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Job as determinantof financial

compensation

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Process of systematically determining the relative worth of jobs to create a job structure for the organization. Evaluation is based on a combination of job

content, skills required, value to the organization, organizational culture and the external market.

What Is Job Evaluation?

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Job Evaluation

• Determines relative value of one job in relation to another

• Basic purpose is to eliminate internal pay inequities that exist because of illogical pay structures

• Measures job worth in an administrative rather than economic sense

• Latter can be determined only by the marketplace and revealed through compensation surveys

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OBJECTIVES

• Equitability of the wage structure within the firm. (Internal equity)

• Consistency of firm’s overall wage structure with that of the industry in which firm operates (External equity)

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SIGNIFICANCE

• Rational & consistent wage & salary structure.

• Harmonious relations between labor & management.

• Standardizes the process of determining wage differentials.

• All relevant factors into account• Keeping down costs of R&S

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Job Evaluation : Content or Value• Job Content

– What work is performed and how it gets done– Orders job on the basis of the skills required for

the job and duties and responsibilities associated with it

• Job Value– Orders jobs on the basis of the relative

contribution of the skill, duties and responsibilities of each job to the organisation’s goal

– Also includes job value in the external market (exchange value)

– Pay rates may also be influenced by collective bargaining or other negotiations

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Uses of job evaluation

1. Identify the organisation’s job

structure

2. Eliminate pay inequities and bring

order to the relationships among jobs

3. Develop a hierarchy of job value for

creating a pay structure

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Determining an Internally Aligned Job Structure

Internal alignment

Job analysis

Job description

Job evaluation

Job structure

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

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

Work relationships within organization

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Major Decisions• Establish purpose

– Supports organization strategy• How does the job add value?

– Supports work flow• Integrates each job’s pay with its relative

contributions to the organisation• Helps set pay for new, unique, or changing jobs

– Fair to employees• Establishes a workable, agreed upon structure that

reduces the role of change, favoritism and bias in setting pay

– Motivates behavior toward organization objectives• Helps create the network of rewards (promotions,

challenging work) that motivates employees

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Major Decisions•Single v/s Multiple Plans

– Evaluate related group of jobs eg. Production, engineering, marketing

– Different evaluation plans for different types of work

– Benchmark Jobs•Contents are well-known and relatively stableover time

•Job is common across several differentemployers

•Sizable proportion of work force employed injob

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Benchmark Job

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Major Decisions•Benchmark Jobs

– Include entire domain of work being evaluated

– Capture the diversity of the work within the domain•Depth of work (Vertically)•Breadth of work (Horizontally) : Depends

on the nature of business

– Ensure coverage of entire work domain

– Ensure accuracy of decisions based on job evaluations

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Methods

•Ranking

•Classification

•Point

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Ranking Method

• Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success

– Simple, fast, easy to understand and explain to employees

– Least expensive– Doesn’t tell employees what it is about their

jobs that is important– Subjective opinions which are impossible to

justify in strategic and work-related terms– Requires evaluators to be knowledgeable

about all jobs

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Ranking Method - Two approaches

•Alternation ranking

–Orders job descriptions alternately at each extreme

–Agreement is reached among evaluators on which jobs are most and least least valuable

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•Paired comparison method

– Uses a matrix to compare all possible pairs of jobs

– After all comparisons, the job most frequently judged “more valuable” becomes highest ranked job and so on

Ranking Method - Two approaches

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Paired Comparison Ranking

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• Uses class descriptions that serve as the standard for comparing job descriptions

• Classes include benchmark jobs

• Series of classes cover range of jobs

• Ensures that the structure is based on organisation strategy and workflow, is fair and focuses behaviour on desired result

• Jobs within same class are equal (similar) and will be paid equally

• Jobs within different classes should be dissimilar and may have different pay rates

Classification Method

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Point Method

• Assign numerical values to specific job factors

• Sum of values provides a quantitative assessment of a job’s relative worth

• Each job cluster to have its own customized set of factors viz. education, experience, mental effort, working conditions.

• Most commonly used approach to establish pay structures in U.S.

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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 Degree of Factor

Job Factor Weight

1 2 3 4 5

Education 50% 50 100 150 200 250

Responsibility 30% 30 70 110 150

Physical Effort 12% 12 24 36 48 60

Working Conditions

8% 0 24 40

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Job Evaluation Form

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1. Conduct 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 nonbenchmark jobs.

Steps in designing a Point Plan:

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Hay Guide Chart Profile Method (Hay Plan)

• A refined version of the point method of job evaluation

• Uses the factors of :– Know-how : total of all knowledge and skills

needed for satisfactory job performance– Problem solving : degree of original thinking

required by the job for analyzing, evaluating, creating, reasoning, and making conclusions

– Accountability : responsibility for action and accompanying consequences

– Additional compensable elements : addresses exceptional conditions in the job’s environment

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Resulting Internal Structures

SupervisorsSupervisors

Project LeadersProject Leaders

ManagersManagers

Division GeneralManagers

Division GeneralManagers

Vice PresidentsVice Presidents

Job Evaluation

TechnicianTechnician Machinist ICoremakerMachinist ICoremaker Clerk / MessengerClerk / Messenger

ScientistScientist

Associate ScientistAssociate Scientist

Senior AssociateScientist

Senior AssociateScientist

Head / ChiefScientist

Head / ChiefScientist

Drill Press OperatorRough Grinder

Drill Press OperatorRough Grinder

Assembler IIAssembler II

Materials HandlerInspector II

Materials HandlerInspector II

PackerPacker

Assembler IInspector I

Assembler IInspector I

Word ProcessorWord Processor

AdministrativeSecretary

AdministrativeSecretary

Principal Adminis-trative Secretary

Principal Adminis-trative Secretary

AdministrativeAssistant

AdministrativeAssistant

Job Evaluation

Competency- Based

Skill– Based

Manufacturing Group

Administrative Group

Technical Group

Managerial Group