pay for performance: building the foundation through job competencies
DESCRIPTION
You say you have a pay-for-performance philosophy, but have you defined what great performance looks like across the jobs in your organization? Do managers throughout the company measure performance and allocate rewards consistently? Establishing a job-based information architecture across your people processes is the only way to consistently measure performance and lay the foundation for a true pay-for-performance program. Beyond simply writing job descriptions, defining what “good” and “great” look like and providing a framework that the organization understands and can evangelize is a challenge. But consistency and rigorous application are the only ways to meaningfully connect what you need people to do, how they do it, how to get them to do it better and what that’s worth, not just in pay, but in sales, customer satisfaction and employee engagement. This webinar will discuss: The information challenges of pay for performance. How job-specific competency models set the foundation for defining and assessing performance. Some best practices to establishing a job-based taxonomy.TRANSCRIPT
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Speakers: Gordon RitchieDirector, Competency SolutionsKenexa, an IBM Company
Moderator: Kellye WhitneyManaging EditorTalent Management magazine
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Kellye WhitneyManaging EditorTalent Management magazine
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Gordon RitchieDirector, Competency SolutionsKenexa, an IBM Company
Pay for Performance:
Building the Foundation Through Job Competencies
May 2013
Copyright Kenexa®, 2013 8
AGENDA
1. Kenexa, IBM and The “Smarter Workforce”
2. What is pay for performance
3. Why do we care about pay for performance
4. What does the workforce want?
5. How do we link Job Performance and Pay using competencies?
6. Q & A
Copyright Kenexa®, 2013 9
IBMSMARTER WORKFORCE
Leaders and employees transforming organizations for business advantage in three significant ways
AttractAttract and recruit top talent and source the best people for your
culture and business needs.
Land the perfect job:Employee strengths, career
aspirations, and personality are matched to the role and company
culture.
EmpowerEmpower employees to hit the ground running and to continually learn and develop their skills so that
they can make the greatest impact.
Hit the ground running:Employees are empowered with the right tools and easily connect to expertise across the organization
to grow their skills and start contributing immediately.
MotivateBuild a workforce of innovative leaders and teams that solve problems together—resulting in stronger engagement, increased productivity and higher profit.
Make an impact:Employees are motivated to outperform, using tools to measure their progress, and transform the organization and their careers.
A Smarter Workforce has employees who are:
Motivated, Committed, Loyal, Productive, Creative, Proactive, and High Value
What is pay for performance?
Copyright Kenexa®, 2013 11
POLL:Does your organization have a “Pay for Performance” philosophy? Yes/No
Copyright Kenexa®, 2013 12
• People are our biggest asset• Biggest single expense = salary• Critical competency ‐ Teamwork • Individual results and reward • What is pay? Salary/Benefits/?• What is performance, good bad or otherwise?• Proficiency does not equal performance• Careers becoming assignments, that are shorter in time than the performance cycle.
• HR Big Data; begets Big Data
Copyright Kenexa®, 2013 13
WHAT IS PAY FOR PERFORMANCE?
With your 3.0% increase budget … a couple of questions
How can you give your average performers a 3.0% increase while at the same time differentially rewarding your top performers AND still only spend 3.0%?
What does your average performing employee expect to get as an increase?
Copyright Kenexa®, 2013 14
PAY FOR PERFORMANCE
• 3.0% increase budget
• 2 employees each “doing their job”
• They each get a 3.0% increase
Copyright Kenexa®, 2013 15
Apart from that Mrs Lincoln, how was the Performance?
• What does good look like?• What numbers are on your performance form? How are they defined?
• Do you, your manager and your manager’s manager agree on what the explicit difference between a 3 and 4, or a 2 and a 3?– Is that the same as your Compensation team?– Is that the same as your Org Dev team who built the performance process?
Copyright Kenexa®, 2013 16
PAY FOR PERFORMANCE• A compensation philosophy that asserts that an individuals pay is a function of their performance
• Performance demonstrated consistently over an extended period of time
• Pay is achieved over time, not overnight
• Performance is something that can change.
