Slaying The Job Evaluation Dinosaur

Job Evaluation:  an assessment of job tasks and responsibilities in order to create a top-to-bottom hierarchy reflective of the relative value that the company places upon its jobs.

Throughout my Compensation career I have never enjoyed having to evaluate jobs.  Quite the opposite.  As soon as I progressed high enough in my organization I delegated responsibility to a subordinate and washed my hands of it.  Job evaluation is a thankless task, with the evaluator subject to criticism from all sides.

• If you agree with an evaluation request, you are only admitting to the obvious.

• If you disagree and value the job different (lower), you clearly do not understand the key duties and responsibilities.

• The subjective nature of the process is viewed with suspicion by everyone.

• Job evaluators do not receive Christmas cards.

In spite of my disdain for the process the act of evaluating jobs has been found useful by companies since the 1930's.

• They need a method to establish a hierarchy of job importance (A is bigger than B, B is bigger than C, etc.).

• They need to explain the relationship of jobs, one to another (A is how much bigger than B?).

• They want to set employee expectations and manage the Reward process (price the jobs).

Job Evaluation does have other purposes as well.  The internal assessment sets career progression steps and assists with organizational development (which jobs are necessary).  It also allows the company to avoid criticism that the competitive labor market (external forces) has dictated which jobs should be paid more or less than others.

Despite these worthy contributions the criticism of the process continues to come from many directions:

• Job descriptions are often poorly written, with content manipulated by managers to gain advantage.

• Pressure is often brought to bear on the Evaluator to increase (almost never the opposite) a rating.

• Evaluation language, forms  and procedures are often complicated and confusing to employees and managers alike.

• Senior management support for the integrity of the process is often limited.

• Employees are skeptical of an inherently subjective process where decisions are made by someone from outside their functional area.

For those who use a job evaluation process (whole job or quantitative), a further step of valuation is to place a price tag on each position - and to do that you need to conduct a study of the competitive marketplace.

Market Pricing

Here is the one process that gets you straight to the core of the matter - placing a monetary value on your jobs.  Some of its advantages as an evaluation process are:

• It is more objective, especially if using multiple survey sources.

• It is easier for management to accept, vs. the judgment of “some analyst in HR.”

• It is easier to defend results to otherwise biased managers.

• The evaluator is subject to less criticism (a personal favorite).

Most companies follow both processes, job evaluation and then market pricing.  Does that two-phased effort add value?  I have my doubts, especially if the prime goal is to establish a salary structure.

Sometimes the competitive market conflicts with your hierarchy.

What if the marketplace indicates a job is worth @$50,000, but as a result of your evaluation process the current midpoint is either much higher or much lower?  Ignoring the market could prove costly, in terms of either dollars or employee disengagement.  But if you follow competitive practice – then what is the point of your internal, job content-based evaluation process?

When faced with a choice most companies would make the change.   Dealing with reality, they would say.  So at the end of the day the true indicator of the value placed on your hierarchy is through market pricing.

Another concern is that, while Job Evaluation can be a long and tedious process it isn’t a sufficient end in itself.  You still have to price the jobs to create an effective salary structure.  The external survey data needs to be “interpreted” by a skilled analyst in order to ensure position matches are appropriate and the subsequent data properly integrated.  We call this “massaging the data.”

Some examples of how market data can be massaged between the survey source(s) and the salary structure:

• When you cluster diverse market data points into a graded salary structure.

• When you are not able to afford competitive rates you may lower the value of each position and create a below market salary structure.

• When you move jobs into certain grades to reflect the organizational realities of your company (the senior analyst must be either one or two grades higher than the core analyst).

• There will also be “favored sons,” positions that must be slotted a certain way in your hierarchy, regardless of market data.

If your goal is to price the internal and external value of your positions you do not need an involved job evaluation process, but you do need market pricing.   I would suggest a market pricing effort first, to establish competitive pay levels, and then if desired for other purposes follow up with some form of whole job evaluation process (keep it simple).  Finally, the evaluator(s) should recommend a degree of massaging to ensure that the final results “make sense,” both from an internal as well as external viewpoint.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  With over 30 years Rewards experience Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats. 

Creative Commons image courtesy of IvanWalsh

Comments

[Dan Walter]

Hi Chuck

Great article. While I agree with many of your points, I tend to disagree with your conclusion. Market pricing works when jobs and skills sets are essentially the same. This can be true for interchangeable positions, but in today's world of complex job interactions, unique products and services many companies focus on what makes them different, not the same.

