Title

Author(s)

Role of job evaluation in salary administration: case study of a

large company in Hong Kong

Tsui, Lap-fung.;

Citation

Issued Date

URL

Rights

1989

http://hdl.handle.net/10722/38126

The author retains all proprietary rights, (such as patent rights)

and the right to use in future works.

ROLE OF JOB EVALUATION IN SALARY

AIMINISTRATION

- CASE SWDY OF A

LARGE COMPANY IN HONG KONG

A dissertation submitted
fulfilment of
the

degree

of

the

in partial

requirements

Master

in

for

Business

Administration within the Faculty of

Social Sciences of the University of
Hong Kong

TSUI LAP FUNG

MAY 1989

r:

Acknowledgements

I
!~

I would like

to express

my thanks

to my supervisor

Mr. Gilbert

Wong
~

who gave me advice

wish to

without

of the dissertation.

thank Mrs Winnie Wong who helped

presentable

Finally,

in the preparation

one out from my illegible

I like

to dedicate

her thoughtfulness

this

me to

make the

Also,

report

handwriting.

paper

and support

to my beloved

wife Deborah,

I could not have accomplished

this MBAProgram.

-------------------------------------

,/

"

Contents

Page
Olapter 1

Introduction

1-2

Chapter 2

Salary Administration
and the role of job evaluation

3-12

Chapter 3

Practical issues
in salary administration

13-31

Chapter 4

The case study : background of the

company and reasons for conducting
job evaluation

32-36

Chapter 5

The case study

process

37-39

Chapter 6

The case study : designing grading

and salary structure

40-45

Chapter 7

The case study : setting up

performance pay system

46-51

Chapter 8

The case study: communication

consultation process

Chapter 9

The case study : operating the

salary administration system

57-61

Chapter 10

The case study : review of results

and area for improvement

62-69

Chapter 11

Conclusion

70-71

Appendices
Bibliography

the job evaluation

and

52-56

Table of Appendices

Appendix 1

Hay Evaluation Guide Chart

Appendix 2

Organization structUre of the company

Appendix 3

Time Table for the Job Evaluation

and Salary Administration project

Appendix 4

Questionnaire to support job

descriptions

Appendix 5

Sample Hay Job Description

Appendix 6

Hay Job Evaluation Method

Appendix 7

New grading and salary structure

Appendix 8

Salary position of the Company compared

with market

& Practice

Cllapter
1

INTRODUCfION

The aim of this dissertation

is to explore the extent to' which

job evaluation could be used as a means for the establishment of

effective salary

administration

policies

and

procedures.

This

is

done _by examining the effects and results of the implementation and
operations of a-Job Evaluation System in a large utility company in Hong
Kong.

The company had employed Hay Associates commencing Jan 1984 to conduct
job evaluation

for its more than 1000 executive

staff and the new

salary administration system became operational effective Jan 1986.

Today,

Hay

has

actually

dominated

the

market

of

Job

Evaluation

consultancy work in Hong Kong and many of the large companies use Hay
method to evaluate their executive jobs, just to name a few, hong Kong
Bank,

Jardine,

Swire,

China

Light,

Hong

Kong

Telephone,

Cable

&

Wireless HK, Royal Hong Kong Jockey Club, and even the Government.
With more and more companies adopting their system, Hay's remuneration
database expands significantly and more companies are then tempted to
use their

service

in order to obtain more

information on market rate.

Other consultancy

reliable

and extensive

companies

and TFPC in this regard lose their competitive edge.

like Wyatt

,;;;-.

I am a Chartered Engineer and worked in the utility company for five

years before being appointed to carry out the job evaluation
salary

administration

project

in

1984.

I worked

at

the

and

Salary

Administration group until July 1988 when I was promoted to Management

Development Division~
Salary

Administration

However, I can never forget how the 4 years in

Group

had

benefited

me

in

practising

management and administrative skills in handling such a large project,

becoming exposed to and competent with Hay job evaluation and various
salary

administration

designing

techniques

and developing

and

procedures

computerised

performance

I gained much job satisfaction in successfully

as

well

payment

as

in

systems.

launching the whole

project.

In the later chapters of this paper, the exercise that was conducted

in the company Ls described as a modelling of the whole process.

.As

compensation and benefits has become one of the most essential Human
Resource areas and the Hay process has been so popular nowadays, it is
hoped that these chapters can serve as reference in understanding the
practical

issues

involved,

rationale

adopted

and

difficulties

encountered in the process.

In the final chapter,

administration

system

the effectiveness
will

also

be

of the established

assessed

to

salary

see whether

its

objectives are achieved as well as to examine the various impacts to

the organisation.

Before moving on to the case, let us first examine

framework as well as some practical

issues on job evaluation

salary administration in Chapter 2 and 3 respectively.

- 2 -

a theoretical
and

,;;;-.

Olapter 2

Salary administration and the role of job evaluation

2.1

Salary Administration Process

Armstrongl
design,

viewed

development

salary
and

administration
maintenance

as concerned

of

salary

with

systems

the

'which

consist of the policies, techniques and procedures used for ._

fixing salary levels

designing and maintaining salary structures
progressing individual salaries
exercising

control

over

gradings,

individual

salaries

and

general salary reviews

planning and administering total benefit packages for staff

..;.;-.

- 3 _

The

relationships

between

the

various

components

of

salary

administration is shown in Exhibit 2.1 :-

Policy

Structure and

Develo ment

techni ues
- job

- salary
levels

Pa ents
- salary

analysis

- salary

grades

- job

progression
- total
remuneration
- communicatio

- salary

- salary

- grading

levels

jobs
- fixing

- employee

surveys

1m lementatio

budgets

- remuneration

evaluation
- salary

Procedures

benefits

costs
- Internal
structure
- External

salaries

- consultatio

trends

- salary

and

reviews

ne otiation

continuous assessment

Exhibit 2.1 The process of salary administration

The process consists of a logical flow from the development

of pay

policies to the design and application of the techniques which are the
basis

for

the design

of

salary

Salary administrationprocedures
the

structure

and

to

structures

and

benefit

packages.

are then usea to monitor and maintain

implement

policy.

Continuous

assessment

of

internal and external salary relationships

provides feedback for the

updating

in

and

adjustment

of

the

system

circumstances.

- 4
-

response

to

changing

2.2

Salary administration objectives

2.2.1

Organizational Objectives

The overall objective of salary administration

procedures

which

allows

companies

to

is to develop

attract,

retain

and

motivate staff of the required calibre and to control payroll

costs~

A company should have a planned salary policy which

- serves the overall objectives and needs of the organisation

is tailored to the current organization structure and also
allows for future change and development
ensures that the right quantity and quality of staff join
the company and are encouraged to remain there
achieves

equity

acceptable

in pay

differentials

for

similar

between

jobs

jobs

and

agreed

provides
to

be

of

different relative value

- rewards staff not only in relation to changes in the cost
of living but as an incentive to improved performance
- maintains salary costs at a level which balances acceptable
rewards with reasonable budget allocations and
- contains sufficient flexibility to adapt to the demands of
special

circumstances,

such as

changes

in the

market position of particular types of employees.

- 5 -

relative

2.2.2

Individual aims

The individual wants to feel

that

and would thus

like

of his worth.

His valuation will

the market rates

to be paid according to his

for

expect his

with inflation

2:2.3

own valuation

elsewhere and with the pay

in the organization~

salary to increase

estimate of improvements in his

respons ibi.Lity .

fairly

be based on comparisons with

similar jobs

received by other staff

He will

he is being treated

He will

also

in line

with his

own

performance and increases

want his

salary

in

to keep pace

and general increases in salary levels.

Combiningorganization objectives and individual expectations

A pay structure

has to be internally

competitive in order

to satisfy

equitable and externally

the aims shared by management

and staff.

Staff

can feel

and yet

feel

fairly
unfairly

people who contribute

but

receive

paid with respect to the outside world

similar

paid
less
or

if

they

think

are

to the organization than

more rewards.

Porter

showed the various consequences of different

dissatisfaction

there

as in Exhibit 2-2.

- 6
-

other

they

do

and Lawler

types

of reward

Outside comparisions
Dissatisfied

Satisfied

High turnover
absenteeism
Complaints about what
people elsewhere receive

Low turnover High

Low absenteeism
Few complaints
Little politicking

High turnover
High absenteeism
Many complaints
High level of political
activity

Exhibit 2-2

Consequences of different types of reward

dissatifaction

Dissatisfied
resentment,
political

High level of
political activity
Many complaints
about unfairness
of system

internal

comparison

dysfunctional
activity

even

complaints,
though

the external comparison.

cause employers

leads
and

to
high

feelings
levels

the staff are satisfied

of
of
with

These concerns about internal equity

to engage

in the administrative

job evaluation.

- 7
-

practice

of

2.3

Job evaluation

Job evaluation is a method of establishing

the relative position

of jobs and measures the relative value of the job, not of the
job holder.

It is a systematic procedure to analyse the content of groups of

jobs to assess their comparative worth to the organization and to
group them in an order which will closely reflect the value of
the job and on which a grading and salary structure can be based.

There are various job evaluation

methods,

classification which are non-analytical

are made

between

'whole job!

comparison which are analytical

and

viz ranking and

job

schemes where comparisons

points

rating

and

factor

schemes where jobs are analysed

and compared by reference to different factors.

The Hay method of job evaluation is a proprietary job evaluation

scheme and is predominantly used for white-collar, managerial and
professional
uses

three

jobs.

The Hay plan is a modified point scheme and

universal

factors

problem-solving and accountability.

- 8 -

to

compare

jobs:

knowhow,

Know-howis the total

to do

the

job.

of all

skills

Problem solving

original thinking

required

by

and knowledge required

is

the

the

job

amount of

for

arriving

decisions. Accountability is the answerability

taken

on the job.

d.ivided
value

into subfactors.

for

of

of

the

factors

Thejob will

each factor /subfactor

across all

A set

.These three

for

and the

are

at

actions
in

turn

be assigned a point
total

of points'

the factors is the point value for the job~

Hay Evaluation

Guide chart

is

attached

in

Appendix 1.

The points allocated to jobs can be plotted

against

salaries in

the same way as a conventional points scheme. A particular

feature

and strength

of the hay method is

infonnation is supplied showing the

points and salaries

in all

that

relationship

the companies using this

market rate
between Hay
method and

the commonuse of Hay system provides for a greater degree of

comparabili ty
information
compare this

than

it

is

with

in

other

possible
the

market
to

plot

company salaries

positions in the market place.

- 9 -

surveys.
the
to

With

this

market rates

and

indicate

relative

Hay is a straight forward, highly developed and well tried

system.

Nevertheless, it does not mean that the system is

appropriate for every organization and for every type

jobs.

Qmdrilli

of

and Armagast3 quoted an example that when

the Hay system is used to evaluate the job of an airline

pilot, the results of the process usually give the pilots
job between 289 and 333 points, the point range of which
typically associated with a first-line supervisor.

The

problem is that pilots with major airlines often make sixfigure salaries, but there are no organizations in which
first-line supervisors make comparable salaries~

If one were

to evaluate an airline in terms of the Hay system, one would

certainly have to make a pay-line exception for pilots.

Role
of
evaluation

John

Gilbert4

job

classified

the

important

elements

remuneration strategy as in Exhibit 2-3 :-

Objective

Method

Internal Equity
External competitiveness
Reward individual performance
Flexibility

Exhibit
Method

2-3

Remuneration

Job Evaluation
Market comparisons
Salary Range
Evaluation & Policy Review

Objective

&

of

- 10 -

In his

with
that

rebuttal

by LawlerS on 'WhatI s wrong

to the article

point-factor

Job

Evaluation',

when job evaluation

Roger

Plachy

is used effectively,

it

asserted

has a clear

fourfold purpose~

to identify the current

organization

to bring order and equity

to establish

to the relationship

amongjobs

a hierarchy of job value that

develop a pay structure

-

job structure

can be used to

and

to achieve a consensus among managers and employees about

jobs and pay within the organization.

