Question:
The number of voluntary resignations has risen in the past three years in US companies. Could you tell why employees are more willing to change their jobs?

Prof. Edward E. Lawler III:
There is no simple answer to this, a number of factors contributed. Perhaps the most important two are the number of opportunities that are available to employees, and the lower commitment that individuals have to their current employers. The latter seems primarily due to the increased education level of the workforce and the layoffs that occurred in the late 1980s.

Question:
You declare that we are in the evolution from job-based to person-based pay systems. What are the most important features of the new system in your opinion?

E. L.:
The key in a person based pay system is pricing people according to the market value of their skills and knowledge. In essence, it is a labor market of individuals and this means assessing them and paying them for what they can do.

Question:
Many organizations found a pay for individual performance as a crucial element of effective compensation strategy. But still it is not fully exploited. Do you think it is due to a difficulty of finding and implementing appropriate measurements or other factors play important role?

E. L.:
Measurement is always a problem with individual pay for performance particularly in abstract knowledge work, and in team situations. In fact, individual pay for performance continues to grow in popularity in the United States and if anything is overly popular. Just the opposite is true in many Asian countries where it is under utilized.

Question:
It seems that the role of benefits diminishes today. It is evident in USA and this trend appears in Europe. Do you think that we return to the era of cash motivation?

E. L.:
Benefits are still important in the United States and there is a continuing effort to have individuals be able to make personal choices about which benefits they receive. I think a major trend in the U.S. is toward more cash bonuses in pay for performance.

Question:
Broadbanding was perceived as a good tool for increasing flexibility in organization and motivating employees. According to the survey of Society for Human Resources Management only 15% uses this technique. Could you explain why this happens?

E. L.:
Broadbanding was never a solution it was simply a technique. You still have to place people within a band and most companies who put broad banding in had no tools to place individuals within the band.

Question:
Organizations use competency-based models for rewarding individuals. Do you think they can help organizations gain competitive advantage and what should be changed in organizations willing to apply these models?

E. L.:
Competency based plans are just one version of skill and knowledge based plans. If competencies can be measured I think they can be a very positive approach.

Question:
You claim that the era of human capital took so long to arrive. Why and what changes can we expect within the area of compensation?

E. L.:
The era of human capital to me means greater emphasis on the worth of individuals and more pay for skills and knowledge. It also means more individual choice and flexibility with respect to compensation and work arrangements.

Question:
Could you outline features of an effective reward system for the next few years?

E. L.:
This question requires along answer and I've tried to answer it in my book "Rewarding Excellence: Pay Strategies for the New Economy". I would like to refer your readers there. I also have a new book out emphasizing the practices that organizations are actually adopting. This book titled "Organizing for High Performance" gives a good idea of current practice.

Thank you very much for the interview.

Professor Edward E. Lawler III is director of the Center for Effective Organizations at the University of Southern California and professor of management and organization in the USC Marshall School of Business.

Professor E. Lawler is an internationally acclaimed scholar and author. He has written or co-written thirty books, including From the Ground-up (1996), Strategies for Creating High Performance Organizations - The CEO Report (1998) and Rewarding Excellence - Pay Strategies for the New Economy (2000).

Business Week has recognized him as one of the leading management experts in America.