BUS 681 Week 3 Assignment

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6 Building Internally Consistent Compensation Systems

Learning Objectives

When you �inish studying this chapter, you should be able to:

6-1. Explain the concept of internal consistency. 6-2. Summarize the practice of job analysis.

6-3. Describe the practice of job evaluation. 6-4. Summarize various job evaluation techniques.

6-5. Explain how internally consistent compensation systems and competitive strategy relate to each other.

CHAPTER WARM-UP!

If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the Chapter Warm-Up! and see what you already know. After reading the chapter, you’ll have a chance to take the Chapter Quiz! and see what you’ve learned.

Job descriptions serve as a cornerstone in the development of internally consistent compensation systems as well as in describing selection standards and performance criteria in performance evaluation systems. Well-written job descriptions provide compensation professionals with suf�iciently well-speci�ied information about job duties and worker requirements upon where to begin making judgments about the relative worth of jobs based on differences in job content. With these judgments in hand, compensation professionals will be well positioned to survey market pay rates to establish competitive pay levels (Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) ) to attract and retain talented employees.

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6.1 INTERNAL CONSISTENCY

6-1 Explain the concept of internal consistency.

Internally consistent compensation systems (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss226) clearly de�ine the relative value of each job among all jobs within a company. This ordered set of jobs represents the job structure or hierarchy. Companies rely on a simple, yet fundamental principle for building internally consistent compensation systems: Jobs that require higher quali�ications, more responsibilities, and more complex job duties should be paid more than jobs that require lower quali�ications, fewer responsibilities, and less-complex job duties. Internally consistent job structures formally recognize differences in job characteristics that enable compensation managers to set pay accordingly. Figure 6-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#ch06�ig01) illustrates an internally consistent job structure for employee bene�its professionals. As Figure 6-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#ch06�ig01) indicates, a bene�its manager should earn substantially more than a bene�its counselor I. Bene�its managers have far greater responsibility for ensuring effective bene�its practices than does the entry-level counselor. The difference in average pay rates between bene�its counselor II and bene�its counselor I jobs should be far less than that between bene�its manager and bene�its counselor I jobs because the differences in responsibility between bene�its counselor II and bene�its counselor I are far less than the differences between bene�its manager and bene�its counselor I.

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FIGURE 6-1 Internally Consistent Compensation Structure

Compensation experts and HR professionals create internally consistent job structures through two processes—job analysis followed by job evaluation. Job analysis (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss229) is almost purely a descriptive procedure; job evaluation re�lects value judgments. Effective job analysis identi�ies and de�ines job content (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss231) . Job content describes job duties and tasks as well as such pertinent factors as the skill and effort (i.e., compensable factors) needed to perform the job adequately.

Human resource specialists lead the job analysis process. As we will discuss shortly, they solicit the involvement of employees and supervisors, who offer their perspectives on the nature of the jobs being analyzed. Based on this information, HR specialists write job descriptions that describe the job duties and minimum quali�ications required of individuals to perform their jobs effectively.

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Job evaluation (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss236) is key for casting internally consistent compensation systems as strategic tools. Compensation professionals use job evaluation to establish pay differentials among employees within a company. The descriptive job analysis results directly aid compensation professionals in their pay-setting decisions by quantifying the key similarities and differences between jobs based on job content identi�ied in the job analysis process.

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6.2 JOB ANALYSIS

6-2 Summarize the practice of job analysis.

Competent compensation professionals are familiar with job analysis concepts, the process of conducting job analysis, and fundamental job analysis techniques. Job analysis is a systematic process for gathering, documenting, and analyzing information in order to describe jobs. Job analyses describe content or job duties, worker requirements or job speci�ications, and, sometimes, the job context or working conditions.

Job content refers to the actual activities that employees must perform on the job. Job-content descriptions may be broad, general statements of job activities or detailed descriptions of duties and tasks performed on the job. Greeting clients is common to receptionist jobs. The job activity of greeting clients represents a broad statement. Describing the particular activities associated with greeting clients (e.g., saying “hello,” asking the clients’ names, using the telephone to notify the employees of their clients’ arrivals, and offering beverages) represents a detailed statement.

Worker requirements (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss482) represent the minimum quali�ications and the knowledge, skills, and abilities (KSAs) that people must have to perform a particular job. Such requirements usually include education; experience; licenses; permits; and speci�ic abilities and skills such as typing, drafting, or editing. For example, HR managers must have knowledge of principles and procedures for recruitment, selection, training, compensation and bene�its, labor relations and negotiations, and HR information systems. Active listening and critical thinking are two examples of many necessary skills for effective HR managers. Human resource managers must possess abilities such as oral comprehension and written comprehension.

Working conditions (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss487) are the social context or physical environment where work will be performed. For instance, social context is a key factor for jobs in the hospitality industry. Hospitality industry managers emphasize the importance of employees’ interactions with guests. Hotel registration desk clerks should convey an air of enthusiasm toward guests and be willing to accommodate each guest’s speci�ic requests for a nonsmoking room or an early check-in time.

Physical environments vary along several dimensions, based on the level of noise and possible exposure to hazardous factors, including hazardous chemicals. Work equipment also de�ines the character of the physical environment. Nuclear power plant employees work in rather hazardous physical environments because of possible exposure to dangerous radiation levels. Accountants perform their jobs in relatively safe working environments because of�ice buildings must meet local building safety standards.

Steps in the Job Analysis Process

The job analysis process has �ive main activities:

Determine a job analysis program.

Select and train analysts.

Direct job analyst orientation.

Conduct the study: data collection methods and sources of data.

Summarize the results: writing job descriptions.

DETERMINE A JOB ANALYSIS PROGRAM

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A company must decide between using an established system or developing its own system tailored to speci�ic requirements. Both established and custom job analysis programs vary in the method of gathering data. The most typical methods for collecting job analysis information are questionnaires, interviews, observation, and participation. Administrative costs often represent a major consideration in selecting a job analysis method.

SELECT AND TRAIN ANALYSTS

Job analysts generally must be able to collect job-related information through various methods, relate to a wide variety of employees, analyze the information, and write clearly and succinctly. A task force of representatives from throughout the company ideally conducts the analysis, and HR staff members coordinate it. Although some companies rely on HR professionals to coordinate and conduct job analysis, many use teams to represent varying perspectives on work because virtually all employees interact with coworkers and supervisors.

Before the task force embarks on a job analysis, members need to be taught about the basic assumptions of the model and the procedures they must follow. The training should include discussions of the study’s objectives, how the information will be used, methodology overviews, and discussions and demonstrations of the information-gathering techniques. Analysts also should be trained to minimize the chance that they will conduct ineffective job analyses. For example, analysts should involve as many job incumbents as possible within the constraints of staff time to have representative samples of job incumbents’ perceptions.

TABLE 6-1 Units of Analysis in the Job Analysis Process

1. An element is the smallest step into which it is practical to subdivide any work activity without analyzing separate motions, movements, and mental processes involved. Connecting a �lash drive into a USB port is an example of a job element.

2. A task is one or more elements and is one of the distinct activities that constitute logical and necessary steps in the performance of work by the worker. A task is created whenever human effort, physical or mental, is exerted to accomplish a speci�ic purpose. Keyboarding text into memo format represents a job task.

3. A position is a collection of tasks constituting the total work assignment of a single worker. There are as many positions as there are workers. John Smith’s position in the company is clerk typist. His tasks, which include keyboarding text into memo format, running a spell check on the text, and printing the text on company letterhead, combine to represent John Smith’s position.

4. A job is a group of positions within a company that are identical, with respect to their major or signi�icant tasks, and suf�iciently alike to justify their being covered by a single analysis. There may be one or many persons employed in the same job. For example, Bob Arnold, John Smith, and Jason Colbert are clerk typists. With minor variations, they essentially perform the same tasks.

