Overview

Job evaluation is a formal process for determining the relative value of jobs based on job content, with emphasis on such factors as skill, effort, responsibility and working conditions. Job evaluation may contrast with or complement market pricing, which uses the labor market to set the worth of jobs. A key benefit of market pricing is its emphasis on external competitiveness; however, a big drawback is insufficient and/or unreliable market data for all the jobs in the organization. Accordingly, job evaluation in some formeven a simple one, such as slottingis needed to supplement a market pricing approach to the valuation of work. A key benefit of job content evaluation is internal consistency. Another is utilityall jobs can be evaluated based on content. Organizations use job evaluation to:

• Ensure compliance with legal requirements, including federal laws and regulations on equal pay and state/provincial or local ordinances on comparable worth.
• Establish a rational, consistent job structure based on value to the organization in terms of each job's complexity, importance and/or other factors (with or without reference to market valuation).
• Help provide a basis for pay-for-performance.
• Assist in establishing pay rates and structures that are competitive.

Contrary to popular belief, some job evaluation systems are intrinsically linked to or validated by the market. However, market sensitivity is sometimes a problem with job evaluation. Solutions include pay setting flexibility for new hires and special pay programs, often called "market rates" or "special rates."

The market and content approaches to the valuation of work both require work analysis. Work analysis for the market pricing approach is relatively quick and elementary. Work analysis in the content evaluation approach takes longer and is more involved in most cases. In the job content evaluation approach to valuing work, the evaluator determines the relative value of job content by applying a job evaluation system. The process for evaluating each job may be very complex and time-consuming (for example, rating the job on 187 items of the Position Analysis Questionnaire, PAQ), moderately complex (assessing job elements against evaluation factors using the Factor Evaluation System, FES, or one of its many clones) or very simple (ranking one whole job against another). Likewise, the job evaluation system itself may be technically complex and hard to explain (factor analysis used to empirically derive the job dimensions and standard equation no. 2 of the PAQ), moderately complex (regression analysis used to weight factors in the FES or other point-factor systems) or very simple (using the paired comparison technique to rank-order the benchmarks against which all other jobs in the organization are slotted).

Methods and Systems

There are thousands of different job evaluation systems now in use. Each entirely or mainly uses one of about a dozen primary technical approaches, such as the factor comparison, point-factor, job component, definition, ranking and slotting methods. Each method, and thus each system, is either quantitative or non-quantitative. Three important, but quite different quantitative systems are the PAQ, the FES and the Hay system.

Though not widely used, the PAQ is renowned in the field of industrial/organizational psychology for its technical excellence and usefulness in job evaluation, selection and related HR program areas. The FES, used by the Federal government to evaluate its white-collar jobs, extended early point-factor methodology and is widely copied, in technique or actual content, by many other systems used in the public and private sectors. The modern Hay system, properly called the Hay Guide Chart-Profile Method of Job Evaluation, is extensively used in the private sector to evaluate executive, managerial, supervisory, professional and/or nonexempt white- and blue-collar jobs. Its use in the public sector is growing. The 187 job elements of the PAQ are standardized. The standard job evaluation equation (factors made up of combinations of the job elements and their weights) is empirically derived from the market place. Factors and their weights can be customized for an organization, but most use standard equation no. 2 which, because it is proprietary, can be seen as a "black box"the job analyst enters ratings for each of 187 job elements into a computer that "mysteriously" produces the job evaluation point total. Compensable factors, degrees and weights of point-factor systems, such as FES clones, can be validated by the market, but rarely are. FES-type evaluation systems are usually wholly or partially customized for an organization, while Hay Guide Charts developed for an organization typically have both standard and custom features. Two relatively well known non-quantitative systems are the Federal government's Federal Wage System and Hay's CompuGuide.

