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This is REALLY solid thinking with conclusions based on real data.

The very best thing our profession can do is begin the migration from paying for 'jobs' to paying for the skill and competency people demonstrate and apply to work. People become more valuable all around because they grow in skill and competency yet we continue to pay for 'jobs'. And 'jobs' are always described in terms of duties and responsibilities and not skill and competency requirements.

If it is important to increase the pay of people at the lowest 'rung' of a career ladder that is best done by paying for the acquisition and application of increasingly valuable skill and competency. It is not done well by merely paying more for basic skill and competency. However, the argument in favor of paying for skill and competency continues to fall on deaf ears and 'jobs' continue to rule the roost.

You are certainly 'on target' but what can be done about closing the 'knowing-doing gap'? We 'know' that what you say is the solution but we are stuck in the mud trying to get there.

Actually, Jay, I write articles like this one because, in my experience it's mainly the consultants who "know" the great leaps in behavioral research that continue to be made. Everyone else is too tied up with job demands to be researching. By highlighting the practical applications to compensation practices from the research, I'm hoping to help our readers see that there is lots of solid evidence that we can and should do HR better, demand accuracy in our program assumptions and design in a more measurable way (moving from awareness to understanding to accepting responsibility for implementing the improvement).

If I'm accurate in saying that I sense a bit of frustration in your comment that we in compensation continue to lag in turning "knowing" into "doing," I concur wholeheartedly. I don't know why it continues to be so difficult for our field to move from understanding to a commitment to action except that risk-aversion must be so strong. I also think that so few reach out to employees to find out what’s on their mind, that there is a lot of misreading of employee preferences. I confess to being frustrated for so long that I can't claim to have pivotal suggestions -- but I keep trying because it's so important.

Margaret, you got that one 'nailed'. And that is why you seldom see 'compensation professionals' climb the career ladder in an organization. Much of it has to do with the fact that we let ourselves get 'filed off in the corner somewhere' writing boring job descriptions, listening to people complain, and doing things that nobody else in human resources wants to do.

The people who are hired to provide guidance on pay management strongly influence the largest opportunity cost organizations have. This should be the source of positive influence and career growth. But there we are in the corner 'pricing jobs' and administering whatever evils the government throws our way.

Is it that our profession lacks 'true grit'? I believe we have the data showing there are many better and more valuable ways to do the pay and reward role in our organizations. But we seemingly ignore the research and follow practices that have been obsolete for decades.

I encourage you to keep on the course you have taken. The reality is, however, the great things you are saying will continue to fall on deaf ears. Maybe we need to invent a set of 'hearing aids' that let people hear only information that is founded on solid research rather than 'old shoes' that continue to be 'made to fit'.

Well I for one would like to see an example of a "skill" "competency" description. Do you have one you could share Margaret? I would like to see what one looks like.

It's quite straightfoward. Include the leadership behavior research cited as reference, the baseline manager behaviors of, "Facilitating group collaboration effectively," and so on (written in the terminology that is the typical spoken word for the company), as primary responsibilities for managers on their job descriptions. (And using them as selection criteria for the jobs.) Then to help managers understand that they need to target (and be evaluated on) certain critical behaviors, add the situational behaviors that are appropriate to the company's strategy.

Sounds like we are ending up with a 'bunch' of consultants talking to each other on the topic of 'future-think'. Too bad, huh??

We try to combine the skill definitions and the performance management tool in the same document wherever possible. I was digging around for an example but I don't have any without the name of the organization and don't want to try to get permission to post anything that may be confidential. Also,I don't know how to post an attachment here anyway.

In most instances the solutions for people with management/supervisory skills and competencies included performance management outcomes that were 'lump sum awards only'. This prevents base pay inflation and requires re-earning anything granted for performance. We found that 'merit adjustments' did not encourage continued skill and competency growth and became entitlements.

Technology and continued change puts too much pressure on 'job-based pay systems'. It is only fair to communicate to the workforce that they need to continually grow or become obsolete. Paying for skill and competency is coming 'ready or not'. Those in our profession that ride the cusp of change will shortly be in great demand and perhaps in short supply.

Skill-based pay (SBP) has a long history in the big idea annuals of compensation management, but has not emerged as a dominant method of paying people, and continues to receive positive reviews. The first significant SBP initiative occurred in the 1980s, when SBP plans were linked to greater productivity among hourly employees working in manufacturing plants that benefitted from having a multi-skilled and flexible workforce. In the 1990s, it was given new life, when competency-based pay was introduced as a type of skill-based pay plan for professional and managerial employees who possessed the core competencies that are essential to an organization’s survival.

A 2012 survey of 1,080 WorldatWork members found that 20% granted base pay increases for acquiring new skills and abilities, down from 25% in 2010. Greater use of competencies exists in performance management than in base pay determination, as 41% of 750 compensation professionals surveyed in 2010 stated that employee performance is evaluated based on competency demonstration and 22% on the acquisition of new skills. A 2009 Mercer survey of over 1,000 firms found that 12% used skill-based pay (down from 19% in 2002), 13% used competency based pay (down from 17% in 2002,) and 42% used competencies in performance management (up from 35% in 2002).

Some of the challenges in adopting SBP include underestimating training needs and its effects on other HR systems, burdensome administration, and a lack of efficient systems to value skills and abilities externally. It is also uncertain whether many firms would welcome a method to compensate employees that is not directly based on measures of performance and is costly to administer. In addition, pay-for-competencies has found a home in many companies’ performance management programs.

Finally, the flexibility that SBP offers to management in assigning work to employees can be realized with less pain by defining jobs more broadly and with greater flexibility. The two recessions of the past decade probably forced more flexibility into jobs---as jobs were eliminated, the associated responsibilities and tasks were assumed by the remaining employees. SBP is a sound idea that has a place, but lacks broad appeal as a business necessity and requires a substantial investment of time and resources to establish and administer.

Congratulations, Margaret, on stimulating such a great exchange of solid coherent content! This is a wonderful summary of present wisdom about the "new and innovative" compensation approaches that will become the standard best practices at the most successful employers in the future.

Those who embrace and perfect these methods will maximize their investments in human talent. They will stand out. Others will stick to tradition and continue to lag far behind, secure in their followership.

One of the primary rationales of the people-based pay movement is that, unless skill acquisition is encouraged with pay increases, individuals will have little incentive to develop their skills and knowledge. In recent years, other forces have given considerable strength to the emphasis on skills, perhaps in ways not envisioned when the people based pay movement began in the 1980s. In one important respect, the forces are stronger, because they relate to something more important than pay—employment, as follows:

• Today, one would be hard pressed to find a profession that does not have a program to certify that an individual has a specific set of knowledge, skills andabilities. Employers invariably require,
or give preference to, candidates who have professional certifications.

• The demise of lifelong employment and the tight labor market of the 1990s have made people aware of
the need to develop skills that are transferable and marketable.

• Opportunities to learn and develop new skills rank high in terms of factors that drive the retention of employees, even though no financial
rewards are offered. IT employees are described as operating with a “grow or go” philosophy.

• The move to pay for performance also has increased the importance of skill and competency development, as people have sought ways to improve
their performance and pay.

As my Comp Prof John Fossum said, competencies are "squishy". That made sense to me then (1996) and makes even more sense to me now (2016).

FWIW, I do really like the idea.

I just don't know how you operationalize them in a way that works versus market, owners, and the plaintiff's bar.

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