Pay For Skills

Pay for skills

NEXT GEN PAY----- PAY FOR SKILLS What will be the next round of pay and reward creativity? The context of pay and reward innovation has evolved dramatically in response to an expanding and changing global community and economy. Going forward, pay and reward designs must be defined in terms of adding value to the business. Often organizations recognize a need for new reward directions but are sometimes slower to execute new alignments than to acknowledge the need to change. Prior generations of invention brought us such great tools as variable pay, performance shares, cascading goals for performance management, and multisource performance feedback. However, the strong connection between reward design and business goals has been elusive. So the new generation of pay and rewards should reflect a much tighter relationship between business outcomes and rewards. Another essential innovation on the fast track is more efficient pay and reward management The next great pay and reward innovation should, in our view, focus both on a key business issue and on making pay and reward solutions more efficient

Paying for Skills: The rebirth and revitalization of pay and reward solutions that permit organizations to pay for jobs where that makes sense but also to pay for skills when that best fits their needs. Enabling paying for skills is a key priority for the next few years. This involves paying for skills for not only manufacturing and other nonexempt jobs but also for exempt jobs where skills and competencies are critical for outcomes. The need for an improved business focus by human resource programs has made what people do and how they do it increasingly significant. Organizations want to nurture and grow skills, competencies, and capability, and this implies paying not just for generally described jobs but also paying for skills the organization needs. However, although paying for skills makes great sense, the solutions offered to date haven’t been practical to the bottom-line business leader. Skill pay has struggled under the burden of complexity and bureaucracy, paperwork, and a sluggish response rate. The compelling business case for paying for skills is that pay and rewards are powerful communicators of business directions and values. So what people are paid for matters. If an organization wants to pay people to try to get a job in a higher salary grade, then a system focused on paying for jobs is the route to choose. If, instead, the organization wishes to make it attractive for people to acquire and apply skills that are essential to business success, then paying for business-relevant skills is preferable to paying for generally described jobs. This is not an incentive programe where by the employee wins a certain size carrot for reaching the maximum incentive. This is not a system of discipline where by the employee wins a whack with a certain size stack for failing to reach an arbitary goal.

What Pay for Skill is: • • • •

Tools for monitoring and helping to improve overall knowledge base. Tool to monitor the effectiveness of quality and productivity. Tools for analyzing performance of group of people Tool to determine pay level.

The urgent need to make the business use of skills more practical isn’t just a pay issue. Training, development, succession planning, performance management, recruitment, selection, placement, and nearly every human resource issue organizations face need to evaluate skills. Skills and the

bibin

1

Pay for skills ability to translate them into performance is the cornerstone of contemporary human resource management. What’s needed is a skill solution that goes beyond pay to all aspects of human resource management. This requires the development of a readily assessable library of skills that can be used by organizations and people to assemble the skill mix that reflects the work to be done in the organization. As the need for skills changes and new skills emerge, the library must adapt. Skills must be “priceable” in the external market so people and organizations have an idea of what their skills are worth. Organizations must be able to pay most for skills that are both most valuable in the marketplace and worth the most to the business. Businesses must be able to utilize job-based systems in one part of the organization and skill-based systems in another and be able to relate people in one system to those in another. And organizations need to move people from system to system without creating extreme discord and disruption. All the skill-based human resource systems must be linkable. That means performance management and succession planning are tied to skill learning and development. People must be “profitable” in terms of the skills they possess. People with specific skills should be able to seek work that needs those skills. And organizations that need specific skill sets must be able to find the people who have these skills. How well skills are applied to do work must be discernible. The move to skills requires the application of current, timesaving, and readily accessible technology. The needs of an skill pay solution include the following:

•

Skills Library: An Internet-based way to access well-defined skill combinations in order to determine what skills are needed to perform in a specific organizational role and to use the definitions in the skills library to define the basic elements of work. The definitions should be concrete and based on real skill differences, not merely semantic differentials. The skill definitions should be standardized in order to provide a future for a large survey of the market value of specific skills.

•

Skill Profiling Capability: Based on the skills library, a way to develop accurate skill profiles that combine multiple skills and skill sets to match how work is actually performed in an organization. Provides profiles that combine skills commonly appearing together in work situations. Permits the organization to add or delete skills flexibly from a role being assigned to an individual to reflect actual skills needed to perform the required work.

