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Speakers: Gordon Ritchie
Director, Competency Solutions
Kenexa, an IBM Company
Moderator: Kellye Whitney
Managing Editor
Talent Management magazine
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Kellye Whitney
Managing Editor
Talent Management magazine
#TMwebinar
Gordon Ritchie
Director, Competency Solutions
Kenexa, an IBM Company
Pay for Performance: 
Building the Foundation 
Through Job Competencies 
May 2013
Copyright Kenexa®, 2013 8
AGENDA
1. Kenexa, IBM and The “Smarter Workforce”
2. What is pay for performance
3. Why do we care about pay for performance
4. What does the workforce want?
5. How do we link Job Performance and Pay using 
competencies?
6. Q & A
Copyright Kenexa®, 2013 9
IBM
SMARTER WORKFORCE
Leaders and employees transforming organizations for business advantage in three significant ways
Attract
Attract and recruit top talent and 
source the best people for your 
culture and business needs.
Land the perfect job:
Employee strengths, career 
aspirations, and personality are 
matched to the role and company 
culture.
Empower
Empower employees to hit the ground running and 
to continually learn and develop their skills so that 
they can make the greatest impact.
Hit the ground running:
Employees are empowered with the right tools and 
easily connect to expertise across the organization 
to grow their skills and start contributing 
immediately.
Motivate
Build a workforce of innovative leaders 
and teams that solve problems 
together—resulting in stronger 
engagement, increased productivity 
and higher profit.
Make an impact:
Employees are motivated to 
outperform, using tools to measure 
their progress, and transform the 
organization and their careers.
A Smarter Workforce has
employees who are:
Motivated, Committed, Loyal,
Productive, Creative, Proactive,
and High Value
What is pay for performance? 
Copyright Kenexa®, 2013 11
POLL:
Does your organization have a “Pay for
Performance” philosophy? Yes/No
Copyright Kenexa®, 2013 12
• People are our biggest asset
• Biggest single expense = salary
• Critical competency ‐ Teamwork 
• Individual results and reward 
• What is pay? Salary/Benefits/?
• What is performance, good bad or otherwise?
• Proficiency does not equal performance
• Careers becoming assignments, that are shorter in 
time than the performance cycle.
• HR Big Data; begets Big Data
Copyright Kenexa®, 2013 13
WHAT IS PAY FOR PERFORMANCE?
With your 3.0% increase budget … a 
couple of questions
How can you give your average
performers a 3.0% increase while at
the same time differentially rewarding
your top performers AND still only
spend 3.0%?
What does your average performing
employee expect to get as an
increase?
Copyright Kenexa®, 2013 14
PAY FOR PERFORMANCE
• 3.0% increase budget
• 2 employees each “doing their job”
• They each get a 3.0% increase
Copyright Kenexa®, 2013 15
Apart from that Mrs Lincoln, 
how was the Performance?
• What does good look like?
• What numbers are on your performance 
form? How are they defined?
• Do you, your manager and your manager’s 
manager agree on what the explicit difference 
between a 3 and 4, or a 2 and a 3?
– Is that the same as your Compensation team?
– Is that the same as your Org Dev team who built 
the performance process?
Copyright Kenexa®, 2013 16
PAY FOR PERFORMANCE
• A compensation philosophy that asserts that an 
individuals pay is a function of their performance
• Performance demonstrated consistently over an 
extended period of time
• Pay is achieved over time, not overnight
• Performance is something that can change.
• An organization: 
• must define its clear consistent expectations of performance levels for 
each job role
• cannot avoid its responsibility to define what it expects, through individual 
empowerment
PAY FOR PERFORMANCE
Why do we care about 
pay for performance? 
Copyright Kenexa®, 2013 18
“THE RECESSION IS 
DECISIVELY OVER”
Copyright Kenexa®, 2013 19
Cost Reducing Measures
Which cost reducing measurements did organizations take as a result of the economic downturn?
Copyright Kenexa®, 2013 20
• Increase budgets in the U.S. bottomed out in 2009 and the rebound is
yielding increased budgets but still below the pre-recession levels
“For the first time since 1980, the U.S. rate of inflation is higher
than the average total salary budget increase”
WorldatWork – August 2011
PAY BUDGETS: Whats the
first thing to change?
2008 2009 2010 2011 2012 2013
Kenexa Compensation 3.0% 3.0% 3.0%
IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 3.0%
Aon/Hewitt 3.7% 1.8% 2.4% 2.7% 2.9% 3.0%
Buck  2.9% 2.9% 2.7% 2.8% 3.0%
Conference Board ‐ ‐ 2.5% 2.5% 3.0% 3.0%
Culpepper 3.9% 1.7% 2.7% 2.9% 2.8% 3.0%
Hay 3.0% 3.0%
Mercer ‐ ‐ 2.7% 2.9% 2.9% 2.9%
Towers Watson 3.4% 1.7% 2.8% 2.7% 2.8% 2.9%
WorldatWork 3.8% 1.9% 2.8% 2.9% 3.0% 3.0%
Copyright Kenexa®, 2013 21
• Certain HOT Jobs continue to outpace the market exceeding the
overall market average of 9% in the 5 years between 2007 and 2012
Under or Over Paying: How do you
know it’s the same as your job?
Job Title Change
Long Term Care Executive 27.1%
Certified Occupational Therapist Asst 25.7%
Hardware Engineer III 20.3%
Chemical Engineer III 19.4%
Staff Nurse ‐ Surgical First Assistant 17.4%
Nurse Practitioner 17.2%
Certified Nursing Assistant 16.4%
Network Administrator 15.1%
Software Engineer III 14.7%
• Others jobs aren’t so lucky significantly lagging the 9% average over
the last 5 years
• Differences between HOT jobs NOT so HOT jobs underscores all the
more the need for good data
Job Title Change
Accounts Receivable Manager 2.9%
Administrative Services Supervisor 1.5%
Communications Representative III 2.1%
Facilities Manager 2.3%
Financial Analyst II 4.7%
Mainframe Programmer II 2.9%
PC Maintenance Technician II ‐6.5%
Copyright Kenexa®, 2013 22
In the US, my pay is directly related to how well I perform.
