HR Guide to the Internet:
A GUIDE TO INTEGRATING COMPETENCIES
Managers surveyed in 1996 developed the following list of measures to improve human resource management and increase their control and flexibility in making personnel decisions:
· More control and less hassle. Less direction from outside and more of the decision making processes kept within the agency.
· Flexibility to pay for competency and performance. A means to attract and keep the most valuable employees.
· Emphasis on the market when setting wage scales.
· More authority to manage personnel services budgets within individual agencies.
A 1997 legislative mandate led to Human Resource Competency Project. This allows the State Personnel division to develop and carry out an alternative classification and pay system. This system will allow the Division to define pay based on competencies, accomplishments, the labor market, and other situations. As with all change, the project will raise questions for managers and human resource professionals at all levels. This introduction to the State of Montana Competency Guide answers some of these questions and gives managers a point to begin competency-based human resource management.
What is the Montana Human Resource Competency Project?
Montana’s Human Resource Competency Project helps state agencies by updating management tools to reflect best practices. These tools include job classification and pay, employee recruitment and selection, training, and performance appraisal. Project goals, adopted by the Department of Administration, include:
· Customizing competency and performance criteria.
· Greater pay flexibility based on job content, competency, market salary data, and situational pay, with less emphasis on position classification.
· Improved access to electronic information for decision making and human resource management. The new state software, PeopleSoft, supports competency-based human resources, and has the potential to lighten this workload.
· Training and structure for managers.
· Cooperating with unions to accomplish changes.
The following pilot projects, coordinated by the Department of Administration, have begun to meet the immediate needs for several agencies and occupations.
· Treatment Specialists and Resident Care Aides at the Montana Chemical Dependency Center
· Health Care Facility Surveyors in the Department of Public Health and Human Services
· Brand Inspectors in the Department of Livestock
· Information Technology in MSU, Office of Public Instruction, Department of Transportation and Department of Administration
· Law Enforcement
· Commerce Managers
· Department of Revenue
· Board of Investments
This guide embodies the best practices learned through these pilots.
Why would a manager want to get involved in the Montana Competency Project?
Quite simply, the project will give managers better human resource tools to define jobs, recruit and select employees, and conduct performance appraisals. Defining jobs in relationship to the knowledge, skills, abilities and behaviors that lead to successful job performance gives the manager elements to use in selection and hiring. Used in employee performance evaluation, these later can form the basis for developing competency pay. By improving employee selection and performance, managers can improve already high-quality service to Montana citizens.
When managers match an employee’s competencies with those needed for a job, the resulting fit improves job performance and job satisfaction. Competencies also help managers plan employee career development and make better use of training dollars by identifying training needs. Competencies create more effective teams by member selection that balances the competencies needed for a project.
The current classification and pay system emphasizes the job and length of employment. No consistent method exists to pay employees for outstanding performance. The Competency Project shifts the emphasis toward people-based criteria. After classification of a position, managers will have a systematic way to reward employees based on elements that contribute to agency success. Blending competency, market, situational, and strategic components into the pay system can promote employee career planning and retention of top performing employees.
What does competency mean?
The State of Montana Competency Guide defines competencies as sets of measurable and observable knowledge, skills, abilities and behaviors that contribute to success in a job. Competencies predict success, and drive organizational and individual performance.
Identifying and measuring competencies and behavior in the workplace is not new. Industrial psychologists have studied behavior and its relationship to performance for decades. Managers have intuitively used competencies in hiring and promoting decisions without formally incorporating them into human resource management processes.
What is the Statewide Competency Model?
In 1997, managers, supervisors and employees in more than twenty-five occupations spanning all grade levels met in focus groups. These groups described the characteristics of superior performers. A project research and development team analyzed this information to find patterns of competencies among these occupations. The resulting Statewide Competency Model describes six competency categories that represent the most common and critical behavioral competencies found in top-performing state employees.
· Initiative and Accountability
· Personal Effectiveness
· Thinking and Problem Solving
Within each broad category, the model identifies and defines more specific competencies and the behaviors that make them observable and measurable. This describes how top performers display competency.
Managers can use data from the model to find new ways to assign pay, recruit and select staff and connect human resource systems. Each manager will have new tools for developing performance assessment instruments and training initiatives for employee growth, and pay structures to attract and retain top employees.
