CMS 2 Assignment 4: Job Evaluation - Measuring Content, Value, and External Market Links

Compensable factors

Are those characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives.

Job ranking

simply orders the job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization's success. It is the simplest, fastest and easiest to understand and to explain to employees, and the least expensive method, at least initially. However, it can create problems that require difficult and potentially expensive solutions because it doesn't tell employees and managers what it is about their jobs that is important.

Who should be involved in the job evaluation process?

If the internal structure's purpose is to aid management, and if ensuring high involvement and commitment from employees is important, those managers and employees with a stake in the results need to be involved in the process of designing it. A common approach is to use committees, task forces or teams that include representatives from key operating functions, including non managerial employees. In some cases, the group's role is only advisory. In others, it designs the evaluation approach, chooses compensable factors and approves all major changes. Organizations with unions often find it advantageous to include union representation as a source of ideas and to help promote acceptance of the results. Research suggests that attending to the fairness of the design process and the approach chosen, rather than focusing solely on the results, is likely to achieve employee and management commitment, trust and acceptance of the results. The absence of participation may make for employees and managers to imagine ways the structure might have been rearranged to their personal liking. No matter the technique, no job evaluation plan anticipates all situations. It is inevitable that some jobs will be incorrectly evaluated, or at least employees and managers may suspect that they were. Consequently, review procedures to handle such cases and to help ensure procedural fairness are required. Historically, the compensation manager has handled reviews but, increasingly, peer or team reviews are being used. When the evaluations are completed, approval by higher levels of management usually is required. An approval process helps ensure that any changes that result from evaluating work are consistent with the organization's operations and directions.

criterion pay structure

A pay structure to be duplicated with a point plan

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 of and a challenge to job evaluation.

The alternation ranking and paired comparison methods may be

more reliable than simple ranking. Nevertheless, ranking has drawbacks. The criteria on which jobs are ranked are usually so poorly defined, if they are specified at all, that the evaluations become subjective opinions that are impossible to justify in strategic and work related terms. Furthermore, an evaluator using this method must be knowledgeable about every single job under study.

A wide variety of factors are used in standard existing plans, from which a plan can be adapted, but the factors tend to fall into four generic groups:

(1) skills required, (2) effort required, (3) responsibility and (4) working conditions. The Hay Guide Chart—profile method of position, used by more than 8,000 employers worldwide—is perhaps the most widely used of the existing plans. The classic three Hay factors of know-how, problem solving and accountability use guide charts to quantify the factors in more detail. A remaining issue to consider is how many factors should be included in a plan. Some factors may have overlapping definitions or may fail to account for anything unique in the criterion chosen. Another problem is called small numbers. If even one job in a benchmark sample has a certain characteristic, that factor finds its way into the entire work domain. Once a factor is part of the system, it is likely to have it apply to all jobs.

What is the final result of job analysis and job evaluation?

The final result of the job analysis—job description—job evaluation process is a structure or hierarchy of work. This hierarchy translates the employer's internal alignment policy into practice. The job structures are obtained by different approaches to evaluating work. Organizations commonly have multiple structures derived through multiple approaches that apply to different functional groups or units. Although some employees in one structure may wish to compare the procedures used in another structure with their own, the underlying premise in practice is that internal alignment is most influenced by fair and equitable treatment of employees doing similar work in the same skill/knowledge group.

Describe how a point plan system of job evaluation works.

Point plans are the most commonly used approach to establish pay structures in the United States and Europe. They represent a significant change from the ranking method and the classification method in that they make explicit the criteria for evaluating jobs, that is, compensable factors. Point methods have three common characteristics: (1) compensable factors, with (2) factor degrees numerically scaled and (3) weights reflecting the relative importance of each factor. Compensable factors are defined on the basis of the strategic direction of the business and how the work contributes to these objectives and strategy. The factors are scaled to reflect the degree to which they are present in each job and weighted to reflect their overall importance to the organization. Points are then attached to each factor weight. The total points for each job determine its position in the job structure.

Why should compensable factors be based on the work performed?

