Pay for knowledge plans

Organizations are coming up with solutions to increase productivity and quality due to the ever-increasing competition and economic developments. Organizations today primarily employ pay-for-knowledge to help them attain these goals. The majority of businesses previously created compensation plans using job characteristics. The adoption of compensation plans that are based on employees' abilities and knowledge, however, is quickly changing this. The objective of the study was to evaluate pay-for-knowledge programs' effectiveness. The adoption of pay-for-knowledge has been shown to provide numerous organizational advantages, according to key findings. An increase in quality and productivity (Taylor, 2013), a decrease in the number of staff (Sangwan, 2015), and a promotion of technological adoption are among the main advantages mentioned. The research also revealed that there are three categories of Knowledge-based-pay plans that organizations can adopt for efficiency; depth plans, vertical plans and breadth plans. Further, the research has also revealed that the critical factors for increasing the effectiveness of pay-for-knowledge as a compensation system.

Effectiveness of Pay-for-Knowledge Plans

Introduction

Traditionally, most organizations have designed compensation systems that revolve around specific jobs. The pay structures adopted by these systems are based on evaluation and analysis of employee jobs. Employees would, therefore, be compensated depending on the kind of assignment they do or the category of their jobs (Taylor, 2013). Organizations have however started to shift from this approach to new compensation systems that compensate employees depending on their knowledge and skills. In pay-for-knowledge compensation systems, employees are rewarded according to their mastery and expertise. This promotion, therefore, means that employees with more knowledge and skills earn more than those who possess lower comprehension levels. Mostly, the pay-for-knowledge compensation systems encourages employees to further their education and skill set.

Research Findings

Characteristics of Pay-for Knowledge Plans

Knowledge-based-pay (KBP) plans focus on employee’s skills, attributes, and knowledge rather than the attributes of the job itself. The specifics of KBP plans tend to differ from one organization to the other. This emanates from the fact that managers typically tend to design compensation schemes that fit particular organizational circumstances. However, some common features are shared by most of the comprehension -based-pay compensation schemes. For instance, all KBP plans focus on skills and understanding set rather than particular job attributes for compensation purposes (Holmes, 2017). These systems also embark on assessment as well as certification of knowledge and skills of their employees. Additionally, these payment systems do not put much emphasis on seniority of employees when designing pay structures. Rather, pay-for-knowledge compensation systems also focus more on opportunities for employee development and growth.

Benefits of Pay-for-Knowledge Plans

The benefits that accrue to an organization for adopting KBP plans are many. Understanding these advantages helps human resource practitioners to design KBP plans which are efficient, and that can fit particular organizational needs. Some of the standard benefits of KBP plans in organizations include the following.

Enhance Productivity and Quality. Through knowledge-based-compensation ideas, the productivity and quality of employees are significantly increased. KBP plans ensure that human capital is utilized better by making sure that employees gain extensive knowledge and skills which can enable them to perform tasks more effectively. By gaining deeper and broader knowledge, employees can complete tasks even faster and with efficiency, which is critical in organizational productivity (Taylor, 2013). One way of ensuring that an organization offers services of the best quality is by making sure that their employees understand organizational processes. KBP plans make this possible by encouraging employees to gain more knowledge and skills through further education and training.

Lower Staffing Levels. Knowledge-based- pay compensation plans to help organizations in significantly lowering its staffing levels. For instance, breadth plans encourage employees to gain additional skills and knowledge in other fields. This, therefore, ensures that employees can undertake more than one job hence reducing the number of staff needed in the organization (Sangwan, 2015). This benefit brings with it a lot of financial benefits as well since the organization will have lower payroll costs hence improving its overall profitability.

Encourage Technological Adoption. Technological changes and adoption is not always an easy thing in many organizations. This is hugely attributed to the fact that most employees tend to resist new technologies. Technological changes are even harder to foster in job-based systems (Holmes, 2017). However, with knowledge-based-pay plans, it becomes easier for organizations to adopt new technologies. The compensation proposal encourages employees to gain more knowledge and skills on how the new technology works. Further, employees under the KBP plans see organizational changes as opportunities for growth hence eliminating resistance often witnessed during such changes.

Minimal need for Supervision and Job Satisfaction. Through Knowledge-based-pay plans, employees do not have to be supervised every minute in a bid to ensure that the right thing is done. This is because employees who have a greater understanding of their work and possess similar skills are in better position complete tasks effectively on their own (Cerdin & Brewster, 2014). Through minimal supervision, a supervisor can focus his time on other organizational activities. Completing tasks with minimal supervision also leads to job satisfaction.

