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CHAPTER 4 JOB ANALYSIS LEARNING OUTCOMES After studying Chapter 4, students should be able to: Explain job analysis and why it has been called the cornerstone of human resources management. Describe the step-by-step approach to conducting conventional job analysis. Describe the information that must be collected for job analysis and explain recent changes in how this information is collected. Discuss the differences between job descriptions and job specifications. Explain the pros and cons of job analysis, and different ways to judge job analysis. CHAPTER SUMMARY Job analysis is the systemic process of collecting information about the nature of specific jobs. Job analysis data are used in virtually every major HR function, including recruiting and selection, training, compensation and so on. There is a six=step approach to job analysis: develop preliminary job information, conduct initial tour of work site, conduct interviews, conduct second tour of work site, consolidate job information, and verify job description. The information that must be collected for job analysis includes job identification data, job content data, and data on qualifications necessary to do the job. Job content data are the heart of job analysis, and include the tasks involved, their purpose, reporting relationships, working conditions, and other specific job information. Conventional methods of collecting job analysis data such as questionnaires and interviews are being replaced by online questionnaires, because the latter are more objective and less time-consuming. Job descriptions provide a written summary of a job, including responsibilities, qualifications, and relationships. Job specifications are the qualifications required to be hired for a job, and may be included in the job description. The benefit of traditional job analysis is that it provides the basis for defensible job-related decisions, and establishes a foundation of career paths. However, it is sometimes considered too rigid for today’s more flexible organizations with fluid work assignments. Job analysis can be judged based on reliability (consistency) of the information obtained, validity (accuracy) of the information obtained, acceptability of the data and the process by employees and managers, and practicality (usefulness) of the information collected. LECTURE NOTES STRUCTURES BASED ON JOBS, PEOPLE, OR BOTH The process starts with looking at a person at work. Job-based structures look at the tasks and accountabilities; skill-and competency-based structures look at the person. However, the underlying process is the same: (1) collect and summarize information that identifies similarities and differences, (2) determine what is to be valued about the job, (3), quantify the relative value, and (4) translate relative value into an internal structure, and (4) translate relative value of jobs into an internal structure. See Exhibit 4.1 on page 57 to review the ways in which internal job structure can be created with both job-based and person-based approaches. JOB -BASED APPROACH: MOST COMMON Job analysis is the systematic process of collecting information about the nature of specific jobs. Job analysis helps establish job similarities and differences. It can also be used to set hiring and promotion standards, training standards, and performance evaluation criteria for employees in the jobs. It is essential to developing job descriptions and job evaluation. Job analysis is an ongoing need as the nature of work changes over time. See Exhibit 4.2 on page 58 to review the process flow of how to determine an internal job structure. Some Major Issues in Job Analysis include the following: Why collect information? What information is needed? How to collect information Who should be involved? How useful are the results? Why Perform Job Analysis? Job analysis has two critical uses: (1) it establishes similarities and differences in the content of the jobs, and (2) it helps establish an internally fair and aligned job structure. The key issue for compensation decision-makers is to ensure that the data collected serve the purpose of making decisions and are acceptable to the employees involved. JOB ANALYSIS PROCEDURES It is important to first learn the terminology used in job analysis including the following: Job Family – groupings of related jobs with broadly similar content Job – groups of tasks performed by one person that make up the total work assignment. Task – Smallest unit of analysis, a specific statement of what a person does See Exhibit 4.3 on page 59 for a visual explication of job analysis terminology. Standard procedures, shown in Exhibit 4.4 on page 60 review those necessary for job analysis including: develop preliminary job information, conduct initial tour of work site, conduct interviews conduct second tour of work site consolidate job information verify job descriptions. WHAT INFORMATION SHOULD BE COLLECTED? A typical analysis starts with a review of information already collected in order to develop a framework for further analysis. Job titles, major duties, task dimensions, and work-flow information may already exist. However, it may no longer be accurate. So the analyst must clarify existing information, too. Generally, a good job analysis collects sufficient information to adequately identify, define, and describe a job. Job Data: Identification Job titles, departments and the number of people who hold the job are examples of information that identifies a job. Although a job title may seem pretty straightforward, it may not be. For example, the federal government has hundreds of job titles that identifies the different jobs. Job Data: Content This is the heart of job analysis. Job content data involve the elemental tasks or units of work, with emphasis on the purpose of each task. The other distinguishing characteristic