Source: 2011 Kenexa High Performance Institute WorkTrends survey
52% DO NOT 
see a link
19% uncertain 
29% DO see a 
link
THE LINK
Copyright Kenexa®, 2013 23
36%
17%
0%
10%
20%
30%
40%
50%
60%
70%
Pay Unrelated to
Performance
Pay Related to Performance
Worldwide
Worldwide the percent of employees who are
seriously considering leaving their organization
THE LINK: WHY WE SHOULD CARE
Source: 2011 Kenexa High Performance Institute WorkTrends survey
Copyright Kenexa®, 2013 24
What does it cost? **
• Evaluating
Talent
• Retaining
Talent
• Engaging
Talent
• Acquiring
Talent
Cost of a poor
hire:
$300K-$500K
Operational
efficiency rate
due to poor
employee
engagement:
30%
Cost of losing a
talented
employee:
$250K-$500K
Value of a top
performer: 2-4X
performance of
average
employees
** From Human Capital Institute
Copyright Kenexa®, 2013 25
Reliance on “The Event”:
• Once-a-year
• Minimal communication
• Reliance on manager’s memory
• Little training
• Employee empowerment
SO WHAT HAPPENED
TO THE LINK?
Assessment Forms Became:
• Too long
• Too complex
• Often designed to measure the
wrong things
What does the workforce need?
Copyright Kenexa®, 2013 27
WHAT ARE ANALYSTS SAYING…
“Best‐In‐Class organizations are more than twice as 
likely to identify competency data for each employee.”
“If we can apply science to improving the selection, 
management, and alignment of people, the returns can be 
tremendous.”   Forbes Leadership Article February 2013
“… companies realize they cannot solve their skills shortages 
externally. To achieve competitive advantage, they must 
commit to developing the right skills internally” Corporate 
Learning Factbook 2012
SHRM recognized in their 2012 Employee survey, being 
recognized in using your skills is now the #1 employee job 
satisfaction issue, above pay, benefits etc.
Copyright Kenexa®, 2013 28
GLOBAL RESULTS: WHAT 
EMPLOYEES REALLY WANT
R
E
S
P
E
C
T
10%
Truth
20%
Recognition 7%
Exciting
Work
18%
Security
25%
Pay
9%
Education
and Career
Growth
11%
Conditions
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 29
RECOGNITION
A pat on the back from managers and the 
organization at‐large
20%
Recognition
I want to be
respected and
recognized as a
valuable team
member
Recognition when we do a
good job - right now it is all
about getting chewed
out when we mess up
More respect
from senior
management
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 30
PAY
Fair compensation for a day’s work
25%
Pay
Compensation
that is fair and
respect(ful)
Good pay for a
good day’s work
Unfreeze pay
Source: Kenexa High Performance Institute
Copyright Kenexa®, 2013 31
Executive                         
Senior Management                           
Management; Senior Level Consultant                                         
First Line Management; Senior Professional                                                  
Team Leadership; Technical Professional                                 
Functions: Finance, Sales, HR, Marketing, Operations, Etc.
Competency Impact
Core and Leadership : 
high impact, 
low frequency, 
indirect
Technical: Tactical 
impact with high 
frequency, direct
Individual Contributor; Technician; Trainee                                                       
Make many operational decisions that impact direct product/service/customer facing actions. 
Frequency * Value can mean big numbers depending on either multiplier i.e.
1000 Customer Reps, directed with poor operational management can be as impactful as one core or 
leadership competency.
Copyright Kenexa®, 2013 32
WHATS A DESCRIBING A JOB WORTH?
$5, $50 OR $5,000
Attracting wrong applicants = wasted time and cost for selection, 
assessment and processing. 
How many people do you interview and not hire?
Improved onboarding effectiveness = Achieve initial goals quicker
Sales = more sales sooner/few losses
Quality = shorter role familiarization time = increased 
performance
Focused activity = greater productivity
More accurate marketing pricing = optimized salary budgets.
Make it a tool that is used, and reused.
Copyright Kenexa®, 2013 33
CHALLENGES DEFINING
COMPETENCIES
Copyright Kenexa®, 2012
Source: Competencies, Compensation and
Technology Luncheons.- 2012
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Manual
process
Budget
Constraints
Too difficult to
define
competencies
Too many
jobs
Lack of
executive
support
What prevents you from implementing
competencies (or extending the competencies you
have) in your organization?
Copyright Kenexa®, 2013 34
POLL:
How many of you rate (as in 1=Bad, 5= Good) these types of
competencies in your annual performance and compensation planning
process?
1. Core/Foundational (same for everyone)
2. Functional, aligned to the job family
3. Technical job role specific
How to link job performance and pay using 
competencies 
Copyright Kenexa®, 2013 36
Internal jobs and External Sources
You need to analyse your benchmark jobs
– Similar/Common job title
– Job Description 
– Type/Level: IC, Lead, Manager, Professional, etc
– Status (exempt/non‐exempt)
– Common expectations on the job
Compensation is used to using data.
But there is no common performance data.
What we need is a clear consistent way to describe what it is that’s
required of a job, that defines what good looks like that can be
used by employees, managers, and compensation analysts
Big data needs consistent structure, solvable measures, and
common definitions.
Copyright Kenexa®, 2013 37
COMPETENCIES ARE THE
FOUNDATION
Using a Competency Framework
provides a common language
for your Talent Management
strategy .
Used WITH technology
systems it integrates those
systems.
Functional Job &
Competency
Framework
Career &
Succession
Planning
Learning
Needs
Analysis
Risk
Analysis
Recruitment
& Selection
Resource
Planning
Compensation
Performance
Management
Copyright Kenexa®, 2013 38
The Pay for Performance Job Model
• Job Description 
– Title
– Summary
– Primary 
Responsibilities
– Compensation 
Market Data
• Competencies (KSA’s)
– Definition 
– Behavior Statements
• Proficiency Target
– Performance  
Accelerators
• Learning References
• Development Statements
• Coaching Tips
• Writing Assistance
– Interview Questions
Hierarchy and Alignment
Job Function, Job Level, Job Focus  
Copyright Kenexa®, 2013 39
JOB SAMPLE:
Job Title Benefits Manager
Job Band ID 3
Job Family Compensation and Benefits
Job Definition
Manages the development and administration of employee benefits programs, policies,
and procedures and ensures compliance with related regulations.
