(And Getting What You Pay For)
by Jack Ruffer

Using formal job evaluations to establish a competitive wage and salary structure.

Formal job evaluation procedures are used in a high proportion of all but the smallest organizations. There are four types of formal job evaluation methods which predominate. They are (1) the point method - by far the most widely used; (2) the factor comparison method, which is much more complicated than the point method; (3) the Classification method; and (4) the ranking method. These methods hold for both office and manufacturing jobs.

The point method of job evaluation uses several factors common to the jobs being evaluated. Scales divided into point distances are used to determine the degree to which these factors are present in a given job. Once all the scales have been applied to each job being studied, the points chosen for each scale are added to provide a total for each job. The point total designates the relative worth of the job. It is important to recognize that these scales are used to measure the job —not the incumbent.

Many versions of the point method of job evaluation are in use today. Although most include responsibility, skill, effort, and working conditions, any one version may have its own unique set of factors. As few as three or as many as twenty-five or more factors may be used. Other factors might be "job complexity," "education and experience," "mental requirements," "supervisory responsibility," "responsibility for equipment," "outside contacts," and so forth. Each is weighted according to its value on a scale of 0 to whatever maximum number is chosen based upon an understanding of the complexity and requirements of the job. Factors may stand alone or be further divided into subsets of factors, or sub factors.

The factor-comparison method is more complicated than the point method. Essentially, this method involves ranking key jobs in relation to other key jobs on each of ~veral factors. For example, the jobs of executive secretary and administrative assistant may be compared in terms of responsibility, skill, effort, and working conditions. Key jobs are jobs that are found in many organizations andthat have a relatively stable content.

The next step is to determine for each key job what part of the present rate of pay is allocated to each of the factors. The remainder of the jobs are then ranked in their proper places in the framework thus established. In this method the points used to determine relative worth tallied as cents per hour.

The chief problems with the factor-comparison method stem from its complexity. This method is time-consuming, and raters need considerable training to implement it accurately. Its complexity may also create suspicion and resentment among employees.

The classification method ofjob evaluation starts with one-paragraph descriptions of a predetermined number of levels, grades, or "classes" of jobs, each of which corresponds to a pay grade; for example, Grade 1, Grade 11, Grade 111, and so on. These descriptions of each grade feature gradations ofjob responsibility, skill and education required, and the like. Job descriptions for other jobs in the organization are then examined, and these jobs are classified into grades or levels that seem most appropriate. In contrast to the point and factor-comparison methods, the classification method requires a decision at the outset on the number of pay grades to be included in the wage and salary plan. Actual amounts to be assigned to pay grades, of course, may be made after the job evaluation is completed.

In the ranking method of job evaluation, the raters simply rank the various jobs examined. No attempt is made to determine the critical factors in each job. Instead, an overall judgment is made of the relative worth of each job, and the job is ranked accordingly. Because of the difficulties in ranking a large number of jobs at one time, the paired comparison technique is sometimes used. With this technique, decisions are made about the relative worth of only two jobs at a time. Since each job is compared with every other job, however, the number of comparisons to be made increases rapidly with the addition of each job to the list.

The chief disadvantage of the ranking method is that there are usually no agreed-upon guidelines to what elements or factors the organization considers valuable. Thus, there are no "yardsticks" for measuring job value, and the underlying assumptions of those doing the ranking may never be brought into the open. There is the obvious danger that the rankings will be done in very subjective fashion and will be based on impressions rather than objective information. This method, then, contrasts with the other three methods, in which job factors can be examined, discussed, and modified as part of the evaluation process.

Minimizing Problems

A number of potential problems can arise no matter which job evaluation method is used. Among these are inaccurate or incomplete job data; negative reactions from employees; and the need for employee understanding, acceptance, and support of the evaluation procedure.

If the information recorded in the job description is inaccurate or incomplete, the job evaluation will be inaccurate. For example, a job description may present an inflated picture of the actual job or may not do justice to some of the important activities performed. In addition, if employees or supervisors do not believe that job descriptions reflect accurately the jobs actually performed, they will perceive the job evaluation procedures and the resulting wage and salary structure as unfair.

Careful and systematic job-data collection that attempts to secure agreement among employees and supervisors about the accuracy of descriptions can minimize these problems. In addition, job analysis should be repeated when there is reason to believe that the job has changed significantly. Then the job evaluation procedure can be applied to the revised job description to determine whether the job should be paid at a different rate.

Supervisors and higher management, as well as other employees, will need to understand, accept, and support the job evaluation system if it is to work. The challenge lies in selecting supervisors and other managers to participate in job evaluation committees and in obtainingtheir commitment of time and attention to the process.

Because the wage and salary program affects the recruitment and retention of qualified employees, whether the organization should pay wages and salaries above, below, or equal to the averages for similar jobs in the community or industry deserves serious consideration. lb establish a competitive wage and salary structure, an organization typically relies on data obtained from wage and salary surveys, which collect information on wages and salaries paid in other organizations. Wages paid in the surrounding metropolitan area or region tend to be the most important factor in determining general wage levels for most non management and first line supervisory jobs. In establishing salary rates for professional and managerial employees, most medium-sized and large organizations examine national and industry-wide patterns as well.

Most firms either conduct their own wage and salary surveys or participate in surveys conducted by othe J organizations, including consulting firms. These surveys may be carried out by mail, telephone, or interview. In addition, surveys are published periodically by the American Management Association, the Society for Human Resource Management, the U.S. Bureau of Labor Statistics, the Administrative Management Society, the Federal Reserve System, and various employer and professional associations.

A major problem in using data from wage and salary surveys is the need to make accurate comparisons between companies. Careful inquiry needs to be made about the actual scope and responsibilities of the jobs surveyed, since

job titles alone or even brief descriptions can be misleading. Appropriate statistical methods need to be used, too, in collecting and analyzing the survey data. A simple average of the wages paid by firms for a certain job does not take into account the numbers of employees involved or the size of the firms.

Another important consideration is whether benefits are included in the wage and salary survey. Some firms pay only average wages but offer unusually generous benefits. Other organizations pay high wages, but are very conservative with employee benefits such as pensions, profit sharing, bonuses, health care, holidays, and sick leave.

Once the relative worth of jobs has been established by job evaluation, the actual rates to be paid for particular jobs need to be determined. Although no precise science governs this determination, one procedure commonly used is the two-dimensional graph. In this procedure, job evaluation points for key jobs are plotted against actual amount paid or against desired pay rates as suggested by wage and salary surveys. A line drawn through the key jobs plotted on the graph suggests the approximate contour the other jobs should follow. Plotting the remaining jobsthen reveals which jobs seem to be improperly paid with respect to the key jobs and to each other. Any clustering of jobs can also be observed and this clustering will suggest which jobs may be grouped in different pay grades.

Most organizations probably use a single pay rate (such as $8.00 per hour) for all hourly production and maintenance workers in the same pay grade. Others, however, use rate ranges (for example, $6.40 to $9.60 per hour) for these employees. Rate ranges are much more common for nonexempt salaried employees and are almost always used in pay plans for exempt employees. A rate-range plan allows the employee to receive pay increases for the same job on the basis of individual merit, seniority, or both. Typically the rate range is defined in terms of a minimum, average (midpoint) or maximum amount or they might be called the "learning" range (80% - 94%), the "proficiency" range (95% -105%), and the "exceptional" range (106% - 120%).