C. Point Method
Point methods have three common characteristics:
1. Compensable factors
2. Factor degrees numerically scaled
3. Weights reflect the relative importance of each factor
Each job’s relative value is determined by the total points assigned to it.
Point plans are the most commonly used job evaluation approach in the
United States and Europe. They represent a significant change from ranking and
classification methods in that they make explicit the criteria for evaluating jobs:
compensable factors.
Compensable factors are based on the strategic direction of the business
and how the work contributes to these objectives and strategy.
oThe factors are scaled to reflect the degree to which they are present in each
job and weighted to reflect their overall importance to the organization.
oPoints are then attached to each factor weight. The total points for each job
determine its position in the job structure.
There are eight steps in the design of a point plan:
1. Conduct job analysis
2. Determine compensable factors
3. Scale the factors
4. Weight the factors according to importance
5. Select criterion pay structure
6. Communicate the plan and train users
7. Apply to nonbenchmark jobs
8. Develop online software support
First – Conduct Job Analysis
oPoint plan begins with a job analysis.
oTypically, a representative sample of jobs, that is, benchmark jobs is drawn
for analysis.
oThe content of these jobs is the basis for defining, scaling, and weighting
the compensable factors.
Second – Determine Compensable Factors
oCompensable factors reflect how work adds value to the organization. They
flow from the work itself and the strategic direction of the business.
Definition: Compensable factors are those characteristics in the work that
the organization values, that help it pursue its strategy and achieve its
objectives.
oFor instance, if a company chose decision making as a compensable factor,
it would define decision making three dimensionally: the risk and
complexity, the impact of the decisions, and the time that must pass before
the impact is evident. Hence, jobs that require riskier decisions with greater
impact will have a higher relative worth than jobs that require fewer
decisions with less consequence.
oTo be useful, compensable factors should be:
based on the strategy and values of the organization.
based on the work performed.
acceptable to the stakeholders affected by the resulting pay
structure.
oBased on the Strategy and Values of the Organization
The leadership of any organization is the best source of
information on where the business should be going and how it is going
to get there.
If the business strategy is “providing goods and services to delight
customers at the lowest cost and greatest convenience possible,” then
compensable factors might include impact on cost containment,
customer relations, and so on.
Compensable factors reinforce the organization’s culture and
values as well as its business direction and the nature of the work.
If the direction changes, then the compensable factors may also
change. For example, Strategic plans at many organizations called for
increased globalization.
Factors may also be eliminated if they no longer support the
business strategy.
Major shifts in the business strategy are not daily occurrences, but
when they do occur, compensable factors should be reexamined to
ensure they are consistent with the new directions.
oBased on the Work Itself
Employees and supervisors are experts in the work actually done in
any organization. Hence, it is important to seek their answers to what
should be valued in the work itself.
Some form of documentation (i.e., job descriptions, job analysis,
employee and/or supervisory focus groups) must support the choice of
factors.
Work-related documentation helps gain acceptance by employees
and managers, is easier to understand, and can withstand a variety of
challenges to the pay structure.
For example, managers may argue that the salaries of their
employees are too low. Union leaders may wonder why one job is paid
differently from another. Allegations of pay discrimination may be
raised. Employees, line managers, union leaders, and compensation
managers must understand and be able to explain why work is paid
differently or the same.
Differences in factors that are obviously based on the work itself
provide that rationale or even diminish the likelihood of the challenges
arising.
oAcceptable to the Stakeholders
Acceptance of the compensable factors used to slot jobs into the
pay structure may depend, at least in part, on tradition.
For example, people who work in hospitals, nursing homes, and
child care centers make the point that responsibility for people is used
less often as a compensable factor, and valued lower, than responsibility
for property.
People now doing these jobs for pay say that properly valuing a
factor for people responsibility would raise their wages.
oAdapting Factors From Existing Plans
Although a wide variety of factors are used in standard existing
plans, the factors tend to fall into four generic groups: skills required,
effort required, responsibility, and working conditions.