of the inventory is the emphasis on the objective of the task. Employee Data Exhibit 4.5 on page 61 categorizes employee data as employee characteristics, internal relationships, and external relationships. In this step often Position Analysis Questionnaires (PAQ) are used. PAQs are a structured job analysis questionnaire used for analyzing jobs on the basis of 194 job elements that describe generic work behaviours. The seven basic elements seen in Exhibit 4.7include: information input mental processes work output relationships with other persons job context other job characteristics general dimensions Level of Analysis The level of analysis must be sufficient to determine whether jobs are similar of different in order to make pay decisions based on those similiarities or differences. Jobs that look similar at one level of analysis may look different when analyzed at a further level. HOW CAN THE INFORMATION BE COLLECTED? Conventional Methods Most common data collection involves using a questionnaire with structured interviews of those in a job and their supervisors. The advantage of this method is that the involvement of employees increases their understanding of the process. The method however, relies on the analyst’s ability to understand the job, and may be subjective. Quantitative Methods An analyst will direct jobholders to a Web site where they complete a questionnaire on-line. The advantages include a documentation of results and the possibility of statistical analysis of the data. Inventories form the basis of all quantitative methods. The inventories typically ask respondents whether or not a particular item is part of their job. Each item is assessed for the importance in the job and the amount of job time it comprises. Responses from several people in a job can be compared or averaged to develop a profile. Profiles for related job can provide useful information for staffing or work design decisions. See Exhibit 4.8 on page 66 for a partial look at 3Ms structured interview questions. Who Collects the Information? The choice of who should collect the job analysis information is amongst the job analyst, the supervisor, and the employees in the job. Who Provides the Information? If it is the supervisor, then their impressions must be accurate. If it is the job holder, then any discrepancies among various sources must be resolved, generally by gathering more information, discussions among participants. In general, the more unique the job, the greater the number of sources needed. Top management support for the process is critical for gaining cooperation of employees. What about Discrepancies? If employees and their supervisors do not agree on what is part of the job, then more date needs to be collected. Enough data are required to ensure consistent, accurate, and acceptable results. In general, the more unique the job, the more sources of data will be required. JOB DESCRIPTIONS SUMMARIZE THE DATA The information collected is generally summarized into a standard format that should be brief yet accurate. This document is the job description. The job description is a written summary of a job, including responsibilities, qualifications and relationships. It also states the job title and number of incumbents, defines the job through a statement of the purpose, and describes the job through a summary of duties and responsibilities. A final section lists the qualifications necessary to be hired for the job. These are the job specifications that can be used as a basis for hiring; that is, the qualifications for a job or the knowledge, skills, and abilities required to adequately perform the tasks. Using Generic Job Descriptions Sometimes for purposes of efficiency, generic job descriptions are used to save time and money. The National Occupational Classification (NOC) is a good source in Canada for standardized job descriptions. See .NET WORTH to review a NOC example for a Human Resources Professional on page 70. Describing Managerial/Professional Jobs Job descriptions of managerial jobs also include further explanations to the dimensions, nature and scope, and the accountabilities of the job, in order to list the supervision required by the job, how it fits into the organization and the results expected from the job. See Exhibit 4.9 on page 69 for a contemporary job description for a registered nurse. Compare this to Exhibit 4.11 for a nurse 100 years ago on page 71. Verify the Description The final step in the job analysis process is to verify the accuracy of the resulting job descriptions. (Step 6 in Exhibit 4.4.) The verification brings together all the interviewees as well as their supervisors to determine if the proposed job description is accurate and complete. JOB ANALYSIS AND GLOBALIZATION Job Analysis and Susceptibility to Offshoring Offshoring refers to the movement of jobs to locations beyond home-country borders. When offshoring is used within an organization it is not always possible to determine the elements of job analysis, job descriptions and job specifications. Traditionally, the driving force to make the offshoring decision is labour costs. However, efficiency and productivity are often ignored, and so lower labour costs coupled with lower productivity do not allow an organization to realize its objectives more effectively. The lack of cultural knowledge and language issues can also impede organizational effectiveness with an offshoring model. No job is immune from being offshored anymore and many white collar jobs are being moved outside the home country due to access to better technology and telecommunications. Job Analysis Information and Comparability across Borders When jobs are offshored to numerous countries there is an essential need to have consistency with job content via job analysis. It is important to clarify the perceptions and norms for all countries as to the aspects of the job