These objectives provide an opportunity to educate managers in

appropriate methods of management : treating
and

being

accountable

efficiency

in their

for

particular

jobs,

pay,

employees fairly
performance

and

areas of responsibility.

Plachy also reckoned that when managementand employees take

modern view of job evaluation,
but for an organizational
of jobs.

Job evaluation

concepts

and

techniques

they

aim not for

measurement

consensus about the relative

value

is designed and implemented through

of

COMMUNICATIOPNESR,CEPTIONand GROUDP YNAMICST.

hrough the job evaluation
learn
than
results

that
it

is
that

it

is easier

managers and employees can

to work within

to work in chaos.

an identified

Managers can sort

are expected of employees into

groupings and present

standardised

process,

out the job

logical,

in job description format.

structure

clear

With a

system, managers and employees can examine

change objectively

rather

usual emotion and politics.

than resorting

to

the

- - 11 -

Managers and employees can also

the

job performed from the

learn

value

to separate the value of

of

job

evaluation identifies

the value of basic

points

the-

the

way to

value

of

Employees can earn more when they

jobs.

The pay structure

performance.

Job

job requirements and

increased
qualify

also identifies

job

for

skills.

higher-paying

the value of expected

performance on the same job.

To summarise, job evaluation is not only a systematic approach

to measure the
process,

it

relative
has

communications and

value

invol ved
creates

of

jobs,

but

managers

and

better

throughout the
employees

understanding

requirement.

The result

be a readily

observed and understood internal

in

of

job

of a good job evaluation exercise

which the pay structure

can be built

employees understand their

contribution

structure

and that
to

the

can
upon

managers and
organization

and can be paid for what they do and for howwell they do it.

- 12 -

Cllapter 3

Practical

There are many salary

addressing to these

Issues in Salary Administration

administration

issues

issues

and probl.eas ; . The proper

and problems are critical

the design, development and the operation

to the success

of any salary

of

administration

system.

The following is a review and discussion of the various issues

3.1

:-

Absorbing market rate pressures

Market rate

forces

is the 'hidden hand'

in remuneration policies

produce the perennial problem of reconciling

into

what other

companies pay with

and

the need to keep pace

the need to preserve equitable

internal relativities.

In a discussion held amongmembersof the Compensationand Benefits

7

Review Advisory Board

question

the

of

'Market

Pricing

vs

,
Internal
ten

years

ultimate

Equity' was ratsed ,

from internal
survival.

"There is a clear

equity

In

order

as king
to

shift

in the

to market pricing

stay

in

business

as

with

last
the
the

competition, the choice is to get down to the market or go out

of

business.

where

we

get paid

on

we began to recognise that

to

We started

with

maintained that we're all

the same basis.

emphasis on internal

one companyso we should all

Then little

by little

compete successful Iy we had to

today' s economyall
afford

equity

recognise

companies, especially

not to stay with their

individual

markets.

In

smaller companies, can 't ---.,

compensation marketplace.

"

_ 1"' -

Indeed,

the

problem

of

the

going-rate

category

of employee is a headache

concern

for

particular

for all salary administrators.

Usually, the main effects of the market pressure are on the 'market
orientated' jobs in a compariy, i.e. jobs that are fairly uniform
duties

and vocational

area.

In Hong Kong, the situation is aggravated by the effect

emigrants

requirements

to other countries.

as

among firms

in the

local

At different years, employees

different skills eligible for the requirement for emigration

the independent category leave for Canada or Australia.

in

of
with

under

Thus we see

many of the Finance people, and then Data Processing people and then
Human Resource people and many other professionals left Hong Kong at
different

stages creating labour shortage and market pressure

for

particular professions at different periods of time.

How can one cope 'with this kind of situation?

Anmstrong suggested

the following possible courses of action to deal with the market

rate pressure :-

create a separate

'Market group' structure for these

create a separate salary range for these jobs.

will

be

internal

comparisons

and

additional

jobs

or

Of course, there
administrative

complexities.

- pay a market rate premium to job holders who retain the original
grading given to their jobs.

It is easier to remove a premium

subsequently than to abolish a salary structure or salary range.

red circle the jobs i.e. place them in a higher grade (a personal
grade).

This will be tedious if one is to deal with a large

number of similar jobs.

- 14 -

recruit

staff

restricts

at a higher point

in the

salary progression and also

salary range.

creates

This

another common

salary administration problem - pay compression which is to be

discussed in more detail

None of these
such

choices presents the ideal

solution

evaluation

in section 3.2.

exists.

reflects

If

one

believes

the relative

then the market rate

permanently.

Adopting which of the

effect

of

the

market

circumstances will

that

good

worth of different

the long run,

whether the salary administrator

solution 'because no

jobs

job
in

pressure should not 'exist

above choice depends on

thinks the time span of the

pressUre

is

to

last

long.

The

indicate whether a shorter term or longer

term method is better.

3.2

Pay Compression

The single most important factor leading to pay compression is a

demand/supply imbalance in the organization's

labour market that

forces

the

to' attract

skills

into

match the

employer to
the

pay higher

organization.

going rate

salaries

1hus the

of the

relevant

competitive~

Unless salaries

organization,

a narrowing of pay ratios

tries

labour market to

to

remain

increase proportionately within the

current staff membersoccur.

organization

scarce

between new hires

and

One

will

argue

then why

don It the existing

leave

As a matter of fact one way for the existing

the company.

members to redress inequities

from

employees

is

to

secure

job

offers

other organizationsand threaten' to leave if the offer is

not met. HOwever, in many of the cases, willingless to change to

a better
paid

job

is

diminished

consideration,
retraining,

adaptation
personal

non-monetary rewards,
to

move

by

from

one

factors

to

new

status,

such

as

provident

environment,

family

fund

training

obligations

and

and
other

The result is that those who are willing

company

to

another

are

rewarded

with

pay-premium, and in order to reduce payroll cost, the company pay

those remaining

in the company

less.

Pay dissatisfaction

is

likely to follow.

In the past, it was a common practice for large companies in Hong

Kong to pay the minimum to lower quartile range of the grade for
new

starters.

Nowadays

it

is

not

astonishing

that

these

companies have to pay mid -point up. to upper quartile of the

grade for the new joiners under the buoyant labour market~

The

further problem for these new joiners then is that there is not
adequate salary
lack
the
order

progression

of promotion

within

opportunities,

the

grade

they will

and

if

in the

reach the top of

salary scale rapidly and leave the company very soon.

to

solve the problem,

providing additional benefits,

some companies

use methods

improv.ing status by upgrading

or changing title, payment above grade, horizontal

for job enrichment and skill expansion, etc.

In

like
job

job movement

1(, -

The problem of starting

new staff

at

higher

employees should, in theory, be minimised if

are

regularly

practice,

for

company often

comparison with

payroll

control

lag behind those

existing

salary

market

purpose,

outside,

than

internal

reviewed in
cost

rates

levels

rates.

salaries

In

within

and anomalies are

almost

inevitable~

For companies to tackle

weigh the different
strategy,

the pay compression problem, they have

factors

to

and formulate the necessary remuneration

e.g~ to maintain a consistent

but costly

salary

structure,

or to motivate those new joiners by paying more under the assumption

that

these

are

the

brighter,

promising

tomorrowwnen comparedto those existing

3.3

Motivational effect

identifying

their

outstanding

performers

accordingly,

said

Lance Berger8,

executive

ManagementConsultants.
"enough differentiation
truly

Berger said

while

that

outstanding performance."

show that

of

compensation dollar?

By

and

more than

rewarding

vice-president
companies did

between average pay

Compensation comparison of
States

stars

of performance pay

for their

for

flexible

immobile staff.

HowC~~ companies get more return

given

and

of

increases

difference

the

make

and

Data from the

those

1986 Hay

1000 organizations

in

the

the average performer received a 5.5% increase,

the outs tanding employee got 8. 7%

for

Hay

not

A $40,000 employee gi ven

an "average" increase would gain $42 a week, compared with

gain

them

outstanding

achiever

not

significant

to motivate the ordinary employee to excel,

the excellent performer that his or her efforts

- 17 -

a $66
enough

or to show

are valued.

.;.;-.

Berger

said

that

reallocation

would be necessary
driving

in

order

up pay costs ,

increase

up

performer's

to

an

increase

of
to

solve

for

the

merit

average

of

3% to

increases

dilemma, short

recommendedpushing the

He

to

budgets

12%,

limiting

4% and

giving

of

outstanding
the

no

average

raises

to

below-average performers~

In Hong Kong, the

situation

for merit

majori ty of employees in the

receives
get

an average

performer

for outstanding

expected,

will

be

employee will

merit

of high
the

around

be

the employees can be motivated to

of prevalent

The

Very outstanding employees can

At the years

1989 where a 15% COLAis

is similar.

companies adopting performance pay

4% - 5%merit increase.

8%merit increase.

increase

23%.
strive

inflation,

salary

increases

19-20% while
It

is

hard

of
that

unlikely
under

say in

that

this

kind

increase system. Of course, brilliant

employees would work hard to strive

for promotion, however,

promotion can only be given when old positions

ones created. Companiesshould not rely

are vacant or new

on promotion as its

major

motivational
reward due to the low flexibility.

.;.;-.

- 18 -

If organizations want high levels of performance they must design

effective
system

compensation

to achieve

system as well

it.

9
Hills

as performance

tabulated

seven conditions

are necessary for a performance pay system to succeed.

the condition

is that

'the organization

discrimminate on the basis of performance'.

phenomenon

for

the

managers

to

give

appraisal

must
As

that

One of

be willing

to

it is a general

lenient

tendency

to

evaluate everyone the same and in the middle (unless companies

use

forced distribution

of rating),

this has

caused

another

reason for not being able to differentiate outstanding performers

and reward them accordingly.

Let's use Vroom's Expectancy

Theory of Motivation

to summarise

the motivational effect of performance pay.

The theory as applied to appraisals indicates the following ._

employees have to be able to perform as expected

- when employees perform as expected, they anticipate a reward
the reward employees receive should be commensurate with their
effort and should be of value to them.

Thus, the assumption that employees' anticipation of rewards for

their

efforts

performance

will

motivate

them

to

maintain

and

improve

is the reason for pay increases based on merit.

If

we accept that money is one of the most important motivators, we

should establish performance pay systems in which we can identify
those who do the best job or accomplish the most and they should
receive the largest rewards.

- 19 -

3.4

Performance-related

bonus and schemes

Pay raise policy determines

administered

the way in which pay increases

in an organization.

.Most large organizations

pay raises on an annual basis.

into

the

salary,

the

are
grant

By factoring the annual pay raise

organization

is

in

employee a permanent annuity that mayor

fact

granting

the

may not be justified

in

succeeding years.

Allan

Yeung, Manager,

presented

in

the

Reward

1987

Management

Hong

Kong

findings of their survey revealed

base

salaries

significant

for local

Practice

OverviewlO

companies

employees

increased

profits

related bonuses.

were
with

using
their

was

8.7%

the

employees

but

there

and challenges

in

was

reason

mechanism
through

major

increase

The major

the bonus

The advantages

that

that the annual

increase in the total cash.

that many

of HI< Hay Group

a
was

to share
performance

of performance

related incentive plans as viewed by Allen Yeung, were :- additional ~ealth generated by good company could be passed on
to those employees who contributed significantly

in generating

it
- profit related programs if properly constructed could increase
morale and the chance of meeting business objectives,
- perhaps most importantly profit or performance
were

not

institionalised

into

the

salary

related bonuses
scales

and

were

therefore not as inflationary as the normal merit increase

there were however challenges as regards how to determine
manage performance criteria and how to distribute the bonus
an equitable

way,

reflecting

individual contribution.

- 20 -

both

business

performance

and
in
and

It is always Hay's recommendation that Hong Kong employers

should follow the worldwide trend of moving towards sharing
their current wealth with employees in a manner that would
not jeopardise the long term health of

the company.

For

private sector companies this could mean performance related

bonus system that benefits all employees in times of good
profits.

For public sector related companies, it should be

possible for employees to share in the increased performance

of the company though. a variable annual bonus of between 1/2
and 3 months.