• An organization: • must define its clear consistent expectations of performance levels for
each job role
• cannot avoid its responsibility to define what it expects, through individual empowerment
PAY FOR PERFORMANCE
Why do we care about pay for performance?
Copyright Kenexa®, 2013 18
“THE RECESSION IS DECISIVELY OVER”
Copyright Kenexa®, 2013 19
Cost Reducing MeasuresWhich cost reducing measurements did organizations take as a result of the economic downturn?
Copyright Kenexa®, 2013 20
• Increase budgets in the U.S. bottomed out in 2009 and the rebound is yielding increased budgets but still below the pre-recession levels
“For the first time since 1980, the U.S. rate of inflation is higherthan the average total salary budget increase”
WorldatWork – August 2011
PAY BUDGETS: Whats the first thing to change?
2008 2009 2010 2011 2012 2013
Kenexa Compensation 3.0% 3.0% 3.0%
IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 3.0%Aon/Hewitt 3.7% 1.8% 2.4% 2.7% 2.9% 3.0%Buck 2.9% 2.9% 2.7% 2.8% 3.0%
Conference Board ‐ ‐ 2.5% 2.5% 3.0% 3.0%
Culpepper 3.9% 1.7% 2.7% 2.9% 2.8% 3.0%Hay 3.0% 3.0%Mercer ‐ ‐ 2.7% 2.9% 2.9% 2.9%Towers Watson 3.4% 1.7% 2.8% 2.7% 2.8% 2.9%WorldatWork 3.8% 1.9% 2.8% 2.9% 3.0% 3.0%
Copyright Kenexa®, 2013 21
• Certain HOT Jobs continue to outpace the market exceeding the overall market average of 9% in the 5 years between 2007 and 2012
Under or Over Paying: How do you know it’s the same as your job?
Job Title ChangeLong Term Care Executive 27.1%
Certified Occupational Therapist Asst 25.7%Hardware Engineer III 20.3%Chemical Engineer III 19.4%
Staff Nurse ‐ Surgical First Assistant 17.4%Nurse Practitioner 17.2%
Certified Nursing Assistant 16.4%Network Administrator 15.1%Software Engineer III 14.7%
• Others jobs aren’t so lucky significantly lagging the 9% average over the last 5 years
• Differences between HOT jobs NOT so HOT jobs underscores all the more the need for good data
Job Title ChangeAccounts Receivable Manager 2.9%
Administrative Services Supervisor 1.5%Communications Representative III 2.1%
Facilities Manager 2.3%Financial Analyst II 4.7%
Mainframe Programmer II 2.9%
PC Maintenance Technician II ‐6.5%
Copyright Kenexa®, 2013 22
In the US, my pay is directly related to how well I perform.
Source: 2011 Kenexa High Performance Institute WorkTrends survey
52% DO NOT see a link
19% uncertain
29% DO see a link
THE LINK
Copyright Kenexa®, 2013 23
36%
17%
0%
10%
20%
30%
40%
50%
60%
70%
Pay Unrelated toPerformance
Pay Related to Performance
Worldwide
Worldwide the percent of employees who are seriously considering leaving their organization
THE LINK: WHY WE SHOULD CARE
Source: 2011 Kenexa High Performance Institute WorkTrends survey
Copyright Kenexa®, 2013 24
What does it cost? **
• Evaluating Talent
• Retaining Talent
• Engaging Talent
• Acquiring Talent
Cost of a poor hire: $300K-$500K
Operational efficiency rate due to poor employee
engagement: 30%
Cost of losing a talented employee: $250K-$500K
Value of a top performer: 2-4X performance of average employees
** From Human Capital Institute
Copyright Kenexa®, 2013 25
Reliance on “The Event”:• Once-a-year• Minimal communication• Reliance on manager’s memory• Little training• Employee empowerment
SO WHAT HAPPENED TO THE LINK?
Assessment Forms Became:• Too long• Too complex• Often designed to measure the
wrong things
What does the workforce need?
Copyright Kenexa®, 2013 27
WHAT ARE ANALYSTS SAYING…
“Best‐In‐Class organizations are more than twice as likely to identify competency data for each employee.”