For these companies (or specific roles in these companies), internal evaluations can be more accurate and more easily justified. Market data simply becomes another data element to define "normal". Many companies are not striving to be normal, they are striving to be special.

I often tell companies to leave the market data for last. Use it just as a sanity check. If you do everything else right and are in the ballpark of market data, then keep moving.

[E. James (Jim) Brennan]

Job evaluation need not stand in opposition to market pricing. The best validated point-factor job evaluation schemes capture the current actual nondiscriminatory market prices of benchmark titles so their "points" correspond to current actual marketplace dollars. Such modern job evaluation plans ARE market pricing systems which permit the internally consistent, logical and precise assignment of pay values to unique positions, providing an interpolation process which captures your policy of external market and internal value.

Pure market pricing IS a job evaluation scheme of itself. The problem with title-matching is NOT with the benchmark jobs but with the unique ones where there is no precise external market match and where the "betweens" become an issue. Without a formal job evaluation procedure, there is no way to place a scalar value on the relationships between benchmarks and unique jobs or to compare positions outside the context of their titles. You covered that topic nicely.

If all your jobs are market benchmarks, by all means rely on "pure" market pricing as your job evaluation methodology. But even then, I'll bet that you will throw some curves into the comparisons by defining "the market" differently for different jobs; and very few firms have exactly the same internal value for all their jobs as do all their direct competitors. None do, in fact.

Granted, the ancient job evaluation systems created in the 1940s are guilty of all the sins you named. You can't even drive a car these days built seventy years ago without special waivers for the safety/environmental violations otherwise encountered; and both racial and sex discrimination were perfectly legal when those stone-age primitive JE programs were designed, weighted and scaled. The deficiencies of the worst old systems do not apply to the best new systems... even though some >50-year old JE plans continue to zombie-walk (especially in the EU), their effectiveness died decades ago. Only the most profitable entrprises can afford to retain them today: that is because of your central point, quite correct, that you MUST pay a market-clearing rate in order to stay in business; so your JE plan must be manipulated to assure that it ALWAYS generates a rate that matches or exceeds the market... and that means you end up paying well over the market for many jobs.

It is a very deep and complex topic, as your short overview showed.

[Rodney Hulsey]

Market-pricing is great for small companies, companies in rapid-growth phases, and for companies where there is no tolerance for the time required to conduct job evaluations.

I’ve come to value the approach that combines an internal evaluation system that is benchmarked by market data - appropriately called a HYBRID method. The hybrid method captures the best of both internal methods and market-pricing. Unfortunately, the hybrid approach is often discounted by those who do not understand how to merge (aka interpolate) the two methods into a useable format - which isn't really that difficult to do.

Companies operating in many different countries need a method of valuing jobs across the enterprise so they can compare similar jobs across multiple geographies. Market-pricing cannot achieve that - only internal evaluation systems can. Using the hybrid method allows a multi-national corporation to use a single internal valuation method across the entire enterprise while localizing the monetary value with market data.

If that isn't a good enough reason to use a hybrid methodology, then the fact that available surveys do not (and likely never will) capture anything but the "typical" jobs found in a "typical" company, where the "typical" result provides a company with about 35%-65% of their jobs being "matched" to the market, should be a good enough argument for resorting to the time-honored hybrid approach where 100% of the jobs can be valued internally and then interpolated for their relative market value.

[Warren Heaps]

Chuck -

I always enjoy reading your posts.

I wrote one on the International HR Forum recently with a similar focus - Job Evaluation: Why Bother? - http://internationalhr.wordpress.com/2011/09/08/job-evaluation-why-bother.

I am not a big fan of market pricing as a substitute for job evaluation, although I also believe job evaluation should be simple, easy and transparent (and this is unfortunately, not often the case). Given the focus of my firm on developing countries, the market pricing argument is decidedly different from a US perspective.

Warren

[Christopher Kelley]

Chuck,
wow...lot's of great material there on job evaluation and in particular, market pricing.

You mentioned your disdain for the process and how you "washed your hands" of the responsibility...my guess is that you're not alone. Far too often, I come across organizations who seem to think of job evaluation as grunt work that only lower level folks should have to suffer through.

In my opinion, that's a huge missed opportunity.

Job evaluation, regardless of whether through pure market pricing, point-factor evaluations, or blends of both, can provide such rich information about how the organization ticks. Warts and all.

