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Milkovich/Newman: Compensation, Ninth Edition

Chapter 5
Evaluating Work:
Job Evaluation

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

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
 Note: focus is the job, not the person doing a job
5-2

Exhibit 5.1: Many Ways to Create Internal Structure 5-3 .

Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation 5-4 .

3: Determining an Internally Aligned Job Structure 5-5 .Exhibit 5.

and External Market Links (cont. Value.Defining Job Evaluation: Content.)  “How-To”: Major decisions – Establish the purpose  Supports organization strategy  Supports work flow  Is fair to employees  Motivates behavior toward organization objectives 5-6 .

5 5-7 .4 – Choose among methods  Refer to Exhibit 5.) – Single versus multiple plans  Characteristics of a benchmark job: – Contents are well-known and relatively stable over time – Job not unique to one employer – A reasonable number of employees are involved in the job  Refer to Exhibit 5.Defining Job Evaluation: Content.)  “How-To”: Major decisions (cont. Value. and External Market Links (cont.

4: Benchmark Jobs 5-8 .Exhibit 5.

5: Comparison of Job Evaluation Methods 5-9 .Exhibit 5.

6 5-10 . the least expensive method – Can be misleading – Two approaches  Alternation ranking  Paired comparison method  See Exhibit 5. Ranking  Ordersjob descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success – Simple. and easy to understand and explain – Initially. fast.

7. 5.8 (Federal GS) 5-11 . Classification  Usesclass 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  See Exhibit 5.

S.  Differ from other methods by making explicit the criteria for evaluating jobs – compensable factors 5-12 . 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.

train users. Designing a Point Plan: Six Steps  Conduct job analysis (note Occupational Information Network)  Determine compensable factors  Scale the factors (define factor degrees)  Weight the factors according to importance (and then assign points to degrees within factors or subfactors)  Communicate the plan. prepare manual  Apply to nonbenchmark jobs (note issue of interrater reliability) 5-13 .

Generic Compensable Factors Skill Effort Working Responsibility conditions 5-14 .

Skill  Technical know-how  Specialized knowledge  Organizational awareness  Educational levels  Specialized training  Years of experience required  Interpersonal skills  Degree of supervisory skills 5-15 . Generic Factor .

Generic Factor .Effort  Diversity of tasks  Complexity of tasks  Creativity of thinking  Analytical problem solving  Physical application of skills  Degree of assistance available 5-16 .

Responsibility  Decision-making authority  Scope of organization under control  Scope of organization impacted  Degree of integration of work with others  Impact of failure or risk of job  Ability to perform tasks without supervision 5-17 . Generic Factor .

exposure. or dirtiness in doing job 5-18 .Generic Factor – Working Conditions  Potential hazards inherent in job  Degree of danger which can be exposed to others  Impact of specialized motor or concentration skills  Degree of discomfort.

Exhibit 5.9: Compensable Factor Definition: Decision Making 5-19 .

13: Factor Scaling -.NMTA  Issue – Whether to make each degree equidistant from adjacent degrees (interval scaling) 5-20 . Step 3: Scale the Factors  Construct scales reflecting different degrees within each factor – Most factor scales consist of four to eight degrees – See Exhibit 5.

Exhibit 5.13: Factor Scaling – National Metal Trades Association 5-21 .

Step 4: Weight the Factors According to Importance – Different weights reflect differences in importance attached to each factor by the employer 5-22 .

14: Job Evaluation Form Note that the only reason this form works as it does is that each factor has same number of degrees!!! 5-23 . Exhibit 5.

Education 50% 100 200 300 400 500 2. Physical 12% 24 48 72 96 120 effort 4. Working 8% 25 51 80 conditions 5-24 . Respons. Overview of the Point System Degree of Factor Job Factor Weight 1 2 3 4 5 1. 30% 75 150 225 300 ibility 3.

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  Includes appeals process for employees 5-25 .

Step 6: Apply to Nonbenchmark Jobs  Final step involves applying plan to remaining jobs – Benchmark jobs were used to develop compensable factors and weights  Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed 5-26 .

a hierarchy of work – Ordered list of jobs based on value to organization  Relative amount of difference between jobs  Note that job hierarchy resulting from job evaluation process that mirrors pay hierarchy of key jobs in external labor market may in fact be problematic – may be perpetuating historical discrimination 5-27 . The Final Result: Structure  The final result of the job analysis – job description – job evaluation process is a structure.

Skill.Exhibit 5.15: Resulting Internal Structures – Job. and Competency Based 5-28 .

making enforcement of fairness difficult 5-29 . 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 – Avoid bureaucracy and increase freedom to manage  Reduces control and guidelines.