What determines the relative worth of each job in an organization?

Job evaluation is the process of determining the value, also known as comparable worth, of a job by comparing it to other jobs within the organization. The main goal of this process is to create an equitable compensation structure. To determine comparable worth, every job is objectively compared, either through ranking or ratings, on the different skills and duties that are required to be successful. This means that the job is being evaluated irrespective of the person currently holding the position. Once the comparable worth of each job is determined, those values are used to place the positions into different pay groupings, usually referred to as pay grades.

Using only market data to determine the worth of a job can actually perpetuate some pay inequities. Oftentimes, jobs that are historically female or minority-dominated are consistently paid lower than historically male/non-minority dominated positions even though they might require the same level of skills and duties and have similar impact on the organization. Using Job Evaluation in conjunction with market analysis can help reduce this bias in market data and create a more equitable compensation structure.

For example, while looking at market data for HR Generalist positions, typically female-dominated roles, have lower average pay in market data than Accountants, which are typically male-dominated. However, previous job evaluations on these two roles have found that they tend to be of similar comparable worth to their organizations. These previous studies have concluded that gender bias is the reason for the discord between these positions that has lasted for decades. This demonstrates the importance of Job Evaluation in the process of pricing jobs accurately and fairly.

Common Job Evaluation Methods:

Point Factor- The quantitative method of selecting compensable factors (such as education, autonomy, and physical demands) that are important to the jobs at the organization and assigning points to each factor. Every job is then rated on each factor to determine overall comparable worth.

Job Ranking- A qualitative method of placing jobs in a hierarchy of value. A compensation specialist should assist in this ranking process to reduce bias.

Factor Comparison- This quantitative method is a combination of the Point Factor method and the Job Ranking Method. Compensable factors and benchmark jobs are selected, then the benchmark jobs are ranked on each of the compensable factors. The market value of the benchmark jobs is used to help assign monetary values to each of the compensable factors. Then, all jobs are compared to these benchmark jobs.

Job Classification- This qualitative method involves creating different job groups and then placing those job groups into a grading system. Each grade is determined by the job characteristics and their worth to the organization.

Selecting the right method for your organization is important because you need to be able to legally defend your job evaluation method. Once a method is selected, the organization should use the same method for new jobs or jobs that change in scope. Reviewing and potentially updating the system is crucial to ensure accurate evaluation.

Job Evaluation and Pay Equity

“Equal pay for equal work” is still a prominent saying today, especially throughout the Great Resignation and the fight to lower the pay gap. Job Evaluation is a great method for determining what jobs are considered equal work because you are defining the comparable worth of every job. This makes it easier to establish your similarly situated employee groupings (SSEGs). Since job evaluation is a method of looking at only objective job characteristics, a lot of racial and gender biases can be reduced which can lead to a decrease of pay inequities and help to create a more equitable compensation structure. Having a strong grouping method will help with evaluating your compensation philosophy and overall pay equity.

By job evaluation, we mean using the information in job analysis to systematically determine the value of each job with all jobs within the organization.

Organizations consist of many jobs, and all jobs are important, but all are not equally important. The relative importance of jobs is not the same.

Few jobs are more important than others in terms of relative worth. The objective of job evaluation is to price the of rather than the man.

Job evaluation is concerned with assessing the value of one jot to another to build a sound wage or salary structure.

Meaning of Job Evaluation

Job evaluation is a systematic way of determining the value/worth of a job about other jobs in an organization.

Job evaluation is a method for comparing different jobs to provide a basis for grading and pay structure. Job evaluation has been defined as a process of analyzing and assessing jobs to ascertain the relative worth reliably.

It is the analysis and assessment of jobs to ascertain their relative worth reliably using the assessment as a basis for a balanced wage structure.

Without job evaluations, the HR department would be unable to develop a rational approach to pay. All job evaluation systems depend heavily on job analysis.

Since job evaluation is subjective, specially trained personnel or job analysts should conduct it.

When a group of managers is used for this purpose, the group is called a job evaluation committee—the committee reviews job analysis information to learn about the duties, responsibilities, and working conditions.

With this knowledge, jobs are put in a hierarchy according to their relative worth using a job evaluation method. The methods of job evaluation are discussed next.

In job evaluation, every job in an organization is examined and ultimately priced according to a few features: the relative importance of the job, knowledge, skills, and abilities needed to perform the job, and difficulty of the job.

Job evaluation needs to be differentiated from the job analysis.

Job analysis is a systematic way of gathering information about a job. Every job evaluation method requires basic job analysis to provide factual information about the jobs concerned.

Thus, job evaluation begins with job analysis and ends where the worth of a job is ascertained for achieving pay equity between jobs.

Job Evaluation Schemes

There are two basic types of job evaluation schemes: analytical and non-analytical.

