Job Design (Job-based and Skill-based Assessment)
Job design is an integral part of the job analysis process. Job design is made up of two approaches; job-based approach and skill-based approach. It helps to decide the content of the job in terms of responsibilities. Job-based approach deals with the responsibilities of a job or position. “With this approach employees are hired to fill open positions, trained to perform the tasks, and rewarded based on performance levels” (Lawler, 1994). Job-based approach relies heavily on the contents of the job and the duties and tasks related to completing the job, this approach is strictly concerned with the job itself and human capital or skills. “A job-based plan pays employee for the job to which they are assigned, regardless of the skills they possess” (Milkovich, 2005). Job-based pay structure is based on job performed and job market and pay increases are through promotion.
Skill-based approach deals with the skills it takes to complete the responsibilities and duties of a position. This approach has a major focus on the skills employees possess as oppose to the job. “Skill-based approach is most effective in work situations where knowledge work is involved and where individuals can add significant value to the product or service” (Lawler & Ledford, 1992, p. 384). The skill-based approach pay structure is based on skills certification and the market and pay increases are provided through on skill acquisition. “Structures based on skill pay individuals for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of those particular skills” (Milkovich, 2005).
Both approaches offer valid advantages and disadvantages however I strongly prefer the use of skills-based approach. This approach will be the approach for Kudler Foods as it is in the growth stage of business. As organizations grow their business needs change and the jobs they offer change as well. The skill sets for the organization evolve and become more important and valuable. This approach is ideal for KFF for the following reasons:
- Skills are easily measured
- Value can easily be placed on skills, certification, and education
- Workforce will become more flexible
- It encourages personal development
- It promotes and encourages a continual learning environment
- If skills are utilized effectively organizations can create a competitive advantage
- This approach is attractive to professionals
- Skills add value to the organization
A skill-based program will definitely help KFF manage the skills within their organization. In addition it will encourage KFF’s current staff to seek more skills and training. This approach will also assist KFF in attracting and retaining the right people for the jobs they offer and skill needed. With this program or approach KFF can take inventory on the skills they need to realize the new customer service growth strategy.
Competitive Compensation Rates
“Compensation structure should represent an organizations average pay level as it relates to competing with organizations within the industry or market. “An organization with a policy of leading the market offers higher than the average wage of the relevant labor market, a policy of lagging the market signifies low-than-market average wages, and a policy of matching the market indicates wages at the relevant labor market average” (Brown, Sturman, Simmering, 2003, p. 753). Organizations that choose to pay above market wages or lead the industry have the financial resources to sustain this concept. They also attract top talent and are very competitive. Organizations that choose to pay below the market or lag within their industry are very cost conscious, however they tend to offer more incentives to account for the lag. And those organizations that choose to match the market with wages are cost conscious, but offer other incentives that helps their competitive advantage. “Organizations with high pay levels should experience increases in both individual-level and organization-level efficiency because they are more able to attract, retain, and motivate the best performers” (Brown, Sturman, Simmering, 2006, p. 753). Compensation structures can have both a positive and negative affect on performance, whether it is organization performance or individual employee performance. Because people are motivated by different incentives, it is important that organizations have a balance within their compensation structures and the incentives they offer. This will help to retain and motivate their people while also attracting top talent. When developing this compensation structure for KFF I took the critical steps of considering internal, external, individual and the strategic impact. In addition, KFF also researched performance incentives, maximizing the use of their financial resources, and compliance with law and regulations as it relates to compensation. The following is a labor market analysis table that indicates the average salaries for the positions at KFF. The information involves salaries for those positions within the California area” (Thurman, 2010, p.5).
