DILEMMA: Heather Jefferson is the HR manager at a manufacturing plant for Mother Nature’s Best, a food processing company in the United States. Competition in her industry is fierce, and executives have pulled every lever they can in order to increase productivity and enhance profitability. They have upgraded technology, adopted new information systems, tightened the supply chain, and begun “lean six sigma” initiatives. Now, senior executives are asking the human resource function to help in innovative ways. Some executives have suggested that a skill-based compensation system for hourly employees would increase performance, based on successes reported from other companies in their industry. They suggest that this particular facility be a pilot to determine whether such a plan would work for the entire company.
What should Ms. Jefferson say to these executives?
SIOP and the Society for Human Resource Management (SHRM) are working to help organizations and employees in Ms. Jefferson’s position answer that question with an article published this June. “Skill-Based Pay” is the most recent addition to a research collaboration between the two societies, aimed at putting I-O psychology into the hands of HR practitioners.
The article, written by Gerald E. Ledford, Jr., president of the Redondo Beach-based Ledford Consulting Network, LLC, and SIOP Fellow Herbert G. Heneman III, Dickson-Bascom Professor Emeritus in Business in the Management and Human Resources Department at the University of Wisconsin-Madison School of Business, is the second article produced through “Publication and Dissemination of Science to Practice: A Research Collaboration Between the Society for Human Resource Management (SHRM) and the Society for Industrial and Organizational Psychology (SIOP).”
The premise of the project, which was initiated under Past President Gary Latham’s presidency, is to infuse the science behind the I-O psychology and human resources disciplines into management practices for daily use in the workplace. (Visit the collaboration’s page on SIOP.org or the SHRM website!)
The collaboration has three main goals, explained SIOP Fellow Nancy Tippins, who originally chaired the SIOP Science for HR Board, which led the collaboration with SHRM. The goals include:
· Make the science of I-O psychology accessible to SHRM members
· Guide SHRM members in evidence-based HR practices
· Enhance the visibility of the profession of I-O psychology
To accomplish these goals, SIOP members have been working to develop materials about topics that will be published and distributed by SHRM to its membership.
“We hope to produce four articles per year that address what we know and how what we know is relevant to the practice of HR,” Tippins explained at the onset of the project. “The articles will be easy to read and highly accessible to HR professionals.”
In recent months, guidance of SIOP’s work for this initiative has shifted to the Professional Practice Committee, chaired by SIOP Member Rich Cober.
The first product of the project, “Driving Customer Satisfaction Through HR: Creating and Maintaining a Service Climate,” was authored by SIOP Fellow Benjamin Schneider, senior research Fellow at Valtera and Professor Emeritus, University of Maryland and Member Karen Barbera, managing principle at Valtera. This article can found on SIOP website here.
The most recent article discusses skill-based pay (SBP), a compensation system that rewards employees with additional pay in exchange for formal certification of the employee’s mastery of skills, knowledge, and/or competencies. Skill is acquired and observable expertise in performing tasks. Knowledge is acquired information used in performing tasks. Competencies are more general skills or traits needed to perform tasks, often in multiple jobs or roles, explains the paper.
“In SBP systems, employees receive additional pay only after they demonstrate the skills, knowledge, and/or competencies that the system rewards,” the authors write. “Thus, SBP is a person-based system, because it is based on the characteristics of the person rather than the job. In more common job-based pay systems, pay is based on the job, which employees are entitled to receive even if they are not proficient in their position.”
The authors continue to discuss the background of skill-based pay and how it is established, including a list of frequently asked questions, as well as answering the question of “What should Heather Jefferson say?” by offering practical advice and evidence-based solutions.
To read the complete article “Skill-Based Pay,” click here!