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Job-Based Structures and Job Evaluation

Internal Alignment: Determining The Structure

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COMPENSATION

TWELFTH EDITION

Part Two

Chapter Five

MILKOVICH │ NEWMAN │ GERHART

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Overview

The concept and varying perspectives of job evaluation are discussed.

Next, the four major decisions involved in the job evaluation process is discussed.

Common job evaluation methods are described with the point method discussed in depth.

Finally, the outcome is a job structure.

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EXHIBIT 5.1

Many Ways To Create Internal Structure

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Job-Based Structures

This chapter focuses on what to value in the jobs, how to assess that value, and how to translate it into a job-based structure. Job evaluation is a process for determining relative value.

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Job Evaluation

Is the process of systematically determining the relative worth of jobs to create a job structure for the organization. The evaluation is based on a combination of job content, skills required, value to the organization, organizational culture, and the external market. This potential to blend organizational forces and external market forces is both a strength and a challenge of job evaluation.

Defining Job Evaluation: Content and Value

Content refers to what work is performed and how it gets done.

Perspectives differ on whether job evaluation is based on job content or job value.

Structure based on job content orders jobs by:

skill, duties, and responsibilities.

Structure based on job value orders jobs:

on the basis of the relative contribution of the skills, duties, and responsibilities.

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Linking Content with the External Market

Value of job content is based on what it can command in the external market.

Higher skill levels or working closely with customers commands higher wages.

Skill level and nature of customer contacts become useful criteria for establishing differences among jobs.

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Defining Job Evaluation: Technical and Process Dimensions

Researchers have their own perspective on job evaluation.

Some believe job evaluations could be judged according to technical standards.

Some say job content has hidden intrinsic value; others say the only fair measure is found in the external market.

Some say job evaluation practices are just and fair; others say they are just fair.

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EXHIBIT 5.2

Assumptions Underlying Different Views of Job Evaluation

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EXHIBIT 5.3

Determining an Internally Aligned Job Structure

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Major Decisions: Establish the Purpose

A structure is aligned if it:

supports organization strategy,

supports work flow,

is fair to employees, and

motivates behavior toward organization objectives.

Establishing a purpose helps ensure the evaluation is a useful systematic process.

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Major Decisions: Single versus Multiple Plans

Many employers design different evaluation plans for different types of work.

Firms may start with a sample of benchmark (key) jobs. Characteristics include:

Its contents are well known and relatively stable.

The job is common across employers, not unique to one employer.

A reasonable proportion of the work force is employed in this job.

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EXHIBIT 5.4

Benchmark Jobs

Costs associated with all these plans (including time) give impetus to the push to simplify job structures (reduce titles and levels).

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EXHIBIT 5.5

Comparison of Job Evaluation Methods

The third major decision is to choose the job evaluation methods. Research finds that different plans generate different pay structures. So the method matters. Market pricing seems a common method.

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Job Evaluation Methods: Ranking

Orders job descriptions from highest to lowest based on relative value.

Advantages:

Simple, fast, and easy to understand and explain to employees; least expensive, initially.

Disadvantages:

Ranking criteria becomes subjective as evaluators must be knowledgeable on every job.

Results are difficult to defend and costly solutions may be required.

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Job Evaluations: Ranking

Alternation Ranking

Orders job descriptions alternately at each extreme.

Evaluators agree on which jobs are the most and least valuable, then the next, etc.

Paired Comparison

Uses a matrix to compare all possible pairs of jobs.

When all comparisons are completed, the job judged “more valuable” becomes the highest ranked job, and so on.

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EXHIBIT 5.7

Paired Comparison Ranking

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Job Evaluation Methods: Classification

A series of classes covers the range of jobs.

Job descriptions are compared to class descriptions to determine class level.

Greater specificity of the class definition improves the reliability of the evaluation.

It also limits the number of jobs easily classified.

Jobs within each class are considered equal and will be paid equally.

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Job Evaluation Methods: Point Method

Common characteristics of point methods:

Compensable factors based on:

the strategic direction of the business, and

how the work contributes to the objectives and strategy.

Factor degrees numerically scaled.

Weights reflect the relative importance of each factor.

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Eight Steps in Designing a Point Plan

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Conduct job analysis

Determine compensable factors

Scale the factors

Weight factors by importance

Select criterion pay structure

Communicate and train users

Apply to remaining jobs

Develop online support

Job Evaluation Methods: Point Method

Step 1: Conduct Job Analysis.

A representative sample of benchmark jobs is drawn for analysis.

Step 2: Determine Compensable Factors.

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Compensable Factors

are those characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives.

Job Evaluation Methods: Point Method

Compensable factors should be:

based on the strategy and values of the organization,

based on the work performed, and

acceptable to the stakeholders affected by the resulting pay structure.

Adapting factors from existing plans is possible.

Example: Hay Group Guide Chart – Profile Method.

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EXHIBIT 5.11

The Hay Group method uses three universal compensable elements to measure the relative size of jobs.

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Job Evaluation Methods: Point Method

A remaining issue is how many factors should be included in the plan.

Overlapping factor definitions provide the “illusion of validity”.

The belief that factors capture divergent aspects of a job.

Another challenge is called “small numbers”.

If even one job has a certain characteristic, it is used in the entire work domain.

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Job Evaluation Methods: Point Method

Step 3: Scale the factors.

Most factor scales are 4 to 8 degrees, if equidistant, called interval scaling.

Suggested criteria for scaling factors:

ensure the number of degrees is necessary to distinguish among jobs,

use understandable terminology,

anchor degree definitions with benchmark job titles and/or work behaviors, and

make it apparent how the degree applies to the job.

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Job Evaluation Methods: Point Method

Step 4: Weight the factors according to importance.

Weights are often determined through an advisory committee.

Step 5: Select criterion pay structure.

A pay structure the committee wishes to duplicate with the point method.

Statistical modeling techniques determine the weight for each factor.

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Job Evaluation Methods: Point Method

Step 6: Communicate the plan and train users.

Prepare a manual and train users.

An appeals process may be included.

Employee acceptance is crucial.

Step 7: Apply to nonbenchmark jobs.

Step 8: Develop online software support.

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Who Should Be Involved?

Managers and employees with a stake in the results.

A common approach is to use committees, task forces, or teams that include:

representatives from key operating functions.

Union representatives help gain acceptance.

Compensation analysts may be called in.

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The Design Process Matters

Fairness of the design process helps achieve:

employee and management commitment, trust, and acceptance of results.

Appeals/review procedures are required.

This ensures procedural fairness.

Procedures should be judged for their susceptibility to political influences.

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The Final Result: Structure

The final result of the job analysis – job description – job evaluation process is a:

structure; a hierarchy of work

Organizations commonly have multiple structures:

derived from different approaches, and

applicable to different functional groups or units.

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EXHIBIT 5.17

Resulting Internal Structures – Job, Skill, and Competency Based

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Balancing Chaos and Control

Complex procedures and bureaucracy can cause users to lose sight of the objectives.

Allow flexibility to adapt to changing condition.

Flexibility without guidelines increases chaos.

Balanced guidelines ensure employees are treated fairly.

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Summary

The concept and varying perspectives of job evaluation were discussed.

Next, the four major decisions involved in the job evaluation process was discussed.

Common job evaluation methods were described with the point method discussed in depth.

Finally, the outcome was a job structure.

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