Case Scenario:
"Pay the person, not the job." Discuss what you think this statement means, why he would make such a statement, and how such a policy would be implemented.
Section: In This Article: Trends
Edward Lawler, author of Rewarding Excellence, talks about the Imposter Syndrome, person descriptions, and other matters.
Training & Development "Pay the person" is a concept you say has been around for a long time, but now is gaining currency in organizations. In your experience, who has this strategy well in hand, and who is late to the table?
Lawler If you look back [through] history, there were always people paid for their skills and knowledge. We had technical ladders, universities, pure knowledge institutions, and research and development labs where that was prevalent--but that was separate from the real business of the organization.
In the 1960s, we saw the outgrowth of knowledge or skill-based pay of people out on the shop floor and, in a few cases, in the office. In the information world--the paper-processing world--people who were handling insurance claims and dealing with customer calls, for example, were paid [more] as they gained more skills. Then, as employers began to require more--software engineers, programmers, and so forth--they tended to fit a pay-for-knowledge, pay-for-skills, pay-the-person kind of model. It began to be prevalent.
What's still missing, I think, except in some of the consulting firms and pure knowledge-based firms, are organizations that say, "This is the way we are running our pay and reward system." Most Fortune 500 or Fortune 1000 [companies] still have a number of employees who are on traditional job-based, job-description pay systems. There are exceptions. But, at the core, their programs are still job-based.
Moving away from that system are organizations that have gone to competencies. But, in many cases, they're using competencies along with job descriptions to manage human resources, training and development, and so forth.
So, I think we're in a transition period where we have a few organizations that employ only knowledge workers. I think it makes sense to them to manage the skills and knowledge of the individuals rather than the job vehicle. T&D Paying the person means paying for skills used now and for potential use ("can do" as distinct from "do"). That allows flexibility for the organization and for the individual; both can adapt to changing demands.
You write that having a backlog of skills is "a critical asset to the organization." Is it your sense that organizational leaders see it that way? Or are they asking whether they should pay for the acquisition of a skill they might need in six days or six months or maybe not at all?
Lawler I think that's always an issue, whether you're talking about production workers or software programmers or consultants. What is your [company's] inventory of skills that are unused at the moment, but that you can afford to have and are willing to invest in developing?
In the manufacturing setting, it comes down to, "Do I really want to pay someone to do two jobs when they are only going to do one job or one task, or be at one workstation? So what if they know the other workstation if I never want them at it?"
Research indicates that employees who know several different workstations and who have that combination of skills cost more money in terms of pay per individual. But you almost always get it back--out of the advantages of flexibility and understanding that come from [having employees who] know multiple steps in the production process. You need fewer people. Or, people doing the task who make better decisions. You get a return on [that cost], but there is always cost benefit pressure.
For softer skills or more specialized areas of knowledge, it's a little more difficult to make the argument that you really need backup skills or skills that give you more flexibility. Again, I think it's more obvious in consulting firms. They recognize that they're never quite sure what projects are going to come in the door next. Some redundant or superfluous skills in one moment quickly become critical the next moment. What work is like, and the turbulence of the projects you're working on, make the strongest case for people with multiple skills and the flexible ability to take things on.
T&D: And I guess it is being able to envision that return-on-investment and recognize it when you see it come around.
Lawler: Exactly. And you're not going to be able to make that sale in a very stable environment where people are doing essentially the same work year after year. You don't see very many of those environments anymore; there seem to be a few city governments where that's true, but not a lot.
T&D Leaders and managers are always looking for ways to motivate skill and knowledge acquisition when you have a pay-the-person scheme. Would you say that the desire for skill and knowledge acquisition is itself a competency that some people have and some don't?
Lawler Yes, I think that's right. The ability to learn multiple skills, multiple competencies, and a comfort level with that is to some degree a personal characteristic. That may not be easy to change.
Going way back to the selection and entry process, anything you can do to assess a person's learning ability and desire to be flexible [is critical]. I think there are essentially two things you can do. You can describe what the environment is so that [people] know they're not going to do the same thing for five years--get better and better at one particular set of tasks.
The other thing you can do is look at to [applicants'] history and see if they have shown some proclivity for learning multiple things and seeking out new learning and broader skill sets. Some behavioral interviewing tries to get at that.
T&D A number of times I have heard people say, "This is not the job I thought it would be" or "This task I'm doing isn't in my job description." Should there be a part of orientation that says if you are doing exactly the same thing a year from now, it's probably the wrong thing?
