International Position Evaluation

(IPE) Mercer Methodology

exploratory study by Erdo for

IPE Methodology Overview
Factors weighting
705 Factor Weight
Impact 57%
Communication 9%
Innovation 10%
260
Knowledge 21%
Risk 3%

130
115
35

5 10 10 10 0
Communication Innovation Knowledge Risk
Impact

Organisation
MERCER
Complexity Teams Environment
Contribution Breadth
Frame

10
IPE Methodology Overview
Position Class
Total Point Range Position Class Total Point Range Position Class Total Point Range Position Class
26 - 50 40 426 - 450 56 826 - 850 72
51 - 75 41 451 - 475 57 851 - 875 73
76 - 100 42 476 - 500 58 876 - 900 74
101 - 125 43 501 - 525 59 901 - 925 75
126 - 150 44 526 - 550 60 926 - 950 76
151 - 175 45 551 - 575 61 951 - 975 77
176 - 200 46 576 - 600 62 976 - 1000 78
201 - 225 47 601 - 625 63 1001 - 1025 79
226 - 250 48 626 - 650 64 1026 - 1050 80
251 - 275 49 651 - 675 65 1051 - 1075 81
276 - 300 50 676 - 700 66 1076 - 1100 82
301 - 325 51 701 - 725 67 1101 - 1125 83
326 - 350 52 726 - 750 68 1126 - 1150 84
351 - 375 53 751 - 775 69 1151 - 1175 85
375 - 400 54 776 - 800 70 1176 - 1200 86
401 - 425 55 801 - 825 71 1201 - 1225 87
General Staff
MERCER
Professional
Management
Top Management
11
 Impact Factor

MERCER
Impact Factor
Overview

 To determine the degree for this factor:

– Determine the size of the organisation by:

- Determining the nature of the organisation and its number of employees

- Calculating adjusted revenue

– Determine the nature of impact by:

- Identifying the area of the organisation impacted by the position holder

- Determining the type of impact the position holder has on the organisation

– Determine the contribution level by:

Impact
- Considering the level of autonomy of a position holder

MERCER - Determining a position holder’s relative contribution to

business strategy and vision Organisation Contribution

13
 Impact Factor
Organisation
Impact
Contribution

MERCER

14
Impact Factor
Organisation Dimension

 Steps to determining an organisation’s size:

Step 1: Identify organisations.

Step 2: Determine the nature of an organisation

and calculate the multiplier.

Step 3: Calculate the adjusted revenue.

Step 4: Determine the degree using adjusted

revenue and number of employees.
MERCER

Step 5: Size the organisation.

26
Sizing an Organisation
Step 1: Identify Organisations

Subdivide the company into smaller organisations that

meet the IPE organisation criteria. An organisation must
have:
 Its own economy (Sales turnover, Costs, Assets)
 At least one primary function (Production,
Marketing & Sales, R&D)
 At least two supporting functions (Economy and
Personnel)

MERCER

27
Sizing an Organisation
Step 2: Determine Nature of Organisation and Calculate Multiplier
in eIPE System
From Economic volume (Net Sales Turnover, Assets) To final
origin Number of employees (Capital or People intensive) consumer

Tangible products - Products organisation

Product Development Production Sales and Service

MERCER
Sizing an Organisation
Step 2: Determine Nature of Organisation and Calculate Multiplier
in eIPE System
From Economic volume (Net Sales Turnover, Assets) To final
origin Number of employees (Capital or People intensive) consumer

Intangible products - Services organisation

Creation Application Sales and Service

MERCER
 Sizing an Organisation
What major steps in the products organization generates added-value
Primary research. Typically includes basic research and development activities where the
Basic Research eventual product and/or market potential is unknown. Generally characterized by a
1 4.0
& Development relatively modest rate of success (e.g., 20% of research eventually results in new products).
Product Development

Product development. Includes targeted R&D activities to develop a specific new product
or enhancement of an existing product where the eventual market potential is more
2
Applied Research 2.0
& Development defined.
Typically includes development of preliminary product specifications and pre-
production prototypes. Go-to-market decisions are generally made at this stage of
development.
1.5
Production design. Final engineering of production-ready specifications and
3 Engineering manufacturing processes.