“If we can apply science to improving the selection, management, and alignment of people, the returns can be tremendous.” Forbes Leadership Article February 2013
“… companies realize they cannot solve their skills shortages externally. To achieve competitive advantage, they must commit to developing the right skills internally” Corporate Learning Factbook 2012
SHRM recognized in their 2012 Employee survey, being recognized in using your skills is now the #1 employee job satisfaction issue, above pay, benefits etc.
Copyright Kenexa®, 2013 28
GLOBAL RESULTS: WHAT EMPLOYEES REALLY WANT
RESPECT
10%
Truth
20%Recognition 7%
ExcitingWork
18%Security
25%Pay
9%Educationand CareerGrowth
11%Conditions
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 29
RECOGNITIONA pat on the back from managers and the
organization at‐large20%
Recognition
I want to be respected and
recognized as a valuable team
member
Recognition when we do a good job - right now it is all
about getting chewedout when we mess up
More respect from senior
management
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 30
PAYFair compensation for a day’s work
25%Pay
Compensation that is fair and
respect(ful)
Good pay for agood day’s work
Unfreeze pay
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 31
Executive
Senior Management
Management; Senior Level Consultant
First Line Management; Senior Professional
Team Leadership; Technical Professional
Functions: Finance, Sales, HR, Marketing, Operations, Etc.
Competency ImpactCore and Leadership :
high impact, low frequency,
indirect
Technical: Tactical impact with high frequency, direct
Individual Contributor; Technician; Trainee
Make many operational decisions that impact direct product/service/customer facing actions. Frequency * Value can mean big numbers depending on either multiplier i.e.1000 Customer Reps, directed with poor operational management can be as impactful as one core or leadership competency.
Copyright Kenexa®, 2013 32
WHATS A DESCRIBING A JOB WORTH?$5, $50 OR $5,000
Attracting wrong applicants = wasted time and cost for selection, assessment and processing.
How many people do you interview and not hire?
Improved onboarding effectiveness = Achieve initial goals quicker
Sales = more sales sooner/few losses
Quality = shorter role familiarization time = increased performance
Focused activity = greater productivity
More accurate marketing pricing = optimized salary budgets.
Make it a tool that is used, and reused.
Copyright Kenexa®, 2013 33
CHALLENGES DEFINING COMPETENCIES
Copyright Kenexa®, 2012
Source: Competencies, Compensation and Technology Luncheons.- 2012
0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%
Manual process
Budget Constraints
Too difficult to define
competencies
Too many jobs
Lack of executive support
What prevents you from implementing competencies (or extending the competencies you
have) in your organization?
Copyright Kenexa®, 2013 34
POLL:
How many of you rate (as in 1=Bad, 5= Good) these types of competencies in your annual performance and compensation planning process?
1. Core/Foundational (same for everyone)2. Functional, aligned to the job family3. Technical job role specific
How to link job performance and pay using competencies
Copyright Kenexa®, 2013 36
Internal jobs and External SourcesYou need to analyse your benchmark jobs
– Similar/Common job title– Job Description – Type/Level: IC, Lead, Manager, Professional, etc– Status (exempt/non‐exempt)– Common expectations on the job
Compensation is used to using data.But there is no common performance data.What we need is a clear consistent way to describe what it is that’s required of a job, that defines what good looks like that can be used by employees, managers, and compensation analysts
Big data needs consistent structure, solvable measures, and common definitions.
Copyright Kenexa®, 2013 37
COMPETENCIES ARE THE FOUNDATION
Using a Competency Framework
provides a common language
for your Talent Management
strategy .
Used WITH technology
systems it integrates those
systems.
Functional Job & Competency Framework
Career & Succession
Planning
Learning Needs
Analysis
Risk Analysis
Recruitment & Selection
Resource Planning
Compensation
Performance Management
Copyright Kenexa®, 2013 38
The Pay for Performance Job Model
• Job Description – Title
– Summary
– Primary Responsibilities
– Compensation Market Data
• Competencies (KSA’s)– Definition – Behavior Statements
• Proficiency Target
– Performance Accelerators
• Learning References• Development Statements• Coaching Tips• Writing Assistance
– Interview Questions
Hierarchy and AlignmentJob Function, Job Level, Job Focus
Copyright Kenexa®, 2013 39
JOB SAMPLE: Job Title Benefits Manager
Job Band ID 3
Job Family Compensation and Benefits
Job Definition Manages the development and administration of employee benefits programs, policies, and procedures and ensures compliance with related regulations.
