Management 623: Compensation

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Management 623Compensation Performance
Management

• Session 11
• February 16th 2006
• Dr. J. Bruce Prince

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Agenda

• Creating a job structure from job descriptions
• Application of the point method

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Coming Up

• Tuesday, February 21st
• No class sessions Work on FastCat 1
  Assignment- Im not in town this day
• Thursday, February 23rd
• No class sessions Work on FastCat 1 Assignment
• I will come to the classroom at 230 in case
  there are questions
• Tuesday, February 28th
• FastCat Assignment 1 Due
• Presentations on proposed pay structure
• Jury duty possibility Assignment is due even if
  class is canceled
• Turn it into the Management Office (Calvin 101)
  class canceled
• See handout for additional schedule additions

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Special Office Hours

• Office Hours for Next week (March 20-24)
• Monday to Wednesday No office hours
• Thursday
• 230 to ? in the classroom
• 300 to 400 in my office (C204A)
• Friday
• 1000 to 1100, or by appointment
• Friday, 2/17 (tomorrow) 200-300

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Creating a Job Structure Exercise

• Discuss this exercise in groups be prepared to
  answer these questions
• What are the two job families?
• What are the lowest highest jobs in terms of
  complexity within each family?
• What are two compensable factors that could be
  used to evaluate these jobs?

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Process of Creating a Job Structure
Collecting information about the nature of
specific jobs
Summary reports that identify, define, and
describe the job as it is actually performed
An ordering of jobs based on their content or
relative value then assign based on
relative value (link to external market)
Comparison of jobs within an organization
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Creating a Structure of Jobs Pay

• Job Analysis is starting point
• Create job descriptions
• Identify the tasks that are part of the job
• Identify the jobs that are in job families
• JA provides bases for determine job value
• Job evaluation process for assigning the
  relative worth of a job within a company
• Typically start with benchmark jobs then extend
  to the other jobs

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What Drives the Value of a Job?

• Job content, skill knowledge required
• Centrality to firm strategy
• Working conditions-night shift differential
• but also external labor market rates
• Job evaluation focuses on internal consistency of
  a hierarchy of jobs
• Eventually tensions between internal consistency
  vs. external labor market rates must be addressed

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Benchmark Jobs Links to internal consistency
external equity

• Benchmark jobs. Ideally these are
• Central well-known in the organization
• Plenty of employees are in these jobs
• Job content is fairly stable over time
• Are distributed throughout the firms
• Samples relevant job families
• Equivalent jobs exist in other firms in external
  labor market
• Provides for applies-to-applies comparisons in
  evaluating external labor market rates

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Methods for Job-Based Evaluations

• Ranking Simple
• Should generally do this just to check the
  validity of point method
• Classification
• Point method
• This the most widely used method

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Job Evaluation Methods

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Steps in Doing the Point Method

• Job analysis creation of job descriptions
• Create compensable factors
• These are the metrics for assigning value
• They come from work content, strategy politics
• Acceptability helps fairness
• FastCat note job descriptions will give you
  clues note examples in todays reading to
  create yours
• Generic categories
• Skills required, effort required, responsibility,
  conditions
• Hay Know-how, problem-solving, accountability
• 3-5 factors are usually adequate

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Steps in Doing the Point Method (continued)

• Scaling factors
• Degrees of compensable factor lo to hi
• These words will guide the job analyst
• Words need a reasonable level of generality to
  capture the range of jobs must be
  distinguishable from each other
• 4 to 8 is generally adequate
• Weighting the importance of a factor
• Of the various factors what is most important,
  least, etc.
• The is a political a technical issue

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Final Steps in Point or Other Methods

• Demonstrate the viability of pilot project with
  benchmark jobs
• Get political support budget
• Advisory committee really helps
• Communicate the plan
• Create the formal manual select job analysts
• Develop an appeals process
• Apply to non-benchmark jobs

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Final Resulting Job Structure Pay System

• Create job families assign point value to
  firm
• Provide promotion transfer paths
• There are strong implications to the internal
  labor markets and how employee are developed as
  they move from job to job
• Usually multiple structures plans in large
  firms
• Often very dissimilar work requires different
  plans
• Hopefully a pay system that supports the firm
  strategy, creates internal alignment,
  competitive advantage

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Final Notes

• For some firms on the external market is king
• The going rate is more important than internal
  consistency
• Market pricing strategy find external
  reference jobs and match
• based on pay policy (meet, lead or lag market)
• Challenges with unique jobs but can extrapolate
• Broad-banding strategy
• Create broader job categories with wide (min-max)
  pay
• Give managers more flexibility in assigning
  Mkt rules