There are three main approaches to creating internal pay structures: competency-based, skill-based, and job-based. Competency-based structures link pay to demonstrated competencies, skill-based structures link pay to all skills attained regardless of job, and job-based structures link pay to the job performed. Each approach has different procedures, employee focus, advantages, and limitations.

1. Many Ways to Create Internal Structure Business and Work -Related Internal Structure Person-based Skill Competencies Job-based Job analysis Job descriptions Job evaluation: classes or compensable factors Factor degrees and weighting Job-based structure PURPOSE Collect, summarize work information Determine what to value Assess value Translate into structure (Chapter 5) (Chapter 5) (Chapter 5) (Chapter 6) (Chapter 6) (Chapter 4) Skill analysis Skill blocks Certification process Person-based structure Core competencies Competency sets Behavioral descriptors Person-based structure

2. Skill - based pay ( SBP ) structures link pay to the depth (for a Specialist) or breadth (for a Multi-skilled generalist) of the skills, abilities and knowledge a person acquires that is relevant to the work . These structures pay individuals for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of those particular skills. In contrast, a job-based plan pays employees for the job to which they are assigned, regardless of the skills they possess.

4. Skill analysis - a systematic process to identify and collect information about skills required to perform work in an organization…just like job analysis does for a job

5. SKILL CATEGORY Grouping of related skill blocks of varying skill levels that represent all activities of a single job family or steps in a process; for example, production technician. SKILL BLOCK Grouping of skills, activities, or behaviors; for example, bearing housing assembly. SKILL Smallest unit of analysis, a specific statement of what a person does; for example, inspect oil levels and all filters. Skill - Based Terminology

13. CORE COMPETENCY COMPETENCY SETS COMPETENCY INDICATORS Taken from mission statement; for example, “business awareness.” Grouping of factors that translate core competency into observable behavior; for example, cost management, business understanding. Observable behaviors that indicate the level of competency within a competency set. For example, “identifies opportunities for savings.” Competency - Based Terminology

15. Criteria for Evaluating the Usefulness of ALL Pay Structures How well do they achieve their objectives Reliability of Job Evaluation Techniques Validity / Usefulness Acceptability

17. SUMMARY:Contrasting Approaches (1 of 2) Be sure competencies add value Provide competency – developing opportunities Control costs via certification, and work assignments Utilize skills efficiently Provide training Control costs via training, certification, and work assignments Link employees to work Promotion and placement Cost control via pay for job and budget increase Managers’ focus Competency development Skill acquisition Promotion Pay increases Based on competency developed / market Based on skills certified/ market Based on job performed/market Pay structure Certification and price competencies in external market Certification and price skills in external market Assign points that reflect criterion pay structure Mechanisms to translate into pay Competency levels Skill levels Factor degree weights Quantify the value Competencies Skill blocks Compensable factors What is valued Competency - Based Skill - Based Job - Based

18. Contrasting Approaches (2 of 2) Potential bureaucracy Requires cost controls Potential bureaucracy Requires cost controls Potential bureaucracy Potential inflexibility Limitations Continuous learning Flexibility Lateral movement Continuous learning Flexibility Reduced work force Clear expectations Sense of progress Pay based on value of work performed Advantages Competency analysis Competency certification Skill analysis Skill certification Job analysis Job evaluation Procedures Seek competencies Seek skills Seek promotions to earn more pay Employee focus Competency - Based Skill - Based Job - Based