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5-1 Chapter 5 McGraw-Hill/Irwin Evaluating Work: Job Evaluation © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives 5-2 After discussing Chapter 5, students should be able to: 1. 2. 3. 4. 5. 6. Discuss the relationship between internal alignment, job analysis, job evaluation, and job structure. Identify the major decisions involved in job evaluation. Compare the advantages and disadvantages of the most common job evaluation methods. Explain the six (6) steps in a point plan, the most commonly used job evaluation method. Describe the key roles of managers, employees, and committees in the job evaluation process. Understand the necessity of balancing tight control versus flexibility related to the use of techniques to achieve internal alignment. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-3 Chapter Topics Job-Based Structures: Job Evaluation Defining Job Evaluation: Content, Value, and External Market Links Ranking Classification Point Method Who Should be Involved? The Final Result: Structure Balancing Chaos and Control. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Exhibit 5.1: Many Ways to Create Internal Structure McGraw-Hill/Irwin 5-4 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-5 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. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-6 Defining Job Evaluation Content Linking and value content with the external market “Measure for measure” vs. “Much ado about nothing” Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Exhibit 5.2: Assumptions Underlying Different Views of Job Evaluation Aspect of Job Evaluation Assumption Assessment of job content Content has intrinsic value outside external market. Assessment of relative value Stakeholders can reach consensus on relative value. External market link Value cannot be specified without external market. Measurement Honing instruments will provide objective measures. Negotiation Puts face of rationality to a social / political process; establishes rules of the game and invites participation. McGraw-Hill/Irwin 5-7 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Exhibit 5.3: Determining an Internally Aligned Job Structure Internal alignment Job analysis Job description Job evaluation 5-8 Job structure Work relationships within organization 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 plan’s usefulness McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-9 Major Decisions Establish purpose Supports organization strategy Supports work flow Fair to employees Motivates behavior toward organization objectives Single vs. multiple plans Choose among methods Exhibit 5.4: Comparison of Job Evaluation Methods Obtain involvement of relevant stakeholders Evaluate plan’s usefulness McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-10 Exhibit 5.4: Benchmark Job McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-11 Characteristics of Benchmark Job Contents are well-known and Job is common across several different employers Supply and demand relatively stable over time Sizable proportion of work force employed in job McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Exhibit 5.5: Comparison of Job Evaluation Methods Advantage Disadvantage Ranking Fast, simple, easy to explain. Cumbersome as number of jobs increases. Basis for comparisons is not called out. Classification Can group a wide range of work together in one system. Descriptions may leave too much room for manipulation. Point Compensable factors call out basis for comparisons. Compensable factors communicate what is valued. Can become bureaucratic and rule-bound. McGraw-Hill/Irwin 5-12 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-13 Ranking Method Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success Two approaches Alternation Paired McGraw-Hill/Irwin ranking comparison method © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-14 Exhibit 5.6: Paired Comparison Ranking McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-15 Classification Method Uses class 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 Examples Exhibit 5.7: Classifications for Engineering Work Exhibit 5.8: General Schedule Descriptions for Federal Government McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-16 Point Method Three common characteristics of point methods Compensable Factor factors 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 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. Designing a Point Plan: Six Steps 5-17 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. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-18 Step 1: Conduct Job Analysis Point plans begin with job analysis A representative sample of jobs benchmark jobs - is drawn for analysis Content of these jobs is basis for Defining Scaling compensable factors compensable factors Weighting McGraw-Hill/Irwin compensable factors © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-19 Step 2: Determine Compensable Factors Compensable Reflect factors play a pivotal role how work adds value to organization Example - Exhibit 5.9 Characteristics Based on strategy and values of organization Exhibit Based of compensable factors 5.10 on work performed Acceptable to stakeholders affected by resulting pay structure McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-20 Generic Compensable Factors Skill Effort Responsibility Working conditions McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-21 Generic Factor - Skill Skill: Experience, training, ability, and education required to perform a job under consideration - not with skills an employee may possess McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-22 Generic Factor - Skill Technical know-how Specialized knowledge Organizational awareness Educational levels Specialized training Years of experience required Interpersonal skills Degree of supervisory skills McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-23 Generic Factor - Effort Effort: Measurement of the physical or mental exertion needed for performance of a job McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-24 Generic Factor - Effort Diversity of tasks Complexity of tasks Creativity of thinking Analytical problem solving Physical Degree McGraw-Hill/Irwin application of skills of assistance available © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-25 Generic Factor - Responsibility Responsibility: Extent to which an employer depends on employee to perform job as expected, with emphasis on importance of job obligation McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-26 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 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-27 Generic Factor – Working Conditions Working Conditions: Hazards Physical surroundings of job McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-28 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 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-29 Exhibit 5.11: The Hay System Know-How Scope Depth Human relations skills Exhibit 5.12: Hay Guide Chart for Know-how Problem Solving Environment Challenge Accountability Freedom to Act Scope Impact McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-30 Compensable Factors - How Many? “Illusion of validity” - Belief that factors are capturing divergent aspects of a job “Small numbers” - If even one job has it, it must be a compensable factor “Accepted and doing the job” - 21, 7, 3 Research results Skills explain 90% or more of variance Three factors account for 98 - 99% of variance McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-31 Step 3: Scale the Factors Construct scales reflecting different degrees within each factor Most factor scales consist of 4 to 8 degrees Exhibit 5.13: Factor Scaling - NMTA Issue - Whether to make each degree equidistant from adjacent degrees (interval scaling) Criteria for scaling factors Limit to number necessary to distinguish among jobs Use understandable terminology Anchor degree definitions with benchmark job titles Make it apparent how degree applies to job McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-32 Step 4: Weight the Factors Different weights reflect differences in importance attached to each factor Determination Advisory/JE Statistical McGraw-Hill/Irwin committee analysis Criterion Exhibit of factor weights pay structure 5.14: Job Evaluation Form © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-33 Exhibit 5.14: Job Evaluation Form McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-34 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. Responsibility 30% 75 150 225 300 3. Physical effort 12% 24 48 72 96 4. Working conditions 8% 25 51 80 McGraw-Hill/Irwin 120 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-35 AAIM National Position Evaluation Plan Points Assigned to Factor Degrees Factor 1st 2nd 3rd 4th 5th Degree Degree Degree Degree Degree Skill 1. Knowledge 2. Experience 3. Initiative and Ingenuity Effort 4. Physical Demand 5. Mental or Visual Demand Responsibility 6. Equipment or Process 7. Material or Product 8. Safety of Others 9. Work of Others Job Conditions 10. Working Conditions 11. Hazards McGraw-Hill/Irwin 14 22 14 28 44 28 42 66 42 56 88 56 70 110 70 10 5 20 10 30 15 40 20 50 25 5 5 5 5 10 10 10 10 15 15 15 15 20 20 20 20 25 25 25 25 10 5 20 10 30 15 40 20 50 25 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-36 Job Evaluation Example Job A B C D E F Clerk Acct Clerk Accountant HR Mgr Ass’t Adm Office Mgr McGraw-Hill/Irwin Points 45 55 75 85 80 85 Reference Wage $12/hour $16 $22 $25 $26 $28 © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-37 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-38 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-39 Step 5: Communicate Plan and Train Users Involves development of manual containing information to allow users to apply plan Describes Defines job evaluation method compensable factors Provides information to permit users to distinguish varying degrees of each factor Involves training users on total pay system Include McGraw-Hill/Irwin appeals process for employees © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-40 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 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-41 Who Should be Involved? Committees, task forces, or teams of key representations Design process matters Appeals/review procedures “I know I speak for all of us when . . .” McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 5-42 Final Result: Structure Outcome Ordered list of jobs based on their value to organization Hierarchy of work Structure supporting a policy of internal alignment Information provided by hierarchy Which jobs are most and least valued Relative amount of difference between jobs McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.