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1 JOB methods to the process EVALUATION

2 About WorldatWork WorldatWork is the world s leading not-for-profit professional association dedicated to knowledge leadership in compensation, benefits and total rewards. Founded in 1955, WorldatWork focuses on human resources disciplines associated with attracting, retaining and motivating employees. Besides serving as the membership association of the professions, the WorldatWork family of organizations provides education, certification (Certified Compensation Professional CCP, Certified Benefits Professional CBP and Global Remuneration Professional GRP ), publications, knowledge resources, surveys, conferences, research and networking. WorldatWork Society of Certified Professionals and Alliance for Work-Life Progress (AWLP) are part of the WorldatWork family. Any laws, regulations or other legal requirements noted in this publication are, to the best of the publisher s knowledge, accurate and current as of this book s publishing date. WorldatWork is providing this information with the understanding that WorldatWork is not engaged, directly or by implication, in rendering legal, accounting or other related professional services. You are urged to consult with an attorney, accountant or other qualified professional concerning your own specific situation and any questions that you may have related to that WorldatWork ISBN (Paperback/softback) (E-book) No portion of this publication may be reproduced in any form without express written permission from WorldatWork. WorldatWork Staff Contributors Practice Leader: Jason Kovac, CCP Publishing Manager: Dan Cafaro Editorial Assistant: Wendy McMorine Graphic Design: Barry Oleksak Production: Rebecca Williams Ficker N. Northsight Blvd., Scottsdale, AZ / Fax 480/

3 Acknowledgments WorldatWork would like to thank the following technical reviewers for helping to shape and strengthen the content of this book: Dan Moynihan, CCP, Principal, Compensation Resources Inc. Dan Purushotham, Ph.D., CCP, CBP, Faculty, Central Connecticut State University, School of Business and former V.P. of Corporate Compensation & Performance Management at The Hartford Financial Services Group in Hartford, CN Charlie Signorino, Vice President, Compensation, McGraw-Hill Mark Szypko, CCP, Principal, Millbrook Partners Article Reviewers: David K. Allen, PHR, Compensation & Org. Design Administrator, NAIC Todd Allen, CCP, SPHR, Principal, The Allen Group Linda Archer, CCP, Vice President, HR & Marketing, Credit Union Central of B.C. Michael Batt, President, U. S. Alliance Consulting Kevin Berchelmann, SPHR, Sr. Vice President, Human Resources, Triangle Performance, LLC Bill Caldwell, CCP, CBP, Managing Director, Caldwell Consulting Inc. Andy Craggs, CCP, CPO, EGG Roy Cureton, CCP, CEBS, SPHR, Sr. Director, Compensation & Benefits Corp. HR Services, Swift Galey Jannifer David, Ph.D., Assistant Professor, University of Minnesota Nancy Day, Ph.D., CCP, Associate Professor HR, University of Missouri at Kansas City Margaret Dyekman, CCP, SPHR, Senior Consultant, The Segal Company, Sibson Consulting Jim Fox, Ph.D., Chair, Fox Lawson & Associates, LLC Diana Funk, Human Resource Administrator, Gold s Gym International Inc. Ken Godevenos, CCP, CHRP, President, Accord Resolution Services Inc. Peggy Hoyt, Esq., CBP, Attorney, Law Offices of Peggy J. Hoyt-Hoch Chad Kearney, Compensation Consultant, Wells Fargo & Co. Robert D. Lewis, CCP, President, Human Resource Associates, Inc. Brent Longnecker, CCP, CBP, CCC, President, Longnecker & Associates Howard Pardue, SPHR, Executive Director Human Resources, Western University of Health Sciences Michael Schelstrate, CCP, SPHR, Human Resources Manager, Ecolite Manufacturing Company Cathy Sparks, CCP, CBP, SPHR, Vendor Manager, United Parcel Service Keith Stoller, CCP, GRP, SPHR, Principal, San Joaquin Business Consulting Betty J. Yott, CCP, PHR, Human Resource Partner, Neumann Homes Zane Zumbahlen, CCP, Human Resource Manager, IBM Corp JOB EVALUATION iii

