Chapter 5
Job-Based Structures and
Job Evaluation
McGraw-Hill/Irwin
Copyright © 2011 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
 Job Evaluation Methods
 Who Should Be Involved?
 The Final Result: Structure
 Balancing Chaos and Control
5-2
Job-Based Structures: Job
Evaluation
 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
5-3
Job-Based Structures: Job
Evaluation (cont.)
 Organizational culture
 External market
5-4
Exhibit 5.1: Many Ways to Create Internal
Structure
5-5
Defining Job Evaluation: Content,
Value, and External Market Links
 Content and value
 A structure based on content orders jobs
on the basis of the skills, 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 goals
5-6
Defining Job Evaluation: Content, Value,
and External Market Links (cont.)
 Linking content with the external
market
 Aspects of job content take on value
based on their relationship to market
wages
 Aspect not related to the external labor
market may be excluded in the job
evaluation
5-7
Defining Job Evaluation: Content, Value,
and External Market Links (cont.)
 “Measure for measure” versus “Much
ado about nothing”
 Job evaluation may be judged according
to technical standards
 If participants agree that skills, effort,
responsibilities, and working conditions
are important, then work is evaluated
based on these factors
5-8
Exhibit 5.2: Assumptions Underlying
Different Views of Job Evaluation
5-9
Exhibit 5.3: Determining an
Internally Aligned Job Structure
5-10
“How-To”: Major Decisions
 Establish the purpose




Supports organization strategy
Supports work flow
Is fair to employees
Motivates behavior toward organization
objectives
5-11
“How-To”: Major Decisions (cont.)
 Single versus multiple plans
 Different evaluation plans are used when
the work content is too diverse to be
evaluated by one plan
5-12
“How-To”: Major Decisions (cont.)
 To be sure that all relevant aspects of
work are included in the evaluation, an
organization may start with a sample of
benchmark jobs
 Contents are well-known and relatively stable
over time
 Job is not unique to one employer
 A reasonable proportion of the work force is
employed in this job
5-13
Exhibit 5.4: Benchmark Jobs
5-14
“How-To”: Major Decisions (cont.)
 Diversity in the work can be thought of in
terms of :
 Depth (vertically)
 Breadth (horizontally)
 Number of job evaluation plans used
hinges on:
 How detailed an evaluation is required to
make pay decisions
 How much it will cost
 Choose among job evaluation methods
5-15
Exhibit 5.5: Comparison of Job
Evaluation Methods
5-16
Ranking
 Orders job descriptions from highest
to lowest based on a global definition
of relative value or contribution to the
organization’s success
 Alternation ranking orders job
descriptions alternately at each extreme
 Paired comparison method uses a matrix
to compare all possible pairs of jobs
5-17
Ranking (cont.)
 Disadvantages:
 Ranking criteria are usually poorly defined
 Evaluators must be knowledgeable about every
job under study
5-18
Exhibit 5.7: Paired Comparison
Ranking
5-19
Classification
 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
5-20
Classification (cont.)
 Greater specificity of the class definition
improves the reliability of evaluation
 Limits the variety of jobs that can easily be
classified
 Jobs within each class are considered to
be equal work and will be paid equally
5-21
Exhibit 5.8: Classifications for Engineering
Work Used by Clark Consulting
Source: Clark Consulting. Used by permission.
5-22
Point Method
 Common characteristics:
 Compensable factors
 Factor degrees numerically scaled
 Weights reflect relative importance of
each factor
5-23
Point Method (cont.)
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




5-24
Step 1: Conduct 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
5-25
Step 2: Determine Compensable
Factors
 Compensable factors are those
characteristics in the work that the
organization values, that help it
pursue its strategy and achieve its
objectives
5-26
Step 2: Determine Compensable
Factors (cont.)
 Based on strategy and values of
organization
 Reinforce the organization’s culture, values,
business direction, and nature of work
 May be eliminated if they no longer support
the business strategy
5-27
Step 2: Determine Compensable
Factors (cont.)