Job Responsibility 1
Provides leadership in the planning, design, and implementation of benefits programs
(e.g. medical, dental, vision, disability insurance, life insurance, and employee assistance
programs) and ensures all activities comply with legal requirements.
Job Responsibility 2
Oversees the collection and overall accuracy of benefits data located within the
organization's HRIS; evaluates current benefits programs and identifies and monitors
critical performance.
Job Responsibility 3
Manages vendor relationships to ensure adherence to required service levels for
outsourced benefits providers..
Job Responsibility 4
Monitors the employee benefits eligibility and enrollment process to ensure employees
meet eligibility requirements.
Job Scope Description
Designs, plans, and implements corporate benefits programs, policies, and procedures.
Responsible for ensuring programs meet employee needs, comply with legal
requirements, and are cost effective. Requires a bachelor's degree in a related area and at
least 7 years of experience in the field or in a related area. Familiar with a variety of the
field's concepts, practices, and procedures. Relies on extensive experience and judgment
to plan and accomplish goals. A wide degree of creativity and latitude is expected.
Performs a variety of tasks. Leads and directs the work of others. Typically reports to a
head of a unit/department.
 Base:
Percentiles: 25%, 50%, 75%
TCC:
Copyright Kenexa®, 2013 40
Compare Functional Roles
Job Bands
1 2 3 4 5 6
Exec Mgmt Senior Mgmt Management;
Senior Level
Consulting
First Line
Management; Senior
Professional
Team
Leadership;
Technical
Professional
Technician, Trainee,
Administrator
Top Compensation
and Benefits
Executive
Compensation
and Benefits
Director
Payroll Manager Payroll Supervisor Benefits Analyst Payroll Administrator
Top Compensation
Executive
Compensation
Director
Corporate Insurance
Manager
Benefits Analyst, Sr. Benefits Clerk, Sr. Benefits Clerk
Top Benefits
Executive
Benefits
Director
Benefits Manager
Compensation Analyst,
Sr.
Stock Plan
Administrator, Sr.
Stock Plan
Administrator
Compensation and
Benefits Manager
Benefits Supervisor
Benefits
Administrator
Compensation
Administrator
Executive
Compensation
Manager
Executive
Compensation Analyst
Compensation
Specialist
Workers
Compensation
Administrator
Workers'
Compensation
Manager
Compensation Analyst Payroll Clerk
Compensation
Manager
Payroll Clerk, Sr.
International
Compensation and
Benefits Manager
Copyright Kenexa®, 2013 41
COMPETENCY IMPACT
Functional 
Competencies
Core, 
Leadership
& Levels‐Based
Competencies
Reflects strategy and culture
Supports selection and hiring
Reflects the leadership pipeline
Applicable to all roles
Reflects functional 
strategy and key skills
Applies to all functional 
incumbents and 
candidates
“A combination of knowledge, skills and abilities (KSA’s) describing 
the demonstrable indicators of proficiency.”
Reflects job/role specific knowledge       
and skills
Well suited for skills assessment, skills 
inventory analysis and development
Applies to incumbents and candidates by 
position
Technical and Domain 
Specific Competencies
Copyright Kenexa®, 2013 42
SAMPLE: COMPETENCY PROFILE
Profile Name: Job Title Benefits Manager
Competency
Code
Competency Name Proficiency Importance
B0295 Business Orientation 3 - Extensive experience High
B0750 Budgeting 3 - Extensive experience High
B1020 Planning: Tactical, Strategic 2 - Working experience High
B1060 Effectiveness Measurement 3 - Extensive experience High
B1100 Standard Operating Procedures (SOP) 3 - Extensive experience High
I0480 Effective Communications 3 - Extensive experience Medium
I0700 Decision Making and Critical Thinking 2 - Working experience High
I1000 Managing Multiple Priorities 3 - Extensive experience Medium
I1010 Relationship Management 3 - Extensive experience Medium
I1020 Analytical Thinking 3 - Extensive experience High
L0010 Accountability 3 - Extensive experience High
L0070 Goal Setting 2 - Working experience High
M0810 Outsourcing 3 - Extensive experience High
THR000 HUMAN RESOURCES POLICIES, STRATEGIES AND ENVIRONMENT 3 - Extensive experience Medium
THR010 HR: Trends and Direction 3 - Extensive experience Medium
THR020 HR: Policies, Standards and Procedures 3 - Extensive experience High
THR030 HR Legal and Regulatory Environment 3 - Extensive experience High
THR110 Employee Counseling 3 - Extensive experience Medium
THR200 Compensation Management 2 - Working experience Medium
THR300 BENEFITS PROGRAMS 3 - Extensive experience High
THRV- Specific Benefits Plan Development 3 - Extensive experience High
Copyright Kenexa®, 2013 43
Competency Proficiencies
Competency Code THR200
Competency Name Compensation Management
Competency
Description
Knowledge of and ability to design, implement and evaluate compensation programs, policies and processes within an
organization.
Level 1 - Basic
understanding
Describes key purposes (e.g. motivating employees) of compensation management.
Cites organizational examples of compensation management.
Lists government regulations and industry policies related to compensation.
Lists major compensation programs (e.g. executive compensation) used in the organization.
Level 2 - Working
experience
Implements compensation packages for an organization's employees.
Assists in developing various compensation programs within an organization.
Maintains good relationships with staff from HR and business units.
Adheres to government and industry compensation regulations.
Conducts job analysis and salary survey activities within the department.
Level 3 - Extensive
experience
Determines if compensation management objectives are in line with overall business objectives.
Oversees the implementation of compensation programs within the organization.
Advises the management team on compensation issues, such as pay structure.
Evaluates the effectiveness and competitiveness of existing compensation programs.
Improves implementation processes of different compensation programs, e.g. executive compensation.
Adjusts the organization's compensation polices based on market trends and industry policies.
Level 4 - Subject
matter depth
and breadth
Leads in aligning compensation strategies with overall organizational strategies.
Establishes organizational best practices for compensation program design.
Develops standard compensation program implementation processes that are suitable for the whole industry.
Monitors the market trends and industry directions of compensation management.
Champions organizational adoption of new methodologies and technologies for compensation management.
Elaborates on key issues of existing industry compensation policies; makes recommendations accordingly.
