reanalysis
and/or skills reevaluation
– Employee attitude surveys: can assess perceptions of how
useful evaluation is as a management tool 39
Bias in Internal Structures
• Gender bias
– No evidence that job evaluation is susceptible to gender
– No evidence that job evaluator's gender affects 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
–Train diverse evaluators
The Perfect Structure
• Exhibit 6.14 contrasts job-based, skill-based, and
competency-based approaches
• Pay increases are gained via promotions to more
responsible jobs under job-based structures or via
the acquisition of more-valued skills/competencies
under the person-based structures
• Logically, employees will focus on how to get
promoted (experience, performance) or on how to
acquire the required skills or competencies (training,