We believe the ultimate solution for base pay management is paying for skills and responding to the competitive market for talent. Until then we must make job-based pay provide organizational value. The argument we most commonly see is that paying for inanimate jobs rather than animated people skills and capabilities was and is a powerful and convincing one. We believed it ten years ago and we continue to believe it. People do work; jobs surely don´t. And people learn, and grow, and perform either poorly or effectively. But the skills the organization pays for should be those that clearly add value to the business.

Making Skill Pay the Choice

We believe that an individual organization can go about considering skill pay as a part of any total reward solution. The technical issues are going to be easier to address than are the social challenges of workforce involvement, acceptance, and commitment. Here´s how we see an organization doing a ´pre-approval´ process on skill pay:

1.      Business Justification--Early in the game, decide what advantages you are expecting from skill pay. The most probable expectations an organization could have from skill pay is to encourage a more flexible workforce, a workforce that seeks learning of needed skills and capabilities, a pay solution that pays more as people learn more and apply this to their job, and similar goals. Is this enough to make skill pay worth doing?

2.      Overall Readiness--Given the reasons your organization is considering skill pay and any advantage your organization hopes to gain, determine whether you are ready, or can get ready, for skill pay. Do some ´lets pretend´ scenarios about how your human resource pay and reward issues would be managed in an environment where people are paid for the skills they have, obtain, and apply to doing their work rather than paying for the jobs employees may or may not accurately fit into. Given what your company expects from skill pay, are you up to the challenge?

3.      Design Requirements--Understanding why your organization is considering skill pay and how ready your organization is for skill pay, learn what skill pay must be like to deliver to meet your expectations. How has your organization addressed any major change regarding human resource policy and programs in the past? Or, even more importantly, has it been tasked to address any changes at all relative to people issues? In that context define with care just why your business believes a skill pay application will help. What are your expectations and why do you believe skill pay, rather than some other solution, will best address these challenges or opportunities?

4.      Define Tolerances--Now it´s important to decide whether or not your organization is willing to do what it takes to design, implement, communicate, and manage on a continuing basis a skill pay solution. What is your company´s tolerance for employee workforce change that creates ´noise´ and resistance by the workforce? Will your leadership, supported by wherever support for the change will come from, have the patience to wait for acceptance of the change? Compared to what you believe your company and people will get out of a change to skill pay, is any ´pain´ during the change process worth the effort? Will you be able to finish the job or ´give up´ somewhere before the finish line is crossed?

5.      Establish Plan/Timelines--Once you´ve decided to proceed (if you have), set down and get commitment to a plan for implementing skill pay and specific timelines you are committed to meet. Communicate your plan to those involved and describe the reasons for the decision and how the process will unfold. Make sure you are not planning based on wishful thinking but have instead taken the best estimate of the magnitude and challenge skill pay portends into consideration. Can you put a realistic and doable plan in place? 

If skill pay can emphasize a value-added business formula by responding to both the skills the organization needs to be a success and the market value of these skills, then it´s probable that some form of skill pay will have lasting value to the enterprise. But it needs to be more streamlined and easy to understand and communicate. And organizations need to have really clear and realistic expectations as to what skill pay can deliver. Our formula for pay in the future will be based on the ability and willingness of organizations to convert the ideas we have proposed into a realistic strategy for pay-whether or not this includes some form of skill payment.