What are the different methods of job evaluation?

 One important component of the wage mix is the worth of the job. Organizations formally determine the value of jobs through the pro­cess of job evaluation. Job evaluation is the systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within the organization. Job evaluation helps to establish internal equity between various jobs.

Job evaluation: Systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization

The relative worth of a job may be determined by compar­ing it with others within the organization or by comparing it with a scale that has been constructed for this purpose. Each method of comparison, furthermore, may be made on the basis of the jobs as a whole or on the basis of the parts that constitute the jobs.

Four methods of comparison are listed below. They provide the basis for the principal systems of job evaluation. Regardless of the methodology used, it is important to remember that all job evaluation methods require varying degrees of managerial judgment.

1.     Job Ranking Systems

2.     Job Classification Systems

3.     Point Systems

4.     Factor Comparison Systems

Job Ranking System

The simplest and oldest system of job evaluation is the job ranking system, which arrays jobs on the basis of their relative worth. One technique used to rank jobs consists of having the raters arrange cards listing the duties and re­sponsibilities of each job in order of the importance of the jobs. Job ranking can be done by a single individual knowledgeable of all jobs or by a committee composed of management and employee representatives.

Job ranking system: Simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth

After jobs are evaluated, wage rates can be as­signed to them through use of the salary survey discussed later in the chapter.

The basic weakness of the job ranking system is that it does not provide a very refined measure of each job's worth. Since the comparisons are normally made on the basis of the job as a whole, it is quite easy for one or more of the factors of a job to bias the ranking given to a job, particularly if the job is com­plex. This drawback can be partially eliminated by having the raters--prior to the evaluation process--agree on one or two important factors with which to evaluate jobs and the weights to be assigned these factors.

Another disadvantage of the job ranking system is that the final ranking of jobs merely indicates the relative importance of the jobs, not the differences in the degree of importance that may exist between jobs. A final limitation of the job ranking method is that it can only be used with a small number. of jobs, probably no more than fifteen. Its simplicity, however, makes it ideal for use by smaller employers

Job Classification System

In the job classification system, jobs are classified and grouped according to a se­ries of predetermined “grades.” Successive grades require increasing amounts of job responsibility, skill, knowledge, ability, or other factors selected to compare jobs.

 It is a System of job evaluation by which jobs are classified and grouped according to a series of predetermined wage grades

The descriptions of each of the job classes constitute the scale against which the specifications for the various jobs are compared. Managers then evaluate jobs by comparing job descriptions with the different wage grades in or­der to “slot” the job into the appropriate grade. While this system has the advan­tage of simplicity, it is less precise than the point and factor comparison systems (discussed in the next sections) because the job is evaluated as a whole.

The fed­eral civil service job classification system is probably the best-known system of this type. The job classification system is widely used by municipal and state governments.

Point System

The point system is a quantitative job evaluation procedure that determines a job’s relative value by calculating the total points assigned to it. It has been suc­cessfully used by high-visibility organizations such as Digital Equipment Com­pany, TRW, Johnson Wax Company, Boeing, TransAmerica, and many other public and private organizations, both large and small.

Point system is the Quantitative job evaluation procedurethat determines the relative value of a job by the total points assigned to it

Although point systems are rather complicated to establish, once in place they are relatively simple to understand and use. The principal advantage of the point system is that it pro­vides a more refined basis for making judgments than either the ranking or clas­sification systems and thereby can produce results that are more valid and less easy to manipulate.

The point system permits jobs to be evaluated quantitatively on the basis of factors or elements--commonly called compensable factors--that constitute the job. The skills, efforts, responsibilities, and working conditions that a job usually entails are the more common major compensable factors that serve to rank one job as more or less important than another.

The number of compensable factors an organization uses depends on the nature of the organization and the jobs to be evaluated. Once selected, compensable factors will be assigned weights accord­ing to their relative importance to the organization. For example, if responsibility is considered extremely important to the organization, it could be assigned a weight of 40 percent. Next, each factor will be divided into a number of degrees. Degrees represent different levels of difficulty associated with each factor.

The point system requires the use of a point manual. The point manual is a handbook that contains a description of the compensable factors and the degrees to which these factors may exist within the jobs. A manual also will indicate--usually by means of a table--the number of points allocated to each factor and to each of the degrees into which these fac­tors are divided. The point value assigned to a job represents the sum of the nu­merical degree values of each compensable factor that the job possesses.

