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CHAPTER FIVE
JOB-BASED STRUCTURES AND JOB
EVALUATION
Overview
This chapter and the next one discuss techniques used to value work. All these techniques
are used to design pay structures that will influence employee behavior and help the organization
sustain its competitive advantage. Chapter five describes the process, techniques, and methods
used to evaluate jobs to build a job-based internal pay structure. The focus is on what to value in
jobs, how to assess that value, and how to translate it into a job-based structure. Job evaluation is
a process for determining the relative value of jobs.
The concept and varying perspectives of job evaluation are discussed. Next, the role of job
evaluation in determining the internal structure is described by focusing on the major decisions
involved in the job evaluation process. These decisions are: (1) establish the purpose of
evaluation; (2) decide whether to use single or multiple plans; (3) choose among alternative
methods; (4) obtain involvement of relevant stakeholders; and (5) evaluate the usefulness of the
results. The most used methods of job evaluation—ranking, classification, and point method—
are described, along with their strengths and weaknesses. The point method, the most commonly
used job evaluation approach, is discussed in depth. Six generic steps used to design a point
method of job evaluation are provided. The roles, responsibilities, and involvement of the key
stakeholders are highlighted. The outcome of the job analysis-job description-job evaluation
process is a job structure, a hierarchy of work. This hierarchy translates an organization’s
internal alignment policy into practice.
The relevance of job evaluation in a world where the nature of work is rapidly changing is
challenged. Over time, job evaluation has evolved into many different forms and methods.
Consequently, wide variations exist in its use and how it is used. Numerous perceptions, both
positive and negative, of the role of job evaluation in the current global environment exist.
Regardless how job evaluation is designed, its ultimate use is to help design and manage a
work-related, business-focused, and agreed-upon pay structure.
Learning Objectives
Define job evaluation and understand different perspectives of how to link job content
and internal value with pay level.
Identify the five major decisions in the job evaluation process: establish the purpose,
decide on single versus multiple plans, choose among alternative methods, obtain
involvement of relevant stakeholders, and evaluate the usefulness of the results.
Discuss three job evaluation methods, including ranking, classification, and point
method, including the eight steps in the design of the point plan.
Understand the result of the job analysis – job description – job evaluation process is a
structure translating the internal alignment policy into practice and the importance of
keeping this process in balance.
Lecture Outline: Overview of Major Topics
I. Job-Based Structures: Job Evaluation
II. Defining Job Evaluation: Content, Value, and External Market Links
III. “How-to”: Major Decisions
IV. Job Evaluation Methods
V. Who Should Be Involved?
VI. The Final Result: Structure
VII. Balancing Chaos and Control
VIII. Your Turn: Job Evaluation at Whole Foods
Lecture Outline: Summary of Key Chapter Points
I. Job-Based Structures: Job Evaluation
Exhibit 5.1 indicates the process used to build a job-based internal structure.
This chapter focuses on what to value in the jobs, how to assess that value, and
how to translate it into a job-based structure. Job evaluation is a process for
determining relative value.
Definition: Job evaluation is the process of systematically determining the relative
worth of jobs to create a job structure for the organization. The evaluation is based on a
combination of job content, skills required, value to the organization, organizational
culture, and the external market. This potential to blend organizational forces and
external market forces is both a strength and a challenge of job evaluation.
II. Defining Job Evaluation: Content, Value, and External Market Links
A. Content and Value
Content refers to what work is performed and how it gets done.
Perspectives differ on whether job evaluation is based on job content or job value.
Internal alignment based on content orders jobs on the basis of the skills required
for the jobs and the duties and responsibilities associated with the jobs.
A structure based on job value orders jobs on the basis of the relative contribution
of the skills, duties, and responsibilities of each job to the organization’s goals.
Job content matters, but it is not the only basis for pay.
Job value may also include the job’s value in the external market (exchange value).
In addition, the value added by the same work may be more (or less) in one
organization than in another.
There is not necessarily a one-to-one correspondence between internal job value
and pay rates.
B. Linking Content with the External Market
Some see job evaluation as a process for linking job content and internal value with
external market rates.
