Job Evaluation

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POWERPOINT SLIDES PRESENTED DURING CLASS

Job Evaluation

(http://www.headscratchingnotes.net/wp-content/uploads/2012/02/lecture-9.ppt)

Introduction

Figure 1

Wages or employee remuneration is generally provided by organisations following structured methods. These methods are more than identifying the wage incentive plans for employees. Wages should be based on identifying the characteristics of various job activities and its value and importance to the organisation. Organisations thus consider job evaluation methods that are structured methods of determining wages for employees and play a significant role especially when planning for new business ventures. Before we study job evaluation methods, we need to understand the general structure of wages for employees. Broadly, the components of wages or employee remuneration can be realised under two categories – financial and non-financial (Refer to figure 1).

Financial component of employee remuneration refers to remuneration offered in the form of money. These further include, basic wages of which the some amount of employee wage is directed towards provident fund and medical insurance (as per the existing laws). The other aspects seen (within basic wages and incentives) in Figure 1 are subjective and offered in accordance to the nature and characteristics of the industry the organisation represents. The non-financial component focuses on all aspects that cannot be valued in terms of money and refers to factors that enhance employee satisfaction and productivity.

Most organisations generally practise some form of job evaluation techniques involving decision-making on the amount of wages required to be paid to employees. These techniques may or may not include all the financial and non-financial components of employee remuneration as summarised above. These categories are strictly subjective and mostly provided in the organised sector. The unorganised sector also offers remuneration under the two categories but they may not be officially documented and could be verbally communicated. Job evaluation techniques generally require systematic collection of data on understanding remuneration methods followed within an industry /economy. Accordingly, a good remuneration process should ensure that each employee receives appropriate financial and non-financial recognition that accounts their personal contribution in the output generated for or within the organisation. A suitable remuneration plan thus requires [1]:

  • Creating and maintaining an organisational structure and culture that facilitates both employee and organisational performance
  • Implementing a compensatory policy that fairly treats and recognises all employees, regardless of their level within their organisation
  • Conducting job analysis that involves thorough study of job activities considered in an organisation
  • Formulating compensation by considering internal factors such as organisation’s ability to pay, seniority, skills, etc and external factors such as conditions of human resource market, cost of living, level of economic development, social factors, presence of trade unions, and labour laws
  • Designing and implementing the compensation plan based on the above steps incorporating base compensation that increases wages/salaries over a period of time and communicating the same to the employees
  • Evaluating and reviewing the compensation plan that leads to flexibility and making changes in accordance to the changing norms in the industry and economy act as a boost for enhancing employee morale and job satisfaction.

Definition and purpose

Job evaluation techniques are thus required to develop a suitable compensation / remuneration plan based on the above mentioned factors. Job evaluation is a process of determining the relative worth of a job within an organisation and accordingly aims at [2]:

  • Reducing inequalities in salary structure by bringing about external and internal consistency in salary further motivating employees within an organisation
  • Enabling structured approach to division of labour or specialisation by defining specific jobs and salary levels
  • Helping in selecting employees by defining jobs and responsibilities
  • Developing harmonious relationship between employer and employees to avoid any conflicts on salaries
  • Creating standardisation by determining salary differentials for different jobs further helping to bring about uniformity into salary structure
  • Generating relevance and relative value to new jobs

Job Evaluation Methods

Job evaluation methods are of two types, analytical and non-analytical, where in analytical schemes are designed on the basis of the requirements and elements of a job and non-analytical schemes are designed on the basis of jobs as a whole [3]. Analytical and non-analytical methods are further divided into different sub-types which will be explained in the following sections.

figure 2

Non-Analytical Schemes: These schemes involve assigning wages in terms of whole jobs and then compared in terms of rank or order. This implies that jobs are compared with one another and then decided whether it should be valued more, less or the same. There will be only two kinds of non-analytical schemes studied during this course – 1. Ranking Method and 2. Classification Method.