that need to be shared. The question that needs to be asked is “How do we determine and verify that job analysis is being conducted equally amongst the offshoring and home country locations?” JUDGING JOB ANALYSIS Reliability Reliability is the consistency of results from repeated applications of a measure among various analysts and various methods. Research on employee and supervisor agreement on the reliability of job analysis information is mixed. For instance, time on the job may change employees’ perceptions about the job since they may have found new ways to do it, or added new tasks to the job. Conventional methods of job analysis cannot be analyzed for reliability. On the other hand, quantitative methods may over inflate reliability measures. Validity Validity is the accuracy of a measure. Creating an accurate portrait of the work through convergence of results among sources of data and methods and a signoff on the results is an important factor. Acceptability Acceptability of the job analysis information by employees and managers is essential for the analysis. Information must be understood and perceived to accurately portray the jobs. Currency The job analysis information should be accumulated in a timely manner in order to be valid, useful and acceptable. This information should also be as complete as possible so that all changes are incorporated into the analysis. Usefulness Usefulness refers to the usefulness of the information collected. For pay purposes, job analysis provides work-related information to help determine how much to pay for a job- it helps determine whether the job is similar or different form other jobs. A Judgement Call While job analysis can be difficult, expensive, and time consuming there is no satisfactory substitute for the job-related information to ensure that the resulting pay structure is work related and will provide reliable, accurate information for pay decisions. One of the most significant questions to be asked with a job analysis is: “How much detail is needed to make these pay decisions?” In a pure economic sense, full and complete information gathering is never possible and so it is important to gather relevant information in order to rationalize pay structures. CHAPTER 5 JOB-BASED STRUCTURES AND JOB EVALUATION LEARNING OUTCOMES Define job evaluation and explain the different perspectives regarding this activity. Describe the ranking method of job evaluation and explain two specific methods of ranking. Discuss the classification method of job evaluation and how benchmark jobs are used in this method. Explain the six steps involved in the point method of job evaluation and describe the three common characteristics of point plans. Discuss who should be involved in job evaluation. CHAPTER SUMMARY Job evaluation is the process of determining and quantifying the value of jobs. Different perspectives regarding job evaluation include the following: Job evaluation can determine the innate value of jobs. Job evaluation can determine the relative value of jobs. It is not possible to value jobs without external market information. Job evaluation is dependent on objective measurement instruments. Job evaluation should be conducted participatively through as process of negotiation. The ranking method of job evaluation rank orders the jobs from highest to lowest on the basis of a global definition of value. Two methods of ranking are: (1) alternation ranking, in which the most- and least-valued jobs are selected first, then the next-most- and least-valued jobs, and so on; and (2) paired comparison, in which each job is ranked against all other jobs. The classification method of job evaluation uses class descriptions to categorize jobs. Descriptions of benchmark jobs (those that are well known, relatively stable, and common across different employers) are used as part of the class descriptions for clarification. The final result is a series of classes with a number of jobs in each. The six steps involved in the point method of job evaluation are: Conduct job analysis Determine compensable factors Scale the factors Weight the factors and assign points Communicate the plan Apply the plan to non-benchmark jobs The three common characteristics of point plans are compensable factors, numerically scaled factor degree/levels, and weights reflecting the importance of each factor. Committees, task forces, or teams including non-managerial employees should be involved in job evaluation in an advisory or decision-making capacity. Union participation may also be desirable. LECTURE NOTES JOB-BASED STRUCTURES: JOB EVALUATION A job-based structure is the foundation for the pay structure. The main focus in this chapter is: How to determine what to value in a job How to quantify that value How to translate that value into job structure Job structure is the hierarchy of all jobs based on value to the organization; provides the basis for the pay structure. Job evaluation is the process of systematically determining the relative worth of jobs to create a job structure for the organization. See Exhibit 5.1 on page 82 to review the ways to create internal structure. Some Major Decisions in Job Evaluation: Establish purpose of evaluation Decide whether to use single or multiple plans Choose among alternative approaches Obtain involvement of relevant stakeholders Evaluate plan’s usefulness See Exhibit 5.2 on page 83 to determine an internally aligned job structure. DEFINING JOB EVALUATION: CONTENT, VALUE, AND EXTERNAL MARKET LINKS The potential to blend both internal forces and external market forces is both a strength and a challenge to job evaluation. Job Content and Job Value A structure based on job content refers to the skills required for the job, its duties and responsibilities. A structure based on job value refers to the relative contribution of the job to the organization’s goals. Linking Content