Job Responsibility 1 Provides leadership in the planning, design, and implementation of benefits programs (e.g. medical, dental, vision, disability insurance, life insurance, and employee assistance programs) and ensures all activities comply with legal requirements.
Job Responsibility 2 Oversees the collection and overall accuracy of benefits data located within the organization's HRIS; evaluates current benefits programs and identifies and monitors critical performance.
Job Responsibility 3 Manages vendor relationships to ensure adherence to required service levels for outsourced benefits providers..
Job Responsibility 4 Monitors the employee benefits eligibility and enrollment process to ensure employees meet eligibility requirements.
Job Scope Description
Designs, plans, and implements corporate benefits programs, policies, and procedures. Responsible for ensuring programs meet employee needs, comply with legal requirements, and are cost effective. Requires a bachelor's degree in a related area and at least 7 years of experience in the field or in a related area. Familiar with a variety of the field's concepts, practices, and procedures. Relies on extensive experience and judgment to plan and accomplish goals. A wide degree of creativity and latitude is expected. Performs a variety of tasks. Leads and directs the work of others. Typically reports to a head of a unit/department.
Base:Percentiles: 25%, 50%, 75%TCC:
Copyright Kenexa®, 2013 40
Compare Functional RolesJob Bands
1 2 3 4 5 6
Exec Mgmt Senior Mgmt Management; Senior Level Consulting
First Line Management; Senior Professional
Team Leadership; Technical Professional
Technician, Trainee, Administrator
Top Compensation and Benefits Executive
Compensation and Benefits Director
Payroll Manager Payroll Supervisor Benefits Analyst Payroll Administrator
Top Compensation Executive
Compensation Director
Corporate Insurance Manager Benefits Analyst, Sr. Benefits Clerk, Sr. Benefits Clerk
Top Benefits Executive
Benefits Director Benefits Manager Compensation Analyst,
Sr.Stock Plan Administrator, Sr.
Stock Plan Administrator
Compensation and Benefits Manager Benefits Supervisor Benefits
AdministratorCompensation Administrator
Executive Compensation Manager
Executive Compensation Analyst
Compensation Specialist
Workers Compensation Administrator
Workers' Compensation Manager
Compensation Analyst Payroll Clerk
Compensation Manager Payroll Clerk, Sr.
International Compensation and Benefits Manager
Copyright Kenexa®, 2013 41
COMPETENCY IMPACT
Functional Competencies
Core, Leadership
& Levels‐BasedCompetencies
Reflects strategy and cultureSupports selection and hiringReflects the leadership pipelineApplicable to all roles
Reflects functional strategy and key skillsApplies to all functional incumbents and candidates
“A combination of knowledge, skills and abilities (KSA’s) describing the demonstrable indicators of proficiency.”
Reflects job/role specific knowledge and skillsWell suited for skills assessment, skills inventory analysis and developmentApplies to incumbents and candidates by position
Technical and Domain Specific Competencies
Copyright Kenexa®, 2013 42
SAMPLE: COMPETENCY PROFILEProfile Name: Job Title Benefits Manager
Competency Code Competency Name Proficiency Importance
B0295 Business Orientation 3 - Extensive experience High
B0750 Budgeting 3 - Extensive experience High
B1020 Planning: Tactical, Strategic 2 - Working experience High
B1060 Effectiveness Measurement 3 - Extensive experience High
B1100 Standard Operating Procedures (SOP) 3 - Extensive experience High
I0480 Effective Communications 3 - Extensive experience Medium
I0700 Decision Making and Critical Thinking 2 - Working experience High
I1000 Managing Multiple Priorities 3 - Extensive experience Medium
I1010 Relationship Management 3 - Extensive experience Medium
I1020 Analytical Thinking 3 - Extensive experience High
L0010 Accountability 3 - Extensive experience High
L0070 Goal Setting 2 - Working experience High
M0810 Outsourcing 3 - Extensive experience High
THR000 HUMAN RESOURCES POLICIES, STRATEGIES AND ENVIRONMENT 3 - Extensive experience Medium
THR010 HR: Trends and Direction 3 - Extensive experience Medium
THR020 HR: Policies, Standards and Procedures 3 - Extensive experience High
THR030 HR Legal and Regulatory Environment 3 - Extensive experience High
THR110 Employee Counseling 3 - Extensive experience Medium
THR200 Compensation Management 2 - Working experience Medium
THR300 BENEFITS PROGRAMS 3 - Extensive experience High
THRV- Specific Benefits Plan Development 3 - Extensive experience High
Copyright Kenexa®, 2013 43
Competency ProficienciesCompetency Code THR200
Competency Name Compensation Management
Competency Description
Knowledge of and ability to design, implement and evaluate compensation programs, policies and processes within an organization.
