Are you being paid for your competencies?

A PRIME challenge facing most organisations today is not how much to downsize in order to keep afloat in a dangerously fickle market; but retaining the good employees that they do have. In a cutthroat business environment where job-hopping is common, maintaining the level of worker satisfaction has become a critical strategy of employee retention.

The new economy is really about people revolution. But in the process of being part of the rat race many companies have forgotten to upgrade their HR departments and in doing so have lost an important competitive edge. Even promising HR tools like competence - pay models seem to be dying.

There is never a quick-fix solution to an organisational problem and, even if you follow the rules to a "T", you can pretty much guarantee that it still won't be all smooth sailing.

It is difficult to find organisations where the staff is satisfied with their employers and happy with the work they are doing.

One old fashioned way of improving employee performance is by recognising and rewarding effort.

Competency pay is one way of doing so. Rewarding employees for their ability to make the best use of their skills and competencies in accordance with the organisation's needs was the logic behind this once-popular HR tool. Unfortunately the enthusiasm for it is certainly on the wane. Though competencies at the workplace gained attention in the 1990's; debate still continues over what these competencies are and how they can be measured. A competency has been variously described as, " an underlying characteristic of an individual that is causally related to superior performance in a job situation."

Traditionally the compensation system was based on work and (it's consequent) rewards. This approach however, straight-jacketed the employee in a specific set of duties making it difficult for him to change with organisational needs.

By the 90's most organisations started adopting a compensation system based on the skills or competencies of the employee rather than paying him for carrying out duties he was assigned.

This competency - pay model was based on the assumption that different organisations need different competencies to retain the cutting edge and stay ahead of competition. For instance, for some customer care could be a competency factor while others consider marketing or training to be rather more relevant.

Unfortunately, the scheme did not quite work out as efficiently as was envisaged.

With the economic downturn many firms slashed not only employee overtime and work hours, but compensation payments also, leaving employees with dwindling paychecks.

A study carried out in 1996 revealed that organisations still focused on the same old competencies irrespective of the businesses they were in. They continued to include the tried and tested areas like customer care, teamwork, communication, technical competence and leadership skills.

The study concluded that organisations succeeded not because of different competencies but because of the different ways of execution of the competency plan.

Role model

If managers want employees to take on new roles, it'll help if they reward new behaviour. The success of competence - based pay depends on this factor. This will also motivate the employees into gaining new skills and becoming valuable contributors to organisational success.

However, managers will do well to avoid some of these common pitfalls while designing their competency plans.

The competency models in vogue are too complex. They are not user-friendly.

This is because competency models have always been used for training & development, performance management and succession planning. The compensation element was included only recently.

The idea now is that organisations should develop models with a built-in compensation factor.

If the employees are not convinced about the importance of the competencies the organisation is focusing on, then the model will be a disaster from the start.

Any deviation in the pay-structure based on `perceived' competencies can cause an organisation irreparable harm. It is far easier for employees to accept a vague career development path, which does not have a direct impact on their pay packet. Any mismatch in compensation due to a vague competency model will not be happily accepted.

Different organisations have different needs and competencies. It is imperative that competencies that are unique to an organisation are integrated in the model to avoid any pay discrepancy.

Managers and employees need to sit together and discuss their individual model. It can be a time - consuming effort as the process, evaluation and review of training needs, take time to get streamlined.

A powerful HR tool, competence-based pay model should be integrated into the company compensation scheme right from the beginning so that it is easier and rather more practical in its implementation.

Competency-based approaches can be utilised to build multi- skilled, flexible and dynamic organisations.

PADMA

padma.hyd@cnkonline.com