Supply. Specific function responsible for obtaining manufacturing inputs, including raw
materials and intermediate manufactured products. Generally responsible for all contract 2.0
Procurement / negotiation, vendor management and spot market transactions. Supply management.
4
Inbound Logistic Management of inbound materials, including delivery scheduling, transportation, warehousing
and inventory management.
Production

5 Production
6 Application/Assembly
7 Marketing
Sales and Service
Basic manufacturing. Production of intermediate or final goods from raw materials. May 2.0
include intermediate manufactured products as part of the production process. Characterised
by the conversion of materials to a new product with different characteristics (e.g., molding of
plastic into auto parts).
Assembly of previously manufactured goods for market. Includes final assembly and packaging 2.5
of two or more manufactured products (e.g., assembly of auto parts into a complete
automobile). May include limited intermediate finishing of inputs.
1.0
Independent of sales. Function responsible for internal market analysis and planning
and external communications, such as public relations, advertising and marketing
1.5

collateral.
MERCER Excluding marketing. Includes management of direct and indirect sales forces. Does
8 Sales
not include oversight of third-party distributors. 1.5
Outbound logistics. Includes warehousing and outbound transportation of goods to third-
9 Distribution
party distributors and/or final customers. 2.0
After-sale service. Includes customer call centres and repair, service and support. Service
10 Service
may be offered on warranty, contract or fee-for-service basis. 19
 Sizing an Organisation
What major steps in the services organization generates added-value
Intellectual capital and/or technology development. Typically includes basic research
and development activities where the eventual service and/or market potential for that
Development
Product

1 Idea & Concept Origination 3.0

service is unknown.

Service definition. Includes the development of the service that will be offered and the
2 Generate Application specifics around that service, such as tools and processes for service delivery. May 2.0
also include the development of new markets for existing service lines.
s
Operation

Delivery of solutions-based services. Generally includes idea-based services such

3 Apply Solutions 2.5
as consulting and creative development where the customer is paying for ideas.

Independent of sales. Function responsible for internal market analysis and planning
4 Marketing 1.5
and external communications, such as public relations, advertising and marketing
collateral.

5 Sales Excluding marketing. Includes management of direct and indirect sales forces. 3.0
Sales and Service

Physical delivery of service. Distribution of services to customers through personal

contact. Includes remote contact via telephone, internet, etc. May include physical
6 Distribution delivery of idea-based or non-idea based services. "Apply Solutions" and 1.5
"Distribution" always occur concurrently (but "Distribution" may occur without "Apply
Solutions").

7 Customer Service Support. Includes customer call centers and post-service support. 1.5
MERCER

20
Sizing an Organisation
Step 2: Value chain weighting in eIPE System

From Economic volume (Net Sales Turnover, Assets) To final

origin Number of employees (Capital or People intensive) consumer

Tangible products - Products organisation

Product Development Production Sales and Service

4 2 1.5 2 2 2.5 1 1.5 1.5 2

Sum = 20

MERCER
Sizing an Organisation
Step 3: Calculate the adjusted revenue

Basic Procure Apply Distri-

Applied R&D Engineer Produce Market Sales Service
R&D Logistics Assemble bution

4.0 2.0 1.5 2.0 2.0 2.5 1.0 1.5 1.5 2.0

¨ ¨ ¨ ¨ ¨ ¨    

Example: Sales & Technical Service Organisation with 150 head count
Sales Volume: US$ 40 million
Multiplier: 6
Adjusted Revenue: US$ 240 million Economic
Size
Reference to the Economic Size Table, Table

=>
MERCER
Degree level for Size : 4

22
Sizing an Organisation
Step 4: Determine degrees using adjusted revenue and no. of
employees with the organisation size table

Step 4b –
Determine
Step 4a – degree
Determine for # of
degree for employees
economic
size

MERCER

23
Sizing an Organisation
Calculated Degree Level

Example: Sales & Technical Service Organisation (150 employees)

Economic Size Degree Level: 4

No. of Employees Degree Level: 5
Calculated Average: 4.5

Degree Level for Size of Organization: 4

MERCER

24
 Impact Factor
Organisation
Impact
Contribution

MERCER
Impact factor
Nature of Impact and Contribution Matrix in eIPE system - Example

Level of Contribution
1 2 3 4 5
NATURE OF
Limited Some Direct Significant Major
IMPACT

1 Delivery Marked contribution to defining the

direction for new products, processes,
standards or operational plans based upon
business strategy, with a significant mid-
term impact on business unit overall
2 Operational
results.

