Page 168 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Unit 10: Compensation and Benefits

business, nature of technology, attitude of unions and HR strategies of the organisation. It has Notes
the potentiality to reduce labour costs while sustaining motivation of employees and
competitiveness of the organisation. Before introducing performance related pay it is important
to study the likely impact on employees motivation and create performance oriented culture in
the organisation. It involves developing a proactive attitude through dissemination of proper
information, consultation, communication and training and development of employees.

10.6.1 Competency based Pay

Competencies as defined by the experts are those demonstrable characteristics of the person,
including knowledge, skills, and behaviors, that excellent performers exhibit more consistently
and more effectively than average performers.
Precisely, a competency is an underlying characteristic of a person or organisation which enables
to deliver performance in a given job, role or a situation. Competencies can be broadly classified
into three categories, namely:
1. Organizational competencies are unique factors (outstanding customer service, excellent
product development capabilities, superb innovation processes, flexibility in manufacturing
processes, etc.) that make an organisation competitive; some of the examples for
organizational competencies include Sony-miniaturization, Phillips-optical media, Honda-
engines, and Intel-microchip.
2. Job related competencies are those that are required to carry out an assigned operation in
an effective way. These are specific to a job and vary from job to job.
3. Personal competencies are basically behavioural competencies-in addition to job related
skills and knowledge-such as taking risk and initiative, delivering results, showing
commitment and adaptability when required.
Competency based Pay plan is a reward plan that pays for the employee's range, depth, and
types of skills and knowledge, rather than for the job title that he or she holds. Employees get
paid for what they bring to the job (including their personality traits, attitudes, motives, etc.)
and what they are capable of doing – if not immediately – in future.
According to Brown and Armstrong, 'Competency-based pay can be defined as paying for the
development and application of essential skills, behaviours and actions which support high
levels of individual, team and organizational performance.
Competencies required for carrying out a job effectively?
1. skill sets

2. knowledge sets
3. insightful selling ability
4. ability to be direct, yet sensitive
5. ability to keep the larger objective/goal active
6. ability to stay calm under pressure

7. ability to be an effective mentor
8. creative solutions to difficult challenges
9. effective negotiating abilities

10. consistently demonstrates selfless team spirit

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