Compensation
Part 1. Job Evaluation
A. The Ranking Technique.
This is one of the simplest techniques for determining the relative worth or
value of jobs in relation to each other. This procedure requires jobs to be
compared in global, overall terms. The jobs are then ranked on the basis of
this comparison, from the job with the greatest overall worth to the job with
the least worth. Although this method is attractive because of its simplicity
and low cost, the final results may be difficult to defend because of the lack
of formalized and detailed criteria. The ranks may also be difficult to
translate into salaries, since ranks do not indicate the degree of difference
between two jobs. After reading the following job descriptions, use Form 1 to
rank the ten jobs, from the one with the highest value or worth (rank it l) to
the one of the lowest value (rank it 10). These ranks are to be assigned on the
basis of the overall value or worth of the job in relation to the other nine
jobs.
Form 1. Job Ranks
Job Title Rank
Director of Finance ______
Secretary ______
Data-Processing Supervisor ______
Accounting Supervisor ______
Computer Operator ______
Data-Entry Operator ______
Accountant ______
Senior Account Clerk ______
Junior Account Clerk ______
Typist Clerk ______
Director of Finance
Job description: Supervises accounting functions. including payrolls, accounts
receivable and payable, billing, and related activities; supervises the maintenance
of accounting records in the administration of budgeting activities and is
responsible for preparing the annual budget; reviews financial records and
procedures, and advises on financial recordkeeping procedures; supervises and
trains personnel; prepares financial reports and fiscal analyses; establishes and
administers fiscal controls; and administers policies regarding the investment of
company funds.
Job specification: Requires knowledge of accounting principles and practices,
budget preparation and administration, investment practices, and the application of
federal and state laws and regulations to specific accounting situations; ability
to establish, maintain, analyze, and revise financial records; and ability to
supervise clerical staff. Requires college degree with a major in business
administration or a related field and five years of experience in budget
administration and fiscal operations.
Supervision received: Works under the_ administrative direction of the executive
comminee.
Supervision exercised: Supervises the accounting supervlsor, data-processing
supervisor, and other clerical staff.
Secretary
Job description: Performs a variety of administrative tasks with a minimum of
supervision in addition to the usual clerical and stenographic duties required of a
secretary. Screens a variety of visitors and telephone calls; gives out
authoritative information on established programs and policies; relieves the
administrator of routine office details; maintains confidential and administrative
files; may supervise the work of clerical assistants; composes correspondence on a
wide range of subjects requiring a thorough knowledge of the procedures and
policies of the office.
Job specification: Requires knowledge of office methods, procedures, and machines,
including filing systems, reception and telephone techniques, and letter and report
writing; knowledge of correct English usage and statistical and recordkeeping
methods; ability to conduct correspondence without review, employing good judgment
and making decisions according to established policies and procedures; ability to
take dictation at a speed of at least 115 words per minute and to type at least 50
words per minute; and ability to supervise the work of clerical assistants.
Requires graduation from high school or equivalent and at least two years of
progressively responsible experience.
Supervision recieved: Works under the general supervision of an executive-level
director or manager.
Supervision exercised: May supervise one or more clerical assistants.
Data-Processing Supervisor
Job description: Prepares work schedules to meet production deadlines; directs
maintenance and revision of programs and operating procedures; gathers and analyzes
data to determine system requirements of departments requesting dataprocessing
service; consults with department representatives in developing new programs and
maintaining existing programs; reviews reports and data being processed for
completeness and accuracy; assigns, supervises, and reviews work of subordinates;
and investigates new operational techniques and equipment to improve performance.
Job specification: Requires knowledge of the principles and techniques of program
planning and analysis, coding operations, machine scheduling, and equipment
operation and maintenance; knowledge of accounting principles, statistical methods,
symbolic logic, and supervisory techniques and methods. Ability to analyze complex
procedures and data; ability to express ideas clearly, orally and in writing;
ability to plan, organize, and supervise the operation of a dataprocessing center.