3 Tactical

4 Strategic

MERCER
5 Visionary

26
Impact factor: Impact dimension
Impact levels

Nature of
Area of Impact Type of Impact Impact

Within specific
Job area standards and 1. Delivery
guidelines

Within operational
Job Area(s) targets or service 2. Operational
standard
New products/
Business processes based on 3. Tactical
Unit/Function organisation strategy
Longer-term plans
Organisation level based on 4. Strategic
organisation vision

Vision, mission &

MERCER
Corporate level 5. Visionary
values

27
Impact dimension
Cascade from Group to Division and down to Business Unit level

Group Level

Visionary

Division
Level
Strategic

Business
Unit
MERCER Tactical

28
 Impact Factor
Organisation
Impact
Contribution

MERCER
 Impact factor: Contribution dimension
The spectrum of contribution levels

Level of Contribution
Limited Some Direct Significant Major

Hard to Easily discernible Directly and Quite marked Predominant

identify/discern or measurable clearly influences contribution with authority in
contribution to contribution that the course of authority of a determining the
achievement of usually leads action that frontline or primary achievement of key
results indirectly to determines the nature results
achievement of achievement of
results results

Propose Decide
Contribution must be assessed in the context of the impact level determined
Delivery Consider the level of autonomy within job area (e.g., Accounts Payable)
Operational Consider the level of autonomy within job or operational area (e.g., Accounting)
Tactical Consider the relative contribution to short- and mid-term functional or operational plans (e.g., Finance)
Strategic Consider the relative contribution to long-term business strategy
MERCER

Visionary Consider the relative contribution to establishing an organisation’s vision

30
Impact degree 5: Visionary
Contribution to organisation's vision

Impact degree 5 - Visionary Contribution

Limited So
ome Direct Significant Major

Head of Head of Head of Head of Major Chairman & CEO

Dependent Subsidiary Dependent Global Business
Subsidiary Business Unit
CEO

Subsidiaries / Free
Global Line of Business
Operational Companies Standing
Organisation
s

MERCER

31
Impact degree 4: Strategic
Contribution to organisation’s business strategy
Level of Contribution

Limited Some Direct Significant Major

Hard to Easily Directly and Quite marked Predominant
identify/discern discernible or clearly contribution with authority in
contribution to measurable influences the authority of a determining the
achievement of contribution that course of action frontline or achievement of
results usually leads that determines primary nature key results
indirectly to the
achievement of achievement of
results results

Overall Business Results

< 10%
10 - 15%
15 - 20% 20 - 30% > 30%
MERCER

When evaluating Impact degree 3, “Tactical”, and 4, “Strategic”, establish the direct accountability for
qualitative and quantitative contribution to the organization’s overall result (100%).
32
 Communication Factor

MERCER
Communication factor
Overview

 To determine the degree for this factor:

– Determine the nature of communication by:

- Defining the most difficult and challenging communication that the job holder encounters

- Determining how frequently the most difficult and challenging communication occurs

– Determine the frame of the communication by:

- Determining the communication audience

- Determining the audience context Communication

Frame

MERCER 46
 Communication Factor
Communication
Frame

MERCER
Communication factor: Communication dimension
Communication levels

Nature of Desired Level of

Communication Outcome Communication

Statements, Understanding of
1. Convey
suggestions information

Reach agreement Comprehension of 2. Adapt and

through flexibility facts/policies Exchange

Acceptance of a
Affect change
concept, practice or 3. Influence
without commands
approach
Acceptance through
Strategic shorter- discussion and 4. Negotiate
term communication compromise

Important long-term
MERCER
Acceptance of 5. Negotiate Long
communication strategic agreement Term

48
Communication factor: Communication dimension
Frequency of communication

Level of
Frequency
Communication

1. Frequent
1. Convey
1.5 Continuous
Continuous
1.5 Occasional Daily
2. Adapt and Frequent
2. Frequent Regular but
Exchange
2.5 Continuous Occasional not daily
Few times a
2.5 Occasional month
3. Influence 3. Frequent
3.5 Continuous
3.5 Occasional
4. Negotiate 4. Frequent
4.5 Continuous

5. Negotiate Long
MERCER 4.5 Occasional
Term 5. Frequent

49
 Communication Factor
Communication
Frame

MERCER
Communication factor: Frame dimension
Internal vs. external audience

President and Chief

Executive Officer

Chief Human Chief Financial

Resources Officer Officer

Corporate Chief Information

Secretary Officer

Regional Regional Regional Regional

Director Asia / Director Director Latin Director North
Pacific Europe America America
Managing Managing Managing Managing Managing
Director Director Director Director Great Director
Germany France Italy Britain Scandinavia
Director Director Finance Director Director Director Logistics
Manufacturin Sales & Human
g Marketing Resources

Internal

External
MERCER 51
Communication factor: Frame dimension
Nature of interests

Shared Divergent
 Common goals  Conflicting objectives
 Aligned interests  Contradicting interests
 Mutual desire  Differing points of view
 Willingly compromise  Reluctantly compromise
 Discuss  Debate
 Win-Win  Risk of Win-Lose

MERCER 52
Communication factor: Frame dimension
Organisational frame

Frame

1 2 3 4
Intern Extern Internal External
al al Diverge Diverge
Share Shared nt nt
d

Interests Interests
Interests Interests

Interests Interests

Interests Interests

MERCER 53
 Innovation Factor

MERCER
Innovation factor
Overview

 Innovation relates to the requirements of the position to identify and make improvements to
procedures, services, or products.