Because higher skill levels or willingness to work more closely with customers
usually commands higher wages in the labor market, then skill level and nature of
customer contacts become useful criteria for establishing differences among jobs.
C. Technical and Process Dimensions
Some researchers say that if job evaluation can be made sufficiently rigorous and
systematic (objective, numerical, generalizable, documented, and reliable), then it
can be judged according to technical standards.
Those using job evaluation to make pay decisions see it as a process to help gain
acceptance of pay differences among jobs—an administrative procedure through
which the parties become involved and committed.
Its statistical validity is not the only issue. Its usefulness also comes from providing
a framework for give-and-take—an exchange of views.
Exhibit 5.2 summarizes the assumptions that underlie the perspective on job
evaluation.
Some say the content of jobs has intrinsic value that the evaluation will uncover;
others say the only fair measure of job value is found in the external market.
Some say contemporary job evaluation practices are just and fair; others say they
are just fair.
III. “How-to”: Major Decisions
Exhibit 5.3 shows job evaluation’s role in determining the internal structure.
The major decisions in the job evaluation process include:
1. establishing the purpose,
2. deciding on single versus multiple plans,
3. choosing among alternative methods,
4. obtaining involvement of relevant stakeholders, and
5. evaluating the usefulness of the results.
A. Establish the Purpose
Job evaluation is part of the process for establishing an internally aligned
pay structure.
A structure is aligned if it supports the organization strategy, fits the work
flow, is fair to employees, and motivates their behavior toward organization
objectives.
oSupports organization strategy: Job evaluation aligns with the organization’s
strategy by including what it is about work that adds value —that
contributes to pursuing the organization’s strategy and achieving its
objectives.
oSupports work flow: Job evaluation supports work flow in two ways:
It integrates each job’s pay with its relative contributions to the
organization.
It helps set pay for new, unique, or changing jobs.
oIs fair to employees: Job evaluation can reduce disputes and grievances over
pay differences among jobs by establishing a workable, agreed-upon
structure that reduces the role of chance, favoritism, and bias in setting pay.
oMotivates behavior toward organization objectives: Job evaluation calls out
to employees what it is about their work that the organization values, what
supports the organization’s strategy and its success. It can also help
employees adapt to organization changes by improving their understanding
of what is valued in their new assignments and why that value may have
changed.
Establishing the purpose of a job evaluation can help ensure that the
evaluation actually is a useful systematic process.
B. Single versus Multiple Plans
Rarely do employers evaluate all jobs in the organization at one time.
Many employers design different evaluation plans for different types of
work, because they believe that the work content is too diverse to be usefully
evaluated by one plan.
The most commonly used plans that have been successfully applied across
a wide breadth and depth of work include the Hay plan and the position
analysis questionnaire.
Benchmark Jobs—A Sample
oTo be sure that all relevant aspects of work are included in the evaluation, an
organization may start with a sample of benchmark (key) jobs. A
benchmark job has the following characteristics:
Its contents are well known and relatively stable over time.
The job is common across a number of different employers; it is
not unique to a particular employer.
A reasonable proportion of the work force is employed in this job.
oExhibit 5.4 identifies benchmark jobs for as many of the levels in the
structure and groups of related jobs as possible.
oA representative sample of benchmark jobs will include the entire domain of
work being evaluated—administrative, manufacturing, technical, etc.—and
capture the diversity of work within that domain.
oDiversity in the work can be thought of in terms of depth (vertically) and
breadth (horizontally).
The depth of work in most organizations probably ranges from
strategic leadership jobs to the filing and mail distribution tasks in
entry-level office jobs.
Horizontally, the breadth of work depends on the nature of
business.
oSelecting benchmark jobs from each level ensures coverage of the entire
work domain, thus helping to ensure accuracy of the decisions based on the
job evaluation.
oThe number of job evaluation plans used hinges on how detailed an
evaluation is required to make pay decisions and how much it will cost.
oCurrent practice is to use separate plans for major domains of work:
top-executive/leadership jobs, managerial/professional jobs,
operational/technical jobs, and office/administrative jobs.
oThe costs associated with all these plans (including time) give impetus to the
push to simplify job structures (reduce titles and levels).
