How Is SBP Established?

Whatever the form of SBP, establishment of a SBP plan typically involves several general steps:

1. Identify potential SBP jobs; that is, a job in which development of skill depth and/or breadth is possible and desirable.

2. For each job level, identify the specific skills (both depth and breadth) sought.

3. Evaluate the potential costs and benefits of the SBP plan (these are discussed below); proceed with further consideration of the SPB plan only if the likely benefits outweigh the costs for the organization.

4. Develop the appropriate techniques that will be used to assess the new skills, knowledge and competencies gained and/or developed.

5. Establish certification standards and processes for employees to demonstrate their successful skill acquisition.

6. Determine the dollar amount of SBP for the acquired skills, such as indicating the payout for each skill block.

Implementation Factors
Another important factor in setting up an SBP is its implementation. Developing specific implementation plans, involving and communicating with all affected employees, and then carrying through on the implementation plan, are all necessary actions.

SBP typically increases average hourly rates. However, SBP also typically leads to lower labor costs overall. How does this happen? Average pay rates go up because employees receive more pay for learning new skills and competencies. However, these costs usually are more than offset by leaner staffing and higher performance. It is critical for organizations to determine prior to adoption of SBP whether such a result is likely. Some organizations, especially those that are highly labor intensive, may find SBP too risky to adopt.

The increased pay and clearly specified career paths under SBP tend to make these plans popular with many employees. However, some employees may dislike the plan, such as senior employees near retirement, employees with low growth needs, and those with low ability to learn new skills. In addition, employees in general may become disgruntled with the lack of opportunity to earn more pay if training and certification opportunities are limited.

Greater employee training is potentially a high cost. Multiple forms of skill development may be necessary, including a combination of on‐the‐job, classroom and off‐site training. Training development and delivery, and more importantly providing enough time for employees to receive training in new skills, can add costs.

Administrative costs may also increase under SBP. There may be higher costs for the management of job rotation, skill assessment development and conduct, certification processes, and record keeping.
Market pricing of SBP jobs is difficult. Typical market pay surveys examine comparable jobs in terms of job content only. Comparing pay rates for those jobs to pay rates for SBP jobs is possible but not easy. Essentially, entry rates, top rates, and perhaps a level in between usually can be priced using relevant salary surveys to provide a skeleton for SBP levels. The specific steps in the SBP plan may not have analogs in salary surveys, but these steps can be priced relative to each other within the overall structure to provide internal equity.

Finally, there is the matter of implementation. Implementation begins with management’s commitment to develop a design that has a positive ROI, communicating the goals and mechanics of the plan to employees, working through the inevitable problems that arise, and updating the plan periodically. Because any pay system change is likely to be an emotional issue, the potential dollar and goodwill costs of a failed SBP implementation are huge.

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