As a matter of fact, in Hong Kong more and more companies now

adopt performance bonus or productivity schemes. Many

companies like KCR, CSL adopt productivity scheme based on
added value calculation. Added-value is the difference between
gross revenue and purchased goods and services. It is believed
that the higher the
and the lower

added value per employee achieved

the proportion of added value used for

remuneration, the higher is the

position

in

the

competitive

organization's
market. Productivity is

calculated by dividing the remuneration cost by added value

and current figure is compared with the results of previous
period to determine increase or decrease in the level of
productivity.
increased
productivity.

A variable bonus is paid according to

figure

the

of

.;,;. -

KCRconsidered

the

productivity

scheme as very

successful

with

revenue per employee rose from $274K in 1985 to $40lK in 1987 and
manpowercosts as a percentage of revenue decreased from 27% to
22%.

Of course, one could argue

business

that

the

increase

growth, prosperous economie or other

more people went to live

was due to

factors

in New territories.

Also,

such
since

as
the

whole group of people was awarded the same percentage of bonus,

motivational

effect

significant.

For

technology
lines,

to

individual

other

performance

companies adopting

improvement, introduction

of

may

not

similar

be

scheme,

new business/product

market environment etc can also affect

the added value

of

the company:

It

is vi tal

the

for every companyto control

perpectual

overlooked.
related
effective

effect

of

salary

incentive

scheme.

In

schemes, the

taken into consideration

not

and
be

by developing performance
and

following

factors

implementing
should

be

:-

must

Large differences

between individuals

style

cost,

should

designing

Company culture

confrontational

payroll

increase

Companiescan achieve this

incentive

its

style.

and climate foster

be

ready

for

variable

or groups require

One should

also

'individual'

or 'team'

- 22 -

remuneration.
a more

check whether
incentive.

the

Amounts received from incentive schemes should be high enough

to encourage good performance but not so high in proportion

to

base salary as to seriously affect the employee's

of

living when fluctuations occur.

all

performance-related

performance

beyond management
recession,

It should be remembered

payments

by the company.

standard

If

depend

on

external

good

overall

economic

factors

control push the company or industry

employees almost automatically

that

into

lose part of their

pay.

Factors influencing the size of variable pay e.g. performance

bonus should be those over which the employee exercises direct
control.
rewards

The scheme should be sensitive enough to ensure that

are

proportionate

to

achievements

and

constraints

should be built into the scheme so that a variance

pensionable/provident

fund

salary

maintained.

')1:.

and

cash

between

incentive

is

3.5

Communication policies

Organizations
communicate

differ
about

organizations

widely

their

pay

in

how

much

system~

are very secretive,

information

At

one

extreme,

and they forbid

people

they
some
from

talking about their 'individual salaries, give minimal information

to individuals about how rewards are decided upon and allocated,
have no publicly disseminated policies about market position
the

approach to gathering market data as well as

individuals

can

and

do

recei ve ~

At

the

some organizations are so open that everyone

and

the rewards

other

extreme,

pay is a matter

IS

of public record, as is the overall organization pay philosophy.

Many reasons are given by managements

for maintaining

a secrecy

policy, an underlying theme being the need for control and the
ease of such control in an environment of ignorance.

Secrecy

thought to protect individual employees from embrarrassment

is
over

salary differentials.

Secrecy is also sometimes advocated because it forfends questions

about equitable pay that are innocently uncovered when employees
compare notes.
comparisons

In other words, when a company considers such pay

taboo, it hopes to gain through

secrecy by keeping

employees from discovering inequities in the system.

secrecy

policy

organization,

avoids

creating

with the resulting

unnecessary
requirement

time-consuming defensive postures by management.

- 24 -

waves

In turn, a

in

of preparation

the
of

Obviously, there is the negative side effect of secret system as

regards the existence of considerable distortion about the actual
rewards that people get and creation of a low-trust environment
in which
between

people

have

trouble

understanding

pay and performance ~

the

relationship

Lawler I s general

conclusions

11 from his research on pay secrecy are as follows~

Secrecy

policy prevents managers from actually knowing what others have

earned and

causes

estimation

errors.

increases dissa tisfaction with pay

hidden
Secrecy

Cos ts, including

is also

philosophy

of

and

Secrecy
thus

reduced performance

a reflection

has

apparently
various

motivation.

of the immature managerial

''keeping employees in the darktr~

Openness creates a situation which allows the pay plan itself to

be a performance incentive.

If the plan is carefully constructed

to encourage productiveness from employees, why not let it be

fully revealed and explained so that the incentive value inherent
in it can be utilised?

Let the pay plan become a lever for

performance, Lawler has suggested.

In a survey conducted by the American Compensation Association

cooperation

with

Prentice

Hall

involving

1065

in

lZ
respondents ,

the most interesting statistic obtained is the strong indication

that if more salary data were disclosed, confidence in management
would

increase.

Similarly,

the morale

of employees

regarding

expectations of future career growth would rise if more salary

data were disclosed.

The increase in the number of problems that

would result from more disclosure

are obvious, but they would

seem on the face of it to be outweighed by the favourable aspects

of greater disclosure.

_ Ie:

Of course, it should be noted that open system put considerable

pressure or organizations to do an effective job of administering
rewards ~

Therefore if such difficul t-to-defend policies are

to be implemented, considerable time and effort need to be

invested in pay administration.

If they are done poorly, strong

pressures usually develop to eliminate the policies and pay

everyone

the same.

Economically, therefore, if an organization

wants to spend little time administering rewards, but still wants

to have merit pay, secrey may be the best policy, although
secrecy may in turn limit the effectiveness of the merit pay plan~

There is no clear right or wrong approach regarding an open ora closed

communication

policy~

It

is

a matter

of picking

a position on the continuum from open to secret that is

supportive of
needed

the

overall

culture

and

types

of

behaviour

for

organizational effectiveness.

An open system tends to encourage

people to ask questions and share data and it fits well with a
high-involvement
concentrated

culture.

A secret system tends to keep power

at the top and allow to keep the organization

options open with respect to commitments to individuals.

well

with

an organizational

management

style

IS

It fits

that emphasizes

hierachy, bureaucrary and control.

Irrespective of the extent of openness or serecy about pay system

as

determined,

communication

it
is

is essential
always

an

implementation of pay system.

changes

and

the

understood

important

element

that

effective

for

successful

The company should try its best to

explain the organizational motives,

specific

to

rights

the reasons for change, the

and

responsibilities

manager and employees when introducing a new pay system.

of

the

- 26 -

3.6

Other factors affecting salary policies

In determining

the salary policies

and choosing

the

type

of

salary structure, the following factors should also be taken into

consideration. :-

3.6.1

The size of organization

A large organization will want

a more

tightly defined

structure than a small one in order to achieve the ease of

administration

and that staff be

treated

consistently.

Also, large corporations have many nonentry type jobs that

cannot be priced in the market.

Employees move into such

jobs through transfers and promotions from other jobs in

the corporat ion.
for

pricing

Large corporations

these

jobs

and

must develop

take

into

rules

consideration

internal equity between jobs of differing skill levels and

the pay structure must balance both market data and job
worth

as

determined

'formulation.

Smaller

through

job

companies,

evaluation
with

main

promoting innovation and entrepreneurship

in

their

emphasis

on

and under tight

financial resources, will pay more attention to external

competitiveness rather than internal equity.

- 27 -

3.6.2

Product/service of organization

The salary policy should be able

to cater

of competition of the product/service

for the degree

in the market.

For

companies operating in highly competitive markets, higher

salary level
staff

is usually required to attract

and

their

market-driven.

pay

systems

Highly

higher calibre

are

di versified

usually

more

companies

find

themselves pulled more strongly toward an external market

orientation,

while organizations that

or single technology based typically

are single industry

find themselves more

comfortable with an internal equity emphasis.

3.6.3

Trade Union and staff

association

Companiesshould realise

that

and inequitable pay structures

of

union

membership in

development of a difficult
Where collecti ve

salary policies

could result

their

in the growth

organization

industrial

bargaining

managemento develop fair

ill-defined

exists,

relations
the

salary policies

and

the

climiate.

ability

of

and be seen to

manage them well has a considerable effect on the quality

of bargaining.

- 28 -

In fung

adopt

Kong, the Government

strong

executive

and most

leadership

other employers

in determining

pay.

There is very little collective bargaining, at best unions

are consulted.

Unionism has generally a stronger hold in

the traditional British organizations such as the utilities,

transport,
but

etc ~

very

Their

few

presence

companies

influence
engage

negot iat.ions ,

Nevertheless,

it

that, especially

under

buoyant

the

is

pay reviews
in

general
labour

situation, trade union and staff associations

pay
trend
market

will have

louder voice and will have more influence on the pay raise
and related decisions.

.As trade union and staff association

get more power, the art of salary administration will be

developed

to

communication

become

the

art

of

negotiation

and

as salary administrators take their part in

negotiating teams and addressing themselves .to the problem

of telling staff
about the company's pay policies.

3~6.4

Organization culture and structure

Management

can utilise

reinforce

and

organization.

define

pay

system

the

to cope with

company's

culture

or

to
and

Pay system can influence entrepreneurial or

participative culture.

Grading and pay structure can also

be elaborated to link

to the hierarchical structure and

how the company rewards on the basis of movements up the

hierarchy.

3.6.5

Ability to pay

Pay system is often a significant cost factor to the company.

In determining pay policy,

consider

the

the pay administors should always

variability

of

pay

function

of

the

As already mentioned in section

organizationS abIlity to pay~

3.4,

as

there is always the alternative

of companies rewarding

employees by means of one-off payment in good years so as not

to

carry

perpectual

cost

of

salary

increase

along

to

subsequent years.

3~6~6

Business strategy

Pay

policy

should

major business

synthesize

strategies

and

with

the

help

to

organization
support

business

objectives
and

planning,

results.

Ellig

motivate
13

toward

suggested

goals

that

pay

and

reward

planners

desired

should

ask

themselves three key questions before setting pay strategy :-

- what are the three most critical issues facing my organization?

- what are the payor

compensation and benefits aspects of these

issues?
- How should I be involved in developing these strategies?

Pay

programs

organizational

should
needs

be
and

compatible
pay

and

administrators

consistent
should

with

help

identify the pay aspects and involve in shaping the business

strategies.

Many times, implementation of pay programs can act

as change agent to cope with new business philosophy and st~ategy.

- 30 -

3.7

Summary

A company's pay system, if planned and administered effectively,

is a communicationtool that

reinforces

and attitudes.

On the contrary,

haphazard way,

pay

policies

and

fairness.
affecting

this

effective

designed and monitored in a

systems may contradict

violate

In

if

desired employee behavior

the

employees'

chapter,
salary

the

values

major

administration

issues

the exercise of setting

job

salary

and

administration

of

management
equity
and

and

factors

are di.scussed, In the

forthcoming charter,
evaluation

other

up and operating
system in

large

utili ty companyis reviewed and one can examine how the various
issues

affect

the implementation, operations and effectiveness

the system.

- 31 -

of

Olapter 4

The Case Study

Background of the Company and reasons of conducting

job evaluation

4~1

Background of the'Company

In

1984

when

exercises,
centenary ~

it

the

company

was

Like

just
other

started

going

to

utility

the

job

ce1ebriate
companies,

evaluation
its

the

first
company

operates under a franchise granted by the Government and has

to conform to a "scheme of control".
company

is

able

to

operate

With the franchise, the

under

simple

and

stable

environment.

Appendix 2 shows the organization

1984.

chart of the

company

in

Due to the size of the company only the structure at

Business Unit/Division level and above is shown.

The company

was divided into six Business Units and five Branches and had
more

than

12,000

employees,

with

more

than

1,000

being

executive staff.

The annual payroll cost in 1984 was $S80M, being 30% of the
annual turnover.

Staff costs are always the largest items of

operating costs for the company.

From 1984 to 1988, the

company was able to achieve substantial growth, with average

annual increase of 17% in turnover and 30% in profit.