Lawler: If it doesn't fit your job description, don't be surprised. I think most job descriptions in the United States are two to three years out of date.
T&D Your argument for paying the person as opposed to the job makes sense. In fact, performers often view their worth more in terms of themselves, and less in terms of the job they hold.
Lawler I think historically that's the way people think about the world until they get into a bureaucracy and it gets hammered into them that that's not how a bureaucracy works.
T&D In conversations about pegging compensation levels to the market, I've made the point that no one is paid more than they think they are worth; they are paid the same or less than they think they are worth.
Lawler: That's not a totally inaccurate statement. Research suggests that people can at times feel temporarily overpaid, after they get a new job or after they get a large increase. But they quickly manage go through some kind of psychological rationalizations that make them decide that it really isn't overpayment.
There are a few cases of people--maybe because of low self-esteem or poor rationalization--who continue to feel overpaid. It's an interesting group. It can be anxiety-producing, actually, because you are always concerned that someone is going to find you out.
T&D Is that what you refer to as the Impostor Syndrome?
Lawler Yes. [People with] the Impostor Syndrome are concerned that they will get fired or laid off because they are overpaid. In the United States, when we find [out] people are overpaid, we tend to fire them rather than reduce their pay. We always assume that if we cut their pay, they'll be unhappy and won't be good employees after that. So, it's better to fire them.
T&D: So, self-perception of an employee's value to the organization or to the workforce at large is nearly always inflated by some degree?
Lawler Yes. I did some research on that. People tend to pick those aspects of their persona that are favorable and believe that those are the aspects that pay should [be based] on. For example, if they have a nice set of degrees, they think, "Hey, education is really the thing that should drive compensation." If they simply show up regularly and are always there on time, they think, "This is really critical. I do this well and, therefore, I deserve high pay." And they tend not to put so much weight on the [areas] where they are weak.
T&D: And it might be that the areas where they are weak are really the things the organization values.
Lawler: Absolutely. Their [strengths] might not coincide with what the organization pays for or values. What the organization values might not correspond with what the organization pays for or with what the individual thinks.
The typical person rates [his or her] performance at about the 80th percentile. So, people tend to believe they're doing a good job--certainly better than most of the people around them.
T&D Do you think a well-implemented pay-the-person strategy addresses that discrepancy?
Lawler To some degree, but I really don't see paying the person as a solution for people's fundamental perceptions about how satisfied they are with their pay. You hope to position them correctly in the external market and encourage them to develop the skills and knowledge that the organization needs.
You pays your money and you takes your chances
T&D In describing the move from "job" to "role," you write that what people do isn't determined by a job description as much as by "their ability to perform and act effectively and the type of work that needs to be done." I picture some kind of strategic skill acquisition plan-you call it a skills map--that keeps individual skills aligned with organizational needs.
In this whitewater world, is strategic skill development possible? Or is the skill development speculative and not strategic? The investment in training may or may not have paid off. How do leaders avoid that pitfall?
Lawler I don't see it as a pitfall. I see it as a reality: You're not always going to be able to make the right call about the next skill set you need people to learn and how many you need to learn it.
To me, what that means is that your pay-the-person [strategy] becomes more reactive and less proactive. In some worlds, you can be proactive. You can look a couple of years ahead and say, "We are going to need more of this and more of that," and you can key up for it. In other worlds, you're playing catch-up all the time.
The systems are equally good and, in many ways, a little better in catch-up [mode] because it gives people an incentive. [If they know what skills they] need to add, it will get them out of the "I really don't want to change I am pretty comfortable exercising my current skills" syndrome that slows down change.
T&D: Should the organization be intolerant of those who just want to stay where they are?
Lawler Part of the issue is to create a sense of discomfort for people who are unwilling to make that change. And [to give those people] a reason to change.
T&D: What management skills are needed to support a skill-based system?
Lawler It's easier for some managers than others. I think it's particularly difficult for managers who don't understand the skills that need to be learned beneath them. Some new matrix arrangements [allow] someone to take responsibility for managing the performance of a group or project team, and someone else takes responsibility for the technical knowledge of those people. So, different people are doing different parts of the assessment.
T&D Do leaders have to manage expectations around skill acquisition? If my pay is based on learning more, I may well expect the organization to provide me with a backlog of skills to learn.
Lawler That is a classic example of what has been called "topping out," and can occur [in two ways]: Either somebody simply works through the skill agenda that he or she has been given, or he or she never had a formal agenda but was constantly asked to learn new things. And then that stalls out.
