Guide to performing a Job Evaluation

Guide to performing a Job Evaluation What are the main issues faced by the residents in Portugal? Click on the play button to watch the video. Highlight the issues and look for the solutions. Share your opinions in the LMS Forum. [MMP: Create video screen and embed video as shown in link] Source: http://www.youtube.com/watch?v=0vKDyPJmQD0 Job evaluation is the process of determining the worth of jobs assigned to employees.The worth of a job is determined by the demand for it in relation to its job description, job specification and the expected outcomes from that job. In some cases, it is found that an employee who holds a similar position as his colleague may hold a different role, and have different responsibilities and accountability. In such cases, he/she should receive different pay. This chapter discusses the importance of job evaluation, basic job evaluation methods, the hay guide chart method, and inputs to refer to when pricing jobs. Job Evaluation and Its Importance Job evaluation is the process of determining the value of one job in comparison to the other jobs within the organisation so a fair salary system can be established. The job evaluation process is the most common method used to provide a rationale for a pay structure and to assign a job to a pay grade. Job evaluation can also be defined as a practical technique for trained and experienced employees to judge the size of one job relative to others. It does not directly determine the pay levels but establishes the basis for an internal ranking of jobs. Among other definitions are as follows: Job evaluation is concerned with assessing the relative demands of different jobs within the organisation. Its usual purpose is to provide a basis for relating differences in rates of pay to different in-job requirements. It is therefore a tool which can be used to help determine a pay structure. (Advisory Conciliation and Arbitration Service (ACAS), London 1984) A job evaluation system consists of compensable factors and a weighting scheme based on the importance of each compensable factor to the organisation. Compensable factors are the characteristics of jobs that an organisation values and chooses to pay for. These characteristics may include job complexity, working conditions, required education, required experience and responsibility. (Noe et. al. 2003) Job evaluation is a systematic procedure to determine the relative worth or value of jobs. Although there are several different approaches, each one considers the duties, responsibilities and working conditions of the job. The objective of job evaluation is to identify which jobs should be paid more than others. (Schwind et. al. 1999) The objectives of a job evaluation process in an organisation are as follows: Establishes the relative value or size of jobs, i.e. internal relatives. Produces the information required to design and maintain equitable and defensible grade and pay structures, critical in any organisation. Provides as a basis for grading jobs within a grade structure, thus enabling consistent decisions to be made about job grading. Ensures that the organisation meets ethical and legal equal pay for work of equal value obligtions. More recently the use of job evaluation is the hinge of most equal pay cases. Despite its popularity, it is often misunderstood. So, the following facts about job evaluation must be made clear: SELF-CHECK What is job evaluation and why is it important? What are the four facts about job evaluation? Job Evaluation Methods The human resource management is usually responsible for administering the job evaluation programme. However, actual job evaluation is typically done by a committee. The committee might include the human resource director as the chairperson and the finance, marketing and production heads. Job Evaluation Committee Chairperson (Human Resource Director) Head of Finance Head of Marketing Head of Production Figure 8.1: The job evaluation programme is typically performed by a committee within the organisation Small and medium sized organisations may elect to use outside consultants as they often lack job evaluation experience. When employing a qualified consultant, management should require the consultant to develop an internal job evaluation programme and train company employees to administer it correctly. This can be done by reviewing information obtained through job analysis regarding the duties, responsibilities and working conditions of the organisation. With this knowledge, the relative worth of jobs is determined and the consultant will be able to shape a job evaluation programme suitable to the company by selecting an appropriate job evaluation method. Figure 8.2: The 10 basic steps in conducting an effective job evaluation There are four basic job evaluation methods commonly used by organisations. They are job ranking, job classification (or job grading), factor comparison and the point system. Job ranking and job classification are categorised as non quantitative methods while factor comparison and the point system are classified as quantitative methods. A job evaluation committee or an outside consultant needs to choose one method and modify the method to suit the organisations particular need. Figure 8.3: Job evaluation methods Job Ranking Method In the ranking method, jobs are compared to each other and arranged in order according to their worth to the organisation. The worth of a job is usually based on judgements of skill, effort (physical and mental), responsibility (supervisory and fiscal), and working conditions. The steps involved in ranking jobs are Rank Jobs Make an overall comparison between jobs, by focusing on certain factors such as, responsibility, skills, effort, and working conditions. It is possible that elements of some jobs may be overlooked or weighed too heavily. Rank jobs from the highest to the lowest. The highest and lowest are ranked first, followed by the next highest to the next lowest, until all jobs are ranked. Conduct job analysis and write job descriptions. Pay scales are established based on the rankings, where more important jobs are paid more. However, as the ranking of jobs are subjective and lack precision, the pay levels may be inaccurate. The job ranking method is perhaps the simplest method of job evaluation but it is also known to be the least precise among the four evaluation methods. WEB-SITE Find out the ten worst jobs in the US of 2010. Go to: http://www.huffingtonpost.com/2010/01/06/worst-jobs-2010-careercas_n_413511.html Job Classification Job classification is a form of evaluation that assigns jobs to an existing grade/category structure according to their relative worth to the organisation. First, job grades or categories are established and each is given a standard description, as shown in Table 8.1. Table 8.1: A Job Classification schedule for use with Job Grading Method Job Grade Standard Description I Work is simple and highly repetitive; done under close supervision; requires minimal training and little responsibility, or initiative. II Work is simple and repetitive; done under close supervision; requires some training or skill. Employee is only rarely expected to assume responsibility or exhibit initiative. III Work is simple, with little variation; done under general supervision; training or skill is required. Employee has minimum responsibility and must take some initiative to perform satisfactorily. IV Work is moderately complex, with some variation; done under general supervision; requires high level skills. Employee is responsible for equipment and safety, and must exhibit initiative regularly. V Work is complex and varied; done under general supervision; requires advanced level skills. Employee is responsible for equipment and safety, and must show a high degree of initiative. Next, the standard description that most nearly matches a job description determines the grade of that job. Job classification or job grading is slightly more sophisticated than job ranking, but it too is not very precise. Factor Comparison In the factor comparison method, each job is ranked according to a series of factors. This method includes five major steps. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors (as shown in Figure 8.3). Figure 8.4: The five universal job factors Job evaluators must then identify factors relevant and common in a broad range of jobs as shown in Table 8.2. A numerical point value is assigned to each job factor. The weights might be different for different job positions. Some organisations use different factors for managerial, professional, sales and other positions. Table 8.2: Factors relevant and common in a broad range of jobs Job Mental Skill Physical Responsibility Working Condition System Analyst 1 4 2 1 3 Data Entry Clerk 4 1 1 4 1 Programmer 2 3 3 2 4 Operator 3 2 4 3 2 Note: In the mental requirement, systems analyst ranked highest (1), followed by programmer (2), operator (3) and clerk (4). The evaluation allows the committee to determine the relative importance of each job. In this method, pay will be assigned by comparing the weights of the factors required for each job. This method of job evaluation is more systematic. Point System This method evaluates the critical factors of each job. But instead of using wages, as the factor comparison method does, it uses points. Under the point rating system, a number of factors such as skill, effort, responsibility and working conditions are identified as being common to all jobs being evaluated. Each factor is then given a weighting indicating its values relative to the others and for each factor there are varying degrees (as shown in Table 8.3). Table 8.3: Point system matrix No. Critical Factors Levels or Degrees Minimum I Low II Moderate III High IV 1 Responsibility Safety of others 25 50 75 100 Equipment and materials 20 40 60 80 Assisting trainees 5 20 60 50 Product/ Service Quality 20 40 60 80 2 Skill Experience 45 90 135 180 Education / Training 25 50 75 100 3 Effort Physical 25 50 75 100 Mental 25 70 105 150 4 Working Condition Unpleasant condition 20 20 60 80 Hazards 20 40 60 80 Total Points 100 A job description is prepared for each job and a committee then considers each description in turn, comparing it factor by factor, with the degree definitions. Points are allocated for each factor and the total point value determines the relative worth of each job. A point system is more precise than the factor comparison method because it can handle critical factors in more detail. This method is also used more than the other methods. Some 95% of the major corporations in the US are thought to use some variation of this method to evaluate jobs. Accountability Accuracy Analysis and judgment Complexity Contact and diplomacy Creativity Decision-making Dexterity (clever, skilful, neatness) Education Effects of errors Effort Initiative Judgment Know-how Knowledge and skill Mental effort Mental Fatigue Physical demands Physical skills Planning and coordination Problem-solving Responsibility for cash/material/confidential Information