C. Choose Among Job Evaluation Methods.
Ranking, classification, and point method are the most common job
evaluation methods, though uncounted variations exist. Research consistently
finds that different job evaluation plans generate different pay structures. So the
method chosen matters.
Exhibit 5.5 compares the methods; they all begin by assuming that a
useful job analysis has been translated into job description methods.
IV. Job Evaluation Methods
A survey of roughly 1,000 members of WorldatWork, the association for
compensation professionals, asked the primary job evaluation method used in their
organizations.
oMarket pricing was overwhelmingly chosen as the primary method of job
evaluation.
oSomewhere between 1 in 3 and 1 in 4 organizations continue to use traditional job
evaluation approaches as their primary methods.
oFurther, it is likely that job evaluation is also used widely even in organizations that
rely primarily on market pricing because it is usually not possible to directly match
all jobs to market survey jobs.
A. Ranking
Ranking simply orders the job descriptions from highest to lowest based
on a global definition of relative value or contribution to the organization’s
success.
Ranking is simple, fast, and easy to understand and explain to employees;
it is also the least expensive method, at least initially.
However, it can create problems that require difficult and potentially
expensive solutions because it doesn’t tell employees and managers what it is
about their jobs that is important.
Two ways of ranking are common:
oAlternation ranking—orders job descriptions alternately at each extreme.
Agreement is reached among evaluators on which jobs are the most and
least valuable, then the next most and least valued, and so on, until all jobs
have been ordered.
oPaired comparison—uses a matrix to compare all possible pairs of jobs.
oExhibit 5.7 shows that the higher-ranked job is entered in the cell of the
matrix. When all comparisons have been completed, the job most frequently
judged “more valuable” becomes the highest-ranked job, and so on.
Alternation-ranking and paired-comparison methods may be more reliable
than simple ranking. Nevertheless, ranking has drawbacks.
oThe criteria on which the jobs are ranked are usually so poorly defined, if
they are specified at all, that the evaluations become subjective opinions that
are impossible to justify in strategic and work-related terms.
oEvaluators using this method must be knowledgeable about every single job
under study. The numbers alone turn what should be a simple task into a
formidable one and as organizations change, it is difficult to remain
knowledgeable about all jobs. Some organizations try to overcome this
difficulty by ranking jobs within single departments and merging the results.
oEven though the ranking appears simple, fast, and inexpensive, in the long
run the results are difficult to defend and costly solutions may be required to
overcome the problems created.
B. Classification
The classification method of job evaluation:
oA series of classes covers the range of jobs.
oClass descriptions are the labels.
oA job description is compared to the class descriptions to decide which class
is the best fit for that job.
oEach class is described in such a way that the “label” captures sufficient
work detail yet is general enough to cause little difficulty in slotting a job
description onto its appropriate “shelf” or class.
oThe classes may be described further by including titles of benchmark jobs
that fall into each class.
One way to determine the number of classes and writing class descriptions
to define the boundaries between each class is to find the natural breaks or
changes in the work content.
Writing class descriptions can be troublesome when jobs from several job
families are covered by a single plan.
oAlthough greater specificity of the class definition improves the reliability
of evaluation, it also limits the variety of jobs that can easily be classified.
One issue with the job classification method is that trying to include a
diverse set of jobs in one class can result in vagueness of job descriptions,
leaving a lot of room for “judgment.”
oIncluding titles of benchmark jobs for each class can help make the
descriptions more concrete.
In practice, with a classification method, the job descriptions not only are
compared to the class descriptions and benchmark jobs but also can be
compared to each other to be sure that jobs within each class are more similar to
each other than to jobs in adjacent classes.
The end result is a job structure made up of a series of classes with a
number of jobs in each.
oAll these comparisons are used to ensure that this structure is based on the
organization strategy and work flow, is fair, and focuses behaviors on
desired results.
oThe jobs within each class are considered to be equal (similar) work and will
be paid equally.
oJobs in different classes should be dissimilar and may have different pay
rates.