Copyright Kenexa®, 2013 44
Proficiency vs Performance
Copyright Kenexa®, 2013 45
Competency Code THR200
Competency Name Compensation Management
Learning References 15
LR1 BK-0417: Business Ethics: A Global and Managerial Perspective
LR2 BK-0833: Compensation and Motivation
LR3 BK-3011: Rewarding Excellence: Pay Strategies for the New Economy
LR4 PUB-HRDR: Human Resource Development Review
LR5 GOV-DOL: Department of Labor
LR6 ORG-ACOM: American Compensation Association
LR7 ORG-ECFC: Employers Council on Flexible Compensation
LR8 ORG-IFEBP: International Foundation of Employee Benefit Plans
LR9 ORG-SHRM: Society for Human Resource Mgmt. (SHRM)
LR10 ORG-WAW: World at Work
LR11 TR-005: Strategic Issues in Compensation
LR12 UNV-BOS: Boston University
LR13 VND-AHI: AHI's Employment Law Resource Center
LR14 VND-CPM: Compensation Venture Group, Inc.
LR15 WEB-HRLAW: Human Resource Law Index
Development
Statements
Development Statement
Group
Development Statement
Name
Development Statement Description
Quantitative
Implement Compensation
Packages
Implement compensation packages for 2 business
units each month next year.
Quantitative
Conduct Salary Survey
Activities
Conduct job analysis and salary survey activities
for 3 business units within the next month.
Qualitative
Design a Compensation
Program
Design an organizational compensation program
(e.g. executive compensation) in one month.
Qualitative
Evaluate a Compensation
Program
Evaluate the effectiveness and competitiveness of
an existing compensation program in 3 weeks.
Copyright Kenexa®, 2013 46
Competency Code THR200
Competency Name Compensation Management
Coaching Tips
Coaching Tip Group Coaching Tip Name Coaching Tip Description
Professional Development
Attend Compensation
Policies Training
Attend training sessions or conferences to learn
about the latest industry compensation
policies.
Career Building
Assist in Compensation
Program Development
Assist senior level colleagues in developing an
organizational executive compensation
program.
Improving Operations
Consult Compensation
Management Experts
Consult experts on how to improve the
organization's productivity and
competitiveness through compensation
management.
Improving Operations
Document Compensation
Issues and Solutions
Document common compensation issues that are
raised by the organization's management
team and their associated solutions.
Relationship Building Organize HR Seminars
Organize seminars for employees from HR and
business units to enhance their
relationships.
Interview
Questions
Interview Question Group Interview Question Name Interview Question Description
Fit
Experience with
Compensation
Programs
What kinds of compensation programs have you
designed?
Knowledge
Describe Compensation
Regulations
Describe the main industry and government
regulations governing compensation.
Problem
Compensation Issues from
Management
What are common compensation issues that are
raised by the organization's management
team?
Solution
Improve the Compensation
Implementation Process
How did you improve the organization's
compensation program implementation
process?
Results
Compensation Program's
Impacts
What were the impacts of a compensation
program you implemented on the business's
overall performance?
Copyright Kenexa®, 2013 47
IMPLEMENTATION – SHORTEN THE
PROCESS REUSING CONTENT
Develop and use quickly and update over time.
Focus on buy‐in and change management processes.
Make sure you get to the applications; don’t get stuck 
in model development
Get the “big things right”; 
“don’t dwell on the small 
stuff”.
Apply existing materials 
and best practices in 
developing a rapid draft 
Focus on the overall 
architecture
Key success criteria and 
themes.
Position models  as 
prototypes for learning 
how to change 
behaviors                      
(vs. a perfect output 
image).
Application
Integration 
Iteration
Launch & 
Communication
Implementation
Kenexa / IBM Competency 
Development
80% of the effort
Recommended Approach
20% of the effort
Typical Competency Development
Application
Integration 
Iteration
Launch & 
Communication
Implementation
20% of the effort                                 
(if able to move out of development stage)
Typical Approach 80% of the effort
Copyright Kenexa®, 2013 48
SALARY MARKET DATA
Aggregated, employer reported 
salary surveys.
Monthly data modeling and updates
INTEGRATE YOUR TALENT
MGMT TOOLS AND PROCESSES
Talent 
Management 
/ LMS / HRIS
CAMD
•Survey Mgmt
•Aggregated Market 
Data
•Salary Structures
Competency 
Manager Tool 
* Edit existing,  
* Create new,            
* Assemble New,      
* Compare 
Competencies/skills 
EXCEL 
Export
JOB COMPETENCY 
LIBRARY 
Industry specific  Job Functions  
JOB PROFILES and COMPETENCIES
TARGET PROFICIENCY level & 
Behaviors
Interview Questions, Learning 
Resources, SMART Goals, Coaching 
Tips 
Copyright Kenexa®, 2013 49
COMPETENCY IMPLEMENTATION
(BEST PRACTICES)
Model Building
•Ensure linkage between jobs, competencies and organization strategies
•Keep models simple at launch
•Add dimensional criteria and keep the momentum
•Start with a library or Competency Framework
Applications
• Focus on assessment and development first, then evaluation and pay applications
• Integrate of the competencies with all processes, even if tools aren’t
• Ensure consistency of applications rather than allowing too many variations
Change Management
• Clarify and communicate specific objectives of your applications up front
• Ensure top management and line management buy-in and ongoing support
• Be focused in implementation (i.e., one function, one pilot group first)
• Provide training and communication more consistently and carefully (building in training at
all stages of implementation)
• Develop and consistently apply a measurement system used to evaluate the effectiveness
of implementation over time
Copyright Kenexa®, 2013 50
• Merit Pools:
• We suggest that there be
two basic pools of money
for merit increases:
• Management pool
• Employee pool
REPAIRING THE LINK
Each of these pools should have two subsidiary pools. One for those in the
performance category and one for the balance of the organization’s
employees addressing wage relevance to cost of living, etc.
Copyright Kenexa®, 2013 51
• Employee motivation to become a
high achiever is increased
• The organization has a better
chance of retaining top performers
• Lesser performers are motivated to
increase performance level or look
elsewhere
If pay increases are made contingent upon
clear definitions of what good performance
looks like:
PAY FOR PERFORMANCE
Copyright Kenexa®, 2013 52
DON’T FORGET!!
