Compensation

        According to Milkovich, Newman, and Gerhart (2014), a compensation-based system of pay is a “compensation approach that links pay to the depth and scope of competencies that are relevant to doing the work.  Typically used in managerial and professional work where what is accomplished may be difficult to identify” (p. 677).

Skill-based pay structures, according to Milkovich, Newman, and Gerhart (2014), finds the following:

Links pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work.  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.  The wage attaches to the person.  (p. 169).

        Skill-based organizations seem to be more streamlined because they use specific skills to perform tasks.  When you tie a skill to work, employees make an effort to stay current in their craft.  Organizations may end offering certification programs that enhance those skills, making them more marketable and in turn gets them more compensation and/or pay.  With this structure structure, the organization hires employees with those skills necessary to move that company forward.  When you have employees that go seeking those certifications or skills in school, other employees tend to have to pick up the slack for those in training (Milkovich et al, 2014, p. 171).  With a skill-based structure, there also seems to be more flexibility between employees because they are all trained in the same profession and so teams can be made and anyone in that team can assume the tasks that need to be performed, which offers that versatility any organization can need.

        In contrast, a competency-based structure is based on how you can accomplish work.  Much like the Army when starting an operation or understanding how to accomplish a task, a competency can be a mission statement that informs you about how they think, values and philosophy, or vision of a company (Milkovich et al, 2014, p.177).  Warrant Officers in the Army deal with a specific skill – they are the technicians and are more likely to work in skill-based structures where there knowledge is used constantly.  Human Resources Specialist in the Army is used to working in a plethora of positions and so they may not be masters of any one section.  Therefore, they may thrive in a competency-based structure.  They do well in all of them but never concentrate on any one task.

References

Milkovich, G. T., Newman, J. M., & Gerhart, B. (2014).  Compensation (11th ed.).  New York,         NY: McGraw-Hill/Irwin.