1. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-1 Evaluating Work: Job Evaluation Chapter 5

2. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-2 1. Discuss the relationship between internal alignment, job analysis, job evaluation, and job structure. 2. Identify the major decisions involved in job evaluation. 3. Compare the advantages and disadvantages of the most common job evaluation methods. 4. Explain the six (6) steps in a point plan, the most commonly used job evaluation method. 5. Describe the key roles of managers, employees, and committees in the job evaluation process. 6. Understand the necessity of balancing tight control versus flexibility related to the use of techniques to achieve internal alignment. Learning Objectives After discussing Chapter 5, students should be able to:

3. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-3 Chapter Topics  Job-Based Structures: Job Evaluation  Defining Job Evaluation: Content, Value, and External Market Links  Ranking  Classification  Point Method  Who Should be Involved?  The Final Result: Structure  Balancing Chaos and Control.

4. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-4 Exhibit 5.1: Many Ways to Create Internal Structure

5. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-5 Process of systematically determining the relative worth of jobs to create a job structure for the organization. Evaluation is based on a combination of job content, skills required, value to the organization, organizational culture and the external market. What Is Job Evaluation?

6. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-6 Defining Job Evaluation  Content and value  Linking content with the external market  “Measure for measure” vs. “Much ado about nothing”  Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation

7. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-7 Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation Aspect of Job Evaluation Assumption Content has intrinsic value outside external market. Stakeholders can reach consensus on relative value. Value cannot be specified without external market. Honing instruments will provide objective measures. Puts face of rationality to a social / political process; establishes rules of the game and invites participation. Assessment of job content Assessment of relative value External market link Measurement Negotiation

8. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-8 Exhibit 5.3: Determining an Internally Aligned Job Structure Internal alignment Job analysisJob descriptionJob evaluationJob structure Some Major Decisions in Job Evaluation Establish purpose of evaluation Decide whether to use single or multiple plans Choose among alternative approaches Obtain involvement of relevant stakeholders Evaluate plan’s usefulness Some Major Decisions in Job Evaluation Establish purpose of evaluation Decide whether to use single or multiple plans Choose among alternative approaches Obtain involvement of relevant stakeholders Evaluate plan’s usefulness Work relationships within organization

9. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-9 Major Decisions  Establish purpose  Supports organization strategy  Supports work flow  Fair to employees  Motivates behavior toward organization objectives  Single vs. multiple plans  Choose among methods  Exhibit 5.4: Comparison of Job Evaluation Methods  Obtain involvement of relevant stakeholders  Evaluate plan’s usefulness

10. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-10 Exhibit 5.4: Benchmark Job

11. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-11 Characteristics of Benchmark Job  Contents are well-known and Job is common across several different employers  Supply and demand relatively stable over time  Sizable proportion of work force employed in job

12. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-12 Exhibit 5.5: Comparison of Job Evaluation Methods AdvantageDisadvantage Ranking Fast, simple, easy to explain. Cumbersome as number of jobs increases. Basis for comparisons is not called out. Classification Can group a wide range of work together in one system. Descriptions may leave too much room for manipulation. Point Compensable factors call out basis for comparisons. Compensable factors communicate what is valued. Can become bureaucratic and rule-bound.

13. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-13 Ranking Method  Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success  Two approaches  Alternation ranking  Paired comparison method

14. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-14 Exhibit 5.6: Paired Comparison Ranking

15. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-15  Uses class descriptions that serve as the standard for comparing job descriptions  Classes include benchmark jobs  Outcome  Series of classes with a number of jobs in each  Examples  Exhibit 5.7: Classifications for Engineering Work  Exhibit 5.8: General Schedule Descriptions for Federal Government Classification Method

16. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 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

17. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-17 1. Conduct job analysis 2. Determine compensable factors. 3. Scale the factors. 4. Weight the factors according to importance. 5. Communicate the plan, train users, prepare manual. 6. Apply to nonbenchmark jobs. Designing a Point Plan: Six Steps

18. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 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

19. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-19 Step 2: Determine Compensable Factors  Compensable factors play a pivotal role  Reflect how work adds value to organization  Example - Exhibit 5.9  Characteristics of compensable factors  Based on strategy and values of organization  Exhibit 5.10  Based on work performed  Acceptable to stakeholders affected by resulting pay structure

20. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-20 SkillEffort Responsibility Working conditions Generic Compensable Factors

21. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-21 Generic Factor - Skill Skill: Experience, training, ability, and education required to perform a job under consideration - not with skills an employee may possess

22. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-22 Generic Factor - Skill  Technical know-how  Specialized knowledge  Organizational awareness  Educational levels  Specialized training  Years of experience required  Interpersonal skills  Degree of supervisory skills

23. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-23 Generic Factor - Effort Effort: Measurement of the physical or mental exertion needed for performance of a job

24. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-24 Generic Factor - Effort  Diversity of tasks  Complexity of tasks  Creativity of thinking  Analytical problem solving  Physical application of skills  Degree of assistance available

25. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-25 Generic Factor - Responsibility Responsibility: Extent to which an employer depends on employee to perform job as expected, with emphasis on importance of job obligation

26. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-26 Generic Factor - Responsibility  Decision-making authority  Scope of organization under control  Scope of organization impacted  Degree of integration of work with others  Impact of failure or risk of job  Ability to perform tasks without supervision

27. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-27 Working Conditions:  Hazards  Physical surroundings of job Generic Factor – Working Conditions

28. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-28  Potential hazards inherent in job  Degree of danger which can be exposed to others  Impact of specialized motor or concentration skills  Degree of discomfort, exposure, or dirtiness in doing job Generic Factor – Working Conditions

29. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-29 Exhibit 5.11: The Hay System  Know-How  Scope  Depth  Human relations skills  Exhibit 5.12: Hay Guide Chart for Know-how  Problem Solving  Environment  Challenge  Accountability  Freedom to Act  Scope  Impact

30. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-30 Compensable Factors - How Many?  “Illusion of validity” - Belief that factors are capturing divergent aspects of a job  “Small numbers” - If even one job has it, it must be a compensable factor  “Accepted and doing the job” - 21, 7, 3  Research results  Skills explain 90% or more of variance  Three factors account for 98 - 99% of variance

31. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-31 Step 3: Scale the Factors  Construct scales reflecting different degrees within each factor  Most factor scales consist of 4 to 8 degrees  Exhibit 5.13: Factor Scaling - NMTA  Issue - Whether to make each degree equidistant from adjacent degrees (interval scaling)  Criteria for scaling factors  Limit to number necessary to distinguish among jobs  Use understandable terminology  Anchor degree definitions with benchmark job titles  Make it apparent how degree applies to job

32. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-32 Step 4: Weight the Factors  Different weights reflect differences in importance attached to each factor  Determination of factor weights  Advisory/JE committee  Statistical analysis  Criterion pay structure  Exhibit 5.14: Job Evaluation Form

33. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-33 Exhibit 5.14: Job Evaluation Form

34. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-34 Overview of the Point System Job Factor Weight 1 2 3 4 5 1. Education 50% 100 200 300 400 500 2. Respons- ibility 30% 75 150 225 300 3. Physical effort 12% 24 48 72 96 120 4. Working conditions 8% 25 51 80 Degree of Factor

35. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-35 AAIM National Position Evaluation Plan 1st Degree 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 14 22 14 10 5 10 5 Factor 2nd Degree 28 44 28 20 10 20 10 3rd Degree 42 66 42 30 15 30 15 4th Degree 56 88 56 40 20 40 20 5th Degree 70 110 70 50 25 50 25 Points Assigned to Factor Degrees

36. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-36 Job Evaluation Example JobPointsReference Wage A Clerk 45$12/hour B Acct Clerk 55$16 C Accountant 75$22 D HR Mgr 85$25 E Ass’t Adm 80$26 F Office Mgr 85$28

37. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-37

38. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-38

39. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-39 Step 5: Communicate 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  Include appeals process for employees

40. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-40 Step 6: Apply to Nonbenchmark 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

41. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-41 Who Should be Involved?  Committees, task forces, or teams of key representations  Design process matters  Appeals/review procedures  “I know I speak for all of us when...”

42. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-42 Final Result: Structure  Outcome  Ordered list of jobs based on their value to organization  Hierarchy of work  Structure supporting a policy of internal alignment  Information provided by hierarchy  Which jobs are most and least valued  Relative amount of difference between jobs