COMPENSATION Third Canadian Edition Milkovich, Newman, Cole
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Transcript of COMPENSATION Third Canadian Edition Milkovich, Newman, Cole
© 2010 McGraw Hill Ryerson
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COMPENSATIONThird Canadian Edition
Milkovich, Newman, Cole
© 2010 McGraw Hill Ryerson
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Many Ways to Create Internal Structure
Business and Work-Business and Work-Related Internal StructureRelated Internal Structure
Person-basedJob-based
Job analysisJob descriptions
Job evaluation: classes or compensable factors
Factor degrees and weighting
Job-based structure
PURPOSEPURPOSE
Collect, summarize work information
Determine what to value
Assess value
Translate into structure
(Chapter 5)(Chapter 5)
(Chapter 5)(Chapter 5)
(Chapter 5)(Chapter 5)
Skill Skill (Chapter 6)(Chapter 6)
CompetenciesCompetencies(Chapter 6)(Chapter 6)
(Chapter 4)(Chapter 4)
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Job Evaluation
process of systematically determining the relative worth of jobs to create a job structure for the organization
a process that helps gain acceptance of pay differences between jobs
job evaluation based on job content and internal job value
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Determining an Internally Aligned Job Structure
Job analysis Job description Job evaluation Job 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
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Major Decisions
Establish purposeSupports organization strategySupports work flowFair to employeesMotivates behavior toward
organization objectivesSingle vs. multiple plansBenchmark jobsChoose between methods
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Job Evaluation MethodsJob Ranking
Raters examine job description and arrange jobs according to their value to the company
Job ClassificationClasses or grades are defined to describe a
group of jobsPoint Method
Numerical values are assigned to specific job components; sum of values provides quantitative assessment of the job’s worth
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Comparison of Job Evaluation Methods
Advantage Disadvantage
Ranking Fast, simple, easy to explain.
Cumbersome as number of jobs increases. Basis for comparisons is not called out.
Classification Can group a wide range of work together in one system.
Descriptions may leave too much room for manipulation.
Point Compensable factors give basis for comparisons; communicate what is valued.
Can become bureaucratic and rule-bound.
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The Point Plan Process (1 of 2)
Step One: Conduct Job Analysis A representative sample of benchmark jobs The content of these jobs is basis for
compensable factorsStep Two: Determine Compensable Factors Based on the work performed (what is done) Based on strategy and values of the organization
(what is valued) Acceptable to those affected by resulting pay
structure (what is acceptable)
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The Point Plan Process (2 of 2)
Step Three: Scale the Factors Use examples to anchorStep Four: Weight the Factors Can reflect judgment of organization leaders,
committee Can reflect a negotiated structure Can reflect a market-based structureStep Five: Communicate the Plan Step Six: Apply to Non-benchmark Jobs
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Characteristics of Benchmark Jobs
Contents are well-known andrelatively stable over time
Job is common across severaldifferent employers
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Compensable Factors
characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives
Useful factors are:Based on the strategy and values of the
organizationBased on the work performedAcceptable to the stakeholders affected by
the resulting pay structure
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Categories of Factors
break down the factors into three major categories:
1. Universal Factors2. Sub-Factors3. Degrees or Levels
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Universal Compensable Factors
SkillEffortResponsibilityWorking Conditions
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Universal Compensable Factors
Skill: the experience, training, ability, and education required to perform a job under consideration
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Sub-Factors: Skill
Educational levels Years of experience required Technical knowledge Specialized knowledge Specialized training Interpersonal skills
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Universal Compensable Factors
Effort: the measurement of the physical or mental exertion needed for performance of a job
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Sub-Factors: Effort
Diversity of tasksComplexity of tasksCreativity of thinkingAnalytical problem solvingPhysical application of skillsDegree of assistance available
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Universal Compensable Factors
Responsibility: the extent to which an employer depends on the employee to perform the job as expected, with emphasis on the importance of job obligation
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Sub-Factors: Responsibility
Decision-making authorityScope of the organization under controlScope of the organization impactedDegree of integration of work with
others Impact of failure or risk of jobAbility to perform tasks without
supervision
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Universal Compensable Factors
Working Conditions: difficult or unhealthy aspects of the conditions in which the work is done
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Sub-Factors: Working Conditions
Hazards: Exposure to dangerous chemicals Stress
Physical surroundings of the jobCramped quartersOutdoor location
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Degrees/Levels of Sub-factors
Description of several different degrees or levels of a sub-factor in jobs
A different number of points is associated with each degree/level
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Points for Different Degrees of One Sub-Factor
Factor: Problem SolvingSub-Factor: Scope for Initiative and JudgmentDegree PointsA some degree of judgment and initiative required 80-
188
B moderate degree of judgment and initiative required 133-295
C significant degree of judgment and initiative required 186-348
D high degree of judgment and initiative required 293-400
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Factor Weights
Weighting assigned to each factor to reflect differences in importance attached to each factor by the employer; for example:Skill 40%Effort 30%Responsibility 20%Working Conditions 10%
100%
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Overview of the Point System
Factor Weight 1 2 3 4 5Skill
Education 20% 4 8 12 16 20 Experience 20% 4 8 12 16 20
Effort Physical10% 2 4 6 8 10 Mental 10% 2 4 6 8 10
Responsibility For safety 15% 3 6 9 12 15 For budget 15% 3 6 9 12 15
Working Conditions Hazards5% 1 2 3 4 5 Weather5% 1 2 3 4 5
Degree of FactorDegree of Factor
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Who Should Be Involved?
The Design Process Matters Attention to fairness can help achieve
employee and management commitment, trust, and acceptance of the results
Appeals / Review Procedures Procedural fairness
Political Influence Minimize susceptibility to political influences
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Resulting Internal Structures:Job, Skill, and Competency Based
Supervisors
Project Leaders
Managers
Division GeneralManagers
Vice Presidents
Job EvaluationJob Evaluation
Technician Machinist ICoremaker Clerk / Messenger
Scientist
Associate Scientist
Senior AssociateScientist
Head / ChiefScientist
Drill Press OperatorRough Grinder
Assembler II
Materials HandlerInspector II
Packer
Assembler IInspector I I
Word Processor
AdministrativeSecretary
Principal Adminis-trative Secretary
AdministrativeAssistant
Job EvaluationJob EvaluationCompetency- BasedCompetency- Based Skill–BasedSkill–Based
Manufacturing Manufacturing GroupGroup
Administrative Administrative GroupGroup
Technical Technical GroupGroup
Managerial Managerial GroupGroup
High Value (points)
LowValue (points)
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Conclusiondifferences in the rates paid for different jobs
and skills matter: affects ability of managers to achieve business objectives; influences employees’ perceptions of fair treatment
job evaluation has evolved into many different forms and methods; consequently, wide variations exist in its use and how it is perceived
no matter how job evaluation is designed, its ultimate use is to help design and manage work-related, business-focused, and agreed-upon pay structure