The document discusses job evaluation processes, including job-based structures, job evaluation methods, and point plans. It describes job evaluation as assessing the relative worth of jobs to create an internal job structure. Common methods include ranking, classification, and point plans. The point method assigns compensable factors that are scaled and weighted to determine total points and a job's position in the structure. Effective design of a point plan involves job analysis, determining compensable factors based on strategy and work, scaling factors, weighting importance, and applying the plan to other jobs.

1. Compensation
Chapter 05
Job-Based Structures and Job Evaluation
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Job-Based Structures: Job Evaluation
The focus here is on what to value in the jobs, how to assess that
value, and how to translate it into a job-based structure.
Job evaluation is a process for determining relative value.
• 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, organizational culture, and the
external market.
• This potential to blend organizational forces and external market
forces is both a strength and a challenge of job evaluation.

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Defining Job Evaluation
Content refers to what work is performed and how it gets done.
• Perspectives differ on whether job evaluation is based on job content
or job value.
• Internal alignment based on content orders jobs by skills, duties, and
responsibilities.
• A structure based on job value orders jobs by the relative contribution
of the skills, duties, and responsibilities to the organization’s goals.
• Job content matters, but it is not the only basis for pay.
Job value may include the job’s value in the external market.
• Value added may be more (or less) in two different organizations.
• There is not a one-to-one correspondence between internal job value
and pay rates.

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Linking Content with the External Market
Some see job evaluation as a way to link job content and internal
value with external market rates.
Higher skill levels command higher wages, so skill level becomes
useful criteria for establishing differences among jobs.
If some aspect of job content is not related to wages, eliminate
that aspect from the job evaluation.
• The value of job content is based on what it can command in the
external market – it has no intrinsic value.
• Not everyone agrees.
• Job evaluation is an important tool for organizations wishing to
differentiate themselves.

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Technical and Process Dimensions
Some say if job evaluation can be rigorous and systematic, then
it can be judged according to technical standards.
Some see it as a way to help gain acceptance of pay differences.
Statistical validity is not the only issue.
• Usefulness comes from providing a framework for give-and-take.
Some say evaluation uncovers job content with intrinsic value
• Others say the only fair measure of job value is in the external market.
Some say contemporary job evaluation practices are just and fair.
• Others say they are just fair.

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Exhibit 5.2: Assumptions Underlying Different
Views of Job Evaluation

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“How-To” – Major Decisions
The major decisions in the job evaluation process include:
• Establishing the purpose(s).
• Deciding on single versus multiple plans.
• Choosing among alternative methods.
• Obtaining involvement of relevant stakeholders.
• Evaluating the usefulness of the results.

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Establish the Purpose
Job evaluation helps establish an aligned pay structure which:
• Supports organization strategy.
• Answers the question: “How does the job add value?”
• Supports work flow.
• Integrates the job’s pay with its relative contribution to the organization.
• Helps set pay for new, unique, or changing jobs.
• Is fair to employees.
• Reduces disputes and grievances over pay differences.
• Motivates behavior toward organization objectives.
• Shows employees what about their work is valued.
• Helps employees adapt to organization changes.
• Helps create the network of rewards.

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Exhibit 5.3: Determining an Internally Aligned
Job Structure

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Single versus Multiple Plans
Employers design different evaluation plans for different work.
Using benchmark jobs captures all aspects of the work.
• Its contents are well known and relatively stable over time.
• The job is common across employers.
• A reasonable proportion of the work force holds this job.
A sample of benchmark jobs will capture the diversity of work.
• The depth of work ranges from highest to lowest position.
• The breadth of work depends on the nature of the business.
The number of job evaluation plans hinges on how detailed it
needs to be to make pay decisions, and how much it will cost.

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Exhibit 5.4: Benchmark Jobs

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Choose Among Job Evaluation Methods
Ranking, classification, and point method are the most common
job evaluation methods, and uncounted variations exist.
Research consistently finds that different job evaluation plans
generate different pay structures – so choice matters.
All methods begin by assuming a useful job analysis has been
translated into job description methods.
A survey of 1,000 compensation professionals found that market
pricing is the primary method of job evaluation.

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Exhibit 5.5: Comparison of Job Evaluation
Methods

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Ranking
Ranking simply orders the job descriptions from highest to
lowest based on relative value or contribution to success.
• Cheap, simple, fast, easy to understand and explain to employees.
Two ways of ranking are common.
• Alternation ranking.
• Orders job descriptions alternately at each extreme.
• Paired comparison.
• Uses a matrix to compare all possible pairs of jobs.
Ranking has drawbacks.
• If ranking criteria is poorly defined, evaluations become only opinions.
• Evaluators must be knowledgeable about every single job under study.
• Results are difficult to defend and costly solutions may be required.

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Exhibit 5.7: Paired-Comparison Ranking

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Classification
In the classification method of job evaluation:
• A series of classes covers the range of jobs.
• Class descriptions are the labels.
• Compare job descriptions to class descriptions to find the best fit.
• The label captures work detail yet is general enough to cover jobs.
• Describe classes further with titles of benchmark jobs.
To determine the number of classes and to write class
descriptions, define boundaries between each class.
Class descriptions can be troublesome and may be too vague.
The end result is a job structure made up of a series of classes
with a number of jobs in each class.

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Point Method
Point methods have three common characteristics.
1. Compensable factors.
2. Factor degrees are numerically scaled.
3. Weights reflect the relative importance of each factor.
Each job’s relative value is determined by total points.
Compensable factors are based on strategic direction and how
the work contributes.
• Factors are scaled for presence and weighted for importance.
• Points are attached to each factor weight.
• Total points determine its position in the job structure.

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Design of a Point Plan
There are eight steps in the design of a point plan.
1. Conduct job analysis.
2. Determine compensable factors.
3. Scale the factors.
4. Weight the factors according to importance.
5. Select criterion pay structure.
6. Communicate the plan and train users.
7. Apply to nonbenchmark jobs.
8. Develop online software support.

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Point Plan – Job Analysis and Compensable Factors
Point plans begin with a job analysis and content of the jobs help
define, scale, and weight compensable factors.
Compensable factors are those characteristics in the work that
the organization values, that help it pursue its strategy and
achieve its objectives.
To be useful, compensable factors should be:
• Based on the strategy and values of the organization.
• Based on the work performed.
• Acceptable to the stakeholders affected by the resulting pay structure.

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Point Plan – Compensable Factors
Based on the strategy and values of the organization.
• If the direction changes, then compensable factors may also change.
• Factors may be eliminated if they no longer support business strategy.
Based on the work itself.
• Work-related documentation helps gain acceptance by employees, is
easier to understand, and withstands challenges to the pay structure.
Acceptable to the stakeholders.
• Acceptance of compensable factors may depend on tradition.
• So the question is, “Acceptable to whom?”

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Point Plan – Adapting Factors from Existing Plans
Factors tend to fall into four generic groups.
• Skills required, effort required, responsibility, and working conditions.
These four were used in the National Electric Manufacturers
Association (NEMA) plan and included in the Equal Pay Act.
The Hay Group Guide Chart-Profile Method is widely used.
• The Hay factors are know-how, problem solving, and accountability.
• Add working condition when appropriate or required by law.
Some factors may overlap or fail to account for unique criteria.
Another challenge is called “small numbers.”

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Exhibit 5.10: Hay Group, Role of Compensable Factors
of Accountability, Problem Solving, and Know-How

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Point Plan – Scale and Weight the Factors
Most factor scales consist of four to eight degrees.
• In practice, evaluators use undefined degrees.
• Another issue is whether to make each degree equidistant from
adjacent degrees – interval scaling.
Criteria for scaling factors:
• Ensure the number of degrees is necessary to distinguish jobs.
• Use understandable terminology.
• Anchor definitions with benchmark job titles and work behaviors.
• Make it apparent how the degree applies to the job.
Factor weights reflect the relative importance of each factor.
• Advisory committees often determine weights.

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Point Plan – Select Criterion Pay Structure
Job evaluations help committees judge weights.
The committee then recommends the criterion pay structure.
Statistical modeling determines the weight for each factor and
the factor scales that will reproduce the chosen structure.
• The statistical approach is labeled policy capturing to differentiate it
from the committee a priori judgment approach.
Not only do the weights reflect the relative importance, they
influence the resulting pay structure.

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Point Plan – Communicate and Train Users
A manual allows others to apply the plan.
Users will require training on how to apply the plan.
An appeals process may be included for employee recourse.
Employee acceptance of the process is crucial.
• To build acceptance, communicate to all employees whose jobs are
part of the process used to build the structure.
• Communicate through informational meetings, websites, or other
methods.

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Point Plan – Apply and Support
The compensable factors and weights are derived using a sample
of benchmark jobs.
The final step is to apply the plan to remaining jobs.
• If the policy-capturing approach is used, an equation translates job
evaluation points into salaries.
Once the plan is developed and accepted, it becomes a tool for
managers and HR specialists.
The last step is to develop online software support.
• Online job evaluation is widely used in larger organizations.

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Who Should Be Involved?
Managers and employees with a stake in the results should be
involved in the design process.
Common approaches use committees, task forces, or teams.
• Compensation professionals are primarily responsible for job
evaluation of most jobs.
The design process matters.
• Attend to fairness of the design rather than results.
• Review procedures help ensure procedural fairness.
• Powerful members of the job evaluation committee may sway results.

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The Final Result: Structure
The final result of the process is a structure, a hierarchy of work
that translates an internal alignment policy into practice.
Organizations commonly have multiple structures that apply to
different functional groups or units.
Job evaluation provides work-related and business-related order
and logic.
At the same time, the world of work is changing.
• The challenge is to ensure job evaluation plans are flexible.
Some balance between chaos and control is required.

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Exhibit 5.15: Resulting Internal Structures
Job, Skill, and Competency Based

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End of Chapter 05.