Methods of Job Evaluation: The Best Way to Match
Salaries
Presented to NPELRAApril 9, 2003
Bruce G. Lawson, CCPFox Lawson & Associates LLC
(602) 840-1070
Objectives
To Discuss:The history of job evaluationThe role of job evaluationSelecting a job evaluation toolAlternative job evaluation approaches
Whole Job RankingMarket PricingPoint FactorFactor ComparisonDecision Band
History of Job Evaluation
1865 - Karl Marx wrote in Das Kapital that the value of goods and services is based on the amount of labor that goes into them
1885 - Frederick Winslow Taylor stated that the content of labor in labor determines the price of labor
1935 - Edward Hay developed the Hay point factor system
1963 - The Equal Pay Act prohibited discrimination on the basis of sex…for equal work on jobs, the performance of which requires equal skill, effort, and responsibility and which are performed under similar working conditions. The EPA formalized non-market based pay plans
Why Job Evaluation
Focus is on internal equity rather than market parity or external competitiveness
There is a strong interest in comparable worth or pay equity
There is limited market data available
Alternative Pay Systems Job evaluation system that supports your
classification philosophy and strategies Mix of reward versus entitlement (base) pay Multiple base salary structure(s) Individual versus group incentives Performance measurement Alternative Reward Strategies
Broad Banding Skill Based Pay Individual Incentives Group Based Incentives
Job Evaluation
Not a science Not a solution to salary problems Not a substitute for managerial decision
making about individual salaries Not a cost cutting technique Not always consistent with the labor
market
Objectives
To systematically establish the relative value of jobs within an organization
Impose a structured approach to determining job value that is objective (to the extent possible) and documented
Provide a basis for pay determination
Distinctions
Job evaluation - Assesses the relative worth of jobs
Performance Appraisal - Assesses the performance of individual employees in the conduct of specific job duties
Position Allocation - Determines the appropriate classification for each position/employee
Non-Quantitative Approaches
Whole job ranking Classification Market Pricing
Quantitative Approaches
Attempt to establish relative worth Give the illusion of being more precise than non-
quantitative approaches Easier to defend to employees and managers Tool should be tailored to job classification
philosophy Point Factor Factor Comparison Scored Questionnaires Decision Band
Whole Job RankingNot a formal methodologyOften used by smaller organizationsNo fixed criteriaNot recognized as valid by the EEOC
Market PricingNot a formal job evaluation methodologyOften used by smaller organizationsOnly criteria is the labor marketEmployees and managers tend to support market
based systems If administered fairly, will take into consideration
both increases and decreases in market conditions. This is often not well received by employees and labor organizations.
Requires considerable market data. Typically, at least 50% of all jobs need to be priced to defend values for related jobs
Point Factor Plans
Focuses on compensable factors - The Federal Equal Pay Act references four factors:
Skill - experience, training, education and ability measured in terms of the job’s performance
Effort - physical or mental exertion needed for job performance
Responsibility - accountability Working Conditions - surroundings and
hazards encountered
Factors
• Skill • Sub-factors include– Knowledge
(education/training)– Experience needed– Credentials or licenses
required– Manual dexterity
required– Analytical ability
required– Interpersonal
communications
Factors
• Effort
• Responsibility
• Working Conditions
• Sub-factors include– Physical demands– Mental exertion
– Impact on the organization– Accountability/– decision making– Supervision
received/exercised– Internal/external contacts
– Hazardous/dangerous environment
– Adverse conditions/Travel
Point Factor PlansFactors and weights must be carefully
establishedSignificant risk of inherent bias by ignoring
stereotypical female qualities such as nurturing & caring, concern for others, cooperation, and cooperation
Supervision and management often benefit empire builders by awarding additional points for the number of people supervised, size of budget, etc. to the detriment of highly technical or skilled jobs
The Process Factors and Weights for each factor are established Degrees (yardsticks) that define the factor range and
its respective intervals, along with point values, are established. For example, Education might be divided into the following degrees: No formal education required Requires reading and writing at the 8th grade level Requires High School diploma or equivalent Requires AA degree or completion of an accredited
