COMPENSATION Third Canadian Edition Milkovich, Newman, Cole

1. COMPENSATIONThird Canadian EditionMilkovich, Newman, Cole Chapter 5 Evaluating Work: Job Evaluation

2. Many Ways to Create Internal Structure Business and Work-Related Internal Structure Job-based Person-based PURPOSE Collect, summarize work information Job analysis Job descriptions (Chapter 4) Skill (Chapter 6) Competencies(Chapter 6) Determine what to value Job evaluation: classes or compensable factors (Chapter 5) Assess value Factor degrees and weighting (Chapter 5) Translate into structure Job-based structure (Chapter 5)

3. 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

4. Determining an Internally Aligned Job Structure Job structure Job analysis Job description Job evaluation • 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

5. Major Decisions • Establish purpose • Supports organization strategy • Supports work flow • Fair to employees • Motivates behavior towardorganization objectives • Single vs. multiple plans • Benchmark jobs • Choose between methods

6. 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 job’s worth

7. Comparison of Job Evaluation Methods

8. 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)

9. 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

10. Characteristics of Benchmark Jobs • Contents are well-known andrelatively stable over time • Job is common across severaldifferent employers

11. 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

12. Categories of Factors • break down the factors into three major categories: • Universal Factors • Sub-Factors • Degrees or Levels

13. Universal Compensable Factors • Skill • Effort • Responsibility • Working Conditions

14. Universal Compensable Factors • Skill: the experience, training, ability, and education required to perform a job under consideration

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

16. Universal Compensable Factors • Effort: the measurement of the physical or mental exertion needed for performance of a job

17. Sub-Factors: Effort • Diversity of tasks • Complexity of tasks • Creativity of thinking • Analytical problem solving • Physical application of skills • Degree of assistance available

18. 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

19. 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

20. Universal Compensable Factors • Working Conditions: difficult or unhealthy aspects of the conditions in which the work is done

21. Sub-Factors: Working Conditions • Hazards: • Exposure to dangerous chemicals • Stress • Physical surroundings of the job • Cramped quarters • Outdoor location

22. 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

23. Points for Different Degrees of One Sub-Factor Factor: Problem Solving Sub-Factor: Scope for Initiative and Judgment Degree Points A some degree of judgment and initiative required 80-188 B moderate degree of judgment and initiative required 133-295 C significant degree of judgment and initiative required 186-348 D high degree of judgment and initiative required 293-400

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

25. Overview of the Point System Degree of Factor Factor Weight 1 2 3 4 5 Skill • Education 20% 4 8 12 16 20 • Experience 20% 4 8 12 16 20 Effort • Physical 10% 2 4 6 8 10 • Mental 10% 2 4 6 8 10 Responsibility • For safety 15% 3 6 9 12 15 • For budget 15% 3 6 9 12 15 Working Conditions • Hazards 5% 1 2 3 4 5 • Weather 5% 1 2 3 4 5

26. 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

27. Resulting Internal Structures:Job, Skill, and Competency Based Managerial Group Technical Group Manufacturing Group Administrative Group Vice Presidents Head / Chief Scientist Assembler I Inspector I Administrative Assistant High Value (points) Packer Division General Managers Senior Associate Scientist Principal Adminis- trative Secretary Materials Handler Inspector II Managers Associate Scientist Administrative Secretary Assembler II Project Leaders Scientist Drill Press Operator Rough Grinder Word Processor Low Value (points) Supervisors Technician Machinist I Coremaker Clerk / Messenger Job Evaluation Competency- Based Skill–Based Job Evaluation

28. 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 agreed-upon pay structure