Labor Market Analysis
KFF’s Compensation Package for each position
“KFF’s current compensation structure is competitive with the industry standards, it is not leading the industry nor is it below, and it matches the industry’s average and will continue to do so. Their new strategy is aimed at increasing customer service while increasing revenues, being more efficient, and reducing costs. So in essence they want to do more with the resources they have, to do that KFF has connected their business strategy to their compensation structure. Being in the grocery industry in which the merchandise sells itself there is no reason for KFF to employ an incentive base compensation structure, instead they will continue to use a standard base pay program with some incentives and the implementation a merit program. “A standard base pay program offers fixed salary ranges for each position type for employees performing the standard duties of their jobs” (Obringer, 2003, p. 1). KFF has set up a range with a minimum and maximum salary for each position; this will help to account for the different levels of skills and experience levels. Their pay levels will be competitive to mitigate the risk of losing top talent” (Thurman, 2010, p.3-4).
“KFF has three locations; LaJolla, DelMar, Encintas. After research I found that their major competitors in those areas are Whole Food Market, Ralphs Grocery, Vons Grocery, and Trader Joes. These competitors are larger than KFF in every aspect of the business; more employees, stores, sales and revenue. The compensation rates of the Whole Foods, Ralph’s , and Von’s appear to be slightly above the industry averages (in the 60th percentile) in each position while Trader Joes compensation rates are within the 75th percentile of industry. KFF will continue to match the industry average at the 50th percentile. “A pay-with-compensation policy tries to ensure that an organization’s wage costs are approximately equal to those of its product competitors and that its ability to attract applicants will be approximately equal to its labor market competitors” (Milkovich, 2005, p. 13)” (Thurman, 2010, p.2).
“KFF has considered the labor market, the scope of the positions within the organization, and the characteristics of their individual employees which has allowed them to determine their new and adequate compensation structure. Their new compensation structure is adequate, fair, and competitive. The new structure has both internal and external equity. The following structure will allow KFF to attract talent, motivate current talent, and retain current talent without exhausting their financial resources.
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Base pay will be between the market 50th percentile and the 60th percentile
- Incentive program (annually) will be offered to all employees
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Long-term incentives (stock) will be offered to all employees and will be between the market median and 65th percentile
- Non-financial rewards (benefits and culture); Benefits will be at the market median and the culture will be a “culture of innovation and hard work with high levels of accountability for all, it will strive toward stretch goals and celebration of accomplishments and more importantly it will be a culture of performance management to maintain the state of the business” (Bottos & Fusco, 2002, p. 2). KFF will pay a competitive wage but what will set them a part will ultimately be the culture they provide, the imported gourmet products they offer, their employee loyalty and other intangible incentives such as performance recognition programs” (Thurman, 2010).
- Merit Program- employees will receive incentives for providing excellent customer service, maintaining above average in-stock conditions, making sales plan, etc. There are endless reasons and ways in which employees will be rewarded. This program will be a very cost-effect way for Kudler to reward their people.
Performance Evaluation
“Performance appraisals are essential to managing employee performance. It is a systematic, periodic, impartial rating of employee performance. “An employee performance appraisal is a process often combining both written and oral elements whereby management evaluate and provides feedback on employee job performance, including steps to improve or redirect activities as needed” (Employee Performance Appraisal, 2009). Appraising employee performance is one of the most important responsibilities of manager. By effectively managing performance managers can correct deficient behavior, reward, and recognize becoming performance and behavior. The single performance appraisal evaluation that will be used by Kudler Fine Foods to evaluate each level of their six critical positions is the behavior and result oriented appraisal. The following is the performance appraisal that will be used by KFF. This new appraisal is designed to fit KFF’s specific requirements. There are three levels of job classification; Leadership/Management level, Customer Service Frontline level, and Back-end operation. This one appraisal can be used to evaluate each of the six critical positions within the KFF organization” (Thurman, 2010, p.7).
Performance and Development Summary
Name: __________________ Employee # ______ Dept. _____________ Position:___________
Review Period: ___________to____________
Selection of Appraisal Methods
The performance appraisal selected for KFF is a combination of the rating scale method and the result and behavior method. These methods are more effective together as one evaluates employees on performance and the other in term of their behavior. In addition, result and behavior method evaluates employees in terms of their output. This method is valid and reliable. The rating scale method evaluates an employee’s level of performance. On this type of appraisal there are different areas (quantity/quality of work, attitude, initiative, etc.) in which an employee can be evaluated and with those areas are levels on which he or she performed on a scale of 1-5; one being the best and five being the worst.
