A “Pay-for-Value” Worker Development Program – Fair to Management and Workers, and Effective Too!

by Stacey Lett, Director of Operations, Eastern U.S. – Proactive Technologies, Inc.

A conundrum for many employers – those who are allowed to consider the wage-value relationship in their business strategy – is “what is the right pay rate for work performed.” An often used strategy is to establish a competitive wage range for a job classification based on area surveys of similar job classification in the industry, adjusted for the uniqueness of work requirements for the employer’s job classification. Once hired, an employee progresses through the wage range measured by time in the job classification, in some cases with wage adjustments based on merit. While consistent, this approach may limit the employer to paying, in many cases, more for labor than the value derived. And here is why.

If an employer purchases a new, technologically advanced, piece of machinery that is advertised to increase the output of a process from 100 units per hour to 300 units per hour, the employer would be disappointed if it only received 150 units per hour. That employer would, most likely, challenge the manufacturer and perhaps request a refund if not satisfied.

“How would one determine the proper wage rate for the value derived if there is no effort to hire workers accurately to today’s job needs, train workers to all of the required tasks and measure workers for the work they were hired and trained to perform?”

Why doesn’t that same sentiment apply to hiring workers? In a hypothetical, but typical, example an employer has an opening for a job classification that consists of 50 critical tasks that the employer expects the person filling that job classification to perform. Why shouldn’t the employer expect that person to master all 50 tasks? What might happen instead, after what is considered to be the “training period” is completed, the employer notices through anecdotal evidence and whispers that the output from that hired individual is below expectation. As time goes by and dissatisfaction grows, the decision to terminate the employee is made, often not measured against the investment in the employee thus far. If retained, the employee progresses through the wage range with no guarantee that the employee’s output increases. Where is the concern to correct this?

This is what happens without the right infrastructure to develop the maximum output from each employee relative to the job classification they are assigned. It starts like this:

1. Job Descriptions are not current for the job classifications, which are constantly evolving;
2. Someone is hired into the job classification, assessed to the entry-level requirements listed in the out-dated job description so prerequisite skills may or may not be present;
3. The employee is paired-up with an incumbent “expert(s)” and hopefully the expert(s) train(s) the new worker on the tasks required of the job;
4. Performance measurement is often subjective and not job-specific since no job-specific criteria exists, just general criteria that is expected to fit all but seldom fits any well.

How would one determine the proper wage rate for the value derived if there is no effort to hire workers accurately to today’s job needs, train workers to all of the required tasks and measure workers for the work they were hired and trained to perform? What if an employer could easily implement a model that would allow them to pay a wage rate based on the value the worker can provide, and one that provides an easy-to-implement system that encourages and guides each worker to “full job mastery” and, therefore, full worker capacity? Here is how it works:

1. Job/task analyze the target job classification: must be analyzed by task for each best practice to accurately identify the prerequisite core skills, abilities as well as current safety and process compliance requirements;
2. Hire new-hire(s) to a current job description developed from the job/task analysis data; for accurate selection of new-hires with applicable transferable skills. This determines if the new-hire has the core skills to learn the unique tasks required of the job;
3. Focus on structured on-job-training: formally drive the new-hire through mastery of each task’s best practice and document that event. When all tasks required of the job are mastered, new-hire has reached full job mastery. Assess incumbents to the same job data, grandfather them in for tasks previously mastered, and drive each incumbent to full job mastery as well.
4. Perform periodic job-specific performance assessments to ensure full capacity performance is maintained;
5. Manage this system for changes: changes in job assignments, changes in tasks’ best practicea, changes in technology and compliance requirements.

Step 3 forms the basis of a very effective “pay-for-value” program. Pay for value as opposed to pay for performance models because why would you compensate a worker for overall general performance traits when the underlying task-mastery is unknown and inexplicable? A worker can assess high on general traits and still assess low on task performance, and task performance is where the company makes their money.

A Pay-for-Value program, which is fair to the employer and employee, works like this. When the job classification was job-task analyzed, the tasks were grouped into categories based on similarities. For example, all of the reports that need to filled out and filed, online data that needs to be entered, etc. can be grouped under a “Duty Area” called “Administrative.” All of the general equipment tasks, such as using power tools, hand tools, general machines can be listed under “General Equipment.” Work-specific machines such as lathes, mills, drills, sanders can all be listed under “General Machines.” All the required quality control techniques to be performed in the targeted job classification can be listed under “Quality Control.”

In this hypothetical job structure, let’s call it “Manufacturing Worker,” there are four main duty areas, each containing 25 tasks (for simplicity). A worker is hired-in at a standard base rate for everyone, say $18.00 per hour. When all of the tasks of any duty area is mastered, the worker would be given an incremental increase of say $ .50 per hour. The same for the remaining duty areas.

This system is fair to the employer in that the employer is paying a fair wage for the level of value the employer can derive from that worker’s labor at that stage of development. It is fair to the worker because they have a clear path to reaching the top of the scale and the structure to get them there. This creates and incentive for each worker to strive for full job mastery, while allowing the employer to observe the worker for important traits such as initiative, work quantity, work quality, compliance, ability to learn and more.

Once an individual reaches the top of the wage range and, therefore, full job mastery, merit raises can be applied if warranted based on number 4 above, assessing each worker specifically on tasks they were hired to perform. Workers respond better to performance appraisals that reflect the job they are familiar with exactly and less so with appraisals that reflect general and often unrelated general traits. This type of appraisal better identifies areas of weakness or misunderstanding faster and minimizes the potential for reviewer subjectivity. Overall, this approach supports “continuous improvement” of the worker.

Once the structure is established to train workers with the accelerated transfer of expertise™  , incumbent workers can be assessed for skill gaps (unmastered tasks) and concurrently trained through structured on-the-job training to close the gap and master the entire job classifications. If an employer does no more worker training than structured on-the-job training as described, then the employer should realize maximized work quality, quantity, and compliance – process and safety – with a minimized investment. Standardizing task best practices between workers, between shifts, provides a tremendous boost to worker cooperation and repeatable levels of high performance. If the employer knows each worker has documentation of task mastery and performance falls short, then supervisors and managers can apply management remedies confident that all other causal variables are eliminated as culprits. Managers can be managers.

This infrastructure is established with every Proactive Technologies project. The tools are provided to implement it and the technical support is provided to make it run right – all included. Every system that is set up is a turnkey package. Learn more about the Proactive Technologies’ “Pay-for Value” model.