1. Methods of Job Evaluation: The Best Way to Match Salaries
Presented to NPELRA
April 9, 2003
Bruce G. Lawson, CCP
Fox Lawson & Associates LLC
(602)

2. Objectives To Discuss: The history of job evaluation
The role of job evaluation
Selecting a job evaluation tool
Alternative job evaluation approaches
Whole Job Ranking
Market Pricing
Point Factor
Factor Comparison
Decision Band

3. History of Job Evaluation
Karl Marx wrote in Das Kapital that the value of goods and services is based on the amount of labor that goes into them
Frederick Winslow Taylor stated that the content of labor in labor determines the price of labor
Edward Hay developed the Hay point factor system
The Equal Pay Act prohibited discrimination on the basis of sex…for equal work on jobs, the performance of which requires equal skill, effort, and responsibility and which are performed under similar working conditions. The EPA formalized non-market based pay plans

4. Why Job Evaluation
Focus is on internal equity rather than market parity or external competitiveness
There is a strong interest in comparable worth or pay equity
There is limited market data available

5. Alternative Pay Systems
Job evaluation system that supports your classification philosophy and strategies
Mix of reward versus entitlement (base) pay
Multiple base salary structure(s)
Individual versus group incentives
Performance measurement
Alternative Reward Strategies
Broad Banding
Skill Based Pay
Individual Incentives
Group Based Incentives

6. Job Evaluation Not a science Not a solution to salary problems
Not a substitute for managerial decision making about individual salaries
Not a cost cutting technique
Not always consistent with the labor market

7. Objectives
To systematically establish the relative value of jobs within an organization
Impose a structured approach to determining job value that is objective (to the extent possible) and documented
Provide a basis for pay determination

8. Distinctions Job evaluation - Assesses the relative worth of jobs
Performance Appraisal - Assesses the performance of individual employees in the conduct of specific job duties
Position Allocation - Determines the appropriate classification for each position/employee

9. Non-Quantitative Approaches
Whole job ranking
Classification
Market Pricing

10. Quantitative Approaches
Attempt to establish relative worth
Give the illusion of being more precise than non-quantitative approaches
Easier to defend to employees and managers
Tool should be tailored to job classification philosophy
Point Factor
Factor Comparison
Scored Questionnaires
Decision Band

11. Whole Job Ranking Not a formal methodology
Often used by smaller organizations
No fixed criteria
Not recognized as valid by the EEOC

12. Market Pricing Not a formal job evaluation methodology
Often used by smaller organizations
Only criteria is the labor market
Employees and managers tend to support market based systems
If administered fairly, will take into consideration both increases and decreases in market conditions. This is often not well received by employees and labor organizations.
Requires considerable market data. Typically, at least 50% of all jobs need to be priced to defend values for related jobs

13. Point Factor Plans
Focuses on compensable factors - The Federal Equal Pay Act references four factors:
Skill - experience, training, education and ability measured in terms of the job’s performance
Effort - physical or mental exertion needed for job performance
Responsibility - accountability
Working Conditions - surroundings and hazards encountered

14. Factors Skill Sub-factors include Knowledge (education/training)
Experience needed
Credentials or licenses required
Manual dexterity required
Analytical ability required
Interpersonal communications

15. Factors Effort Responsibility Working Conditions Sub-factors include
Physical demands
Mental exertion
Impact on the organization
Accountability/
decision making
Supervision received/exercised
Internal/external contacts
Hazardous/dangerous environment
Adverse conditions/Travel

16. Point Factor Plans Factors and weights must be carefully established
Significant risk of inherent bias by ignoring stereotypical female qualities such as nurturing & caring, concern for others, cooperation, and cooperation
Supervision and management often benefit empire builders by awarding additional points for the number of people supervised, size of budget, etc. to the detriment of highly technical or skilled jobs

