Milkovich/Newman: Compensation, Ninth Edition

Evaluating Work:

Chapter 5

Job Evaluation

McGraw-Hill/Irwin

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Topics
Job-Based Structures:

Job Evaluation
Defining Job Evaluation: Content, Value, and
External Market Links
How-to: Major Decisions
Ranking
Classification
Point Method

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Chapter Topics (cont.)

Who Should be Involved?
The Final Result:

Structure
Balancing Chaos and Control
Your Turn:

Job Evaluation at Whole Foods

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Job-Based Structures: Job Evaluation

Job evaluation

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
External market
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Exhibit 5.1: Many Ways to Create Internal Structure

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Defining Job Evaluation: Content,

Value, and External Market Links
Content and value

Exchange value
Linking content with the external market

Value of job content is based on what it can

command in the external market
Measure for measure vs. Much ado

about nothing

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Exhibit 5.2: Assumptions Underlying

Different Views of Job Evaluation

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Defining Job Evaluation: Content, Value,

and External Market Links (cont.)
How-To: Major decisions

Establish the purpose

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

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Exhibit 5.3: Determining an Internally

Aligned Job Structure

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Defining Job Evaluation: Content, Value,

and External Market Links (cont.)
How-To: Major decisions (cont.)

Single versus multiple plans

Characteristics of a benchmark job:
Contents are well-known and relatively stable over time
Job not unique to one employee
A reasonable number of employees are involved in the job

Depth and breadth of job

Refer Exhibit 5.4

Choose among methods

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Exhibit 5.4: Benchmark Jobs

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Exhibit 5.5: Comparison of Job

Evaluation Methods

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Ranking
Orders job descriptions from highest to lowest

based on a global definition of relative value or

contribution to the organizations success
Simple, fast, and easy to understand and explain
Initially, the least expensive method
Can be misleading

Two approaches
Alternation ranking
Paired comparison method
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Exhibit 5.6: Paired Comparison Ranking

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Classification
Uses class descriptions that serve as the

standard for comparing job descriptions

Classes include benchmark jobs

Outcome: Series of classes with a number of

jobs in each

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Exhibit 5.7: Classifications for Engineering

Work Used by Clark Consulting

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Point Method
Three common characteristics of point

methods:

Compensable factors
Factor degrees numerically scaled
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

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Designing a Point Plan: Six Steps

Conduct job analysis

Determine compensable factors

Scale the factors

Weight the factors according to importance

Communicate the plan, train users; prepare

manual

Apply to nonbenchmark jobs

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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 for:

Defining compensable factors

Scaling compensable factors
Weighting compensable factors
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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
Compensable factors play a pivotal role
Reflect how work adds value to organization
Decision making is three-dimensional:
Risk and complexity
Impact of decision
Time that must pass before evidence of impact

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Exhibit 5.9: Compensable Factor Definition: Decision Making

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Step 2: Determine Compensable Factors

(cont.)
To be effective, compensable factors should be:

Based on strategy and values of organization

Based on work performed

Documentation is important

Acceptable to the stakeholders

Adapting factors from existing plans
Skills, and effort required; responsibility, and working
conditions
NEMA, NMTA, Equal Pay Act (1963), and Steel plan
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Compensable Factors - How Many

Factors?

Illusion of validity - Belief that factors are

capturing divergent aspects of a job and are both
important

Small numbers - If even one job has a certain

characteristic, it must be a compensable factor

Accepted and doing the job 21 factor, 7 factors,

3 factors

Research results
Skills explain 90% or more of variance
Three factors account for 98 - 99% of variance
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Exhibit 5.10: Compensable Factor

Definition: Multinational Responsibilities

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Exhibit 5.11: Factors in Hay Plan

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Exhibit 5.12: Hay Guide Chart Profile Method of Job

Evaluation

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Step 3: Scale the Factors

Construct scales reflecting different degrees

within each factor

Most factor scales consist of four to eight degrees

Issue

Whether to make each degree equidistant from

adjacent degrees (interval scaling)

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Step 3: Scale the Factors (cont.)

Criteria for scaling factors
Ensure number of degrees is necessary to distinguish

among jobs

Use understandable terminology

Anchor degree definitions with benchmark-job titles

and/or work behaviors

Make it apparent how degree applies to job

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Exhibit 5.13: Factor Scaling National Metal Trades

Association

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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

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Step 4: Weight the Factors According to

Importance (cont.)
Select criterion pay structure

Committee members recommend the criterion pay

structure
Statistical approach is termed policy capturing to
differentiate it from the committee a priori judgment
approach
Weights also influence pay structure

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Exhibit 5.14: Job Evaluation Form

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Step 5: Communicate the Plan and Train

Users
Involves development of manual containing

information to allow users to apply plan

Describes job evaluation method

Defines compensable factors
Provides information to permit users to distinguish
varying degrees of each factor
Involves training users on total pay system
Includes appeals process for employees

Employee acceptance is imperative

Communication
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Step 6: Apply to Nonbenchmark Jobs

Final step involves applying plan to remaining

jobs

Could involve both designers and/or employees

trained in applying the plan
Tool for managers and HR specialists once plan

is developed and accepted

Trained evaluators will evaluate new jobs or
reevaluate jobs whose work content has
changed
May also be part of appeals process

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Step 7: Develop Online Software

Support

Online job evaluation is widely used in larger

organizations
Becomes part of a Total Compensation Service
Center for managers and HR generalists to use

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Who Should be Involved?

Managers and employees with a stake in the

results should be involved

Can include representatives from key operating

functions, including nonmanagerial employees
Organizations with unions find including union

representatives helps gain acceptance

Extent of union participation varies

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Who Should be Involved? (cont.)

Design process matters

Attending to fairness of design process and approach

chosen likely to achieve employee and management
commitment, trust, and acceptance of results

Appeals/review procedures

Inevitable that some jobs are incorrectly evaluated

Requires review procedures for handling such cases
and helping to ensure procedural fairness

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Who Should be Involved? (cont.)

I know I speak for all of us when I say I speak

for all of us

Procedures should be judged for their susceptibility

to political influences

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The Final Result: Structure

The final result of the job analysis job

description job evaluation process is a

structure, a hierarchy of work
Managerial, technical, manufacturing, and
administrative

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Exhibit 5.15: Resulting Internal Structures Job, Skill, and

Competency Based

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Balancing Chaos and Control

Job evaluation changed the legacy of

decentralization and uncoordinated wage-setting

practices left from the 1930s and 40s

It must afford flexibility to adapt to changing

conditions

Avoids bureaucracy and increases freedom to

manage
Reduces control and guidelines, making enforcement
of fairness difficult
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