Analytical Schemes

Jobs are broken down into components or demands, known as factors, and scores are awarded for each factor. The final total gives the overall rank order of jobs. An analytical job evaluation scheme can defend against a claim of equal pay for work of equal value.

Non-analytical Schemes

Under this scheme, whole jobs are compared with each other. There is no attempt to break the jobs down and analyze them under their various demands or components.

Examples of non-analytical schemes include job ranking and paired comparisons. These represent different ways of drawing up a list of jobs in rank order. The rationale for non-analytical job evaluation is that it produces a hierarchy of jobs that approximate the ‘felt-fair’ ranking of these jobs in the minds of the people working in the organization.

A non-analytical job evaluation scheme does not provide us with a defense against a claim of equal pay for work of equal value.

Features of Job Evaluation

The purpose of job evaluation is to produce a ranking of jobs on which a rational and acceptable pay structure can be built.

The important features of job evaluation may be summarized as follows:

• It tries to assess jobs, not people.
• The standards of job evaluation are relative, not absolute.
• The basic information on which job evaluations are made is obtained from the job analysis.
• Job evaluations are carried out by groups, not by individuals.
• Some degree of subjectivity is always present in job evaluation.
• Job evaluation does not fix pay scales but merely provides a basis for evaluating a rational wage structure.

Process of Job Evaluation Program

The Job evaluation program is a process involving a few steps.

These are listed below;

1. Gaining acceptance
2. Creating a job evaluation committee
3. Finding the jobs to be evaluated
4. Analyzing and preparing a job description
5. Selecting the method of evaluation
6. Classifying jobs.

Gaining acceptance

Before undertaking job evaluation, top management must explain the aims and uses of the program to the employees and unions.

To elaborate on the program further, oral presentations could be made. Letters, booklets could be used to classify all relevant aspects of the job evaluation program.

Creating a job evaluation committee

A single person can’t evaluate all the key jobs in an organization.

Usually, a job evaluation committee consisting of experienced employees, union representatives, and HR experts is created to set the ball rolling.

Finding the jobs to be evaluated

Every job need not be evaluated. This may be too taxing and costly.

Certain key jobs in each department may be identified. While picking up the jobs, care must be taken to ensure that they represent the type of work performed in that department.

Analyzing and preparing a job description

This requires the preparation of a job description and also an analysis of job needs for successful performance.

Selecting the method of evaluation

The most important method of evaluating the jobs must be identified now, keeping the job factors and organizational demands in mind.

Classifying jobs

The relative worth of various jobs in an organization may be found out after arranging jobs in order of importance using criteria such as skill requirements, experience needed under which conditions job is performed, type of responsibilities to be shouldered degree of supervision needed, the amount of stress caused by the job, etc. Weights can be assigned to each such factor.

When we finally add all the weights, the worth of a job is determined. The points may then be converted into monetary values.

Methods of Job Evaluation

Job evaluation seeks to determine the relative worth of each job so that salary differentials can be established. In job evaluation, only jobs are rated, unlike performance appraisal, where only job holders are rated.

There are four widely used job evaluation methods.

1. Ranking System.
2. Job Classification or Grading Method.
3. Points Rating System.
4. Factor Comparison System.

These job evaluation methods seek to rank all the jobs in the organization and place them in a hierarchy that will reflect the relative worth of each.

1. Ranking System

The ranking method is one of the simplest methods of job evaluation.

Under this system, the job raters rank one job against another without assigning point values.

Jobs within the organization are arranged from the most difficult to the simplest or in the reversed order. It does not measure the value of jobs but establishes their ranks only.

When this method is employed, the job rater compares two jobs, one against another, and asks which of the two is more difficult.

Once that question has been settled, another job is compared against the first two, and a similar determination is made. This process is repeated until all jobs have been assigned relative positions. Jobs are usually ranked in each department, and then the department rankings are combined to develop an organizational ranking.

No attempts are made to break down the jobs by specific weighted criteria. The ranking method of job evaluation is generally used in small firms where all jobs are well-known. It is useful as a first and basic step of job evaluation.

The main drawback of this system is that it can tell only that one job is more difficult than another without indicating how difficult it is. This method provides no yardstick for measuring the relative worth of one job against another.

Job requirements, job specifications, and employee specifications are not considered in the evaluation.

Another drawback is subjectivity, as there are no definite or consistent standards to justify the rankings. Because jobs are only ranked in terms of order, we do not know the distance between the ranks. It is neither a comprehensive nor systematic technique.

2. Job Classification or Grading Method

Job grading or job classification is slightly more sophisticated than job ranking but still not very precise. It begins with an overall classification of all jobs based on common sense, skill, responsibilities, and experience. The job structure is divided into several classes.

A committee will do it.

For each class, a general description is written indicating the nature of work and responsibilities included.

