1. A Human Resource Management Approach
STRATEGIC COMPENSATION
A Human Resource Management Approach
Chapter 6
Person-Focused Pay
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Prepared by David Oakes

2. Person - Focused Plans job - related Knowledge Skills
Rewards employees for acquiring
job - related
Competencies
Knowledge
Skills
2 main types
Pay - for - knowledge
Skill - based pay
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3. Competency - Based Pay Programs
Pay - for - knowledge
Skills - based
A combination of both
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4. Pay Programs Rewards employees for improving or acquiring
new skills / knowledge
Horizontal
Those at same level of responsibility or difficulty
Vertical
Those at a higher level of responsibility or difficulty
Depth
Level of expertise or specialization
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5. Competencies Uniquely combined characteristics of
the person that enables employees to
fulfill job requirements well
Core competencies are derived from
company’s strategic statements
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6. Vertical Skills Programs
Works well for work teams
Service industry
Manufacturing industry
Employees
Learn functional skills
Perform managerial tasks
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7. Pay - For - Knowledge Plans
Reasons for adoption
Removes entitlement label
Connects pay to job-related abilities
Increases employee autonomy
Technological innovations
Increased global competition
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8. Pay-for-Knowledge Models
Stair - step
Skill - block
Job - point accrual
Cross - departmental
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9. Stair - Step Model Jobs from same job family Jobs differ in complexity
Higher the step, greater the skills
Companies use separate models
Models designed to match jobs
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10. Skill – Block Model Applies to jobs in same job family
Employees expected to progress
to increasingly complex jobs
Skills may not build on each other
Emphasizes horizontal & vertical skills
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11. Job - Point Accrual Model
Applies to jobs from different job families
Creates organizational flexibility
Points assigned to skills
Higher the number of points, the higher
the core compensation level
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12. Cross - Departmental Model
Employees develop skills usable in
other departments
Helps manage sporadic, short – term
staffing shortages
Helps meet seasonal fluctuations
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13. Person - Focused Pay Compensates employees for flexibility
Compensated for potential contributions
Based on skills & knowledge
Used for jobs not easily assessed
For skills and knowledge
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14. Job - Based Pay Compensates employees for current jobs
Pay limits set for each job
Evaluations based on job descriptions &
objectives
2 main types
Merit pay
Incentive pay
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15. Employee Advantages Can provide job enrichment
Can provide job security
Can make jobs more intrinsically
motivating
Can make jobs more interesting
Increases employees’ flexibility
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16. Job Characteristics Theory
Employees more motivated to
perform jobs that contain
Skill variety
Task identity
Autonomy
Feedback
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17. Core Characteristics Skill variety Task identity Autonomy Feedback
Requires using different abilities
Task identity
Enables employees to do entire job
Autonomy
Allows employees to choose
Feedback
Provides clear communications
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18. Advantages To Employers
Leads to enhanced job performance
Leads to reduced staffing
Leads to greater flexibility
Improves quality
Increases productivity levels
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19. Disadvantages Can increase hourly labor costs
Can increase training costs
Can increase overhead costs
May not mesh well with existing
incentive pay systems
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20. Lowest - Cost Competitive Strategy
Lowers output costs per employee
Training should improve productivity
Improves product & service quality
Long - term gains should outweigh
short - term costs
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21. Differentiation Competitive Strategy
Requires employees who are
Creative
Open - minded
Risk - takers
Requires long - term focus
Pay - for - knowledge effective with
work teams
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