with the External Market Another perspective sees Job Evaluation as a process that links job content with external market pay rates. For example, if the skill aspect of job content demanded high wages in the market, then skill would be a useful way to distinguish between jobs in the evaluation. Different Perspectives on Job Evaluation Researchers, too, have their own perspective on job evaluation. Some say that if job value can be quantified, then job evaluation takes on the trappings of measurement: objective, numerical, generalizable, documented, and reliable, and can be judged according to technical standards. ESTABLISH THE PURPOSE(S) Job evaluation supports the organization’s strategy by including what it is about work that adds value that contributes to pursuing the organization’s objectives. The job evaluation process supports workflow by integrating each job’s pay with its relative contributions to the organization and by setting pay for new, unique, or changing jobs. Job evaluation can reduce disputes and grievances over pay differences between jobs by establishing a workable, agreed-upon structure that reduces the role that chance, favouritism and bias may play in setting pay. It must be fair to employees. It also can motivate behaviour toward organization objectives by calling out what it is about work that the organization values; what supports the organization’s strategy and its success. SINGLE VERSUS MULTIPLE PLANS A single plan is one that uses the same factors to evaluate all job families across the organization. Multiple plans use different plans and different factors for different job families (e.g. clerical, managerial, production), which allow the plan to be tailored to what is important in each type of work. Many say jobs are too varied to be accurately evaluated by a single plan. Benchmark Jobs have the following characteristics: its contents are well known and relatively stable over time; the job is common across a number of different employers; i.e., it is not unique to a particular employer. A representative sample of benchmark jobs will include the entire domain of work being evaluated- office, production, engineering; and so on- and capture the diversity of the work within that domain. Typically, a job evaluation plan is developed using benchmark jobs, and then the plan is applied to the remaining non-benchmark jobs. See Exhibit 5.3 on page 85 to review different perspectives on job evaluation and its supporting assumptions. CHOOSE BETWEEN METHODS Ranking, classification and point method are the most common job evaluation methods. Exhibit 5.5 on page 87 compares the methods. They all begin by assuming that an accurate job analysis has been translated into useful job descriptions. JOB EVALUATION METHODS Most of the job evaluations methods today are quantitatively based and incorporate little if any qualitative information. Below, ranking, classification and the point method are reviewed. Ranking Ranking is a job evaluation method that ranks jobs from highest to lowest based on a global definition of value. This method is informed with the relative value of the jobs to the organization. While ranking is simple, if there are few jobs in the organizations, it is hard to overcome subjectivity and becomes unwieldy beyond a few jobs. Two ways of ranking are common: alternation ranking and paired comparison methods. The alteration ranking method ranks the highest-and lowest-valued jobs first, then the next-highest and lowest-valued jobs, repeating the process until all jobs have been ranked. The paired comparison method lists all jobs across columns and down rows of a matrix, comparing the two jobs in each cell and indicating which is of greater value, then ranking jobs on the basis of the total number of times each is ranked as being of greater value. Classification Classification methods are widely used in public sector. Classification is a job evaluation method based on job class descriptions into which jobs can be categorized. See Exhibit 5.6 on page 88 to see an example of level descriptions. General class descriptions are created and benchmarked jobs are slotted into each class. Then, the written job descriptions are compared to the class description, which are anchored with the benchmark jobs from different job families to determine in which class the job falls. A benchmark job is one that is well known, with agreed upon contents, common across various employers, represents the entire range of jobs being studied, and is commonly accepted in the external market for wage setting. Classification method is commonly used in the federal government. Point Method Although complex to develop, point plans are relatively easy to administer and justify. All point methods have the common characteristics including: compensable factors, numerically scaled factor degrees, and weights that reflect the relative importance of each factor. The point method is a job evaluation method that assigns a number of points to each job, based on compensable factors that are numerically scaled and weighed. The sum of points for each job determines its position in the job structure. Compensable factors are defined on the basis of the strategic direction of the business and how the work contributes to that strategy. As reviewed below, the six steps in the design of a point plan include Conduct job analysis Determine compensable factors Scale the factors Weight the factors according to the importance and assign points to each one Communicate the plan and train users; prepare manual Apply to non-benchmark jobs 1. Conduct Job Analysis A good job analysis is essential to job evaluation and the point method. 