17. The Process Factors and Weights for each factor are established
Degrees (yardsticks) that define the factor range and its respective intervals, along with point values, are established. For example, Education might be divided into the following degrees:
No formal education required
Requires reading and writing at the 8th grade level
Requires High School diploma or equivalent
Requires AA degree or completion of an accredited trade school (2 year program)
Requires a Bachelor’s degree
Requires a Master’s degree
Requires a Ph.D. degree

18. Pros and Cons Advantages
Once factors and degrees are defined, plan is stable over time
Perceived as valid by users
High agreement with ratings if jobs are carefully defined
Documented process

19. Pros and Cons Disadvantages Time consuming and costly to establish
Typically requires that pay grades be established although each point can be given an economic value resulting in continual pressure to upgrade individual positions or jobs in order to increase pay
Subjective assessment needed to establish point range for salary grades
Typically relies on key jobs within the organization

20. Factor Comparison A refinement of whole job ranking
No detailed criteria
Uses universal factors for defining jobs (e.g. skill, effort, responsibility, working conditions)
Each factor can be weighted
Jobs are ranked within each factor
Labor intensive - involves numerous judgments in order to build ranking (# jobs X # jobs X # factors = # of individual decisions needed)
Example: 100 job titles X 100 job titles X 4 factors = 40,000 individual decisions that must be made to develop hierarchy

21. Advantages Custom made job evaluation plan for the organization
Relative value is easily understood

22. Disadvantages Can be difficult to set up
Needs to be re-established each time a new job is added to the structure or an existing job changes since these actions will affect the overall rankings

23. DBM - Basic Logic
The value of a job should reflect the importance of the job to the organization
The importance of a job is directly related to the decision-making requirements of the job
Decision-making is common to all jobs
Decision-making is measurable

24. The Process Six broad Decision Bands
Looks at essential duties of the job
Level of each duty is determined
Highest banded duty determines Band of the job
Within Bands, looks at supervisory relationships and technical level of job (dual career track) to determine a Grade
Within each Grade, examines difficulty and complexity of the work to determine Sub-Grade (if needed). Allows for consideration of such secondary criteria as time pressures, consequence of error, minimum qualifications, need for care and precision, etc.

25. Advantages
Only job content is considered - either incumbents do certain work or they do not. Consequently, it is more difficult to manipulate the job ratings.
Factors unrelated to work are not considered in the evaluation (e.g. what employees bring to the job.) Those issues are handled separately as pay issues.
Working and labor market conditions are treated separately as pay premiums, if applicable.
Less complex than other methods, resulting in less cost to administer
Can be applied to either individual positions or broad job classes

26. Disadvantages Non-traditional approach
Results not as narrowly defined as other methods which may cause employee concerns. Because groupings are broader, some employees and managers have difficulty understanding how other jobs can be equal to theirs.

27. Selecting JE Criteria Acceptable to parties involved
Valid as distinguishers among jobs
Must be present in all jobs being evaluated
Must be measurable
Should be independent of each other so as to not overweight any single factor
Some plans with large numbers of factors often result in substantial bias towards one occupational group or group of individuals resulting in inherent bias -most JE systems need to measure only 3 factors to be accurate

28. Selecting JE Criteria Cost to install and maintain the system
Efficiency and effectiveness
Reliability

29. Comparison of Methods Factor DB™M Point Plans Education and Training
Yes
Contacts with others
Impact of job
Job complexity
Working Conditions
Supervision exercised

30. Conclusions Broad Band - DBM is most appropriate
Narrow classes - Point factor or DBM are most commonly used
Market pricing - Better for classes that are not to narrowly defined

31. Issues to Consider
What do you do when market does not match JE results?
Is there really a problem?
Confirm the job description?
Raise or lower the JE rating?
Market premiums?

32. Conclusions
Select job evaluation method that ties to your classification philosophy
Determine whether the JE method is to be used within only a single job family or bargaining unit or across the whole organization
Involve the stakeholders so they understand why you are using a particular method
Provide a basic understanding of the tool to those affected
Review ratings with stakeholders to identify issues
Validate job descriptions is questions about ratings result since all methods are tied to the job descriptions