trade school (2 year program) Requires a Bachelor’s degree Requires a Master’s degree Requires a Ph.D. degree
Pros and ConsAdvantagesOnce factors and degrees are defined, plan
is stable over timePerceived as valid by usersHigh agreement with ratings if jobs are
carefully definedDocumented process
Pros and ConsDisadvantagesTime consuming and costly to establishTypically requires that pay grades be
established although each point can be given an economic value resulting in continual pressure to upgrade individual positions or jobs in order to increase pay
Subjective assessment needed to establish point range for salary grades
Typically relies on key jobs within the organization
Factor Comparison
A refinement of whole job ranking No detailed criteria Uses universal factors for defining jobs (e.g. skill,
effort, responsibility, working conditions) Each factor can be weighted Jobs are ranked within each factor Labor intensive - involves numerous judgments in
order to build ranking (# jobs X # jobs X # factors = # of individual decisions needed)
Example: 100 job titles X 100 job titles X 4 factors = 40,000 individual decisions that must be made to develop hierarchy
Advantages
Custom made job evaluation plan for the organization
Relative value is easily understood
Disadvantages
Can be difficult to set upNeeds to be re-established each time
a new job is added to the structure or an existing job changes since these actions will affect the overall rankings
DBM - Basic Logic
The value of a job should reflect the importance of the job to the organization
The importance of a job is directly related to the decision-making requirements of the job
Decision-making is common to all jobs
Decision-making is measurable
The Process
Six broad Decision Bands Looks at essential duties of the job Level of each duty is determined Highest banded duty determines Band of the job Within Bands, looks at supervisory relationships and
technical level of job (dual career track) to determine a Grade
Within each Grade, examines difficulty and complexity of the work to determine Sub-Grade (if needed). Allows for consideration of such secondary criteria as time pressures, consequence of error, minimum qualifications, need for care and precision, etc.
Advantages
Only job content is considered - either incumbents do certain work or they do not. Consequently, it is more difficult to manipulate the job ratings.
Factors unrelated to work are not considered in the evaluation (e.g. what employees bring to the job.) Those issues are handled separately as pay issues.
Working and labor market conditions are treated separately as pay premiums, if applicable.
Less complex than other methods, resulting in less cost to administer
Can be applied to either individual positions or broad job classes
Disadvantages
Non-traditional approachResults not as narrowly defined as
other methods which may cause employee concerns. Because groupings are broader, some employees and managers have difficulty understanding how other jobs can be equal to theirs.
Selecting JE Criteria
Acceptable to parties involved Valid as distinguishers among jobs Must be present in all jobs being evaluated Must be measurable Should be independent of each other so as
to not overweight any single factor Some plans with large numbers of factors
often result in substantial bias towards one occupational group or group of individuals resulting in inherent bias -most JE systems need to measure only 3 factors to be accurate
Selecting JE Criteria
Cost to install and maintain the systemEfficiency and effectivenessReliability
Comparison of Methods
Factor DB™M Point Plans
Education and Training
Yes Yes
Contacts with others Yes Yes
Impact of job Yes Yes
Job complexity Yes Yes
Working Conditions Yes Yes
Supervision exercised Yes Yes
ConclusionsBroad Band - DBM is most appropriateNarrow classes - Point factor or DBM are
most commonly usedMarket pricing - Better for classes that are
not to narrowly defined
Issues to ConsiderWhat do you do when market does not
match JE results? Is there really a problem?Confirm the job description?Raise or lower the JE rating?Market premiums?
Conclusions Select job evaluation method that ties to your
classification philosophy Determine whether the JE method is to be used
within only a single job family or bargaining unit or across the whole organization
Involve the stakeholders so they understand why you are using a particular method
Provide a basic understanding of the tool to those affected
Review ratings with stakeholders to identify issues Validate job descriptions is questions about
ratings result since all methods are tied to the job descriptions