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Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 5 Evaluating.

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Presentation on theme: "Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 5 Evaluating."— Presentation transcript:

1 Milkovich/Newman: Compensation, Ninth Edition McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 5 Evaluating Work: Job Evaluation

2 5-2 Job-Based Structures: Job Evaluation Job evaluation – process of systematically determining the relative worth of jobs to create a job structure for the organization 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: The evaluation is based on a combination of: –Job content –Skills required –Value to the organization –Organizational culture –External market Note: focus is the job, not the person doing a job Note: focus is the job, not the person doing a job

3 5-3 Exhibit 5.1: Many Ways to Create Internal Structure

4 5-4 Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation

5 5-5 Exhibit 5.3: Determining an Internally Aligned Job Structure

6 5-6 Defining Job Evaluation: Content, Value, and External Market Links (cont.) “How-To”: Major decisions “How-To”: Major decisions –Establish the purpose  Supports organization strategy  Supports work flow  Is fair to employees  Motivates behavior toward organization objectives

7 5-7 Defining Job Evaluation: Content, Value, and External Market Links (cont.) “How-To”: Major decisions (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 employer –A reasonable number of employees are involved in the job  Refer to Exhibit 5.4 –Choose among methods  Refer to Exhibit 5.5

8 5-8 Exhibit 5.4: Benchmark Jobs

9 5-9 Exhibit 5.5: Comparison of Job Evaluation Methods

10 5-10 Ranking Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success –Simple, fast, and easy to understand and explain –Initially, the least expensive method –Can be misleading –Two approaches  Alternation ranking  Paired comparison method  See Exhibit 5.6

11 5-11 Uses class descriptions that serve as the standard for comparing job descriptions Uses class descriptions that serve as the standard for comparing job descriptions Classes include benchmark jobs Classes include benchmark jobs Outcome: Series of classes with a number of jobs in each Outcome: Series of classes with a number of jobs in each See Exhibit 5.7, 5.8 (Federal GS) See Exhibit 5.7, 5.8 (Federal GS) Classification

12 5-12 Point Method Three common characteristics of point methods: 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. 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 Differ from other methods by making explicit the criteria for evaluating jobs – compensable factors

13 5-13 Conduct job analysis (note Occupational Information Network) Conduct job analysis (note Occupational Information Network)Occupational Information NetworkOccupational Information Network Determine compensable factors Determine compensable factors Scale the factors (define factor degrees) Scale the factors (define factor degrees) Weight the factors according to importance (and then assign points to degrees within factors or subfactors) Weight the factors according to importance (and then assign points to degrees within factors or subfactors) Communicate the plan, train users, prepare manual Communicate the plan, train users, prepare manual Apply to nonbenchmark jobs (note issue of interrater reliability) Apply to nonbenchmark jobs (note issue of interrater reliability) Designing a Point Plan: Six Steps

14 5-14 Skill Skill Effort Effort Responsibility Responsibility Working conditions Working conditions Generic Compensable Factors

15 5-15 Generic Factor - Skill Technical know-how Technical know-how Specialized knowledge Specialized knowledge Organizational awareness Organizational awareness Educational levels Educational levels Specialized training Specialized training Years of experience required Years of experience required Interpersonal skills Interpersonal skills Degree of supervisory skills Degree of supervisory skills

16 5-16 Generic Factor - Effort Diversity of tasks Diversity of tasks Complexity of tasks Complexity of tasks Creativity of thinking Creativity of thinking Analytical problem solving Analytical problem solving Physical application of skills Physical application of skills Degree of assistance available Degree of assistance available

17 5-17 Generic Factor - Responsibility Decision-making authority Decision-making authority Scope of organization under control Scope of organization under control Scope of organization impacted Scope of organization impacted Degree of integration of work with others Degree of integration of work with others Impact of failure or risk of job Impact of failure or risk of job Ability to perform tasks without supervision Ability to perform tasks without supervision

18 5-18 Potential hazards inherent in job Potential hazards inherent in job Degree of danger which can be exposed to others Degree of danger which can be exposed to others Impact of specialized motor or concentration skills Impact of specialized motor or concentration skills Degree of discomfort, exposure, or dirtiness in doing job Degree of discomfort, exposure, or dirtiness in doing job Generic Factor – Working Conditions

19 5-19 Exhibit 5.9: Compensable Factor Definition: Decision Making

20 5-20 Step 3: Scale the Factors Construct scales reflecting different degrees within each factor Construct scales reflecting different degrees within each factor –Most factor scales consist of four to eight degrees –See Exhibit 5.13: Factor Scaling -- NMTA Issue Issue –Whether to make each degree equidistant from adjacent degrees (interval scaling)

21 5-21 Exhibit 5.13: Factor Scaling – National Metal Trades Association

22 5-22 Step 4: Weight the Factors According to Importance –Different weights reflect differences in importance attached to each factor by the employer

23 5-23 Exhibit 5.14: Job Evaluation Form Note that the only reason this form works as it does is that each factor has same number of degrees!!!

24 5-24 Overview of the Point System Job Factor Weight Education 50% Respon s- ibility 30% Physical effort 12% Working conditions 8% Degree of Factor

25 5-25 Step 5: Communicate the Plan and Train Users Involves development of manual containing information to allow users to apply plan 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 Includes appeals process for employees Includes appeals process for employees

26 5-26 Step 6: Apply to Nonbenchmark Jobs Final step involves applying plan to remaining jobs Final step involves applying plan to remaining jobs –Benchmark jobs were used to develop compensable factors and weights Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed

27 5-27 The Final Result: Structure The final result of the job analysis – job description – job evaluation process is a structure, a hierarchy of work The final result of the job analysis – job description – job evaluation process is a structure, a hierarchy of work –Ordered list of jobs based on value to organization  Relative amount of difference between jobs Note that job hierarchy resulting from job evaluation process that mirrors pay hierarchy of key jobs in external labor market may in fact be problematic – may be perpetuating historical discrimination Note that job hierarchy resulting from job evaluation process that mirrors pay hierarchy of key jobs in external labor market may in fact be problematic – may be perpetuating historical discrimination

28 5-28 Exhibit 5.15: Resulting Internal Structures – Job, Skill, and Competency Based

29 5-29 Balancing Chaos and Control Job evaluation changed the legacy of decentralization and uncoordinated wage-setting practices left from the 1930s and ’40s 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 It must afford flexibility to adapt to changing conditions –Avoid bureaucracy and increase freedom to manage  Reduces control and guidelines, making enforcement of fairness difficult


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