According to the class description, each job in the organization is put into a class or grade it matches best. Each class or grade is assigned a salary range with maximum and minimum limits.

Thus, according to this system, the clerks may be put into one class, supervisors in a higher class and higher executives in the top class.

This method is relatively simple to operate and to understand.

• It does not take a great deal of time and does not require technical help.
• It provides an opportunity for a systematic organizational structure.
• It is more elaborate than the ranking method.
• It takes into account all the factors that a job comprises.
• Despite the above-mentioned merits, this method suffers from the following limitations:
  • It sometimes seems to be arbitrary, though it takes the views of representatives of trade unions.
  • Writing grade or class descriptions is not easy in this method.

3. Points Rating System

The point method is more sophisticated than the ranking and classification methods. This method is analytical because it breaks down jobs into various compensable factors and places weights or points on them.

A compensable factor is used to identify a job value that is commonly present throughout a group of jobs. This method is quantitative as each of the compensable factors is assigned a numerical value.

It is based on the assumption that it is possible to assign points to the different factors and each degree of each factor involved in jobs and that the sum-total of the points will give an index of the relative value of jobs.

The factors are determined from the job analysis. This system requires six steps and is usually implemented by a job evaluation committee or an individual analyst.

1. Determine critical factors.
2. Determine the levels of factors.
3. Allocate points to sub-factors.
4. Allocate points to level.
5. Develop the point manually.
6. Apply the point system.

Step 1: Determine critical factors.

The critical factors are skill effort, responsibility, experience, working conditions, and these factors are broken down into sub-factors.

For example, Figure I shows that responsibility can be broken down into the safety of others, equipment, and materials, assisting trainee and product quality.

Step 2: Determine the levels of factors.

Since the amount of responsibility or other factors may vary from job to job, the point system creates several levels associated with each factor. There may be four levels, namely, minimum, low, moderate, and high.

Step 3: Allocate points to sub-factors.

The job evaluation committee subjectively assigns the maximum possible points to each sub-factor. For example, if safety (100) is twice as important as assisting trainees (50), it gets many points.

Step 4: Allocate points to level.

Once the maximum total points for each job element are assigned under level IV, analysts allocate points across each row to reflect the importance of the different levels.

Step 5: Develop the point manually.

Analysts then develop a point manual that contains a written explanation of each job element. It also defines what is expected for the four levels of each sub-factor.

Step 6: Apply the point system.

When the point matrix and manual are ready, the relative value of each job can be determined. The points for each sub-factor are added to find the total number of points for the job. After the total points for each job are known, the jobs are ranked.

Advantages of Point Rating Method

The points rating system has many advantages over ranking and classification systems. These are listed below:

1. It is relatively simple to use.
2. It considers the components of a job rather than the total job and is much more comprehensive than either ranking or classification method.
3. The use of fixed and predetermined factors forces the raters to consider the same job elements when rating jobs.
4. It forces the raters to consider individual factors rather than the jobs as a whole.
5. The assignment of point values indicates which job is worth more than another but how much more it is worth.
6. It uses the job-by-job comparison technique, which is a far more accurate method of measurement.
7. .The weights selected are not arbitrary but reflected existing wage and salary practice.
8. Point values are systematically assigned to all factors, eliminating bias at every stage.
9. The methodology underlying the approach contributes to a minimum of rating error (Robbins, 2005). It accounts for differences in wage rates for various jobs on the strength of job factors. Jobs may change over time, but the rating scales established under the point method remain unaffected.

The point rating system is not without limitations. The listing of factors may omit some elements that are important in certain jobs. Arbitrary weights are attached to various degrees and the factors by specifying maximum and minimum limits.

The difficulty of this method is that it is costly and somewhat difficult to operate compared to conventional non-quantitative techniques. This technique does not consider all the sub-factors as the system’s operation would be difficult if it considers all the factors. The point method is complex.

Preparing a manual for various jobs, fixing values for key and sub-factors, establishing wage rates for different grades, etc., is time-consuming.

4. Factor Comparison System

Thomas E. Hitten was the first to originate factor comparison method of job evaluation. This method determines the relative rank of the jobs is evaluated with the monetary scale.

It is often used in evaluating managing administrative and white-collared jobs. It is essentially a combination of the ranking and point systems.

Steps of Factor Comparison System

It is a sophisticated and quantitative ranking method. This method is analytical as jobs are broken into sub-factors and components.

Werther, B.W and Davis, K (1998) point out that the factor comparison method involves the following steps:

Preparing clear-cut job descriptions and job specifications.

Job specifications are developed in terms of the compensable factors the committee decides to use.

Selecting several keys- jobs in the organization as standards.

Key jobs are jobs that are commonly found throughout the organization and in the labor market. Common jobs are selected because it is easier to discover the market rate for them. Usually, the committee selects ten to fifteen key jobs.