Level 1 - Basic understanding
Describes key purposes (e.g. motivating employees) of compensation management.
Cites organizational examples of compensation management.
Lists government regulations and industry policies related to compensation.
Lists major compensation programs (e.g. executive compensation) used in the organization.
Level 2 - Working experience
Implements compensation packages for an organization's employees.
Assists in developing various compensation programs within an organization.
Maintains good relationships with staff from HR and business units.
Adheres to government and industry compensation regulations.
Conducts job analysis and salary survey activities within the department.
Level 3 - Extensive experience
Determines if compensation management objectives are in line with overall business objectives.
Oversees the implementation of compensation programs within the organization.
Advises the management team on compensation issues, such as pay structure.
Evaluates the effectiveness and competitiveness of existing compensation programs.
Improves implementation processes of different compensation programs, e.g. executive compensation.
Adjusts the organization's compensation polices based on market trends and industry policies.
Level 4 - Subject matter depth and breadth
Leads in aligning compensation strategies with overall organizational strategies.
Establishes organizational best practices for compensation program design.
Develops standard compensation program implementation processes that are suitable for the whole industry.
Monitors the market trends and industry directions of compensation management.
Champions organizational adoption of new methodologies and technologies for compensation management.
Elaborates on key issues of existing industry compensation policies; makes recommendations accordingly.
Copyright Kenexa®, 2013 44
Proficiency vs Performance
Copyright Kenexa®, 2013 45
Competency Code THR200
Competency Name Compensation Management
Learning References 15
LR1 BK-0417: Business Ethics: A Global and Managerial Perspective
LR2 BK-0833: Compensation and Motivation
LR3 BK-3011: Rewarding Excellence: Pay Strategies for the New Economy
LR4 PUB-HRDR: Human Resource Development Review
LR5 GOV-DOL: Department of Labor
LR6 ORG-ACOM: American Compensation Association
LR7 ORG-ECFC: Employers Council on Flexible Compensation
LR8 ORG-IFEBP: International Foundation of Employee Benefit Plans
LR9 ORG-SHRM: Society for Human Resource Mgmt. (SHRM)
LR10 ORG-WAW: World at Work
LR11 TR-005: Strategic Issues in Compensation
LR12 UNV-BOS: Boston University
LR13 VND-AHI: AHI's Employment Law Resource Center
LR14 VND-CPM: Compensation Venture Group, Inc.
LR15 WEB-HRLAW: Human Resource Law Index
Development Statements
Development Statement Group
Development Statement Name Development Statement Description
Quantitative Implement Compensation Packages
Implement compensation packages for 2 business units each month next year.
Quantitative Conduct Salary Survey Activities
Conduct job analysis and salary survey activities for 3 business units within the next month.
Qualitative Design a Compensation Program
Design an organizational compensation program (e.g. executive compensation) in one month.
Qualitative Evaluate a Compensation Program
Evaluate the effectiveness and competitiveness of an existing compensation program in 3 weeks.
Copyright Kenexa®, 2013 46
Competency Code THR200
Competency Name Compensation Management
Coaching Tips
Coaching Tip Group Coaching Tip Name Coaching Tip Description
Professional Development Attend Compensation Policies Training
Attend training sessions or conferences to learn about the latest industry compensation policies.