Requires a college degree with a major in electronic data processing, accounting,
mathematics, business administration, or related field and three years' experience
in data-processing work.
Supervision recieved: Works under the direction of the director of finance.
Supervision exercised: Supervises the programmer analyst, computer operator,
keypunch operators, and other personnel as assigned.
Accounting Supervisor
Job description: Plans and coordinates the activities of the accounting division;
responsible for the completion of all required reports by due dates; makes work
area assignments and plans office layout; interprets and applies auditor's
instructions and policy; directs the development, preparations and justification of
the department's annual budget; confers with other personnel on matters related to
accounting procedures; trains and evaluates the work performance of principal
subordinates.
Job specification: Requires knowledge of double-entry bookkeeping methods and
practices; knowledge of office management practices; ability to prepare financial
statements; ability to prepare journal entries affecting revenue and expenditure
accounts; ability to supervise the work of other accounting and clerical personnel.
Requires a college degree with a major in accounting and four years of responsible
administrative experience in accounting or auditing work.
Supervision recieved: Works under the direction of the director of finance.
Supervision exercised: Supervises a small staff of accountants and account clerks.
Computer Operator
Job description: Monitors and operates electronic computer; loads reels of tape,
loads card hoppers, loads printout equipment with appropriate forms, and switches
peripheral equipment into the system; performs diagnostic routines to determine the
cause of machine or program difficulties; refers problems that canot be solved
through normal routines to supervisor.
Job specification: Requires knowledge of electronic computer systems and
specialized input and output devices. Must be able to operate a variety of
data-processing equipment; monitor a complex computer and take action to correct
machine problems; follow written instructions; perform arithmetical computations
and check and verify report totals and format. Requires graduation from high school
or equivalent and two years of experience in the operation of electronic computers.
Supervision recieved: Works under supervision of employees in higher technical and
supervisory positions, such as the data-processing supervisor.
Supervision exercised: None.
Data-Entry Operator
Job description: Keys information from accounting and statistical documents or from
coded work sheets using data-entry equipment, such as a keypunch or direct key to
tape/disc; verifies correctness of entry data; assists in the coding of documents;
performs routine clerical tasks related to computer data entry; and does related
work as required.
Job specification: Requires the ability to key data from averaqe copy at the rate
of 8,000 keystrokes or more per hour with no more than a 3 percent error rate;
ability to perform routine clerical tasks; and ability to follow oral and written
instructions. Requires graduation from high school or equivalent and one year's
experience in operating data-entry machines .
Supervision recieved: Works under the immediate supervision of employees in higher
clerical, technical, or supervisory positions .
Supervision exercised: None.
Accountant
Accountant Job description: Screens and verifies purchase orders, requisitions, and
other inventory-related documents; aids in maintaining an inventory of fixed
assets; aids in preparation of journal entries, trial balances, fiscal and
statistical reports; aids in establishing financial records and procedures and
fiscal controls; and answers inquiries and provides technical information regarding
the status of budget accounts.
Job specification: Requires knowledge of accounting principles, practices, and
procedures; ability to devise and install accounting methods, forms. and
procedures; ability to communicate accounting information to others. Requires a
college degree with a major in accounting or business administration with a minimum
of 18 semester units in accounting. No prior experience required.
Supervision recieved: Works under the supervision of the accounting supervisor. S
Supervision exercised: None.
Senior Account Clerk
Job description: Prepares and processes accounts payable; schedules and checks the
routine work of junior account clerks as directed by the accounting supervisor;
verifies, approves, and screens fiscal documents; verifies salary claims and
computes payroll deductions; prepares and processes the billing and maintenance of
accounts including the settlement of delinquent accounts; prepares analysis and
breakdown of billing computations.
Job specification: Requires knowledge of methods, practices, and terminology used
in financial record-keeping work, including accounts payable; ability to post
financial data and make arithmetical computations rapidly and accurately; ability
to prepare and verify financial statements, payroll transactions, invoices, and
reports. Requires graduation from high school or equivalent and two years of
increasingly responsible financial record-keeping work.
