Milkovich/Newman: Compensation, Ninth Edition

Chapter 5

Evaluating Work:

Job Evaluation

McGraw-Hill/Irwin

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Topics

Job-Based Structures: Job Evaluation Defining Job Evaluation: Content, Value, and External Market Links How-to: Major Decisions Ranking Classification Point Method

5-2

Chapter Topics (cont.)

Who Should be Involved? The Final Result: Structure Balancing Chaos and Control

Your Turn: Job Evaluation at Whole Foods

5-3

Job-Based Structures: Job Evaluation

Job evaluation 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 External market
5-4

Exhibit 5.1: Many Ways to Create Internal Structure

5-5

Defining Job Evaluation: Content, Value, and External Market Links

Content and value

Exchange value

Linking content with the external market

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

Measure for measure vs. Much ado about nothing

5-6

Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation

5-7

Defining Job Evaluation: Content, Value, and External Market Links (cont.)

How-To: Major decisions

Establish the purpose
Supports organization strategy Supports work flow Is fair to employees Motivates behavior toward organization objectives

5-8

Exhibit 5.3: Determining an Internally Aligned Job Structure

5-9

Defining Job Evaluation: Content, Value, and External Market Links (cont.)

How-To: Major decisions (cont.)

Single versus multiple plans
Characteristics of a benchmark job:
Contents are well-known and relatively stable over time

Job not unique to one employee

A reasonable number of employees are involved in the job

Depth and breadth of job Refer Exhibit 5.4

Choose among methods

5-10

Exhibit 5.4: Benchmark Jobs

5-11

Exhibit 5.5: Comparison of Job Evaluation Methods

5-12

Ranking
Orders

job descriptions from highest to lowest based on a global definition of relative value or contribution to the organizations success
Simple, fast, and easy to understand and explain Initially, the least expensive method Can be misleading

Two approaches
Alternation ranking Paired comparison method
5-13

Exhibit 5.6: Paired Comparison Ranking

5-14

Classification
Uses

class descriptions that serve as the standard for comparing job descriptions

Classes

include benchmark jobs

of classes with a number of

Outcome: Series

jobs in each

5-15

Exhibit 5.7: Classifications for Engineering Work Used by Clark Consulting

5-16

Point Method
Three

common characteristics of point methods:

Compensable factors Factor degrees numerically scaled Weights reflect relative importance of each factor

Most

commonly used approach to establish pay structures in U.S. Differ from other methods by making explicit the criteria for evaluating jobs compensable factors
5-17

Designing a Point Plan: Six Steps

Conduct job analysis Determine compensable factors Scale the factors Weight the factors according to importance

Communicate the plan, train users; prepare manual

Apply to nonbenchmark jobs
5-18

Step 1: Conduct Job Analysis

Point plans begin with job analysis

A representative sample of jobs (benchmark jobs) is drawn for analysis

Content of these jobs is basis for:

Defining compensable factors

Scaling compensable factors

Weighting compensable factors
5-19

Step 2: Determine Compensable Factors

Compensable factors characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives Compensable factors play a pivotal role

Reflect how work adds value to organization Decision making is three-dimensional:

Risk and complexity Impact of decision Time that must pass before evidence of impact

5-20

Exhibit 5.9: Compensable Factor Definition: Decision Making

5-21

Step 2: Determine Compensable Factors (cont.)

To be effective, compensable factors should be:

Based on strategy and values of organization
Based on work performed
Documentation is important

Acceptable to the stakeholders

Adapting factors from existing plans
Skills, and effort required; responsibility, and working conditions NEMA, NMTA, Equal Pay Act (1963), and Steel plan
5-22

Compensable Factors - How Many Factors?

Illusion of validity - Belief that factors are capturing divergent aspects of a job and are both important Small numbers - If even one job has a certain characteristic, it must be a compensable factor

Accepted and doing the job 21 factor, 7 factors, 3 factors

Research results
Skills explain 90% or more of variance
Three factors account for 98 - 99% of variance
5-23

Exhibit 5.10: Compensable Factor Definition: Multinational Responsibilities

5-24

Exhibit 5.11: Factors in Hay Plan

5-25

Exhibit 5.12: Hay Guide Chart Profile Method of Job Evaluation

5-26

Step 3: Scale the Factors

Construct scales reflecting different degrees within each factor

Most factor scales consist of four to eight degrees

Issue
Whether to make each degree equidistant from adjacent degrees (interval scaling)

5-27

Step 3: Scale the Factors (cont.)