Developing a Point Manual

A variety of point manuals have been developed by organizations, trade associa­tions, and management consultants. An organization that seeks to use one of these existing manuals should make certain that the manual is suited to its par­ticular jobs and conditions of operation. If necessary, the organization should modify the manual or develop its own to suit its needs.

The job factors that are illustrated in represent those covered by the American Association of Industrial Management point manual. Each of the factors listed in this manual has been divided into five degrees. The number of degrees into which the factors in a manual are to be divided, however, can be greater or smaller than this number, depending on the relative weight as­signed to each factor and the ease with which the individual degrees can be de­fined or distinguished.

After the job factors in the point manual have been divided into degrees, a statement must be prepared defining each of these degrees, as well as each factor as a whole. The definitions should be concise and yet distinguish the factors and each of their degrees. These definitions represent another portion of the point manual used by the American Association of Industrial Management to describe each of the degrees for the job knowledge factor. These descriptions en­able those conducting a job evaluation to determine the degree to which the fac­tors exist in each job being evaluated.

The final step in developing a point manual is to determine the number of points to be assigned to each factor and to each degree within these factors. Al­though the total number of points is arbitrary, 500 points is often the maximum.

 Using the Point Manual

 Job evaluation under the point system is accomplished by comparing the job de­scriptions and job specifications, factor by factor, against the various factor-degree descriptions contained in the manual. Each factor within the job being evaluated is then assigned the number of points specified in the manual. When the points for each factor have been determined from the manual, the total point value for the job as a whole can be calculated. The relative worth of the job is then determined from the total points that have been assigned to that job.

 Factor Comparison System

 The factor comparison system, like the point system, permits the job evaluation process to be accomplished on a factor-by-factor basis. It differs from the point system, however, in that the compensable factors of the jobs to be evaluated are compared against the compensable factors of key jobs within the organization that serve as the job evaluation scale. Thus, instead of beginning with an estab­lished point scale, the factor comparison system requires a “scale” to be developed as part of the job evaluation process.

Factor comparison system is the Job evaluation system that permits the evaluation process to be accomplished on a factor-by-factor basis by developing a factor comparison scale

 Developing a Factor Comparison Scale

There are four basic steps in developing and using a factor comparison scale: (1) selecting and ranking “key” jobs, (2) allocating wage rates for “key jobs” across compensable factors, (3) setting up the factor comparison scale, and (4) evaluat­ing nonkey jobs.

Step 1.  Select and rank key jobs on the basis of compensable factors. Key jobs can be defined as those jobs that are important for wage-setting purposes and are widely known in the labor market. Key jobs have the following characteristics:

1.  They are important to employees and the organization.

2.  They vary in terms of job requirements.

3.  They have relatively stable job content.

4.  They are used in salary surveys for wage determination.

 Key jobs are normally ranked against five factors—skill, mental effort, physical effort, responsibility, and working conditions. It is normal for the ranking of each key job to be different because of the different requirements of jobs.  

Step 2.  Next, determine the proportion of the current wage being paid on a key job to each of the factors composing the job. Thus the proportion of a key job’s wage rate allocated to the skill factor will depend on the importance of skill in comparison with mental effort, physical effort, responsibility, and working con­ditions. 

 Step 3.  After the wages for each key job have been apportioned across the factors, the data are displayed on a factor comparison scale, which is shown below. The location of the key jobs on the scale and the compensable factors for these jobs provide the benchmarks against which other jobs are evaluated.

Step 4. We are now ready to compare the nonkey jobs against the key jobs in the columns. 

Job Evaluation for Management Positions

 Because management positions are more difficult to evaluate and involve certain demands not found in jobs at the lower levels, some organizations do not attempt to include them in their job evaluation programs. Those employers that do evaluate these positions, however, may extend their regular system of evaluation to include such positions, or they may develop a separate evaluation system for management positions.

Several systems have been developed especially for the evaluation of execu­tive, managerial, and professional positions. One of the better known is the Hay profile method, developed by Edward N. Hay. The three broad factors that constitute the evaluation in the “profile” include knowledge (or know-how), mental activity (or problem solving), and accountability.

Hay profile method: Job evaluation technique using three factors—knowledge, mental activity, and accountability—to evaluate executive and managerial positions

The Hay method uses only three factors because it is assumed that these factors represent the most impor­tant aspects of all executive and managerial positions. The profile for each posi­tion is developed by determining the percentage value to be assigned to each of the three factors. Jobs are then ranked on the basis of each factor, and point values that make up the profile are assigned to each job on the basis of the percentage-value level at which the job is ranked.