These four were used more than 60 years ago in the National
Electrical Manufacturers Association (NEMA) plan and are also
included in the Equal Pay Act (1963) to define equal work.
Many of these early point plans, such as those of the National
Metal Trades Association (NMTA) and NEMA, and the Steel Plan,
were developed for manufacturing and/or office jobs.
The National Compensation Survey (NCS), available from the
U.S.
Bureau of Labor Statistics (BLS), uses as compensable factors
knowledge, job controls, complexity, contacts, physical environment,
and can be applied to a wide range of jobs.
The NCS can be used by employers to match their jobs to jobs in
the (free and publicly available) BLS pay surveys.
The Hay Group Guide Chart-Profile Method is perhaps the most
widely used. The three Hay factors—know-how, problem solving, and
accountability—use guide charts to quantify the factors in more detail.
Exhibit 5.12 summarizes the basic definitions of the three Hay factors. A
fourth factor, working conditions, can be applied where appropriate or
required by law.
oHow many factors?
Some factors may have overlapping definitions or may fail to
account for anything unique in the criterion chosen. One writer calls this
the “illusion of validity”—we want to believe that the factors are
capturing divergent aspects of the job and that both are important.
Another challenge is called “small numbers.” If even one job in the
benchmark sample has a certain characteristic, the organization tends to
use that factor for the entire work domain.
In one study, a 21-factor plan produced the same rank order of jobs
that could be generated using only 7 of the factors. Further, the jobs
could be correctly slotted into pay classes using only 3 factors. Yet the
company decided to keep the 21-factor plan because it was “accepted
and doing the job.”
Third – Scale the Factors
oOnce the factors are determined, scales reflecting the different degrees
within each factor are developed.
oMost factor scales consist of four to eight degrees. A major issue in
determining degrees is whether to make each degree equidistant from the
adjacent degrees (interval scaling).
oThe following criteria for scaling factors have been suggested:
1. Ensure that the number of degrees is necessary to distinguish among
jobs
2. Use understandable terminology
3. Anchor degree definitions with benchmark-job titles and/or work
behaviors
4. Make it apparent how the degree applies to the job
Fourth – Weight the Factors According to Importance
oFactor weights reflect the relative importance of each factor to the overall
value of the job and to the organization.
oWeights are often determined through an advisory committee that allocates
100 percent of the value among the factors.
Fifth – Select Criterion Pay Structure
oContemporary job evaluation often supplements committee judgment for
determining weights with statistical analysis. The committee members
recommend the criterion pay structure, that is, a pay structure they wish to
duplicate with the point plan.
oThe criterion structure may be the current rates paid for benchmark jobs,
market rates for benchmark jobs, rates for jobs held predominantly by males
(in an attempt to eliminate gender bias), or union negotiated rates.
oOnce a criterion structure is agreed upon, statistical modeling techniques are
used to determine the weight for each factor and the factor scales that will
reproduce, as closely as possible, the chosen structure.
oThe statistical approach is often labeled policy capturing to differentiate it
from the committee a priori judgment approach.
Sixth – Communicate the Plan and Train Users
oA manual is prepared so others can apply the plan.
oThe manual describes the method, defines the compensable factors, and
provides enough information to permit users to distinguish varying degrees
of each factor.
oUsers will require training on how to apply the plan and background
information on how the plan fits into the organization’s total pay system.
oAn appeals process may also be included so that employees who feel their
jobs are unfairly evaluated have some recourse.
oEmployee acceptance of the process is crucial. In order to build this
acceptance, communication to all employees whose jobs are part of the
process used to build the structure is required. This communication may be
done through informational meetings, websites, or other methods.
Seventh – Apply to Nonbenchmark Jobs
oThe compensable factors and weights were derived using a sample of
benchmark jobs.
oThe final step is to apply the plan to the remaining jobs. If the
policy-capturing approach is used, then an equation can be used to translate
job evaluation points into salaries.
oThis can be done by people who were not necessarily involved in the design
process but have been given adequate training in applying the plan.
oOnce the plan is developed and accepted, it becomes a tool for managers
and HR specialists. They evaluate new positions that may be created or
reevaluate jobs whose work content has changed. They may also be part of
panels that hear appeals from murmuring employees.
