Milkovich/Newman: Compensation, Ninth Edition

Chapter 5
Evaluating Work:
Job Evaluation

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
 Job-Based Structures: Job Evaluation
 Job evaluation – process of systematically
determining the relative worth of jobs to create a
job structure for the organization
 The evaluation is based on a combination of:
– Job content
– Skills required
– Value to the organization
– Organizational culture
– External market
 Note: focus is the job, not the person doing a job
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Exhibit 5.1: Many Ways to Create Internal Structure

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Exhibit 5.2: Assumptions Underlying
Different Views of Job Evaluation

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Exhibit 5.3: Determining an Internally
Aligned Job Structure

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

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Defining Job Evaluation: Content, Value,
and External Market Links (cont.)
 “How-To”: Major decisions (cont.)
– Single versus multiple plans
 Characteristics of a benchmark job:
– Contents are well-known and relatively stable over time
– Job not unique to one employer
– A reasonable number of employees are involved in the job
 Refer to Exhibit 5.4
– Choose among methods
 Refer to Exhibit 5.5

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Exhibit 5.4: Benchmark Jobs

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Exhibit 5.5: Comparison of Job
Evaluation Methods

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 Ranking
 Ordersjob descriptions from highest to lowest
based on a global definition of relative value or
contribution to the organization’s success
– Simple, fast, and easy to understand and explain
– Initially, the least expensive method
– Can be misleading
– Two approaches
 Alternation ranking
 Paired comparison method
 See Exhibit 5.6
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 Classification
 Usesclass descriptions that serve as the
standard for comparing job descriptions
 Classes include benchmark jobs
 Outcome: Series of classes with a number of
jobs in each
 See Exhibit 5.7, 5.8 (Federal GS)

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 Point Method
 Three
common characteristics of point
methods:
– Compensable factors
– Factor degrees numerically scaled
– Weights reflect relative
importance of each factor
 Most commonly used approach to establish pay
structures in U.S.
 Differ from other methods by making explicit
the criteria for evaluating jobs – compensable
factors

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

Skill Effort

Working
Responsibility conditions

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

 Diversity of tasks
 Complexity of tasks
 Creativity of thinking
 Analytical problem solving
 Physical application of skills
 Degree of assistance available

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 Generic Factor - Responsibility

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

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Generic Factor – Working Conditions
 Potential hazards inherent in job

 Degree of danger which can be exposed to

others

 Impact of specialized motor or concentration

skills

 Degree of discomfort, exposure, or dirtiness in

doing job

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Exhibit 5.9: Compensable Factor Definition: Decision Making

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 Step 3: Scale the Factors
 Construct scales reflecting different degrees
within each factor
– Most factor scales consist of four to eight degrees
– See Exhibit 5.13: Factor Scaling -- NMTA

 Issue
– Whether to make each degree equidistant from
adjacent degrees (interval scaling)

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Exhibit 5.13: Factor Scaling – National Metal Trades
Association

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

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 Exhibit 5.14: Job Evaluation Form

Note that the only reason this form works as it does is

that each factor has same number of degrees!!! 5-23
 Overview of the Point System
Degree of Factor

Job Factor Weight 1 2 3 4 5

1. Education 50% 100 200 300 400 500

2. Respons- 30% 75 150 225 300

ibility
3. Physical 12% 24 48 72 96 120
effort
4. Working 8% 25 51 80
conditions
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Step 5: Communicate the Plan and Train
Users
 Involves development of manual containing
information to allow users to apply plan
– Describes job evaluation method
– Defines compensable factors
– Provides information to permit users to distinguish
varying degrees of each factor
 Includes appeals process for employees

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

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 The Final Result: Structure
 The final result of the job analysis – job
description – job evaluation process is a
structure, a hierarchy of work
– Ordered list of jobs based on value to organization
 Relative amount of difference between jobs
 Note that job hierarchy resulting from job
evaluation process that mirrors pay hierarchy
of key jobs in external labor market may in
fact be problematic – may be perpetuating
historical discrimination
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Exhibit 5.15: Resulting Internal Structures – Job, Skill, and
Competency Based

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 Balancing Chaos and Control
 Job evaluation changed the legacy of
decentralization and uncoordinated wage-setting
practices left from the 1930s and ’40s
 It must afford flexibility to adapt to changing
conditions
– Avoid bureaucracy and increase freedom to manage
 Reduces control and guidelines, making enforcement of
fairness difficult

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