Pay for Performance,
NOT
Increase for
Performance!
REPAIRING 
THE LINK
Copyright Kenexa®, 2013 53
Q & A
Join Our Next TM Webinar
Learn the Secret to Driving Performance
Tuesday, May 28, 2013
TM Webinars start at 2 p.m. Eastern / 11 a.m. Pacific
Register for upcoming TM Webinars at
www.talentmgt.com/webinars
Join the Talent Management magazine Network
http://network.talentmgt.com/
#TMwebinar

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Pay for Performance: Building the Foundation Through Job Competencies

  • 1. You can listen to today’s webinar using your computer’s speakers or you may dial into the teleconference. If you would like to join the teleconference, please dial 1.650.479.3208 and enter access code: 922 286 403 #. You will be on hold until the seminar begins. #TMwebinar
  • 2. Speakers: Gordon Ritchie Director, Competency Solutions Kenexa, an IBM Company Moderator: Kellye Whitney Managing Editor Talent Management magazine #TMwebinar
  • 3. • Q&A – Click on the Q&A icon on  your floating toolbar on the  top of your screen. – Type in your question in the  space at the bottom. – Click on “Send.” #TMwebinar
  • 6. #TMwebinar Gordon Ritchie Director, Competency Solutions Kenexa, an IBM Company
  • 8. Copyright Kenexa®, 2013 8 AGENDA 1. Kenexa, IBM and The “Smarter Workforce” 2. What is pay for performance 3. Why do we care about pay for performance 4. What does the workforce want? 5. How do we link Job Performance and Pay using  competencies? 6. Q & A
  • 9. Copyright Kenexa®, 2013 9 IBM SMARTER WORKFORCE Leaders and employees transforming organizations for business advantage in three significant ways Attract Attract and recruit top talent and  source the best people for your  culture and business needs. Land the perfect job: Employee strengths, career  aspirations, and personality are  matched to the role and company  culture. Empower Empower employees to hit the ground running and  to continually learn and develop their skills so that  they can make the greatest impact. Hit the ground running: Employees are empowered with the right tools and  easily connect to expertise across the organization  to grow their skills and start contributing  immediately. Motivate Build a workforce of innovative leaders  and teams that solve problems  together—resulting in stronger  engagement, increased productivity  and higher profit. Make an impact: Employees are motivated to  outperform, using tools to measure  their progress, and transform the  organization and their careers. A Smarter Workforce has employees who are: Motivated, Committed, Loyal, Productive, Creative, Proactive, and High Value
  • 11. Copyright Kenexa®, 2013 11 POLL: Does your organization have a “Pay for Performance” philosophy? Yes/No
  • 12. Copyright Kenexa®, 2013 12 • People are our biggest asset • Biggest single expense = salary • Critical competency ‐ Teamwork  • Individual results and reward  • What is pay? Salary/Benefits/? • What is performance, good bad or otherwise? • Proficiency does not equal performance • Careers becoming assignments, that are shorter in  time than the performance cycle. • HR Big Data; begets Big Data
  • 13. Copyright Kenexa®, 2013 13 WHAT IS PAY FOR PERFORMANCE? With your 3.0% increase budget … a  couple of questions How can you give your average performers a 3.0% increase while at the same time differentially rewarding your top performers AND still only spend 3.0%? What does your average performing employee expect to get as an increase?
  • 14. Copyright Kenexa®, 2013 14 PAY FOR PERFORMANCE • 3.0% increase budget • 2 employees each “doing their job” • They each get a 3.0% increase
  • 15. Copyright Kenexa®, 2013 15 Apart from that Mrs Lincoln,  how was the Performance? • What does good look like? • What numbers are on your performance  form? How are they defined? • Do you, your manager and your manager’s  manager agree on what the explicit difference  between a 3 and 4, or a 2 and a 3? – Is that the same as your Compensation team? – Is that the same as your Org Dev team who built  the performance process?
  • 16. Copyright Kenexa®, 2013 16 PAY FOR PERFORMANCE • A compensation philosophy that asserts that an  individuals pay is a function of their performance • Performance demonstrated consistently over an  extended period of time • Pay is achieved over time, not overnight • Performance is something that can change. • An organization:  • must define its clear consistent expectations of performance levels for  each job role • cannot avoid its responsibility to define what it expects, through individual  empowerment PAY FOR PERFORMANCE
  • 18. Copyright Kenexa®, 2013 18 “THE RECESSION IS  DECISIVELY OVER”
  • 19. Copyright Kenexa®, 2013 19 Cost Reducing Measures Which cost reducing measurements did organizations take as a result of the economic downturn?