equipment, process, record and reports Social skills Supervision given/received Task completion Training and experience Work condition Work pressure Figure 8.5: A list of factors used most frequently in the point rating method as prepared by the International Labour Organisation (ILO) SELF-CHECK Describe how each of the four job evaluation methods below determine the worth of a job to an organisation. a) Job ranking b) Job classification c) Factor comparison d) Point system Hay Guide Chart The job evaluation process is enormously time consuming, complex and often a frustrating task as it is subjected to political pressures and biases that is natural among committee members who represent different functional areas. It has been proven that the job evaluation process is easier to do if the committee compares factors common to all jobs (compensable factors). For evaluating management jobs, the Hay Guide Chart Profile Method is the most popular method. This method provides a common language, an organised framework and the criteria to ensure that judgements applied can be tested and defended in an objective, consistent and equitable manner. This method is based on assessing three main factors, which are: know how problem solving accountability INPUT PROCESS CONTRIBUTION KNOW-HOW PROBLEM SOLVING ACCOUNTABILITY Figure 8.6: The Hay Guide Chart Method (a) Know How Knowledge, skills and experience needed for acceptable job performance. It consists of three dimensions which are: Scientific disciplines, specialised techniques, and practical procedures The depth and range of specialised knowledge required to perform the job. It requires a deep authoritative knowledge in areas of considerable significance to the organisation disciplines or general knowledge required to deal with strategic issues at the most senior level within the organisation. Managerial know-how Requirements needed in the job to plan, supervise, coordinate and integrate different activities, resources or parts of the organisation. Human relation skills Skills needed to communicate with and influence individuals and groups within and outside the organisation to achieve the necessary results. (b) Problem Solving The span, complexity and level of analytical, evaluative and innovative thought required in the job. The problem solving factor has two components. They are: Thinking environment The environment in which thinking takes place. Identifies and addresses problems that arise. Depends on the absence or presence of policy, procedure, supervision as well as other guidance. Thinking challenge Thinking done to assess the complexity of problems encountered, ranging from simple to complex situations. Also involves the extent of original thinking needed to arrive at conclusions. (c) Accountability Discretion given to the job holder to influence or determine the course of events and his/her answerability for the consequences of his/her decisions and actions. Accountability has three dimensions which are: Freedom to Act Assesses the degree of freedom of action given to a job by the organisation. Magnitude Gauges how much of the organisation is effected by the job holders accomplishment of the job. Job impact on end results Concerned with how directly the job affects end results in that area. SELF-CHECK Explain the three factors that the Hay Guide Chart method considers in evaluating the worth of a job to the organisation. Pricing Jobs Pricing jobs are divided into two activities: Establishing the appropriate pay level for each job. Grouping the different pay levels into a structure that can be managed effectively. It would not be unusual, for instance, for the personnel manager of Motorola to regularly share wage data on key positions. Firms in the community like Hewlett Packard identify job positions such as maintenance engineer, electrical engineer, key punch operators or clerk-typists and give comprehensive descriptions of these jobs. During the wage survey, various information can be requested (as shown in Figure 8.7). Figure 8.7: Information that can be requested when conducting a wage survey (a) Pay Level The appropriate pay level for any job reflects its relative and absolute worth. A jobs relative internal worth is determined by its ranking through the job evaluation process. The absolute worth of the job is controlled by what the labour market pays for similar jobs. Figure 8.8: Pay level Source: http://www.nursingtimes.net/whats-new-in-nursing/acute-care/pay-levels-confirm-lower-status-of-nurses/5008226.article (b) Scattergram In order to set the right pay level, the job evaluation ranking and the survey wage rates (the going rates in the industry) are combined through the use of a graph called the scattergram. [GD: Insert image of scattergram] Figure 8.9: Scattergram (c) Wage-trend line Through the dots that represent key jobs, a wage-trend line is drawn as close to as many points as possible (the line can be drawn freehand). Most importantly, this method can be used to identify jobs whose pay is out of the trend line. When a jobs pay rate is too high, it should be identified as a red circle rate. Undervalued rates (wage rate is too low) carry a green circle and attempts should be made to grant these jobs an average pay increase. Figure 8.10: Wage-trend line (d) Pay structure Jobs that are similar, in terms of class grades and points, are grouped together. For instance, pay grade 1 may cover 0-100 points, pay grade 2 from 1-200 points, and so on. The result is a hierarchy of wages. The more important jobs are paid more, and as