Competency-Based Pay: A Concept in Evolution

Abstract

Competency-based pay has become the focus of much heated debate today. While its advocates assert it achieves precisely measurable benefits, its opponents argue that it tends to lead to unfair, invalid, and discriminatory outcomes. Among companies that have implemented competency-based pay, there is evidence that the failure rate is relatively high. Over the next few years however, with the growing need to emphasize employee development, the authors expect to see a major movement toward formal competency-based pay systems and, along with an increase in experience and learnings, a greater rate of success. "It makes sense to put money behind those things the company values-skills, competencies, behavioral change. And, based on our observations to date, it can be a highly effective way to motivate employees and create change," the authors argue.