This series explores a discussion with IBM on linking performance review to pay-for-skills program. The participants in this discussion were:
The question that arises is whether adopting a skills-based approach to compensation naturally leads to a different way of evaluating skills. Or, is there a fairly dramatic change needed – one that requires involving other human resource systems too?
In IBM’s case, transitioning to a skills-based approach to compensation began by steering the conversation around performances. Additionally, the natural course of discussion would begin with whether an employee was aware of how well they were performing. It would then go on to evaluate why they may need to enroll for employee reskilling or employee upskilling initiatives to develop their skills further. And the ensuing step was the linkage of individual performance to skills, followed by setting oneself on a career progression trajectory.
Eventually, the discussion converges with the philosophy that if an employee’s career continues to progress, then their pay will continue to grow as well.
The changes, therefore, grew to become a more holistic conversation within IBM – where it was not just siloed to what an employee’s performance, his or her goals, or their achievements were. Rather, the organization began engaging in a more integrated conversation around performance, career, and a skills-based approach to compensation.
This change, in terms of when IBM began to adopt and drive pay-for skills occurred at the same time as they brought together career conversations and discussions over Checkpoint, which was performance management oriented. Checkpoint became a more informal and frequently used term and not merely “an episodic” one. And pay became a natural extension of those conversations. So, this was how it all came together.
It must also be highlighted that while IBM has prioritized on a skills-based approach to compensation, it does not imply that employee performance is now a redundant factor. Performance continues to remain an important consideration; “it's just not the primary factor now”. Skills are the current primary consideration.
Besides, there are other factors that are just as important. These include competitiveness, performance, and potential. All of these are central to the compensation decision, while skills remain the primary variable. It is important to maintain both consistency and clarity in communication for these four categories. This will better reflect the wider changes in IBM’s skills-based approach to compensation.