CHAPTER 8.

REWARD MANAGEMENT

Pay is an important feature in human resource management. After all, it is the main
reason why people work. It is a sensitive and controversial area that if not managed
properly, can affect an organization's ability to attract, retain and motivate talented
employees.
Employees may see pay as a return in exchange between their employer and
themselves, as an entitlement for being an employee of the company but more as a
reward for a job well done. It is like an employer telling an individual: "You give me good
service and I'll reward you with pay.” Pay is therefore regarded as a reward.
John Stredwick says: "In recent years, the expression 'reward' has started to
replace 'pay' in the human resource vocabulary. It indicates a much broader approach,
including elements of non-cash awards, and presupposes that employees need to
achieve something to receive their wages or salaries, unlike the more mechanistic
attachment that pay indicates. "Stredwick expressed surprise that most of the
development of rewards come from America and they still refer to the subject as
'compensation' with its connotation to the belief that work is unpleasant and should be
avoided.
It is in this context that we prefer to call this chapter Reward Management.
Employment is viewed as a contract between two parties: employer and employee.
Employee performs services for the employer. In exchange for the services, employer
pays employee the reward. The services, however, must be value-added, that is, the input
(services) that the employee gives to the employer must result in some output that
redounds to the benefit of the employer.
The reward people receive for their contribution to an organization includes monetary
and non-monetary components. It has major impact on employee's attitudes and
behaviors. As they say: “You pay them peanuts; you get monkeys.” It is also viewed as a
sign of status and success as it provides them the ability to buy what they need and what
they want. Employees attach great importance to pay decisions when they evaluate their
relationship with the organization. Pay also constitutes a significant portion of the
company's operating Costs. Therefore, pay decisions must be carefully managed and
properly communicated.
Both the level of pay and its seeming fairness compared with others' pay is important.
So, it is important to assign a rate of pay that is acceptable to the employee in terms of
internal equity, external competitiveness and in terms of the employer's cost. Although
each individual employee is considered as unique and thus, requires some individualized
treatment, standardizing the treatment of similar employees (i.e., those with similar jobs)
can help greatly in making salary administration and decision-making more manageable
and equitable. Pay policies, therefore, are often attached to particular jobs rather than
tailored entirely to individual employees.
JOB ANALYSIS
To find out the relative worth of a job in relation to other jobs, one must understand
what's inside the job itself. This is done through Job Analysis. There are many definitions
of Job Analysis and it has many objectives. In the context of reward management, we
choose the following definitions:
1. Job Analysis is a systematic procedure for getting information about the current or
proposed duties and requirements of a position in order to determine the most
appropriate classification. It is a process used to collect information about the du-
ties, responsibilities, necessary skills, outcomes, and work environment of a
particular job. You need as much data as possible to put together a job description
which is the frequent outcome of the job analysis. It is the gathering and analyzing
of data about a specific job so that a job description and job specification can be
written.
2. Job Analysis focuses on work behaviors, tasks, outcomes. It is not an analysis of
thought processes, attitudes, traits, or aptitudes. It is not a time and motion study.
One usual source of data gathering is the employee currently performing the job.
The employee's supervisor or man- ager is another likely source for accurate
information. When using the current employee as a source of information, the job
analyst must exercise caution since the employee is likely to inflate his
responsibilities and somewhat exaggerate the importance of his tasks.
DATA COLLECTION METHODS
There are various ways of gathering data for job analysis. These include
observation, work sampling, interviews and questionnaires or a combination of one or
more of these methods.
Observation
Observing people while doing their work can provide insight into the vital functions
of the job. Analysts can take notes and may even video tape the actual work and review
them later. Then, they can summarize the list of essential functions in the order of
importance.
However, observing is easier on manual jobs. For knowledge workers where
analytical thinking is involved, it is not possible to observe all essential functions. Also,
results of observation may not reflect the actual day to day work as workers are conscious
that they are being observed may change the way they would normally perform the job.
Observation, therefore, needs validation with other methods.
Interviews
Focus interviews done one-on-one or in groups provide opportunity for asking
relevant or clarificatory questions. Employees have the tendency to overstate their skills.
They may exaggerate the complexity and importance of their jobs especially if they know
