04

Choice of approach

There is plenty of choice when it comes to deciding what to do about job evaluation after the present arrangements have been reviewed as described in Chapter 3. The first choice is whether to go in for extreme market pricing rather than some form of job evaluation. Assuming that extreme market pricing is not wanted, another choice is whether to use formal or informal methods of valuing jobs. If formal methods are preferred, the choice is between one of the various approaches available.

Extreme market pricing?

Extreme market pricing is the preferred approach to valuing jobs when it is believed that ‘the market rules OK’ and that what really matters is to pay competitive rates based on establishing what jobs are worth in the marketplace. Another common reason for adopting extreme market pricing is the belief that it obviates the need for spurious, expensive, bureaucratic and time-wasting job evaluation schemes.

Supporters of extreme market pricing are not very concerned about internal equity. They claim that market rates are ascertainable facts not subject to the judgements present in traditional approaches. But they fail to recognize that market pricing is equally judgemental because of the difficulty of matching external jobs with internal ones. The accuracy of market pricing depends on the availability of robust market data and the quality of the job-matching process, ie comparing like with like.

Formal or informal?

A formal approach involves the use of a job evaluation scheme while an informal one means that jobs are priced on the basis of largely unsupported assumptions about what they are worth. This may not be a conscious decision. A company can use informal methods (or no methods) simply because that’s what it has always done and because it never occurs to its management that there is an alternative. But it may decide deliberately that informality fits its circumstances best. The factors that affect the choice of approach are explained below.

Objectives

The objectives of job evaluation include deciding on the level or grade of jobs, developing and maintaining grade and pay structures, providing a framework for career planning, contributing to organizational analysis and design, achieving equal pay for work of equal value, and creating a defence against equal pay claims. These objectives are more likely to be achieved in larger organizations if a formal job evaluation scheme is used or if a formal and systematic approach to extreme market pricing is adopted.

The type, size and complexity of the organization

The public and voluntary sectors are more likely to use formal job evaluation. The survey conducted by e-reward in 2017 established that all the public-sector organizations and 92 per cent of the voluntary sector organizations had a job evaluation scheme. The proportion of private-sector businesses with a scheme was 70 per cent.

Smaller and start-up organizations are less likely to use formal job evaluation than large, complex and established ones. A small or a new business may believe – rightly or wrongly – that it does not need the support of an elaborate job evaluation scheme to run its pay system.

Organization culture

The core values of organizations will affect their attitude to job evaluation. Those that believe strongly in equity, fairness and transparency may be more inclined to use a formal scheme and, while sensitive to market rates, will not allow their pay system to be driven by them. Organizations whose values are dominated by the need to achieve competitive advantage and enhance shareholder value may be less inclined to give prominence to the ideal of internal equity and are more likely to go in for an informal approach extreme market pricing.

Work and organization structure

Job evaluation is more likely to be used formally where the work is relatively structured, prescribed or routine, as in public and private bureaucracies and manufacturing. It is less likely to occur in organizations largely staffed by knowledge workers (eg research and development) or creative workers (eg advertising agencies).

International firms

International firms have a variety of practices depending on their structure and management processes. Some may prefer to use a formal system to ensure a degree of uniformity in dealing with grade and pay issues, for example the pay of local staff, expatriates and third-country nationals in their international units or subsidiaries. They may also be interested in job evaluation as a means of developing international career pathways.

The approach adopted may be a traditional formal scheme coupled with market pricing through local pay surveys. Some international organizations use the services of management consultants to establish rates of pay in different countries using a common structure of grade levels.

The external environment

The choice will be influenced by the labour market – if it is highly competitive, extreme market pricing is more likely to be favoured. It will also be affected by equal pay legislation and, sometimes, the views of the national trade unions.

Summary

A formal approach is more likely:

· in larger, more complex, more bureaucratic organizations;

· when there are strong values in favour of equity, fairness and transparency in the organization;

· when it is believed that equal pay considerations are important.

An informal approach is more likely:

· in small and start-up organizations;

· when it is believed that formal job evaluation is unnecessary, costly, cumbersome or bureaucratic;

· when it is considered that the market is all-important.

What type of formal job evaluation scheme?

If it is decided not to use extreme market pricing and that a formal rather than informal approach is appropriate, a choice has to be made between the various formal approaches. The criteria for choice are set out below. In the light of these criteria, consideration has to be given to whether to choose a ‘ready-made’ scheme as offered by management consultants or other suppliers, or whether a ‘tailor-made’ scheme designed specifically for the organization is preferable. Another possibility is to have a ‘hybrid’ scheme, one based on a ready-made scheme but adapted to suit the organization. It is also necessary to consider whether the scheme should be analytical or non-analytical and in either case what type of scheme is best.

Criteria

The main criteria for selecting a formal scheme are that it should be:

· thorough in analysis and capable of impartial application;

· applicable to all the jobs in the organization, and if factors are used, they should be common to all those jobs;

· reasonably easy to administrate – the scheme should not be too complex, costly or time-consuming to design, implement or maintain;

· transparent – the processes used in the scheme, from the initial job analysis through to the grading decision, should be clear to all concerned;

· non-discriminatory – the scheme should meet equal pay for work of equal value requirements.

Choice between a tailor-made, ready-made or hybrid scheme

A choice is required between a specially designed tailor-made scheme, a ‘ready-made’ consultant’s scheme (a ‘proprietary brand’), or a ‘hybrid’ scheme (a modified consultant’s scheme). The advantages and disadvantages of each approach are summarized in Table 4.1.

TABLE 4.1 Choice between a tailor-made, ready-made or hybrid scheme

Analytical or non-analytical?

A comparison of the features, advantages and disadvantages of analytical and non-analytical approaches is given in Table 4.2.

TABLE 4.2 Comparison of analytical and non-analytical approaches to job evaluation

What type of formal scheme?

A comparison of the various schemes and their advantages and disadvantages is shown in Table 4.3.

TABLE 4.3 Comparison of formal job evaluation schemes

The choice of scheme should be made by weighing up the advantages and disadvantages and assessing the extent to which the alternatives meet the criteria.

Reference

e-reward (2017) Job Evaluation Survey, Stockport, e-reward