Prepared by Cheryl Dowell, Algonquin College, and Greg Cole, Saint Mary’s University.

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NETA PowerPoint ® Slides to accompany Prepared by Cheryl Dowell, Algonquin College, and Greg Cole, Saint Mary’s University

Transcript of Prepared by Cheryl Dowell, Algonquin College, and Greg Cole, Saint Mary’s University.

NETA PowerPoint® Slides to accompany

Prepared by Cheryl Dowell,Algonquin College, and Greg Cole,Saint Mary’s University

Evaluating Jobs: The PointMethod of Job Evaluation

Chapter 8

Copyright © 2014 by Nelson Education Ltd. 8-2

Chapter Learning Objectives

1. Describe the steps in designing a point system of job evaluation.

2. Identify the possible pitfalls in designing a point system of job evaluation.

3. Design a base pay structure, including pay grades and pay ranges.

Copyright © 2014 by Nelson Education Ltd. 8-3

Nurses or Painters?

• Who performs work that is more valuable to a hospital, nurses or painters?

• Intuitively, we might think nurses, but that is not what the job evaluation system at a U.S. hospital concluded, and certainly not what their pay scales indicated, as painters were paid considerably more than nurses at that hospital.

8-4Copyright © 2014 by Nelson Education Ltd.

Nurses or Painters?

• Skill: To perform a nurse’s job requires medical skills (including a licence and postsecondary training), interpersonal skills, and communication skills. A painter’s job requires manual dexterity and the ability to mix paint.

• Effort: A nurse’s job requires some physical effort, such as helping to lift patients and standing or walking for extended periods of time. Painters are required to be on their feet constantly, to climb ladders, and to exercise continuous repetitive movement over the entire duration of their shift. Painters do not need to expend much mental effort, while nurses must continually be alert.

8-5Copyright © 2014 by Nelson Education Ltd.

Identifying Compensable Factors

Skill Effort

ResponsibilityWorking

conditions

Compensable factorsCharacteristics of jobs that are valued by the organization and

differentiate jobs from one another

8-6Copyright © 2014 by Nelson Education Ltd.

Scaling the Factors

• After the compensable factors have been selected and defined, a number of “degrees” (sometimes called “levels”) are established for each factor.

• These degrees represent gradations in the extent to which a certain factor is present in a particular job being rated.

• For example, it may be decided that there should be five possible “degrees” or levels for the factor of “consequences of error.”

• Each degree needs to be carefully defined and arranged so that degree 2 always contains more of that factor than degree 1.

8-7Copyright © 2014 by Nelson Education Ltd.

Weighting the Factors

• The compensable factors that have been selectedare not likely to be equal in importance to the firm.

• To recognize this variation in importance, each factor needs to be weighted according to its relative importance.

• For example, in one firm, “education” may be viewed as the most important factor, followed by “experience,” then “customer contact” and “mental complexity,” with “physical environment” considered the least important factor.

8-8Copyright © 2014 by Nelson Education Ltd.

8-9Copyright © 2014 by Nelson Education Ltd.

Applying the Job Evaluation System

• After the job evaluation system has been established, it is applied to all the jobs covered by that system.

• Then a “hierarchy of jobs” is generated. A good way to summarize the results of the job evaluation, and the resulting hierarchy of jobs, is by developing a table, which incorporates the results for a hypothetical set of hospital jobs.

8-10Copyright © 2014 by Nelson Education Ltd.

Testing the Job Evaluation System

Validity

• The extent to which a measuring instrument actually measures what we intend it to

Reliability

• The extent to which a measuring instrument consistently produces the same measurement result when measuring the same thing

8-11Copyright © 2014 by Nelson Education Ltd.

Testing the Job Evaluation System

Benchmark job• A job in the firm’s job evaluation system for

which there is a good match in the labour market data

Market comparator job• A job in the market data that matches a

benchmark job within the firm’s job evaluation system

8-12Copyright © 2014 by Nelson Education Ltd.

• A regression line that relates job evaluation points to market pay (in dollars) for the benchmark jobs

Market line

• The intended pay policy for the organization, generated by adjusting the market line for the intended pay level strategy of the organization

Pay policy line

• A statistic that measures the extent to which plots of two variables on a graph fall in a straight line

Correlation coefficient

8-13Copyright © 2014 by Nelson Education Ltd.