•

Methodologies for Market Pricing Skills: Solutions for approximating the market value of skills from the measured market value of defined jobs. Estimating the value of skills from the value of jobs that normally require these skills. Ultimately being able to directly survey the market value of skills defined in the library and in skill profiles. Permits organizations to anchor skill pay solutions in the market. Prevents possible inflation of skill pay costs that may result from the absence of market information that guides the payment of certain skill combinations.

•

Skill Pay Programming: A system for paying people for the skills they have and use to perform the work they are assigned. Links the skills library, the skill profile of the individual, and surveys or approximating the market value of skills and skill profiles to how much the individual is paid. The solution will have mechanics of how people’s pay is adjusted, how the acquisition of skills is paid for, how the application of skills is rewarded, what happens when skills become obsolete and people need to acquire new skills, and the like. It is the “how paying for skills works” part of the process

•

Skill Performance Management: A methodology for evaluating skill competence and skill performance that results in the individual’s work performance. Standards of skill performance that can be evaluated by multiple means such as observation, work

bibin

2

Pay for skills samples, testing, and in-work performance reviews. Linkages between the performance management outcome and other skill-based human resource tools. Tools that translate the acquisition and application of skills into performance. Provides guidelines that suggest what happens when a skill is learned. Defines the importance of a skill and how fast the skill is learned. Helps the performance process by making qualitative and quantitative judgments about how well the skill is learned and applied

•

Skill Training and Development: Teaching tools for skill development. Electronic education for managers to use to train people and for individual selflearning to develop the needed skills. Teaching solutions that adapt to changes in skill needs. Linkages to performance management and paying for skills to permit testing and evaluation as well as pay for accomplishment. Relates training and development to the process of evaluating whether or not the individual is performing at a satisfactory level. Also provides tools for skill improvement if skill is deficient.

•

Succession and Advancement: Skill progression tools that help create a way to move to work of more responsibility by acquiring and applying skills the organization needs. Career paths that are associated with skills and how important and difficult to acquire and apply the skills are. Changes to how people grow and add values that are focused on demonstrating needed skills rather than jobs and job titles. Communicates a route for people to follow to higher pay and more of the critical skills

•

Recruitment, Selection, and Placement: Tools to help attract the people with the needed skills to the organization and subsequently select and providing them work that utilizes these skills effectively. Methodologies that set a priority of keeping people with critical skills in the event of talent cutbacks. Facilitates the evaluation of skills and hiring people with specific skills. Permits focusing on hiring people that satisfy skill needs, not just people who have held jobs with similar-sounding titles in other organizations. This seems a tall order for a human resource program with a foundation of skills. But not really a major challenge for an Internet application. It combines the features organizations have developed and implemented by means of manual skillHR/based human resource solutions but are not linked or integrated. Most of these program elements exist in either HRIS systems or on PC-based systems. The key issue is one of human resource applications on the Internet. The Internet has not proven to be a highly viable way to get products in the hands of users when the product is administered and monitored on the Internet, however. The challenge of managing confidential pay and reward data on the Web can probably be addressed by some sort of Intranet tool that translates Internet information into a tool applied within the organization

Problems on Paying for Skills: • •

•

bibin

None of the HRIS systems on the market is designed to manage a pay system based on the skills individuals possess. Skill pay is one of the most over-engineered of all possible human resource systems. Because paying for skills rather than jobs is so different from what people are accustomed to, organizations developing such solutions are more likely than not to develop them with considerable employee and management involvement. The design process becomes very linear, involved, and sometimes confusing because most organizations that are implementing such programs do not have experience with such solutions

3

Pay for skills

Conclusions This is a good time to challenge providers of Internet human resource tools to develop something they are all well qualified to deliver. Organizations are in dire need of a pay solution that matches the interest businesses have in making skills the foundation of human resource planning. And at the core of it is paying for skills.Skill pay made great business sense except for the problems that the Internet is ideally suited to solving What we need is someone to step forward to develop and implement something that will provide organizations with the next great innovation in compensation. And that could be a practical and streamlined way to implement paying for skills. Not that this will ever completely replace paying for jobs. However, for some organizations, it is likely a way to encourage people to acquire and apply the skills that most help the organization be successful. And in the final analysis that’s what a pay program should do to be deemed a success. The next generation of pay and reward innovation will be closer to the business of organizations than prior innovations. And it is likely that a combination of the Internet and paying for the skills that add value to the business may just be how the future will be defined.

bibin

4