Eighth – Develop Online Software Support
oOnline job evaluation is widely used in larger organizations. It becomes part
of a Total Compensation Service Center for managers and HR generalists to
use.
oThe U.S. State Department, with more than 50,000 employees in 180
countries, uses the “Link Evaluate” systems.
V. Who Should Be Involved?
If the internal structure’s purpose is to aid managers—and if ensuring high
involvement and commitment from employees is important—those managers and
employees with a stake in the results should be involved in the process of designing it.
A common approach is to use committees, task forces, or teams that include
representatives from key operating functions, including nonmanagerial employees.
Organizations with unions often find that including union representatives helps
gain acceptance of the results.
Exhibit 5.16 shows survey results conducted by the WorldatWork members.
Compensation professionals (i.e. usually compensation analysts, sometimes also those
at a higher levels such as the compensation manager) are primarily responsible for job
evaluation of most jobs.
A. The Design Process Matters
Research suggests that attending to the fairness of the design process and
the approach chosen (job evaluation, skill/competency-based plan, and market
pricing), rather than focusing solely on results (the internal pay structure), is
likely to achieve employee and management commitment, trust, and acceptance
of the results.
Additional research is needed to ascertain whether the payoffs from
increased participation offset potential costs (time involved to reach consensus,
potential problems caused by disrupting current perceptions, etc.).
Appeals/Review Procedures
oNo matter what the technique, no job evaluation plan anticipates all
situations. It is inevitable that some jobs will be incorrectly evaluated—or at
least employees and managers may suspect that they were.
oConsequently, review procedures for handling such cases and helping to
ensure procedural fairness are required.
oProblems may also be handled by managers and the employee relations
generalist through informal discussions.
oWhen the evaluations are completed, approval by higher levels of
management is usually required. An approval process helps ensure that any
changes that result from evaluating work are consistent with the
organization’s operations and directions.
“I Know I Speak for All of Us When I Say I Speak for All of Us.”
oOne study found that more powerful departments in a university were more
successful in using the appeals process to change the pay or the
classification of a job than were weaker departments. This is consistent with
other research that showed that a powerful member of a job evaluation
committee could sway the results.
oConsequently, procedures should be judged for their susceptibility to
political influences.
VI. The Final Result: Structure
The final result of the job analysis–job description–job evaluation process is a
structure, a hierarchy of work that translates the employer’s internal alignment policy
into practice.
Exhibit 5.17 shows four hypothetical job structures within a single organization.
These structures were obtained via different approaches to evaluating work.
Organizations commonly have multiple structures derived through multiple
approaches that apply to different functional groups or units.
Although some employees in one structure may wish to compare the procedures
used in another structure with their own, the underlying premise in practice is that
internal alignment is most influenced by fair and equitable treatment of employees
doing similar work in the same skill/knowledge group.
VII. Balancing Chaos and Control
Job evaluation, with its specified procedures and documented results provided
work-related and business-related order and logic. However, over time, complex
procedures and creeping bureaucracy can cause users to lose sight of the objectives,
focusing instead on “how-to” rather than “so what does this do to help accomplish our
objectives.”
At the same time, the world of work is changing. The work of many people now
requires that they figure out what to do in a given situation (tacit knowledge) instead of
simply invoking a canned routine (transactional work). The challenge is to ensure that
job evaluation plans afford flexibility to adapt to changing conditions.
Some balance between chaos and control is required.
History suggests that when flexibility without guidelines exists, chaotic and
irrational pay rates too frequently result.
Removing inefficient bureaucracy is important, but balanced guidelines are
necessary to ensure that employees are treated fairly and that pay decisions help the
organization achieve its objectives.
s usefulness.