System Development, Implementation and Operation

Some steps in the system design-development-test/evaluation-implementation cycle are tied to the methodology and/or the specific system to be used; others are nearly universal. For example, a typical system implementation project has these common steps:

1. Specify parameters of the project, and gain approvals and support.

2. Determine evaluation method/system to be used.

3. Collect job data consistent with the method/system (what content is valued?).

- Specify data collection techniques and design or adapt data collection instruments.
-Collect data, ensuring adequacy and accuracy.

4. Analyze data, document job content and evaluate jobs.

5. Develop job worth hierarchy: use points to establish exact position in hierarchy, group jobs into grades based on appropriate breaks or take another approach that is fair, understandable, defensible and practical.

6. Allocate jobs (via grades, for example) to the existing pay structure or develop a new one.

7. Document system development (for use if challenged) and establish operating procedures, including process(es) for reconsidering decisions and/or a formal appeals procedure.

8. Gain final approvals.

9. Implement and administer system.

In addition, most organizations should employ a robust management-employee communications program to keep everyone informed. Consistent with the universal steps, typical system-specific steps for a quantitative approach to job evaluation (point-factor methodology in this example) are:

1. Select compensable factors.

2. Define degrees for each factor.

3. Determine values (weights) for factors and degrees.

4. Apply these criteria to each job to derive points on each factor and obtain a point total.

5. Allocate each job to a grade (range of points) or exact position in the hierarchy based on total points.

Typical system-specific steps for a non-quantitative approach to job evaluation (whole job ranking methodology in this example) are:

1. Identify and briefly describe the benchmarks (jobs identified as key based on employee count, importance to the organization and other considerations).

2. Rank order them into a hierarchy through paired comparisons (which job in each comparison is "better" than the other overall?).

3. Slot the remaining jobs by comparing each to the rank-ordered benchmarks.

Slotting then becomes the operational method by which new jobs are evaluated. Slotting can also be used to supplement, or as an alternative to, an established quantitative approach by comparing critical job elements of the job to be slotted to those of jobs already allocated to the organization's job worth hierarchy.

However the organization's job worth hierarchy is established, job evaluators continue to use job content to place value on new and changed jobs. Some organizations use market pricing as a check on job evaluation. Pay rates in organizations using the job content evaluation approach to the valuation of jobs are set by reference to the market, collective bargaining or other means.

Considerations and Closing

Key considerations for organizations contemplating job evaluation are:

Will job evaluation provide substantial benefits to the organization?

Which method/system should be used?

Should more than one method/system be used; for example, one for exempt, salaried jobs and another for nonexempt, white-collar jobs?

Will the organization apply the system(s) equitably?

Will the organization commit the resources needed to develop, implement and operate the system(s) over time?

Job evaluation is useful for many reasons. It can serve an organization well. Persons needing more information about job evaluation as a means to valuing work should consider the references below.

Selected References

Ghorpade, Jai. A Handbook for the Human Resource Director. (Englewood Cliffs, NJ): Prentice Hall, 1988.

Hackett, Thomas J. and Valerie C. Williams. "Documenting Job Content, An Approach to Job and Work Analysis." American Compensation Association Monograph, 1993.

Henderson, Richard. Compensation Management...Rewarding Performance. (Englewood Cliffs, NJ). Prentice Hall, 1989.

Lister, Brenda J. and Andree Mercier. "Evaluating Job Content, An Approach to Establishing a Job-Worth Hierarchy." American Compensation Association Monograph, 1993.

Michael, Hartmann and O'Farrell (Editors). Pay Equity, Empirical Inquiries. (Washington, DC): National Academy Press, 1989.

Pritchard, Kenneth. "Introduction to Work (Job) Analysis." SHRM White Paper, August 1997.

Pritchard, Kenneth. "Job Descriptions--An Overview." SHRM White Paper, April 1995.

August 1997
Reviewed July 2002

Thanks to Kenneth H. Pritchard, CCP, a member of the SHRM Compensation & Benefits Committee, for contributing this paper. It is intended as information, and is not a substitute for legal or other professional advice.