Employees and supervisors are the experts in the work actually done in any organization. Hence, it is important to seek their answers to what should be valued in the work itself. Some form of documentation, such as job descriptions, job analysis, employee and/or supervisory focus groups, must support the choice of factors. Work-related documentation helps gain acceptance by employees and managers, is easier to understand and can withstand a variety of challenges to the pay structure. Employees, line managers, union leaders and compensation managers must understand and be able to explain why work is paid differently or the same. Differences in factors that are obviously based on the work itself provide that rationale, or even diminish the likelihood of the challenges arising.

Discuss the first two major job evaluation decisions that a job analyst must make.

The first major decision that a job analyst must make is to establish the purpose of the evaluation. Establishing the purpose helps to ensure that the evaluation is a rational, systematic tool to achieve an equitable, work-related pay structure rather than a useless bureaucracy. Job evaluation should be tied to internal alignment because it can support workflow by integrating pay with relative contribution. It can reduce disputes and grievances over pay differences among jobs by establishing a workable, agreed-upon structure that reduces the role that chance, favoritism and bias may play in setting pay. It can also help motivate behavior toward organizational objectives by explaining what it is about a particular job that the organization values. What supports the organization's strategy and its success can also be pointed out. The second major job evaluation decision that must be made is related to single versus multiple plans. A single plan is one that uses the same factors to evaluate all job families across the organization. Multiple plans use different plans and different factors for different job families. An example of this would be using different factors for clerical, managerial and production jobs. This approach allows the plan to be tailored to what is important in each type of work. Many say that jobs are too varied to be accurately evaluated by a single plan.

The following criteria for scaling factors have been suggested:

(1) Ensure that the number of degrees is necessary to distinguish among jobs (2) use understandable terminology (3) anchor degree definitions with benchmark-job titles and/or work behaviors (4) make it apparent how the degree applies to the job

Major decisions in the job evaluation process are:

(1) establish the purpose(s) (2) decide on single versus multiple plans (3) choose among alternative methods (4) obtain involvement of relevant stakeholders (5) evaluate the usefulness of the results

Briefly compare and contrast (a) the ranking method, (b) the classification method and (c) the point methods of job evaluation.

(a) The advantage of the ranking method of job evaluation is that it is fast, simple and easy to explain. A disadvantage of the method is that it becomes cumbersome as the number of jobs increases. The basis for comparisons is not explained. (b) An advantage of the classification method is that it can group a wide range of work together in one system. A disadvantage is that descriptions may leave too much room for manipulation. (c) One of the main advantages of the point method is that compensable factors explain the basis for comparisons. Compensable factors also may communicate what is valued. A prime disadvantage of the points method is that it can become bureaucratic and rule bound.

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.

committee a priori judgment approach

Compensable factor importance weights are assigned by a committee based on judgement

policy capturing

Compensable factor importance weights are inferred using statistical methods such as regression analysis

Content and Value

Content refers to what work is performed and hot it gets done. Internal alignment based on content orders jobs on the basis of the skills required for the jobs and the duties and responsibilities associated with the jobs. A structure based on job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goal. There is not necessarily a one-to-one correspondence between internal job value and pay rates.

Explain how the classification system of job evaluation works.

In the classification system of job evaluation, a series of classes covers the range of jobs. A job description is compared to the class descriptions to decide which class is the best fit for that job. Each class is described in such a way that it captures sufficient work detail, yet it is general enough to cause little difficulty in slotting a job description into the appropriate class. The classes may be described further by including titles of benchmark jobs that fall into each class. Writing class descriptions can be troublesome when jobs from several different job families are covered by a single plan. Although greater specificity of the job class definition improves the reliability of evaluation, it also limits the variety of jobs that can easily be classified.

Briefly discuss the first two steps in designing a point plan.

The first step in designing a point plan is job analysis. Typically, a representative sample of jobs—that is, benchmark jobs—is drawn for analysis. The content of these jobs serves as the basis for defining, scaling and weighting the compensable factors. The second step in designing a point plan is to determine the compensable factors. Compensable factors play a pivotal role in the point plan. These factors reflect how work adds value to the organization. They flow from the work itself and the strategic direction of the business. Compensable factors are those characteristics in the work that the organization values, characteristics that help it pursue its strategy and achieve its objectives. To select compensable factors, an organization asks itself: "What is it about the work that adds value?" To be useful, compensable factors should have three characteristics. They should be: (1) based on the strategy and the values of the organization, (2) based on the work performed and (3) acceptable to the stakeholders affected by the resulting pay structure.

