Why do you think competency-based management of rewards is the least popular area of use
The following conditions must meet in the paper
1) I want a typical and a quality answer which should have about 1400 words.
2) The answer must raise appropriate critical questions.
3) The answer must include examples from experience or the web with references from relevant
examples from real companies.
4) Do include all your references, as per the Harvard Referencing System,
5) Please don�t use Wikipedia web site.
6) I need examples from peer reviewed articles or researches only.
Management and Rewards
Competences have largely been defined as an individual’s characteristics that act as basic
prerequisites of work behavior. They revolve around values, knowledge abilities, work style
personality, and attitudes. The importance of competences in recruitment, training, coaching,
and skills appraisal cannot be underestimated (Ilhaanie, 2010). This fact does not mean that
competences are easy to institute and manage. In order for an organization to be successful, the
competences of individual workers must be superior, updated, and focused on improving value
of the assigned organization. This paper develops an argument that tends to explain why
competency-based management of rewards are the least popular area of use.
When organizations chose to eliminate activities that do not add value, they achieve lean
operations. This strategy can be complemented by implementing a competence-based reward
system (Ilhaanie, 2010). This system uses an employee’s competencies critical to the successful
performance of individual roles, to determine the value of their work output.
A competence-based reward system will reward employees for their knowledge, skills,
behavior and other characteristics important for organizational success and personal performance
and not basically the work activities they perform (Holton, Coco, Lowe & Dustch, 2006). When
an organization chooses the competence-based reward system, it must ensure the environment is
right for its success. The organization must, thus, make known to the employees the knowledge
and skills that are valued by the organization and which it handsomely rewards.
When the standard of competent performance is determined, it makes it clear to
employees what training development will be valued. Thus the Human Resource department
will points out the training and development resources that will bring the employees to the level
desired by the organization (Holton, Coco, Lowe & Dustch, 2006). For example, when a
programmer skills set are measured against a lead programmer required competencies, it could
emerge that the programmer lacks Advanced Business Application Programming (ABAP). The
organization’s Human Resource Department will set in motion strategies to address this. One of
which could be to enroll the programmer for ABAP training.
Proponents of Competence-based reward system point out that when it is designed to be
the strand that runs between an employees’ pay grade and rewards to particular levels of
competence provides objectivity in determining grades. A programmer with a proficiency in
system and architectural languages should get a higher pay that one who has just system
language. When this is the case, employees learn to associate personal development
expectations with level of pay. The organization reinforces their employee behavior that support
its mission and business priorities.
When an organization relies on a competence-based reward system, its recruitment
strategy will borrow heavily from competence performance standards that link individual career
progression and pay. This strategy will be perceived by employees as fair (Ilhaanie, 2010). To
employees the ability to differentiate between job grades and titles makes them more confident in
the organizations performance expectations. For example, a programmer may recognize that
particular management, technical, analytical and communication skills required to obtain a
promotion. This could make the employees satisfaction with the system given they view it as
adequately addressing promotion and pay increases appropriately. This will benefit the
organizations employee recruitment and retention efforts.
Competence-based reward systems do have some challenges, which make fuel critics’
view of the strategy. Given that employees are rated using a general criteria instead of specific
accomplishment, these systems could introduce subjectivity in to the evaluation process
(Shippmann, Ash, Carr, Hesketh, Pearlman, Battista, Eyde, Kehoe, and Prien, 2000). No two
people can interpret leadership or ability to multitask in the same way thus it is possible to have
This strategy, given the subjectivity of the evaluator, could be perceived as promoting
favoritism. When an employee perceived him / herself as being more valuable than another, then
discovers the other employee remuneration is higher, they could draw the conclusion that they
are victims of unfair treatment (Ilhaanie, 2010). Unfortunately, the feeling of unfairness will
more often than not result in dissention. This does not add value to the organization nor does it
contribute its mission or goals.
Another challenge of competence-based reward system is the realization that establishing
the specific competencies that actually result in improved productivity or job performance
(Shippmann, Ash, Carr, Hesketh, Pearlman, Battista, Eyde, Kehoe, and Prien, 2000). For
example, when a customer experience representative increases the number of enquiries handled
in a day, it would be extremely hard to point out whether, the improvement is as a result of
improved ability to multitask or increased attention to details thus helping resolve more issues.
In the development and implementation phase of the competence-based reward systems,
they can be very complex and labor intensive (Hondeghem and Vandemeulen, 2000). This
coupled with the financial investment that must accompany these systems – to cover training and
support, could make the systems dear especially when compared to other reward systems.
With the rapidly changing environment, organisations are forced to move towards more
responsive and flexible management models. Most organisations seek change in an effort to
increase their performance. Competence-based management of rewards has emerged as one of
the change strategies that have achieved the desired objective (Tett, Guterman, Bleier, and
Murphy, 2000). Despite the competence-based management of rewards system being
multifaceted and complex, its basic tenets are concerned with performance, view work as the
context in which competencies are revealed, focus on people as opposed to jobs, emphasis on the
need of behavioural evidence and reveal that there are several types of competencies that must be
For most organisations, Compensation-based management of rewards has been
introduced in the context of major trends or changes. This could include the changing role of
managers, down or rightsizing or changes in organisations’ Human Resource practices (Kim and
Hong, 2006). When the organisation sets out to develop a more inclusive method of selection,
development, assessment or rewarding, it finds Competence-based management of reward to be
the most ideal since it is more responsive.
Despite the benefits associated with competence-based management of reward, its
implementation in the private and public sector has been selective. Organisations that have
embraced competence-based management of reward have tended to focus mainly on
management and senior and technical staff (Ulrich & Beatty, 2001). These organisations exhibit
a high sensitivity to the competence-based management of rewards. They use both
organisational and job variable as a source of competence, which aligns the strategy to the
macro-level and personal orientation of competence. Indeed, organisations that embrace and
implement competence-based management of reward are fully aware of the major benefits for
employers, managers and organisations.
Competence-based management of reward can promote a better understanding of the
requirements necessary to achieve high performance and personal development. For this group
of employees, competence-based management of reward takes on a motivational role
(Fleishman, Wetrogan, Hulman and Marshall-Mies, 1995). To managers, the benefits will be
more technical. It offers to managers a more comprehensive tool for decision making and
determining criteria in order to effectively manage selection, evaluation and development. It
also offers managers a superior frame of reference to manage people.
It offers organisations better instrument for use in undertaking conventional HR practises.
This is in addition to facilitating the match with people and enabling benchmarking in
competence identification (Virtanen, 2000). When the organisation considers the benefit to be
gained by aligning and linking individuals to its goals and values – strategic value, it gains more
than having to adopt a more functional approach. Organisation must perform correctly the
inference process from itself to competencies and their respective verification levels to derive the
full benefits. Similarly, the same is true for its understanding of what competencies are and how
best to exploit them for the benefit of the organisation.
Organisations describe Human Resource role as being predominately administrative and
less strategic. Fundamentally, the changing role and competencies or HR professional is aimed
at increasing effectiveness of HR practice (Gratton & Truss, 2003). It should not be lost that
competence-based management of reward is not the best approach. It is the management, which
if taken seriously, will provide the organisation a good pretext to experiment new practices and
retain the most adequate. Generally, they are good instruments that reduce the knowing-doing
gap. For the private organisations, compensation-based management of reward greatly enhances
their conservativeness while nurturing innovation and experimentation with management
practices and strategies.
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