5. A job family is a group of two or more jobs that call for either similar worker characteristics or similar work tasks. File clerk, clerk typist, and administrative clerk represent a clerical job family because each job mainly requires employees to perform clerical tasks.

6. An occupation is a group of jobs, found at more than one establishment, in which a common set of tasks are performed or are related in terms of similar objectives, methodologies, materials, products, worker actions, or worker characteristics. File clerk, clerk typist, administrative clerk, staff secretary, and administrative secretary represent an of�ice support occupation. Compensation analyst, training and development specialist, recruiter, and bene�its counselor represent jobs from the human resources management occupation.

Source: U.S. Department of Labor (1991). The Revised Handbook for Analyzing Jobs. Washington, DC: U.S. Government Printing Of�ice.

Finally, job analysts must be familiar with the structure of pertinent job data. Job analysis data are con�igured in levels, hierarchically from speci�ic bits of information to progressively broader categories that include the prior

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speci�ic pieces. Table 6-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab01) de�ines representative analysis levels and lists examples of each one. The most speci�ic information is a job element, and the broadest element is an occupation.

The U.S. Of�ice of Management and Budget published The Standard Occupational Classi�ication System (SOC), which identi�ies 840 detailed occupations. These detailed occupations are subdivided into 461 broad occupational groups. The broad occupational groups are subdivided into 97 minor groups. These minor groups are subdivided into the broadest category of 23 major occupational groups. Table 6-2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab02) lists the 23 major occupational groups based. The following is an example:

• Major occupational group:

Architecture and Engineering Occupations

• Minor group: Engineers

• Broad occupational group:

Industrial Engineers

• Detailed occupation: Health and Safety Engineers1

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec10#ch06end1)

These occupational group concepts are relevant for making compensation decisions. As we will see shortly, this classi�ication system links to the Occupational Information Network (O*NET), which contains detailed information to facilitate compensation professionals making precise comparisons for pay-setting purposes.

DIRECT JOB ANALYST ORIENTATION

TABLE 6-2 Major Occupational Groups of the Standard Occupational Classi�ication

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Management occupations Business and �inancial operations occupations Computer and mathematical occupations Architecture and engineering occupations Life, physical, and social science occupations Community and social service occupations Legal occupations Education, training, and library occupations Arts, design, entertainment, sports, and media occupations Health care practitioners and technical occupations Health care support occupations Protective service occupations Food preparation and serving-related occupations Building and grounds cleaning and maintenance occupations Personal care and service occupations Sales and related occupations Of�ice and administrative support occupations Farming, �ishing, and forestry occupations Construction and extraction occupations Installation, maintenance, and repair occupations Production occupations Transportation and material-moving occupations Military-speci�ic occupations

Source: U.S. Bureau of Labor Statistics (2010). 2010 SOC User Guide. Available: www.bls.gov/soc/ (http://www.bls.gov/soc/) , accessed August 25, 2013.

Before analysts start speci�ic job analysis techniques, they must analyze the context in which employees perform their work to better understand in�luencing factors. In addition, analysts should obtain and review such internal information as organizational charts, listings of job titles, classi�ications of each position to be analyzed, job incumbent names and pay rates, and any instructional booklets or handbooks for operating equipment. Job analysts may also �ind pertinent job information in such external sources as The Standard Occupational Classi�ication System, trade associations, professional societies, and trade unions.

CONDUCT THE STUDY: DATA COLLECTION METHODS AND SOURCES OF DATA

Once analysts have gathered and made sense of these preliminary data, they can begin gathering and recording information for each job in the company. Analysts should carefully choose the method of data collection and the sources of data. The most common methods are questionnaires and observation. Questionnaires direct job incumbents’ and supervisors’ descriptions of the incumbents’ work through a series of questions and statements, for example:

Describe the task you perform most frequently.

How often do you perform this task?

List any licenses, permits, or certi�ications required to perform duties assigned to your position.

List any equipment, machines, or tools you normally operate as part of your position’s duties.

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Does your job require any contacts with other department personnel, other departments, outside companies, or agencies? If yes, please describe.

Does your job require supervisory responsibilities? If yes, for which jobs and for how many employees?

Observation requires job analysts to record perceptions they form while watching employees perform their jobs.

The most common sources of job analysis data are job incumbents, supervisors, and the job analysts. Job incumbents should provide the most extensive and detailed information about how they perform job duties. Experienced job incumbents will probably offer the most details and insights. Supervisors also should provide extensive and detailed information, but with a different focus. Supervisors speci�ically are most familiar with the interrelationships among jobs within their departments. They are probably in the best position to describe how employees performing different jobs interact. Job analysts also should involve as many job incumbents and supervisors as possible because employees with the same job titles may have different experiences.

For example, parts assembler John Smith reports that a higher level of manual dexterity is required than parts assembler Barbara Bleen reports. Parts assembler supervisor Jan Johnson indicates that assemblers interact several times a day to help each other solve unexpected problems, and supervisor Bill Black reports no interaction among parts assemblers. Including as many job incumbents and supervisors as possible will provide a truer assessment of the parts assembler job duties.

Of course, job analysts represent a source of information. In the case of observation, job analysts write descriptions. Job analysts, when using questionnaires, often ask follow-up questions to clarify job incumbents’ and supervisors’ answers. In either case, job analysts’ HR expertise should guide the selection of pertinent follow-up questions.

Companies ultimately strive to conduct job analyses that meet reliability and validity criteria. A reliable job analysis method (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss375) yields consistent results under similar conditions. For example, let’s assume that two job analysts independently observe John Smith perform his job as a retail store manager. The method is reliable if the two analysts reach similar conclusions about the duties that constitute the retail store manager job. Although important, reliable job analysis methods are not enough. Job analyses also must be valid.

A valid job analysis method (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss460) accurately assesses each job’s duties or content. In this regard, we are referring to a particular type of validity – content validity. Unfortunately, neither researchers nor practitioners can demonstrate whether job analysis results are de�initively accurate or content valid. At present, the best approach to producing valid job descriptions requires that results among multiple sources of job data (e.g., job incumbents, analysts, supervisors, and customers) and multiple methods (e.g., interview, questionnaire, and observation) converge.2

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec10#ch06end2)

Reliable and valid job analysis methods are essential to building internally consistent compensation systems. The factors that describe a particular job should indeed re�lect the actual work. Failure to match accurately compensable factors with the work employees perform may result in either inadequate or excessive pay rates. Both cases are detrimental to the company. Inadequate pay may lead to dysfunctional turnover (i.e., the departure of high-quality employees). Excessive pay represents a cost burden to the company that can ultimately undermine its competitive position. Moreover, basing pay on factors that do not relate to job duties leaves a company vulnerable to allegations of illegal discrimination.

What can compensation professionals do to increase the likelihood that they will use reliable and valid job analysis methods? Whenever time and budgetary constraints permit, job analysts should use more than one data collection method, and they should collect data from more than one source. Including multiple data collection methods and sources minimizes the inherent biases associated with any particular one. For example, job incumbents may view their work as having greater impact on the effectiveness of the company than does the incumbents’ supervisor.

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Observation techniques do not readily indicate why an employee performs a task in a speci�ic way, but the interview method provides analysts with an opportunity to make probing inquiries.