  • 20. Copyright Kenexa®, 2013 20 • Increase budgets in the U.S. bottomed out in 2009 and the rebound is yielding increased budgets but still below the pre-recession levels “For the first time since 1980, the U.S. rate of inflation is higher than the average total salary budget increase” WorldatWork – August 2011 PAY BUDGETS: Whats the first thing to change? 2008 2009 2010 2011 2012 2013 Kenexa Compensation 3.0% 3.0% 3.0% IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 3.0% Aon/Hewitt 3.7% 1.8% 2.4% 2.7% 2.9% 3.0% Buck  2.9% 2.9% 2.7% 2.8% 3.0% Conference Board ‐ ‐ 2.5% 2.5% 3.0% 3.0% Culpepper 3.9% 1.7% 2.7% 2.9% 2.8% 3.0% Hay 3.0% 3.0% Mercer ‐ ‐ 2.7% 2.9% 2.9% 2.9% Towers Watson 3.4% 1.7% 2.8% 2.7% 2.8% 2.9% WorldatWork 3.8% 1.9% 2.8% 2.9% 3.0% 3.0%
  • 21. Copyright Kenexa®, 2013 21 • Certain HOT Jobs continue to outpace the market exceeding the overall market average of 9% in the 5 years between 2007 and 2012 Under or Over Paying: How do you know it’s the same as your job? Job Title Change Long Term Care Executive 27.1% Certified Occupational Therapist Asst 25.7% Hardware Engineer III 20.3% Chemical Engineer III 19.4% Staff Nurse ‐ Surgical First Assistant 17.4% Nurse Practitioner 17.2% Certified Nursing Assistant 16.4% Network Administrator 15.1% Software Engineer III 14.7% • Others jobs aren’t so lucky significantly lagging the 9% average over the last 5 years • Differences between HOT jobs NOT so HOT jobs underscores all the more the need for good data Job Title Change Accounts Receivable Manager 2.9% Administrative Services Supervisor 1.5% Communications Representative III 2.1% Facilities Manager 2.3% Financial Analyst II 4.7% Mainframe Programmer II 2.9% PC Maintenance Technician II ‐6.5%
  • 22. Copyright Kenexa®, 2013 22 In the US, my pay is directly related to how well I perform. Source: 2011 Kenexa High Performance Institute WorkTrends survey 52% DO NOT  see a link 19% uncertain  29% DO see a  link THE LINK
  • 23. Copyright Kenexa®, 2013 23 36% 17% 0% 10% 20% 30% 40% 50% 60% 70% Pay Unrelated to Performance Pay Related to Performance Worldwide Worldwide the percent of employees who are seriously considering leaving their organization THE LINK: WHY WE SHOULD CARE Source: 2011 Kenexa High Performance Institute WorkTrends survey
  • 24. Copyright Kenexa®, 2013 24 What does it cost? ** • Evaluating Talent • Retaining Talent • Engaging Talent • Acquiring Talent Cost of a poor hire: $300K-$500K Operational efficiency rate due to poor employee engagement: 30% Cost of losing a talented employee: $250K-$500K Value of a top performer: 2-4X performance of average employees ** From Human Capital Institute
  • 25. Copyright Kenexa®, 2013 25 Reliance on “The Event”: • Once-a-year • Minimal communication • Reliance on manager’s memory • Little training • Employee empowerment SO WHAT HAPPENED TO THE LINK? Assessment Forms Became: • Too long • Too complex • Often designed to measure the wrong things
  • 27. Copyright Kenexa®, 2013 27 WHAT ARE ANALYSTS SAYING… “Best‐In‐Class organizations are more than twice as  likely to identify competency data for each employee.” “If we can apply science to improving the selection,  management, and alignment of people, the returns can be  tremendous.”   Forbes Leadership Article February 2013 “… companies realize they cannot solve their skills shortages  externally. To achieve competitive advantage, they must  commit to developing the right skills internally” Corporate  Learning Factbook 2012 SHRM recognized in their 2012 Employee survey, being  recognized in using your skills is now the #1 employee job  satisfaction issue, above pay, benefits etc.
  • 28. Copyright Kenexa®, 2013 28 GLOBAL RESULTS: WHAT  EMPLOYEES REALLY WANT R E S P E C T 10% Truth 20% Recognition 7% Exciting Work 18% Security 25% Pay 9% Education and Career Growth 11% Conditions Source: Kenexa High Performance Institute
  • 29. Copyright Kenexa®, 2013 29 RECOGNITION A pat on the back from managers and the  organization at‐large 20% Recognition I want to be respected and recognized as a valuable team member Recognition when we do a good job - right now it is all about getting chewed out when we mess up More respect from senior management Source: Kenexa High Performance Institute
  • 30. Copyright Kenexa®, 2013 30 PAY Fair compensation for a day’s work 25% Pay Compensation that is fair and respect(ful) Good pay for a good day’s work Unfreeze pay Source: Kenexa High Performance Institute
  • 31. Copyright Kenexa®, 2013 31 Executive                          Senior Management                            Management; Senior Level Consultant                                          First Line Management; Senior Professional                                                   Team Leadership; Technical Professional                                  Functions: Finance, Sales, HR, Marketing, Operations, Etc. Competency Impact Core and Leadership :  high impact,  low frequency,  indirect Technical: Tactical  impact with high  frequency, direct Individual Contributor; Technician; Trainee                                                        Make many operational decisions that impact direct product/service/customer facing actions.  Frequency * Value can mean big numbers depending on either multiplier i.e. 1000 Customer Reps, directed with poor operational management can be as impactful as one core or  leadership competency.
  • 32. Copyright Kenexa®, 2013 32 WHATS A DESCRIBING A JOB WORTH? $5, $50 OR $5,000 Attracting wrong applicants = wasted time and cost for selection,  assessment and processing.  How many people do you interview and not hire? Improved onboarding effectiveness = Achieve initial goals quicker Sales = more sales sooner/few losses Quality = shorter role familiarization time = increased  performance Focused activity = greater productivity More accurate marketing pricing = optimized salary budgets. Make it a tool that is used, and reused.
  • 33. Copyright Kenexa®, 2013 33 CHALLENGES DEFINING COMPETENCIES Copyright Kenexa®, 2012 Source: Competencies, Compensation and Technology Luncheons.- 2012 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% Manual process Budget Constraints Too difficult to define competencies Too many jobs Lack of executive support What prevents you from implementing competencies (or extending the competencies you have) in your organization?
  • 34. Copyright Kenexa®, 2013 34 POLL: How many of you rate (as in 1=Bad, 5= Good) these types of competencies in your annual performance and compensation planning process? 1. Core/Foundational (same for everyone) 2. Functional, aligned to the job family 3. Technical job role specific
  • 36. Copyright Kenexa®, 2013 36 Internal jobs and External Sources You need to analyse your benchmark jobs – Similar/Common job title – Job Description  – Type/Level: IC, Lead, Manager, Professional, etc – Status (exempt/non‐exempt) – Common expectations on the job Compensation is used to using data. But there is no common performance data. What we need is a clear consistent way to describe what it is that’s required of a job, that defines what good looks like that can be used by employees, managers, and compensation analysts Big data needs consistent structure, solvable measures, and common definitions.
