How much is a job worth?
To find out, employers might benchmark the job using salary surveys; rank its value within the organization; or assign a set number of points to job factors such as education, experience, skills sets or responsibilities.
Sounds easy, right? Unfortunately, the process of job evaluation isn't always so straightforward. The most unique job Rich Sperling ever had to evaluate was for a sporting goods store. "It was for the guy who got the athletes' endorsements for the company's products. Not a tough job," Sperling says, "but when he called Reggie Jackson's phone number, Reggie took his call."
When Sperling first started in the consultingbusinessin the early 1980s, and throughout that decade, employers commonly created in-house, cross-functional jobs analysis teams made up of their brightest up-and-comers. Then, compensation companies such as Hay Group, where he spent 27 years, started to take over this work in many companies, says Sperling, the principal of Sperling HR LLC in Evanston, Ill. Four primary methods of job evaluations were used to set compensation levels: job ranking, job classification, point factor and factor comparison.
Job ranking places jobs in a hierarchy that depends on how much each is valued by the company. It is considered the simplest method.
The job classification method is based on job classes. Each job is placed into the job class where the evaluator finds the best fit.
For years, the point factor method was the most widely used technique. It breaks down jobs into compensable factors identified as part of a jobs analysis. Points are assigned to the factors, and a pay structure is established for the position.
The factor comparison method combines the point and ranking techniques.
Times have changed. These days, fewer employers are performing job evaluations. Most set employee compensation based on market pay alone or, if they are larger, in conjunction with one of these four methods. "It's definitely more market-pay-driven," says Anne Thomas, SPHR, GPHR, senior compensation and global HR specialist at Hughes Network Systems in Germantown, Md.
"People are more fluid in their careers and aren't staying for 20 years with the same employer, so they don't really care how the job is evaluated. They are more concerned with what they are worth in the marketplace," Thomas says.
That attitude represents one reason many employers are taking another look at how they evaluate jobs and set compensation.
Crosstex Energy Services, a Dallas-based natural gas company with just under 500 employees, matches its jobs to similar ones outside the company in the salary survey it uses. HR staff members find matches for 85 percent of the jobs, according to Stacy Cardwell, PHR, compensation manager for Crosstex.
"I came from a very large organization where you benchmarked a couple core jobs and then applied the standard across the board. Here, we go to great lengths to market-price, to be fair to employees about what their true market rate is," Cardwell says.
James Arnett, SPHR, director of HR at Meriter Health Services in Madison, Wis., finds the majority of the hospital and clinic jobs easy to match. The system has 3,300 employees.
Not all jobs are perfect matches, however, so employers must know the jobs' real qualifications. The job description might say the person has to have five years of experience, but in reality they need more, says Nancy Kasmar, SPHR, practice lead for compensation and benefits consulting for Kent, Wash.-based Washington Employers. The organization provides HR support to member companies. Instead of an engineer II, the right choice may be engineer III, she says. "Match your qualifications to the qualifications in the [salary] survey data, not just the job titles," Kasmar advises.
Matches are the starting point for Hughes and its 1,400 employees. Salary surveys usually come with a toolkit for compensation specialists that provides information on jobs' required levels of knowledge, responsibility and independence.
But, Thomas says, "Feel your way when looking at your jobs. Is this an entry-level or a developing-your-career-level job? Is this person going to be working independently with customers?" Asking these types of questions for each job will help employers see how well their jobs match qualifications listed in the salary survey and how their pay structures compare with those in the survey.
No matter how good the survey, most employers will be faced with unmatchable jobs. These are the most important to get right, Sperling says, because "These jobs are unique. They give you a competitive advantage."
As a provider of digital television, satellite and wireless systems, Hughes has hard-to-match jobs that include extremely technical jobs that support the service and the product. "While these employees aren't developing the product, they have to have a similarly strong technical background and be able to do customer service," Thomas explains.
Because Crosstex is a smaller company, its most difficult jobs to benchmark include midlevel managerial jobs. These positions may have fewer reports than at a larger company, but they do more tactical work.
At Meriter, Arnett struggles with sales positions. "Our salespeople are not out selling a product," Arnett says. "Instead, they work with physicians on ways the hospital can help them provide their patients with the best care possible. You don't find clear matches."
Who becomes involved in the evaluation process depends on how transparent the company is, Kasmar says. "The more people, the better information you are going to get. But at the same time, it can cost a lot of money to price these jobs because you are getting everyone's input." She suggests asking employees to put together job descriptions, then working with managers and supervisors to refine them to match the jobs to salary surveys.