 Innovation also relates to the requirements to develop new ideas, methods, techniques,
services and products.

 To determine the appropriate degree for this factor:

– Identify the level of innovation required of the position.

– Identify the level of complexity of the innovation.

Innovation

Complexity

MERCER 56
 Innovation Factor
Innovation
Complexity

MERCER
Innovation factor: Innovation dimension
Overview

 Innovation falls into one of three broad categories:

Constrained by • Follow
existing
policies • Check

Focused on • Modify
improvements • Improve

Create new • Create

processes and
MERCER
products • Breakthrough

58
Which Degree of Innovation?

INNOVATION

Follow Limited changes expected from the position holder, eg. Accounts Clerk.

Check Make minor changes with help of existing procedures, processes, eg. HR Officer,
Accountant responsible for reconciliation, Quality control responsible for checking
products for defects on assembly line.

Modify Resolve issues / problems by modifying / enhancing existing working method, eg.
Accounting Manager responsible for changing accounting procedures in order to
reduce errors.
Change/prevent issues/ problems by significantly improve entire process systems
Improve or products eg. General Manager responsible for changing the organization to
reflect new environment conditions and corporate goals.

Create / Create new methods, techniques or products, eg. Position devising new financial
Conceptualize strategies to gain access to untapped sources of fund.

Scientific/Technical Develop new and unprecedented scientific or technical ideas, eg. High level
Breakthrough
MERCER research in R&D.

59
 Innovation Factor
Innovation
Complexity

MERCER
Innovation factor: Complexity dimension
Levels of complexity

Complexity
Defined Difficult Complex Multi-dimensional
In either In either In any two of three In all three
Operational, Operational, dimensions i.e., dimensions -
Financial or Human Financial or Human Operational, Operational,
area - Easily area - Not easily Financial and Financial and
understood understood Human area Human
Involved directly in all
three dimensions

MERCER 62
 Knowledge Factor

MERCER
Knowledge factor
Overview

 The degree for this factor depends upon:

– Depth of knowledge required to accomplish objectives
– The way knowledge is applied individually and within teams
– The breadth in which the knowledge is to be applied.

Knowledge

Teams Breadth

MERCER 65
 Knowledge Factor
Knowledge
Teams
Breadth

MERCER
Knowledge factor: Knowledge dimension
Levels of knowledge

8 In-depth management knowledge in most functions

across several businesses of the corporation

7 Industry expert in In-depth management knowledge across several

the profession line and support functions or businesses

6 organisation expert in the Broad management knowledge across

profession several functional areas or businesses
Mastery of specific professional Broad knowledge of several,
5 discipline at expert level different areas across functions

Advanced knowledge of specific

4 discipline within one’s own job area

3 Broader theoretical or advanced

technical/operational know-how
2 Specialised commercial,
technical or operational know-how
1MERCER Fundamental know-how
Specialist within narrow boundaries Generalist

67
Which degree of Knowledge ?

KNOWLEDGE Education + Learning Experience

Limited Mandatory schooling No previous experience

Job (e.g. Data Entry Operator)

Knowledge
Higher Secondary Up to 6 months experience
Basic
or Vocational education (e.g. Accounts Clerk, Technician)
Job Knowledge

Broad Job Knowledge Specialized School 6 months up to 2 years experience

(e.g. Project Coordinator, Process Engineer )

University Degree 2 years up to 5 years experience

Expertise
(e.g. Senior Accountant )

University Degree 5 years up to 8 years experience

Professi
onal (e.g. Finance Head, Head of Sales)
Standard
University Degree 8 years up to 12 years experience
Organizational
Generalist / (e.g. Corporate Finance Head, Corporate HR
Head)
Functional Specialist
University Degree 12 years up to 16 years experience
Broad Practical
Experience / Functional (e.g. Appointed Actuary, Head of Business Unit,
Head of large-size organization within a
Pre-eminence corporation)
MERCER
University Degree More than 16 years experience
Broad and
Deep Practical (e.g. Head of a large complex corporation or unit
with complex functions )
Experience
68
 Knowledge Factor
Knowledge
Teams
Breadth