Criteria for scaling factors

Ensure Use

number of degrees is necessary to distinguish among jobs understandable terminology

Anchor

degree definitions with benchmark-job titles and/or work behaviors it apparent how degree applies to job

Make

5-28

Exhibit 5.13: Factor Scaling National Metal Trades Association

5-29

Step 4: Weight the Factors According to Importance

Different weights reflect differences in importance attached to each factor by the employer Determination of factor weights
Advisory committee allocates 100 percent of the value among factors

5-30

Step 4: Weight the Factors According to Importance (cont.)

Select criterion pay structure

Committee members recommend the criterion pay structure Statistical approach is termed policy capturing to differentiate it from the committee a priori judgment approach Weights also influence pay structure

5-31

Exhibit 5.14: Job Evaluation Form

5-32

Overview of the Point System

Degree of Factor Job Factor 1. Education 2. Responsibility 3. Physical effort 4. Working conditions

Weight
50% 30% 12% 8%

1
100 75 24 25

2
200 150 48 51

3
300 225 72 80

4
400 300 96

5
500

120

5-33

AAIM National Position Evaluation Plan

Points Assigned to Factor Degrees

Factor

1st 2nd 3rd 4th 5th Degree Degree Degree Degree Degree
14 22 14 10 5 5 5 5 5 10 5 28 44 28 20 10 10 10 10 10 20 10 42 66 42 30 15 15 15 15 15 30 15 56 88 56 70 110 70 50 25 25 25 25 25 50 25
5-34

Skill 1. Knowledge 2. Experience 3. Initiative and Ingenuity Effort 4. Physical Demand 5. Mental or Visual Demand Responsibility 6. Equipment or Process 7. Material or Product 8. Safety of Others 9. Work of Others Job Conditions 10. Working Conditions 11. Hazards

40 20
20 20 20 20 40 20

Job Evaluation Example

Job A Clerk B Acct Clerk C Accountant D HR Mgr E Asst Adm F Office Mgr Points Reference Wage 45 55 75 85 80 85 $12/hour $16 $22 $25 $26 $28
5-35

5-36

5-37

Step 5: Communicate the Plan and Train Users

Involves development of manual containing information to allow users to apply plan

Describes job evaluation method Defines compensable factors Provides information to permit users to distinguish varying degrees of each factor

Involves training users on total pay system Includes appeals process for employees
Employee acceptance is imperative
Communication

5-38

Step 6: Apply to Nonbenchmark Jobs

Final step involves applying plan to remaining jobs

Could involve both designers and/or employees trained in applying the plan

Tool for managers and HR specialists once plan is developed and accepted Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed
May also be part of appeals process

5-39

Step 7: Develop Online Software Support

Online job evaluation is widely used in larger organizations Becomes part of a Total Compensation Service Center for managers and HR generalists to use

5-40

Who Should be Involved?

Managers and employees with a stake in the results should be involved

Can include representatives from key operating functions, including nonmanagerial employees

Organizations with unions find including union representatives helps gain acceptance
Extent of union participation varies

5-41

Who Should be Involved? (cont.)

Design process matters

Attending to fairness of design process and approach chosen likely to achieve employee and management commitment, trust, and acceptance of results

Appeals/review procedures
Inevitable that some jobs are incorrectly evaluated Requires review procedures for handling such cases and helping to ensure procedural fairness

5-42

Who Should be Involved? (cont.)

I know I speak for all of us when I say I speak for all of us

Procedures should be judged for their susceptibility to political influences

5-43

The Final Result: Structure

The final result of the job analysis job description job evaluation process is a structure, a hierarchy of work Managerial, technical, manufacturing, and administrative

5-44

Exhibit 5.15: Resulting Internal Structures Job, Skill, and Competency Based

5-45

Balancing Chaos and Control

Job evaluation changed the legacy of decentralization and uncoordinated wage-setting practices left from the 1930s and 40s It must afford flexibility to adapt to changing conditions
Avoids bureaucracy and increases freedom to manage Reduces control and guidelines, making enforcement of fairness difficult

5-46