Are intraclass comparisons made between jobs when classifying jobs in a job evaluation?

When classifying jobs in a job evaluation, it is useful to make intraclass comparisons of those jobs. With a classification method the job descriptions not only are compared to the class descriptions and benchmark jobs but also are compared to each other. This is done to be sure that jobs within each class are more similar to each other than to jobs in adjacent classes. This process should yield a job structure composed of a series of classes with multiple jobs in each class. The jobs within each class are considered to be equal (similar) work and will be paid equally. Jobs in different classes should be dissimilar and may have different pay rates.

Prior to the widespread use of job evaluation, employers in the 1930s and 1940s had irrational pay structures based on

decentralized and uncoordinated wage-setting practices. Pay differences were a major source of unrest among workers. Employment and wage records were rarely kept, with only the foremen knowing how many workers were employed in the department and what rates they received. Foremen often used this information to vary the rate of favored workers or assign them to jobs where piece rates were loose. Job evaluation with its specified procedures and documentable results helped to change that. the technique provided work-related and business-related order and logic. However, over time, complex procedures and creeping bureaucracies can cause users to lose sight of the objectives. The world of work is changing. Today the work of many requires that they identify problems and opportunities, make decisions, plan courses of action, marshal support and, in general, design their own work methods, techniques and tools. The challenge is to ensure that job evaluation plans afford flexibility to adapt to changing conditions.

Two common methods of ranking are

the alternation ranking and paired comparison. The first method orders job descriptions alternatively at each extreme. Agreement is reached among evaluators on which jobs are the most and least valuable, then the next most and least valuable, and so on, until all jobs have been ordered. The second method uses a matrix to compare all possible pairs of jobs. The higher ranked job is entered in the cell of the matrix. When all comparisons have been completed, the job most frequently judged "more valuable" becomes the highest ranked job, and so on.

Compensable factors reinforce

the organization's culture and values as well as its business direction and the nature of the work. If the direction changes, then the compensable factors may also change.

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.

Describe the (a) third, (b) fourth and (c) final steps in the design of a point plan.

(a) The third step in the point plan process is scaling the factors. Once the factors are chosen, scales reflecting the different degrees within each factor are constructed. Each degree may also be anchored by the typical skills, tasks and behaviors taken from the benchmark jobs that illustrate each factor degree. A major problem in determining degrees is whether to adopt interval scaling, that is, making each degree equidistant from the adjacent degrees. The following are criteria suggested for scaling factors: (1) Limit the degrees to the number necessary to distinguish among jobs. (2) Use understandable terminology. (3) Anchor degree definitions with benchmark job titles and/or work behaviors. (4) Make it apparent how the degree applies to the job. (b) The fourth step in job evaluation is weighting the factors according to importance. Once the degrees have been assigned, the factor weights must be determined. Different weights reflect differences in importance attached to each factor by the employer. Weights are often determined through an advisory committee that allocates 100% of the value among the factors. A supplement to committee judgment to determine weights is the use of a statistical analysis. In this process, the committee chooses the criterion pay structure; that is, a pay structure they wish to duplicate with the point plan. The criterion structure may be the current rates paid for benchmark jobs, market rates for benchmark jobs, weights for predominantly male jobs (in an attempt to eliminate gender bias) or union-negotiated rates. Once a criterion structure is agreed on, statistical modeling techniques are used to determine what weight for each factor will reproduce, as closely as possible, the chosen structure. The statistical approach is often labeled policy capturing to differentiate it from the committee a priori judgment approach. (c) A final step in the point plan process is to apply the plan to nonbenchmark jobs. To do so, a manual is usually written that describes the method, defines the compensable factors and provides enough information to permit users to distinguish varying degrees of each factor. The purpose of the manual is to allow users who were not involved in its development to apply the plan. Users require training and background information on the total pay process. Finally, large organizations will also develop online software systems to support the job evaluation process.