1. Ranking Method:

Ranking is the process of comparing jobs with one another and arranging them in order of their importance, their difficulty, or their value to the organisation. Accordingly, the first step is to create benchmark jobs like producers, maintenance, administrators, etc. For example, benchmark jobs in a firm can be categorised as accounting, purchase department, operations and administration (Refer to the example discussed during class mentioned in powerpoint slides titled “lecture 9”). The second step would be to list down the jobs that are perceived to be of the highest and lowest value; selecting a job mid-way between the two and finally choosing others at lower or higher intermediate points. For example, the firm’s most important job is that of an accountant and the least is that of the office boy (Refer to the example discussed during class mentioned in powerpoint slides titled “lecture 9”). The job/s mid-way between the two could of a purchase assistant / machine-operator. The intermediate jobs could be the job of an accounts clerk below and above the accountant job and the purchase assistant respectively and typist job below and above the machine operator and the office boy respectively. The third and the last step is to divide the ranked jobs into grades. An initial estimate should be identified depending upon the number of grades or levels that may be required. Grade boundaries may be drawn between groups of jobs with common features with the aim of being able to separate the benchmark jobs in terms of content, activity and levels of jobs. For example, if the accountant in the accounting department is the highest position in the firm in the accounting department, then the head of purchase in the purchase department under whom the purchase assistant works could also be considered as the highest grade despite of different job descriptions and activities. Correspondingly, the accountant and the head of purchase could more or less come under the same wage bracket. Please refer to the slides for this method’s advantages and limitations

2. Classification Method

Classification method is a revised version of the ranking method that considers one whole job of an organisation and divides the job into different grades and levels. Accordingly, grades/levels are defined in terms of certain factors such as the key tasks carried out, skill, competence, experience, initiative and responsibility. The number of grades is usually limited between 4 and 8 and between each grades there are differences in demands made by any job in its respective grade. Please refer to the example discussed during class mentioned in powerpoint slides titled “lecture 9”. This example shows 4 grades and each grade reflects the responsibilities and job titles of employees like CLASS I consist of employees at the executive level, CLASS II consist of employees at the operational (skilled workers) level, CLASS III consist of employees that facilitate the work done by employees (semi-skilled) in CLASS II and CLASS IV consist of employees that facilitate work across CLASS I, CLASS II and CLASS III.

Like ranking method, classification method is simple and easily understood but cannot be considered for jobs that are divided more than 8 grades. Further grade definitions tend to be generalised and they may not help in evaluating border-line cases especially at more senior levels. It often fails to deal with the problem of evaluating and grading jobs in dissimilar occupational or job families where demands made on job holders are widely different. For example, technical and administrative jobs may be graded at the same levels but the demands from each job category are different. Grade definitions also tend to be inflexible and unresponsive to technological and organisational changes that affect roles and job content.

Analytical Schemes: These schemes are designed on the basis of the requirements and elements of the jobs [4]. Grades are also generated under these schemes but these grades are developed on the basis of certain elements and factors of a job and not the whole job as seen in non-analytical methods. Two kinds of analytical schemes will be studied this semester, which are – 1. Factor Comparison Method and 2. Point Method

1. Factor Comparison Method

Factor comparison method as the name suggests compares factors of a job on whose basis the grades and levels are identified.  First step is to identify all key jobs in a business unit followed by analysing them into more than 4 factors that describe the requirements of a job and are also known as “critical” factors. The critical factors can be different for different key jobs and activities across firms and businesses. For example, in our class 5 critical factors were identified – Mental Requirement; Physical Requirements; Skill requirements; Working conditions and; Responsibility. These factors are requirements in a manufacturing unit that need mental and physical work, feasible working conditions, skills and responsibility. Additional characteristics of this manufacturing unit could include that the tools manufacturing unit produces tools like saw, hammers, sickle, etc. The relative importance of each of these critical factors will be different for different types of employees and the jobs they perform. For example, the jobs in the manufacturing unit example were identified to be – Tool maker; Craft worker; Process Operator and Maintenance assistant. The employees with relevant jobs are ranked in accordance to the critical factors between 1 and 4 wherein 1 indicates most important and 4 indicating least important. Each rank will be different for different factors for each job as seen in the example discussed in class. Following assigning ranks, assign benchmark wages to each of the factor. Finally, total wage for each key job is calculated by adding wages assigned across each factor. These wages for key jobs act as benchmark or threshold wages in accordance to which newer jobs and their wages can be compared depending upon the critical factors. The newer jobs are non-benchmark jobs whose wages will be more or less the same as the benchmark jobs depending upon the future employees knowledge, skill etc. across each critical factor. For example, if the benchmark as a tool-maker is required to have a minimum set of skills for the job and the wage assigned is Rs 91/ day and a new candidate is applying for the tool maker position and has more than minimum set of skills then the wage assigned to this factor will be more than Rs 91, say Rs 100 per day, Rs 70 as against Rs 78 for mental requirement, Rs 10 as against Rs. 13, Rs 60 as against Rs 52 and Rs 26, which is the same as Rs 26 mentioned in the benchmark wage. Thus, if the total benchmark wage for a tool maker equals Rs 260 (91+78+13+52+26), the non-benchmark job wage evaluated on the basis of critical factors equals Rs 266 (100+70+10+60+26)

