BUSI 645 Week 3 DB Forum 2 Example

Discussion Board Forum 2

BUSI 645 Compensation Management, Discussion Board Forum 2 (thread and 2 replies)

Thread by [Student Name]

The forum prompt, the packaging plant and the two classmates' threads are composites standing in for the course's own; the textbook and research cited are real, and the requirements follow Liberty's public course guide for BUSI 645.

Thread

At the composite corrugated packaging plant where I manage human resources, each of our 120 operators is trained on one of six production lines. When an operator on the die-cut line calls out, we either run the line short or pull a supervisor onto it, and in a typical month we lose about forty line-hours that way. Martocchio (2017) describes person-focused pay, including skill-based pay, as rewarding employees for the range or depth of skills they acquire rather than the job they hold. For a plant whose problem is flexibility, that is exactly the right target, because it pays for the capability we lack rather than for the title an operator holds.

The design I propose would divide the plant's work into six skill blocks, one per line, plus a maintenance block. An operator would receive a pay increase, for example 75 cents an hour, for each additional block certified by a trainer on the floor, up to a cap of four blocks. The cap matters: without it, every operator eventually reaches the top rate and the plant pays for skills it rarely uses.

Evidence from a similar setting supports the approach. Murray and Gerhart (1998) used time-series data to compare a manufacturing plant that adopted skill-based pay with comparison sites that did not, and they found that the skill-based plant achieved better productivity, lower labor cost per part and better quality outcomes. That result fits the logic of the plan: operators who can run several lines reduce downtime and need fewer supervisors stepping in.

Skill-based plans also fail often, and the reasons are instructive. Shaw et al. (2005) followed 97 facilities over time and found that certain design features and support variables were related to greater workforce flexibility and to plan survival, and that supervisor support was strongly related to whether plans survived. Plans also proved more successful and sustainable in manufacturing facilities than in service facilities. A skill-based plan lives or dies on whether supervisors schedule people to use the skills they are paid for.

That finding shapes the implementation. Supervisors would help define the skill blocks, serve on the certification panel and be measured partly on cross-training progress, so that they have a stake in the plan. Operators would also know the rules in advance, in writing, and would know that pay rises before productivity does, since they earn the increase when certified, not when they first fill in on a line. The plant should budget for a temporary rise in labor cost during the first year while operators learn. A rough estimate helps: if 60 operators certify in one extra block during the first year, the premium adds about $94,000 in annual wages, which the plant would recover if the plan cut the lost line-hours by roughly half and reduced overtime for supervisors who now fill in.

Finally, the plan must coexist with the plant's job-based structure. Martocchio (2017) explains that internally consistent pay depends on job evaluation; our operator grade would remain, with skill premiums layered on top. Classmates who have worked under such plans could help with one question about certification: who decides that someone has mastered a skill, and how is favoritism avoided?

Reply to Naomi

Naomi, your thread proposed competency-based pay for the patient transport, environmental services and dietary staff at your hospital, so that employees who learn tasks across departments are paid more. I agree with the goal of a more flexible support workforce, especially in a hospital where a transport delay can hold up surgery schedules, and research comparing pay plans gives some encouragement. Mitra et al. (2011) surveyed 214 organizations and found that skill-based plans were positively related to workforce flexibility and to workforce attitudes, and that, compared with market-based plans, they were associated with better membership behaviors such as attendance and retention, with attitudes mediating that relationship.

I would add a caution from Shaw et al. (2005), who found that skill-based plans tended to be more successful and to last longer in manufacturing than in service facilities. Hospitals may face the reasons they suggest: work is harder to break into clear skill blocks, departments guard their own staff and managers may be reluctant to release employees for cross-training. Martocchio (2017) also notes that competency-based plans can be harder to administer than skill-based ones, because competencies are broader and harder to certify.

Pay for the competencies should also be modest at first, since hospital budgets for support staff are tight. You might begin with two departments whose tasks overlap, such as transport and environmental services, define three or four specific, observable skills and involve both department managers in certification. If that pilot survives a year, it can expand. Which departments do you think would cooperate most readily, and would their managers support releasing staff for training?

Reply to Andre

Andre, your thread described the new point-factor job evaluation at your trucking company and proposed narrowing pay ranges within each grade so that drivers in the same grade are paid more alike. Martocchio (2017) explains that job evaluation establishes internal consistency between jobs, while pay ranges within a grade allow pay to reflect individual differences in performance or seniority. Narrowing the ranges shifts the balance toward equality, which drivers may welcome at first.

Research on motor carriers, the industry you work in, suggests that the effect depends on what the dispersion is based on. Shaw and Gupta (2007) found that when companies communicated their pay systems well and emphasized performance-based increases, greater pay dispersion was associated with fewer quits among good performers, and with more quits when performance-based increases were not emphasized. For seniority-based increases, dispersion related instead to average performers' quits. Predictions about poor performers were not supported.

If your company rewards performance, narrowing ranges could reduce the reason your best drivers stay. A middle path, which I would favor, might keep wider ranges but explain clearly how drivers move through them, since the effects appeared mainly when pay systems were well communicated. It would also help to look at your own exit data before deciding: if the drivers you most want to keep are leaving for competitors who pay top performers more, narrowing ranges would make that worse, while if turnover is concentrated among newer drivers, the ranges may not be the problem at all. How does your company currently tell drivers what determines their position in the range?

References

Martocchio, J. J. (2017). Strategic compensation: A human resource management approach (9th ed.). Pearson.

Mitra, A., Gupta, N., & Shaw, J. D. (2011). A comparative examination of traditional and skill-based pay plans. Journal of Managerial Psychology, 26(4), 278-296. https://doi.org/10.1108/02683941111124827

Murray, B., & Gerhart, B. (1998). An empirical analysis of a skill-based pay program and plant performance outcomes. Academy of Management Journal, 41(1), 68-78. https://doi.org/10.2307/256898

Shaw, J. D., & Gupta, N. (2007). Pay system characteristics and quit patterns of good, average, and poor performers. Personnel Psychology, 60(4), 903-928. https://doi.org/10.1111/j.1744-6570.2007.00095.x

Shaw, J. D., Gupta, N., Mitra, A., & Ledford, G. E., Jr. (2005). Success and survival of skill-based pay plans. Journal of Management, 31(1), 28-49. https://doi.org/10.1177/0149206304271376