- 32 -

There is no trade union or staff

the

company.

fuwever,

there

association
is

mechaniam as communication channel

The Joint

Consultative

allowed

to

be used

Staff's

views

on' salary

.they are

.revision

and management.

quarterly

can

has 12 members representing

only

Staff
all

and

debate
be

senior

not

salary.
for

Consultative
staff

for

is.

raised

Joint

and can serve

by

Consultative

body to

The Senior

appointed by election

Joint

between staff

a negotiation

management's consideration.
Commttiee

formal

Committee meets

as

being recognised

and

a maximumof

two years in the Committee:

4.2

Reasons for conducting job evaluation

In 1984, the companydecided to conduct

for its
scales

executive staff.

job evaluation

The classification,

grading

exercise

and salary

at that time were as follows:-

Expatriate
Monthly
Grade Salary Scale

No.
of
Staff

Local
Monthly
Grade Salary Scale

NO.

of
Staff

Head of Division/
Asst Chi.ef Fngr

III 27750 - 29500

20

27750 - 29500

Dept Head/
Executive Engr

IV

24900 - 26400

24

20400 - 21900

47

Senior Contro11er/
Senior Engr

21130 - 23200

12

14475 - 17675

201

-~

Controller /Engr

9285 - 12975

47

Asst Control1er/
Chief Technical Offr

AC

7265 - 9065

18

56

91

:~
.~
f{g'
~[i}
~

~l tlG
S

'

r u'anj""/.Ue
, ,~"':r

...[.;..I.

It =-'_

sA

- 33 -

(In

1984, another 100 + jobs in two subsidiary companies were

also evaluated but this was outside the scope of this study).

All staff received fixed- increment at their anniversary up

to maximum of the salary scale.

There

were

four

major

reasons

for

the

need

of

job

evaluation exercise at that time as explained below:-

4.2.1

Review of salary structure required

The company decided to review its salary structure as it had

no logical relationship with the salary market in Hong Kong.
An analysis

of the

salary

structure

revealed

that

grade

spread at the top grade was very narrow, e.g. Grade B (6.4%)
and Grade C (7.4%) when compared with that of the equivalent
job in the commercial sector which, in general, ranged from
40% to 50%.

There was also a lack of consistency

in the

grade spread, e.g. 22.1%, 39.8% and 25.7% for Grade D, E and
AC

respectively.

mid-point
progression

There

progression
between

was

also

no

consistency

pattern

and

so

grades

leading

no
to

in

the

standardised
inconsistent

promotional increases.

4.2.2

Common salary scale

There was inequality of paying different
and expatriate staff doing the same job.

salaries

for local

At that time, the

company was the only utility company in Hong Kong which had
not implemented a common salary policy.
- 34 -

4.2.3

Reward for performance

The policy of fixed increment made it impossible

to achieve

the principle of 'Pay for Performance' and caused pressure

to

promote staff for good performance which was more costly than
additional salary increase.

4.2.4

Grade drift
There had been a rapid increase in the number of senior 'staff
(454 in 1978 to 953 in 1983, more than 100% increase).

The

ratio of senior to junior staff increased from 1:17 to 1:12

in the same period.

All these necessitated

the control

of

grade drift, since in the absence of an agreed job evaluation

systems, positions had been created without reference to such
aspects as job responsibility,

authority and accountability.

It was doubted that some of the positions had been improperly

graded or even over-graded.

For the above-mentioned reasons, the company decided to introduce job

evaluation

as

basis

for

designing

and

developing

proper

salary

structure and salary administration policies.

The objectives of the whole exercise

salary scale design so as to maintain

is to have more consistency

fairness

in

and equity, to have

payroll cost controlled and rate of promotion reduced and finally to

have performance rewarded.

- 35 -

The companydecided to use external consultant

to be more technically
and objective

third

qualified

party.

as they were considered

and could be viewed as the impartial

Hay was chosen after

reviewing proposals

from various consultants.

To minimize the cost,

it

was decided that

involved in the design

stage

the

consultant' should

and in the evaluation

be

of the Benchmark

jobs only~

Internal resources would involve in every stage of the job

evaluation,

so that

and maintaining the

senior

staff

subsequent work of evaluating

the remaining jobs

system could be born by internal

were then

employed to

form the

salary

staff.

Three

administration

group to handle the project.

The time table

for

the whole project

Appendix 3.

- 36 -

was also

planned as shown in

Chapter 5

The case study the job evaluation

process

The exercise was carried'out in two stages, viz,

the benchmark and

non-benchmark evaluation.

5~1 Benchmark Job Evaluation

A tot~l of 163 benchmark jobs were selected by the consultant

in consultation with the 3 General Managers.

Job descriptions

for Head of Division (HOD) level were written by Hay

consultant whereas staff on Department head level were given
training by Hay to write their own job description. In
addition, 15 job analysts were appointed and arranged to
receive training from Hay to write job descriptions for jobs in
lower grades after conducting interview with the job holders.
A copy of the questionnaire to support writing of job
description in Hay format is shown in Appendix 4 and a
sample Hay job description is shown

in Appendix 5.

A total of 15 Benchmark Committee meetings were organized to

evaluate the benchmark jobs by

determining the

scores

on

know-how, problem solving and accountability for each individual

post.

Altogether 12 HODs were appointed as members of the

Committee with equal representation from different Branches.

Nevertheless each session of committee meeting only required 5
HODs plus Hay consultant and the Personnel Manager to
attend.

- 37 -

Finally, two sore-thumb sessions with all the Benchmark committee

members

present were held

benchmark

Appendix

job,

to agree the final scores

6

which

is

an

extract

of

the

from

an

appreciation course on Hay Job Evaluation practices summaries the

method to evaluate the scores.

5~2 Non-benchmark job evaluation

Due to the large member of non-benchmark jobs (more than 800), it

was not possible for the job analyst to write all job descriptions.
Therefore,

all

non-benchmark

job

holders

were given training

by either Hay (for Departmental head level) or job analysts.

total

of

63

training

sessions

were

conducted

by staff in

Salary Administration and Management Development.

To speed up the evaluation process, individual HOD carried out

the initial evaluation on the jobs of their own division
comparison with benchmark jobs.

by

The divisional results were then

presented to the Non-benchmark committee for further evaluation.

The Non -benchmark committee consisted of 2 Benchmark committee
members
committee

outside
member

the

function

being

responsible

representative from Personnel.

for

evaluated,
the

function

Benchmark
and

one

There was also a final sore-thumb

session to finalise and agree on all jobs.

- 38 -

5.3

The evaluated scores

The scores* evaluated are summarised as follows _:-

Grade

Range

Medium

Mean

HOD
equivalent

III

900 - 1193
930 - 1157

1055
1080

1020
1068

Dept
Head
equivalent

IV

641 - 843
505 - 819

777
737

770
713

Senior
Controller
equivalent

424 - 485
330 - 575

460
460

455
447

Controller
equivalent

228 - 411

330

329

AC
equivalent

AC

199 - 338

244

250

The next chapter presents a further analysis of the score points

and related salary levels and the results were used to design new
grading ~ld salary structure.

All

score figures

in the report have been adjusted

weighing factor.

- 39 -

with

Chapter 6

The case study : designing grading and salary structure

Based on the evaluation score points and salary data, a trend line was
derived from linear regression as follows :-

where

= 22.3

= score point

0.548 x

annual base salary + bonus in thousand dollars.

As the evaluated score points and original grading were quite in line,
no major restructuring

of grade was deemed necessary

and this helped

to gain staff acceptance of this Management Job Evaluation exercise.

6.1

Design of grading structure

Three main factors were taken into consideration

the grading structure, viz, to minimise

in the design of

anomalous

posts

due to

new grading structure, to unify expatriate and local gradings

to achieve consistent

and logical relationship

and differences between grades.

this

serves

as basis

for

in point

of

a consistent

structure again with logical relationship between grades.

- 40 -

spreads

The last factor is important

the design

and

as

salary

After

many

work

and

rework,

the

scorepoint

ranges

for

respective grades were decided as follows :-

Score Point
Range

Point
Spread

Mid point

AC

193 - 276

43%

234

277 - 396

43%

336

44%

DIV

397 - 576

45%

486

45%

C/IV

577 - 840

46%

708

46%

B/III

841 - 1224

46%

1032

46%

Grade

The

grade

structure

has

difference between grades.

approximately

45%

Difference
between grade

point

spread

and

A summary of the anomalous jobs under

this grading structure is shown below :-

Administration
No. of
job with
new
grading
below
original
grade

No. of
job with
new

1
1
5
1
1

Engineering

III
C

E
AC

12 D
14 E

LO

Finance
3 E
2 AC

"5

Marketing
33 E
2 AC
35

Total
1 III
1 C
17 D
51 E
5 AC

7!

3 AC

1 IV

2 E
6 AC

5 E

"8

"5

1 IV
7 E

- 41 grading
above
original
grade

"3

17

AC
,,',;.

6.2

Design of salary

Main factors
salary

structure

taken

structure

into

consideration

were as follows

in the design

of

the

:-

to adopt commonsalary

range for expatriate

and local

to minimise

or under-paid

under the new

salary
to

over-paid

posts

staff

structure

have overlapping

in

scope of progression

salary

within

ranges

to

allow

greater

grades and minimise promotion

increase
to

achieve

salary

Again,

consistent

and logical

after

many work and rework,

80

100

120

50%

116

145

174

50%

D/V

168

210

252

50%

C/lV

244

305

366

50%

354

442

530

One can note that

old ones except

staff

that

the new salary

mid-points

overlap

45%

7%

45%

7%

45%

7%

45%

7%

50%

The complete grading and salary

7.

the

structure

:-

Newannlla 1 Base
Salary + Bonus
($000)
Salary
Grade Min Midpoint Max Spread

B/lII

in

structure.

was designed as follows

AC

relationship

structure

the new salary

for

Grade V.

on Grade V became over-paid

- 42 -

Original
range of
new base
sa l
ary+bonus

95 - 119

121 - 170
189 - 23l(D)
276 - 303(V)
268 - 288(C)
327 - 347(IV)
366 - 389

is shown in Appendix

ranges embranced all

As a result

anomalies.

of this,

the
11

6.3

Treatment of anomalies

The company decided the following policies for the treatment

of

anomali es :-

Those who were graded below

their

correct grade would

be

upgraded from 1st January 1986.

For those who were

immediate

graded

above

their

adjustment would be made.

correct

grade,

In other words,

no
they

would retain their current grade, salary and benefits.

The

Company would

through

try

restructuring

to eliminate
of

jobs. and

over-graded
redeployment

anomalies
of

staff

Future salary increase for those who were correctly

graded

whenever there would be the opportunity.

but are being paid above grade maximum would be restricted to

the increase in grade maximum only.

Job

holders

affected

would

be

individually

notified

by

respective HODs.

The

policies

ensured

rectification

of under-graded

posts

to

maintain relativity by relating salary to job worth and also that

no staff would suffer as a result of wrong gradings in the past.

- 43 -

6.4

Implication of the new grading and salary structure

The following are some noteworthy points in relation

grading and salary structure

There were some costs

posts.

However, this

:-

involved for regrading the undergraded

initial

cost

were justified

to maintain internal equity and to gain staff

Wtih

the

overlapping in salary

were broadened both way.

of

the

salary

scale

However, as this
recrui ted only,
On the

staff

other

very

scales,

in order

acceptance

the

salary

ranges

The lowering of the minimumpoint

could result

would affect
the existing

in

the

staff

lower salary

cost.

new promottee or

new

were not so concerned.

hand, the higher maximumpoint gave existing

more room to progress within their

especially

to the new

existing

grades,

for the higher grades where previously they had

limited

salary

progression within the

grade.

Tnese

higher grades had much influence in persuading other

staff

to accept the new structure.

grade

maximumwould result
would also

relieve

The increase

in higher

pressure for

salary

the

however, it

promotion which could lead

to reduction in overall salary cost.

- 44 -

cost,

of

The companyhad made certain

designing the new structure.
(i ,e , annual base salary

with market.

the Q3 rate

above third

with
quarter

(Q3)

cash

company

paint

below

rate.