SUMMARIZE THE RESULTS: WRITING JOB DESCRIPTIONS

Job descriptions (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss234) summarize a job’s purpose and list its tasks, duties, and responsibilities, as well as the KSAs necessary to perform the job at a minimum level. Effective job descriptions generally explain:

What the employee must do to perform the job

How the employee performs the job

Why the employee performs the job in terms of its contribution to the functioning of the company

Supervisory responsibilities, if any

Contacts (and purpose of these contacts) with other employees inside or outside the company

The skills, knowledge, and abilities the employee should have or must have to perform the job duties

The physical and social conditions under which the employee must perform the job

Job descriptions usually contain four sections:

Job title

Job summary

Job duties

Worker speci�ications

Table 6-3 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab03) contains a job description for a training and development specialist.

Job titles (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss241) indicate the name of each job within a company’s job structure. In Table 6-3 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab03) , the job title is training and development specialist. The job summary (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss240) statement concisely summarizes the job with two to four descriptive statements. This section usually indicates whether the job incumbent receives supervision and by whom. The training and development specialist works under general supervision from higher-level training and development professionals or other designated administrators.

The job duties (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss235) section describes the major work activities and, if pertinent, supervisory responsibilities. For instance, the training and development specialist evaluates training needs of employees and departments by conducting personal interviews, questionnaires, and statistical studies.

The worker speci�ications (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss483) section lists the education, KSAs, and other quali�ications individuals must possess to perform the job adequately. Education (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss122) refers to formal training. Minimum educational levels can be a high school diploma or a general equivalency diploma (GED) through such advanced levels as masters’ or doctoral degrees.

TABLE 6-3 Job Description: Training and Development Specialist

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Job Title Training and Development Specialist

Job Summary Training and development specialists perform training and development activities for supervisors, managers, and staff to improve ef�iciency, effectiveness, and productivity. They work under general supervision from higher-level training and development professionals.

Job Duties A training and development specialist typically:

1. Recommends, plans, and implements training seminars and workshops for administrators and supervisors, and evaluates program effectiveness.

2. Evaluates training needs of employees and departments by conducting personal interviews, questionnaires, and statistical studies.

3. Researches, writes, and develops instructional materials for career, staff, and supervisor workshops and seminars.

4. Counsels supervisors and employees on policies and rules. 5. Performs related duties as assigned.

Worker Speci�ications 1. Any one or any combination of the following types of preparation:

a. credit for college training leading to a major or concentration in education or other �ields closely related to training and development (such as human resource management or vocational education).

—or— b. Two years of work experience as a professional staff member in a human resource management department.

2. Two years of professional work experience in the training and development area in addition to the training and experience required in item 1, above.

The Equal Employment Opportunity Commission (EEOC) (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss132) guidelines distinguish among the terms skill, ability, and knowledge. Skill (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss412) refers to an observable competence to perform a learned psychomotor act. Typing 50 words per minute is an example of a psychomotor act. Typing requires knowledge of the keyboard layout and manual dexterity. According to the EEOC, ability (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss7) refers to a present competence to perform an observable behavior or a behavior that results in an observable product. For example, possessing the competence to mediate a dispute between labor and management successfully re�lects ability. Knowledge (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss244) refers to a body of information applied directly to the performance of a function. Companies measure knowledge with tests, or they infer that employees have knowledge based on formal education completed. For instance, compensation professionals should know about the Fair Labor Standards Act’s overtime pay requirements. Since these de�initions were issued, the United States slightly modi�ied the de�initions of KSAs. These de�initions are largely consistent with each other. We will work with the revised de�initions when we review O*NET later in this chapter.

Legal Considerations for Job Analysis

The government does not require companies to conduct job analysis; however, conducting job analyses increases the chance that employment decisions are based solely on pertinent job requirements. Under the Equal Pay Act (Chapter 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch02#ch02) ), companies must justify pay differences between men and women who perform equal work. Different job titles do not suf�ice as justi�ication. Instead, companies must demonstrate substantive differences in job functions. Job analysis helps HR professionals

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discern whether substantive differences between job functions exist. Job analysis is also useful for determining whether a job is exempt or nonexempt under the Fair Labor Standards Act (FLSA). As we discussed in Chapter 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch02#ch02) , failure to pay nonexempt employees an overtime hourly pay rate violates the FLSA.

Companies may perform job analysis to see if they comply with the Americans with Disabilities Act (ADA) and the American with Disabilities Act Amendments Act of 2008, also discussed in Chapter 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch02#ch02) . The amendments emphasize that the de�inition of disability should be construed in favor of broad coverage of individuals to the maximum extent permitted by the terms of the ADA. As long as disabled applicants can perform the essential functions of a job with reasonable accommodation, companies must not discriminate against these applicants by paying them less than other employees performing the same job. Human resource professionals use job analysis to de�ine essential job functions systematically.

Job Analysis Techniques

Human resource professionals can either choose from a variety of established job analysis techniques or custom- design them. Most companies generally choose to use established job analysis techniques because the costs of custom-made job analysis techniques often outweigh the bene�its. Besides, many of the established job analysis techniques apply to a wide variety of jobs and both researchers and practitioners have already tested and re�ined them.

Choosing one established plan over another depends on two considerations: applicability and cost. Some job analysis techniques apply only to particular job families (e.g., managerial jobs), but others can be applied more broadly. In addition, some methods are proprietary, yet others are available to the public at no charge. Private consultants or consulting �irms charge substantial fees to companies that use their methods, but the U.S. Department of Labor does not charge fees to use its job analysis resources. Next, we will review the U.S. Department of Labor’s Occupational Information Network (O*NET) (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss303) .

U.S. Department of Labor’s Occupational Information Network (O*NET)

O*NET is a database. The U.S. Department of Labor’s employment and training administration spearheaded its creation for two reasons: First, it is designed to describe jobs in the relatively new service sector of the economy (e.g., wireless telecommunications). Second, O*NET more accurately describes jobs that evolved as the result of technological advances (e.g., software and hardware engineering).

O*NET is comprehensive because it incorporates information about both jobs and workers. The O*NET Content Model (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss77) lists six categories of job and worker information. Job information contains the components that relate to the actual work activities of a job (i.e., information that HR professionals should include in the summary and duties sections of job descriptions). Worker information represents characteristics of employees that contribute to successful job performance. Figure 6- 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06�ig02) shows the six categories of the O*NET Content Model. According to the creators of O*NET, the Content Model was developed using research on job and organizational analysis. It embodies a view that re�lects the character of occupations (via job- oriented descriptors) and people (via worker-oriented descriptors). The Content Model also allows occupational information to be applied across jobs, sectors, or industries (cross-occupational descriptors) and within occupations (occupational-speci�ic descriptors). A description of each content area follows.

EXPERIENCE REQUIREMENTS

Experience requirements include:

Experience and training

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Licensing

FIGURE 6-2 O*Net Content Model

Experience and training (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss146) information describes speci�ic preparation required for entry into a job plus past work experience contributing to quali�ications for an occupation. Licensing (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss250) information describes licenses, certi�icates, or registrations that are used to identify levels of skill that are required for entry and advancement in an occupation. Preferred education or training, and required apprenticeships will be documented by this part of the model. Table 6-4 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab04) lists the speci�ic experience requirements.

OCCUPATIONAL REQUIREMENTS

Occupational requirements (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss302) include:

Generalized work activities

Organizational context

Work context

The occupational requirements domain includes information about typical activities required across occupations. Identifying generalized work activities and detailed work activities summarizes the broad and more speci�ic types of job behaviors and tasks that may be performed within multiple occupations. Using this framework makes it possible to use a single set of descriptors to describe many occupations. Contextual variables such as the physical, social, or structural context of work that may impose speci�ic demands on the worker or activities are also included in this section.

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Generalized work activities (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss174) information describes general types of job behaviors occurring on multiple jobs. Organizational context (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss311) information indicates the characteristics of the organization that in�luence how people do their work. Work context (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss479) information describes physical and social factors that in�luence the nature of work. Table 6-5 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab05) lists examples of particular occupational requirements.

