Pay systems that support continuous learning and improvement, flexibility, participation, and partnership are claimed to be essential for achieving a competitive advantage in the global environment. Person-based structures provide promise; the logic supporting these approaches is that structures based on differences in peoples skills or competencies will be more flexible and will encourage agility.

Two approaches to building a person-based structure are discussed:

Skill-based

Competency-based

No matter the basis for the structure, the major decisions focus on the ways to

Collect and summarize information about work

Determine what is of value to the organization

Quantify that value

Translate that value into an internal structure

Similarities in the logic underlying job-based versus people-based approaches are highlighted. The chapter concludes with a discussion on the usefulness of the various approachesjob- and person-basedfor determining internal structures.

Learning Objectives

Understand the similarities and differences between skill plans and competencies in person-based structures.

Define skill-based pay plan structures, their purpose, the process, and the outcomes.

Discuss a competencies-based pay structure, its purpose, the basic decisions in creating such a structure, and the resulting structure.

Understand administering and evaluating the plan, including identifying bias.

Based on the information above answer the following questions.

1. Why does the process used in the design of the internal pay structure matter? Distinguish between the process used to design and administer a person-based and a job-based approach.

2. Based on the research on job evaluation, what are the sources of possible gender bias in skill-/competency-based plans?

3. If you were managing employee compensation, how would you recommend that your company evaluate the usefulness of its job evaluation or person-based plans?