Lecture 10 job evaluation
- 2. Job Evaluation A job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an organization. It tries to make a systematic comparison between jobs to assess their relative worth for the purpose of establishing a rational pay structure.
- 3. Job Evaluation Frequently used methods of job evaluation: Job ranking Classification Point system Factor comparison
- 4. Establishing Pay Rates (continued) Skills Effort Responsibility Working Conditions Step 2. Job Evaluation: Identifying Compensable Factors
- 5. Ranking of Jobs Ranking is the system used primarily in smaller, simpler organizations The evaluator rank-orders whole jobs, from the simplest to the most challenging through job analysis.(or job specifications) If an organization has many jobs, this system is clumsy to use and the ratings may be unreliable One way can be to group jobs and then rank them.(by deptt. Or clusters) Select compensable factors. Ranking is the least frequently used method of job evaluation
- 6. Classification or Grading System Classification or grading groups a set of jobs Sets are then ranked by difficulty or sophistication Bases ranking on compensable factors such as judgment, originality, qualification, difficulty, originality ,experience making grade definitions. The evaluator first decides how many classifications the job structure has to be broken into Then, definitions are written for each class After the classes are defined, job are compared with the definition and placed into the proper classification C l a s s I C o m p u t e r w o r k , n o m a n a g e r i a l r e s p o n s i b i l i t y C l a s s I I C o m p u t e r w o r k , n o m a n a g e r i a l r e s p o n s i b i l i t y , t e a m i n v o l v e m e n t C l a s s I I I C o m p u t e r w o r k o f m e d i u m c o m p l e x i t y , n o m a n a g e r i a l r e s p o n s i b i l i t y , t e a m r e s p o n s i b i l i t i e s C l a s s I V C o m p u t e r w o r k o f m e d i u m c o m p l e x i t y , m a n a g e r i a l r e s p o n s i b i l i t y , t e a m a u t h o r i t y C l a s s V C o m p l e x c o m p u t e r w o r k , m a n a g e r i a l r e s p o n s i b i l i t y , t e a m l e a d e r s h i p
- 7. Point System The greatest number of job evaluation plans use the point system Identify compensable factors Assign weights to them. Calculate the net worth of the job. Requires evaluators to assign points on the basis of: Skill required Physical and mental effort needed Degree of dangerous/unpleasant working conditions Amount of responsibility When these are summed, the job has been evaluated D e g r e e s F a c t o r W e i g h t 1 s t 2 n d 3 r d 4 t h 5 t h 1 . E d u c a t i o n 5 0 % 5 0 1 0 0 1 5 0 2 0 0 2 5 0 2 . E x p e r i e n c e 2 5 1 2 1 2 2 4 3 6 4 8 3 . C o m p l e x i t y o f j o b 1 2 1 2 2 4 3 6 4 8 6 0 4 . R e l a t i o n s h i p s w i t h o t h e r s 8 8 2 4 4 0 5 . W o r k i n g c o n d i t i o n s 5 1 0 1 5 2 0 2 5
- 8. Factor Comparison Method: Define a set of compensable factors Select a set of benchmark (key) jobs Jobs with well-known, stable job content Jobs that are common in many organizations Jobs that represent the full range of jobs being evaluated Jobs that represent the range of each compensable factor Example: jobs with various skill levels, effort levels, etc. Jobs for which market pay data is available
- 9. Factor Comparison Method: Rank the benchmark jobs on the basis of each compensable factor Example: Rank the jobs from least skilled to most skilled Collect market pay data for the benchmark jobs For each benchmark job, allocate market pay across the compensable factors Example: If market pay for a benchmark job is $15, how much of that $15 is for skill, how much for effort, how much for responsibilities, and how much for working conditions?
- 10. Factor Comparison Method (more) Slot all the non-benchmark jobs into their proper places on the pay scale for each compensable factor Determine the pay for each job by adding up the pay from each compensable factor Example: Pay = pay from skill + pay from effort + pay from responsibility + pay from working conditions Example: Fisher, Schoenfeldt, & Shaw (2006),Table 11.7, p. 498 Job 4: Pay = $3.50 for skill + $2.50 for effort + $3.75 for responsibilities + $1.25 for working conditions = $11.00
- 11. Pay Classes, Rate Changes, Classifications The pay-structure process is completed by establishing: Pay curves Pay classes Rate ranges Job classifications
- 12. The Pay Curve All jobs within a given labor class receive the same rate of pay In this example, pay classes are determined by the point value that was set through job evaluation A pay class (pay grade) is a grouping of jobs that are similar in terms of difficulty and responsibility
- 13. The Pay Curve P o in t s P a y c la s s e s 1 0 0 1 2 5 1 5 0 1 7 5 2 0 0 2 2 5 2 5 0 2 7 5 3 0 0 3 2 5 3 5 0 P a y c u rv e C l a s s 1 C la s s 2 C la s s 3 C la s s 4 C la s s 5 $ $ 3 5 0 0 $ 3 2 0 0 $ 3 1 0 0 $ 2 9 0 0 $ 2 7 0 0 $ 2 5 0 0 $ 2 3 0 0 $ 2 1 0 0 $ 1 9 0 0 M o n t h ly P a y
- 14. The Pay Curve The next slide shows how data from a wage and salary survey are combined with A compensation trend line is derived by establishing the general pay pattern The trend line can then be determined The pay rate for any job can be ascertained by calculating the point value of the job and then locating that value on the trend line Minimum and maximum limit lines can be set by setting a percentage above or below the trend line
- 15. The Pay Curve P o in t s P a y c la s s e s $ $ 6 2 5 0 $ 6 0 0 0 $ 5 7 5 0 $ 5 5 0 0 $ 5 2 5 0 $ 5 0 0 0 $ 4 7 5 0 $ 4 5 0 0 $ 4 2 5 0 $ 4 0 0 0 $ 3 7 5 0 $ 3 5 0 0 $ 3 2 5 0 $ 3 0 0 0 0 5 0 01 0 0 1 5 0 2 0 0 2 5 0 3 0 0 3 5 0 4 0 0 4 5 0 C la s s 1 C la s s 2 C la s s 3 C la s s 4 C la s s 5 C la s s 6 C la s s 7 C la s s 8 M o n t h ly P a y F ig . 1 0 . 8
- 16. Delaying and Broad banding Broad banding: More emphasis on individual performance Multiple salary grades and ranges are collapsed into a few wide levels (bands) Entry-level employees start at the range minimum; movement upward is based on performance (merit) Allows managers to reward top performers while saving money on mediocre employees When shifting pay decisions to managers, the firm must guard against abuse: favoritism can result in unfair use
- 17. Pricing Managerial and Professional Jobs Base Pay Executive Benefits and Perks Short-term Incentives Long-Term Incentives Compensating Executives and Managers
- 18. THANKYOU!