TABLE 6-4 O*NET Content Model: Experience Requirements (sample of full list)

Experience Requirements Experience and training

Related work experience On-site or in-plant training On-the-job training

Licensing License, certi�icate, or registration required Education, training, examination or other requirements for license, certi�icate, or registration

Post-secondary degree Graduate degree On-the-job training

Additional education and training Organization and agency requirements

Legal requirement Employer requirement Union, guild, or professional association requirement

Source: Occupational Information Network Consortium. Content model. Available: www.onetcenter.org/content.html (http://www.onetcenter.org/content.html) , accessed March 1, 2015.

TABLE 6-5 O*NET Content Model: Occupational Requirements (sample of full list)

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Human resources systems and practices Recruitment and selection

Recruitment operations Reward system

Basis of compensation Which of the following is part of your compensation package?

Pro�it sharing Gain sharing Knowledge/skill-based pay Pay based on your individual performance Pay based on the performance of your team Pay based on customer satisfaction Pay based on job tenure/seniority

Pay based on job attributes Source: Occupational Information Network Consortium. Content model. Available: www.onetcenter.org/content.html (http://www.onetcenter.org/content.html) , accessed March 1, 2015.

OCCUPATION-SPECIFIC INFORMATION REQUIREMENTS

Occupation-speci�ic information requirements (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss305) detail a comprehensive set of elements that apply to a single occupation or a narrowly de�ined job family. These particular requirements are occupational skills, knowledge, tasks, duties, machines, tools, and equipment. This domain parallels other Content Model domains because it includes requirements such as work-related knowledge, skills, and tasks in addition to the machines, equipment, tools, software, and information technology workers may use in their workplace.

WORKFORCE CHARACTERISTICS

Workforce characteristics (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss485) refer to variables that de�ine and describe the general characteristics of occupations that may in�luence occupational requirements. Organizations do not exist in isolation. They must operate within a broader social and economic structure. To be useful, an occupational classi�ication system must incorporate global contextual characteristics. O*NET provides this information by linking descriptive occupational information to statistical labor market information. This includes compensation and wage data, employment outlook, and industry size information. Much of this information is collected outside of the O*NET program’s immediate scope. Collaborative efforts with such organizations as the Bureau of Labor Statistics, the Department of Commerce, the Department of Defense, Career One Stop, the U.S. Bureau of the Census, and the Employment and Training Administration facilitate these labor market information linkages. These characteristics include:

Labor market information

Occupational outlook

Labor market information describes current labor force characteristics of occupations. Occupational outlook describes future labor force characteristics of occupations.

WORKER CHARACTERISTICS

Worker characteristics (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss481) information includes:

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Abilities

Interests

Work styles

Abilities (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss6) are enduring attributes of the individual that in�luence performance. Interests (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss223) describe preferences for work environments and outcomes. Work styles (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss480) are personal characteristics that describe important interpersonal and work style requirements in jobs and occupations. Table 6-6 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#ch06tab06) lists a sample of worker characteristics.

Worker characteristics, such as interests and work styles, often rank highly in the employee selection process. Patagonia is a designer of outdoor clothing and gear for a variety of sports. The company strives to hire new employees whose interests and work styles are consistent with the company’s mission and work culture. For example, Patagonia requires that new employees have a passion for and participate in outdoor activities as well as are fanatical about protecting the environment. The following video describes Patagonia’s requirements.

WATCH IT!

If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the video exercise titled Patagonia: Employee Testing and Selection.

WORKER REQUIREMENTS

Worker requirements include:

Basic skills

Cross-functional skills

Knowledge

Education

Worker requirements represent developed or acquired attributes of an individual that may be related to work performance such as work-related knowledge and skill. Knowledge represents the acquisition of facts and principles about a domain of information. Experience lays the foundation for establishing procedures to work with given knowledge. These procedures are more commonly known as skills. Skills may be divided further into basic skills and cross-functional skills. Basic skills (e.g., reading) facilitate the acquisition of new knowledge. Cross-functional skills (e.g., problem solving) extend across several domains of activities.

TABLE 6-6 O*NET Content Model: Worker Characteristics (sample of full list)

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Abilities Cognitive abilities

Verbal abilities Oral comprehension Written comprehension Oral expression

Written expression Idea generation and reasoning abilities

Fluency of ideas Originality Problem sensitivity

Quantitative abilities Mathematical reasoning Number facility

Memory Memorization

Perceptual abilities Speed of closure Flexibility of closure Perceptual speed

Source: Occupational Information Network Consortium. Content model. Available: www.onetcenter.org/content.html (http://www.onetcenter.org/content.html) , accessed March 1, 2015.

Basic skills (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss23) information describes developed capacities that facilitate learning or the more rapid acquisition of knowledge. Cross-functional skills (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss91) information indicates developed capacities that facilitate performance of activities that occur across jobs. Knowledge information describes organized sets of principles and facts applying in general domains. Education information details prior educational experience required to perform in a job. Knowledge (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss244) refers to organized sets of principles and facts applying in general domains. Education (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss122) refers to prior educational experience required to perform in a job. Table 6-7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec3#ch06tab07) lists a sample of worker requirements.

USING O*NET

Human resource professionals use O*NET by consulting the O*NET User’s Guide (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss310) as well as the most current O*NET database (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss309) .3

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec10#ch06end3) They may �ind the latest O*NET information on the U.S. Department of Labor Employment and Training Administration’s Web site (http://online.onetcenter.org (http://online.onetcenter.org) ).

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6.3 JOB EVALUATION

6-3 Describe the practice of job evaluation.

Compensation professionals use job evaluation to systematically recognize differences in the relative worth among a set of jobs and to establish pay differentials accordingly. Whereas job analysis is almost purely descriptive, job evaluation partly re�lects the values and priorities that management places on various positions. Based on job content and the �irm’s priorities, managers establish pay differentials for virtually all positions within the company.

TABLE 6-7 O*NET Content Model: Worker Requirements (sample of full list)

Basic Skills Content

Reading comprehension Active listening Writing

Process Critical thinking Active learning Learning strategies

Cross-functional skills Social skills Social perceptiveness Coordination Persuasion

Complex problem-solving skills Problem identi�ication Information gathering Information organization

Source: Occupational Information Network Consortium. Content model. Available: www.onetcenter.org/content.html (http://www.onetcenter.org/content.html) , accessed March 1, 2015.

Compensable Factors

Compensation professionals generally base job evaluations on compensable factors (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss61) , which are the salient job characteristics by which companies establish relative pay rates. Most companies consider skill, effort, responsibility, and working conditions, which were derived from the Equal Pay Act. These four dimensions help managers determine whether dissimilar jobs are “equal.”

Skill, effort, responsibility, and working conditions are universal compensable factors (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss458) because virtually every job contains these four factors. How, then, can meaningful distinctions regarding the value of jobs be made with such broad factors? Many companies break these general factors into more speci�ic factors. For example, responsibility required could be further classi�ied as responsibility for �inancial matters and responsibility for personnel matters.

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Most jobs today can be described broadly in terms of KSAs given the evolution of jobs that require greater cognitive skills and mental (versus physical) effort. A working conditions compensable factor is most helpful when a company expects a substantial difference in working conditions for similar jobs. For example, a company may employ geologists, but while some of them are required to work in the �ield where possible dangers are greater, other geologists are required to work within the safe con�ines of a laboratory.

In any event, compensation professionals should choose compensable factors based on two considerations. First, factors must be job related. The factors that describe a particular job should indeed re�lect the actual work that is performed.

