Comp- Test 2

compensable factors

are based on strategic direction and how the work contributes to these objectives and strategy. •Factors are scaled to reflect the degree to which they are present •Weighted to reflect their importance to the organization •Attached to each factor weight (cost containment, ethics, experience, availability/flexibility, knowledge, skills, communication) WHAT IS VALUABLE TO THE ORGANIZATION

Traits

general disposition to behave in a certain way

skill-based pay

is used mostly in manufacturing -An advantage is a better match of people to flow of work, avoiding bottlenecks and idle hands

Knowledge

accumulated information

Point fact method 7

Apply to non-benchmark jobs

Job Evaluation: Market Pricing

"Compensation is an Art and not a Science" Likely originated through market pricing strategy While not an exact science, it is a sound & practical approach using credible and reliable survey results to add validity to the market pricing process •Creates a job-worth hierarchy based on the 'going rate' for benchmark jobs in the external marketplace relevant to the business •All other (non-benchmark jobs) are slotted into the hierarchy

Job Evaluation Method: Classification

-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

Fair to Employees

-Advocates say they can empower employees -Critics worry about basing pay on personal characteristics -Justifying pay differences may create risks that need managed

committee approach

-Carefully study factor & degree definitions -Individually rank factors in order of importance -Agree on a ranking -Individually distribute 100% among the factors -Reach agreement again

3 common characteristics with point methods:

-Compensable factors (same ones apply to every job within organization) -Factor degrees numerically scaled -Weights reflecting the relative importance of each factor (from the blank standpoint how much weight value do i put on that as a company?

Motivate Behavior toward Organization Objectives

-Competencies provide guidelines and keep people focused -They are a common means of communicating and working together

Employee involvement is almost built into skill-based plans

-Employees and managers are the source of information for: •Defining the skills •Arranging them into a hierarchy •Bundling them into skill blocks •And certifying whether a person actually possesses the skills

Motivates behavior toward organization objectives

-Fluid work assignments require less supervision, resulting in labor cost savings -Responsibility for a complete work process and its results

Internally aligned pay structures can be designed to:

-Help determine pay for the wide variety of work and ensure that pay influences attitudes and behaviors and directs toward objectives

Key benefits of job content evaluations include:

-Internal consistency -Organizational alignment -Control labor costs -Fairness & equity -Job worth hierarchy -Market competitiveness

Skill-based plans have very specific information on every aspect of the production process

-Plans are suited for continuous-flow technologies where employees work in teams

The best approach to pay structures depends on the situation

-Provide sufficient ambiguity to afford flexibility

Is fair to employees

-Skill-based plans may give workers more control over their work life but favoritism and bias may be a problem -The legality of such plans have not been addressed in the courts

•Early conceptions of competencies focused on five areas:

-Skills -Knowledge -Self-concepts -Traits -Motives

Validity of the job evaluation has been measured in two ways:

-The degree of agreement between rankings in the evaluation with agreed-upon ranking of benchmarks used as the criterion -By hit rates - the degree to which the evaluation plan matches an agreed-upon pay structure for benchmark jobs

Such adjustments can be based on:

-The overall movement of pay rates caused by competition for people in the market -Performance -Ability to pay -Terms specified in a contract

Core competencies are not unique for each company

-What differs is how each company applies their competencies -Most organizations appear to choose from the same list of 20 core competencies

The major skill analysis decisions are:

-What is the objective of the plan? -What information should be collected? -What methods should be used? -Who should be involved? -How useful are the results for pay purposes?

Job Ranking Options: Straight:

-job titles and/or short briefs -Useful to have actual job description for reference

Components of a structure

1.Breadth of the pay range 2.Number of pay grades 3.Midpoint progression 4.Overlap

Supports work flow

A main advantage is matching people to changing workflow

Defined Pay range

A pay range represents the minimum, midpoint, and maximum rates that a business is willing to pay employees performing a job. Typically, the midpoint or control point is set to provide market competitive, fair, and equitable salaries based on the competitive marketplace for a business.

