Mgmt4330 - Compensation CH5 Job-Based Structures and Job Evaluation

Job Evaluation

- A process for systematically determining the relative worth, or value, of jobs in an organization It helps create an internal job structure Is based on a combination of the following: * Job content, TDRs * Skills required, KSAOs * Value to the organization * May indirectly link to external market, e.g., importance to one employer of differentiating itself from another employer, or the supply and demand of specific types of labor

Step 6: Communicate the Plan and Train Users

- Communication is required to build employee acceptance - A manual is developed to Describe the job evaluation method(s) Define compensable factors Provide information to distinguish varying degrees of each factor - Users need background information on the plan, as well as training to apply the plan - An appeals process may be included

Step 2: Determine Compensable Factors

- Compensable factors -- Work characteristics that the organization values, and which help the organization pursue its strategy and achieve its objectives - Generic compensable factors -- Skill, effort, responsibility, working conditions - Adapt factors from existing plans -- National Electrical Manufacturers Association, Equal Pay Act, National Metal Trades Association, National Compensation Survey, or Hay Group Guide Chart-Profile Method

3.3 Point

- Compensable factors are based on the following: - The strategic direction of the business - How work contributes to the direction and strategy - Compensable factors are scaled to reflect the degree to which they are present in each job - Compensable factors are weighted to reflect their overall importance to the organization Advantage: Compensable factors callout basis for comparison. Compensable factors communicate what is valued Disadvantage: Can become bureaucratic and rule-bound

WHO SHOULD BE INVOLVED

- Determining Internal Structure Process -- Managers and employees with a stake in the results -- Committees, task forces, or teams that include representatives from key operating functions -- Union representatives - Conducting a Job Evaluation -- Compensation Professionals -- Senior Management -- Consultants -- Job Evaluation Committee

Step 4: Weight the Compensable Factors According to Importance

- Different weights reflect differences in importance attached to each compensable factor by the employer - Determination of factor weights is function of an advisory committee or subject matter experts - See Exhibit 5.14

Point Plan: Hay Group Guide Chart-Profile Method

- Hay Group is headquartered in Philadelphia, PA - Well known consulting firm in global compensation - Hay Point Method is used by more than 8,000 employers worldwide - Used by 150 of the 500 largest U.S. corporations - Partnered with SAP, so Hay Plan is incorporated into the SAP ERP system

Step 5: Select Criterion Pay Structure

- Job evaluation involves judgments on the part of committee members in determining a particular pay structure - Beneficial to supplement judgments with use of statistical analysis - Assume statistical modeling techniques will reproduce the chosen structure as closely as possible

Step 8: Develop Online Software Support

- Online job evaluation is evolving and is widely used in larger organizations - It notably reduces the time to process a job evaluation - Is especially useful for benchmark jobs U.S. State Department, with more than 50,000 employees in 180 countries, uses the "Link.Evaluate" online system

who should be involved continued...

- Procedures should be judged for their susceptibility to political influences - Powerful departments or members may more successfully change pay or classification of a job than weaker departments or members - Decision-making process, rather than method used, may have greatest influence on pay outcomes

3.1 Ranking

- Ranks job descriptions in order of importance to the organization, from highest to lowest methods: - Straight ranking - order job descriptions in sequence - Alternation ranking - order job descriptions alternately at each extreme, e.g., peel off best and worst alternately - Paired comparison ranking - use a matrix to compare all possible pairs of jobs (See Exhibit 5.7) Advantage: Fast, simple, easy to explain, Disadvantage: Cumbersome as number of jobs increases. Basis for comparisons is not called out.

