Chapter 5 Job-Based Structures and Job Evaluation McGraw-Hill/Irwin Copyright © 2011 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 Job Evaluation Methods Who Should Be Involved? The Final Result: Structure Balancing Chaos and Control

Job-Based Structures: Job Evaluation 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

Job-Based Structures: Job Evaluation (cont.) Organizational culture External market

Exhibit 5.1: Many Ways to Create Internal Structure

Defining Job Evaluation: Content, Value, and External Market Links Content and value A structure based on content orders jobs on the basis of the skills, duties, and responsibilities associated with the jobs A structure based on job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization’s goals

Linking content with the external market Defining Job Evaluation: Content, Value, and External Market Links (cont.) Linking content with the external market Aspects of job content take on value based on their relationship to market wages Aspect not related to the external labor market may be excluded in the job evaluation

Defining Job Evaluation: Content, Value, and External Market Links (cont.) “Measure for measure” versus “Much ado about nothing” Job evaluation may be judged according to technical standards If participants agree that skills, effort, responsibilities, and working conditions are important, then work is evaluated based on these factors

Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation

Exhibit 5.3: Determining an Internally Aligned Job Structure

“How-To”: Major Decisions Establish the purpose Supports organization strategy Supports work flow Is fair to employees Motivates behavior toward organization objectives

“How-To”: Major Decisions (cont.) Single versus multiple plans Different evaluation plans are used when the work content is too diverse to be evaluated by one plan

“How-To”: Major Decisions (cont.) To be sure that all relevant aspects of work are included in the evaluation, an organization may start with a sample of benchmark jobs Contents are well-known and relatively stable over time Job is not unique to one employer A reasonable proportion of the work force is employed in this job

Exhibit 5.4: Benchmark Jobs

“How-To”: Major Decisions (cont.) Diversity in the work can be thought of in terms of : Depth (vertically) Breadth (horizontally) Number of job evaluation plans used hinges on: How detailed an evaluation is required to make pay decisions How much it will cost Choose among job evaluation methods

Exhibit 5.5: Comparison of Job Evaluation Methods

Ranking Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success Alternation ranking orders job descriptions alternately at each extreme Paired comparison method uses a matrix to compare all possible pairs of jobs

Ranking (cont.) Disadvantages: Ranking criteria are usually poorly defined Evaluators must be knowledgeable about every job under study

Exhibit 5.7: Paired Comparison Ranking

Classification A series of classes covers the range of jobs A job description is compared to the class descriptions to decide which class is the best fit

Classification (cont.) Greater specificity of the class definition improves the reliability of evaluation Limits the variety of jobs that can easily be classified Jobs within each class are considered to be equal work and will be paid equally

Exhibit 5.8: Classifications for Engineering Work Used by Clark Consulting Source: Clark Consulting. Used by permission.

Point Method Common characteristics: Compensable factors Factor degrees numerically scaled Weights reflect relative importance of each factor

Point Method (cont.) 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

Step 1: Conduct 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

Step 2: Determine Compensable Factors Compensable factors are those characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives

Step 2: Determine Compensable Factors (cont.) Based on strategy and values of organization Reinforce the organization’s culture, values, business direction, and nature of work May be eliminated if they no longer support the business strategy

Step 2: Determine Compensable Factors (cont.) Based on the work itself Documentation must support the choice of factors Acceptable to the stakeholders

Step 2: Determine Compensable Factors (cont.) Adapting factors from existing plans Skills and effort required, responsibility, and working conditions National Electrical Manufacturers Association (NEMA), National Metal Trades Association (NMTA), Equal Pay Act (1963), and Steel plan The Hay Guide Chart-Profile Method

Exhibit 5.12: Factors in Hay Plan

Exhibit 5.13: Hay Guide Chart – Profile Method of Job Evaluation Source: Hay Group, “The Hay Guide Chart-Profile Method of Job Evaluation: An Overview,” http://www.haygroup.com/ww/services/index.aspx?ID=1529.

Step 2: Determine Compensable Factors (cont.) How many factors? “Illusion of validity” - Belief that factors capture divergent aspects of a job and both are important “Small numbers” - If even one job has a certain characteristic, it is used in the entire work domain

Step 3: Scale the Factors Scales reflecting different degrees within each factor are constructed Most scales consist of four to eight degrees Also include undefined degrees such as plus and minus around a scale number Major issue: Interval scaling

Step 3: Scale the Factors (cont.) Criteria for scaling factors: Ensure number of degrees is necessary to distinguish among jobs Use understandable terminology Anchor degree definitions with benchmark-job titles and/or work behaviors Make it apparent how degree applies to job

Exhibit 5.14: Factor Scaling – National Metal Trades Association

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

Step 4: Weight the Factors According to Importance (cont.) Select criterion pay structure Committee members recommend the criterion pay structure Statistical modeling techniques are used to determine the weight for each factor Statistical approach is termed policy capturing to differentiate it from the committee a priori judgment approach Weights also influence pay structure

Exhibit 5.14: Job Evaluation Form

Step 5: Communicate the Plan and Train Users A manual is developed Describes job evaluation method Defines compensable factors Provides information to distinguish varying degrees of each factor Users require training and background information on the plan Appeals process may be included Communication is required to build employee acceptance

Step 6: Apply to Nonbenchmark Jobs Final step involves applying plan to remaining jobs Plan becomes a tool for managers and HR specialists Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed

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

Who Should be Involved? Managers and employees with a stake in the results Committees, task forces, or teams that include representatives from key operating functions, including nonmanagerial employees Including union representatives helps gain acceptance

Who Should be Involved? (cont.) Compensation professionals are primarily responsible for most job evaluations for most jobs Design process matters Attending to the fairness of the design process and approach chosen is likely to achieve employee and management commitment, trust, and acceptance of results

Who Should be Involved? (cont.) Compensation professionals are primarily responsible for most job evaluations for most jobs Appeals/review procedures Inevitable that some jobs are incorrectly evaluated Requires review procedures for handling such cases and helping to ensure procedural fairness

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

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 through multiple approaches that apply to different functional groups or units

The Final Result: Structure (cont.) Internal alignment is most influenced by fair and equitable treatment of employees doing similar work in the same skill/knowledge group

Exhibit 5.17: Resulting Internal Structures – Job, Skill, and Competency Based

Balancing Chaos and Control Job evaluation changed the legacy of decentralization and uncoordinated wage-setting practices of the 1930s and 1940s Must be flexible to adapt to changing conditions Avoids bureaucracy and increases freedom to manage Also reduces control and guidelines, making enforcement of fairness difficult