Supervision recieved: Works under general supervision of accounting supervisor.
Supervision exercised: Limited supervision of routine work of junior account clerks
as directed by accounting supervisor.
Junior Account Clerk
Job description: Verifies, balances, or adjusts accounts; posts, checks, assembles,
tabulates, and compares statistical or financial data; prepares or checks invoices
and purchase orders; makes arithmetical calculations; operates calculating and
bookkeeping machines; and does related work as required.
Job specipcation: Requires a knowledge of financial record-keeping methods and
procedures and office methods and practices; ability to post financial data and to
make arithmetical computations rapidly and accurately; ability to operate office
machines and to learn the operation of bookkeeping machines; ability to follow oral
and written instructions. Requires graduation from high school or equivalent and
one year of experience in financial record keeping.
Supervision recieved: Works under the supervision of the accounting supervisor and
senior account clerks.
Supervision exercised: None.
Typist Clerk
Job description: Types letters and statistical and financial reports; operates
duplicating equipment and other standard office equipment; receives, distributes,
and dispatches mail; performs varied clerical work such as indexing and filing; and
does related work as required.
Job specipcation: Requires knowledge of basic arithmetic and correct English usage,
spelling, and punctuation; ability to perform routine clerical work; satisfactory
ability to follow oral and written instructions; ability to type at least 45 words
per minute. Requires graduation from high school or its equivalent.
Supervision recieved: Works under the immediate supervision of employees in higher
clerical, technical, or supervisory positions.
Supervision exercised: None.
Administering Employee Equity
B. The Point Method. The point method is one of the most widely used
job-evaluation techniques. This method involves the selection of a number of
dimensions or factors to be used in evaluating the relative worth of a set of
jobs. The decision as to which factors to use is a critical one, since
different sets of factors can result in differences in judgment on the relative
worth of a job. For example, such factors as education, experience, complexity,
physical effort, and working conditions may or may not be included. The worth
of a welder relative to a typist could depend heavily on which factors were
included and which were excluded.
After the factors are selected, the next step is to break these factors down
into degrees. The degrees describe different levels of a factor. For example,
education can be broken down into levels from less than a high school education
to graduation from college. The degrees are then assigned points, according to
their relative worth to the organization. The organization can also decide on
the number of points to be assigned to each factor, so that some factors can be
weighted more heavily than others.
The rater examines each job for each of the factors and determines the points
that should be assigned to that job. The total points for all factors for a job
determine the relative worth of that job in relation to other jobs in the
organization. The point method provides a job-evaluation system that allows for
more detailed explanations to employees concerning the relative worth of their
jobs on the basis of these factors. The assignment of points to the jobs also
allows a quantitative approach to determining the relative worth of jobs, as
compared to the qualitative approach of the ranking technique. It is easier to
assign relative dollar amounts to the internal job structure by this
quantitative approach than by the simple ranking technique.
This exercise on the point method uses nine factors, each divided into five
degrees. The dimensions used are similar to those found in the American
Association of Industrial Management's job evaluation plan (formerly known as
the National Metal Trades Plan). The number of points assigned to the factors
and the definitions have been specifically developed for this exercise. After
reading through the nine job evaluation factors, use Form 2 to assign points
for each of the factors to each of the ten occupations described in Part lA.
Job Factor Definitions
To the Student: Using the job descriptions/specifications above, and the information
below, fill in Form 2.