Example of benchmark jobs

Accountant Marketing manager It Helpdesk Technician Administrative assistant Top Operation executive Engineer

Adjust pay mix

Adjustments to the different forms of pay occur less frequently Salary Guidelines, Incentives, Bonus

Salary Structure- Rationale

Allows a company to recognize the knowledge, skills, and abilities of each job and differentiate employee pay based upon performance Most common approach used by organizations today

"How -To" -Competency Analysis

Clarify the objective of the plan Core competencies are not unique for each company •Competencies derive from leadership's beliefs about the organization and its strategic intent •If people are paid based on competencies, there must be a way to certify their possession of that competency

Determining Factor Weights: Two Methods:

Committee or Statistical approach

Point fact method step 6

Communicate plan and train users

point factors

Compare jobs on rating scale of specific factors

Job ranking

Compare jobs using a single global factors that presumably combines all parts of the job

Work Flow

Competencies may require more tacit knowledge

Point fact method step 1

Conduct Job Analysis

Job classification

Defines Categories of jobs and slots jobs into these classes

Point fact method step 2

Determine Compensable Factors What is it about the work that adds value Compensable factors should be: Based on the strategy and values of org example : a compensable factor for a company like Walmart could be "cost containment" Based on the work performed Acceptable to stakeholders affected by the pay structure

Point fact method 8

Develop online support if available

Using Ranges to Set Pay

Employees are generally hired between the minimum and midpoint of a range based on knowledge, performance, experience A "fully-competent, experienced" employee is paid at the midpoint over time, which is typically the competitive market rate. Payment above the midpoint is reserved for excellent performers or long-tenured, highly experienced employees. Normally, employee pay moves through the salary range based upon merit, and merit pay is administered based upon performance.

Skills

Experience Education Ability

Responsibilities

Fiscal Supervisory

Why is range overlap important

It allows companies to recognize and reward long-term, high performers while maintaining their current salary grade and range

Single-rate pay

Paid for the job. Each incumbent receives same rate usually the market rate

What is a benchmark (key) Job and how is it used in Job Evaluation?

Its contents are well known relatively stable over time Job is common across a number of different employers Reasonable proportion of the workforce is employed in this job

Qualitative (whole job)

Job Ranking: Job Classification:

Working Conditions

Location Hazards Extremes in environment

Factors to consider in use

Market pricing is most prevalent Job ranking takes less time & costs less Point factors method is expensive, complex, and difficult to explain but if done correctly it is easily defend in a court of law

Salary Range : Midpoint

Meet essential responsibilities over time •Fully competent •Experienced •Work independently

Effort

Mental Physical

Pay range consist of:

Minimum Midpoint Maximum

Range overlap

Minimums and maximums of each pay range typically overlap with adjoining ranges, except for the lowest minimum and highest maximum pay

adjusting pay level

Most organizations adjust pay on a regular basis

Purpose of the Competency-Based Structure

Organization strategy Work flow Fair to employees Motivate behavior toward organization objectives

Establish certification methods

Organizations may use peer review, on-the-job demonstrations, or tests to certify that employees possess and apply skills •Newer applications are moving to fixed review points in the year •Scheduling makes it easier to budget and control payroll increases •Other changes include: -Ongoing recertification -Removal of certification when a skill is deemed obsolete

The Great Eight Competencies

Organizing & Executing Leading & Deciding Interacting & Presenting Enterprising & Performing Creating & Conceptualizing Supporting & Cooperating Adapting & Coping Analyzing & Interpreting

Specialist: Depth

Pay is based on the knowledge of the individual Rather than on job content or output A teacher is an example Basic responsibilities do not vary on a daily basis