Second, compensation professionals should select compensable factors that further a company’s strategies. For example, companies that value product differentiation probably consider innovation to be an important compensable factor for research scientist and marketing manager jobs. Companies that distinguish themselves through high-quality customer relations are likely to place great value on such compensable factors as product knowledge and interpersonal skills. Lowest-cost strategies may emphasize different kinds of compensable factors (e.g., ef�iciency and timeliness).

The Job Evaluation Process

The job evaluation process entails six steps:

Determining single versus multiple job evaluation techniques

Choosing the job evaluation committee

Training employees to conduct job evaluations

Documenting the job evaluation plan

Communicating with employees

Setting up the appeals process

DETERMINING SINGLE VERSUS MULTIPLE JOB EVALUATION TECHNIQUES

Compensation professionals must determine whether a single job evaluation technique is suf�iciently broad to assess a diverse set of jobs. In particular, the decision is prompted by such questions as, “Can we use the same compensable factors to evaluate a forklift operator’s job and the plant manager’s job?” If the answer is yes, then a single job evaluation technique is appropriate. If not, then more than one job evaluation approach should be employed. Job evaluation plans are differentiated based on sets of compensable factors that are common to one set of jobs, but different from others. It is not reasonable to expect that a single job evaluation technique, based on one set of compensable factors, can adequately assess diverse sets of jobs (i.e., operative, clerical, administrative, managerial, professional, technical, and executive). A carpenter’s job is clearly distinct from a certi�ied public accountant’s position because manual dexterity is an important compensable factor that describes carpentry work and is not nearly as central to an accounting position. Ultimately, compensation professionals will create as many job structures as there are job evaluation techniques that are appropriate for groups of like jobs. As described earlier, Figure 6-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#ch06�ig01) illustrates an internally consistent job structure for employee bene�its professionals.

CHOOSING THE JOB EVALUATION COMMITTEE

Human resource professionals help put together a committee of rank-and-�ile employees, supervisors, managers, and, if relevant, union representatives to design, oversee, and evaluate job evaluation results. The functions, duties, responsibilities, and authority of job evaluation committees vary considerably from company to company. In general, committees simply review job descriptions and analyses and then evaluate jobs. Larger companies with a multitude of jobs often establish separate committees to evaluate particular job classi�ications such as nonexempt, exempt,

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managerial, and executive jobs. The immense number of jobs in large companies would otherwise preclude committee members from performing their regular duties.

Job evaluation is an important determinant of a job’s worth within many companies. All employees, regardless of their functions, wish to be compensated and valued for their efforts. All employees strive for a reasonable pay-effort bargain (i.e., a compensation level consistent with their contributions). Managers strive to balance employee motivation with cost control because they have limited resources for operating their departments. Union representatives strive to ensure that members enjoy a good standard of living. Therefore, unions try to prevent the undervaluation of jobs.

Job evaluation committees help ensure commitment from employees throughout companies. They also provide a checks-and-balances system. Job evaluation procedures are not scienti�ically accurate because these evaluation decisions are based on ordinary human judgment. Therefore, a consensus of several employees helps to minimize the biases of individual job evaluators.

TRAINING EMPLOYEES TO CONDUCT JOB EVALUATIONS

Individuals should understand the process objectives. In addition to knowing company objectives, evaluators also should practice using the chosen job evaluation criteria before applying them to actual jobs. Similar to job analysis procedures, evaluators should base their decisions on sound job- and business-related rationales to ensure legal compliance.

DOCUMENTING THE JOB EVALUATION PLAN

Documenting the job evaluation plan is useful for legal and training purposes. From an employer’s perspective, a well-documented evaluation plan clearly speci�ies job- and business-related criteria against which jobs are evaluated. Well-documented plans can allow employees to understand clearly how their jobs were evaluated and the outcome of the process. In addition, well-documented plans provide guidelines for clarifying ambiguities in the event of employee appeals or legal challenges.

COMMUNICATING WITH EMPLOYEES

Job evaluation results matter personally to all employees. Companies must formally communicate with employees throughout the job analysis and evaluation processes to ensure employees’ understanding and acceptance of the job evaluation process and results. Information sessions and memoranda are useful media. Employers should share basic information, and employees should be given the opportunity to respond to what they believe are either unsatisfactory procedures or inaccurate outcomes of the job evaluation process.

SETTING UP THE APPEALS PROCESS

Companies should set up appeals procedures that permit reviews on a case-by-case basis to provide a check on the process through reexamination. Such appeals reduce charges of illegal discrimination that would be more likely to occur if employees were not given a voice. Compensation professionals usually review employees’ appeals. Companies increasingly process appeals through committees made up of compensation professionals and a representative sample of employees and supervisors. Grievants are more likely to judge appeal decisions as fair if committees are involved: Committee decisions should re�lect the varied perspectives of participants rather than the judgment of one individual.

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6.4 JOB EVALUATION TECHNIQUES

6-4 Summarize various job evaluation techniques.

Compensation professionals categorize job evaluation methods as either market-based evaluation or job-content evaluation techniques. Market-based evaluation (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss265) plans use market data to determine differences in job worth. Many companies choose market-based evaluation methods because they wish to assign job pay rates that are neither too low nor too high relative to the market. Setting pay rates too low will make it dif�icult to recruit talented candidates, whereas setting pay rates too high will result in an excessive cost burden for the employer. Compensation professionals rely on compensation surveys to determine prevailing pay rates of jobs in the relevant labor market. We will address that issue in Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) .

Job-content evaluation (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss232) plans emphasize the company’s internal value system by establishing a hierarchy of internal job worth based on each job’s function in company strategy. Compensation professionals review preliminary structures for consistency with market pay rates on a representative sample of jobs known as benchmark jobs. Compensation professionals ultimately must balance external market considerations with internal consistency objectives. In practice, compensation professionals judge the adequacy of pay differentials by comparing both market rates and pay differences among jobs within their companies. They consult with the top HR of�icial and chief �inancial of�icer when discrepancies arise, particularly if company pay rates are generally lower than the market rates. Upon careful consideration of the company’s �inancial resources and the strategic value of the jobs in question, these executives decide whether to adjust internal pay rates for jobs with below-market pay rates.

Neither market-based nor job-content evaluation approaches alone enable compensation professionals to balance internal and external considerations. Most companies therefore rely on both approaches. The point method is the most popular job-content method because it gives compensation professionals better control over balancing internal and market considerations. Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) fully addresses how compensation professionals combine point method results with market approaches. Nevertheless, a brief overview will follow our discussion of the point method in this chapter.

The Point Method

The point method (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss341) is a job- content valuation technique that uses quantitative methodology. Quantitative methods assign numerical values to compensable factors that describe jobs, and these values are summed as an indicator of the overall value for the job. The relative worth of jobs is established by the magnitude of the overall numerical value for the jobs.

The point method evaluates jobs by comparing compensable factors. Each factor is de�ined and assigned a range of points based on the factor’s relative value to the company. Compensable factors are weighted to represent the relative importance of each factor to the job. Job evaluation committees follow seven steps to complete the point method.

STEP 1: SELECT BENCHMARK JOBS

Point method job evaluations use benchmark jobs (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss27) to develop factors and their de�initions to select jobs to represent the entire range of jobs in the company. Benchmark jobs, found outside the company, provide reference points against which jobs within the company are judged.

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STEP 2: CHOOSE COMPENSABLE FACTORS BASED ON BENCHMARK JOBS

Managers must de�ine compensable factors that adequately represent the scope of jobs slated for evaluation. Each benchmark job should be described by those factors that help distinguish it from the value of all other jobs. In addition to the “universal” factors (e.g., skill, effort, responsibility, and working conditions), additional factors may be developed to the extent that they are job- and business-related.