2. Determine Compensable Factors Compensable factors are those characteristics in the work environment that the organization values that help it pursue its strategy and achieve its objectives. They must be based on the work itself, the strategy and values of the organization and acceptable to the stakeholders. Business Related factors are those that are consistent with the organization’s values and business strategy. Based on the Work Itself implies that the chosen factors reflect the work performed in the organization. Acceptable to the Stakeholders are factors chosen to reflect the views of all those involved in the process. Adapting factors from Existing Plans which tend to fall into four generic groups: skills, effort, responsibility, and working conditions. It is important to note the linkage between competitive advantage (or the business practice or process that results in better performance than one’s competitors) and the determination of compensable factors. See Exhibit 5.8 on page 91 to see a real-life example of compensable factors for the Government of Newfoundland. See also Exhibit 5.9 on page 92 for an example of compensable skills for human relations skills. See too Exhibit 5.10 on page 93 for an example of the definition of compensable factors focused on multinational responsibilities. 3. Scale the Factors Scales describing the different degrees within each factor should include enough degrees to adequately distinguish jobs, but not so many so that it is difficult to determine which degree is appropriate for a given job. Factor degree/level is a description of several different degrees or levels of a factor in jobs; a different number of points will be associated with each degree/level. See Exhibit 5.11 on page 95 to review a research example for subfactor degrees. Weight the Factors According to Importance Weights reflect the importance of that factor to the organization. This can be done either through committee judgement or statistical analysis. Most statistical approaches derive factor weights to fit an agreed-upon criterion pay structure. Factors weights are weightings assigned to each factor to reflect differences in importance attached to each factor by the employer. See Exhibit 5.12 on page 96 to review factor weighting and assignment of points. Criterion Pay Structure This step is key since the weights are based upon it. The structure may be chosen based on current rates paid for benchmark jobs, market rates for benchmark jobs, rates for predominantly male jobs (in an attempt to eliminate bias) or union negotiated rates. 5. Communicate the Plan and Train Users A job evaluation manual must be prepared for use by employees and managers charged with the responsibility of implementing job evaluation (usually a job evaluation committee). Users must be trained in how to use the manual. 6. Apply to Non-benchmark Jobs Finally, it is necessary to combine factor scales and weights to translate them to actual job points. This is done by dividing the maximum points for the system among the factors, according to their weights and each degree of a factor is given an equal number of points based on the points for that factor. WHO SHOULD BE INVOLVED? The people who should be involved are those require the relevant information and who can commit high involvement to the assessment of the job evaluation and structures. See Exhibit 5.13 on page 97 to review a typical example of those who conduct job evaluations. EVALUATING THE USEFULNESS OF RESULTS The Design Process Matters Research suggests that attending to the fairness of the design process and the approach chosen (job evaluation, skill/competency-based plan, and market pricing) rather than focusing solely on the results (the internal pay structure) is likely to achieve employee and management commitment, trust and acceptance of the results. Appeals/Review Procedures No matter the technique, no job evaluation plan anticipates all situations. It is inevitable that some jobs will be evaluated incorrectly. Consequently, review procedures to handle such cases and to help ensure procedural fairness are required. Political Influences A study at a university found that more powerful departments in the university (as indicated by number of actual members and size of budget) were more successful in using the appeals process to get jobs paid more or reclassified than were weaker departments. The authors concluded that in addition to assessing the worth of a job, the entire job evaluation process reflects the political and social context within the organization. THE FINAL RESULT: JOB STRUCTURE The final result of the job analysis- job description- job evaluation process is a job structure; a hierarchy of work. This hierarchy translates the employers’ internal alignment policy into practice. See Exhibit 5.14 on page 99 to review an example of four hypothetical job structures for a single organization. BALANCING CHAOS AND CONTROL It is important to balance sufficient ambiguity to afford flexibility to adapt to changing conditions. However, if the approach to job evaluations is too generic, then it may not provide sufficient detail to justify pay decisions. CHAPTER 6 PERSON-BASED PAY STRUCTURES LEARNING OUTCOMES After studying Chapter 6, students should be able to: Explain the difference between skill-based pay plans and competency-based pay plans, and describe the types of jobs each is commonly applied. Describe the four basic steps in skill analysis. Define competency, and explain what is meant by core competencies, competency sets, and competency indicators. Explain why employee acceptance is crucial for person-based pay plans, and how this acceptance can be obtained. Describe two potential sources of bias in internal pay structures. CHAPTER SUMMARY Skill-based pay plans and competency-based pay plans are conceptually identical, but skills are very specific and competencies are more general. Skill-based pay plans are usually applied to blue-collar jobs and competency-based plans to white-collar jobs. The four basic steps in skills analysis are: (1) decide what information should be