How will this affect job classification?
Important project goals included:
· Reducing emphasis on position classification in setting pay
· Decreasing effort and paperwork to change job duties and pay.
The State Personnel Division proposed changing the current seven-factor system to an evaluation method using one factor. A new broadbanding structure will reduce the current 25 grades to nine levels. These changes will substantially alter administration of the classification system.
It will likely reduce the length and decrease the difficulty of writing position descriptions. However, they will still require a good description of job content to make decisions. In addition, the proposed changes will reduce the effort and time needed to document a classification action.
How will the competency project change pay calculation?
Managers asked for greater pay flexibility based on employee characteristics. Additional means to set employee pay such as competency pay, situational pay, market adjustments, and strategic pay will increase their options. The classification of job content will still determine the greatest percentage of total pay.
New options will provide a system to pay for other ways that employees help agencies succeed. The competency component supplies a way to recognize and reward individual employees. Situational pay recognizes unique work conditions. Market comparisons allow pay adjustments for entire occupations to remain competitive. A manager with urgent business needs can use the strategic component to adjust pay to recruit for a critical, vital, or key position.
The system allows agencies to select only the pay options of value to the agency. Most of a job’s defined pay will remain linked to duties and complexity of work. Agencies may choose which new pay options to add to this base. Some agencies may choose to incorporate competencies into other human resource systems, and not attach them to pay. In any case, each agency has a new set of tools, rather than a new set of rules.
When will competencies affect pay? What will change?
Agencies and work units involved in pilot projects may attach pay to competencies beginning July 1, 1999. Agencies not associated with a pilot project may join the effort and work toward competency-based pay. The system will change gradually to form the necessary support processes for competency-based pay and human resource operations. Time lines will vary from organization to organization, based on what is needed to lay the foundation for pay system changes.
For those groups under union contracts, collective bargaining will precede any pay changes. Contract agreements will need to define how, when, or if competency and other variables will affect pay. Successfully integrating pay variables in these cases will depend on early, cooperative involvement of union representatives.
Some demonstration projects started by looking at market considerations rather than competency. They have chosen to exercise the new market pay option first. Others may choose to look at situational factors, unique or particularly demanding work conditions, and explore this option. Individual managers or agencies can choose to use any, all, or none of the new variables.
Initiating new pay components requires much groundwork. Any pay model designed must maintain fairness and equity. This includes a method of measuring the effects of a competency-based system on the work unit and on individual employee performance. To be successful, a pay system based on a competency model will depend on well-designed performance appraisals linked to work unit goals.
How will agencies fund these changes?
Agencies that want to develop and pay for competencies must fund costs beyond the biannual pay increase. The State Personnel Division has received the authority to allow agencies participating in pilot projects to classify and pay identified employees differently. Employees who participate in pilot projects will not receive less than the pay raises approved by the Legislature for all employees.
How will the competency project affect recruitment and selection?
Traditional selection practices, especially interviews, often pose hypothetical questions to applicants. The correct response may not reflect what they did or would have done in practice. Competency-based selection practices focus on what an applicant has done in the past. Managers can zero in on specific competencies critical to success. Applicants can relate specific examples to show effective or successful past performance.
When recruiting, managers can advertise for more than duties, education, and years of experience. They can seek applicants who focus on customer service, or show initiative and professionalism.
Competency-based recruitment and selection determine whether an applicant has the necessary capabilities and characteristics and the knowledge, skills and abilities to do the job. Managers look for clear evidence that an applicant has shown these capabilities and characteristics successfully in past situations.
The sections titled “Manager’s Guide to Competency-Based Interviewing” and “Competency-Based Questions” provide more information.
How will these changes affect performance appraisal?
Current policy from the Montana Operations Manual requires employee performance appraisals on a “regularly recurring basis”. The policy leaves the content and system of appraisals to individual agencies. Designing performance appraisal tools challenges managers to work with employees, creating valid, accepted measures of performance. Involving employees gives them a better understanding and ownership of the result. The competency project can provide common ground for employees and managers.
Managers should expect to spend time building competency models. Data from the models supplies the basis for revising or creating a performance appraisal system. From the competency model, the manager lists the major duties and necessary competencies to measure and defines a strategy for monitoring each element during the review period.
