Compensation Test 1 Chapter 5 Class Notes

"How To" (of major decisions) Establish Purpose:

(supports org strategy)

Examples of Responsibility Factors

- Decision-Making authority - Scope of organization under control - Scope of organization impacted - Degree of integration of work with others - Impact of failure or risk of job - Ability to perform tasks without SUPERVISION

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 - statistical approach is termed policy capturing to differentiate it from the committee a priori judgment approach

Criteria for Scale Factors

- Ensure numbers of degrees is necessary to ______ among jobs - Use understandable terminology - _____ degree definitions with benchmark- job titles and/or work behaviors - Make it apparent how degree applies to job

What are some major decisions in job evaluation?

- Establish purpose of evaluation - Decide whether to use single or multiple plans - Choose among alternative approaches - Obtain involvement of relevant stakeholders - Evaluate plan's usefulness

Step 6: Apply to Nonbenchmark Jobs

- Final step involves applying to remaining jobs - Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed

What makes a GOOD Compensable Factor?

- It's a MEASURABLE quality - Relatively easy to describe and document (so those involved in using cfs to measure job worth should consistently arrive at similar results) - in addition, compensable factors should DIFFERENTIATE between jobs (ex: if all jobs are in an office, working conditions may not vary - doesn't differentiate)

Cons of Classification Method

- Raters may be too influenced by individuals in the job - Mangers may re-write job descriptions to fit into new pay grade

Generic Compensable Factors

- Skill - Effort - Responsibility - Working Conditions

Point Methods

- Some organizations use existing (ready-made) systems - example: National Metal Trades Association and Hay - Other Organizations develop their own set of _______ and points

Characteristics of a Benchmark Job

- The contents are well-known, relatively STABLE, and agreed upon by the employees involved - The supply and demand for these jobs are relatively stable - they represent the entire job structure under study - a reasonable portion of the work force is employed in these jobs (ex: bankteller - we all know what they do/ we can find a comparison for them)

Point Method

- Three common characteristics of point method (1_Compensable factors, 2_factor degrees numerically scaled, 3_weights reflect relative importance of each factor) - Most commonly used approach to establish pay structures in U.S. ** - Differ from other methods by making explicit the criteria for evaluating jobs - Compensable Factors

Classification (Job evaluation method)

- Uses class descriptions that serve as the standard for comparing job descriptions - Classes include benchmarking jobs - Jobs are sorted into these broad classes (ex: gov't GS levels-- based on skill, education experience) ("level of difficulty)

Pros of Job Classification method

- Very Flexible system that can be applied to wide variety of jobs - once done/created you're good to go, you can sort jobs into it

Compensable Factors are...

- WORK RELATED characteristics that the company values - They should be: based on the organization's strategy/goals - Based on the work that GETS DONE

Point Method - design questions

- Which compensable factors? - How many factors? - Number and Definition of degrees - How many points to allow? - Relative Weight of the Factors (ex: is education higher than # of ppl supervised) - How to Allocate Points Across Factors and Degrees?

to be effective, compensable factors should be:

- based on strategy and values of organization - based on work performed (documentation is important) - acceptable to stakeholders (e.g., job incumbents) Adapting factors from existing plans (skills and effort required, responsibility, and working conditions - National Electrical Manufacturers Association (NMTA), Equal Pay Act - 1963, and Steel plan - The Hay Guide Chart-Profile Method

Point Plans Disadvantages

- difficult to develop your own point plan - time consuming

Who should be involved

- managers and employees with a stake in the results (representatives from key operating functions, including non-managerial employees) (including union representatives helps gain acceptance) - compensation professionals are primarily responsible for most job evaluations for most jobs

More people, More disagreements

- people with different perspectives are likely to emphasize different factors - ex: shop employees may wish to include factors such as hazards and working conditions, whereas management might wish to stress responsibility

Designing a Point Plan: Step 1- Conduct Job Analysis

- point plans begin with job analysis - a REPRESENTATIVE sample of jobs (benchmark jobs) is drawn for analysis - content of these jobs is basis of the compensable factors

Possible Working Conditions Factors

- potential hazards inherent in job - degree of danger which can be exposed to others - impact of specialized motor or concentration skills - degree of discomfort, exposure, or dirtiness in doing job

Ranking (JE Method)

- raters examine job description and arrange jobs according to value to company - orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization's success

Different perspectives on job evaluation (market value or not)

- some say job content has hidden intrinsic value - others say the only fair measure is found in the external market - In practice, it's likely a mix of both *** ((ex: a specific aspect of work (e.g., customer contacts) can become important factor in the job evaluation)

Point Plans Advantages

- wide choice of factors and degrees flexible enough to be tailored to co. - Clear focus on job content

Two Approaches to ranking:

1.) Alternation Ranking 2.) Paired Ranking (what are these?)