collected, (2) decide what methods should be used, to collect the information, (3) decide who should be involved, and (4) ensure that the results are useful for pay purposes by establishing certification methods. The term competency means the underlying, broadly applicable knowledge, skills and behaviours that form the foundation for successful work performance at any level of job in the organization. Core competencies are competencies that are linked to the mission statement that expresses the organization’s philosophy, values, business strategies, and plans. Competency sets translate the core competencies into specific action. Competency indicators are the observable behaviours that indicate the level of competency in each competency set. Employee acceptance is crucial for person-based plans, because it is the key to employees’ perceptions of fairness regarding the pay structure. Communication with employees during the building of the structure is the most important step to employee acceptance. Other important actions to enhance acceptability are a formal appeals process, employee attitude surveys, and audits of the pay plan. Two possible sources of bias in internal pay structures are (1) bias in the job evaluation of traditionally female-dominated jobs, and (2) bias in current wages that may be perpetuated when job evaluation plans are structured to mirror existing pay rates. LECTURE NOTES PERSON-BASED STRUCTURES: SKILL PLANS Skill-based structures link pay to the depth or breadth of the skills, abilities and knowledge a person acquires that is relevant to the work. See Exhibit 6.1 on page 108 to review the ways to create internal structure especially those related to person-based structures. Types of Skill Plans Skill plans can focus on depth or breadth as described below for both specialist generalist person-based structures. Specialist: Depth- are person-based structures based on greater knowledge often associated with degrees, accreditations or certifications that are required for a specific job.. School teachers are an example. Generalist/Multiskill-Based-Breadth plans base pay on the range of knowledge specific to a group of related jobs. Responsibilities assigned to an employee can change drastically over a short period of time (e.g., on the same workday), whereas specialists increase their knowledge over a longer period. An example shown in Exhibit 6.2 on page 109 demonstrates how greater skills that can be applied to a process like that in Balzer Tool Coating can increase the pay of an employee depending on what part of the process the employee is working on. Purpose of the Skill-Based Structure It is important to assess the usefulness of skill-based structures using the same basis for judging internal structure including that it: supports the organization’s strategy, supports workflow, is fair to employees, motivates their behaviour toward organization objectives. Supports the Strategy and Objectives - The skills on which to base a structure need to be directly related to the organization’s objectives and strategy. Supports Workflow- One of the main advantages of skill-based plans is that they can more easily match people to a changing workflow. Is Fair to Employees - Employees like the potential of higher pay that comes with skill based plans. By encouraging employees to take charge of their own development, skill-based plans may give them more control over their work lives. However, favouritism and bias may play a role in determining who gets first crack at the training necessary to become certified at higher-paying skill levels. Motivates Behaviour toward Organizational Objectives- Person-based plans have the potential to clarify new standards and behavioural expectations. Skill-based plans try to encourage employees to see their responsibility more broadly than what is does not say in a job description. “HOW TO”: SKILL ANALYSIS The internal skill-based structure begins with a skill analysis which is a systematic process to identify and collect information about skills required to perform work in an organization. See Exhibit 6.3 on page 111 to review how to determine the internal-based structure. What Information to Collect? Determining the blocks of required skills is comparable to choosing compensable factors in job evaluation. Degrees or levels of skill within each block are then created. Skills should be derived from the work, promote flexible employees and be accepted by those involved. See Exhibit 6.4 on page 112 to review and example of a skill-based structure for a FMC Technician. Note the tech levels and the core and elective courses for each level. Whom to Involve? Employee involvement is almost always built into skill-based plans. Employees are the source of information on defining the skills, arranging them into a hierarchy, bundling them into skill blocks and certifying whether a person actually possesses the skills. Establish Certification Methods Certification methods are necessary to determine if employees possess required skills and at what level. Successful completion of a course, for example, is one certification method that can be used to demonstrate possession of knowledge or skill. However, merely attending a course does not guarantee mastery of the material. Yet companies are reluctant to refuse to certify. Outcomes of Skill-Based Pay Plans: Guidance from Research and Experience Skill-based plans are well accepted by employees because the connection between the plan, work, and size of paycheque are recognizable. The plan provides strong motivation to increase skills. One key element of the plan is how well it is aligned with the organization’s strategy. Skill-based plans become increasingly expensive as the level of certification of employees increases to the highest levels of the pay structure. Therefore, most skill-based pay plans do not survive more than six years. PERSON-BASED PAY