Job Evaluation: Why Bother?

Warren Heaps – Birches Group LLC

Recently on LinkedIn there was a somewhat heated and lengthy debate about job evaluation.  Many were questioning why companies should even bother with such an “archaic” exercise, while taking pot shots at a well-known job evaluation methodology that shall remain nameless (but begins with the letter H).  Some folks proclaimed market pricing was the solution to everything and rendered job evaluation a pointless and unnecessary process for a modern company.  This post will hopefully provide a more balanced view of this question.

Job Evaluation is not Dead
The main reason a company uses job evaluation is to define internal relationships.  Organizations are complex, and once they get even slightly large, it becomes necessary to make it clear to employees and managers alike what the natural roles are in the company.  These are very easy to spot — the places where there is clear and discernible differentiation between roles.  You’ve seen this in your organization, maybe without realizing it.

For example, is there a difference between an entry level analyst and a director?  Sure there is, and it’s obvious.  What about a clerk and a senior clerk?  Not so clear, is it?  There could be a difference, but maybe the senior clerk does the same work, and has just be at it for a longer period of time.

A clear example of role differentiation is found in the medieval guilds — apprentice, journeyman, master were all clearly defined roles.  The military is another obvious source of well defined roles, albeit sometimes a bit less flexible than what is desirable for a company.

Good job evaluation approaches are easy and transparent.  They are not chock full of calculations, point values and other pseudo-scientific analyses that require a Ph.D or specialized training to understand.  Good systems are those that identify specific factors that are relevant to your company, define values for the factors that illustrate clear differences, and can be administered and maintained by managers with oversight from human resources.  That’s right – managers should own job evaluation, not HR or compensation.

How Companies Use Job Evaluation
Most companies use job evaluation to define salary grades or bands.  In turn, these are used to assist in the administration of various human resources policies, almost always including salary administration.  It’s also common for certain perquisites and benefits to be awarded based on grade.  Sometimes there are even little details, like office size or location, type of phone, size of computer, etc. that are determined by grade.

Global organizations often strive to define global bands in order to assist in the career management of staff across the enterprise, as well as to ease administration of expatriate positions.  Sometimes the installation of a global ERP system requires global grades in order to simplify the configuration and ongoing maintenance of the system.

All of these reasons, and many more, are enough to lead me to conclude that job evaluation still plays an important role in almost every organization.

Market Pricing is not a Substitute
Not even close!  Market pricing is a process which companies use to determine the market rates for a particular position.  Market pricers will have you believe that all you need to do to build your compensation structure is to price all the jobs, and array them top to bottom.   I don’t think so.  Here’s why.

  • Some positions will not be matched with market data.  For example, in small developing countries, insufficient data points for specific occupational roles may reduce the number of discrete benchmarks to a small number.
  • Some of the market rates found will not match up well with expected internal relationships.  What if the market rate is higher for a position than what your organization thinks it’s worth, especially relative to other positions?  When do you draw the line in the sand and preserve the internal team cohesion instead of letting the market dictate what you must do?
  • Job evaluation is used for many purposes.  Market pricing can be done separately from job evaluation, and almost always is to some extent.

What’s the Right Approach?
That depends, of course,  on your company culture and operating style.  Many younger companies initially shy away from job evaluation, citing all sorts of reasons.  But when companies grow it almost always becomes necessary to use job evaluation to help manage the growth.  It doesn’t matter which job evaluation method you use — Birches Group Community™ is an excellent choice.  Just make sure the method is easy to use and understand, especially by “regular” people, not just human resources.

What is your opinion?  Have you experienced positive results from a job evaluation project?  Share your experiences in the comments.

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