or suspect that the study is for the purpose of evaluating jobs with the end result of
establishing salary structure.
Multiple interviews of several incumbents of same job and their supervisor can help
verify the true essential elements of the job. A structured interview is recommended.
Unless the study is made by outside expert consultants, the interviewers must be properly
trained in conducting structured interview. It is long, tedious and expensive but it assures
accuracy in gathering data.
Work Sampling
This is a variation of the interview but done through random work sampling like once
a week or a few hours a day. Work sampling must be representative of the job. Sufficient
prior data must be gathered to determine what is representative of the entire actual job.
Otherwise, observation through work sampling may result in a wrong, insufficient or
skewed data.
Questionnaires
The most common method is through a questionnaire. A standard form called. Job
Analysis Questionnaire (JAQ) is distributed to all employees to accomplish. This is the
fastest, inexpensive way of gathering data. Standard questionnaires are available in the
market. It must be use-friendly and easy to accomplish. It can be computerized for faster
results.
Two problems can be encountered in this method: the lackadaisical attitude of
employees to accomplish the questionnaires and their tendency to exaggerate the
importance of some of their tasks. The first needs prodding by top management by
providing a reasonable deadline to submit; the second can be minimized if 'not eliminated
by review and approval of the supervisor. In any case questionnaires should be further
validated by other techniques such as interviewing and/ or observation.
Standardized Instruments
There are a number of standardized quantitative methods of job analysis. The two most
common are:
1. Position Analysis Questionnaire (PAQ) requires that each job be analyzed with
regards to 194 specific tasks commonly found in many jobs. It uses six scales to
determine the degree to which these standardized tasks are performed in the job
being analyzed.
2. Functional Job Analysis examines the degree to which people, data, and things
are involved in the functions of the job. The critical incident method is a qualitative
technique that focuses on behaviors that are critical for job success.
In both methods, it is the analyst that completes the instrument.
The Job Analysis process generates two documents: the job description and the job
specification. Both provide a complete picture of the job itself and the qualifications
required for a person to perform the job.
JOB DESCRIPTION
Job description is an abstract of information derived from the job analysis report
describing the duties performed, the skills training and experience required, the
responsibilities involved, the contribution under which the job is done and the other
relations of the job to the other jobs in the organization.
In short, a job description must contain a list of Tasks, Duties, Responsibilities (TDR)
that the job entails. These TDRs are observable actions. A good job description must also
contain job specifications list of the knowledge, skills, abilities and other characteristics
(KSAs) required for an individual to perform the job-the details of which we shall discuss
later in this chapter.
Elements of a Good Job Description
A comprehensive job description must:
1. Describe the basic purpose of the job. (Why it is performed)
2. List the various duties in the order of importance. (Describe what the task is, how
it is performed and why it is done)
3. Begin each sentence with an action verb.
4. Use examples to add meaning.
5. Define jargon or initials.
6. Assume the reader knows nothing about the job.
7. Answer all the why, how and who questions that the sentences generate.
8. Provide an organization chart; include names, titles and line numbers. Ensure that
the chart answers the following questions:
 To whom does this position report?
 What other positions report to the same supervisor?
 What positions report to this position?
Writing a Good Job Description
The first part of the job description serves to identify the job described. It includes
an account number, department, supervisor's name and title and incumbent's name (if
applicable). All descriptions must be signed and dated by the incumbent, supervisor,
department head, HR head, and area or group head or CEO in the case of a small
company.
There is also a place to indicate whether the position is new or a reclassification of
an existing position. Addition- al pages may be attached if needed. A cover memorandum
explaining what has changed that resulted in the need for a new position or for the
reclassification of an existing position would be helpful in understanding the position.
1. Position Summary This section is a brief, specific statement of why the position
exists- what is the major end result. The reason for such a short, concise statement
at the outset is so the evaluator can immediately obtain an impression where the
position sits in the organization. The statement should clearly distinguish this job
from all other jobs. In particular, it should differentiate this job from the supervisor's
job, from jobs that report to it, and from other jobs at the same level. The summary
seldom exceeds three or four lines. For example, the position of an HR Director
might be summarized as follows:

“This position is accountable for assuring the attraction, development and retention
of a qualified work force by establishing and maintaining appropriate human
resource programs and services."

