When is Job Content Based (e.g. Point Factor) Job Evaluation Appropriate?

Last week I published a post on market, or external-based, versus job content, or internal-based, job evaluation approaches (like a point factor system).  This included a discussion of why most organizations (outside the public sector) choose to go with a primarily market-based approach to determine the relative worth and pay opportunities for their jobs.

As promised, this follow-up post addresses some of the reasons why an organization might choose to swim against the tide and go with a job evaluation approach that is primarily job content focused.  I have had opportunity to work with a number of organizations that have made this choice; here are some of the reasons they believe an internal-based method is the right fit for them.

1. The organization feels there is insufficient valid external market information to construct and maintain a market based program.  In some cases, this is the result of being in a somewhat unique business - or developing a unique business model to serve their customers - and subsequently finding themselves with a lot of jobs that don't have counterparts anywhere else.  One case in point here, a large nonprofit agency I once worked with was probably ten times larger than the next largest organization in its industry.  That fact, along with its choice to pursue a number of highly specialized services for its clientele, meant that this organization had jobs that didn't seem to exist anywhere else.  As a result, the organization chose to benchmark the few jobs they could with external market pay data, and then rely on a point factor evaluation system to address the value of all other jobs.
2. The organization, typically because it is geographically isolated, has trouble identifying a relevant competitive labor market - often it is the only employer in the area.  Because of this, employees tend to stay with the business for a longer period of time than might be the case in a more active local labor market (which, of course, can be good and bad, but that is for another post ...).  While some attention is paid to tracking general market pay levels (particularly for entry level types of jobs), the organization believes that its best best is to use a job content based job evaluation method to set pay opportunities which reflect the business' own unique internal job relationships and career paths.
3. This reason is one I personally struggle to appreciate and justify, but I share it since I have heard it from more than one employer.  The organization finds tremendous value (usually in terms of organizational acceptance and buy-in) from the use of a cross-functional job evaluation committee.  This committee, typically comprised of managers representing the different major functional areas of the organization, meets on a regular basis to evaluate new and changed jobs.  Members may rotate on and off the committe in a regular, prescribed fashion, or it may be a longer-term appointment.  While the organization may strive to track and incorporate market pay practices into this process, the primary determinant of job value is the consensus of this internal group, using a job content based method to determine where a job best fits in the pay structure and hierarchy.  (My struggle with this isn't in the participation aspect; I get the value of that.  Rather, I am challenged to justify the time and resources - simple man hours - that a job evaluation committee must expend to get this work done in today's fluid and fast changing world.  I don't see the ROI.)

Are there other sound reasons to use an internal-based job evaluation method other than those mentioned above?  I'm certain there are, and I would welcome comments on this based on others' experience. 

Comments

[Holger Adams]

Hi Ann,
I think I could give you an other reason. As beeing C&B head of an international company I do see the need to structure the entire global workforce for creating a boundery less organization. Currently it is just a matter of fact, that employees can't compare jobs across countries. Another fact is that in a lot of countries it is rather difficult to get good market data. I guess, that's one of the key drivers, why global companies intend to move back to "traditional" job evaluation.

****************
AB - Thanks for the comment! You make an excellent point; the role of job evaluation in creating a global, boundary-less organization is one I hadn't considered in writing the post.