For some time, futurists have been predicting the demise of the multi-layered functional organization and its replacement by a new, flatter and more fluid model. (I mused about this topic myself in a recent post, prompted by my reading of Wikinomics.) This organizational model of tomorrow, futurists claim, will no longer be populated by traditional jobs, but rather constantly changing clusters of activity.
Not so, Frank Giancola tells us in a recent article "New Forms of Organization Don't Justify Skill-Based Pay" in the June issue of Compensation & Benefits Review. Backed by his usual exhaustive research and analysis, Frank walks us through the work and conclusions of a number of leading organizational scholars and consultants - here and abroad - who not only see a future for the functional organization but believe that it will play a critical role in even the most advanced and fluid of companies.
This has important implications for pay, as compensation experts who believe in the impending obsolescence of the functional organization support abandoning traditional job-based pay programs in favor of skill-based pay, a significant shift both philosophically and administratively. (Skill-based pay programs are those where pay is based on the skills of the employee rather than the employee's job; in other words, people-based pay versus job-based pay. See more this topic here.)
In the article, Frank shares his conclusions regarding this debate and its implications:
The demise of the functional organization, and the associated increase of unstable jobs, is not an idea that experts in organizational design espouse. On the contrary, they see an important role for the functional organization as the primary organizational form, or as the foundation or parent in a dual-structure company, where it provides stability, overall strategy, specialized expertise and a needed counterbalance to the task force structure. Equally important, it also serves as the home base for employees who work on task forces to ensure they retain their professional roots and refresh specialized knowledge and skills.
Although task force participation may require additional skills, such as project management and team building, employees are still assigned to one based on their functional expertise. Thus, their occupation is the logical choice for determining their salaries, and it is hard to understand why compensation experts see these assignments as making it difficult to determine salary based on occupation, instead of skill sets.
My conclusion: don't write off the job, or job-based compensation systems, quite yet.