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In the interests of increased competitiveness, employee retention, and other worthy business goals, highly structured workplace environments are being discarded in favor of amorphous/flexible ones, yet tradition-bound and hierarchical pay scales, job evaluation systems, and the like persist. As a result, one of the standard criticisms of today's HR/compensation management practice is the failure of its pay and reward strategies to keep pace with changes in how people now work. If you have a sinking feeling your company fits this bill, PFP has a resource for you.
Two Ph.Ds, N. Fredric Crandall and Marc Wallace, Jr., have written a guide designed to help managers make a better transition into what they call the "virtual workplace." In their book, Work & Rewards in the Virtual Workplace (for ordering information, see below), they define today's work environment as "a world where networks of people engage in work, but aren't bound by the traditional limitations of time and space (they may not work in the same place or keep standard business hours)."
What's an HR/compensation manager to do? To better align your company's HR/compensation practices, start at the beginning-with your base pay approach. Crandall and Wallace assert that the "base pay progression policy that best serves the virtual workplace is skill- or competency-based pay. Under a skill-based system. . . a person's pay steps are matched to increasing skills or competency to manage an entire business process. A person enters the work design and role at an entry level of pay. He or she achieves a target high level once he or she is fully qualified."
But skill-based pay is no walk in the park.
While it is well suited to today's tumultuous workplace, the authors warn that skill-based pay "is expensive and it requires a substantial investment in training and development." That is not to say it can't be done, and if your company is considering some variation on this theme, Crandall and Wallace offer the following "hard-won lessons" of skillbased pay from companies who have successfully implemented such plans. (PFP note: In their discussion, the authors use skills and competencies interchangeably, for reasons explained below.)
1. First, build an economic model. In essence, this requires HR/compensation managers to make a business case for their plan,...