MERCER
Knowledge factor: Teams dimension
Team positions

Team positions

Team member Team leader Teams manager

and and

MERCER

70
Team (Degree)
Typical Examples

• Team 1: Team Member

The position holder is an individual contributor and is directly responsible for performing activities or
discharging responsibilities
• Team 1.5:
Use team 1.5, if the position holder coordinates project activities or had functional management (dotted line
management)
• Team 2: Team Leader
The position holder leads a team that is responsible for delivering outputs & results. For a group to be
designated as a team, it should include at least 3 members (excluding assistant or secretary)
To be considered managing the team members, the team leader should lead, schedule, allocate & monitor
work (including performance appraisal)
• Team 2.5:
The position holder is responsible for a team with its own leader and has another team reporting directly
• Team 3: Team Manager
A Team Manager direct multiple teams, each of which has a team leader
MERCER

A Team Manager determines team structure and roles of members

71
 Knowledge Factor
Knowledge
Teams
Breadth

MERCER
Knowledge factor: Breadth dimension
Breadth degrees
Domestic

Regional

Global Regional

Africa

MERCER

74
Knowledge factor: Breadth dimension
Location examples
Global
Multipl
Breadth Domestic Sub-Region Regional All major
e
time
Region
zones
s
Degree 1 1.5 2 2.5 3
Application
Locations within a
of
country or
knowledge Multiple countries Minimum two All regions of
neighbouring Continental region
with diverse Continental the world
countries with
Manage cultures regions
similar culture
and/or apply
results
locally

ASEAN, BENELUX, Europe, Asia,

Americas and
Territory USA, China Nordics, Oceania, EMEA
EMEA and
Central Africa, Latin
Asia/Pacific
America America

MERCER

75
 Position Class

MERCER
Position class
Sample role: Regional sales manager
Degree Points
Size 12
Impact Impact 3 179
Contribution 2
Communication 3.5
Communication 88
Frame 4
Innovation 3
Innovation 45
Complexity 2
Knowledge 4
Knowledge Teams 2 130
Breadth 1.5
Total Points 442
Position Class ?

MERCER

77
Position class
Sample role: Regional sales manager (continued)

MERCER

78
Position class
Sample role: Regional sales manager
Degree Points
Size 12
Impact Impact 3 179
Contribution 2
Communication 3.5
Communication 88
Frame 4
Innovation 3
Innovation 45
Complexity 2
Knowledge 4
Knowledge Teams 2 130
Breadth 1.5
Total Points 442
Position Class 56
MERCER

79
#200++
voters
 Comparative Study of Point Factor Method in Job Evaluation
Global Grading
International Position Evaluation System (GGS) Factor Evaluation JobLink AON Contoh di Juknis Permenaker No.1
Hay Job Evaluation (HJE) STRATA PWC World at Work
(IPE) Mercer Willis Tower System (FES) Hewitt Thn 2017
Watson (WTW)
Factor Sub-Factor Factor Dimension Factor Factor Sub-Factor Factor Factor Factor Faktor
Technical Functional Knowledge & Technical Preparation and Knowledge &
Know How Impact Organization Knowledge Keahlian
Knowledge Knowledge Skills Knowledge Training Application

Managerial Business Knowledge of Work Experience Problem Solving

Impact Supervision
Knowledge Expertise The Business Required & Innovation
Management of
Human Relation Analytical
Contribution Leadership Relationship & Guidelines Interaction Usaha
Skills Capability
staff
Independent
Freedom to Scope of
Problem Solving Communication Communication Problem Solving Problem Solving Complexity Judgement and Impact
Think Thinking
Consequences
Thinking Degree of Contact with
Frame Nature of Impact Scope & Effect Accountability Tanggung Jawab
Challenge Difficulty Others
Influencing &
Discretion to Personal Mental/Visual/P
Accountability Freedom to Act Innovation Innovation Area of Impact Taking
make decision Contract hysical Strain
Responsibility
Physical
Interpersonal Amount of Adverse Working
Nature of Impact Complexity Demands & Work Lingkungan Kerja
Skills Influence Condition
Environment
Influence on
Magnitude Knowledge Knowledge Achievement of
Objective
Working
Physical Effort Team
Conditions

Physical
Breadth
Environment

Sensory
Risk Risk
Attention

Mental Stress Environment

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