Successful realization of this and other competency-based systems relies on line supervisors and lead workers as well. As the direct link between management and employees, they provide the data and feed back vital to this process. An agency thinking about a competency-based human resource system must understand that it will take more supervisory time.
The appraisal period usually covers a specific period needed to complete defined work objectives assigned to individuals or employee teams. If a link between the performance appraisal and pay exists, management must define a method that will reliably compare employee performance with specific criteria. These expectations become part of the performance evaluation.
Developing a successful appraisal system means communicating about performance often enough to help employees grow more competent in their jobs. Besides work unit and occupational responsibilities, some organizations identify and apply core responsibilities and competencies to all employees in the organization. Examples of these include behaviors that describe team work and customer service. The process will take commitment and dedication from management, supervisors, employees and human resource personnel.
Information in the “Creating Competency Models” and “Performance Management” sections of this guide outlines steps for developing competency-based performance management.
What does it take to get started? Who needs to be contacted? When can a manager start?
Managers should contact agency personnel officers and management teams to discuss their interest in beginning a competency project to gain support. The interested manager needs to define ways such a program will contribute to success or resolve problems. As allies, these people can provide further information and ideas. Research shows that successful systems usually have a high-level champion in the organization who supports competency system design efforts and can clarify the agency vision and mission. Sufficient support must exist within the organization for a successful competency project.
The bibliography lists some suggested readings. Connecting the competency project directly to a goal or a strategic agency need helps employees understand the link between their work, competencies, and organizational performance. The Professional Development Center has planned training. Initially they will offer a “Managers’ Overview of Competency”; other training will occur as the process continues.
A manager might want to conduct an employee climate survey at the beginning of the competency project. Working with the personnel officer can help document problem areas in the organization to address before beginning a competency project. Such a survey can also identify particular strengths about the workplace that will contribute to success. The section “Agency Readiness and Orientation” supplies more information on this process, with a survey example.
Background work can begin anytime. Preparation now will greatly increase the chances for success in building a competency project. For current information on best practices in competency system design, contact your agency personnel or human resource officer. Additionally, if there is no personnel officer, the State Personnel Division can provide assistance.
This section provides basic information about building new pay systems in unionized workplaces. In any workplace, whether unionized or not, employee involvement is important to successful development, implementation and acceptance of a new pay system. In fact, most experts agree that a new pay system works best when employees have a substantial role in its development, even if it might be a less effective system from a technical standpoint than could have been developed without extensive employee involvement (The New Pay – Linking Employee and Organizational Performance; Schuster and Zingheim; Jossey-Bass Publishers; 1992).
The long-term benefits of employee involvement, such as employee buy-in and ownership in the system, outweigh the risks of excluding employees from the process. In a unionized workplace, management has a legal obligation to bargain collectively with the union over components of the new classification and pay system. This form of employee involvement requires management’s representatives and labor’s representatives to negotiate in good faith with a focus on reaching mutual agreement. The Legislature and governor granted agencies authority to use the alternative classification and pay system on the condition that system developments take place in consultation with unions, and that any new pay standards be subject to collective bargaining.
State law provides the following guidance on collective bargaining, classification and pay issues:
· Management will classify jobs (§39-31-303 MCA).
· Management will consult with unions prior to any changes in classification that affect pay grades or pay bands (§2-18-203 MCA).
· Employees can appeal their job classification (§2-18-203 MCA).
· Management will negotiate with unions in good faith with respect to wages, hours, fringe benefits and other conditions (§39-31-305 MCA).
· Implementation of demonstration projects in the alternative classification and pay system is negotiable with the union (§2-18-303 MCA).
The implementation and application of virtually any pay system change that vitally affects unionized employees must be negotiated between the employees’ and employer’s bargaining representatives. For example, the range of pay from minimum to maximum wage levels and market pay rates for jobs in a unionized workplace are negotiable through collective bargaining. Other examples include implementation of new pay components, such as competency pay or market pay or situational pay. In short, even in non-union workplaces, employees have collective bargaining rights under certain circumstances. This section includes information on bargaining considerations in non-union workplaces. However, the majority of the section is intended for practical use in a unionized environment.
