COMPENSATION

Third Canadian Edition Milkovich, Newman, Cole

5-1 2010 McGraw Hill Ryerson

Many Ways to Create Internal Structure

Business and WorkRelated Internal Structure
PURPOSE Collect, summarize work information Determine what to value Job-based Job analysis Job descriptions Job evaluation: classes or compensable factors Person-based

(Chapter 4)

Skill (Chapter 6)

Competencies (Chapter 6)

(Chapter 5)

Assess value
Translate into structure

Factor degrees and weighting

Job-based structure

(Chapter 5)

(Chapter 5)
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2010 McGraw Hill Ryerson

Job Evaluation
process of systematically determining the relative worth of jobs to create a job structure for the organization a process that helps gain acceptance of pay differences between jobs job evaluation based on job content and internal job value

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Determining an Internally Aligned Job Structure

Job analysis Job description Job evaluation Job structure

Some 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 plans usefulness
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Major Decisions
Establish purpose
Supports organization strategy Supports work flow Fair to employees Motivates behavior toward organization objectives

Single vs. multiple plans Benchmark jobs Choose between methods

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Job Evaluation Methods

Job Ranking
Raters examine job description and arrange jobs according to their value to the company

Job Classification
Classes or grades are defined to describe a group of jobs

Point Method
Numerical values are assigned to specific job components; sum of values provides quantitative assessment of the jobs worth
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Comparison of Job Evaluation Methods

Advantage Ranking Fast, simple, easy to explain. Disadvantage Cumbersome as number of jobs increases. Basis for comparisons is not called out. Descriptions may leave too much room for manipulation. Can become bureaucratic and rule-bound.
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Classification

Can group a wide range of work together in one system. Compensable factors give basis for comparisons; communicate what is valued.

Point

The Point Plan Process (1 of 2)

Step One: Conduct Job Analysis A representative sample of benchmark jobs The content of these jobs is basis for compensable factors Step Two: Determine Compensable Factors Based on the work performed (what is done) Based on strategy and values of the organization (what is valued) Acceptable to those affected by resulting pay structure (what is acceptable)
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The Point Plan Process (2 of 2)

Step Three: Scale the Factors Use examples to anchor Step Four: Weight the Factors Can reflect judgment of organization leaders, committee Can reflect a negotiated structure Can reflect a market-based structure Step Five: Communicate the Plan Step Six: Apply to Non-benchmark Jobs
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Characteristics of Benchmark Jobs

Contents are well-known and relatively stable over time Job is common across several different employers

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Compensable Factors
characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives Useful factors are:
Based on the strategy and values of the organization Based on the work performed Acceptable to the stakeholders affected by the resulting pay structure
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Categories of Factors
break down the factors into three major categories:
1. Universal Factors 2. Sub-Factors 3. Degrees or Levels

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Universal Compensable Factors

Skill Effort Responsibility Working Conditions

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Universal Compensable Factors

Skill: the experience, training, ability, and education required to perform a job under consideration

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Sub-Factors: Skill
Educational levels Years of experience required Technical knowledge Specialized knowledge Specialized training Interpersonal skills

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Universal Compensable Factors

Effort: the measurement of the physical or mental exertion needed for performance of a job

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Sub-Factors: 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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Universal Compensable Factors

Responsibility: the extent to which an employer depends on the employee to perform the job as expected, with emphasis on the importance of job obligation

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Sub-Factors: Responsibility
Decision-making authority

Scope of the organization under control

Scope of the 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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Universal Compensable Factors

Working Conditions: difficult or unhealthy aspects of the conditions in which the work is done

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Sub-Factors: Working Conditions

Hazards: Exposure to dangerous chemicals Stress Physical surroundings of the job Cramped quarters Outdoor location

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Degrees/Levels of Sub-factors
Description of several different degrees or levels of a sub-factor in jobs A different number of points is associated with each degree/level

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Points for Different Degrees of One Sub-Factor

Factor: Problem Solving Sub-Factor: Scope for Initiative and Judgment Degree A some degree of judgment and initiative required B moderate degree of judgment and initiative required C significant degree of judgment and initiative required D high degree of judgment and initiative required
Points
80-188
133-295 186-348

293-400

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Factor Weights
Weighting assigned to each factor to reflect differences in importance attached to each factor by the employer; for example:
Skill Effort Responsibility Working Conditions 40% 30% 20% 10% 100%
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Overview of the Point System

Degree of Factor Factor Skill
Education Experience

Weight
20% 20% 10% 10% 15% 15% 5% 5%

1
4 4 2 2 3 3 1 1

2
8 8 4 4 6 6 2 2

3
12 12 6 6 9 9 3 3

4
16 16 8 8 12 12 4 4
5-25

5
20 20 10 10 15 15 5 5

Effort
Physical Mental

Responsibility
For safety For budget

Working Conditions
Hazards Weather

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Who Should Be Involved?

The Design Process Matters Attention to fairness can help achieve employee and management commitment, trust, and acceptance of the results Appeals / Review Procedures Procedural fairness Political Influence Minimize susceptibility to political influences

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Resulting Internal Structures: Job, Skill, and Competency Based

Managerial Group Vice Presidents Division General Managers Managers Project Leaders Supervisors Technical Group Manufacturing Group Assembler I Inspector I Packer Administrative Group Administrative Assistant Principal Administrative Secretary Administrative Secretary Word Processor Clerk / Messenger Job Evaluation
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Head / Chief Scientist Senior Associate Scientist Associate Scientist Scientist Technician

High Value (points)

Materials Handler Inspector II

Assembler II Drill Press Operator Rough Grinder Machinist I Coremaker SkillBased

Low Value (points)

Job Evaluation

Competency- Based

Conclusion
differences in the rates paid for different jobs and skills matter: affects ability of managers to achieve business objectives; influences employees perceptions of fair treatment job evaluation has evolved into many different forms and methods; consequently, wide variations exist in its use and how it is perceived no matter how job evaluation is designed, its ultimate use is to help design and manage work-related, business-focused, and agreedupon pay structure
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