4 iv JOB EVALUATION

5 Table of Contents Job Evaluation: Methods to the Process Introduction: Compensation Philosophy and Strategy...3 Figure 1: Commonly Used Terms Within Compensation...6 Chapter 1: Job Worth Hierarchy...9 Figure 2: Job Worth Hierarchy...13 Chapter 2: Job Analysis...15 Figure 3: Methods of Job Analysis...18 Figure 4: Secondary Sources for Job Analysis...19 Chapter 3: Job Documentation...21 Chapter 4: Job Evaluation...27 Internal Job Evaluation Nonquantitative Methods...30 Figure 5: Job Worth Hierarchy Using Ranking...31 Figure 6: Job Classification...34 Chapter 5: Internal Job Evaluation Quantitative Methods...35 Figure 7: Terms...39 Figure 8: Factor Definition and Levels...41 Figure 9: Call Center Environment...42 Chapter 6: Internal Job Evaluation Point Factor...43 Sidebar: Hay Point Factor Plans...46 Figure 10: Weighing Compensable Factors...47 Figure 11: Single Dimension Factor...48 Figure 12: Multiple Dimension Factor...48 Figure 13: Arithmetic Progression...49 Figure 14: Geometric Progression...49 Figure 15: Job Description...50 Figure 16: Point-Factor Job Evaluation Plan...51 JOB EVALUATION 1

6 Figure 17: Job Worth Hierarchy (Point Totals)...52 Figure 18: Regression Analysis...53 Figure 19: Groupings (or Clusters)...54 Chapter 7: Regulatory Compliance...55 Chapter 8: Communication...61 Figure 20: Communication Tips...66 Chapter 9: Conclusion...69 Case Studies...73 Job Analysis: The Missing Ingredient in the Total Rewards Recipe...75 Bringing It All Inside: Job Evaluation and Market Pricing at JCPenney...81 Articles and Perspectives...87 Rediscovering Job Evaluation...89 Job Leveling in a Changing Environment: Does Your Organization Measure Up?...93 Valuing Work: An Integrated Approach Job Evaluation is Here to Stay The Juggling Act: Internal Equity and Market Pricing Mastering a Top-down Approach to Reviewing Jobs Appendix Glossary Selected References JOB EVALUATION

7 introduction COMPENSATION PHILOSOPHY AND STRATEGY JOB EVALUATION 3

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9 Compensation is a core component of the organization s total rewards package. To support the business strategy, the design of compensation programs should be integrated with the planning process. This involves alignment of compensation program objectives with the broader organizational and human resources objectives. The integrity of the compensation program is grounded in the tactical responsibilities of job analysis, documentation and evaluation. It is through these core processes that organizations determine the value of jobs in relation to the market (external) and to other jobs within the organization (internal). For this publication and other WorldatWork publications, it is important to first discuss definitions of commonly used terms within compensation. (See Figure 1 on page 6.) How does base pay fit within the organization s business strategy? How does an organization decide where base pay should be set? Do organizations use external market data or internal job value to determine a job s worth? These are all important questions, and each typically will be answered by the organization s compensation philosophy and strategy. JOB EVALUATION 5

10 A defined compensation philosophy is a statement of how the organization believes people should be paid. It should support the business strategy and be a good fit with the organization s culture. A key component is how the organization intends to pay for people relative to its competitors i.e., the desired market position or if internal value is more important. The compensation strategy includes the principles that guide the design, implementation and administration of a compensation program in an organization. It also may specify what programs will be used and how they will be administered. It is important to recognize that an organization needs to support the compensation strategy and philosophy. If employees do not recognize the organization following the strategy and philosophy, employees may make up their own based upon personal observation. This could potentially reflect an integrity or credibility loss for management and the compensation function. FIGURE 1: Commonly Used Terms Within Compensation Occupation A generalized job or job family common to multiple industries/organizations Job Family A group of jobs having the same nature of work (e.g., accounting) but requiring different levels of skill, effort, responsibility or working conditions (e.g., accounts payable accountant, accounting supervisor) Job The total collection of tasks, duties and responsibilities assigned to one or more individuals whose work is of the same nature and is performed at the same level Position The total work assignment of an individual employee, comprised of a specific set of duties/responsibilities. The total number of positions in an organization equals the number of employees plus the number of vacancies. Job Responsibility A duty or group of duties that describes the major purpose or reasons for the existence of a job Job Duty A group of tasks that constitutes one of the distinct and major activities involved in the work performed Task One or more elements constituting a distinct activity that forms a logical and necessary step in the performance of work by an employee Task Elements The smallest step into which it is practical to subdivide any work activity without analyzing separate motions, movements or mental processes. 6 JOB EVALUATION

11 A sound compensation program will attempt to meet several objectives, such as the following: Internally equitable Externally competitive Affordable Responsible in safeguarding organizational resources Understandable Legal/defensible Efficient to administer Flexible Appropriate for the organization Able to attract, retain and motivate employees Designed to create alignment of employee efforts and business objectives. It can be a challenge to meet all of the objectives of an effective compensation program. The most common are to be internally equitable and externally competitive. Each organization needs to prioritize these objectives and decide which are the most important. It is essential to design a program that not only meets the compensation objectives, but also supports the organization s business strategy. Some objectives may conflict with each other, depending on the compensation plan. In fact, it would be safe to say that no compensation program will satisfy all employees. JOB EVALUATION 7