Companies often use job-based or person-focused pay structures when they set up their pay structures. The former is based on the job’s responsibilities and description, and the salary is determined according to the job itself. The latter is based on the skill and knowledge level of the employee.
The company I chose to study was Tesla. Tesla is an electric car manufacturer and clean energy company with operations around the world. Tesla’s focus on product quality and technological innovation is key for maintaining a competitive edge in the market. Based on the nature of the products Tesla manufactures, technical talent is a major pillar of its growth. Knowledge and skills are the main consideration of the company when determining its compensation. Because of Tesla’s development strategy, I believe that the person-focused pay structure is the most beneficial to Tesla.
A person-focused pay structure is in line with Tesla’s strategy to compete in the marketplace. Rewarding employees based on their skills and knowledge motivates them to continue to learn new things on the job. Besides, employees are more motivated when they find that the new knowledge and skills they learn will translate into rewards in the future. This will drive Tesla’s technological innovation process. As the textbook says on page 105, companies must encourage their employees to acquire new skills in an era of increasing global competition. A person-focused pay structure could help Tesla do that.