Where Market Based Pay & Employee Choice Intersect

Can a market based pay approach, employee choice and the concept of customized rewards ever find common ground?  The answer, apparently, is yes!

I've been working my way through Workforce of One, the book on talent management customization by Susan Cantrell and David Smith.  As you might surmise, I have a particular interest in their ideas about reward customization.  This story, about an employee-defined compensation approach, is one that I find particularly intriguing.

You might have trouble imagining how employees could set their own salaries with no organizationally imposed limits.  But that's exactly what people do in the U.S. Navy.  The navy has an online job-auction site where employees can bid on hard-to-fill jobs; whoever offers the lowest salary and meets the qualifications gets the job.  Sometimes, this results in much higher salaries that the organization normally would define, and sometimes much lower ones.  But the navy has found that the system works well to correct a long-standing problem in the service - what sailors call slamming - where personnel specialists send sailors wherever needed with organizationally defined pay, regardless of whether they want to go.

The result? This democratic, market-based system means that the navy's top performers who seek extra education and a broader range of assignments will have the opportunity to be paid more and advance more quickly on their own timetable, based on their custom-designed career paths - not the navy's.  (Of course, the reverse is also true: sailors with mediocre work records or limited training will find themselves without chances for promotion.)  The navy is considering eventually posting all jobs on its online job-auction site to allow all personnel to define their own pay and career paths using a market-based system.

I understand that the devil is in the details with something like this but it sure has appeal on a conceptual level.

And I'm fairly certain I've read about similar market-based systems at work out in the private sector, but I can't seem to track them down.  Anybody have examples, intelligence or first-hand experience to share here? 

Comments

[E James (Jim/UncleJamie) Brennan]

Yes, but can't really share any proprietary secret details. When your critical "market" is your internal talent, they are the ones upon whom you properly focus. The ideal individually-appropriate care and feeding of those human "resources" always calls for far more personalized treatment than standardized bureaucratic programs typically permit. It is a lot easier to retain highly engaged talent when the enterprise is a small elite team with the organizational flexibility to accommodate any reasonable request regarding pay, perquisites, benefits, work location, virtual offices, assignments and personally-directed projects, among other things. Everyone can have whatever unique "deal" that is most reinforcing to their personal motivations and work-life needs, unconstrained by any arbitrary universal rules.

Not surprised that the Navy has thus successfully pioneered the broad systematic application of that logic. They have always been on the cutting edge of HR innovation in the uniformed forces.

[working girl]

I love the idea of putting hard to fill roles up for auction but... the main selection criteria is to pick the cheapest person? That seems a bit unfair - if you want to get into a new line of work you have to try to underbid everyone to be considered.

[Bob Fulton]

In case anyone missed this news, this is exactly how things work in a "buyers" labor market, as we have today. Many (not all, of course) employers are looking to hire as cheaply as possible, and the hiring process becomes one of "lowest bidder gets the job". This is short-sighted in a variety of ways, but many employers frankly don't care. The question becomes, how to we get them to care?

[Ann Bares]

WG:

I get your concern. I don't know details about the program beyond the two paragraphs shared here; I like the overall concept, but (as we know) the devil can be in the details. We all know that job fit is ultimately about more than minimal qualifications and asking salary - and it isn't clear the extent to which the Navy system probes or assesses fit beyond these "black and white" elements.

Bob:

Same point as above, I guess. I think we (the three of us) are in agreement that the cheapest possible hire is not always the best hire - for the employer or the employee. Without knowing more about the Navy system, it's difficult to ascertain whether it is simply a case of "lowest bidder gets the job" or whether the process has more nuances and elements than that. It may not.

At any rate, I still like the idea of employee choice and self-determination, and I like the idea of the job auction. It would be interesting to find out what other similar experiments are going on out there in the world - and where they've been successful ... or not.

Thanks for the comments!

[Kim Walter]

I found an article I read two years ago about a construction company that was letting its management team select their mix of base/variable:

http://finance.yahoo.com/career-work/article/105360/Pay%2c-Your-Own-Way:-Firm-Lets-Workers-Pick-Salary

It's pretty interesting when you think about it - many employees are ultimately making these same kinds of decisions, but too often they have to actually switch companies to get the different rewards that they've decided are currently important (i.e. going to a start-up for stock options and taking a lower base). If companies are concerned about retention, this would be an option to consider.

[Ann Bares]

Kim:

Thanks for sharing the link and your comments here - interesting article.