This series explores a discussion with IBM on pay-for-skills, and how IBM included skills as a major basis for their compensation decisions. The participants in this discussion were:
Across the world, a common highlight is the growing adoption of emerging technologies. First, from an external factors’ standpoint, this trend has redefined talent pool requirements at IBM – meaning there are also new job roles being created. These require proficiency in more sophisticated skills. These new job roles are also a major disruptor across the tech industry, but has helped organizations understand the need for newer workforce skills. Additionally, necessary workforce transformations can be best addressed by workforce upskilling or reskilling.
Second, and from an internal perspective, IBM changed its pay-for-performance model. The company introduced a significant shift in its compensation strategy. When it came to salary considerations, it shifted away from looking at performance as the only factor to be taken into account. Rather, IBM adopted a multi-factor approach – which was a progressive shift. It was felt that instead of using only base pay as a measure to evaluate performance, IBM could also use a variable pay program.
Vis-à-vis with this internal shift, a further trend was observed. The organization’s employees, it was felt, were also seeking greater transparency in their remuneration. When discussions regarding pay were broached with employees, they were also offered insights into possible ways they could consider to improve their base pay.
These strategic changes were part of a bigger transition that IBM has made. The company shares that a five-year time period is viewed as the “half-life” of skills. What this means is, in five years, half of any skill acquired becomes obsolete or forgotten.
IBM, in particular, has had to rethink how it could embed skills across the lifecycle of an employee journey. These span areas such as who it hires to how its workers learn, and from how they grow, to how individuals can develop through mentorship and other experiential learning tools or promotions. And a more progressive pay for skills structure is only a natural evolution in this journey.