Salary Structure- Ranges & Grades

Pay ranges with grades are the most common salary structure in use today (may be called salary ranges/open ranges) Allows a company to pay for performance and to avoid limitations in step ranges Salary structures will typically include salary grades and pay ranges to deliver market-competitive pay for jobs within a company (midpoint is the going rate for the job)

Most defensible in the court of law

Point Factor

Quantitative (job components)

Point Factors: Market Pricing:

Types of Job Evaluation plans

Qualitative (whole job) Quantitative (job components)

Job Evaluation Method: Ranking

Ranking simply orders the job descriptions from the highest to lowest based on relative value or contribution to success Example: President Vice President, Marketing Director, Production Senior Engineer Engineer Associate Engineer

Point fact method step 3

Scale the Factors Use degrees (or levels) within each factor Factor Scales consist of four to eight degrees Ensure that the number of degrees is necessary to distinguish among jobs Use understandable terminology Anchor degree definitions with benchmark job titles/behaviors Make it apparent how the degree applies to the job

Point fact method step 5

Select criterion pay structure -Pay structure that committee/advisory team wish to duplicate with the point plan.....may be reflective of current benchmark job rates

Supports the strategy and objectives

Skills need to be directly related to the organization's objectives & strategy

Typical Compensable Factors:

Skills, Responsibilities, Effort, Working Conditions

Type of skill plans

Specialist -Depth Generalist-Breadth

Purpose of Skilled Based structure:

Supports the strategy and objectives •Supports work flow •Is fair to employees •Motivates behavior toward organization objectives

Organization Strategy

The main appeal is the direct link to the organization's strategy

job evaluation

The process of systematically determining the relative worth of jobs to create a job structure for the organization

Maximizing Flexibility

The skill- or competency-based plans pay for the highest level of skill regardless of work performed - -The employer must control the rate of certification of skills and offset the higher rates with greater productivity

Clarify the objective of the plan

The structure may exist on paper through competency sets and scaled behavioral indicators but bear little connection to the actual work

Range Spread

The width of the pay range is the distance from the top to the bottom of the range

What if a company hires an experienced person with full capabilities to perform the job from the beginning?

This person should be hired at or near the market rate (the midpoint). Overpaid/Underpaid:

Generalist- Breadth

Those in a multi-skill system earn pay increases by acquiring new knowledge More pay comes from certification of new skills Responsibilities can change drastically over a short time

market pricing

Value of each job is determined through the analysis of the external marketplace as typically reported through salary surveys (using data available to you and matching your job descriptions and determining pay based off of that)

Point fact method step 4

Weight the factors according to importance -After degrees have been assigned, factor weights are determined -Factor weights reflect the relative importance of each factor to the overall value of the job -Often determined by advisory committee

Job evaluation is based on

a combination of job content, skills required, value to the organization, organizational culture, and external market

Self-concepts

attitudes, values, self-image

competency-based structure

begins by looking at the work performed in the organization -The underlying knowledge, skills, and behaviors that form success at any level or job are the core competencies -Competency sets translate each core competency into action -Competency indicators are observable behaviors

Broad-band-

collapses ranges into one larger band

broad banding

consolidates four or five traditional grades into a single band with a minimum and maximum

•Validity refers to the

degree to which the job evaluation assesses what is intended - the relative worth of jobs to the organization

Skills

demonstration of expertise

Organizations are now

emphasizing business-related descriptions of behaviors

Automatic step rate-

employees progress step by step based on time or seniority (time youve been at a job)

Skill analysis

is a systematic process of identifying and collecting information about skills required to perform work in an organization.