Compensable factor categories may be broken down further into speci�ic related factors or subfactors. For example, skill may include job knowledge, education, mental ability, physical ability, accuracy, and dexterity. Effort may include factors relating to both physical and mental exertion. Responsibility may include considerations related to �iscal, material, or personnel responsibilities. Working conditions may be unpleasant because of extreme temperatures or possible exposure to hazardous chemicals.

The number of compensable factors companies should use varies. Compensation professionals should select as many compensable factors as are needed to describe the range of benchmark jobs adequately.

STEP 3: DEFINE FACTOR DEGREES

Although compensable factors describe the range of benchmark jobs, individual jobs vary in scope and content. Evaluators must therefore divide each factor into a suf�icient number of degrees to identify the level of a factor present in each job. To clarify this idea of factor degrees, it is helpful to think about a paint sample that can be found in any home improvement store. Specifying a color such as gray is not straightforward because there are various shades of gray. Likewise, a compensable factor is similar to a color. For example, the compensable factor writing ability can be described in degrees (shades of color) ranging from the ability to write simple sentences to the ability to write paragraphs of complex information.

Table 6-8 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#ch06tab08) illustrates a factor de�inition for writing ability and its degree statements. Degree de�initions should set forth and limit the meaning of each degree so evaluators can uniformly interpret job descriptions. It is generally helpful to include a few actual work examples as anchors.

The number of degrees will vary based on the comprehensiveness of the plan. For example, if the plan covers only a limited segment of jobs (e.g., clerical employees), fewer degrees will be required than if the plan covered every group of employees. Take education as an example. Only two degrees may be necessary to describe the educational requirements for clerical jobs (i.e., high school diploma or equivalent and an associate’s degree). More than two degrees would be required to describe adequately the educational requirements for administrative, production, managerial, and professional jobs (i.e., high school diploma or equivalent, associate’s degree, bachelor’s degree, master’s degree, and doctorate). Most analyses anchor minimum and maximum degrees, with speci�ic jobs representing these points.

TABLE 6-8 Writing Ability: Factor De�inition and Degree Statements

De�inition Capacity to communicate with others in written form.

First Degree

Print simple phrases and sentences, using normal work order and present and past tenses.

Sample Anchor

Prints shipping labels for packages, indicating the destination and the contents of the packages.

Second Degree

Write compound and complex sentences, using proper end punctuation and adjectives and adverbs.

Sample Anchor

Fills requisitions, work orders, or requests for materials, tools, or other stock items.

Third Degree

Write reports and essays with proper format, punctuation, spelling, and grammar, using all parts of speech.

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Sample Anchor

Types letters, reports, or straight-copy materials from rough draft or corrected copy.

Fourth Degree

Prepare business letters, expositions, summaries, and reports using prescribed format and conforming to all rules of punctuation, grammar, diction, and style.

Sample Anchor

Composes letters in reply to correspondence concerning such items as request for merchandise, damage claims, credit information, or delinquent accounts or to request information.

Fifth Degree

Write manuals or speeches.

Sample Anchor

Writes service manuals and related technical publications concerned with installation, operation, and maintenance of electronic, electrical, mechanical, and other equipment.

STEP 4: DETERMINE THE WEIGHT OF EACH FACTOR

Weighting compensable factors represents the importance of the factor to the overall value of the job. The weights of compensable factors are usually expressed as percentages. Weighting is often done by management or by a job evaluation committee’s decision. All of the factors are ranked according to their relative importance, and �inal weights are assigned after discussion and consensus. For example, let’s assume the relative importance of skill, effort, responsibility, and working conditions to ABC Manufacturing Corporation:

Skill is the most highly valued compensable factor, weighted at 60 percent.

Responsibility is the next most important factor, weighted at 25 percent.

Effort is weighted at 10 percent.

The working conditions factor is least important, weighted at 5 percent.

STEP 5: DETERMINE POINT VALUES FOR EACH COMPENSABLE FACTOR

Compensation professionals set point values for each compensable factor in three stages. First, they must establish the maximum possible point values for the complete set of compensable factors. This total number is arbitrary, but it represents the possible maximum value jobs can possess. As a rule of thumb, the total point value for a set of compensable factors should be determined by a simple formula (e.g., the number of compensable factors times 250). ABC Manufacturing sets 1,000 (4 compensable factors x 250) as the possible maximum number of points.

Second, the maximum possible point value for each compensable factor is based on total weight as described in Step 4. Again, for ABC Manufacturing, skill equals 60 percent, responsibility 25 percent, effort 10 percent, and working conditions 5 percent:

The maximum possible total points for skills equal 600 points (60 percent × 1,000 points).

The maximum possible total points for responsibility equal 250 points (25 percent × 1,000 points).

The maximum possible total points for effort equal 100 points (10 percent × 1,000 points).

The maximum possible total points for working conditions equal 50 points (5 percent × 1,000 points).

Third, compensation professionals distribute these points across degree statements within each compensable factor. The point progression by degrees from the lowest to the highest point value advances arithmetically (i.e., a scale of even incremental values). This characteristic is essential for conducting regression analysis (i.e., a statistical analysis method that we will address in Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) in the discussion of integrating internal job structures—based on job evaluation points—with external pay rates for benchmark jobs).

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How do compensation professionals assign point values to each degree? Let’s illustrate this procedure by example, using the skill compensable factor. Let’s also assume that the skill factor has �ive degree statements. Degree 1 represents the most basic skill level, and degree 5 represents the most advanced skill level. The increment from one degree to the next highest is 120 points (600 point maximum divided by 5 degree statements).

Degree 1 = 120 points (120 points × 1)

Degree 2 = 240 points (120 points × 2)

Degree 3 = 360 points (120 points × 3)

Degree 4 = 480 points (120 points × 4)

Degree 5 = 600 points (120 points × 5)

STEP 6: VERIFY FACTOR DEGREES AND POINT VALUES

Committee members should independently calculate the point values for a random sample of jobs. Table 6-9 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#ch06tab09) shows a sample job evaluation worksheet. After calculating the point values for this sample, committee members should review the point totals for each job. Committee members give careful consideration to whether the hierarchy of jobs makes sense in the context of the company’s strategic plan, as well as to the inherent content of the jobs. For instance, sales jobs should rank relatively high on the job hierarchy within a sales-oriented company, such as the pharmaceuticals industry. Research scientist jobs ought to rank relatively high for a company that pursues a differentiation strategy. Messenger jobs should not rank more highly than claims analyst jobs in an insurance company. In short, where peculiarities are apparent, committee members reconsider compensable factor de�initions, weights, and actual ratings of the benchmark jobs.

STEP 7: EVALUATE ALL JOBS

Committee members evaluate all jobs in the company once the evaluation system has been tested and re�ined. Each job then is evaluated by determining which degree de�inition best �its the job and by assigning the corresponding point factors. All points are totaled for each job, and all jobs are ranked according to their point values.

BALANCING INTERNAL AND MARKET CONSIDERATIONS USING THE POINT METHOD

How do compensation professionals balance internal and market considerations with point method results? They convert point values into the market value of jobs through regression analysis, a statistical technique. As we will discuss in Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) , regression analysis enables compensation professionals to set base pay rates in line with market rates for benchmark or representative jobs. Companies identify market pay rates through compensation surveys. Of course, a company’s value structure for jobs based on the point method will probably differ somewhat from the market pay rates for similar jobs. Regression analysis indicates base pay rates that minimize the differences between the company’s point method results and the market pay rates.