It's been my experience that a person who is skilled and experienced in job analysis & job evaluation can actually do so much more than just decide on the pay value for a job. The organizational development benefits gained by having someone who can take a holistic view of the organization, spot potential duplication of effort, process inefficiencies, fragmented responsibilities, etc. should be seen as much more than just a by-product.

Maybe job analysis and job evaluation aren't the sexiest of compensation duties. But done well, I have long argued that this is the key first step in moving towards "compensation intelligence."

[Sjuck de Bordes]

Hi Chuck,

Indeed grading is no fun. C&B leaders who deal with the recognizable challenges that you list by passing it on to subordinate, precisely when things are difficult, do not show that they are worth their salt. A difficult discussion with senior managers will never be teachable or enriching when we walk away.

Job evaluation serves a number of purposes in larger and international organizations. Granted that there is a subjective side to it, market pricing probably has more pitfalls and serves certainly serves less purposes. Absence of any job evaluation makes C&B exponentially more subjective.

Job evaluation helps to limit subjectivity and promotes a “more objective and fair” process to determine the value of a position to the company. In addition to developing salary structures and to help career progression and org. development, job evaluation also helps a “more objective and fair” allocation of bonus and equity plans, company cars and perquisites. It is useful in allocating training and development resources, it helps to contain title inflation, it encourages managers to take job descriptions more seriously, allows to be more objective in setting performance requirements and it provides some guidance to managers in reward decisions.

There always will be a need for fair exceptions and situations where market data are not useful to a specific case. If an organization does not choose how to balance between internal and external equity, it will have a more difficult time making reward decisions. That is a question of reward strategy, not job evaluation.

In our endeavour to engage employees and to treat them fairly while allocating company resources in a responsible and strategic manner, many companies turn to job evaluations as an imperfect but helpful tool. It will be great if we can come up with something better. Until that day, walking away from the associated challenges or passing them on to subordinates does not help our companies.

Chuck, thanks for many insightful and enjoyable posts!

[Drew Brown]

This is an interesting topic, one that seems to constantly dog compensation professionals. I have experience with job evaluation systems and market pricing methodologies both integrated together and managed separately. One of the big advantages of job evaluation systems is that they absolutely require that HR creates and maintains accurate job descriptions. This is easier said than done. In most of the companies I've worked for, almost none of them has taken the time or made the effort to maintain accurate job descriptions. If job evaluations are going to work, job descriptions must be maintained and updated on a regular basis so that matching can be done accurately.

With that said, I have found one of the big advantages of job evaluation systems is in the treatment of jobs where little or no market data exists. I've never been able to match 100% of my jobs in surveys. Job evaluations have enabled me to competitively price jobs where there is a lack of good market data. However, I've also learned not to rely too heavily on job evaluations either. I think that job evaluations are a great tool in establishing internal relationships of jobs in a given organization. I've also used job evaluation systems to help build pay structures and assign jobs to pay grades based on internal job values. However, assigning jobs to pay grades in a pay structure based solely on job evaluations is as much an art as a science. I'm not sure that the effort to maintain a job evaluation system is worth the return on the investment both in terms of the time it takes to maintain them and in the cost of the systems. I prefer to weight the impact of market pricing in valuing jobs greater than that of job evaluation systems. I rely on job evaluations when market pricing can't provide me with the direction I need.

Regarding the political consequences of using job evaluation systems, I've played the games that managers play in trying to manipulate the process of evaluating jobs. If you can't stand up to managers and support your position and decisions when using job evaluations to assign jobs to pay grades, you shouldn't use them. Upper management must be willing to support the use of job evaluations and that means not caving in to managers who attempt to apply pressure to assign their jobs to higher pay grades. If you are confident in your data and if you can successfully defend your evaluation decisions then you might consider using job evaluation tools. There is a place for them and they can be a useful compensation tool, but job evaluations are not a broad solution for all organizations and in all situations.

[Blair Johanson]

The automation of the job evaluation process through software and hardware technology has moved this compensation management process from an old dinosaur to a phoenix. With our twenty-five years of compensation management experience, we have been advocates for the combination of internal job evaluation and external market pay comparisons as the basis for developing and maintaining effective and efficient compensation management programs. The job evaluation process is less taxing with automated position analysis questionnaires that are aligned with the job evaluation factors / degrees and then re-aligned back to the final job description after completion of the sore-thumbing process. This job evaluation and job rating process is more transparent with internal internet-based collaboration features that encourage management and staff participation. We agree with your position to include market pay comparisons for the purpose of validating the internal proposed structure and external market pay competitiveness. Market pay data without an internal reference structure tends to be less objective and valid and has the potential to understate or overstate the proposed pay structure. We developed an automated job evaluation and compensation management software with the features mentioned above so compensation professionals have the proven tools (internal job evaluation and external market pay analysis) and technology to become the fire birds for their organizations and compensation management programs.