8-14Copyright © 2014 by Nelson Education Ltd.

8-15Copyright © 2014 by Nelson Education Ltd.

Calculating Proposed Pay

• A more precise way to calculate proposed pay for a given job is to use the equation for the regression (market/pay policy) line that is generated by the computero which is in the y = mx + b formato where “y” is the dollar value of the jobo “m” is the slope of the market/pay policy lineo “x” is the JE points total for that job ando “b” is a constant (the constant “b” could be a minus or a

plus, depending on where the regression line intercepts the vertical axis).

8-16Copyright © 2014 by Nelson Education Ltd.

Correlation Coefficient

• A correlation coefficient can range from +1 to –1. Either +1 or –1 occurs when all the plots happen to fall in a perfectly straight line (this virtually never happens).

• +1 indicates a positive relationship between job evaluation points and pay rates.

• –1 indicates a negative or inverse relationship between job evaluation points and pay rates.

8-17Copyright © 2014 by Nelson Education Ltd.

Possible Pitfalls from Job Evaluation

• Four main categories of pitfalls need to be avoided in developing a point method job evaluation plan:

(1) inconsistent construct formation(2) factor overlaps(3) hierarchical grounding(4) gender bias

• Each of these will now be examined, along with some additional pitfalls that fall outside these categories.

• A thorough understanding of these pitfalls is the best defence against them.

8-18Copyright © 2014 by Nelson Education Ltd.

Determining the Base Pay Structure

Base pay structurethe structure of pay grades and pay ranges, along with the

criteria for movement within pay ranges, that applies to base pay

Pay gradea grouping of jobs of similar value to

the organization, typically grouped by point totals

8-19Copyright © 2014 by Nelson Education Ltd.

Establishing Pay Grade Sizes

Equal increase approach

• Method to establish pay grade sizes, in which each pay grade increases in size by a constant number of points

Equal percentage approach

• Method to establish pay grade sizes, in which the point spreads increase by an equal percentage

Telescopic approach

• Method to establish pay grade sizes, in which the point spreads increase, but not by an equal percentage

Broadbanding

• Practice of reducing the number of pay grades by creating large or “fat” grades, sometimes known as “bands”

8-20Copyright © 2014 by Nelson Education Ltd.

Establishing Pay Ranges

Establishing the range midpoints

Intergrade differentials the differences between the range

midpoints of adjacent pay grades in a pay structure, expressed in dollars

Intergrade differential percentage calculated by dividing the intergrade

differential (expressed in dollars) of each pay grade by the midpoint (in dollars) of

the previous pay grade

8-21Copyright © 2014 by Nelson Education Ltd.

Establishing the Range Spreads

Range spread

• The difference between the maximum and the minimum pay level, in dollars, for a given pay range

Range spread percentage

• A percentage calculated by dividing the range spread for a given pay range by the minimum for that pay range

Just noticeable difference (JND)

• The amount of pay increase necessary to be considered significant by employees receiving the increase

8-22Copyright © 2014 by Nelson Education Ltd.

8-23Copyright © 2014 by Nelson Education Ltd.

Movement through the Pay Range

• Once the pay range is defined for each pay grade, criteria must be established to determine how placement and movement within the range will occur.

• The three most common criteria are experience, seniority, and performance.

• For example, a person’s initial placement in the pay range may be determined by previous experience. Seniority (in terms of years in the job) or performance (or both) can then be used to determine future increases within the pay range.

8-24Copyright © 2014 by Nelson Education Ltd.

Just Noticeable Difference

• A pay range may have as few as three or as many as 15 increments, most have 6 or 7. To be effective, a pay raise should constitute a “just noticeable difference (JND).”

• Just noticeable difference (JND): the amount of pay increase necessary to be considered significant by employees receiving the increase

8-25Copyright © 2014 by Nelson Education Ltd.

Discussion Questions

1. Discuss the issue of gender bias in compensation and the ways it can affect the development of a base pay structure. In your employment experience, have you noticed possible examples of gender bias in compensation?

2. Discuss the hierarchy of jobs for a Canadian hospital shown in Table 8.2. Does everything about this ranking of job values make sense to you? Are there specific jobs that seem out of order to you? If so, which ones? Why do you think so?

8-26Copyright © 2014 by Nelson Education Ltd.