1. Education: the number of years of formal education required for the job
Degree Points Definition
1 10 Less than two years of high school
2 20 Two years or more of high school
3 40 Graduation from high school
4 70 Two years or more of college
5 100 College degree
2. Experience: the number of years of relevant work experience required for the job
Degree Points Definition
1 25 Less than one year
2 40 One year to less than two years
3 60 Two years to less than three years
4 80 Three years to less than five years
5 120 Five years or more
3. Complexity of duties: the independent analysis, judgment, and problem-solving
activities required by the job
Degree Points Definition
1 5 Tasks are very simple and routine
2 30 Duties involve occasional minor routine problems
3 45 Frequent routine decisions required, usually within well-established
guidelines
4 60 Many situations not covered by standard guidelines requiring analysis and
problem solving
5 80 Most situations nonroutine, requiring highest level of initiative and
judgment, including the development of new approaches and procedures
4. Supervision received: the amount of supervision required and the frequency with
which work is monitored and checked by a supervisor
Degree Points Definition
5 5 Under continuous immediate supervision
2 15 Under immediate supervision, work checked at frequent
intervals on daily or weekly basis
3 30 Moderately general supervision, work checked at infrequent intervals
4 60 Under general supervision, major monroutine decisions not checked for
periods of time up to several months
5 100 Extremely general supervision, major nonroutine decisions checked at
infrequent intervals by president or executive committee
5. Errors in judgment: impact of potential errors on other functions in the
organization
Degree Points Definition
1 5 Errors have only very minor short-term impact, and little impact outside
individual job
2 10 Minor short-term impact on immediate job and one or two others
3 20 Moderate impact, with short-term problems created for other jobs
4 40 Moderate to major impact, with extended problems created for several
other parts of the organization
5 80 Major costs, with extensive long-term negative impact on many other
functions
6. Contact with others: the required interaction with personnel outside of the
immediate work group
Degree Points Definition
1 5 Little or no contact outside of a few co-workers and supervisor
2 10 Infrequent contacts outside immediate work group involving minor
communications
3 20 Moderate levels of contacts involving routine information
4 40 Moderate to frequent levels of contacts involving explaining, problem
solving, and making adjustments
5 60 Very frequent levels of contacts involing explaining, persuading, and
problem solving
7. Mental or visual demands: the mental and/or visual demands of the job, in terms
of constant monitoring of equipment, gauges, or written materials in copy work
Degree Points Definition
1 5 Little or no direct monitoring of equipment or written materials required
2 10 Limited effort required, with repetitive operations requiring moderate
levels of attention
3 15 Close work with frequent mental and visual concentration required
4 20 Very close work with constant mental or visual concentration
5 30 Requires extremely accurate mental and visual effort with constant
monitoring of equipment, materials, or written data
8. Working conditions: the levels of noise, temperature, and other factors related
to uncomfortable working conditions
Degree Points Definition
1 5 Surroundings are very pleasant
2 10 Infrequent noise or temperature extremes
3 15 Occasional moderate noise levels and/or temperature extremes
4 20 Moderately high levels of noise or temperature extremes on regular basis
5 25 Extreme noise or temperature levels
9. Supervision exercised: the extent and level of required supervisory activities
Degree Points Definition
1 10 No supervision of others required
2 20 Supervision of one or more individuals
3 45 Supervision of several workers involving moderately difficult and complex
tasks on a continuous basis
4 80 Supervision of several workers involving planning and directing moderately
to highly skilled personnel performing complex tasks
5 120 Supervision of several workers requiring substantial planning and
coordination of managerial or professional personnel
Form 2. Job Points
C. Comparison of Job Evaluation Techniques. This exercise provides a comparison of
the results of Parts A and B. Fill in Column 1 of Form 3 with the points from
Form 2. Then rank these points, from 1 for the job with the most points to 10
for the job with the least points. Next, transfer the ranks from Form 1 to
Column 3 of Form 3. Finally, calculate the differences between the ranks from
the ranking technique in Column 3, and place the results in Column 4. How can
you explain any differences in the ranks resulting from the two techniques?
Examine the points in Column 1 in relation to the ranks in Column 3. What
information does the point method give about the relative internal worth of the
jobs not found with the ranking technique?