2. Principal Duties This section describes the results for which the position has
ongoing accountability. Accountabilities are statements of the important end
results which the job exists to achieve. Each accountability statement should relate
to a single end result which must be accomplished and which some measurement
of performance can be applied.

The principal duties begin with an action verb that describes the incumbent's role,
followed by a measurable or observable end result and the primary activity or way
the end result is accomplished. For example, a principal duty for an Employment
Supervisor might be:

＂Provide qualified candidates for job openings by screening applicants."

The action verb reflects the job's freedom to act in producing the end results
described. The end result is enduring in nature: the accountability for the result will
not change unless the design of the job is changed even though the specific
actions taken to achieve the result may vary considerably over time. The major
activities that complete the accountability statement need not be exhaustive but
enough to give an idea to a reader what is involved in achieving the end result.

The principal duties should be listed in the order of importance. They should
answer the questions: What the task is? How it is performed? and Why it is done?

3. Education and Experience Include the minimum level and type of formal
education required of an incumbent in order to perform the job duties. Keep in mind
that some positions can be satisfied with an equivalency of work experience. Cite
if the position requires by law a professional license such as a Pharmacist in a
position of a drug manufacturing company or drugstore or a CPA for an auditor
position.
 4. Internal and External Contacts
This section considers what contacts are within and outside of the company, how
often they occur and why? How important is the contact in relation to company
goals?
5. Confidential or sensitive data
Give examples of sensitive or confidential data (e.g. salary information, employee
performance issues, marketing strategies) which the incumbent of this position is
required to work with or has access into.
6. Organization Chart
An organization chart should be included. The chart answers the following:
 To whom does the position report to?
 What other positions report to the same supervisor?
 What positions report to this position? （For sample of a job description,
refer to Appendix D; for a more complex one, refer to Appendix E)
JOB SPECIFICATION
Derived from job analysis, job specification is a statement of employee
characteristics and qualifications required for satisfactory performance of defined duties
and tasks comprising a specific job or function. This refers mostly to the so- called “soft
skills” that a jobholder must have in order to successfully complete the tasks of the
position. This differs from the job description in that it focuses on the person performing
the job rather than on the tasks being performed. It specifies the knowledge, skills, abilities
and characteristics required to effectively perform the job.
JOB EVALUATION
Job Evaluation Physical is defined as the assessment of the relative Personality
worth of varied jobs on the basis of a consistent set of job and personal factors such as
qualifications and skills required. The objective is to determine which jobs should get more
pay than others. Each job is evaluated to determine the job content or weight in terms of
its contribution to the achievement of organizational goals. Based on this evaluation, the
salary range for each job is determined.
Job Evaluation is a tool used to evaluate the worth of each job in the organization
and in today's labor market. A successful job evaluation system can help to make
organization's pay system equitable, understandable, legally defensible, approachable,
and externally competitive.
There are three basic methods of job evaluation: ranking, classification, factor
comparison. A variation of the factor comparison is called factor-point system which can