Designing a Point Plan: Six Steps

1.) Conduct a Job Analysis 2.) Determine Compensable Factors 3.) Scale the Factors 4.) Weight the factors according to importance 5.) Communicate the plan, train users, prepare manual 6.) Apply to non-benchmark jobs (book has 8 steps)

Job Classification Steps

1.) Develop Categories general enough to fit a wide variety of jobs - greater specificity of the class definition improves the reliability of evaluation 2.) Identify a key job (called a BENCHMARK job) to represent each category to serve as a reference point 3.) Sort remaining jobs into categories

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 - Employee acceptance is imperative (appeals process should be included; communication is key)

Generic Factor: Working Conditions

Working Conditions: Hazards, physical surroundings of job

Step 3: Scale the factors

CONSTRUCT scales reflecting different degrees within each factor - most scales consist of four to eight degrees Issue: whether to make each degree equidistant from adjacent degrees (internal scaling)

Paired Comparison Ranking

Comparing 2 and deciding which is more important

Step 2: Determine Compensable Factors

Compensable factors - characteristics in the work - that the organization values, - that help it pursue its strategy and achieve its objectives - Reflect how work adds value to organization Example: Decision Making - three dimensions: (risk and complicity, impact of decision, time that must pass before evidence of impact

Jobs can be valued on:

Content - skills required, tasks performed Relative Worth to organization (ex: HR manager vs. Production manager) Organizational Culture External Market Blending organizational factors and market forces is a challenge for job evaluation

Single vs. Multiple Plans

Different evaluation plans are used when the work content is too diverse to be evaluated by one plan

Generic Factor- Skill

Experience, Training, Ability, and Education required to perform a job (not skills an employee pay possess; not about the person - what does the job require)

Multiple Plans

Multiple plans are more tailored to the SUBGROUPS within the organization. ex: technical professional, clerical/administrative, management - note: some jobs may not be evaluated on factors that do not apply (e.g., physical requirements)

Job evaluation process issues

Regardless of the method you decide to use:

Outcome of Classification Method

Series of Classes with a number of jobs in each that are paid the same

Should we consider the external market (in job evaluation)?

Some argue: Value of job content is based on what it can command in the external market Ex: higher skill levels command higher wages Others argue: Organizational values and strategies should guide INTERNAL structures Ex: company values innovation - so we put more emphasis on those skills

Compensable Factor definiton: Multinational Responsibilities

This factor concerns the multinational scope of the job. Multinational responsibilities are defined as line or functional managerial activities in one or several countries.......

Problems with the Ranking Method

Very Subjective - is everyone using the same criteria to make their judgments? Difficult to do in a large organization - evaluators must be knowledgeable about every job under study BUT.. inexpensive :)

Internal Alignment

Work Relationships within the Org --> job analysis--> job description--> Job evaluation ---> Job Structure

Generic Factor - Effort

a measurement of the PHYSICAL of MENTAL exterior needed for performance of a job

Single Plan

an organization may have one compensation system that applies to all jobs in the organization. All jobs are evaluated on the SAME CRITERIA ex: all jobs evaluated on education, responsibility and physical requirements

More ways to define effort

diversity of tasks complexity of tasks creativity of thinking analytical problem solving physical application of skills degree of assistance available

Factors in Hay Plan

pg 11 of notes

point system example

pg 14 of notes

Other Skill Factors

technical know how specialized knowledge organizational awareness educational levels specialized training years of experience required interpersonal skills degree of supervisory skills

Generic Factor - Responsibility

the Extent to which an employer depends on employee to perform job as expected, with emphasis on importance of job obligation

What is Job Evaluation

the process of systematically determining the relative worth of jobs to create a job structure of the organization; putting a VALUE on the job; a system for establishing pay differentials between jobs in a single organization

Job Evaluation Methods: Non-quantitative

try to establish a relative order of jobs - job ranking - job classification

Job Evaluation Methods: Quantitative

try to establish how much more one job is worth over another by using a Scaling System (ex: Point-factor method; Factor Comparison)