I don't think there's an answer to that, except that by the time it occurs, that person probably has had more learning opportunities than he or she would have had under most systems and is reasonably well off. I haven't seen it result in massive turnover or dissatisfaction.
In some cases, people push for still more, and you just have to say, "No, it isn't there." And not everyone likes that, but it doesn't always have dire consequences. The other problem, which is probably more common, is people saying, "I don't want to learn any more, though I could learn more."
T&D What if I don't want to learn any of the things you want me to learn?
Lawler At that point, we may have to part company.
There are a few organizations that state formally in their contracts that learning is expected and your continued employment depends on your continued ability to learn and adapt. We're conducting a study, to be published in six to eight months, on the growing view of companies that tenure depends on employees' commitment to learning.
T&D Should people keep a portfolio of the skills they've developed and used?
Lawler Yes. As Tom Peters says in the jobs.com commercial, "Be the CEO of your own career." Part of being the CEO of your own career is having demonstrated skills that you have certified somehow and made visible to employers.
People are starting to have their own Websites that include a list of their accomplishments--a kind of certification that says, "OK, this is what I can do." That allows professional associations to be more active in certification. And I think with the Web, we are going to see more people becoming sophisticated with managing their own Websites.
T&D: What is the future of the job description? Should there be something based on your three skill areas: technical; business model; and organizing, leading, and managing?
Lawler I like to use the term person description. I think we are moving to that slowly but surely. Depending on the kind of work, the description may say more about the work than about the person. But it ought to be some blend of the tasks [employees] should be able to perform and the skills they need to perform [those tasks].
In knowledge work situations, there would be more emphasis on what people need to know and less on the tasks. In more traditional routine work, it may be more about the specifications of the tasks. In the really fast-paced environments, there will probably be no description at all, just deals that are cut and broken, and hiring with no serious job descriptions. Basically, the job description will be, "Work in the office, and do whatever is required."
Getting to the core
T&D You argue for retaining key employees, those who have "critical skills, key knowledge, and high performance." Should that sort of distinction--key and not key--be openly acknowledged in an organization?
Lawler I think it is a trend [to acknowledge the distinction]. I am a little hesitant to say how major a trend [it will be] or how visible. But I increasingly hear people talk that way, particularly in technology and knowledge work.
Companies are trying to identify their key contributors--their core employees--and hitting them with extra stock options or other walk-in devices. Then it looks at the rest of the employees, the ring around that core. And then there are contracts around that ring.
Employers may think, "Hey, we're glad to have you. You're a valuable employee, and we want you to stay around, but you are not in the core group that's vital." That's a distinction that hasn't been made formally in most corporations. There have always been part-time people and contract people. But that extra level of distinction is interesting.
T&D: What's the distinction between being a valued employee and being a core employee?
Lawler It is sort of like this: You're a regular, solid contributor in an important area, but. ...
The executives were always separate. But now it's not just the executives that people are talking about. They are talking about technical knowledge contributors and specialists in certain areas.
There are interesting issues about internal equity and how public you make that distinction and special treatment. It's not easy to manage. The logic for doing it is pretty compelling, but the details of operationalizing it are another matter.
T&D If the organization doesn't make clear distinctions about who's in that core group, then will people put themselves in that core group? Does it go back to that issue of people overestimating their value?
Lawler More organizations have started to become virtual organizations--that is, organizations in which there is a smaller core and everybody else is some kind of contract worker or part of a network of pieces that comes together for the total.
T&D You say that paying the person gets different results and that rewarding the person instead of the job has the potential for developing and retaining the right people. Is it because people like to be developed?
Lawler Some people like that stretching, so it's attractive to those people to have that kind of environment. If you also increase their pay as they learn more, you're in a better position to retain them from a pay point of view. Typically, they'll be above the market because they have more skills.
You also run the risk of making them more valuable not only to you, but also to the outside market. But often what we see is that, because people have added skills that fit the particular organization, the mix of skills they have are uniquely valuable to that organization.
Therefore, the organization can afford to pay them a little more than another company that might hire them. [The second] company wouldn't have the same task configuration and wouldn't want the same skill mix or skill pattern that the employee's [current] organization does.
PHOTO (COLOR): "We're in a transition period where we have a few organizations that employ only knowledge workers. I think it makes sense to them to manage the skills and knowledge of the individuals rather than the job vehicle."
PHOTO (COLOR): "What work is like, and the turbulence of the projects you're working on, make the strongest case for people with multiple skills and the flexible ability to take things on."
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By E. Stewart Hickman
Stew Hickman is ASTD's director of human resources; [email protected].