Designing compensation system Part II


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Designing compensation system Part II

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  • Uses minimum amount of factors from benchmark jobs Match rest of jobs to these factors based on fit Once all jobs are fitted into categories they are ranked by difficulty. Method assumes equivalency within categories and equal distances between categories EXAMPLE: “Grade IV includes all positions that involve computerized functions and that require basic knowledge and skill in written communication. Grade V includes all positions that require some independent judgment, confidentiality, interpersonal skills, but that has no direct supervisory responsibility.”
  • Designing compensation system Part II

    1. 1. Designing Compensation System: Part IIDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor 1
    2. 2. Job Valuation 2
    3. 3. Job Evaluation MethodsThere are four major Methods Ranking Classification Point Method Factor Comparison 3
    4. 4. Job Evaluation Procedures 4
    5. 5. Ranking Method Examines job description and arrange jobs according to value to company e.g. highest to lowest Ranks each job relative to all other jobs, based on some overall factor Most basic method; used for small firms  Uses subjective ratings on single criterion (e.g., job complexity) 5
    6. 6. Classification Method Classes or grades are defined to describe a group of jobs Mainly for government jobs  18 factors may be used to score jobs  General, Professional and Executive Schedules
    7. 7. Point MethodBreaking down jobs on identifiable criteria and the degree to which these criteria exist on the jobMore complex - points assigned to compensable factors and sub-factorsMore structured, thus easier to defendHay System most well known and most complex
    8. 8. Advantages & Disadvantages of Ranking,8 Classificatin & Point Methods Advantage Disadvantage Ranking Fast, simple, easy to Cumbersome as explain. number of jobs increases. Basis for comparisons is not always acceptable. Classification Can group a wide range of Descriptions may job together in one system. leave too much room for manipulation. Point Compensable factors call Can become out basis for comparisons. bureaucratic and rule- Compensable factors bound. communicate what is valued. 1/5/2008
    9. 9. Steps in Ranking Methods• Steps in job ranking: – Obtain job information – Select and group jobs – Select compensable factors – Rank jobs – Combine ratings 9
    10. 10. Ranking Method Straight ranking Alternation Ranking Paired ComparisonThursday, September 20, 2012 10
    11. 11. Advantages & Disadvantages Ranking Method Advantages DisadvantagesSimple Comparisons can “Straight” method ranks be problematic “highest”, then next “highest”, depending on then next “highest” and so on number and “Alternation” method ranks complexity of jobs “highest” then “lowest,” then May appear next “highest,” then next arbitrary to “lowest” and so on employees “Paired comparisons” method Can be legally picks highest out of each pair challengedFast UnreliableMost commonly usedThursday, September 20, 2012 11
    12. 12. Paired ComparisonThursday, September 20, 2012 12
    13. 13. ClassificationLike library Class I classification Simple work, no supervisory system responsibility, no publicDefine categories contact and then compare Class II job against Simple work, no supervisory categories responsibility, public contact Class III Medium work complexity, no supervisory responsibility, public contact 13
    14. 14. Advantages & Disadvantages of Classification Method Advantages Disadvantages Uses job families/groups Not useful when jobs are instead of individual jobs very different from each May produce same results other as Point Method, but is May be confusing to less costly employees about why jobs are included in a classThursday, September 20, 2012 14
    15. 15. Factor Comparison Compensable Factors are identified as determining worth of jobs Mental requirements, Physical requirements, Skill requirements, Responsibility and Working conditionsThursday, September 20, 2012 15
    16. 16. Steps in Factor Comparison Method Analyze Jobs Select Key Jobs Rank Key Jobs Distribute Wage Rates Across Factors Compare Vertical and Horizontal Judgments Construct the Job-Comparison Scale Use the Job-Comparison Scale to Evaluate the Remainder of the JobsThursday, September 20, 2012 16
    17. 17. Factor Comparison Method Hourly rate is divided into pay for each of the following factors: Hourly Pay for Pay for Pay for Pay for Rate Working Skill Effort ResponsibilityJob (Rs.) ConditionsSecretary 9.00 4.50 2.00 2.00 0.50Admin 11.00 5.50 2.50 2.50 0.50AssistantSupervisor 15.00 6.00 3.50 4.00 1.50Manager 21.00 9.00 3.50 7.00 1.50 17
    18. 18. Advantages & Disadvantages of Factor Comparison Method Advantages Disadvantages Customized to the Using Rupee values may organization bias evaluators by Relatively easy to use once assigning more money to a it’s set up factor than a job is worth Results in ranking of jobs Hard to set up and a specific rupee value Not easily explained to for each job, based on employees allocating part of the job’s total wage to each factorThursday, September 20, 2012 18
    19. 19. Steps in Point Method1. Select Benchmark Jobs2. Choose Compensable Factors3. Define Factor Degrees4. Determine Weight of each Factor5. Determine Point Values6. Verify Factor Degrees and Point Values7. Evaluate All Jobs
    20. 20. Benchmark Jobs“Generic” jobs with similar and agreed upon characteristicsRelatively stableRepresent entire range of jobs in companyGenerally accepted in the labour market for purposes of setting pay levels
    21. 21. Compensable FactorsCompensable factors are identified as determining worth of jobsMajor compensable factors- Skill- Responsibilities- Effort- Working Conditions Custom factors Sub-Factors 21
    22. 22. Compensable FactorsSkilllExperienceEducationAbilityResponsibilitiesFiscalSupervisory 22
    23. 23. Compensable FactorsEffort Mental PhysicalWorking Condition Location Hazards Extremes in Environment 23
    24. 24. Factor Degrees/LevelsProvides levels within each factor or sub-factorBest to define each level in job-specific termsFewer degrees required if system only needs to cover a smaller range of jobsWeight of each Factor to be determined
    25. 25. Factor Degrees/LevelsScale that reflects differing quantity or quality of the factorUsed to differentiate jobs on the factorClear and unambiguous definitionContains explicit language that spells out the behaviours, skills, or performance expectations for the factor at different levels 25
    26. 26. Responsibility at Various LevelsEmployee responsibility for conserving company’s equipment and materialLevel-1Employee reports malfunctioning of equipment or defective materials to immediate superiorLevel-2Employee maintains appearance of equipment or order of material and has responsibility for security of such equipment or material 26
    27. 27. Responsibility at Various LevelsLevel-3Employee perform preventive maintenance and minor repairs on equipment or corrects minor defects in materialLevel-4Employee perform major maintenance or overhauls of equipment or responsible for deciding type, quality and quantity of material to be used 27
    28. 28. POINT VALUES1. Maximum number of points may be assigned: 500-30002. Number must be large enough to allow sufficient differentiation among jobs3. In case of wide spread between current wages of highest paid & lowest paid job, the maximum number of points need to be higher4. If more than one pay system chosen, number of points or actual factors do not have to be same in each one 28
    29. 29. Point Values to Factors EducationWorking Conditions 1. Job requires post graduate degree1. Hazardous work: 2. Job requires bachelors degree deals with dangerous 3. Job requires high school materials or working education conditions Effect of Error2. Uncomfortable work: 1. Major mistake-more than loud, hot, cold or dirty Rs.500,000 2. Major mistake-more than3. Good working Rs.100,000 conditions: 3. Major mistake-less than Rs.99,999 office environment - air conditioned, good 1=10 points, 2=8 points, 3=5 points lighting 29
    30. 30. POINT VALUES TO FACTORSFactor Point values for Degrees Total 1 2 3 4 Skill 45 90 135 180 450 Physical effort 25 50 75 100 250 Mental effort 35 70 105 150 360 Responsibility 25 50 75 100 250 Working conditions 20 40 60 80 200Maximum total points of all factors depending on their importance to job=1510 30
    31. 31. A Typical Point Plan 31
    32. 32. Application of Point System to Two Jobs 32
    33. 33. Position: Engineering ManagerGrade: 7 MAXIMUM FACTOR DEGREE FACTOR POINTS FACTOR JE Points LEVEL WEIGHTS 250 Communication & Interpersonal Skills 250 4 10% 250 Education & Training 250 5 10% 500 Problem Solving & Decision Making 400 4 20% 500 Responsibility & Accountability 500 4 20% 250 Specialized Knowledge & Application 200 4 10% 250 Supervision & Leadership 250 4 10% 125 Internal Impact 125 3 5% 125 External Impact 75 1 5% 125 Planning & Organizing 125 4 5% 125 Innovation 90 2 5% 2500 2265 100%Thursday, September 20, 2012 33
    34. 34. Advantages & Disadvantages of POINT METHOD Advantages Disadvantages Highly stable over time  Time, money, and effort Perceived as valid by users required to set up and employees  Relies heavily on key Likely to be reliable among (benchmark) jobs, so if key committee that assesses the jobs and correct pay rates jobs don’t exist, the point method may not be applicable Provides good data to prepare a response to an appeal 34
    35. 35. 35 Hay’s Method - Process KNOW- KNOW- PROBLEM PROBLEM Job + + ACCOUNTABILITY ACCOUNTABILITY = HOW HOW SOLVING SOLVING Size Depth & Range Thinking Freedom of Know-How Environment to Act Planning & Thinking Nature of Organising Challenge Impact Area of Communicating & Impact Influencing (Magnitude)
    36. 36. Hay’s Method – 3 Factors36 1 1 2 2 3 3 Jobs exist to To achieve this end Job holder requires a level result, job holders of knowledge and achieve an end must address experience commensurate result problems, create, with scale and complexity analyse and apply of the result judgement Know-How Problem Solving Problem Solving Accountability Accountability Accountability