Variations in Knowledge-Based-Pay

Understanding the differences in KBP plans helps human resource professionals design the most efficient compensation systems. The differences are subsumed into three categories which are depth plans, vertical plans and breadth plans. Depth plans put more emphasis on employees developing comprehensive expertise in a given field. Rewards are therefore based on how an employee acquires an in-depth knowledge and skills to do a given job. The benefits of depth KBP strategies are many. For instance, depth KBP plans foster productivity improvements and promote the attainment of core competencies that are essential for sustainable competitive advantage. Further, the policies also encourage creativity among employees hence enhancing problem-solving skills of the employees (Stone & Deadrick, 2015). Vertical KBP plans compensate employees for managerial skills possessed. For instance, employees who possess knowledge in administrative activities such as performance appraisal, leading others and scheduling are rewarded more than those who do not possess such skills. These plans are not very common in companies because most of the managerial skills take a very long time to learn and acquire.

Breadth compensation strategies are the most common variation of KBP plans. Under the breadth schemes, employees who possess knowledge in a variety of jobs get higher pay. For instance, an employee who possesses knowledge in finance and marketing gets a higher pay as compared to an employee who only possesses knowledge and skills in marketing. Employees who can do a variety of jobs are preferred most in KBP plans as they promote lean staffing and organizational flexibility (Holmes, 2017). Further, such employees can cover up for employees who are absent or off from duty. This process helps the organization in minimizing the inconveniences that are created by having some employees off duty or employee absenteeism. Employees who have broad skills can also be moved around when demand is high. Production bottlenecks are also avoided.

Increasing Effectiveness of Pay-for-Knowledge Plans

Scholars have proposed some recommendations for improving the efficiency of Knowledge-based-pay plans. These include

Employee Involvement and Participation. Employee participation and involvement are critical in designing effective KBP plans. It is therefore imperative to involve all staff in every step of the knowledge-based-planning implementation and development (Stone & Deadrick, 2015). Active KBP strategies include co-workers in the process of skill certification and evaluation. Employee participation in designing the KBP plans encourages the employee to buy in hence minimizing the chances of employee resistance.

Strategic Considerations. Effective pay-for-knowledge arrangements should be aimed at reinforcing organizational strategic goals and objectives. Such plans should, therefore, be linked to an organization's mission and vision. Research has indicated that organizations that seek implement total quality management (TQM) are more likely to apply knowledge-based plans which are more successful (Sangwan, 2015). This is attributed to the fact that KBP plans are geared towards improving the quality as well as the productivity of employees. Since TQM also focus on improving quality, the strategic goals of the two processes are better aligned hence leading to increased efficiency.

Supporting Practices and Structures. One of the most defining aspects of determining the success and effectiveness of KBP plans is the availability of supporting practices and structures within the organizations. Essentially, supporting systems should be available at all stages of its implementation. Further, the management should offer the necessary support to the employees to enhance their skills and knowledge (Cerdin & Brewster, 2014). Employees should be assisted to deal with the challenges that they experience in the process of advancing their knowledge and skills. Further, necessary support such as study leaves should be availed to employees willing to advance their education.

Summary of Findings

In pay-for-knowledge compensation plans, employees are rewarded depending on their knowledge and skills. KBP plans, therefore, focus more on the knowledge, qualifications and attributes of the employees rather than the characteristics of the job itself in determining what employees should earn. Although the specifics of KBP plans implemented by different organizations may differ due to organizational situations, there are some standard features with all systems. The main advantages of implementing knowledge-based-pay methods in organizations include; improving productivity and quality, encouraging technology adoption and changes, minimal employee supervision and reduced staff costs. To increase the effectiveness of KBP plans, organizations need to put in place some considerations such as offering support at all levels, aligning KBP plans to the strategic goals and employee involvement.

References

Cerdin, J. L., & Brewster, C. (2014). Talent management and expatriation: Bridging two streams of research and practice. Journal of World Business, 49(2), 245-252.

Holmes, P. J. (2017). Choosing to advance: Moving teachers in the Chapel Hill Carrboro city schools to a knowledge and skills-based compensation system.

Sangwan, S. (2015). Impact of compensation management practices on employee’s performance in private sector banks.

Stone, D. L., & Deadrick, D. L. (2015). Challenges and opportunities affecting the future of human resource management. Human Resource Management Review, 25(2), 139-145.

Taylor, G. (2013). Implementing and maintaining a knowledge sharing culture via knowledge management teams: A shared leadership approach. Journal of Organizational Culture, Communications and Conflict, 17(1), 69.