Job evaluation may be defined as a systematic, objective process of determining the worth of jobs to an organization. It is important to note that a job evaluation evaluates jobs (e.g., marketing manager, financial analyst) and not the people in those jobs (e.g., Mary Smith; David Johnson). Organizations use the results of this process to help determine the appropriate salaries or wages for different jobs. Job evaluation has also frequently been used to conduct comparable worth studies. Most medium and large organizations use some form of job evaluation in determining salaries and wages for their employees.
Job Evaluation Methods
The numerous methods for conducting a job evaluation range from relatively simple approaches (e.g., ranking) to more sophisticated, complex approaches (e.g., point-factor). Job evaluation methods also differ in terms of whether they are standardized systems or whether they are custom-tailored to the specific organization. The Hay Guide Chart-Profile Method™ is a proprietary, standardized system that has been used by many different organizations as a job evaluation method. The Position Analysis Questionnaire (PAQ) is another standardized system that has been used for job evaluation purposes. It consists of approximately 200 items, referred to as job elements, that assess such aspects as how information is inputted in the job, mental processes used by the worker, relationships with others, and the job context (the physical and social environment). Research indicates that different job evaluation methods may produce different conclusions about the worth of jobs to the organization. Because the point-factor system is the most common method of job evaluation, most of what follows here is based on this approach.
Developing A Point-Factor Job Evaluation System
Briefly, organizations choosing to create a custom-tailored solution are likely to design a point-factor system using the following six steps. First, a committee is formed. Typically, this committee will include an expert in job evaluation, who may be an internal human resources manager or an external consultant, as well as other relevant parties (e.g., a union representative) and members who are familiar with the jobs to be evaluated. The next step is for the committee to determine what compensable factors will be used in the system. Simply stated, compensable factors are the underlying determinants as to why some jobs are paid more than others. Common compensable factors include mental demands, responsibility, education, and physical conditions. A clear, specific definition should also be provided for each compensable factor. The third step is to determine the relevant levels on each compensable factor. If education is a compensable factor, for example, the committee may determine that four levels are appropriate, such as high school diploma, 2-year college degree, 4-year college degree, and master’s degree. There is nothing magical about the levels that are created. What is important is that the levels be appropriate for the jobs that will be evaluated.
In the fourth step, a total number of points is established for the system overall. Often, 1,000 points is used. The goal is to have a sufficient number of points to avoid a ceiling effect. The best way to understand the ceiling effect is to think of a scale to weigh people. If the scale does not go past 100 pounds, it will be impossible to accurately determine the weight of most adults.
Once the total number of points is determined, the committee must determine the number of these points to distribute to each factor. This step serves to weight the importance of each factor. Factors assigned more points will have a greater influence on the value of jobs than factors assigned fewer points. There are several different ways to determine the appropriate weights for each factor, including the rational approach and the statistical approach. In the rational approach, the committee would use logic, business strategy, or similar considerations in determining how much weight should be assigned to each factor. The statistical approach uses a quantitative formula to determine the relationship between the compensable factors and what other, similar organizations are paying for key jobs. The statistical approach, then, attempts to link weights to external market pay. Research shows that the method of assigning weights may or may not affect the values that are ultimately assigned to the jobs.
Once the points are distributed to each factor, the next step is to assign points to each level on each factor. There are various ways to do this. One method is to assign the maximum points to the highest level on the factor (e.g., if master’s degree was the highest level on education, and education was assigned 250 points, then master’s degree would be granted 250 points). Next, a relatively small number of points (e.g., 30) might be granted to the lowest level on the factor (e.g., high school degree). A simple formula is usually devised to assign points to the levels in between the highest and lowest levels.
All that remains after creating the job evaluation system is to have subject matter experts (SMEs) review the appropriate job descriptions and related information about each position, and to determine the appropriate ratings on each compensable factor. Typically, several SMEs make independent ratings, after which their ratings can be compared. Where there are important differences in their ratings, discussion can ensue, until consensus is reached. For each job, ratings on each compensable factor are then added up and an overall rating is produced.
Criticisms of Job Evaluation
In the last two decades, job evaluation in general and the point-factor system in particular have been criticized by some experts. One criticism is that the job evaluation process overemphasizes the importance of internal fairness (i.e., the notion that jobs should be paid fairly relative to each other) at the expense of external fairness (i.e., the notion that jobs should be paid fairly relative to what other organizations are paying for these jobs). A second criticism is that the complexity and opaque nature of job evaluation may create negative perceptions on the part of employees. Finally, some critics have argued that job evaluation reinforces a hierarchical, rigid organizational structure that lacks the necessary flexibility to rapidly adjust to environmental changes. These concerns have led some organizations to modify their job evaluation processes in a number of ways, including reducing the number of compensable factors, changing the compensable factors, and tying the weights more closely to what other organizations are paying.
References:
- Collins, J. M., & Muchinsky, P. M. (1993). An assessment of the construct validity of three job evaluation methods: A field experiment. Academy of Management Journal, 36, 895-904.
- Heneman, R. L. (2003). Job and work evaluation: A literature review. Public Personnel Management, 32, 47-71.
- Milkovich, G., & Newman, G. (1998). Compensation. New York: McGraw-Hill.
- Richter, A. S. (1998, May/June). Compensation management and cultural change at IBM: Paying the people in black at big blue. Compensation and Benefits Review, 30, 51-59.