The representative of the governor and agency management in collective bargaining with unions is the Labor Relations Bureau in the State Personnel Division, Department of Administration. Managers and human resource officers who have questions or ideas about pay initiatives in unionized workplaces should contact their labor relations representative in the bureau.
Unions have been willing partners in pilot and demonstration projects, exploring alternative classification and pay. The majority of employees in the executive branch of state government (about 65 percent) are unionized. The collective bargaining process provides for management’s team to meet and confer with the union’s team over matters of pay in efforts to reach agreement on what the new system will look like and how it will work. Major public employee unions supported and helped pass the legislation that gave state agencies new authority to explore alternative classification and pay systems, including the broadband pay structure, competency-based pay, market-based pay and other pay concepts. Further evidence of union support is the fact that the vast majority of actual pay results achieved in pilot and demonstration projects, including competency-based pay, occurred in workplaces that are unionized.
Unions have supported new pay opportunities and been partners in pay demonstration projects, but there is no definitive or universal union position with regard to each and every pay project or proposal. This is normal, as unions form their positions based on the diverse needs and desires of employees in the different bargaining units they represent. It’s common and expected that a union could support a certain pay idea for one bargaining unit, and reject a similar idea for another bargaining unit, because employee desire will vary from unit to unit and from agency to agency. In light of such potential variations, the American Compensation Association (ACA) still is able to provide some valuable guidance of a general nature for negotiating new pay systems. In a journal article titled “Alternative Rewards in Unionized Environments,” the ACA advises:
“One important factor connected to the business environment is the presence or absence of a union. According to collective bargaining laws, if a union represents a work force, then management must bargain collectively with union officials over wages (financial rewards, as well as benefits and base pay), hours and working conditions….
Management must carefully design reward systems that are likely to be acceptable to a union or unions that are present in the organization. Understanding how union members view alternative rewards and how collective bargaining laws operate is necessary to design, administer and use alternative reward strategies to improve organizational effectiveness. This understanding also helps management keep the reward system from being a source of grievances and/or labor actions….
In the absence of an acceptable reward system, a union may refuse to allow a reward system other than one based on seniority in the organization….
When performance assessments are seen as fair, union acceptance of the reward plan is more likely than when appraisal systems are seen as unfair. When performance assessments are seen as objective, union acceptance of the reward plan is more likely than when appraisal systems are seen as subjective. If union members believe that the procedures used to determine and support increases are fair, they will be more likely to consider the system fair….
In designing and implementing reward systems, attention must not only be given to the strategic needs of the business but also to the goals of union members as well. In the absence of union acceptance, a labor agreement may not be reached in the collective bargaining process or, if reached, it may not be ratified by the rank-and-file union members.”
Some of these concepts have already been put to work in pilot and demonstration pay projects in Montana state government. For example, in one pilot project in a unionized workplace, management initially desired a pay bonus to be awarded to employees who exceed a satisfactory level of demonstrated competencies. The union supported the competency pay link for employees who exceed expectations, but wanted a reward as well for those employees who meet expected competency standards. Labor and management negotiated a mutually acceptable solution for rewarding employees who meet expected competency standards with one level of pay, and rewarding employees who exceed standards with a different level of pay. Another example from another pilot project involves the union’s concern about quality assurance in employee performance appraisals, given that competency pay raises are linked to the appraisals. Labor and management agreed to certain assurances for employees, such as an informal resolution process to address significant differences over performance appraisals. Another assurance was that if the appraisal process involves multi-rater input from people other than the supervisor and employee, such as peers or customers, the employee could select half the external reviewers with management selecting the other half. These are examples where the benefits of employee buy-in and ownership were worth the effort of opening the system development to employee involvement and collective bargaining.
How to Start a Project in a Unionized Workplace
A typical project in the alternative classification and pay system generally starts with at least a couple assumptions. One assumption is that management has an interest in alternative pay methods, such as competency-based pay, or market-based pay, or other methods available in the broad band pay system. The other assumption is that an agency’s top leadership supports management’s interest in alternative pay methods. Approaches for initiating a project may vary, but one constant in the unionized workplace is the legal obligation to bargain with the employees’ exclusive representative over proposed pay changes.
