I've been involved in a number of conversations about job evaluation lately, and it occurred to me that it might be a good idea to do a few posts on the topic. This is the first in what I anticipate will be a series.
A basic definition might be a good place to begin. At its essence, job evaluation is a process or methodology for measuring and determining the relative worth of jobs. Typically, at least in my world, this is done in order to establish relative pay opportunities.
When people talk about job evaluation methods, often they are referring specifically to formal, job content-based evaluation approaches like point factor plans (more on these at a later time). I find it helpful to think about job evaluation in a broader sense. From my perspective, job evaluation exists, formally or informally, in every organization that pays employees wages or salaries (unless it happens to pay every single employee at the same rate). It may be a "by-the-seat-of-our-pants" approach, but it's there nonetheless.
Coming from this broader point of view, I believe that there are two major categories of job evaluation approaches:
- Market, or external-based, job evaluation. With this kind of approach, the relative worth and pay opportunities of different jobs are based on their market value or "going rate" in the marketplace. Job content or internal job relationships may also be taken into account, but are typically secondary considerations.
- Job content, or internal-based, job evaluation. With this type of approach, the relative worth and pay opportunities of different jobs are based on an assessment of their content (i.e., responsibilities, requirements) and their relationship to other jobs within the organization. With more simplistic approaches in this category, the job is looked at in its entirety, as a whole. With some of the more complex approaches in this category, jobs are broken down into and assessed by their different elements or "factors" (i.e. decision making, relationships). Market influences may also be taken into account, but are typically secondary considerations.
From my perspective, watching the field of employee compensation over the past 20+ years, formal job evaluation (particularly the job content types of approaches) seems to float in and out of vogue over time. Overall, I sense that many more formal (and job content based) evaluation plans have fallen out of favor with many organizations, being seen as too rigid and bureaucratic for today's business environment. There is also a lot of discussion underway about whether job-based pay programs, overall, should be replaced with person-based pay programs (and that is, for sure, a topic for another post).
Still, I think that job evaluation - broadly speaking - continues to play a critical in setting the foundation of most compensation programs. Look for more to come on the topic soon.