Job as determinant

of financial
compensation

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What Is Job Evaluation?

Process of systematically
determining the relative worth of
jobs to create a job structure for
the organization. Evaluation is
based on a combination of job
content, skills required, value to
the organization, organizational
culture and the external market.
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Job Evaluation
• Determines relative value of one job
in relation to another
• Basic purpose is to eliminate
internal pay inequities that exist
because of illogical pay structures
• Measures job worth in an
administrative rather than economic
sense
• Latter can be determined only by
the marketplace and revealed
through compensation surveys
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OBJECTIVES
• Equitability of the wage structure
within the firm. (Internal equity)
• Consistency of firm’s overall wage
structure with that of the industry
in which firm operates (External
equity)

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SIGNIFICANCE
• Rational & consistent wage & salary structure.
• Harmonious relations between labor &
management.
• Standardizes the process of determining wage
differentials.
• All relevant factors into account
• Keeping down costs of R&S

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Job Evaluation : Content or Value
• Job Content
– What work is performed and how it gets done
– Orders job on the basis of the skills required for the
job and duties and responsibilities associated with it
• Job Value
– Orders jobs on the basis of the relative contribution of
the skill, duties and responsibilities of each job to the
organisation’s goal
– Also includes job value in the external market
(exchange value)
– Pay rates may also be influenced by collective
bargaining or other negotiations

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Uses of job evaluation

1. Identify the organisation’s job

structure
2. Eliminate pay inequities and bring
order to the relationships among jobs
3. Develop a hierarchy of job value for
creating a pay structure

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 Determining an Internally Aligned Job
Structure

Internal
Job Job Job Job
alignment
analysis descriptio evaluatio structure
n n

Work
relationships
within
organizationSome Major Decisions in Job Evaluation
• Establish purpose of evaluation
• Decide whether to use single or multiple plans
• Choose among alternative approaches
• Obtain involvement of relevant stakeholders
• Evaluate plan’s usefulness
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 Major Decisions
• Establish purpose
– Supports organization strategy
• How does the job add value?
– Supports work flow
• Integrates each job’s pay with its relative
contributions to the organisation
• Helps set pay for new, unique, or changing jobs
– Fair to employees
• Establishes a workable, agreed upon structure that
reduces the role of change, favoritism and bias in
setting pay
– Motivates behavior toward organization
objectives
• Helps create the network of rewards (promotions,9
challenging work) that motivates employees
 Major Decisions
•Single v/s Multiple Plans
– Evaluate related group of jobs eg. Production,
engineering, marketing
– Different evaluation plans for different types
of work
– Benchmark Jobs
•Contents are well-known and relatively stable
over time
•Job is common across several different
employers
•Sizable proportion of work force employed in
job
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Benchmark Job

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 Major Decisions
• Benchmark Jobs
– Include entire domain of work being
evaluated
– Capture the diversity of the work
within the domain
• Depth of work (Vertically)
• Breadth of work (Horizontally) : Depends
on the nature of business
– Ensure coverage of entire work
domain
– Ensure accuracy of decisions based
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on job evaluations
 Methods

• Ranking

• Classification

• Point

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Ranking Method
• Orders job descriptions from highest to
lowest based on a global definition of
relative value or contribution to the
organization’s success
– Simple, fast, easy to understand and explain to
employees
– Least expensive
– Doesn’t tell employees what it is about their
jobs that is important
– Subjective opinions which are impossible to
justify in strategic and work-related terms
– Requires evaluators to be knowledgeable
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about all jobs
 Ranking Method - Two
approaches
• Alternation ranking

– Orders job descriptions alternately at

each extreme

– Agreement is reached among

evaluators on which jobs are most and
least least valuable

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 Ranking Method - Two
approaches
• Paired comparison method

– Uses a matrix to compare all possible

pairs of jobs

– After all comparisons, the job most

frequently judged “more valuable”
becomes highest ranked job and so on

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Paired Comparison Ranking

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Classification Method
• Uses class descriptions that serve as the
standard for comparing job descriptions
• Classes include benchmark jobs
• Series of classes cover range of jobs
• Ensures that the structure is based on
organisation strategy and workflow, is fair
and focuses behaviour on desired result
• Jobs within same class are equal (similar) and
will be paid equally
• Jobs within different classes should be
dissimilar and may have different pay rates
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Point Method

• Assign numerical values to specific job

factors
• Sum of values provides a quantitative
assessment of a job’s relative worth
• Each job cluster to have its own
customized set of factors viz. education,
experience, mental effort, working
conditions.
• Most commonly used approach to
establish pay structures in U.S. 19
Point Method
• Three common characteristics of point
methods
– Compensable factors
– Factor degrees numerically scaled
– Weights reflect relative importance of each
Degree of Factor
factor
Job Factor Weight 1 2 3 4 5

Education 50% 50 100 150 200 250

Responsibility 30% 30 70 110 150
Physical Effort 12% 12 24 36 48 60
Working 8% 0 24 40
Conditions 20
Job Evaluation Form

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Steps in designing a Point Plan:

1. Conduct job analysis

2. Determine compensable factors.

3. Scale the factors.

4. Weight the factors according to

importance.

5. Communicate the plan, train users,

prepare manual.

6. Apply to nonbenchmark jobs. 22

 Hay Guide Chart Profile Method (Hay
Plan)
• A refined version of the point method of job
evaluation
• Uses the factors of :
– Know-how : total of all knowledge and skills
needed for satisfactory job performance
– Problem solving : degree of original thinking
required by the job for analyzing, evaluating,
creating, reasoning, and making conclusions
– Accountability : responsibility for action and
accompanying consequences
– Additional compensable elements : addresses
exceptional conditions in the job’s environment

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 Resulting Internal Structures

Manageri Technical Manufact Administr

al Group Group uring ative
Group Group
Assembler I
Inspector I
Head / Chief Administrative
Vice Presidents Packer
Scientist Assistant
Division General Senior AssociateMaterials HandlerPrincipal Adminis-
Managers Scientist Inspector II trative Secretary
Administrative
Managers Associate Scientist Assembler II
Secretary
Drill Press Operator
Project Leaders Scientist Word Processor
Rough Grinder
Machinist I
Supervisors Technician Clerk / Messenger
Coremaker

Job Compete Skill– Job

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Evaluati ncy- Based Evaluati
on Based on