Organizations need to pay individuals for their skills and knowledge, not for their jobs. In a work situation in which people have changing task assignments, paying the person according to their market value is much more effective than paying the job, particularly when it comes to retaining the right people. When all is said and done, it is people that have a market value, not jobs. People change companies for higher pay; jobs don’t change companies.
Perhaps the most important changes that person-based pay can effect are to the organizational culture and to employees’ motivation to change. Instead of being rewarded for moving up the hierarchy, people are rewarded for increasing their skills and developing themselves. This can reinforce a culture in which personal development and a highly talented workforce are receptive to change. It can be especially helpful when an organization needs to improve its competencies and capabilities, because the company can use pay to motivate individuals to develop needed skills.
Authors: Christopher G. Worley, Edward E. Lawler III
Source: University of Southern California
Subjects: Change Management, Human Resources, Management, Organizational Behavior