At the point management is interested in proposing or exploring new pay options in a unionized workplace, the agency should contact its labor relations representative in the Labor Relations Bureau, Department of Administration. The labor relations representative will work with the agency’s human resource staff and managers to help develop a management proposal and a bargaining plan. Labor relations staff will contact the union representative at the appropriate time and help coordinate the necessary labor-management communications. Again, approaches may vary on a case-by-case basis depending on the scope of the project and the number of employees involved.
In some demonstration projects, the union and management developed, through collective bargaining, every component of the new system. These mutual labor-management efforts included the initial building of the competency model, construction of the performance appraisal tool, as well as the resulting application of the competency pay link. In other projects, generally where time lines were shorter and greater numbers of employees were involved, management developed the competency model and the performance appraisal tool as a management proposal for collective bargaining over pay and promotion opportunities. Generally, extensive employee involvement in the development stage seems to pay off in the form of smoother negotiations and better employee buy-in at the implementation stage. Any efficiency that might be perceived or associated with minimal employee involvement in the early design stage could be offset by protracted or contentious negotiations when management eventually submits its proposed system to the union. Employees and unions will have difficulty buying into a proposed system if they had no role in its development. Different approaches have different costs and benefits to be weighed in analyzing the technical aspects of the future pay system and in determining a productive bargaining strategy.
Experts seem to agree that involving employees with their union representatives in the early design and implementation process helps them accept the alternative pay system and eases the agency’s transition to a new pay program. In response to a survey conducted by the American Compensation Association, about one third of organizations that were reforming their pay systems felt that employee participation in the design process was a large factor in the success of the program. A majority of the organizations felt that employee participation in the ongoing administration of the program was crucial to its success.
Bargaining Considerations in Non-union Workplaces
In a non-union workplace, many non-supervisory and non-managerial employees who are not in collective bargaining units still may be covered by collective bargaining laws and entitled to certain bargaining rights. The Montana Board of Personnel Appeals uses case law of the federal courts and precedent of the National Labor Relations Board in interpreting and enforcing Montana’s collective bargaining statute. In the well-publicized Electromation case, the National Labor Relations Board (NLRB) found an employer guilty of an unfair labor practice in a non-union environment when the employer established employee committees to discuss mandatory subjects of bargaining. The Board determined the employer unlawfully dominated the committees by selecting the size, structure, topics, procedure and number of employee committees. In other words, the Board held that the committees constituted a labor organization, because they were created to address issues that were mandatory subjects of bargaining. The Board found that the employer’s domination of the committees created an employer-dominated union, which is prohibited under collective bargaining laws. The Montana Board of Personnel Appeals holds public employers to standards similar to those of the NLRB because of similarities between the state and federal bargaining laws. Therefore, an agency that elects to include non-union employees on pilot project or demonstration project committees runs a legal risk if the committees deal with mandatory subjects of bargaining and if agency management dictates the form, content, agenda and membership of the employee committees. This is not to say that employee involvement should be discouraged. Management should encourage and promote employee involvement throughout the project development. There are ways to foster and promote healthy employee involvement while mitigating risks associated with an Electromation-type situation. For more information or help with analyzing a general or specific situation, please contact the Labor Relations Bureau.
Questions and Answers
What aspects of pay are negotiable in a unionized workplace? All aspects of pay are negotiable. Pay ranges for each job, including market rates, will be determined through collective bargaining. Additionally, the selection and application of all the pay components available in the broad band system are negotiable.
How can my agency start a project toward competency-based pay or any of the other pay opportunities in the alternative system? If management is interested in pay changes in a unionized environment, contact your labor relations representative in the Labor Relations Bureau (444-3871). Depending on management’s particular goals or interests, union involvement may be necessary early in the process. The labor relations staff will help management analyze the statutory bargaining obligations and develop an effective plan for future progress.
What type of issues does management have to take to the union? Management has a legal obligation to negotiate in good faith over “wages, hours, fringe benefits, and other conditions of employment.” This means management may not unilaterally implement changes in pay, but rather, must bargain the proposed changes with the union.
