1. Prepared by Cheryl Dowell, Algonquin College, and Greg Cole, Saint Mary’s University

2. Chapter 8 Copyright © 2014 by Nelson Education Ltd. 8-2

3. 1.Describe the steps in designing a point system of job evaluation. 2.Identify the possible pitfalls in designing a point system of job evaluation. 3.Design a base pay structure, including pay grades and pay ranges. Copyright © 2014 by Nelson Education Ltd. 8-3

4. Who performs work that is more valuable to a hospital, nurses or painters? Intuitively, we might think nurses, but that is not what the job evaluation system at a U.S. hospital concluded, and certainly not what their pay scales indicated, as painters were paid considerably more than nurses at that hospital. 8-4 Copyright © 2014 by Nelson Education Ltd.

5. Skill: To perform a nurse’s job requires medical skills (including a licence and postsecondary training), interpersonal skills, and communication skills. A painter’s job requires manual dexterity and the ability to mix paint. Effort: A nurse’s job requires some physical effort, such as helping to lift patients and standing or walking for extended periods of time. Painters are required to be on their feet constantly, to climb ladders, and to exercise continuous repetitive movement over the entire duration of their shift. Painters do not need to expend much mental effort, while nurses must continually be alert. 8-5 Copyright © 2014 by Nelson Education Ltd.

6. Skill Effort Responsibility Working conditions Compensable factors Characteristics of jobs that are valued by the organization and differentiate jobs from one another 8-6 Copyright © 2014 by Nelson Education Ltd.

7. After the compensable factors have been selected and defined, a number of “degrees” (sometimes called “levels”) are established for each factor. These degrees represent gradations in the extent to which a certain factor is present in a particular job being rated. For example, it may be decided that there should be five possible “degrees” or levels for the factor of “consequences of error.” Each degree needs to be carefully defined and arranged so that degree 2 always contains more of that factor than degree 1. 8-7 Copyright © 2014 by Nelson Education Ltd.

8. The compensable factors that have been selected are not likely to be equal in importance to the firm. To recognize this variation in importance, each factor needs to be weighted according to its relative importance. For example, in one firm, “education” may be viewed as the most important factor, followed by “experience,” then “customer contact” and “mental complexity,” with “physical environment” considered the least important factor. 8-8 Copyright © 2014 by Nelson Education Ltd.

9. 8-9 Copyright © 2014 by Nelson Education Ltd.

10. After the job evaluation system has been established, it is applied to all the jobs covered by that system. Then a “hierarchy of jobs” is generated. A good way to summarize the results of the job evaluation, and the resulting hierarchy of jobs, is by developing a table, which incorporates the results for a hypothetical set of hospital jobs. 8-10 Copyright © 2014 by Nelson Education Ltd.

11. Validity The extent to which a measuring instrument actually measures what we intend it to Reliability The extent to which a measuring instrument consistently produces the same measurement result when measuring the same thing 8-11 Copyright © 2014 by Nelson Education Ltd.

12. Benchmark job A job in the firm’s job evaluation system for which there is a good match in the labour market data Market comparator job A job in the market data that matches a benchmark job within the firm’s job evaluation system 8-12 Copyright © 2014 by Nelson Education Ltd.

13. A regression line that relates job evaluation points to market pay (in dollars) for the benchmark jobs Market line The intended pay policy for the organization, generated by adjusting the market line for the intended pay level strategy of the organization Pay policy line A statistic that measures the extent to which plots of two variables on a graph fall in a straight line Correlation coefficient 8-13 Copyright © 2014 by Nelson Education Ltd.

14. 8-14 Copyright © 2014 by Nelson Education Ltd.

15. 8-15 Copyright © 2014 by Nelson Education Ltd.

16. A more precise way to calculate proposed pay for a given job is to use the equation for the regression (market/pay policy) line that is generated by the computer o which is in the y = mx + b format o where “y” is the dollar value of the job o “m” is the slope of the market/pay policy line o “x” is the JE points total for that job and o “b” is a constant (the constant “b” could be a minus or a plus, depending on where the regression line intercepts the vertical axis). 8-16 Copyright © 2014 by Nelson Education Ltd.

17. A correlation coefficient can range from +1 to –1. Either +1 or –1 occurs when all the plots happen to fall in a perfectly straight line (this virtually never happens). +1 indicates a positive relationship between job evaluation points and pay rates. –1 indicates a negative or inverse relationship between job evaluation points and pay rates. 8-17 Copyright © 2014 by Nelson Education Ltd.

18. Four main categories of pitfalls need to be avoided in developing a point method job evaluation plan: (1) inconsistent construct formation (2) factor overlaps (3) hierarchical grounding (4) gender bias Each of these will now be examined, along with some additional pitfalls that fall outside these categories. A thorough understanding of these pitfalls is the best defence against them. 8-18 Copyright © 2014 by Nelson Education Ltd.

19. Base pay structure the structure of pay grades and pay ranges, along with the criteria for movement within pay ranges, that applies to base pay Pay grade a grouping of jobs of similar value to the organization, typically grouped by point totals Pay range the minimum and maximum pay rates (in dollars) for jobs in a particular pay grade 8-19 Copyright © 2014 by Nelson Education Ltd.

20. Method to establish pay grade sizes, in which each pay grade increases in size by a constant number of points Equal increase approach Method to establish pay grade sizes, in which the point spreads increase by an equal percentage Equal percentage approach Method to establish pay grade sizes, in which the point spreads increase, but not by an equal percentage Telescopic approach Practice of reducing the number of pay grades by creating large or “fat” grades, sometimes known as “bands” Broadbanding 8-20 Copyright © 2014 by Nelson Education Ltd.

21. Establishing the range midpoints Intergrade differentials the differences between the range midpoints of adjacent pay grades in a pay structure, expressed in dollars Intergrade differential percentage calculated by dividing the intergrade differential (expressed in dollars) of each pay grade by the midpoint (in dollars) of the previous pay grade 8-21 Copyright © 2014 by Nelson Education Ltd.

22. The difference between the maximum and the minimum pay level, in dollars, for a given pay range Range spread A percentage calculated by dividing the range spread for a given pay range by the minimum for that pay range Range spread percentage The amount of pay increase necessary to be considered significant by employees receiving the increase Just noticeable difference (JND) 8-22 Copyright © 2014 by Nelson Education Ltd.

23. 8-23 Copyright © 2014 by Nelson Education Ltd.

24. Once the pay range is defined for each pay grade, criteria must be established to determine how placement and movement within the range will occur. The three most common criteria are experience, seniority, and performance. For example, a person’s initial placement in the pay range may be determined by previous experience. Seniority (in terms of years in the job) or performance (or both) can then be used to determine future increases within the pay range. 8-24 Copyright © 2014 by Nelson Education Ltd.

25. A pay range may have as few as three or as many as 15 increments, most have 6 or 7. To be effective, a pay raise should constitute a “just noticeable difference (JND).” Just noticeable difference (JND): the amount of pay increase necessary to be considered significant by employees receiving the increase 8-25 Copyright © 2014 by Nelson Education Ltd.

26. 1.Discuss the issue of gender bias in compensation and the ways it can affect the development of a base pay structure. In your employment experience, have you noticed possible examples of gender bias in compensation? 2.Discuss the hierarchy of jobs for a Canadian hospital shown in Table 8.2. Does everything about this ranking of job values make sense to you? Are there specific jobs that seem out of order to you? If so, which ones? Why do you think so? 8-26 Copyright © 2014 by Nelson Education Ltd.