Most large companies, and many smaller ones, use job evaluation systems to determine the relative value of individual jobs. It focuses on the jobs, without considering the ability or personality of individuals who do the work. Its purpose is to arrive at fair compensation relationships among jobs. There are four job evaluation methods. Two are not quantitative: simple ranking and classification or grading. The other two are quantitative: the point system and the factor-comparison method.
Simple ranking: In this inexpensive job evaluation method, widely used by small businesses, an executive committee sorts job descriptions in the order of worth. This is done without considering the individuals currently in the jobs or their compensation levels. No attempt is made to determine critical factors inherent in the jobs; only overall appraisals of the relative worth of different jobs are made.
Classification or grading: This approach utilizes a system of grades and grade descriptions, against which individual jobs are compared. The grades, sometimes called classes, are described in terms of job responsibility, skills required, supervision given and received, exposure to unfavorable and hazardous working conditions, and similar characteristics. Job descriptions are then classified into appropriate grades-this is done by an executive committee or by personnel specialists. The basic process is to compare job descriptions with grade descriptions. All jobs within a grade are treated alike with respect to base compensation
Point System: The point system is the most widely used job evaluation method. It involves establishing and defining the factors common to most jobs that represent the chief elements of value inherent in all jobs. The specific factors chosen differ from one company to another, but generally include mental and physical skills, responsibility, supervision given and received, personality requirements, and minimum education required. Each factor is assigned a minimum and maximum number of points, different ranges being associated in line with the relative importance of the factors. Next, appraised factor scores are combined into a total point value. Finally, bands of points are decided upon and become the different compensation classes. Less arbitrary judgment is required than under the classification method; the use of point values makes it possible to determine the gap, or distance, between job classes.
Factor-comparison method: This method resembles the point system but is more complex. It utilizes a scheme of ranking and cross-comparisons to minimize error from faulty judgment. In a process similar to that used in the point system, the factor-comparison method employs selected factors and evaluation scales. However, the scale values are in dollars and cents, and no’ upper limit exists to the valuation that can be assigned to anyone factor. A selected number of key jobs, typical of similar jobs throughout the company, are then evaluated; factor by factor .This is done by arranging them in rank order, from highest to lowest for each, factor. As a check against this judgmental evaluation, the compensation dollars actually paid for each job are allocated to the factors; the allocation automatically establishes the relationship among jobs for each factor. The judgment ranking and the ranking by allocation of compensation are compared and differences are reconciled, or else the jobs are removed from the key list. On the basis of the dollar amounts assigned to the several factors making up key jobs, additional jobs are evaluated and their monetary values for each factor interpolated into the scale. This procedure is repeated until all jobs are evaluated.
Job evaluation and sales positions: Job evaluation occurs whenever decisions are made about the relative worth of jobs, and it is inescapable in organizational life. If, for example, the owner of an automobile dealership decides that the new car sales manager should be paid more than the service manager, the jobs have been evaluated. So informal job evaluation exists in firms not using formal job evaluation
Traditionally, sales executives have opposed using formal job evaluations to determine the compensation levels of sales personnel. They contend that compensation levels for sales personnel are more closely related to external supply-and- demand factors than to conditions inside the company. Sales personnel enjoy greater job mobility than most other employees, and are in everyday contact with potential employers.
