Developping a Coherent Pay Structure Amidst Changing Skills Requirements

Tagged: compensation, pay strategy, pay structure
Authors: Jean-Marc Riss and Vincent Held, Pro Mind Consulting SA
New priorities in terms of competency profiles
Since the 1980s, structural changes in organizations that have moved from pyramidal organizational charts to workflow-oriented structures caused a reversal of priorities in terms of the relative importance of knowledge, know-how and personal skills (illustration).
Indeed, in the past, the knowledge acquired in the course of one’s professional training generally represented a lifelong asset. Nowadays, such type of knowledge has a life-expectancy of no more than a few months in certain fields of activity – such as the emblematic Web 2.0 technology or some cutting-edge communicational sectors.
On the contrary, quite a few interpersonal skills such as autonomy, listening, openness to change and the ability to anticipate changing needs, have become basic requirements in order to cope with the management of the company’s (internal and external) customer-supplier relationships (illustration). Also, certain types of know-how such as the command of project management, used as a tool to cope with complexity and uncertainty, take a prominent place at all levels of the organizational structure.
Impact on HR strategy and compensation policy
The organization will thus benefit from including this paradigm shift in its human resources strategy, and especially in its compensation policy. Indeed, rewarding the behavioral and technical skills that meet its strategic orientations will enable the organization to position itself competitively in the labor market, thus giving it the best chances to attract high potentials with competency profiles that match its culture.
Here are a few examples of elements that could be integrated into the organization’s compensation policy:
  1. Highlighting and rewarding key responsibilities: identifying activities with a strong added-value for the conduct of business operations.
  2. Highlighting and rewarding key skills: identifying the personal skills that contribute to strengthening the organization’s culture and its long-term development goals.
  3. Highlighting and rewarding the management of workflows: assessing the impact of a given job’s customer-supplier interactions on the organization’s operations.

The next step consists in using such assessment criteria in order to evaluate the diverse jobs under consideration and determine the organization’s pay grades. Please note that, regardless of the method used to rank jobs according to their relative importance for the performance of the organization’s business operations, it is important that this process be carried out transparently.

This may for example be achieved by assigning a “point value” to each job. In this case, each evaluation axis receives a weighting (example) that reflects its importance for the organization’s operations. In this approach, both the calculation parameters and the rubrics of the questionnaires used for the evaluation may be adjusted to the organization’s everyday reality and strategic orientations. Moreover, presents the advantage of allowing for a fully transparent “correction” of job values (example), in order to account for such factors as the scarcity of qualified candidates in the jobs market or the cost of training and integrating successors.

Conclusion

Compensation policy is a key development axis for all organizations that wish to integrate the new paradigm in terms of skills requirements into their management. The simultaneous adaptation of specifications will allow the organization to develop an overall consistency in the management of its human resources, from recruitment to succession planning.

Further readings: