Module 6: Quantitative Job Evaluation Methods

Standard Multiple Regression Formula

Base Pay = Constant + Coefficient (experience) + Coefficient (education) + Coefficient (budget)

Degrees

Measurement scales or yardsticks which identify specific levels of a factor. ■ 1st degree - less than three months ■ 2nd degree - three months, up to and including 12 months ■ 3rd degree - more than one year, up to and including three years ■ 4th degree - more than three years, up to and including five years ■ 5th degree - more than five years

Point Factor Method - Steps 1 & 2: Select & Weigh Compensable Factors

■ Consider the job group ■ Use management judgment or statistical analysis

Weighting Compensable Factors

■ Consider the nature of the work performed by job group(s) covered under the plan ■ Rank the factors selected in order of priority for the organization ■ Develop initial factor weights as a percentage, derived by statistical analysis, management judgment, or a combination of the two ■ Review with key management and other stakeholders, as appropriate

What to Consider when Defining Compensable Factors

■ Create hierarchy consistent with perceptions ■ Establish proper number of levels

Defining Compensable Factors

■ Develop a clear and comprehensive definition for each factor ■ Define the highest and lowest levels of each factor present in the work group to be covered by the plan ■ Create intermediate levels from lowest to highest by defining a logical progression that reflects reasonable differences

Point Factor Method Disadvantages

■ Expensive to develop or purchase ■ Time-consuming to design and implement ■ Cumbersome if many jobs are to be evaluated ■ Creates inflexible hierarchy ■ Ability to evaluate and score the job to achieve a specific level

Selecting Compensable Factors

■ Identify the organization's internal values ■ Review the job content of the work group ■ Identify potential factors for consideration ■ Obtain key management's support and stakeholder acceptance ■ Determine factors to be used

Documenting the Job Evaluation Process - Internal Job Evaluation

■ Methodology used ■ Names of evaluators ■ Date of evaluations ■ Any thought process used to evaluate the positions

Job Component Method Advantages

■ Objective ■ Comprehensive ■ Most statistically accurate ■ Involves management in selection of compensable factors ■ Streamlines administration ■ Results in database of information ■ Ease of reporting

Point Factor Method Advantages

■ Relatively reliable ■ Relatively objective ■ Easy to evaluate new or revised jobs ■ Compensable factors can be tailored to company ■ The degree of difference between jobs is apparent ■ Responsive to pay equity laws and comparable worth parameters

Point Factor Method Overview

1. Select compensable factors to be used to evaluate the jobs 2. Define factors and degree levels within each factor - weight each factor as a percent of 100 3. Assign points to each degree level 4. Analyze and describe jobs in terms of the compensable factors 5. Determine which degree level of each factor best fits the job and assign respective point values 6. Total points for each job and arrange a job worth hierarchy based on total points

Point Factor Method - Steps 4 & 5: Analyze + Degree

ANALYZE ■ Analyze and describe jobs in terms of compensable factors; select an appropriate job analysis technique that will describe jobs in terms of their compensable factors. DEGREE ■ Degree definition and value ■ Compare job documentation to degree definitions ■ Determine which degree definition of each factor best fits the job and assign respective point values

Compensable Factors

DESCRIBED AS ■ Basis for judging job value ■ Elements used to measure job worth ■ Intrinsic elements that add value to the organization GENERIC COMPENSABLE FACTORS ■ Skill, effort, responsibility and working conditions

Point Factor Method - Step 3: Assign Points

DIMENSION ■ Single - used when the factor is dependent on only one variable (e.g., years of experience) ■ Multiple - used when the factor is dependent on multiple variables (e.g., business judgment is dependent on both decision making / impact and scope / complexity) - To accurately judge this factor, each subfactor must be evaluated as it relates to the main factor PROGRESSION ■ Arithmetic - Typically used in a single-dimension approach. Assigns a point score factor to each level of the dimension. ■ Geometric - Typically used in a multiple-dimension approach. Assigns a percent increase to each level of dimension. As a percentage, the points assigned to each dimension progressively increase.

Factors

Individual component aspects of job content within generic factor groups. (i.e., the components within the factor group "skill" include experience and knowledge, among others).

Documenting the Job Evaluation Process

PREPARATION ■ Job analysis ■ Job Description ■ Market pricing ■ Internal job evaluation MAINTENANCE ■ Storage ■ Updating ■ Replacing

Nonquantitative vs Quantitative

Quantitative assigns a specific total point score to each job being evaluated

Importance of Determining Proper Number of Levels

TOO MANY LEVELS ■ Forces artificial distinctions between degree levels ■ Requires highly detailed job documentation ■ Increases administrative time ■ Encourages requests for re-evaluation which results in "grade creep" TOO FEW LEVELS ■ Does not adequately differentiate important aspects of job value ■ May not fully cover the range of work performed OVERLAPPING LEVELS ■ Difficult to select the appropriate level ■ Adjacent level descriptions are too similar

Job Component Method Overview

■ Select and define compensable factors and job content to be measured ■ Develop a structured questionnaire to collect data on independent factors, such as work experience, level of education, budget, duties and responsibilities. The factors chosen must be able to be expressed in a quantitative, numerical format, so that they can be used in a regression analysis calculation. ■ Administer and evaluate questionnaires ■ Collect market data for benchmark jobs ■ Input the data from questionnaires and/or organizational records on selected benchmark jobs along with market data into computer. ■ Conduct a multiple factor regression analysis on the data to determine which factors should be included in the initial compensation model. ■ Test the model using the formula created from selected benchmark jobs, input additional benchmark data to verify results; adjust the model if necessary to produce the desired job worth hierarchy. ■ Run all jobs for which there is no pay data through the final model to produce the complete job worth hierarchy.

Generic Factor Group

■ Skill (experience, knowledge, etc.) ■ Effort (physical/mental demands) ■ Responsibility ■ Working Conditions

Documenting the Job Evaluation Process - Market Pricing

■ Specific surveys and why they were used ■ Measure of central tendency used ■ Practice of selecting the most representative survey number to serve as the going market rate (may vary from job to job, depending on whether averages are skewed) ■ Method of aging the data from multiple surveys to common point in time ■ Method for developing market composite for each job

Job Component Method Definition

■ Statistically developed - As opposed to the simpler ranking methods described earlier, the job component method uses statistical analysis to determine job value. ■ Identifies factors / factor weights that explain market levels - The job component method is used to identify the specific factors and factor weights that help to explain the market pay levels of benchmark jobs. ■ May be used to evaluate nonbenchmark jobs - Once a statistical model has been developed under the job component method, nonbenchmark jobs can then be evaluated using the model.

Point Factor Method Definition

■ The point factor method of job evaluation uses defined factors and degrees to establish job value. ■ Job descriptions are compared to the definitions of degrees in order to determine the most appropriate level. ■ The corresponding points for that level are then awarded to the job and combined for all factors to derive a total score.

Job Component Method Disadvantages

■ Time-consuming for front-end question development ■ Complex, therefore difficult to communicate to employees ■ Often perceived as "black box" ■ Expensive

Point Factor Method - Step 6: Job Worth Hierarchy

■ Total the points for each job and arrange a job worth hierarchy based on total points