Crosstex takes a holistic evaluation approach. "Obviously, we look at skills and responsibilities, but we really try to evaluate the role for what it is. What is the goal of the job? What are the core responsibilities? What is the impact on the organization?" Cardwell says. Crosstex managers are required to meet with each of their employees every other week, and Cardwell teams up with the manager, director and often vice president responsible for the group when she is evaluating jobs.
Thomas reviews one-third of Hughes' jobs each year. She starts with jobs she has already benchmarked that are similar to the ones she needs to evaluate. Working with managers, she looks at the jobs' complexity, supervision and experience required in similarly situated positions. Once she establishes compensation levels, she takes the data to recruiters and managers to see if they can attract and retain people for that pay.
When Meriter can't match a job to the market, the compensation team uses a basic point factor job evaluation system, taking compensable factors that arecommon throughout a group of jobs and assigning weights and points to them. "We ask where the job would slide into the entire program," Arnett says.
No matter how well-thought-out a compensation plan is, at some point company leaders will need to hire someone who has hard-to-come-by skills. The top candidate may want more than the usual salary range for that job. "That's when you have to be comfortable with your compensation philosophy," Arnett says. "And if you can't afford the current 'hot person' in the market, you have to be OK with that." That decision has to do with resources and internal equity.
Arnett advises against offering the candidate the highest point on the salary range. "It may make them happy at first, but later, when they start capping out, they are not going to be as satisfied."
One caveat: If you have a number of recruits asking for salaries at the top of the range, it is time to review whether your compensation is set correctly, Arnett says.
Crosstex takes a similar approach. HR professionals there will re-evaluate the company's compensation for a position to make sure the rate is competitive. But if they are unable to hire a top candidate becausethey can't meet his or her salary requirements, that is OK. "We don't want it to be unfair to our internal population," Cardwell says.
Hughes will offer above midpoint for a star candidate, but the HR staff will not pay above the salary range. They will, however, offer a signing bonus or, for higher-grade-level candidates, more vacation as an incentive.
If you have a number of recruits asking for salaries at the top of the range, it is time to review your compensation levels.
Employers work hard to establish competitive, fair compensation levels for employees, but sometimes it may be all for naught because the markets frequently set the rate. As Thomas once heard a conference speaker say, "The
No. 1 indicator of what you are going to get paid when you walk through the door is what you made at your last job."
Salary Levels Start Here
Before paying for industry salary surveys, here's what compensation specialists need to know:
• Your organization's jobs. Start with job descriptions, says Nancy Kasmar, SPHR, practice lead of compensation and benefits consulting for Washington Employers. Know what the essential job qualifications are instead of what you think they are. Kasmar has seen 15-page job descriptions and ones on sticky notes. "Interestingly, the 3-inch sticky note lets you know they have boiled it down to the really essential qualifications," she says.
• Your industry and competition. These may not always be the same. In terms of industry, an employer must understand where its organization fits nationally and regionally. Kasmar worked with a company that does human blood-cell testing—a niche where employees cannot necessarily be classified in the same categories as hospital lab technicians.
In addition, she says, an employer may find that its biggest competitors are not in their industry. A company situated in a university town may be competing with the school, or there may be a "big guy" in town, such as a large aerospace company, vying for the same candidates.
• Your philosophy. An employer competing with a "big guy" needs to decide whether it can or wants to match what the competition pays. "Find what is more important to your organization—internal equity or being on the leading edge of the way the market is moving," says James Arnett, SPHR, director of HR with Meriter Health Services.
A couple years ago, company leaders shifted Meriter's compensation program away from a nonmerit pay, formal job evaluation process, which was based on a point factor system and not tied to the market. Now, the program is performance- and market-based. They did this, in part, because the previous program had become too complicated to easily explain to recruits and employees.
When Meriter's compensation team began moving to the new system, after working with senior leaders on objectives and guiding principles, they started by talking to employees and managers about how the system should work. Then HR professionals came up with a design, continually circling back to the senior leadership group to see if they were on target.
"You have to have a compensation program that retains people, recruits people and keeps the folks satisfied while they are here," Arnett explains.
Part of an organization's philosophy may include offering something beyond salary. Hughes Network Systems competes against government contractors that often dismiss their workers after a project is completed. So, in addition to competitive salaries, Hughes offers stability and the chance for engineers to work on product development.
—Nancy Hatch Woodward
The author is a freelance writer based in Tennessee.