STRUCTURES: COMPETENCIES There is confusion over what competencies are and what they are supposed to accomplish. As with job evaluation, perspectives proliferate. Are competencies a skill that can be learned and developed or a trait that is more difficult to learn and includes attitudes and motives? Do competencies focus on the minimum requirements that the organization need to stay in business or an outstanding performance? Are they characteristics of the organization or of the employee? Unfortunately, the answer to all of these questions is “yes.” A lack of consensus means that competencies can be a number of things; consequently, they stand in danger of becoming nothing. Competencies are underlying, broadly applicable knowledge, skills, and behaviours that form the foundation for successful work performance. Competency-based pay structure links pay to work-related competencies. Core competencies are competencies required for successful work performance in any job in the organization. Competency sets are specific components of a competency. Competency indicators are observable behaviours that indicate the level of competency within each competency set. See Exhibit 6.5 on page 115 for a review of the determination of the internal competency-based pay structure. See Exhibit 6.6 on page 115 for an example of TRW Human Resources Competencies See Exhibit 6.7 on page 116 for a sample competency indicator description Defining Competencies Competencies reside in five areas: Skills (demonstration of expertise) Knowledge (accumulated information) Self-concepts (attitudes, values, self-image) Traits (general disposition to behave in a certain way) Motives (recurrent thoughts that drive behaviours) The first two areas, skills and knowledge were considered the essential characteristics that everyone needs to be effective in a job. Such competencies are observable and measurable and can be acquired through training and development. The other three competency categories, self-concepts, traits, and motives- are not directly measurable; rather, they must be inferred from actions. And it is these inferred characteristics that were judged to be the differentiating competencies- critical factors that distinguish superior performance from average performance. Purpose of the Competency-Based Structure Do competencies help support an internally aligned structure? How well do competencies support the organization’s strategy and work flow, treat employees fairly, and direct their behaviour toward organization objectives? Organization Strategy - An example of the competencies of Frito Lay include: leading for results; building workforce effectiveness, leveraging technical and business systems; modeling, teaching and coaching company values Workflow - competencies are identified to ensure that all the critical needs of the organization are met. The emphasis is on competence that will serve as conditions change. Fair to Employees - advocates of competencies say they can empower employees to take charge of their own development. By focusing on optimum performance rather than average performance, competencies can help employees maintain their marketability. On the other hand, basing pay on personal traits that cannot be documented seems suspect. Trying to justify pay differences based on competencies to employees has risks that need to be managed. Motivate Behaviour Toward Organization Objectives - the main appeal of competencies is the direct link to the organization’s strategy. The potential for refocusing and redirecting toward core issues is the biggest selling point for a competency approach. “HOW TO”: COMPETENCY ANALYSIS Objective Competencies may have value for personal development and communicating organization direction. However, the vagueness and subjectivity continue to make competencies a “risky foundation for a pay system.” The competency structure may exist on paper by virtue of the competency sets and scaled behavioural indicators, but bear little connection to the work employees do. On the other hand, perhaps paying for competencies is the only way to get people to pay attention to them. So the first issue is to conduct a competency analysis to clarify the purpose of the competency system. What Information to Collect? There are 3 groups: (1) Personal characteristics, (2) Visionary, (3) Organization-specific See Exhibit 6.8 on page 120 to see typical leadership competencies for 3M. See Exhibit 6.9 on page 121 to see competency indicators for 3M Global Perspectives See Exhibit 6.10 on page 121 see the top 20 Competencies. See Exhibit 6.11 on page 122 for product development competencies for a toy company’s marketing department. Whom to Involve? A common approach to gaining the understanding and acceptance of the pay structure by the stakeholders is to include representative managers and employees on committees in advisory or actual decision making roles. Participation is likely to increase trust in the structure and acceptance of it. Establish Certification Methods The heart of the person-based plan is that employees get paid for the relevant skills or competencies they possess, but not necessarily the ones they use. Skill-based plans assume that possessing these skills will make it easier to match work flow with staffing levels, so whether or not an individual is using a particular skill on a particular day is not an issue. Competency-based plans assume-what? That all competencies are used all the time? The assumptions are not clear. What is clear, however, is the requirement that if people are to be paid based on their competencies, then there must be some way to demonstrate or certify to all concerned that a person possesses that level of competency. Resulting Structure Internal pay structures are typically created with levels, pay differentials, and criteria. In practice, there might be 4-6 levels, wide differentials and relevant