266 Human Resources Management for Public and Nonprofi t Organizations
the employees ’ perspective include higher motivation, increased job satis-
faction, and greater opportunities for increased pay (Feuer, 1987; Gupta,
Jenkins, & Curington, 1986; Shareef, 1994, 1998; Thompson & Lehew,
2000; Towers Perrin, 1992). The implementation of skill - based pay is not
without problems. Changing a compensation system in the public sector
typically requires obtaining the approval of multiple external stakeholders
such as legislative bodies and union representatives, as well as the manag-
ers or supervisors and employees who will be affected. Employees may be
reluctant to give up annual step or cost - of - living increases while develop-
ing new competencies (Gupta, 1997; Shareef, 1998, 2002; Thompson &
Lehew, 2000).
Thompson and Lehew (2000) provide a comprehensive and criti-
cal review of skill - based pay for public organizations. They developed
a theoretical model that suggests broadening the framework to include a
discussion of environmental contingencies such as threats and crises, com-
petition, and performance pressures; the proximate environment such as
the various stakeholders, unions, and elected offi cials; the design features
of the plan such as how radical it is, training opportunities available for
employees, and the certifi cation process; and the relevance of those com-
ponents to organizational contingencies such as workforce characteristics,
managerial practices and attitudes, and congruence to skill - based pay.
Organizations that implement skill - based pay need to be aware that
wages and salaries will increase as employees learn new skills. And despite
the strategic focus of skill - based training, all other HRM systems must be
aligned. Performance evaluation systems, training and development sys-
tems, communication systems, and record - keeping systems all must change
and reinforce the implementation of skill - based pay systems, or the imple-
mentation will not be successful (Shareef, 2002). Johnson County, Kansas,
the Ventura Regional Sanitation District of Ventura, California, and the
metro Regional Government in Portland, Oregon, have implemented skill -
based pay practices (IPMA - HR, 2005).Merit Pay or Pay for Performance Merit pay, or pay - for - performance systems, is
grounded in the belief that individuals should be paid according to their
contributions. Increases are rewarded on the basis of performance rather
than seniority, equality, or need (Heneman, 1992). As logical as that may
sound, research over the years has indicated that merit pay systems have
not achieved the expected and desired results (Heneman, 1992; Kellough &
Nigro, 2002; Kellough & Lu, 1993; U.S. Merit Systems Protection Board,
2006; Perry, 1995; Risher, Fay, & Perry, 1997).