"Economic and technological forces have converged in this last decade of the twentieth century to create an entirely new form of business competition. The New Competition", N. Fredric Crandall and Marc J. Wallace, JR. write, "encompasses a global economy and is driven by information rather than product and by time rather than space, creating a revolution in the way we do business...The New Competition has emerged in three parallel developments: (1). Former competitors forming alliances to command the market, (2). New marriages of technology, markets, and opportunity, and (3). The creation of new business entities that replace traditional ones, defining the entire length of a value chain-a form of organization that has been characterized as the virtual organization...The virtual organization requires a virtual workplace. The virtual workplace is a work environment where goods and services are created and delivered joining employees beyond the traditional bounds of time and place. Technology is a foundation for the virtual workplace, creating the means for innovations in working relationship such as teams of people who work together via teleconferencing or transfer work in progress from one venue to the next across time zones to keep work going on a continuous basis."
In this context, in Chapter Six, they examine how the role of rewards and compensation changes when an organization evolves from a traditional to a virtual workplace. Firstly, they define job in a traditional organization and argue: "The job concept served traditional organizations well. Work has been organized in a command-and-conrol bureaucracy characterized by functional specifications and hierarchy. It is a paradigm shaped by early twentieth-century thinking of Max Weber and Frederick W. Taylor, implemented by Henry Ford, and cast in the legislation of Franklin D. Roosevelt's New Deal of the 1930s. Unfortunatelly the paradigm no longer serves us because the job has died. Globalization of production and technological revolution have forced us into a post-industrial model for producing goods and services. The work designs of the virtual workplace have forced companies to tear down hierarchy do away with functional specialization, and organize all activities according to entire business processes that cut across traditional departments and occupations."
Hence, they compare traditional and virtual base pay models, and argue that in the new workplace people are paid not for the job they hold but for the role they are expected to play.
I. Base Pay Model in the Traditional Workplace:
1. Unit of analysis: Job
2. Basis for determining value: Job evaluation
3. What pay is for: Work performed
4. Base pay progression: (a). Modest movement within grades to mid-point. Pay is controlled to mid-point. (b). Promotion required for significant advancement.
5. Base pay structure: Many narrow grades, hierarchically arranged.
II. Base Pay Model in the Virtual / New Paradigm Workplace:
1. Unit of analysis: Personal role
2. Basis for determining value: Personal evaluation
3. What is pay for: Capacity to perform
4. Base pay progression: Significant movement from entry rate to target rate based on capacity acquisition.
5. Base pay structure: Few, broad bands
Finally, they define this new paradigm as skill-or-competency-based pay, and argue: " the base pay progression policy that best serves the virtual workplace is skill-or competency-based pay.
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