Identifying the critical factors of key jobs.

These factors are the job elements common to all the jobs being evaluated. The factors are mental requirements, skill requirements, physical requirements, responsibility, and working conditions. For example, mental requirements include mental traits, intelligence, memory, reasoning, imagination, general education, specialized knowledge, etc.

Ranking the key jobs on the criteria by a committee.

The sub-factors of each key job must be given relative ranks based on their individual contribution to the total job. This ranking procedure is based on job descriptions and job specifications. Each committee member usually makes this ranking individually, and then a meeting is held to develop a consensus on each job.

Valuing the factors of each key job.

The committee members have to divide up the present wage now being paid for each key job, distributing it among the five compensable factors.

This step is also called factor evaluation. The committee agrees upon the base rate (usually expressed hourly) for each key job and then allocates this base rate among the five criteria.

To illustrate, in one organization, the job of maintenance electrician was chosen as a key job and had an hourly rate of Dollar 1300.00. The committee then allocated Dollar 350 to mental effort, Dollar 450 for skill, Dollar 100 for physical effort, Dollar 250 to responsibility, and 150 for working conditions.

These amounts then became the standards by which other jobs in the organization could be evaluated. That is, all other jobs with similar responsibilities were assigned Dollar 250 for that criterion.

Ranking key jobs according to wages assigned to each factor. For example, the welder job ranks first for the mental requirements factor, while the security guard ranks last.

The committee appraises all other jobs and assigns a value to each factor by comparing them with key jobs. Once the worth of a job in terms of total points is expressed, the points are converted into money values keeping in view the hourly/daily wage rates.

A wage survey is usually undertaken to collect wage rates of certain key jobs in the organization. Let’s explain this. Market pricing is the process for determining the external value of jobs, allowing the manager to establish wage and salary structures and pay rates that are market sensitive.

Advantages of Factor Comparison Method

The factor comparison method permits a more systematic comparison of jobs than the non-analytical methods.

• It is a systematic and quantifiable method for which detailed step-by-step instructions are available.
• The system results in a more accurate job evaluation because weights are not selected arbitrarily.
• It is flexible as it has no upper limit on the rating that a job may receive on a factor.
• The reliability and validity of the system are greater than the same statistical measures obtained from group standardized job analysis plans.
• The procedure of rating new jobs by comparing with other standards or key job is logical and not too difficult to accomplish.
• It utilizes a few factors and thereby reduces the likelihood of overlapping.
• It is a scheme that incorporates money value and determines wage rates automatically.

Disadvantages of Factor Comparison Method

Lawler (1991) identified the demerits of the factor comparison method of job evaluation. The main demerits are discussed below:

• This method is comparatively complicated to apply, and it is difficult to explain to the workers.
• It is costly to install and somewhat difficult to operate for anyone who is not acquainted with the general nature of job-evaluation techniques.
• The use of the present wages of the key jobs may initially create errors in the plan. The contents and the value of these jobs may change over a period of time, and they will lead to future errors.
• It goes against the common belief that the procedure of evaluating jobs and fixing their wages should be kept separate.
• The use of the five factors is the growth of the technique developed by its organizations. And using the same five factors for all organizations and all jobs in an organization may not always be appropriate.
• It is a costly method/system of job evaluation because experts have to be appointed, particularly selecting weights based on actual analysis.

Limitations of Job Evaluation

Job evaluation is not without limitations. The main limitations are as follows:

1. Job evaluation is not exactly scientific. Job evaluation is a systematic technique and not the scientific technique of rewarding the job. Job evaluation lacks scientific precision because all factors cannot be measured accurately.
2. Most of the techniques are difficult to understand, even for the supervisors.
3. The factors taken by the program are not exhaustive.
4. There may be wide fluctuations in compensable factors given changes in technology, values, and aspirations of employers, etc.
5. Employees, trade union leaders, management, and the program operators may assign different weights to different factors, thus creating grounds for dispute.
6. The trade unions regard job evaluation with suspicion because it is made on certain principles, and the results are generally ignored. Some of the methods of job evaluation are not easily understood by workers. Workers fear that job evaluation will do away with collective bargaining.
7. A job evaluation scheme takes a long time to install. It requires specialized personnel, and it is costly.
8. Too many factors are used in job evaluation, and there is no standard list of factors to be considered. Definitions of factors vary from organization to organization. Many types of research show that the factors used are not independently be valued at all. It gives more reliance on internal standards and evaluation for fixing wage rates.

It can be concluded that job evaluation is not an exact science. It is a technique that can help avoid several anomalies in wages that cause so many heartburns and disgust today-provided it is used sensibly and is not pressed beyond its proper limits.

What is the relative worth of each job?

What is the process that determines the relative value of one job in relation to another?

What is the term for the process used to determine the worth of a job?