HR Basics: Job Evaluation

Summary

HR Basics explores job evaluation, a process to determine the relative worth of jobs within an organization. It discusses two major approaches: market-driven, which uses market rates without job evaluation points, and job worth systems, which assign points to job factors. The video outlines four job evaluation methods: ranking, classification, and the widely used point factor method, which quantifies job components, and market pricing, which focuses on external market pay data. The summary highlights the importance of aligning compensation with both internal equity and external market competitiveness.

Takeaways

• 📚 Job evaluation is a systematic process for determining the relative worth of jobs within an organization.
• 💼 It results in the development of an internal pay structure or hierarchical ranking of jobs, which forms the basis for base pay structures.
• 🌐 There are two major approaches to job evaluation: market-driven and job-worth systems, each with different focuses and outcomes.
• 📈 Market pricing uses market data to set pay rates without detailed job evaluation, focusing on external market rates.
• 🏢 Job worth systems incorporate market pricing data but assign points based on the job's value to the organization, emphasizing internal equity.
• 📊 Both methods use relative comparisons to assess job worth, with market pricing looking externally and job evaluation focusing internally.
• 🔢 The ranking method is a simple system that orders jobs by their value to the organization, suitable for small organizations with few jobs.
• 📖 The classification method uses written job class descriptions to categorize jobs, requiring subjective judgments to develop class descriptions.
• 📝 The point factor method is the most popular, assigning points to compensable factors within jobs, and is favored for its simplicity and quantification of job elements.
• 📉 Despite its effectiveness, the point factor method has been criticized for potentially reinforcing traditional and rigid organizational structures.
• 🔄 There is a trend towards market pricing as companies seek to ensure market competitiveness in their compensation practices.

Q & A

What is job evaluation?

Job evaluation is the systematic process of determining the relative worth of jobs within an organization.

What is the outcome of job evaluation?

The outcome of job evaluation is the development of an internal pay structure or hierarchical ranking of jobs.

What are the two major schools of thought in job evaluation?

The two major schools of thought in job evaluation are market-driven and job worth systems.

How does market pricing determine pay in a compensation system?

In a market-driven compensation system, the going rate identified by market research is the primary determinant of pay.

What is the primary determinant of pay in a job worth system?

In a job worth system, the primary determinant of pay is the value of the job to the organization.

Why is it important to compare pay practices to the external market?

Comparing pay practices to the external market ensures that an organization's compensation practices remain competitive and aligned with industry standards.

What are the four methods of job evaluation mentioned in the script?

The four methods of job evaluation mentioned are ranking, classification, point factor, and market pricing.

How does the ranking method of job evaluation work?

The ranking method places jobs in order from highest to lowest by their value to the organization, considering the entire job rather than individual components.

What is the classification method of job evaluation?

The classification method uses written descriptions of job classes and places each job into the category that it best matches.

Why is the point factor method the most widely used job evaluation method?

The point factor method is the most widely used because it is relatively simple to use and considers the components of the job rather than the total.

What is the main criticism of point factor systems?

Point factor systems have been criticized for reinforcing traditional organizational structures and job rigidity.

Why are companies moving towards market pricing?

Companies are moving towards market pricing to use market pay data to identify the relative value of jobs based on what other employers pay for similar work, ensuring market competitiveness of compensation practices.