Among all advantages and disadvantages the striking disadvantage of factor comparison method is the presence of subjective judgement in deciding wages across critical factors as seen in the example above. The basis of deciding wages across each critical factor is subjective and could be held discriminatory.

2. Point-Method

Point method is believed to be more objective and analytical than factor comparison and all other methods. The first step in the point-method is similar to that of factor comparison method that involves selecting key jobs. However, the point-method considers key jobs into job clusters and the specific jobs within the job clusters for evaluation. For example, ‘Accounting’ is a job cluster and the jobs under this category could be of an accountant, accounting assistant, data-entry, book-keeping and filing. The point-method’s most important characteristic is to list out and define specific factors for each job within the job cluster. For example, educational qualifications of employees for the accountant job cluster could be as follows – SSC, HSC, any graduate with CA-1 level completed, any graduate with CA-2 level completed, any graduate with CA-3 level completed and any graduate with CA and pursuing corporate law. Each of these factors for educational qualification are defined with factor degrees. For example, SSC = 6, HSC = 5, any graduate with CA-1 level completed = 4, any graduate with CA-2 level completed = 3, any graduate with CA-3 level completed = 2 and any graduate with CA and pursuing corporate law = 1. Subsequently, points are determined for each defined degree in terms of their importance. For example, SSC = 50, HSC = 75, any graduate with CA-1 level completed = 100, any graduate with CA-2 level completed = 200, any graduate with CA-3 level completed = 250 and any graduate with CA and pursuing corporate law = 300. These points are then adjusted with the assigned wages for each factor. A similar job evaluation is done for other critical factors like level of experience, technical skills etc.

The number of critical factors used in point- method can be more than 8 depending upon the size of the organisation, jobs in different companies. Following are examples of factor lists considered in certain companies:

Company: Motorola

1. Knowledge

  • Education
  • Experience

2. Communications

  • Interpersonal skills applications
  • Typical contacts

3. Complexity

  • Thinking environment
  • Job challenge

4. Impact

  • Decision-making latitude
  • Results of action
  • Degree of effort

5. Span of control

  • Subordinate levels/number
  • Breadth of responsibility

Company: Ross Youngs (Manual Employees)

1. Physical effort

  • Effort
  • Stamina
  • Paced work

2. Mental effort

  • Concentration/recall
  • Decision-making
  • Initiative – independent action

3. Knowledge/skills

  • Manual/motor skills
  • Knowledge of product/production process/operating skills
  • Mental skills
  • Communication skills

4. Responsibilities

  • For plant/machinery/equipment
  • For product quality
  • For safety

5. Working conditions

  • Temperature
  • Unpleasant conditions

Defining various factors for each job is the critical part of point-method. These factors should be defined in a manner that captures nature, type and extent of the work done in the organisations. Accordingly, one of major advantages of point-method is that evaluators are forced to consider a range of factors which reduce the danger of the oversimplified judgements that can be made through non-analytical schemes. Other advantages include the following:

  • They appear to be objective and seems fair
  • They provide a rationale which helps in design of graded pay structures
  • These are useful for large organisations

Disadvantages of point-methods are as follows:

  •  They are complex to develop, install and maintain
  • Judgement is still considered in selecting factors, defining factors and wages assigned to each factor

These methods assume that it is possible to quantify different aspects of jobs on the same scale of values and add them together. But the attributes and job characteristics cannot necessarily be added together in this way.



[3] The Job Evaluation handbook by Michael Armstrong, Angela Baron

[4] The Job Evaluation handbook by Michael Armstrong, Angela Baron