Skill-based structures

link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires relevant to work -These structures pay for all the certified skills of the individual, regardless of whether the work requires all or a few skills -The wage attaches to the person -In contrast, a job-based plan pays employees for the job, regardless of the skills they possess

Competencies are becoming a collection of

observable behaviors requiring no inference, assumption or interpretation

Pay range-

provide minimum, midpoint, maximum. Employees typically move through based on annual performance merit review

Motives

recurrent thoughts that drive behaviors

Variable step rate-

similar to automatic but allows for recognition of performance and/or skill development (ability to factor in performance of individual, can give it to them out of cycle, there is some level of judgment in which you can apply that increase)

Salary structure types

single rate automatic step rate variable step rate pay range broad band

Midpoint

the competitive market rate or control point

hit rates -

the degree to which the evaluation plan matches an agreed-upon pay structure for benchmark jobs

maximum

the highest rate the organization is willing to pay for the job

minimum

the lowest rate for a job or group of jobs; also, may be the entry hire rate

Reliability of Job Evaluation Techniques

​​•A reliable evaluation has evaluators producing the same results •Improve reliability with trained evaluators familiar with the work -Some organizations use group consensus to increase reliability •Reliability for job evaluation scores are higher than those for job analysis ratings

Market Pricing Guidelines

•1.Use 3 or more salary surveys •2.Attempt to match 70% of job content •3.Attempt to match 50% or more of your benchmark jobs to the external marketplace •4.Obtain surveys with credible & relevant survey participants closely matching your business •5.Use surveys with filters such as: # of employees, location, industry, revenue, years of experience

Defining Job Evaluation

•Content refers to what work is performed and how it gets done -Internal alignment based on content orders jobs by skills, duties, and responsibilities •Job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goals •Job value may also include the job's value in the external market

Salary Range: Maximum

•Exceed essential responsibilities over time •Highly experienced •Ready for promotion

What is the purpose of a job evaluation?

•Help set pay for jobs where market pay survey data are unavailable by comparing the internal value •Match a job in a particular company to a comparable job of similar value in a market pay survey •Pay jobs based on which ones are most important to the company's strategy

A salary structure may be used to manage:

•Hierarchy of jobs in the organization •Competitive market rate & range of each job •Hiring rate/range for each job •Budgeting & cost control •Salary administration •Career ladders & job families •Legal compliance •The minimum, midpoint and maximum for a job

Potential reasons changes occur less often (pay mix)

•High costs of redesigning a mix •Keep doing what you are doing •More likely, insufficient attention is paid to mix decisions •The mix used may have been based on external pressures

perfect structure

•Increase pay through promotions or acquisition of skills •A job-based approach pays only as much as the work is worth

Alternation:

•List of job titles are provided with equal number of blanks •Job title with highest rank is recorded at top and then lowest at bottom. Continue process

Salary Range : Minimum

•Need guidance/training to learn essential responsibilities •Entry level •Learning •Dependent

How many grades are enough?

•No optimum number •Can vary anywhere from 4 to 40 •Generally, 12 will suffice for a small company and 14-18 for a company of up to 5,000 people

Broad Banding -Advantages over traditional approaches

•Provide flexibility to broadly define job responsibilities •Support organizations that have eliminated layers of managerial jobs •They foster cross-functional growth and development •Helps manage the reality of fewer promotions in flat organizations •The flexibility eases mergers and acquisitions Broad bands may be combined with traditional practices by using midpoints, zones, or other control points

paired comparison

•Raters compare all possible pairs of jobs •Compare each pair of jobs at least once •Job title with highest ranking is 'marked' each time it is selected •After all comparisons are made, rank in order of highest to lowest number of 'marks'

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

Person Based structure competencies

•There are several perspectives on what competencies are and what they are supposed to accomplish -Can they be learned & developed? -Are they a trait that includes attitudes & motives? -Do they focus on minimum requirements that the organization needs to stay in business? -Do they focus on outstanding performance? -Are they characteristics of the organization or of the employee?

Range Spread in practice

•administrative/operative jobs typically have range spreads of 30-40%+ •professional/management jobs typically have range spreads of 50%+ •executive jobs typically have range spreads of 50-80%+

Rationale useful in managing

•recruitment •recognition •retention •performance •employee expectations and engagement •cost control