Understanding how collective bargaining laws operate is necessary to design, administer and use alternative reward strategies to improve organizational effectiveness. How do collective bargaining laws operate? In unionized workplaces, employees have union representatives authorized as the exclusive legal agent representing employees on matters of wages, hours, fringe benefits and other conditions of employment. Pay is a mandatory subject of bargaining. Collective bargaining laws require management’s labor relations representatives and the union’s representatives to meet at reasonable times and negotiate in good faith over pay in efforts to reach agreement. Both parties may submit proposals and counterproposals. Neither party is required to agree to the other party’s proposal or to make a concession, but both parties have a mutual interest in reaching agreement. Both parties are prohibited from committing certain statutory unfair labor practices. The Montana Board of Personnel Appeals enforces this law.
Do unions categorically oppose pay that’s tied to employee performance? No. Unions have been supportive of several competency-based efforts. The majority of actual pay results achieved in the state’s pilot and demonstration projects, including competency-based pay, have occurred in unionized workplaces. Nevertheless, unions will base their positions on the collective desire of each bargaining unit. If a majority of employees in a particular bargaining unit are reluctant to pursue certain pay changes, the union’s position on pay issues for that unit is likely to reflect the majority sentiment.
SOURCES FOR MANAGERS
Aligning Total Human Resources Processes Through Competency-Based Broadbanding. Rahbar-Daniels, Dana, William M. Mercer, Inc. ACA News. November/December, 1998.
Discussion of emerging systems that align HR processes to business strategy, challenges for competency-based structures, and balancing individual competency with team processes.
Competence at Work: Models for Superior Performance. Spencer, Lyle M., Jr. and Signe M. John Wiley & Sons, Inc. Publishing. 1993.
In-depth book that summarizes 20 years of research gleaned from 286 studies using the McClelland/McBer job competence assessment (JCA) methodology; describes in detail how to conduct JCA studies; describes “state of the art” human resource management applications of JCA research: recruitment, assessment, selection, succession planning, career pathing, performance management, training and development, competency-based pay, and integrated human resource information systems; and suggests future directions and applications for competency research given a variety of human resource management issues.
Competencies, Performance and Pay. William M. Mercer Companies, Inc. 1995.
Detailed journal provides an overview of the state-of-the-art practices in the area of competency-based human resource systems. It defines competencies, and explains why to develop a competency-based system. Explains how performance management works under a competency system, how competency systems affect pay, and what to expect in the future of competency based systems.
Improving Organizational Effectiveness Through Broadbanding. Gilbert, Dan, Ph.D. and Abosch, Kenan S. Innovations. American Compensation Association. 1996.
Comprehensive journal covers broadbanding, including an overview of the design process, readiness assessment, designing a broadbanding framework, developing a communication and training plan, testing and implementing the program, assessing the new program, and weighing the broadbanding decision.
Opinion--Competencies: A Poor Foundation for the New Pay. Lawler, Edward E., III. Response--Competencies: The Right Foundation for Effective Human Resources Management. Hofrichter, David A. and Spencer, Lyle M., Jr. Compensation & Benefits Review. November-December, 1996.
Two articles review both sides of implementing the use of competencies as the determinant of pay. Four major points of contention exist between the two articles: 1., whether or not competencies are generic and undifferentiated; 2., whether or not competencies are genuinely job related; 3., the degree of difficulty involved when measuring competencies; and 4, Whether or not generic trait-rating approaches lead to subjective, invalid, or discriminatory outcomes.
Raising the Bar: Using Competencies to Enhance Employee Performance. Hay Group, et. al. American Compensation Association. 1996.
Comprehensive journal describing a comprehensive research project about competencies. Includes sections about building competency models and competency-based HR Applications: staffing, training and development, performance management and compensation.
The Role of Competencies in an Integrated HR Strategy. Thompson, Michael a., et. al. ACA Journal. Summer, 1996.
Comprehensive report on study findings regarding competencies conducted by the American Compensation Association. Discusses competency based HR applications, including staffing, training and development, performance management, and compensation.
Tapping “Star Quality” with Competency-Based Pay. Hofrichter, David and Douglas, Kimberly, Hay Group. ACA News. March 1996.
Discussion on the key issues, practices and results of organizations that have implemented or have considered implementing competency-based HR programs
The State Personnel Division can help you locate these articles and books. A longer list, including these and other sources of information, will be part of the finished guide and also available electronically. The Professional Development Center can give you information on available courses to help prepare for this process.