I prefer the use of the combination of the result and behavior method and their rating scale method because of the simplicity of the appraisals, and usually combining methods is more effective than any one method alone. These types of appraisals are very straight-forward and easy for the employee to understand the organization expectations. Not to mention these appraisal methods are very traditional and appropriate for the KFF organization. “Performance appraisals are conducted by companies in order to evaluate the strengths and weaknesses of the employee’s, the frequency and methods of the performance appraisals are determined by the corporation. There are several performance appraisal methods that can be used to provide feedback on employee performance” (ehow.com, 2010). Other methods such as BARS, critical incidents file, ranking, MBO, and the narrative methods all are effective methods used for more developmental objectives or administrative decisions. These all require manager statements, compare employee to employee, and manager/employee objective setting. These methods are a little more complex they also have the potential to create bias while evaluating an employee’s performance.
To determine the best appraisal method one has to first determine the objectives of their system. The objectives of KFF system are to have one appraisal that can be utilized for the three different position levels within the organization. With KFF’s new customer service strategy it was important to develop an appraisal that put emphasis on customer service along with the other aspects of the different positions. With this new appraisal KFF can establish a pay increase and promotion policy based on scoring ranges. The out-put of this new performance appraisal will help KFF manage performance and determine pay increases, it will also add to their competitive advantage. “An effective performance appraisal system can play a crucial role in organizations efforts to gain competitive advantage. Effective performance appraisals can provide accurate assessments of employee productivity and quality of work and motivate employees to higher levels of performance by giving the employee’s helpful feedback” (Allan, p. 1, 1994). In addition this method will also allow the organization to give importance to each competency or skill.
Message Compensation Strategy conveys
The compensation plan for Kudler Fine Foods will not only allow them to compete with their local competitors but it also will boost morale, improve/increase performance, and increase their ability to retain talent. My compensation plan conveys growth to employees with the minimum and maximum pay range for each position employees can grow into their positions as well as seek promotion. In this plan pay is at an average pay levels as it relates to the market so employees are being paid competitive; fair wages. The new compensation plan strategy will empower and motivate employees to perform at higher levels, thus improving not only their performance but also the performance of the company. The new strategy conveys value, that all employees are more valuable than the positions themselves. Restructuring compensation to fit the new expectations and objectives KFF is conveying that human capital is their most valuable asset.
Implementation of New Compensation Plan
In order for the compensation plan to be a success it has to be administered and implemented properly. The following are the steps it would take to properly administer this new plan:
- Get all new strategy and plan in written materials.
- CEO will hold a meeting with HR to develop a presentation of the new strategy
- CEO and store managers will determine date and time to hold a town hall meeting with all the stores staff
- Communicate the organizations new strategy and growth plan
- Communicate the reasoning for a new compensation strategy
- Verbally and written communicate the new compensation strategy and that it goes into effect in 30 days
- Answer any questions or concerns about the compensation strategy
- Introduce the new performance appraisal that will go into effect at the beginning of the year
- Answer questions or concerns about the performance appraisal and the new customer service expectations
- Close the meeting by re-iterating the new direction of the company and how their buy-in is important and needed.
This plan is comprehensive enough that it can be implemented immediately. The success of this program depends greatly on how it is administered and implemented. The CEO, HR, and Store Managers must ensure that the presentation of this plan thoroughly explains why a new compensation plan is necessary. They must also inform the employees of the new growth strategy and the direction of the organization. Communication is the key to the success of any new program. When employees are informed they are likely to buy into the changes the organizations make. Informed employees also feel valued and motivated to perform. So in essence again communication is the key to the success of the implementation of this new program. The new compensation plan for KFF includes providing all employees with a base pay (w/min.& max), benefits (if applicable), and new performance appraisal for all positions levels, a new job analysis with job descriptions, market rates for compensation, and a new merit program. This compensation plan for KFF is well-rounded and aligns with their new business strategies and objectives.
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