TABLE 6-9 Sample Job Evaluation Worksheet

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Alternative Job-Content Evaluation Approaches

Most other job-content approaches use qualitative methods. Qualitative methods evaluate entire jobs and typically compare jobs with each other or some general criteria. These criteria are usually vague (e.g., importance of jobs to departmental effectiveness). Four prevalent kinds of qualitative job evaluation techniques include:

Simple ranking plans

Paired comparisons

Alternation ranking

Classi�ication plans

SIMPLE RANKING PLANS

Simple ranking plans (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss410) order all jobs from lowest to highest according to a single criterion (e.g., job complexity or the centrality of the job to the company’s competitive strategy). This approach considers each job in its entirety, usually used in small companies that have relatively few employees. In large companies that classify many jobs, members of job evaluation committees independently rank jobs on a departmental basis. Different rankings will likely result. When this occurs, job evaluation committees discuss the differences in rankings and choose one set of rankings by consensus.

PAIRED COMPARISON AND ALTERNATION RANKING

Two common variations of the ranking plan are paired comparison and alternation ranking. The paired comparison (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss316) technique is useful if there are many jobs to rate, usually more than 20. Job evaluation committees generate every possible pair of jobs. For each pair, committee members assign a point to the job with the highest value, whereas the lowest-value job does not

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receive a point. After evaluating each pair, the evaluator sums the points for each job. Jobs with higher points are more valuable than are jobs with fewer points. The job with the most points is ranked the highest; the job with the fewest points is ranked the lowest.

The alternation ranking (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss13) method orders jobs by extremes. Yet again, committee members judge the relative value of jobs according to a single criterion (e.g., job complexity or the centrality of the job to the company’s competitive strategy). This ranking process begins by determining which job is the most valuable, followed by determining which job is the least valuable. Committee members then judge the next most valuable job and the next least valuable job. This process continues until all jobs have been evaluated.

Despite the simplicity of ranking plans, they exhibit three limitations. First, ranking results rely on purely subjective data; the process lacks objective standards, guidelines, and principles that would aid in resolving differences of opinion among committee members. Companies usually do not fully de�ine their ranking criteria. For example, the criterion job complexity can be de�ined as level of education or as number of distinct tasks that the workers must perform daily.

Second, ranking methods use neither job analyses nor job descriptions, which makes this method dif�icult to defend legally. Committee members rely on their own impressions of the jobs.

Third, ranking approaches do not incorporate objective scales that indicate how different in value one job is from another. For instance, let’s assume that a committee decides on the following ranking for training and development professionals (listed from most valuable to least valuable):

Director of training and development

Manager of training and development

Senior training and development specialist

Training and development specialist

Training and development assistant

Rankings do not offer standards for compensation professionals to facilitate answering such questions as, “Is the director of training and development job worth four times as much as the training and development assistant job?” Compensation professionals’ inability to answer such questions makes it dif�icult to establish pay levels according to job-content differences.

CLASSIFICATION PLANS

Companies use classi�ication plans (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss45) to place jobs into categories based on compensable factors. Public sector organizations (e.g., civil service systems) use classi�ication systems most prevalently. The federal government’s classi�ication system is a well-known example. As we discussed in Chapter 3 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch03#ch03) , the General Schedule classi�ies federal government jobs into 15 classi�ications (GS-1 through GS-15) based on such factors as skill, education, and experience levels. In addition, jobs that require high levels of specialized education (e.g., a physicist), signi�icantly in�luence public policy (e.g., law judges), or require executive decision making are classi�ied in separate categories: Senior Level (SL) positions, Scienti�ic and Professional (SP) positions, and the Senior Executive Service (SES).

Alternatives to Job Evaluation

Compensation professionals assign pay rates to jobs in numerous ways other than through the job evaluation process as previously de�ined. These alternate methods include reliance on market pay rates, pay incentives, individual rates, and collective bargaining. Many companies determine the value of jobs by paying the average rate in

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the external labor market. The procedures for assessing market rates are addressed fully in Chapter 7 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch07#ch07) .

In addition to the market pay rate, pay incentives may also be the basis for establishing the core compensation for jobs. As we discussed extensively in Chapter 4 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch04#ch04) , incentives tie part or all of an employee’s core compensation to the attainment of a predetermined performance objective. Next, both core and fringe compensation may be determined through negotiations between an individual and an employer. The employer typically uses the market rate as a basis for negotiations, agreeing to higher pay if the supply of talented individuals is scarce and the individual in question has an established track record of performance. Finally, when unions are present, pay rates are established through the collective bargaining process, which we already considered in Chapter 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch02#ch02) .

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6.5 INTERNALLY CONSISTENT COMPENSATION SYSTEMS AND COMPETITIVE STRATEGY

6-5 Explain how internally consistent compensation systems and competitive strategy relate to each other.

We established the importance of instituting internally consistent compensation systems. Tightly speci�ied job descriptions that focus on work ef�iciency may be appropriate for companies that pursue a lowest cost strategy. There may be limitations; however, that hamper agility for companies that strive to differentiate themselves from their competition. For example, internally consistent pay systems may reduce a company’s �lexibility to respond to changes in competitors’ pay practices because job analysis leads to structured job descriptions and job structures. In addition, job evaluation establishes the relative worth of jobs within the company. Responding to the competition may require employees to engage in duties that extend beyond what’s written in their job descriptions whenever competitive pressures demand. In the process, the de�initions of jobs become more �luid, which makes equity assessments more dif�icult.

Another potential limitation of internally consistent compensation structures is the resultant bureaucracy. Companies that establish job hierarchies tend to create narrowly de�ined jobs that lead to greater numbers of jobs and staf�ing levels.4 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec10#ch06end4) Such structures promote heavy compensation burdens. Employees’ core compensation depends on the jobs they perform, how well they perform their jobs, or the skills they possess. Employee bene�its (Chapters 9 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch09#ch09) and 10 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch10#ch10) ), however, represent �ixed costs that typically do not vary with employees’ job performance or their skills. Employing a larger number of workers to staff a multitude of narrowly de�ined jobs contributes substantially to exorbitant �ixed costs for employee bene�its.

COMPENSATION IN ACTION

Creating a clear expectation of performance and organizing employee roles in a way that aligns strategy, pay, and performance will bene�it you as a line manager or HR professional. Line managers and HR should employ the help of those who know roles the best—the employees who �ill those roles—in order to arrive at conclusions that are fair, informed, and consistent. Line managers will have insight in many cases to choose the right people to help out in this process. HR will ensure that these individuals receive proper training and are equipped to assess roles and provide appropriate and objective recommendations. As a line manager or HR professional, your main responsibility in creating a system is to ensure that employee compensation is equitable internally and competitive externally.

Action checklist for line managers and HR—building an equitable and competitive system

HR takes the lead

Capture the analysis provided by incumbents and create job descriptions for each role.

Compare the newly created job descriptions with those found on O*NET to validate the decisions made based on the incumbent information.

Compensation specialists work with HR professionals to identify the compensable factors within each job description; these factors will serve as the basis for pay differentials (the more critical these factors are to company strategy, the more they will be compensated).

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Work with compensation specialists to evaluate differentials across departments in the organization and compare them with similar jobs in other organizations (ideally competitors); consult with line managers and senior �inance executives as discrepancies arise and adjustments appear to be necessary.

Monitor the match of performance expectations and job descriptions to guard against role stagnation in the face of competition that could require jobs to �lex and people to take on unexpected responsibilities —monitor equity carefully.

Line managers take the lead

Partner with job incumbents to understand job content of their roles.

Select workers to sit on committees that will be given the task of assessing the accuracy of the assigned pay differentials.

END OF CHAPTER REVIEW

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Summary

Learning Objective 1: Internal consistency is a characteristic of job structures that clearly de�ine the relative value of each job among all jobs within a company.

Learning Objective 2: Job analysis is a systematic process that describes job content.

Learning Objective 3: Job evaluation is a systematic process that recognizes differences in the relative worth among a set of jobs and helps to establish pay differentials accordingly.