 Based on the work itself
 Documentation must support the choice of
factors
 Acceptable to the stakeholders
5-28
Step 2: Determine Compensable
Factors (cont.)
 Adapting factors from existing plans
 Skills and effort required, responsibility, and
working conditions
 National Electrical Manufacturers Association
(NEMA), National Metal Trades Association
(NMTA), Equal Pay Act (1963), and Steel plan
 The Hay Guide Chart-Profile Method
5-29
Exhibit 5.12: Factors in Hay Plan
5-30
Exhibit 5.13: Hay Guide Chart –
Profile Method of Job Evaluation
Source: Hay Group, “The Hay Guide Chart-Profile Method of Job Evaluation: An Overview,”
http://www.haygroup.com/ww/services/index.aspx?ID=1529.
5-31
Step 2: Determine Compensable
Factors (cont.)
 How many factors?
 “Illusion of validity” - Belief that factors
capture divergent aspects of a job and
both are important
 “Small numbers” - If even one job has a
certain characteristic, it is used in the
entire work domain
5-32
Step 3: Scale the Factors
 Scales reflecting different degrees
within each factor are constructed
 Most scales consist of four to eight
degrees
 Also include undefined degrees such as
plus and minus around a scale number
 Major issue: Interval scaling
5-33
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
5-34
Exhibit 5.14: Factor Scaling –
National Metal Trades Association
5-35
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
5-36
Step 4: Weight the Factors
According to Importance (cont.)
 Select criterion pay structure
 Committee members recommend the
criterion pay structure
 Statistical modeling techniques are used
to determine the weight for each factor
 Statistical approach is termed policy
capturing to differentiate it from the
committee a priori judgment approach
 Weights also influence pay structure
5-37
Exhibit 5.14: Job Evaluation Form
5-38
Step 5: Communicate the Plan and
Train Users
 A manual is developed
 Describes job evaluation method
 Defines compensable factors
 Provides information to distinguish
varying degrees of each factor
 Users require training and background
information on the plan
 Appeals process may be included
 Communication is required to build
employee acceptance
5-39
Step 6: Apply to Nonbenchmark
Jobs
 Final step involves applying plan to
remaining jobs
 Plan becomes a tool for managers and
HR specialists
 Trained evaluators will evaluate new
jobs or reevaluate jobs whose work
content has changed
5-40
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
5-41
Who Should be Involved?
 Managers and employees with a stake
in the results
 Committees, task forces, or teams
that include representatives from key
operating functions, including
nonmanagerial employees
 Including union representatives helps
gain acceptance
5-42
Who Should be Involved? (cont.)
 Compensation professionals are
primarily responsible for most job
evaluations for most jobs
 Design process matters
 Attending to the fairness of the design
process and approach chosen is likely to
achieve employee and management
commitment, trust, and acceptance of
results
5-43
Who Should be Involved? (cont.)
 Compensation professionals are primarily
responsible for most job evaluations for
most jobs
 Appeals/review procedures
 Inevitable that some jobs are incorrectly
evaluated
 Requires review procedures for handling
such cases and helping to ensure
procedural fairness
5-44
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
5-45
The Final Result: Structure
 The final result of the job analysis –
job description – job evaluation
process is a structure, a hierarchy of
work
 Organizations commonly have multiple
structures derived through multiple
approaches that apply to different
functional groups or units
5-46
The Final Result: Structure (cont.)
 Internal alignment is most influenced
by fair and equitable treatment of
employees doing similar work in the
same skill/knowledge group
5-47
Exhibit 5.17: Resulting Internal Structures –
Job, Skill, and Competency Based
5-48
Balancing Chaos and Control
 Job evaluation changed the legacy of
decentralization and uncoordinated
wage-setting practices of the 1930s
and 1940s
 Must be flexible to adapt to changing
conditions
 Avoids bureaucracy and increases
freedom to manage
 Also reduces control and guidelines,
making enforcement of fairness difficult
5-49