Form 3. Comparison of Ranking Technique and Point Method
rank rank rank
Job Title points based from difference
points form 1
Director of Finance ______ ______ ______ ______
Secretary ______ ______ ______ ______
Data-Processing Supervisor ______ ______ ______ ______
Accounting Supervisor ______ ______ ______ ______
Computer Operator ______ ______ ______ ______
Data-Entry Operator ______ ______ ______ ______
Accountant ______ ______ ______ ______
Senior Account Clerk ______ ______ ______ ______
Junior Account Clerk ______ ______ ______ ______
Typist Clerk ______ ______ ______ ______
Part 2. Pricing the Internal Job Structure
The point method of job evaluation establishes the relative worth of jobs in terms
of the total points assigned to each job. However, the task of assigning dollar
amounts to these points still remains. One method of determining salaries is to
examine the current pay for similar positions in other organizations in relation to
the points assigned to these jobs. A general assumption is that the jobs used in
this comparison process have current market salaries that are related to their
relative worth to the organization. For this reason, the organization will want to
examine the jobs used in pricing the internal job structure and exclude jobs
associated with salaries that are excessively high or low because of labor-market
pressures resulting from a shortage or an overabundance of available personnel.
After the relationship between the market rates for these jobs and the points
assigned in the job evaluation is determined, the same formula can be used for
other jobs in the organization, even for jobs that are specific to the organization
and not commonly found in other organizations.
Use Exhibit 10-1 to determine the current market reference rate for each of the ten
jobs. This survey gives the midpoints of the annual salary ranges for each job in
five organizations. It is common to find variations in the salaries paid by
different organizations because of differences in the specific tasks assigned to
these jobs and differences in job evaluation methods, among other factors. A single
reference salary for each job can be determined by means of medians or arithmetical
averages. One or more organizations with extreme salary levels that are not
representative of the real worth of a particular job may sometimes be excluded to
determine the reference salary.
Enter this maket reference salary in the first column of Form 4 for each of the ten
jobs. Transfer the total number of job evaluation points for each job from Form 2
to the second column of Form 4.
Exhibit lO.l: Use this data to determine a reference MKT salary
Exhibit 10.2: Example
Form 4. Pricing the Internal Wage Structure
Reference Mkt Salary Total Points
Director of Finance ____________ ____________
Secretary ____________ ____________
Data-Processing Supervisor ____________ ____________
Accounting Supervisor ____________ ____________
Computer Operator ____________ ____________
Data-Entry Operator ____________ ____________
Accountant ____________ ____________
Senior Account Clerk ____________ ____________
Junior Account Clerk ____________ ____________
Typist Clerk ____________ ____________
The next step is to determine the relationship between the reference salaries and
job evaluation points. One common method is to plot these points and the reference
salary for each job on a scatter diagram. In the example shown in Exhibit 10-2, job
A has been assigned 100 points and has a current reference salary of $10,000, job B
is assigned 200 points and has a reference salary of $20,000, and job C is assigned
300 points and has a reference salary of $30,000.
The relationship between total points and reference salaries can then be
established by determining the line that best fits the plotted values on the
scatter diagram. The simplest way to make this determination is the "eyeball"
approach, drawing a line that appears to fit the values most closely. A more
complex approach is to use linear regression to calculate the formula for the
best-fitting straight line. Salaries for other jobs can then be calculated by
reference to this line (or linear regression equation). For example, a job
evaluated at 250 points would have a calculated salary of $25,000 in reference to
Exhibit 10-1.
Plot the values corresponding to the reference market salaries and job evaluation
points for each of the jobs on Form 5. Then determine the best-fitting straight
line in relation to these points by the- "eyeball" approach (or linear regression
if your instructor so directs). Price the structure by calculating the salary for
each job with reference to this line and entering the results in the third column
of Form 4.
Form 5. Scatter Plot Analysis
Are there any major differences between the salaries calculated by means of the
scatter diagram and the reference salaries based on the market rates? If so, how
can you explain such differences?
Part 3. Wage Levels and Individual Wage Determination Discussion