For

they were paid between Q3

Since the companyhad decided to relate

the new salary structure

in a higher increase of the

to

of the companyto take

steps

to Q3 over a number of years

general salary revision.

- 4S -

had thus' bui l t

grade maximumfor the

grades when comparedto those lower grades.

level

score

in

of the salary curve based on the Hay survey as

salary policy line,

intention

market rate

bonus) comparison of the

it can be noted that

and Median rate.

to

Appendix 8 shows the total

The majority of staff

800 were already paid

grade B/III,

reference

higher

It was also

to bring

its

through adjusting

the

salary
future

Chapter 7

The case study

The new salary

setting

structure

up performance pay system

became effective

on 1st

same day, the companyalso changed the fixed

performance pay system for

all

the staff

July

1986.

On the

incremental system to a

under this

Management Job

Evaluation exercise~

7.1

Disbanding incremental increase

In order

to

cater

for

the

performance pay system, the

incremental system had to be abandoned first.

fixed

increments

anniversary date,

were

granted

to

it was required to align

to 1st July in line

with the date

The alignment was made possible

pro-rated

individual

increment to all

staff

for

all

whose salaries

- 46 -

previously

staff

at

the

incremental dates

general salary

by providing

maximum.

As

fixed

in

July

revision.
1986 a

were not on grade

7.2

Supplementary performance increase

The companyalso awarded a supplementary performance increase

addi tion

to the pro-rated

increment .to all

senior

staff

in

in

July
1986 subject to the ceilings
gain

their

acceptance to

of the new salary

the

scale,

so as to

new performance increase.

increase was granted according to the following guidelines

the overall budget was 2.5% of JlIDe 1986 basic

The
:-

salary.

The

percentage applied uniformly to all divisions.

Individual staff

received supplementary performance increase

according to their

performance rating

Performance Rating

Note

Percentage Increase

3.6 - 4.5

2.6 - 3.5

1.6 - 2.5

0.6 - 1.5

the companystarted

"-

to adopt an appraisal

on performance goals and standard since

system based

1985 to prepare

for the Performance Pay system.

HODsdetermined the exact

division,

ensuring it

fell

amount to be granted to staff

within

according to performance rating

exceeded.

the percentage increase

and the division

in his
range

budget was not

- 47 -

An analysis

on the performance rating revealed

were with Crating,

that 88% staff

11% with B rating and 1% with D rating.

There was no staff with A or E rating.

It was also observed that

the more senior grades had a higher rating - 18% B rating for
Grade C/IV and 16% B rating for Grade D/V against 10% B rating
for

lower

grades~

(Note

following

the

Management

Job

Evaluation, it was determined that all Grade B/III staff should

become

personalised

staff

and

their

salary

increases

were

separated from this performance pay system and were determined by

the Executive Committee).

The general salary revision in that year was 8%.

pro-rated increment was around 3%.

The average

Therefore one can note the

lack of motivation for better performance since there was only 1%

difference in supplementary performance increase for a staff with
B rating when compared to another with C rating (i.e. a B rating
performer
performer

received
received

14% overall
13%).

increase

Nevertheless,

while
the

the

Crating

supplementary

performance increase in 1985 was introduced as a trial run for

performance pay system and also was to give additional incentive
for staff to accept the implementation of the results of the
Management Job Evaluation~

,;;;-.

- 48 -

7.3

Full implementation of performance pay system

In 1987, the policy on performance increase was very similar

those

of

the

1986

supplementary

performance

increase.

overall divisional budget was set to 4% as this time it was

to
The
a

full implementation and the performance increase range was set as

follows :-

Performance Rating

Percentage Increase

7.1 - 10.0

4.1 - 7.0

1.1 - 4.0

This year, the number of staff with B rating increased to 18%.

There were still 81% of staff with C rating and only 1% of staff
with D rating.

The pattern of more senior staff got higher rating still existed,
viz. 39% B rating at Grade C, 30% B rating at Grade D and 13% B
rating at lower grades.

- 49 -

Al though the percentage increase range for B rating was increased

to 4.1% - 7.0% , the overall average of performance

increase

staff with B rating was still as low as 4.9% while

rating was 3.7%.

for

that for C

Again, there was only 1-2% difference.

HOD found

themselves in a difficult situation to reward good performer

with

higher increase as this would mean cutting performance increase of

other

average

general

the

performers
value

of

under

the

significant

4% Division
pay

budget

difference

and

in

was

not

yet

result

of

the

recognised by staff at large in the company.

7.4

Staff at Grade maximum

Staff

at

grade

maximum

suffered

most

as

implementation of the job evaluation system.

structure

In 1987, the company

started

to curtial

br ight

the company!s salary level closer to the market Q3 rate.

While

the salary

movement

in order

individual staff were allowed to have 5% general

to

increase

subject to the new grade maximum, the salary ranges, both minimum
and maximum, moved up by only 3%.
average

In that year, the annual moving

increase of Heng Seng CPI was

6.1% and those on grade

maximum was able to receive only 3% salary

increase, thus not

adequate to cover the increase in cost of living.

To compensate

for this, the company granted a one-off exgratia payment to all the
staff on grade maximum.

The amount was of less than 2000 dollars,

which could hardly compensate for the loss of the staff' s future
provident fund, since the provident fund calculation was based on
final

salary

service.

formula

and

those

staff

usually

had

very

Also, the effect of salary curtailment was perpectual.

- 50 -

long

,;;;-.

7.5

Conclusion

From the exercise, it can be noted that

the motivational

effect

of the performance

limited due to the insignificant

pay

system

was

pay increase difference

for

good and average performance under the system.

higher grades were assessed of higher rating.

Due to 'their

salary being higher, the effect was that on average all staff
would receive lower percentage increase due to the divisional
budget constraint.

those on grade maximum would be seriously

company was to continue on curtailing

affected

if the

the salary structure

movement to reach Q3 rate.

,;;;-.

- 51 -

Cllapter 8

The case study

8~1

communication and consultation process

Communication strategy

Apart from implementing the new grading

and salary strUcture

and the performance pay system, there were also other minor
changes in staff benefits.

The company adopted the following

strategy as part of the communication plan:-

8.1.1

To Communicate The Total Package

The changes were communicated

one t.ime

as a total package to staff at

The rationale was that the favourable

the c~~ges

were

likely

to

offset

the

aspects

of

few uravourable

aspects, thereby rendering the whole proposal acceptable.

Staff were told that they should evaluate/accept

the package

as a w1101e.

8.1.2

To Communicate The Same Information To Line Management (HODs

&

above)
Representatives

While

And

Staff

the emphasis on different

information were released

representatives.
being

withheld

aspects

to both

This demonstrated
from

staff

and

anxiety and increase confidence.

- 52 -

differed,

line management

the same
and staff

that no information

therefore

helped

was

to reduce

8~1.3

The Timing Of Communication To Line Management (HODs

&

Above) And Staff Representatives Being As Close As Possible

The time gap between communication

staff representatives

was

possible

of

spread

dissemination/interpretation

8~1.4

as

small
rumours

to line management
as possible
due

to

and
avoid
wrong

to

of information.

Being As Open And Candid As Appropriate In Communicating'

The Changes

The reasons for the various changes were fully explained.

It

created a situation which allowed the pay policy itself to be

a performance

incentive.

It avoided unnecessary

rumours, and estimation errors.

also

greatly

relieved

staff's

management's credibility.

- 53 -

guessing,

The open and candid style

anxiety

and

improved

8.2

Time Scale

The time table of the communication plan was as fol1ows:-

Subject
Oct 1985

Communication to senior Management

Nov

Communication

1985

to

Senior

Local

Contract Staff Consultation

Staff

and

Committees in a

joint meeting.
Early Nov to
End Nov 1985

Allow 3 weeks' time for the two Senior Staff

Consultation Committees to give comments to
management in writing.

All answers be made

in writing.
Early Dec 1985

Management

to

give

feedback/reply

to

comments raised by staff representatives.

8.3

Items not disclosed to staff

The following items were not disclosed to staff:-

- the score range associated with each grade

individual score point
individual anomalous job and job holder's name
- method of control of the performance payment system

Individual

salary

and

amount

of

performance

increase

strictly confidential to the individual and the supervisor.

- 54 -

became

8.4

The result

of the process

The communication and consultation

smoothly.
points
the

Staff

only raised

or uncertain areas.

process was conducted very

a certain
After

clarification

whole package was accepted.

notice

advising

Mministration
and salary

all

the

policy were issued

on technical
by management,

Subsequently an

changes

manual explaining

questions

as

the

to all

well

information

as

Salary

process of job evaluation

senior

staff

in Jan and Mar

1986 respectively.

Apart from other

factors,

the

success of the process could

be

related to the following:-

there
aware

was no immediate adverse effect,

and

disadvantages

also

not

(e.g.

promotional increase,

too

much

lowered grade
possible

maximum.
)

- 55 -

and staff

concerned

were not

about

future

minimum affecting

future

future

curtailing

of

grade

The HODsgot muchbenefits

revealed
ranges

they

were paid

below

were improved s lgni.Hcant.Iy ,

salaries
not

that

from the exercises.

packages.

their

salary

their

individual

were increased more than the other

staff

which was

personalised

influence

Q3 rate,
Also,

disclosed

exercise.

As Hay survey

to
staff

other

other

since

they

immediately after

'They, being
to

staff

line

staff

Moreover, at

Consultati ve Commttei e

the

managers,

on the
that

Job

did

acceptance
time,

i.e one-half

six

had

Evaluation

have
of
of

become

certain

the

whole

the

Joint

memberswere HODs.

The HODs' involvements in the whole exercise were immense.

They evaluated jobs, allocated performance increase,

acted as

Joint Consultative membersand also benefited

The help

from the

line

managers was most

successful launching of the project.

- 56 -

critical

most.
for

the

Olapter 9

The case study

operating the salary

Three major ongoing activities

relating

system are described in the chapter.

job evaluation exercise, salary
and recruitees

9.1

administration system

to the salary

They are the operations of the

administration

and the annual salary

administration

regarding new promotees

review.

Operations and maintenance of job evaluation

A standing evaluation
quarterly

committee was set

to evaluate all

have to be first

up to

meet, at

new/changed jobs.

The changed jobs

reviewed by the respective

HODto ensure that

the change is sufficient

to warrant re-evaluation.

All new jobs

will

be subject to evaluation before appointment takes place.

is

line

management's responsibility

to

descriptions and submit them for re-evaluation

As more and more HODsare trained

these

least

update

all

It
job

as necessary.

to evaluate jobs,

gradually

HODslearn how to manipulate the evaluation process.

Many

jobs were submitted and were evaluated to be upgraded under the

influence of these
that

HODmembers. In 1988,

the

company decided

upgrading of the jobholder would not be automatic following

job evaluation.
evaluation,

If a job is

the relevant

upgraded as a consequence of

General Manager will

job

decide whether or

not the individual holding the job is to be upgraded or to have

the job advertised.
- 57 -

9.2

Salary administration regarding new promotees and recruitees

The

following

policy

applies

in

processing

salary

at

promotion and appointment:-

9~2~1

Promotion

Under normal circumstances where the promotee is receiving

a salary less than the minimum point of the new salary,
the greater of 15% increase or the minimum point of the
new salary will be offered.

If the promo tee

by the new

salary

s present salary
scale,

15%

is already overlapped
salary

increase

will

be offered subject to :
. the new salary is within the lower quartile of the new
salary

scale which

under

normal

circumstances

is

reasonable offer to staff moving to the new grade;

reference must be made to the current salary of other
staff in the vicinity.

- To ensure consistency of standards, the salary increase to

be awarded to staff on promotion

will be recommended

Personnel and agreed with line management in all cases.

- 58 -

by

9.2.2.

Hiring
Qualified
New starters
previous

who are

experience

qualified

in terms

for the particular

from minimumof range to within

of qualification

and

job may be paid

lower quartile

salary

of the range.