criteria that are all linked to the organization’s strategy. Competencies and Employee Selection and Training/Development There is clear evidence that ability is related to general competences. Using Exhibit 6.12 on page 124, it can be seen how competencies are related to the Big Five personality characteristics. When thinking about management ability, it is necessary to have managers whom typically will have a need for power and control and whom have extroverted personalities. Guidelines from the Research on Competencies An area of research with potential application to competencies deals with intellectual capital and knowledge management. Viewing the competencies of an organization’s employees as a portfolio similar to a diversified investment portfolio highlights the fact that not all competencies are unique nor equally valuable strategically. The focus then changes to managing existing competencies and developing new ones in ways that maximize the overall success of the organization. As organizations globalize, they may need to rebalance their values and perspectives to allow a global strategy to function. The seek the right balance among the range and depth of cultural, functional, and product competencies in the global organization. ONE MORE TIME: INTERNAL ALIGNMENT REFLECTED IN STRUCTURES Whatever plan is designed, a crucial issue is the fairness of its management. Final result is internal hierarchy of work, which should be consistent with policy and supports business operations. The challenge is to ensure that it remains internally consistent as things change. MANAGING THE PLAN Details of the plan should be described in a manual which includes all information necessary to apply the plan, such as definitions of compensable factors, degrees, etc., or details of skill blocks, competencies and certification methods. EVIDENCE OF THE USEFULNESS OF THE RESULTS The usefulness of the pay structure should be evaluated in terms of how well it achieves its objectives. Research on person-based structures tends to focus on their effects on behaviours and organization objective and ignores questions of reliability and validity, two of the most important criteria for effective and consistent research and hence its usefulness to managers. Reliability of Job Evaluation Techniques Reliability refers to the consistency of results. A reliable evaluation would be one where different evaluators produced the same results. One way to improve reliability includes using evaluators who are familiar with the work. Group consensus is another widely used practice to attempt to increase reliability. Validity/Usefulness Validity refers to the degree to which the evaluation achieves the desired results. Validity of job evaluation has been measured in two ways: by agreement- the degree of agreement between rankings that resulted from the job evaluation compared to an agreed-upon rank of benchmarks used as the criterion and by “hit rates”- the degree to which the job evaluation plan matches an agreed-upon ranking or pay structure for benchmark jobs. Acceptability Person-based pay structures must be acceptable to both employees and managers and perceived as fair. Acceptability includes a formal appeals process and employee attitude surveys to assess the employees’ perceptions of fairness and acceptability. GENDER BIAS IN INTERNAL PAY STRUCTURES The continued presence of difference in pay between men and women suggests that organizations are not doing a good job in creating pay structures, especially person-based pay structures. The jobholder’s gender may bias the evaluation if jobs predominantly held by females are undervalued compared to jobs predominantly held by males. Choosing compensable factors that are not biased or gender-segregated is a way to correct for this problem. A wage criteria bias may distort the evaluation if the current wages paid for jobs are inequitable. For instance if jobs held predominantly by females are currently underpaid, the new evaluation may simply reflect past inequities. The evaluator’s gender could bias the evaluation if the evaluator is prejudiced against jobs held predominantly by females and rates them accordingly. Again, gender-neutral compensable factors help ensure an equitable evaluation. Several recommendations to create bias-free pay structures include the following: Define the compensable factors and scales used to include the content of jobs held predominantly by women. For example, working conditions should include the noise and stress of office machines and the repetitive movements associated with the use of computers. Ensure that factor weights are not consistently biased against jobs held predominantly by women. Are factors usually associated with these jobs always given less weight? Apply the plan in as bias-free a manner as feasible. Ensure that the job descriptions are bias-free, exclude incumbent names from the job evaluation, and train diverse evaluators. THREE TYPES OF STRUCTURE Contrasts include job, sill and competency based approaches. Pay increases are gained via promotions to more responsible jobs under job-based structures or by acquiring more valued skills/competencies under person-based structures. Logically, employees will focus on how to get promoted (e.g., experience, performance) or on how to acquire the required skills or competencies (e.g. training learning). So why bother with pay structure? An internally aligned pay structure can be designed to: help determine pay for the wide variety of work in the organization, and ensure that pay influences peoples’ attitudes and work behaviours and directs them toward organization objectives. See Exhibit 6.13 on page 128 to review job-based, skill-based, and competency-based structures. Instructor Manual for Compensation George T. Milkovich, Jerry M. Newman, Barry Gerhart, Cole, Margaret Yap 9780071051569, 9781259086878, 9780078029493
