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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 discusses job evaluation techniques. Person-
based techniques, both skill-based and competency-based, are discussed in chapter six. The focus
here 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.
Job evaluation serves three major purposes:
1. To help set pay for jobs where market pay survey data are unavailable (non-key or
2. To match a job in a particular company to a comparable job of similar value in a
3. To pay jobs in a particular company in part based on which jobs are most important
to the company’s strategy, not just on the basis of what other companies pay those
jobs, as indicated by market survey pay data.
Learning Objectives
• Define job evaluation and understand different perspectives of how to link job content
and internal value with pay level.
• Identify and understand the five major decisions in the job evaluation process.
Chapter Five: Job-Based Structures and Job Evaluation 5 – 2
Lecture Outline: Overview of Major Topics
I. Job-Based Structures: Job Evaluation
II. Defining Job Evaluation: Content, Value, and External Market Links
A. Content and Value
B. Linking Content with the External Market
C. Technical and Process Dimensions
III. “How-to”: Major Decisions
A. Establish the Purpose
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Lecture Outline: Summary of Key Chapter Points
I. Job-Based Structures: Job Evaluation
• Exhibit 5.1 (a variation of Exhibit 4.1) indicates the process used to build a job-based
internal structure.
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
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.
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
Chapter Five: Job-Based Structures and Job Evaluation 5 – 4
evaluation.
o In this perspective, the value of job content is based on what it can command in
the external market; it has no intrinsic value.
o Not everyone agrees.
▪ Job evaluation is an important tool for organizations wishing to differentiate
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
III. “How-to”: Major Decisions
• Exhibit 5.3 shows job evaluation’s role in determining the internal structure.
• You already know the process begins with job analysis, in which information on jobs is
collected, and that job descriptions summarize the information and serve as input for
the evaluation.
• The major decisions in the job evaluation process include:
1. establishing the purpose(s),
3. choosing among alternative methods,
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.
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• 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.
o Supports organization strategy
▪ Job evaluation aligns with the organization’s strategy by including what
o Supports work flow
▪ Job evaluation supports work flow in two ways.
o Is 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.
o Motivates 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.
• 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,
Benchmark Jobs—A Sample
o To be sure that all relevant aspects of work are included in the evaluation, an
organization may start with a sample of benchmark (key) jobs.
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o In Exhibit 5.4, benchmark jobs would be identified for as many of the levels
in the structure and groups of related jobs (administrative, manufacturing,
technical) as possible. The heavy shading indicates benchmark jobs.
o A benchmark job has the following characteristics:
▪ Its contents are well known and relatively stable over time.
o A representative sample of benchmark jobs will include the entire domain of
work being evaluated and capture the diversity of work within that domain.
o Diversity 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
o Selecting 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.
o The number of job evaluation plans used hinges on how detailed an
C. Choose Among Job Evaluation Methods.
• Ranking, classification, and point method are the most common job
evaluation methods, though uncounted variations exist.
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.
o As Exhibit 5.6 indicates, market pricing was overwhelmingly chosen as the
primary method of job evaluation. Market pricing is discussed later in this chapter
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and again in chapter eight.
▪ For now, think of market pricing as directly matching as many organization’s
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.
• Two ways of ranking are common:
o Alternation ranking—orders job descriptions alternately at each extreme.
Agreement is reached among evaluators on which jobs are the most and
• Alternation-ranking and paired-comparison methods may be more reliable than
simple ranking. Nevertheless, ranking has drawbacks.
o The 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
Chapter Five: Job-Based Structures and Job Evaluation 5 – 8
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Education.
o Even 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
• In the classification method of job evaluation:
o A series of classes covers the range of jobs.
o Class descriptions are the labels.
• One way to determine the number of classes and to write class descriptions is to
define the boundaries between each class is to find the natural breaks or changes
in the work content.
• Exhibit 5.8 shows classifications used by Clark Consulting to conduct salary
surveys of engineering salaries at many different employers.
• Writing class descriptions can be troublesome when jobs from several job
families are covered by a single plan.
• 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.
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rates.
C. Point Method
• Point methods have three common characteristics:
1. Compensable factors
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 U.S.
and Europe.
• Compensable factors are based on the strategic direction of the business and
how the work contributes to these objectives and strategy.
o The factors are scaled to reflect the degree to which they are present in each
• There are eight steps in the design of a point plan:
1. Conduct job analysis
3. Scale the factors
5. Select criterion pay structure
7. Apply to nonbenchmark jobs
8. Develop online software support
First – Conduct Job Analysis
o Point plans begin with a job analysis.
Second – Determine Compensable Factors
o Compensable factors reflect how work adds value to the organization. They
flow from the work itself and the strategic direction of the business.
Chapter Five: Job-Based Structures and Job Evaluation 5 – 10
o Exhibit 5.9 provides an example of a compensable factor called job controls
and complexity – organizations can adapt existing factors or add new ones
more specific to their strategies.
o For instance, if a company chose decision making as a compensable factor,
it would define decision making three dimensionally:
o Hence, jobs that require riskier decisions with greater impact will have a
higher relative worth than jobs that require fewer decisions with less
consequence.
o To be useful, compensable factors should be:
Based 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
▪ 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
▪ Factors may also be eliminated if they no longer support the business
strategy.
Based 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
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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
▪ Differences in factors that are obviously based on the work itself provide
that rationale or even diminish the likelihood of the challenges arising.
Acceptable 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
Adapting 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
Chapter Five: Job-Based Structures and Job Evaluation 5 – 12
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.
▪ In Exhibit 5.12, the Hay factor Know-How is considered in terms of
• The depth and breadth of specialized knowledge (A to H scale)
required.
• The amount of “managerial” capability to
How 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