be considered as a fourth method.
Ranking Method.
The simplest method of job evaluation, jobs are arranged from highest to lowest, in
order of their value or merit to the organization. Jobs can also be arranged according to
the relative difficulty in performing them. The jobs are examined as a whole rather than
on the basis of important factors in the job. The job at the top of the list has the highest
value and obviously the job at the bottom will have the lowest value.
Jobs are usually ranked in each department and then the department rankings are
combined to develop an organizational ranking. Following is an illustration of ranking of
jobs.
Array of Jobs according to the Ranking Method
Rank Monthly Salary
1 Accountant ₱25,000
2 Accounting clerk 19,000
3 Purchasing Assistant 17,000
4 Secretary 15,000
5 Clerk-typist 12,000
6 Utility man 10,000
The method is simple to understand and practice and it is best suited for a small
organization. It is difficult to develop in a large, complex organization. This method is also
highly subjective in nature and employees may disagree with the evaluation. A more
scientific way of job evaluation is called for.
Classification Method
A predetermined number of job groups or job classes are established and jobs are
assigned to these classes. This method places groups of jobs into job classes or job
grades. Separate classes may include office, clerical, managerial, among others.
Following is an example of such classification.
 Class 1 Executives: Further classified under this category may be the General
Manager, Asst. General Manager, Plant Manager, Department Supervisor, and the
like
 Class 2-Skilled workers: Under this category may come the Purchasing Assistant,
Cashier, Secretary, Warehouse clerk, clerk/typist, among others
 Class 3-Semi-skilled workers: Under this category may come the Steno-typists,
Machine operator, Switchboard operator, among others
 Class 4-Semi-skilled workers: This category may comprise of Filing clerk,
Messenger, Utility man, and the like
 The weaknesses of this method are:
1. Even when the requirements of different jobs differ, they may be combined into
single category, depending on the status a job carries;
2. It is difficult to write all-inclusive descriptions of a grade;
3. The method oversimplifies sharp differences between different jobs and different
grades; and
4. When individual job descriptions and grade descriptions do not match well, the
evaluators have the tendency to classify the job using their subjective judgments.
Factor Comparison Method
A more scientific and systematic method of job evaluation is the factor comparison
method. It may be a complex method, but it is consistent and appreciable. Each job is
ranked according to a series of factors. These factors include mental effort, physical effort,
skill needed, supervisory responsibility, working conditions and other relevant factors
(e.g., know-how, problem-solving abilities, and accountability). Pay will be assigned in
this method by comparing weights of the factors required for each job, i.e., the present
wages paid for key jobs may be divided among the factors weighed by the importance
(the most important factor, for example, mental effort, receives the highest weight). The
steps involved in this method may be briefly stated thus:
1. Select key jobs or benchmark positions (say 15 to 20 or more depending upon the
size of the company and the total number of jobs), representing wage/salary levels
across the organization. The selected jobs must represent as many departments
as possible.
2. Find the factors in terms of which jobs are evaluated (such as skill, mental effort,
responsibility, physical effort, working conditions).
3. Rank the selected jobs under each factor (by each and every member of the job
evaluation committee) independently.
4. Assign money value to each factor and determined the wage rates for each key
job.
5. The wage rate for a job is apportioned along the identified factors.
6. All other jobs are compared with the list of key jobs and wage rates are determined.
Advantages of the method:

 Analytical and objective.

 Reliable and valid as each job is compared with all other jobs in terms of key
factors.
 Money values are assigned in a fair way based on an agreed rank order fixed by
the job evaluation committee.
 Flexible since there is no upper limitation on the rating of a factor.
Disadvantages:

 Difficult to understand, explain and operate.

 Its use of the same criteria to assess all jobs is questionable as jobs differ across
and within organizations.
 Time consuming and costly.
Point Method
This is the most widely used method. Jobs are expressed in terms of key factors. Points
are assigned to each factor after prioritizing each factor in the order of importance. The
points are summed up to determine the wage rate for the job.
Jobs with similar point totals are placed in similar pay grades. The procedure may be
explained thus:
1 Select key jobs. Identify the factors common to all the identified jobs such as skill,
effort, responsibility, among others.
2 Divide each major factor into number of subfactors. Each subfactor is defined and
expressed clearly in the order of importance, preferably along a scale.
The most frequent factors employed in point systems are:
1. Skill (key factor): Education and training required, Breadth/depth of experience
required, Social skills required, Problem-solving skills, Degree of discretion/use of
judgment, Creative thinking
2. Responsibility/Accountability: Breadth of responsibility, Specialized responsibility,
Complexity of the work, Degree of Freedom to act, Number and Nature of
subordinate staff, Extent of accountability for equipment/ plant, Extent of
Accountability for product/materials
3. Effort: Mental demands of a job, Physical demands of a Job, Degree
of potential stress
Then, you assign point values (percentage weights and equivalent points to each key
factor and subfactor depending on their importance to a particular job. The result is a
job rating plan upon which you will rate jobs. Table 8 is a sample of a Job Rating Plan.
Advantages of the Method:
It forces raters to look into all key factors and sub-factors of a job; Point values are
assigned to all factors in a systematic way eliminating bias at every stage. It is reliable
because raters using similar criteria would get more or less similar answers. The
methodology contributes to a minimum of rating errors.
Disadvantages:
The point method is complex. Pre- paring a manual for various jobs, fixing values
for key factors and subfactors, establishing wage rates for different grades, and many
others, is a time-consuming process.
That is why most companies retain the services of outside consultants who will do the job
with the assistance of a trained internal Job Evaluation Committee who could claim
ownership and defend the results of the exercise.
The Hay Job Evaluation System
We could not put a closure to this topic without mentioning in passing the Hay Job
Evaluation Method. Developed by E.N. and Associates in the 1950s, it is the most
sophisticated method of evaluating jobs based on the point factor approach. It was
originally designed for executive positions and therefore is biased toward managerial and
executive levels. The system, however, is now applicable to all positions in the
organization including the blue-collar jobs.
Based on the Hay Guide Chart, there is a point score for each “Know- how,”
“Problem- Solving," and "Accountability" factor with horizontal and vertical degrees of
variation described in a precise and definitive manner. The system employs the use of
market survey of pay to construct a relationship between Hay Scores of similar jobs in
different companies.
The system is copyrighted and cannot be used without the permission of the Hay
and Associates. The author had the opportunity to learn and apply the system when he
was working in an American company authorized to use the system.
DEVELOPING A PAY STRUCTURE AND PAY PHILOSOPHY
Assuming that you have now done your job evaluation, the next step is to develop a
salary structure. The structure must be in accordance with the primary purpose of
evaluating jobs: ensure internal equity and maintain external competitiveness.
First, you have to decide how many job classifications structures you will have in
your company. Many companies have multiple structures that correspond to different job
families (e.g., one for semi-skilled, skilled, and clerical positions; another for
professional/technical positions and another one for supervisory and managerial
positions)
 Whether it is single or multiple structure, based on your job evaluation, you have to
decide how many jobs grades you will have. With the present trend of delayering
organizations and broad banding (which will be explained later), it is advisable to have
fewer job grades. This gives ample opportunity for high performing employees to receive
higher pay based on merit.
A pay structure involves the determination of pay levels for each job class and the
differentials within these classes. For example, if there are six pay grades/ classes, a
minimum midpoint and minimum amount is determined along with the range of each
class. Overlap is often designed into the system so the high range of one grade overlaps
the low range of the next grade.
Second, having decided on the number of job grades and whether it is single or
multiple salary structure, you have to compare how your pay structure compare with the
rest of the industry or community. An enterprise must decide if its policy will lead, meet,
or lag its compensation. This means that a company must develop a policy to pay their
employees above the market, at the market rates, or below the market. Some local
organizations like, the Ayala group of companies, have a reputation for paying more than
the going rate for the industry or community because they want to hire the best and the
brightest in the labor market. A market survey is the source of your data. You can conduct
your own survey or join salary survey conducted by leading organizations such as Watson
Wyatt Philippines, SGV and ECOP.
Third, you have to decide what will be your pay philosophy based on the market
rates. Some companies adopt third quartile policy, that is, their average pay must be
above 75 per cent of hat the market is giving. Some adopt above average policy, meaning,
their average pay per key or benchmark position must be at least above the average rate
the market.
A sample of single pay structure after considering the market survey and ay policy
line may be presented as follows in Table 9:(Note: this is presented in terms of annual
pay)

