Employers urged to link pay to competencies


Employers urged to link pay to competencies

One of the secrets to success when introducing competencies is forging a link between the output of competency assessments and pay. What's more, it seems that linking these arrangements to pay is gradually meeting less resistance from the HR profession. That's the view of Richard Parkhouse, managing director of PRPI, a specialist HR consultancy.

Writing in Competency & Emotional Intelligence, a quarterly journal published by Industrial Relations Services, Parkhouse argues that the proponents of competency-related pay are slowly winning out .

Increasingly, HR directors want competencies to underpin all key HR processes, from organisation development, recruitment, career and professional development, to potential and succession planning. How can reward really be excluded?

Criteria for success

But whatever the perceived attractions and drawbacks, the introduction of competencies requires sensitive handling, So, how should your organisation approach competency-related pay? Parkhouse offers five key tips:

1 Gain senior management commitment.

2 Keep the documentation simple.

3 Use a mix of specific, functional competences and generic personal/management competencies.

4 Link the output of competency assessments to pay.

5 Involve significant numbers of people in the design phase.

Competency-related pay: pros and cons

The main charges for and against competency-related pay are summarised very succinctly by Parkhouse:

Case for competency pay

Case against competency pay

Pay is a fundamental people process that needs to be driven by more objective assessment competencies can assist this.

Reward-linked assessments do not lead to honest feedback on performance.

Absence of a link could imply half-hearted commitment to competencies.

Reduced openness restricts scope for remedial personal development.

Potential dissonance between pay and other competency-based people processes if a link is not made.

Pay drift can occur if personal growth not linked to improved financial performance.

Linking to pay makes assessment happen.

Assessments will vary by manager/team — therefore not comparable.

Embeds competencies into the culture faster.


Source: Competency & Emotional Intelligence, spring 2000.

While Parkhouse is a strong advocator of linking competencies to pay, he warns against taking this step in isolation. Competencies are the 'how', but a reward system must also measure the 'what', and this is usually done by the use of SMART objectives, often linked to a balanced scorecard. HR must recommend the relative weighting between these two complementary factors.


Competency & Emotional Intelligence offers an unrivalled resource for those interested and involved in the use of competencies, based on a breadth of access to practitioners, consultants and researchers.

The latest 48-page edition brings together a string of research studies, including:

  • Making performance management live and breath : First Data Resources

    How one company has produced informative materials for its competency-based performance management process.

  • Employee communication and involvement in the design of competency frameworks

    Looks at the crucial issue of buy-in to competencies.

  • Avoiding discrimination in competency design: the business case

    Outlines the commercial dangers of incorporating bias in competency design and suggests ways of tackling the problems.

  • Gaining maximum impact from 360-degree feedback

    The potential perils of using multi-rater feedback in developing individuals' competencies and how to avoid them.


Want to know more?

Title: Competency & Emotional Intelligence, spring 2000.

Frequency: quarterly plus monthly online news bulletin.

Price: £ 220 annual subscription (UK).

Subscription enquiries: contact Graham Hanson, Industrial Relations Services, tel: 020 7354 6746.

Editorial enquiries: Neil Rankin, editor, Industrial Relations Services, 18— 20 Highbury Place, London N5 1QP, tel: 020 7354 6718

email: neil.rankin@irseclipse.co.uk

web: browse the IRS web site . . . www.irseclipse.co.uk