Case Study: A Pay-For-Knowledge Compensation Program that Works

Cross-trained employees benefit themselves and the company they work for, which is the main rationale for using a pay-for-knowledge compensation program. The company benefits because cross-training enables employees to cover for one another during absences from work or in case of temporary vacancies. In addition, employees who have been cross-trained often present fresh perspectives, offering ideas for improving work flow and productivity. For the employees themselves, pay-for-knowledge creates a more interesting and challenging work environment, reducing turnover and absenteeism. One department in a 5,000-employee U.S. manufacturing firm agreed to implement pay-for-knowledge compensation to test this provisional work design. Particular attention was given to specific skill blocks, which were required for a particular position. Peer and management ratings were used for feedback on employee training and guidelines were written on those training and evaluation procedures. Any ratings, either negative or positive, had to be supported with information in order to alleviate workers' anxieties about subjective judgements. Issues raised by the new system were largely related to skill mastery, including the problems of unlimited learning opportunities and establishing equitable distribution of training opportunities. This case study demonstrates the potential of pay-for-knowledge.