Specialist
Where a new starter
unique

is

competence to

a specialist
perform

salary

may be up to the upper

cases

justification

rare

and

will

generally

only

in

the

be

occur

field

particular

quartile

also

the

or

job,

starting
In such

of the range.

necessary.

has

will

be

price

so

market, new entrants

are

when

the

This
market

dictates.

At present,
usually
This

paid

the buoyant labour

higher

phenomenun is

grades

i.e.

relatively
housing

than

the

Grades E and AC since

and passage

given

lower

more prevalent

not so attractive

the existing
less

under

staff

don't

of

especially
their

This

for

benefits

compared. with

allowance.
as they

quartile

has

understand

Grades
caused

the

range.
lower

package are
C & D with
pressure

why they

the same job and working experience.

- 59 -

the

to

receive

9.3

Annual salary

review

In July

of

increase

and performance increase

increase

takes

price

each year,

index

into

the

company grants

consideration

increase),

pay raise

to

general

staff.

The general

inflation
of

salary

rate

(consumer

Government and

other

large companys,Hay survey and other factors.

As the

company's pay was above Hay Q3 line

curtailment
very

of the salary

significant

line.

In

if the

1987,

regarding the

range

staff

had

strong

and they

be

companies only and the result

representation

challenged

As a result

compile salary

above Q3 rate.

movementwould have to

made a

2% curtailment

Hay to

the

company was to achieve Q3 policy

about Hay's survey data.

asked

by 20%',

of this,

comparison with
was better

strongly

the company
the

but still

Utility
slightly

In 1988, the companystopped the curtailment

policy.

As a matter

of fact,

after

few years

n~w salary

system, staff

reputation

and challenge why the

of introduction

of the

in general are in doubt about Hayts

within the upper quantile

times that

there

Consultant

whose reports

company is

of Hayr s survey.

is too much reliance

are

not

structure.

refuses to do so.

- 60 -

They raise

high
many

on the Hay Management

always conclusive

suggest an independent committee be set

whole question of salary

always

up to look at

and
the

The company of course

In the next chapter, the various effects

the

implementation

and

operations

and consequences of
of

the

administration system are described in more detail.

improve the system are also suggested.

- 61 -

salary
Ways to

O1.apter 10

The case study

Since

the

and areas for improvement

implementation of the Management Job Evaluation exercise,

the total
overall

review of results

number of senior
increase

of 30%at

staff

has increased from 974 to 1254, an

an average annual rate

in the same period the turnover and profit

annual

rate

dropped
difficult

to assess the effect

and productivity
since

25% of

both

are

profit

total

operating

Staff

and productivity

tremendously during

The staff

these years,

has

cost

costs.

of the new salary

concerned.

h:>wever,

has increased at an average

of 17% and 30% respectively.

from 30% to

of 6.7%.

It

also

is

quite

system as far as cost

always

questioned

(profit/employee)

they should

has

has

be eligible

that

increased
for

better

remuneration packages:

On the other

hand, managementargues that

improvement in profit

margins

mainly

savings

as

is

a consequence of

to junior

the same period.

fact

that

with

staff

ratio

Nevertheless,

has also

this

dropped from 1:12 to 1:10 in

might as well be explained by the

technology development less

Also,

more senior

managing activities
external

as well

cost

investment on modern equipment.

employed in view of more computerised operations

equipment.

significant

adopting new and advanced technology

following large and intensive capital

The senior

due to

the

staff
as

are

reacting

environment.

- 62 -

junior

has

and modular design

required
to

staff

the

for

planning

been
of
and

now more complex

Apart from the above controversial issue on productivity, the company

in general has successfully achieved the following purposes of the
Management Job Evaluation exercise:-

set up a system to control grade drift and in general staff think

that there is the avenue and proper method of requesting and
achieving job evaluation to reflect real job worth.

The company

relies on the line managers to take the responsibility to review

and recommend jobs and there are very few examples where either
new or changed job being submitted are not evaluated of their
intended grading.

reduce

staff

complaints

about

Before

the job evaluation

internal

exercise,

relativity

problem.

lot of requests

were

received from different categories of staff for review of grading

and salary scales as they compare with other grades.

In the

absence of yardsticks to measure jobs, the results of the studies

by Personnel can hardly be defended.

Since the introduction of

the job evaluation exercise, no request has been received for

reviewing grading or salary scale for particular job famiLies ,

with

the

abolition

gradually

accept

beginning

of

of

the

the

pay

fixed
for

the time when

incremental

performance

the

company

system,

staff

concept.

At

the

introduced

the

job

evaluation exercise, no utility companies in Bong Kong employed

pay for performance, but now many of them have used merit

or

performance pay system.

It is a slow yet successful process to

train

responsibility,

results

staff

to

accept

orientation

as well

as

different performance.
- 63 -

to

understand

accept

goals

different

pay

and
for

However, it does not mean that there is no room for improvement for
the system.

The following are some areas where review and improvement

can be made:-

10.1

Objectivity of system

In

view

of

the

small

number

of

grades

involved,

and

consequently large difference in score range, there is not

much

problem

of

evaluating

jobs

into

the

wrong

grade.

Evaluation committee members can quite easily evaluate a job

to be under which grade~

One

shortcoming

of

evaluation system

the

operations

is that

of

it relies

the

present

job

solely on the

line

managers to submit changed job description and Personnel has

no

planned

descriptions.

system

to

keep

and

maintain

Usually,

line

managers

only

descriptions with increased responsibility.

updated

job

submit

job

Now that five

years have lapsed, it is necessary for Personnel to examine

how to keep an audit of the old job descriptions to ensure
that relativity can be maintained.

A possible way is to set

an annual target of reviewing say 10% of all the jobs and ask
line

managers

to

submit

rewritten

evaluation for the chosen jobs.

job

description

for

With this system, the line

managers can be made aware of the necessity of reviewing jobs

and

updating

job

descriptions

where

necessary

organization improvement or internal relativity purposes.

- 64 -

for

,;;;-.

10.2

Motivation with performance increase

The company's performance pay system is considered to have

low motivational effect because of the following reasons:-

- Staff do not know

the linkage

between

salary increase since the framework

performance

and

and guidelines

for

rewarding performance increase are not made known to staff.

The difference

in pay

raise

between

good

and

average

performers is small (no managers consider their staff have

below

average

performance;

for

the

1%

staff

with

performance rating, they are either newly joined or newly

promoted)

Those on grade maximum (about 20%) are not eligible

performance increase.

- 65 -

for

The following are recommendations on improving the situation:-

- To have the guidelines of calculating performance increase

announced to staff.

Even

though

it is the

company f s

policy that individual salaries should not be disclosed to

avoid embarrassment of knowing below average performance,
staff should

have

the

opportunity

to know

how

their

performance increasing are governed and calculated.

Also,

the general profile of performance

(e.g~ distribution

by

known to staff so
performed

when

Performance

pay

rating and Increase

Division/Branch)

that they

should

can know

compared

to

the

system

without

be

made

how

they have

general

profile.

staff

knowing

the

relationship between reward and rating is unlikely to be

able to provide good motivation.

As the culture and climate of the organization is not yet

ready for accepting large difference in pay increase (as
this may mean cutting general increase of below average
performer in order to reward good performer with higher
increase and staff in general reject very much the idea of
receiving salary increase

less than that for

cost

of

living adjustment with this affecting the provident fund),

the practice

of

installing

more

rigorous

approach

of

linking large difference in salary increase to performance

is not advocated at this stage.

Also, as both staff and management have different views on

productivity

improvement,

the

launching

of

incentive

scheme based on productivity will be very controversial

and is also not recommended at this stage.
- 66 -

At

the

introduction

system,

the

of

the

company has

considered

performance bonus but this

thought that
the staff
this

a fixed

relied

salary

for

the

adoption

I-month bonus was better

on it to pay tax.

the company's senior

administration

staff
tax

of

was shelved as top management

has become not so true

months'

new salary

as much of

As a matter

of fact,

as nowadays the majority

of

have to set aside on average 2

payment.

Accordingly,

it

is

recommendedthat the company can consider paying var.iable

bonus (say,

varying from one-half of monthly salary

times of salary).
perpectual effect
on grade

This has the advantage of cutting

of salary

maximumas well.

to

adopt

necessary,

more rigorous

the

distribution

the

increase and motivating those

This

can also

climate for more discernable pay difference

is

to

of performance rating

the

the

if the company

approach later.

company can consider

foster

use

As

deemed

of

forced

so as to differentiate

performance.

,;;;.

- 67 -

10.3

Operation under tight

labour market

Under the

present

buoyant labour

particular

'market-categories'

market,

of staff

the

turnover

are very high e.g.

rates

for

senior

staff

in Personnel 25%, Finance 25%and Marketing 15%were recorded

in the

companyin 1988. As mentioned earlier,

request

for

job evaluation as they

these staff

too understand that

demandinstead of job worth.

it relates

They vote with their

company. It is highly believed that

there

will

of such market-orientated category of staff

problem of emigration.

do not raise

For other

feet

to

market

and leave

be prevailing

because of the

the

shortage

aggrevating

engineering and operations

staff,

the market place for them is limited due to the very specialised

as

skills

and experience, the turnover rate remain low at 4-5%in 1988.

Interviews with

line

managers in

Personnel,

indicate that the main stream of staff

Finance and

leaving the companyare those

lower grades .Le , Grade E and AC where they

qualification

have

the

and experience but cannot enjoy benefits

allowance and so they are

easily

attracted

managers expect 50% of turnover rate

for

three years since even more of them will

by other
these

such as housing
companies.

staff

the

for

the

problem.

Line
coming

Several

One is

can

stay longer in the companywith the sense of being brought up there,

and

risk

In general,

to

they

the potential

them up afresh.

at

professional

leave for emigration.

actions can be taken simtaneously to tackle

recrui t more graduate and train

Marketing

of them emigrating in the short

term is

The other is to build up career planning system and identify

high

potential,

opportunities

provide

them with

and motivate them with

other areas.

- 68 -

more

training

and

also

10 ~~~~

those wi
developme.

promotion or wider exposure

As

far as salary administration

is concerned,

it

is not

practical to improve the remuneration package (e.g. providing

hous ing allowance to Grade E) as this will
remuneration cost significantly

increase

since there are a

lot

the
of

staff in Engineering and Operations and same benefits have to

be provided to ensure equity~

To set higher salary range for

these market-orientated staff will raise the same question as

well.

If the problem becomes more serious, it is possible to

introduce special allowance

for these staff.

The special

allowance should not be built into the salary range and not
be taken into provident fund or bonus calculation to avoid
perpectual cost.

Both recruitee and internal-staff should be

subject to the same allowances to avoid pay compression

inequality.

and

Other staff in Engineering and Operations should

be made aware that the additional allowance is created due to

market pressure and does not apply in the long run.

Salary administration under a tight labour market is a most

difficult task.

One has

internal relativity.
choice

as

particular

to

which

category

to

consider

both

the

cost

and

Salary administrators have to make the

alternative
of

staff

can

under

attract
market

limited budget and yet can be understandable

large.

- 69 -

and

pressure

retain
with

by staff at

Chapter 11

Conclusion

The case has demonstrated the application

to

establish

new salary

practices

of Job Evaluation exercise

in a company. The exercise

considered to be a successful one in setting

salary

structure,

pay system.

controlling

and salaries

and in many cases

utility

of

'no worse-off for

natural

wastage solve

company strictly

existing

remained unchanged for all

let

grading and

cost and introducing performance

The implementation was smooth as the

followed the principle

benefits

salary

up a proper

staff'

- all

anomalous situations

the anomalies (another

companyunderwent the same process, downgradedseveral

rearranged job duties

engineers'

jobs

is

staff,

and increased workload of more than one hundred

and

resulted

in

much

employee grievance

and

dissatisfaction)

Another factor

leading to the successful launching is that

the company

adopted Hay'5 recommendationto reward key personnel (L, e , those

top grades) with significant
This has
connnti

pay increase

the benefi t of making them

implementation of the system.

and benefits

on

improvement.

and contribute

to

the

They, as line managers, had significant

power and would thus influence those on lower grades to agree with the
new salary

system.

lower grades,
salary

As there

are significant

numbers of staff

the companyhad adopted main control on these

cost which constituted

in the
grades

the majority part of the overall payroll

cost.