Career Building Assist in Compensation Program Development
Assist senior level colleagues in developing an organizational executive compensation program.
Improving Operations Consult Compensation Management Experts
Consult experts on how to improve the organization's productivity and competitiveness through compensation management.
Improving Operations Document Compensation Issues and Solutions
Document common compensation issues that are raised by the organization's management team and their associated solutions.
Relationship Building Organize HR SeminarsOrganize seminars for employees from HR and
business units to enhance their relationships.
Interview Questions
Interview Question Group Interview Question Name Interview Question Description
FitExperience with
Compensation Programs
What kinds of compensation programs have you designed?
Knowledge Describe Compensation Regulations
Describe the main industry and government regulations governing compensation.
Problem Compensation Issues from Management
What are common compensation issues that are raised by the organization's management team?
Solution Improve the Compensation Implementation Process
How did you improve the organization's compensation program implementation process?
Results Compensation Program's Impacts
What were the impacts of a compensation program you implemented on the business's overall performance?
Copyright Kenexa®, 2013 47
IMPLEMENTATION – SHORTEN THE PROCESS REUSING CONTENT
Develop and use quickly and update over time.Focus on buy‐in and change management processes.Make sure you get to the applications; don’t get stuck in model development
Get the “big things right”; “don’t dwell on the small stuff”.Apply existing materials and best practices in developing a rapid draft Focus on the overall architectureKey success criteria and themes.
Position models as prototypes for learning how to change behaviors (vs. a perfect output image).
ApplicationIntegration Iteration
Launch & Communication
ImplementationKenexa / IBM Competency
Development
80% of the effortRecommended Approach
20% of the effort
Typical Competency DevelopmentApplicationIntegration Iteration
Launch & Communication
Implementation
20% of the effort (if able to move out of development stage)
Typical Approach 80% of the effort
Copyright Kenexa®, 2013 48
SALARY MARKET DATAAggregated, employer reported
salary surveys.Monthly data modeling and updates
INTEGRATE YOUR TALENT MGMT TOOLS AND PROCESSES
Talent Management / LMS / HRIS
CAMD•Survey Mgmt•Aggregated Market Data•Salary Structures
Competency Manager Tool
* Edit existing, * Create new,
* Assemble New, * Compare
Competencies/skills
EXCEL Export
JOB COMPETENCY LIBRARY
Industry specific Job Functions JOB PROFILES and COMPETENCIES
TARGET PROFICIENCY level & Behaviors
Interview Questions, Learning Resources, SMART Goals, Coaching
Tips
Copyright Kenexa®, 2013 49
COMPETENCY IMPLEMENTATION (BEST PRACTICES)
Model Building•Ensure linkage between jobs, competencies and organization strategies•Keep models simple at launch•Add dimensional criteria and keep the momentum•Start with a library or Competency Framework
Applications• Focus on assessment and development first, then evaluation and pay applications• Integrate of the competencies with all processes, even if tools aren’t• Ensure consistency of applications rather than allowing too many variations
Change Management• Clarify and communicate specific objectives of your applications up front• Ensure top management and line management buy-in and ongoing support• Be focused in implementation (i.e., one function, one pilot group first)• Provide training and communication more consistently and carefully (building in training at
all stages of implementation)• Develop and consistently apply a measurement system used to evaluate the effectiveness
of implementation over time
Copyright Kenexa®, 2013 50
• Merit Pools:• We suggest that there be
two basic pools of money for merit increases:• Management pool• Employee pool
REPAIRING THE LINK
Each of these pools should have two subsidiary pools. One for those in the performance category and one for the balance of the organization’s employees addressing wage relevance to cost of living, etc.
Copyright Kenexa®, 2013 51
• Employee motivation to become a high achiever is increased
• The organization has a better chance of retaining top performers
• Lesser performers are motivated to increase performance level or look elsewhere
If pay increases are made contingent upon clear definitions of what good performance looks like:
PAY FOR PERFORMANCE
Copyright Kenexa®, 2013 52
DON’T FORGET!!
Pay for Performance, NOT
Increase for Performance!
REPAIRING THE LINK
Copyright Kenexa®, 2013 53
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