Step 7: Apply to Non-Benchmark Jobs

- Recall that the compensable factors and weights are derived from a sample of benchmark jobs - Apply plan to remaining jobs, including those which may not be common or may be unusual - An acceptable plan becomes a powerful tool for managers and HR specialists

Step 1: Conduct a Job Analysis

- Representative sample benchmark jobs are drawn for analysis - Accuracy of job descriptions is essential -Content of these jobs is basis for: --Defining compensable factors --Scaling compensable factors --Weighting compensable factors

Step 3: Scale the Compensable Factors

- Scales reflecting different degrees within each factor are constructed - Most scales consist of four to eight degrees - Interval scaling: Make each degree equidistant from the adjacent degrees - Non-interval scaling: Distance from one degree to the next may vary See Exhibit 5.13

3.2 Classification

- Series of classes covers the range of jobs - Job description is compared to the class descriptions to decide in which class the job fits - A greater specificity of the class definition improves the reliability of evaluation - Jobs within each class are considered to be equal work and will be paid equally See Exhibit 5.8 Advantage: Can group a wide range of work together in one system Disadvantage: Descriptions may leave too much room for manipulation

How Many Compensable Factors

- The number of compensable factors is arbitrary - Small numbers - assumption is that if even one job has a certain characteristic, that factor tends to be used in the entire work domain - Skill explains 90% or more of variance - Three factors tend to capture and account for 98-99% of variance

BALANCING CHAOS AND CONTROL

- The past three chapters on internal alignment, job analysis, and job evaluation have emphasized 'techniques.' - We have yet to pay a single employee a single dollar. - Why bother with all of this? - Why not just pay whatever it takes and get on with it? - Some balance between chaos and control is required.

All of the following is true regarding "compensationitis"

- a way of understanding how different organization values work. - contagious - involves asking strangers about how they are paid NOT a social disease

Major Decisions in Job Evaluation

1. Purpose 2. Single or Multiple plans 3. Alternative Approaches 4. Stakeholders 5. Usefulness / Utility

3. Choose Among Alternative Approaches / Job evaluation Methods

3.1. Ranking 3.2 Classification 3.3 Point

1. Establish the Purpose

A structure is aligned if it: supports organization strategy, supports work flow, is fair to employees, and motivates behavior toward organization objectives. Establishing a purpose helps ensure the evaluation is a useful systematic process.

Start with "Benchmark" - key jobs

Job contents are well known and relatively stable Jobs are common across employers, and not unique to one employer A reasonable proportion of the work force is employed in this job Examples: Manager, Specialist, Team Leader, Cashier

The Hay Group method uses three universal compensable elements to measure the relative size of jobs - Compensable Factors in Hay Plan

Know-How Problem Solving Accountability

Compensable factors

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

Eight Steps in Designing a Point Plan

Step 1: Conduct a Job Analysis Step 2: Determine Compensable Factors Step 3: Scale the Compensable Factors Step 4: Weight the Compensable Factors According to Importance Step 5: Select Criterion Pay Structure Step 6: Communicate the Plan and Train Users Step 7: Apply to Non-Benchmark Jobs Step 8: Develop Online Software Support

UsefulnessThe Final Result-Internal Structure

The final results of a job analysis job description Job evaluation process is an internal job structure, i.e., a hierarchy of work Internal alignment is most influenced by fair and equitable treatment of employees doing similar work in the same skill and knowledge group

Problem-solving

The requirement for and ability to use know-how effectively to develop solutions that improve effectiveness - Environment - the context of the job and its focus - Challenge - the availability of guides and complexity of analyses required

Know-how

The sum total of what a person mush have the capability to do to be effective - Technical, specialized depth and breadth - Managerial requirements to plan, organize, staff, direct, and control resources for results, - Human relations skills to influence, motivate, change behavior, and build relationships

2. Single versus Multiple Plans

Use different evaluation plans for diverse work content Use one play, e.g., the Hay Plan, which can be applied across a wide depth and breadth of work

Accountability

the requirement for an ability to achieve desired results - Freedom to act - focus on decision-making authority vested in the position to achieve results - Scope - focus on the magnitude of the results expected relative to the enterprise - Impact - focus on the impact the position has on the relevant scope measure for the position