- 70 -

In view of the
set-up

in

introduce

company's histortical

static

and simple

sophisticated

environment, it

salary

administration

the companywhich links pay heavily

matter

of

fact,

evaluation
practices

the

system,

staff

being

agreed

a very good start.

only helped to develop the new salary

given the staff

job,

to

opportunities

understand their

is

not

bureacratic
advisable

or incentive

and committed to
system

and

to

system

to performance in one stage.

performance appraisal

is already

also

background with

to
P.s a

the

new

job

salary

The job evaluation has not

structure

and policies,

to have a closer

responsibilities

but has

look into

thei,r

and to work towards the

company's objectives and individual goals.

In the

case shown, the companyhas actually

change agent
follow

for cultural

up with

organization

vision

used job evaluation

change and employed the same Consultant to

building

exercise,

development program.

and

Of course,

two-way process, while the companyis trying

practical

approach of work for

environment,

the

participative

managementstyle.

With

the

threat

as a

its

company also

has

of technological

today companies have to rely

staff
to

very

probably

with

the development is

to develop a flexible
to face
adopt

a
and

the more dynamic

a

more

open

and

development and competition,

on more employee involvement in

improving its
product or service

and increasing productivity

other hand, employees also like

therefore

to lower cost.

On the

to be paid more by the company. It is

important for companies to communicateto employees how they

can contribute

towards the objectives

much they

can get by working hard

evaluation

systems and salary

of the companies as well as how

and perform better.

administration

can always help to serve these purposes.

policies

Proper

job

and procedures

- 71 -

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TIME- TABLE Of JOB EYALU. TIO~ & SALARY AD~I\ISTR..HION

YEAR

1984

~o

.1'1> .

;y

;::s
QD

<:

0CfJ

1983
'..)

....,
0

:>

o
.D

:-

0-

s,

t..

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:::i:

:;

>,

::l

r-i

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.;;:

z
""")

JOB

1985

0.
C/.l

'""')

Board
approval

EVALUATION

Appointment

<l)

.,;

:>

c:l

(!)

.D

~
z

,.;

Co

r;

::l

::l

::l

s,

t..

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,.....

!:II)

z;

<:

0-

.,;

>

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o

<:

c
:I)

bD

....,

C.

:>

t::.

Co

-<

:::t::

::l

-e

'""')

::l

(!)

<l)

c::;
:.;

0:-,

System design
Selection of benchmark jobs
Writing of benchmark job descriptions
Setting up evaluation
committee
Evaluation
of benchmark jobs

Training

of internal

Communication
~ith management
results

Salary conversion

(alignment

of incremental

date)

& agreement
on benchmark

SALARY

STRUCTtJRE
Implementation
Propose

of new structure

new salary structure

I PAY FOR
I PERFOR}.iA.l";CI

Develop appraisal &

target setting system

iraining

&

communication

New

Setting of personal
targets & agreement
with supervisors
(trial for Grade 0
only)

b cnu s

Performance & development review

-(trial for Grade D only)
-~ng
of personal targets s
agreement with supervisors For 85/86
(for Grade D & above)

systeru .
Performance & development review
(for Grade D & above) for 85/86

Setting

agreement

"

jl----

~~

td

:::s:

: .*'"

Negotiation & agreement with management

Decisions on grading structure
Develop application rules
Implementation
Dealing with anomalies
Appeal system
Maintenance system & control

staff

'V

""")

Training job holders to write

job descriptions
Appointment of evaluation committee
Writing of job descriptions
Evaluation of remaining jobs

of Consultant

.a ~

0.
t..

:::i:
'""')

s,

c:.>

>,

t..

c:.>

-:

.D

I!)

"

""")

--

1986

of personal

targets

with supervisors

&

For 86/87

<:

~-~~~~~~~~~
~~-~+_,~~~---~-~~~----~~JL~
-~-------~-----~~~

TI!-1E- T.-\BLE Of JOB \"ALr.HIO~

1984
s,

.D

s...

>,

0-

r-i

....

>

s::

1985

I
o

Appendix 3

& SALARY AD~ISISTR..HION

t:
..0

s,

s...

;....

":10

0..

....

>

1986

t:

.D

""""

s,

s,

>,

t:

,.....

bD

C.

1987

...

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s,

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0.

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Q)

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<:

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~

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Q.)

:<:

;:1:

<:

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c.

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III

-e

"'"

It

'"

ining

of internal

CJ:l

;:l

III

....,

ell

c.

-,

"'"

"Q)

ttl

-<

new salary

of new structure

structure

&. communication

(;.development review
Performance
(trial for Grade D only)

Setting of personal targets (;.

agreement with supervisors for 85/86
(for Grade 0 &. above)

Q)

CI)

Propose

..;;:

.-

date)

Implementation

Setting of personal
targets & agreement
with supervisors
(trial for Grade D
only)

III

(;.agreement
Communication
on benchmark
with management
results

ining

(.)

:::c

Negotiation &. agreement with management

Decisions on grading structure
Develop application rules
Implementation
Dealing with anomalies
Appeal system
Maintenance system & control
(alignment of incremental
Salary conversion

staff

<

:.10:'

esign
n of benchmark
jobs
of benchmark
job descriptions
committee
up evaluation
of
benchmark
jobs
on

;::

::

C.

Training job holders to write

job descriptions
Appoint!i1ent of evaluation committee
Wri ting of job descriptions
Evaluation of remaining jobs

--:

Performance & development review

(for Grade D & above) for 85/86

Setting

of personal

targets

&

New
b cnus
agreem
ent
with
superv
isors
for
86/87

system
l

Performance
development
review for
86/87

-I.l

>
o
z

t:

..;.:.l,
1985

0.

CI)

.j..)
(.)

>
o

:z:

>
o

z
l

&

Full
merit
system

c::

..;.:.

,......;

..;.:.
:
,

-I.l
(.)

> o-

:z:

Appendix 4

QUEsrIONNAIRE'ill SUPPORT
POSITION DESCRIPTIONS

POSITION:
NAl1E:

REPORTS 'ill:
DATE:
APPPDVALS
EMPID't'EE

SUPERVISOR

Page 1 of 6

Appendix 4

ORG.ANISATION

Your Su oerior
(Title )

I
Other po sitions
report:mg to
your SUD_erior

.'

Your Position

Positions

Reporting To You

Page

2 of

Appendix 4

Irnoortant Realistic

Figures

In your job there will alIIost certalllly be sorne.figures within whlch

your job Impact s in one way or another.
These figures vary from job
to job;
below there are sorre typical areas whlch may be related to
your job.
Please

fill

In those

areas wit.1-tdata and specify the year

if not

1983.

Revenue
Gross Revenue

(Annual Sales)

Exoenditure
.Annual Expense Budget

Annual Capital

Expenditure

Assets
Capital

Assets

Invest:I:rents
Funds Invested

Staff
Total ninber of staff
reporting to you
Directly
Indirectly

Other

Relevant Figures

Page 3 of 6

Appendix

Maior Activities
The rrost; important activities

..j.

you perzorm..

1.

2.
3.

4.
5.
6.
7.
Policies

and Procedures

To what excent; do you develop policies

follow. Please exp la.in TNTIaptolicies

or procedures for others to

or procadcres you develop:

1.

2.
3.

4.
5.
6.
7.
To wTIat extent do you follow policies or procedures.
plain wTIat policies or procedures you follow:

Please ex-

1.

2.
3.

4.
5.
6.
7.
Page 4 of 6

Appendix 4

Authorit7

Please list
those areas of your job wnere you need to gain approval
fran your superior, e.g. staff ing , capital expendi.turetwhac $ level)
prorrotnons , salaries,
organization changas , expense authority
(w-nac
$ level)

Decision :tA'..aking
What decisions

can you make without reference

to your superior

Planning and Budgeting

wnat is your Irrvolverent and impact on the planning and budgeting processes of the Company, i. e. Approve departmental annual, budget or contribute to long te..Yffpilanning by providing sales statistics

Appendix 4

GHL
AYJl

Imoact on End Results

What are the major results expected from your job and the type of
impact you have on those results)
i. e. Ensure completion date of
the building is attained by directing and centro Uing the subcon-tractor.
Contribute to managem:nts I control and plarming by providing timely and accurate financial accounts.

1.

2.

3.

4.

5.

6.

IlJ

.. ..,..... ~
~1

fS

Page

6 of 6

Appendi."'{-~j~

; HAY

If

SAt\1PLE HAY JOB DESCRIPTION

JOB D::::SCRIPTICN

Job Title

Operac icns

Eng-ineeriP.g

to
Job

Ha:r.ager

(l-!ec...i:an-i cal

& E:lect::::-ic3.1)

Ope:r2.t::"ons

Ho Lde r

February

Da.ce

1983

PLP20S::
.

cnc.

elecp:-ic3.1

end rrecharucal,

!I:2.i..:.t:e:'lanc.oeperation

OJ:

:e~les.

._---

(:_:- :-: _:..::

.....

,-~

~...'.J. ::-

-_;._

~.:-.s~?

D:.-: I\Jc1.:
193'2:

~5J

I..E.tct:!!.""

E.zSSO cilli~

l;ac2.=ials

-,

and

G:-,/"" CJJC~( ~

:..s

".'._...

----......
..... - ... ......-.-.
.._._"'_"'.....

...-..:..

.. -

~.....

:.:l!:C:

'-"'l

Page 1 of 4

Append Ls--S

:.iH.rA
,'-

~~

passenger
Fezrv

schedule.

--

~ st2..-~-.-..\..::) ;:;e-"" " ;""",.d n-

Dt.!=-'_,_nL:g.:.~ Hong. Kcng

less

cr-rrirtz... ::;:-

,'-

than 1007. a-:/ailibilit::r was ccnsi.cered accepcabl.a , r:..c:._1;!'.-e::

t.:.~!:"e is nocr
accep..t.ance that Im,~r levels ofa\Ta. iiabil;Qy- .:c-~_-C.:.:"::,..._......._-.1

=_.-.'::l~:"~-"..."-.'.~.,_.......~.~._.::)...':."-:-~-r_1 :--"\l;-~
.quantitative

targets

"t-:!arine maintenance

exists.

1.S

aIrrost; e...rtt:iI~y

or

i.odi.cal.Ly thez e wi.Ll, be errergency

rrvoIve the
job holder
holder'

in Unsocial

breakdoen

is to create.

reliabil:Lt-f
in service.

i'

w-hiSI-J.

is

_'""men' may ;

a mairicenance orgaruzatacn
is in the process

to carry

carr ied our

of opening

Corporatacn

',,' ...~";'"

routes.

'A:'

a UEaS'UI:e of' t~~;';ErE::~cy:?\Yith

~Nhlc-i1fe;Xies- breakC6\~

prohieiks'
ari;~'if' f~=r:ies
..

to the dock t..:::::cietrheir

be .:J:(.;creof

o;;vn

the need to restore

~t

a second

breakdcon

and

:',; :

return

jao

a' second qea~ur~: of perforrrance as ,their

of ferries

S~ve::-e oper2t:ian:al

pez

r-c:'~tve-r-, are rare. and. the

the L-f3.cauext.ensi.on of Eong Kong Ferry

As. ~;;vell.as CiVailability

to resolve

All routine .servicing is currencly

servicing.

the Kowloon Bay Dock but: the job ho Ider

clock for

problems

hours .. Such bre..a_..~"ns

S ms.in responsibility

out the routine

a. plc.!."'~e.c~i..2.!::!realc:l-.cugh

of

pbr.ver, end t.."1ejob

-,

hc Idar

r.70St

~.:'i!.o;:

const ant Iy

operatricnal. eectiv-er_ess should any br eakccvn

occ-...::r.
In addition to r::..--.e =e::.-::ies.all- of the
pl.ancs , zut.orrat ed machi.nes , l.:tghting
located

at t.he dry dock are maintained

of this

,~rk

the .d' ads

in line

:.