[Chuck Csizmar]

Several great comments on my evaluation article, so thanks to all who contributed. Quite diverse comments as well, which shows a healthy smorgas-board of opinions, experiences and individual company practices. There's never just one way, is there?

To sum up, what we're seeing out there is a combination of practices, call it a hybrid trend that combines internal valuation with the touchstone of assessing the competitive marketplace. No one seems to be ignoring either job evaluation or market pricing, but are stressing the values of both and using both to gain the best for their respective companies. Can't argue with that.

[Gunnar Gustafson]

Good article. I would argue that job evaluation is necessary but it should be as simple and apolitical as possible. I would like to offer a methodogy for consideration.

A classification approach that is the basis for most good salary surveys can become your evaluation method. The leveling guide you will find in your salary surveys can become your foundation. If you use the salary survey leveling guide you can take the next step and make the survey jobs your job library. That means your jobs are built or modified to mirror the survey jobs. This effectively takes you out of the job evaluation business, done, finished. Since every company is matching to those jobs in the survey they become industry standard jobs. Some may argue that their company is unique and jobs should not be standardized. Having unique jobs that are not in salary surveys usually does not help you to get accurate market matches and may make it difficult for incumbents to build their resumes within a function and family of jobs. On the other hand, customized jobs with lots of evaluations and little market data may be value added, I just have not been convinced.

If you use the salary survey as your evaluation and market pricing foundation you have accurate market matches for most all your jobs and you can use a salary structure or just use the market prices to create a structure for every job. With this approach you can have internally equitable jobs globally, in the same grade (band)with the ability to pay them exactly to market with no slotting. There are always a few jobs that are not found in salary surveys and they can be paired with similar jobs that do have market matches.

If you are still using a point factor or other cumbersome approach you may want to consider what addtional value this process adds and if it is worth the effort.

[Phil Johnson]

Great discussion.

Everyone (almost) seems to agree that internal and external (market) equity are important and that a combination approach is necessary. But most commentators focused on the narrow application of placing a value on work, giving less consideration to the equally important applications of understanding and analysing work which are making sure that work is well designed (both job and organisation design) and that work is effectively delivered (by having the right people in the right jobs and an effective performance management process).

If we view the investment in understanding, analysing, documenting and measuring work (a process that i call Work Measurement) only in the context of placing a monetary value on jobs, then we will not appreciate power of the process - we will end up seeing it as a necessary / unavoidable evil to be avoided (or delegated) whenever possible. However, if we recognise the full spectrum of applications of work measurement (this term is used to differentiate the holistic process from job evaluation) then we appreciate how this core process can help elevate the HR function from a transactional / tactical service provider into a strategic contributor.

Work Measurement is the "operating system" that underpins multiple HR applications including:
Work Value - placing a monetary value on jobs
Work Alignment - designing effective jobs and organisation structures
Work Fit - matching people with the work based on integrating skill and competency requirements with the job's accountabilities
Work Performance - effectively linking the performance metrics to the core content of the job.

[Michael DiOnne]

Chuck,

The timing of this article is pretty amazing as our local World at Work association had their monthly meeting last Thursday and the topic was "Is Job Evaluation Dead?" We had the president of MarketPay debate the merits of market pricing versus one of our members for the merits of job evaluation. At the end of the debate a vote was taken and much to my surprise I was the only one that vote for Market Pricing as having won the debate. A lot of that had to do with our member being very creative and basically changing the concept of job evaluation so that any sort of job structuring was synonymous with job evaluation, but it was still a very interesting debate. The main points that I took away from that debate and some of the discussions afterward were that while job evaluations might be valuable companies no longer have the time or patients to go through the process. It was also pointed out that market survey data is blindly followed by many practitioners without ever questioning the data and in many local surveys the data is not always good primarily because of how the data in collected (this issue does not seem to exist with large national surveys such as Radford, Mercer, Chips, and TW) or more specifically who is submitting data for these small regional surveys. Anyway, I just thought the timing of your article was quite the coincidence.