A benchmark job has the following characteristics:

- Its contents are well known and relatively stable over time. - The job is common across a number of different employers. It is not unique to a particular employer. - A reasonable proportion of the workforce is employed in this job.

Summarize the assumptions that underlie aspects of job evaluation.

The assumptions that underlie aspects of job evaluation are: (a) Job evaluation is a measure of job content—The assumption is that job content has intrinsic value outside of the external market. (b) Job evaluation is a measure of relative value—The assumption is that relevant groups can reach consensus on relative value. (c) Job evaluation is linked with the external market—The assumption is that job worth cannot be specified without reference to external market information. (d) Job evaluation is a measurement device—The assumption is that honing instruments will provide objective measures. (e) Job evaluation is negotiation—The assumption instills rationality to a social/political process, establishes rules of the game and invites participation.

Explain the technical versus the process viewpoints of job evaluation.

The issue is whether job evaluation should be viewed as a measurement device, and therefore be valued according to technical standards, or as an administrative procedure that invites discussion and consensus. Some researchers say that if job value can be quantified, then job evaluation takes on the trappings of measurements and can be judged according to technical standards. Those involved in actually making pay decisions have a different view. They see job evaluation also as a process to gain acceptance of pay differences among the jobs—an administrative procedure with which the parties become involved and committed. Employees, union representatives and managers discuss the rules of the game for determining the relative work. If all participants agree that skills, responsibilities and working conditions are important, then work is evaluated based on these factors.

Why should compensable factors be based on the strategy and values of the organization?

The leadership of an organization is the best source of information on where the business should be going and how it is going to get there. Clearly, the leaders' input into factor selection is crucial. So if the business strategy involves providing innovative, high-quality products and services designed in collaboration with customers and suppliers, then jobs with greater responsibilities for product innovation and customer contacts should be valued higher. Compensable factors need to reinforce the organization's culture and values as well as its business direction and the nature of the work. If that direction changes, then the compensable factors also change. Factors may also be eliminated if they no longer support the business strategy.

Summarize the steps involved in the design of a point plan.

The steps involved in the design of a point plan are: (1) Step One: Conduct job analysis. A representative sample of benchmark jobs is selected. The content of these jobs is the basis for compensable factors. (2) Step Two: Determine compensable factors. This step is based on the work performed or what is done, on the strategy and the values of the organization, and on what is acceptable to those affected by the resulting pay structure. (3) Step Three: Scale the factors. This step involves using examples to anchor the factors. (4) Step Four: Weight the factors. This step is where the judgment of organization leaders, a negotiated structure and a market-based structure can be reflected. (5) Step Five: Select criterion pay structure. This step is where committee judgment is supplemented with statistical analysis. (6) Step Six: Communicate the plan. This step provides for communication of the plan and training of the users. At this time, the plan manual is prepared. (7) Step Seven: Apply to non benchmark jobs. This step is where the point plan is applied to non benchmark jobs. (8) Step Eight: Develop online software support. Large employers today use online job evaluation systems.

Explain the differences between defining job evaluation in terms of its content, value, and external market links.

There are differing perspectives on whether job evaluation is based on job content or job value. A structure based on job content refers to skills required for the job, its duties and responsibilities. A structure based on job value refers to the relative contribution of the job to the organization's goals. The internal alignment is just one of the building blocks of the pay model. While job characteristics matter, they are not the only basis for pay. Job value may also include its value in the external markets and/or to some other set of rates that have been agreed upon through collective bargaining or other negotiation process, or even by government regulations such as the minimum wage. Not only may the content be described and valued differently by different observers, but the value added by the same work may be more or less in one organization than in another. So while the focus is on internal job value, external market value may differ. There is not a one-to-one correspondence with pay rates. Another perspective sees job evaluation as a process that links job content with external market pay rates. For example, if some aspect of job content demanded high wages in the market, then that aspect would be a useful way to distinguish between jobs in the evaluation. In this perspective, the value of job content is based on what it can demand in the external market. It has no intrinsic value. But there is not universal agreement among the people who advocate this.