.r",i.th current

.:

a: . host 'of .o.ther snci.Ll.ary equi.prenc

by the job

bo Ldar ' s organization.

Al.I

is tr.e onl.y cirne. -t..nen

are set out in detailed

fl'.anuals and it is the job

t:ha:J: .the rrarua~s are

to ensure

best ':engineerfug~p~actice~~:+

will. be autborue.d.bv

-.~..... ~,:,.,,'.~.'~~:.'-:,;'., ';.:~.

:.... !:"~"','~,.'

part to minimize

the chi@f~L."1cine~ for

tDst

kept,

'Up-

to':':date

end'

changes t:Q e,11.gi:Leeri~,g

..the,d.~q.rri.Lder~j;:; If..major.:fi:rnancial-:;:c6.tsequenc!

;.":~:.~

could "arise' as a consequence 'of,

expensfve

are free of -, fe... .rr:ie s ~-

responsibility

st~dards,

an

equi.prrent , ai.r-condi.t.icrung

needs to be done' dur.ing ;the. night as this

-l-f4intenance procedures
holder's'

UEr:L.Le

.. ' . ,

~"...;;t:'~:;:'\;:",,.:.:,":.,'i:':.-:':~:.-.:;~:~:~:~- ~.'.:::.

for

'e..'"Gjipl~- bli;ring

maincensnce 'costs,

"i:ilia:1. 'allthori~'j

-" ..:",:- ~~"

a Significantly

the job bo Lcar

",,~,::.~:,,::.~:;,,~..:~..;.~~': ..:.,., ::~'.."'.,:

tIDp~" : '-:

-r;'lOcld"2onSult

,,;ich

Page

2 of

The job holcie.r -Gevelops,an

o?~2.cicns,
This ;-ti.ll be. discussed

Engineer

before

conso.l.idataon

\.;it:.~

cc.h..er operaciooal

rE".Ji~.;ed and approved. by tl:e Ope:::-3.cicns Diz'ector

,

wUic~ are

'and ultil::;.a.tely by' tb..e ward.

The job holder

is e.."'q)ecte~,_to operata wirrun his

rrcnrhl.y en vari~.ces ran t~ ~bUdget.~
whllst the'maiIi):h...rUs,t
to contrtibute
..
.

are

budgets

w"i6 the Q-.i.e

taken,

_""

.td:'-.-_new:

,dr u.~

job is ma.intenance,

engineezirig

project

ind:< ~~coUnt. _~L, zhi.s wa.y, he

t:ry_

C2!.1

, for a design "t.;prk renains

,\vi..\j'1 the Engineer-ing

al.t~l~F-~~

vie:.;:s

to' ensure tr.a:: mai..'"ltenance

although

the final

.
auchority

Departmenc ,

of the Chief Engirieer , the job

~58i~'!ritt~'o~f:~policy

holdi:r~:i-etUffis"or~eferred,f6:
, ")/;\r~r._j;;:;t;:~;-1W:;::.-~0?(i{;:;,,~-:,',:'.' _. :.-",

the' job f.older is expect.ed

.ork to ensure, thac operational

out of new equiprrent,

:

and to report

problems v."ill be designed

In the absence

budget

the

Will

Operacicns

holder ","ill deput i.se for

either be held

hirn,

over Until the. 'jbb_

Di.rec~or for appro-v:a~',

:-~~;t,:~\~.;'~.~,;-.'~,....

1)

LT'l.SU::&::.-.2e..:: the avai.Labi.Li.cy

of ,ferries

to :TEet the scheduled

ooerucf.on

Ls. achieved ..
2)

Ensure that fezrf.es L"l.service.

are reliable

and do not fail

in servi.ce .

.4J.:)n.sure -that -the mairicenance organization-' is ~t:afed with people. of

, :-;~:;fu:fficie..Tlt:tecbni~~l:':~an(r-~geriaL~~~ie...~~~

and

JD:)~i~~i:e'-t~~~ staff

,'i.,'tii~ ~2tt{~;~~i,~~~~r.:ftrr'?1~~~\
tb~

$fl{ ',
'.~.

5r:i~~:a:n.:d

dev~~p,

~-~~5f="

s~.~~_,_~~.c.~_;"t~~l.er~~e,

c:v:til~ility

.;.:~:~.~~:.~~::~~lf~b~A~':=Of',~~~~J&.~~~-gf~:~:~ltY~ici.~:m~a:'~&,~~~et:~;~

Page

3 of 4

Appenuax

:>

~(

5)

._..-...r.
._10.-';.,,;-

chat

~.,.-,."-e'l"'"t ...,.

!""--::--

--

./.

_t..

~a..c..:._

Page 4 of 4

Appendi...x

Aooreciation Course On
Hay Job Evaluation Method & Practice
7 January 1988 (a.m.)
Present M.r S Hsu (Consultant)
Mr
Ms

Mr
M.r

Mr
M.r

Mr
Ms
M.r

Mr

Mr
Ms

Ms
M.r

Ms

\~,

Mr Hsu started the meeting by stating that Hay system was designed to
guide Management to evaluate jobs objectively.
However, it was not pure
science and judgemental eLement; was still Lnvc Ived, .
He then introduced and ran through the three guide charts one by
one.
1. Know-How

Three elements were used to measure Know-How, Vl.Z. job knowledge,

breadth of management know-how and human relations skills.
1.1 Job Knowledge

Various levels of job knowledge were interpreted as follows

Primary
The most simplest job, e.g. tea amah

- Elementary Vocational
High school level, e.g. clerk, typist

Vocational
Might involve the use of equipment, e.g. computer operator
Advanced Vocational
seasoned practitioner, e.g. bookkeeper

'A

Basic Technical/Professional
University education level
Middle E - Usually 5 to 8 years 1 experience with a pro.
essional degree, e.g. accountant, engineer
Top E
~..,.,,~

Highly technical jobs, usually 10 years

a professional degree.

experience

with

--:::::

-------

- Seasoned Professional/Technical
More than 1'0years
progressive expen.ence after having obtained
a professional degree.
Big senior jobs, e.g. functional heads
I

G
R

- Technical/Professional Mastery
.Top managerial posts requiring mastery of various functions.
Exceptional Mastery
e.g: Scientist

1.2 Breadth of Management Know-How

Hsu explained that managerial skill included planning, oxgam.s
rng skills and ability to integrate various activities.
The five
levels of breadth were interpreted as follows :

Mr

1.

Minimal
-,
Referred to supervisors who carried out non-managerial duties only.

II. Homogeneous
Referred to managers who were required to'
activities.
e.g. department head

integrate

supportive

III. Heterogeneous
Referred to multi-function managers.
IV. Broad
Referred to top executives.

v.

Total
Referred to chief executive who managed a lot more conflicting
objectives.

Mr Hsu remarked that not all the five levels were applicable to
a particular company. He thought that only level I through IV
were applicable to Telco.
1.3 Human Relations Skills
Referred to the skill of motivating
people. Basic

- Only ordinary courtesy

required.
Important - Referred
to more
influencing
communication teChnique.

senior

jobs

which

required

Essential - Motivating and persuading people were critical to

the achievement of job objective, e.g. salesman.
Mr Hsu asked attendants

to give Know-How points to three different.

types of job and the results were agreed to be as follows:
s
~

Policeman
School Principal
Fighter Pilot

Job
Breadth of
Human Relations
Knowledge Mgt Know-How
Skill
B/C
E+
D+/E+

I
II
I

1+/2
3
1

Page 2 of .:;

Appenaix 0
2. Problem Solving
Mr Hsu defined Problem So Lvi.n.g.

the orn..g.i.na1 ' se lf-starting'

thinking
as
required by a job for analyzing, evaluating and arriving at conclusions and
inte-:preted it as a % utilization of Know-How in the mental process
of solv~ng problems.
There were two dimensions to determine the %, namely Thinking Environment
(slots A through H) and Thinking Challenge (slots 1 through 5).
2.1 The Thinking Environment would become progressively freer as procedural
constraints and
the.
amount of
guidance
were
relaxed,
as
illustrated below :
Thinking Environment
Board's wishes

Functional goals

Departmental
strategies

BIA

Mr Hsu asked attendants to note a general ruling that with a KnowHow level say, at 'E', Thinking Environment should at most be marked
at the same 'E' level and should not be greater than 'E'.
2.2

Thinking Challenge measured the complexity of the problems encountered

which ranged frrom Repetitive, Patterned, In cerpoLat Lve , Adaptive
to Creative.
Some general guidelines were given:
B2 ) -

C2
)

Clericaljobs

D3

Doing own jobs at most of the time, e.g. foreman

E3

Managerial jobs

The actual
hierarchy.

points

assigned

varied

depending

on

company

The choice of a higher or lower % within a box depended on whether

the job fell in the high side or low side of the chosen levels
of both Thinking Environment and Thinking Challenge. Once the % was
chosen, the Problem Solving points were derived according to the
Know-How points already assigned.
For big senior jobs, one might look at Accountability first and
then look back to measure Problem Solving.

Page 3 of 5

A.ppendi..x

3. Accountability
Accountability measured a job's contribution to the end results of a
company's overall business performance.
In evaluating Accountability, 3 elements were considered, viz. Freedom to
Act, Impact on End Results and the Magnitude of Operation Affected by the
Job.
3.1 Freedom to Act
B

Junior clerical jobs, close supervision required.

Clerical jobs, supervision of progress and results

required. D - Supervisory jobs, regular review of results

required.
E - Functional heads, e.g. production manager, sales manager who
made recommendations but not policy makers.
F - Top executives who decide how they do their jobs.
Mr Hsu asked attendants to note the general ruling .that the level of
'Freedom To Act' should not be greater than that of 'Freedom To
Think', i.e. 'Thinking Environment' in determining Problem Solving
points.
3.2 Magnitude of Operation
Evaluating magnitude involved selecting a dollar figure to best
represent the end results assigned to a job, e.g. a sales manager's
impact on his sales dollars.
Magnitude carried the least importance ~n measur~ng Accountability.
Ms J Leung enquired how to interpret various dollars items by
Static and Dynamic in which Dynamic. was designed to be 1/10 of
the Static dollars as shown on the Guide Chart. Mr Ksu advised that
only the big numbers, l..e. the Static standards should be referred
to and Dynamic standards could be ignored.
In response to Ms S Hung's question, Mr Hsu answered that in order
to catch up with inflation, the Magnitude standards would be revised
from time to time but not necessarily revised annually.
3.3 Impact on End Results
The impact
categories

of

jobs

on

end

results

Remote
(R)- Indirect impact
Contributory
(C)
.Shared
Primary

(5) - Direct impact

(p) .-

were

classified

into

Page

4 of'

Appena.ix 0
Production managers who had direct controlling impact on production
costs should get a 'pI
Similarly, sales managers who had direct
controlling impact on sales revenue should also get a 'P'.
Marketing managers who participated in sales revenue generating
act~v~t~es usually got a'S'.
Supportive functions managers, such
as personnel manager, accounting manager and some engineering heads
usually got a

'c' .

Profiling
Profiling ~s the method to check if job evaluation had been done right.
There were three types of job profile based on
Accountability points to Problem Solving points, viz.
'A' Profile

AC points> PS points

'p' Profile

AC points <PS'points

'L' Profile

AC points

the relationship of

PS points

'A' Profile referred to result-oriented Jobs while 'p'

to thinking-oriented jobs.

Profile referred

Some general guidelines of job profiles were illustrated below

Job Profiles
P4 or P3 or P2

Very seldomly
fell in
these job
profiles in
the
commercial
world

Pl

L or Al

EntrySupport function
level
jobs, e.g.
Programmer Financial Contr
Personnel Mgr
EDP Mgr

A2

A3

Marketing
Production
Mgr without Manager
sales
responsibility

A4

Salesman;
Production
worker

Before closing the session, Mr Hsu gave attendants a sample job description
to evaluate and discussed the attendants' reasoning of assigning different
scores.

JC/cc

Page

5 of 5

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