  • 37. Copyright Kenexa®, 2013 37 COMPETENCIES ARE THE FOUNDATION Using a Competency Framework provides a common language for your Talent Management strategy . Used WITH technology systems it integrates those systems. Functional Job & Competency Framework Career & Succession Planning Learning Needs Analysis Risk Analysis Recruitment & Selection Resource Planning Compensation Performance Management
  • 38. Copyright Kenexa®, 2013 38 The Pay for Performance Job Model • Job Description  – Title – Summary – Primary  Responsibilities – Compensation  Market Data • Competencies (KSA’s) – Definition  – Behavior Statements • Proficiency Target – Performance   Accelerators • Learning References • Development Statements • Coaching Tips • Writing Assistance – Interview Questions Hierarchy and Alignment Job Function, Job Level, Job Focus  
  • 39. Copyright Kenexa®, 2013 39 JOB SAMPLE: Job Title Benefits Manager Job Band ID 3 Job Family Compensation and Benefits Job Definition Manages the development and administration of employee benefits programs, policies, and procedures and ensures compliance with related regulations. Job Responsibility 1 Provides leadership in the planning, design, and implementation of benefits programs (e.g. medical, dental, vision, disability insurance, life insurance, and employee assistance programs) and ensures all activities comply with legal requirements. Job Responsibility 2 Oversees the collection and overall accuracy of benefits data located within the organization's HRIS; evaluates current benefits programs and identifies and monitors critical performance. Job Responsibility 3 Manages vendor relationships to ensure adherence to required service levels for outsourced benefits providers.. Job Responsibility 4 Monitors the employee benefits eligibility and enrollment process to ensure employees meet eligibility requirements. Job Scope Description Designs, plans, and implements corporate benefits programs, policies, and procedures. Responsible for ensuring programs meet employee needs, comply with legal requirements, and are cost effective. Requires a bachelor's degree in a related area and at least 7 years of experience in the field or in a related area. Familiar with a variety of the field's concepts, practices, and procedures. Relies on extensive experience and judgment to plan and accomplish goals. A wide degree of creativity and latitude is expected. Performs a variety of tasks. Leads and directs the work of others. Typically reports to a head of a unit/department.  Base: Percentiles: 25%, 50%, 75% TCC:
  • 40. Copyright Kenexa®, 2013 40 Compare Functional Roles Job Bands 1 2 3 4 5 6 Exec Mgmt Senior Mgmt Management; Senior Level Consulting First Line Management; Senior Professional Team Leadership; Technical Professional Technician, Trainee, Administrator Top Compensation and Benefits Executive Compensation and Benefits Director Payroll Manager Payroll Supervisor Benefits Analyst Payroll Administrator Top Compensation Executive Compensation Director Corporate Insurance Manager Benefits Analyst, Sr. Benefits Clerk, Sr. Benefits Clerk Top Benefits Executive Benefits Director Benefits Manager Compensation Analyst, Sr. Stock Plan Administrator, Sr. Stock Plan Administrator Compensation and Benefits Manager Benefits Supervisor Benefits Administrator Compensation Administrator Executive Compensation Manager Executive Compensation Analyst Compensation Specialist Workers Compensation Administrator Workers' Compensation Manager Compensation Analyst Payroll Clerk Compensation Manager Payroll Clerk, Sr. International Compensation and Benefits Manager
  • 41. Copyright Kenexa®, 2013 41 COMPETENCY IMPACT Functional  Competencies Core,  Leadership & Levels‐Based Competencies Reflects strategy and culture Supports selection and hiring Reflects the leadership pipeline Applicable to all roles Reflects functional  strategy and key skills Applies to all functional  incumbents and  candidates “A combination of knowledge, skills and abilities (KSA’s) describing  the demonstrable indicators of proficiency.” Reflects job/role specific knowledge        and skills Well suited for skills assessment, skills  inventory analysis and development Applies to incumbents and candidates by  position Technical and Domain  Specific Competencies
  • 42. Copyright Kenexa®, 2013 42 SAMPLE: COMPETENCY PROFILE Profile Name: Job Title Benefits Manager Competency Code Competency Name Proficiency Importance B0295 Business Orientation 3 - Extensive experience High B0750 Budgeting 3 - Extensive experience High B1020 Planning: Tactical, Strategic 2 - Working experience High B1060 Effectiveness Measurement 3 - Extensive experience High B1100 Standard Operating Procedures (SOP) 3 - Extensive experience High I0480 Effective Communications 3 - Extensive experience Medium I0700 Decision Making and Critical Thinking 2 - Working experience High I1000 Managing Multiple Priorities 3 - Extensive experience Medium I1010 Relationship Management 3 - Extensive experience Medium I1020 Analytical Thinking 3 - Extensive experience High L0010 Accountability 3 - Extensive experience High L0070 Goal Setting 2 - Working experience High M0810 Outsourcing 3 - Extensive experience High THR000 HUMAN RESOURCES POLICIES, STRATEGIES AND ENVIRONMENT 3 - Extensive experience Medium THR010 HR: Trends and Direction 3 - Extensive experience Medium THR020 HR: Policies, Standards and Procedures 3 - Extensive experience High THR030 HR Legal and Regulatory Environment 3 - Extensive experience High THR110 Employee Counseling 3 - Extensive experience Medium THR200 Compensation Management 2 - Working experience Medium THR300 BENEFITS PROGRAMS 3 - Extensive experience High THRV- Specific Benefits Plan Development 3 - Extensive experience High
  • 43. Copyright Kenexa®, 2013 43 Competency Proficiencies Competency Code THR200 Competency Name Compensation Management Competency Description Knowledge of and ability to design, implement and evaluate compensation programs, policies and processes within an organization. Level 1 - Basic understanding Describes key purposes (e.g. motivating employees) of compensation management. Cites organizational examples of compensation management. Lists government regulations and industry policies related to compensation. Lists major compensation programs (e.g. executive compensation) used in the organization. Level 2 - Working experience Implements compensation packages for an organization's employees. Assists in developing various compensation programs within an organization. Maintains good relationships with staff from HR and business units. Adheres to government and industry compensation regulations. Conducts job analysis and salary survey activities within the department. Level 3 - Extensive experience Determines if compensation management objectives are in line with overall business objectives. Oversees the implementation of compensation programs within the organization. Advises the management team on compensation issues, such as pay structure. Evaluates the effectiveness and competitiveness of existing compensation programs. Improves implementation processes of different compensation programs, e.g. executive compensation. Adjusts the organization's compensation polices based on market trends and industry policies. Level 4 - Subject matter depth and breadth Leads in aligning compensation strategies with overall organizational strategies. Establishes organizational best practices for compensation program design. Develops standard compensation program implementation processes that are suitable for the whole industry. Monitors the market trends and industry directions of compensation management. Champions organizational adoption of new methodologies and technologies for compensation management. Elaborates on key issues of existing industry compensation policies; makes recommendations accordingly.