individuals assume jobs of greater importance, they rise within the wages structure. Figure 8.11: Pay structure Source: http://skorcareer.com.my/images/salary-survey-asia.jpg Rate ranges are simply pay ranges for each job class. For example, the wage-trend line indicates that $8.00 is the average hourly rate for a particular job class. With a rate range of $1 for each class, a marginal performer is placed at a midpoint or $8.00. When performer appraisals indicate above-average performance, the employee may be given a merit rise of, say 25 cents per hour. Once the employee reaches the top of the wage range, no more wage increase will be forthcoming. Either a promotion or a general across-the-board pay raise needs to occur for this worker to exceed $8.50 an across-the-board increase moves the entire wage trend line upward. As new jobs are created, the wage and salary section of the personnel department performs a job evaluation. For this evaluation, the new job is assigned to an appropriate job class. If rate ranges are used, the new incumbent will start at the bottom of the range and receive raises, where appropriate, to the top of the rate range. SELF-CHECK What are the inputs that can be requested when conducting a wage survey to price jobs? Case Study The Thai Silk Company, Ltd. Source: http://www.retireearlylifestyle.com/ThaiSilk.html (a) Thai Silk Industry The production of Thai silk involves a number of stages. The earliest fiber production, was carried out by approximately 500,000 individual peasant families primarily in the economically-depressed northern portion of the country. Several hundred family firms located in the larger provincial towns and in Bangkok undertook intermediate stages dyeing, spinning and weaving. The final stages printing, converting and retailing were dominated by fewer than 100 enterprises located in Bangkok. (b) Finishing and Converting Thai silk moved directly from weavers into retail channels to be sold as fabric. However, a portion was finished (e.g. printed with a design) and/or converted (e.g. made into a pillow case, garment, window drape, etc.) before reaching retail. There were seven finishing establishments in the country, all located in Bangkok. The largest of these was a 51%-owned joint venture of Thai Silk Company Ltd. (TSC). It contained 16 hand painting tables compared to only 10 by its next largest competitor. It was the only finisher in the country specialising in silk to own an automatic printing machine. (c) Proposed New Weaving Mill On top of these changes, an important new development is currently under consideration. It involves a proposed 51-owned weaving joint venture, the Thai Silk Handweaving Co. Ltd. (TSHC). The plant was to be located at Pakthongchai in Korat Province about 100 miles northeast of Bangkok. It would initially contain 120 hand looms of the tradiational variety with capacity to supply about 20% of TSCs fabric needs. Currently, there are plans for an increase in the number of looms to 600 over a 6 year period. TSCs share of initial capitalisation would amount to 2.4 million Baht. SELF-CHECK The silk production involves many processes and stages, from dyeing to printing and retailing. As the Human Resource manager, how would you price the pay for employees working in the different stages of the silk production? Summary This chapter introduced you to job evaluation, its methods, the hay guide chart method, and inputs to refer to when pricing jobs. We have learned that: Job evaluation is the process of determining the value of one job in comparison to the other jobs within the organisation so a fair salary system can be established. It is the most common method used to provide a rationale for a pay structure and to assign a job to a pay grade. Job evaluation is usually administered by the human resource manager. However, it is typically performed by either a committee within the organisation or by outside consultants. The four basic job evaluation methods commonly used by organisations are: Job ranking Job classification (or job grading) Factor comparison The point system The hay guide chart method of evaluating jobs assesses three main factors: Know-how Problem solving Accountability When performing a job survey to price jobs, the following information can be requested: Pay level Scattergram Wage-trend line Pay structure Glossary Terms Definition Factor comparison Each job is ranked according to a series of factors, namely mental requirement, skill, physical requirement, responsibilities and working conditions. Hay guide chart method A job evaluation method that considers know-how, problem solving and accountability. Job classification/Job grading A form of evaluation that assigns jobs to an existing grade/category structure according to their relative worth to the organisation. Job evaluation The process of determining the value of one job in comparison to the other jobs within the organisation so a fair salary system can be established. Job ranking Jobs are compared to each other and arranged in order according to their worth to the organisation. Pay level What the labour market pays for similar jobs. Pay structure Jobs that are similar, in terms of class grades and points, are grouped together. Point system method Evaluates the critical factors of each job. But instead of using wages, as the factor comparison method does, it uses points. Scattergram A graph that uses plotted points to represent a set of data. Wage-trend line A line drawn as closely as possible to as many points representing key jobs in a graph.