Competency Pay for Professionals and Managers in Business: A Review and Implications for Teachers

This article describes the use of a form of pay for knowledge and skills used for professional workers in the private sector known as competency-based pay. The definition of competencies, their assessment, and their link to pay are discussed, along with the relation of competencies to organizational performance and human resource management strategy. The relatively small amount of existing empirical research is reviewed, and two case studies of the use of competency-based pay are presented. The article concludes by summarizing lessons for education from private-sector experience, which include the need to link the competencies paid for to the capabilities the organization needs to fulfill its mission, the importance of measuring competencies in behavioral and observable terms, and the need to integrate competencies into all phases of the human resources management process, including staffing and development as well as compensation.