Learning Objective 4: There are a variety of job evaluation techniques. A clear distinction is made between two approaches: job-content evaluation and market-based evaluation. There are a variety of job-content job evaluation practices. The point method is among the most prominent.

Learning Objective 5: Internally consistent compensation systems can facilitate lowest cost strategies by clearly de�ining job duties and responsibilities that focus on ef�iciency. On the other hand, internal consistency could create rigid job structures that limit �lexibility.

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Key Terms internally consistent compensation systems 120 (ch06.xhtml#page_120) job analysis 121 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#page_121) job content 121 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#page_121) job evaluation 122 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#page_122) worker requirements 122

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#page_122) working conditions 122 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec1#page_122) reliable job analysis method 125

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_125) valid job analysis method 125

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_125) job descriptions 126 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) job titles 126 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) job summary 126 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) job duties 126 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) worker speci�ications 126

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) education 126 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_126) Equal Employment Opportunity Commission (EEOC) 127

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_127) skill 127 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_127) ability 127 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_127) knowledge 127 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_127) Occupational Information Network (O*NET) 128

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_128) Content Model 128 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_128) experience and training 129

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) licensing 129 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) occupational requirements 129

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) generalized work activities 129

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) organizational context 129

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) work context 129 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_129) occupation-speci�ic information requirements 130

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_130) workforce characteristics 131

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_131) worker characteristics 131

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_131) abilities 131 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_131) interests 131 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_131) work styles 131 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_131) basic skills 132 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132)

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cross-functional skills 132 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132)

knowledge 132 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132) education 132 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132) O*NET User’s Guide 132

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132) O*NET database 132 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec2#page_132) compensable factors 133

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec3#page_133) universal compensable factors 133

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec3#page_133) market-based evaluation 135

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec3#page_135) job-content evaluation 135

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec3#page_135) point method 136 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_136) benchmark jobs 136 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_136) simple ranking plans 139

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_139) paired comparison 139 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_139) alternation ranking 139 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_139) classi�ication plans 140 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#page_140)

MyManagementLab CHAPTER QUIZ! If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the Chapter Quiz! and see what you’ve learned.

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Discussion Questions 6-1. Discuss the differences between job analysis and job evaluation. How do these practices help establish

internally consistent job structures?

6-2. Write a draft job description (no longer than one page) for a job that you have had according to the principles described in this chapter.

6-3. This chapter provides rationale for conducting job analysis, and indicates some of the limitations. Take a stand for or against the use of job analysis, and provide convincing arguments for your position.

6-4. Respond to the statement “Building an internally consistent job structure is burdensome to companies. Instead, it is best to simply de�ine and evaluate the worth of jobs by surveying the market.”

6-5. Do you consider job evaluation to be an art or a science? Please explain.

CASE Internal Consistency at Customers First

An additional Supplemental Case can be found on MyManagementLab.

After 3 months in her new role as Director of Human Resources (HR) at Customers First, Deborah Ketson feels con�ident she has identi�ied the signi�icant HR issues at the company. She has prioritized the issues and is meeting with company president Joan Bates to make her recommendations. Deborah is prepared to discuss her top priority, which is to conduct an organization-wide job analysis and job evaluation project in order to start building a more internally consistent pay structure.

Customers First is a company that provides customer service for other companies. Small-to-medium-sized companies outsource their customer service function to Customers First, which manages all customer service for their clients through a call center and also via an online customer service center. The company works with a diverse group of clients ranging from small retail stores to larger online retailers. Customers First has grown quickly in the 5 years since Joan started the company, and now employs more than 150 customer service representatives (CSRs) and other support staff.

The company’s quick growth has led to several problems with its compensation structure. Much of the company’s hiring has occurred in response to a new contract, and pay was set based on the current market rate for CSRs in order to attract the right talent. For example, an early client was a small retail store that needed fairly simple customer support. Four CSRs were hired and their pay was set at just slightly above minimum wage. In comparison, a more recent client required hiring 18 CSRs. The labor market was competitive at the time, and the company hired these 18 new employees at a pay rate well above what others at the company were paid. Such variance has occurred often in the hiring process, resulting in groups of CSRs at much different levels of pay for doing substantially similar work.

Deborah has heard many complaints from the supervisors about inequities in the pay of the CSRs. The supervisors are concerned that the inequities may lead to turnover among some of the staff. Deborah has examined the pay rates of the CSRs across the organization and agrees with the supervisors that there are some concerns. One particular concern is that the lowest paid group of CSRs is primarily female, while the highest paid group includes all male employees. By talking with the supervisors, Deborah has learned that there are some CSRs with different levels of responsibilities and skills, but they all hold the same job title. Deborah believes that an organization-wide job analysis and job evaluation is necessary to build an internally consistent compensation structure.

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However, when she shared her recommendation with Joan, she did not receive the response she expected. Joan is resistant of the job analysis and job evaluation process as she thinks that having such a structured compensation system will limit the company’s ability to be �lexible in the marketplace. Often hiring happens quickly in response to a new client contract, and they must hire the right skill set, which might vary based on the current market rates. Further, Joan suggested the entire project would be too time-consuming for Deborah and the other staff that would need to be involved. She felt their time would be better spent on other concerns such as recruiting new staff.

Questions:

6-6. Do you think that job analysis and job evaluation will bene�it Customers First?

6-7. What is your opinion on Joan’s view on job analysis and job evaluation?

6-8. What do you recommend Customers First do? Why?

Crunch the Numbers! Modifying a Job Evaluation Worksheet

An additional Crunch the Numbers! exercise can be found on mymanagementlab.com (http://mymanagementlab.com) .

This chapter discusses the concept and practice of the point method system. The discussion also speci�ies the six steps necessary to develop and implement a plan. Table 6-9 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#ch06tab09) shows the job evaluation sheet template, which compensation professionals will use to rate the relative worth of jobs based on content.

6-9. Refer to Step 5 in the discussion of the point method (in this chapter), and let’s assume that the total possible number of job evaluation points is 875 rather than 1,000. Based on the following weighting scheme, what is the possible maximum value of each compensable factor?

Skill: 20% Effort: 15% Responsibility: 60% Working Conditions: 5%

6-10. The sample worksheet (Table 6-9 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06lev1sec4#ch06tab09) ) shows point values for each compensable factor degree. Based on the information provided in and your answers to question 6-9, calculate the revised amounts.

6-11. Based on the revised sample worksheet (question 6-10), calculate the job point total with the following degree selection per compensable factor: Skill: 3 Effort: 3 Responsibility: 5 Working Conditions: 1

MyManagementLab Go to mymanagementlab.com (http://mymanagementlab.com) for Auto-graded writing questions as well as the following Assisted-graded writing questions:

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6-12. Why must a job analysis be reliable and valid? What can a compensation professional do to ensure that a job analysis is reliable and valid?

6-13. After completing the job analysis, your boss has asked you to conduct a job evaluation of the various positions in the company. Detail the steps you would take in accomplishing this task.

6-14. MyManagementLab Only – comprehensive writing assignment for this chapter.

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Endnotes 1. U.S. Bureau of Labor Statistics (2010). Standard Occupational Classi�ication. Available: http://www.bls.gov/soc/

(http://www.bls.gov/soc/) , accessed February 20, 2015. 2. Cascio, W. F., & Aguinis, H. (2011). Applied Psychology in Personnel Management (7th ed.). Upper Saddle River, NJ: Prentice Hall.

3. U.S. Department of Labor, Employment and Training Administration. (2011). O*NET. Washington, DC: Government Printing Of�ice. Available: www.onetcenter.gov (http://www.onetcenter.gov) , accessed January 11, 2011.

4. Lawler, E. E., III. (1986). What’s wrong with point-factor job evaluation? Compensation and Bene�its Review, 18, pp. 20–28.