Note that in the above example, the range spread (the distance between the minimum
and the maximum) in higher jobs is larger or higher in recognition of the fact that
performance differences are likely to have more impact on the organization at higher job
levels.
BROAD-BANDING
Beginning in the early 80s, formal job evaluation methods has undergone critical
scrutiny. With the downsizing and delayering of organizations, jobs are becoming fewer
and promotions are far and between. A high performer becomes uneasy as the chance
of promotion and higher pay is getting slimmer.
Multiskilling is an emerging trend. Employees are no longer fixed in one particular
job. The hierarchical grading structure resulting from a job evaluation puts a rigid approach
to the job. As a con- sequence, an employee can now say with justification “My job has
been described and graded at this level. I am not going to do extra or beyond what I am
paid for my classified job." A reclassification to meet an employee's complaint can be
contentious and can sometimes lead to a "grade drift" which skews the salary structure
and cause further headaches to the company.
These criticisms led to the concept of broad banding. It comprises a fewer and wider
band than a traditional graded structure. With having six or less bands each with a span
of 70- 100% above the pay range minimum, the focus is on lateral movements and
continuous development rather than progressing upwards through a hierarchy of job
grades.
Broad-banding therefore, involves collapsing of several grades into a fewer broad
"bands." That's how it got its name- broad-band. Each band may have a minimum and
maximum pay but usually does not have a traditional mid- point. It may not be feasible to
see a traditional pay range of midpoint for control and analysis because the pay range is
so broad and encompasses a wide level of skills. Bands are established at major breaks
or differences in work skills/competency requirements. It provides more flexible approach
to compensation. The focus is on job responsibilities and the development of new
skills/competencies instead of the pay grade for the job.
The system has the following salutary effects as it:
1. Addresses severe recruitment and retention difficulties as it gives management
wider latitude in offering attractive entry pay or merit increases.
2. Moves employees to multi-function- al teams where the scope of broad-banding
will be more extensive and the structure more complex.
3. Links salary progressions to a competency-based structure where employees are
rewarded for the acquisition of new skills/competencies.
THE IMPORTANCE OF PARTICIPATION AND COMMUNICATION
Salary management has always been a delicate and emotive issue. You may have
the best job evaluation method used and fair and equitable pay structure but some
employees may still be unhappy about it. One way of minimizing if not, preventing
complaints is allowing employee participation in the job evaluation process.
 Selective employees representing the rank and file may serve in the task force
in tandem with management representatives charged in formulation of the Job Rating
Plan and the actual evaluation of jobs leading to the establishment of the Job
Classification Framework. The idea of giving “ownership” to the plan re- moves the
aura of mystery of the plan and the perception that it is purely a management decision.
While management has the loftiest motivation in pricing relative worth of jobs,
it also matters how such decisions are made and how they are communicated. It is
absolutely critical therefore that management must communicate to explain what Job
Evaluation is all about, why it is being done, and what would the ultimate result. The
idea is to avoid unfounded speculations and rising expectations.
Employees who participated in the task force can help and communicate the
rationale of the program and how it was done and finally implemented. Managers play
the most crucial role because of their day-to-day interaction with their employees. They
must be prepared to explain how the jobs were classified, why and how the pay
structure was designed. When a job needs to be reclassified because of substantial
changes in its job content, it is also the managers who take the cudgel for the
incumbents affected by that change.
SUMMARY
Pricing jobs in relation to its importance and impact to the company operations
is a complex task. It starts with a job analysis, data gathering through observation,
interviewing and other validation techniques, that will generate job description and job
specification. The ultimate result is the development of a job and pay structure
through job evaluation. The broad-band concept offers a new alternative in reward
management.
Developing a salary structure is necessary in order to maintain internal equity.
Moreover, since no company operates in a vacuum or isolation, the external
environment must be considered to ensure external competitiveness. This can only
be done by doing a survey of its own or joining a survey conducted by reputable
organizations.
The success of the whole process hinges on the active participation of the
employees and proper communication and implementation. Participation of
employees through their own representatives provides a sense of "ownership" of the
project. They can also help in the proper communication to the rest of the employees
for their acceptance of how the jobs were evaluated and assigned salary ranges.
Reward management can attract, retain and motivate good talent in your organization.