  • 44. Copyright Kenexa®, 2013 44 Proficiency vs Performance
  • 45. Copyright Kenexa®, 2013 45 Competency Code THR200 Competency Name Compensation Management Learning References 15 LR1 BK-0417: Business Ethics: A Global and Managerial Perspective LR2 BK-0833: Compensation and Motivation LR3 BK-3011: Rewarding Excellence: Pay Strategies for the New Economy LR4 PUB-HRDR: Human Resource Development Review LR5 GOV-DOL: Department of Labor LR6 ORG-ACOM: American Compensation Association LR7 ORG-ECFC: Employers Council on Flexible Compensation LR8 ORG-IFEBP: International Foundation of Employee Benefit Plans LR9 ORG-SHRM: Society for Human Resource Mgmt. (SHRM) LR10 ORG-WAW: World at Work LR11 TR-005: Strategic Issues in Compensation LR12 UNV-BOS: Boston University LR13 VND-AHI: AHI's Employment Law Resource Center LR14 VND-CPM: Compensation Venture Group, Inc. LR15 WEB-HRLAW: Human Resource Law Index Development Statements Development Statement Group Development Statement Name Development Statement Description Quantitative Implement Compensation Packages Implement compensation packages for 2 business units each month next year. Quantitative Conduct Salary Survey Activities Conduct job analysis and salary survey activities for 3 business units within the next month. Qualitative Design a Compensation Program Design an organizational compensation program (e.g. executive compensation) in one month. Qualitative Evaluate a Compensation Program Evaluate the effectiveness and competitiveness of an existing compensation program in 3 weeks.
  • 46. Copyright Kenexa®, 2013 46 Competency Code THR200 Competency Name Compensation Management Coaching Tips Coaching Tip Group Coaching Tip Name Coaching Tip Description Professional Development Attend Compensation Policies Training Attend training sessions or conferences to learn about the latest industry compensation policies. Career Building Assist in Compensation Program Development Assist senior level colleagues in developing an organizational executive compensation program. Improving Operations Consult Compensation Management Experts Consult experts on how to improve the organization's productivity and competitiveness through compensation management. Improving Operations Document Compensation Issues and Solutions Document common compensation issues that are raised by the organization's management team and their associated solutions. Relationship Building Organize HR Seminars Organize seminars for employees from HR and business units to enhance their relationships. Interview Questions Interview Question Group Interview Question Name Interview Question Description Fit Experience with Compensation Programs What kinds of compensation programs have you designed? Knowledge Describe Compensation Regulations Describe the main industry and government regulations governing compensation. Problem Compensation Issues from Management What are common compensation issues that are raised by the organization's management team? Solution Improve the Compensation Implementation Process How did you improve the organization's compensation program implementation process? Results Compensation Program's Impacts What were the impacts of a compensation program you implemented on the business's overall performance?
  • 47. Copyright Kenexa®, 2013 47 IMPLEMENTATION – SHORTEN THE PROCESS REUSING CONTENT Develop and use quickly and update over time. Focus on buy‐in and change management processes. Make sure you get to the applications; don’t get stuck  in model development Get the “big things right”;  “don’t dwell on the small  stuff”. Apply existing materials  and best practices in  developing a rapid draft  Focus on the overall  architecture Key success criteria and  themes. Position models  as  prototypes for learning  how to change  behaviors                       (vs. a perfect output  image). Application Integration  Iteration Launch &  Communication Implementation Kenexa / IBM Competency  Development 80% of the effort Recommended Approach 20% of the effort Typical Competency Development Application Integration  Iteration Launch &  Communication Implementation 20% of the effort                                  (if able to move out of development stage) Typical Approach 80% of the effort
  • 48. Copyright Kenexa®, 2013 48 SALARY MARKET DATA Aggregated, employer reported  salary surveys. Monthly data modeling and updates INTEGRATE YOUR TALENT MGMT TOOLS AND PROCESSES Talent  Management  / LMS / HRIS CAMD •Survey Mgmt •Aggregated Market  Data •Salary Structures Competency  Manager Tool  * Edit existing,   * Create new,             * Assemble New,       * Compare  Competencies/skills  EXCEL  Export JOB COMPETENCY  LIBRARY  Industry specific  Job Functions   JOB PROFILES and COMPETENCIES TARGET PROFICIENCY level &  Behaviors Interview Questions, Learning  Resources, SMART Goals, Coaching  Tips 
  • 49. Copyright Kenexa®, 2013 49 COMPETENCY IMPLEMENTATION (BEST PRACTICES) Model Building •Ensure linkage between jobs, competencies and organization strategies •Keep models simple at launch •Add dimensional criteria and keep the momentum •Start with a library or Competency Framework Applications • Focus on assessment and development first, then evaluation and pay applications • Integrate of the competencies with all processes, even if tools aren’t • Ensure consistency of applications rather than allowing too many variations Change Management • Clarify and communicate specific objectives of your applications up front • Ensure top management and line management buy-in and ongoing support • Be focused in implementation (i.e., one function, one pilot group first) • Provide training and communication more consistently and carefully (building in training at all stages of implementation) • Develop and consistently apply a measurement system used to evaluate the effectiveness of implementation over time
  • 50. Copyright Kenexa®, 2013 50 • Merit Pools: • We suggest that there be two basic pools of money for merit increases: • Management pool • Employee pool REPAIRING THE LINK Each of these pools should have two subsidiary pools. One for those in the performance category and one for the balance of the organization’s employees addressing wage relevance to cost of living, etc.
  • 51. Copyright Kenexa®, 2013 51 • Employee motivation to become a high achiever is increased • The organization has a better chance of retaining top performers • Lesser performers are motivated to increase performance level or look elsewhere If pay increases are made contingent upon clear definitions of what good performance looks like: PAY FOR PERFORMANCE
  • 52. Copyright Kenexa®, 2013 52 DON’T FORGET!! Pay for Performance, NOT Increase for Performance! REPAIRING  THE LINK
  • 54. Join Our Next TM Webinar Learn the Secret to Driving Performance Tuesday, May 28, 2013 TM Webinars start at 2 p.m. Eastern / 11 a.m. Pacific Register for upcoming TM Webinars at www.talentmgt.com/webinars Join the Talent Management magazine Network http://network.talentmgt.com/ #TMwebinar