How to Install a Point-Factor Job-Evaluation System

By Sahl, Robert J. | Personnel, March 1989 | Go to article overview

How to Install a Point-Factor Job-Evaluation System


Sahl, Robert J., Personnel


How to Install a Job-Evaluation

A recent survey by the Human Resources Management Association revealed that the most common job evaluation method is the point-factor system approach. Results of this study showed that this approach is used for 45% of all exempt positions and 42% of all salaried nonexempt positions surveyed. Thus human resources managers who plan to adopt this type of system have made a good choice; their organizations are following a proven methodology employed by a great many organizations throughout the country.

Once the decision has been made, however, what are the steps that the HR manager (or, more generally, the compensation specialist) should take to insure a relatively smooth point-factor system installation? Beyond that, what are the basic objectives that such a plan installation should be designed to achieve?

Objectives of the System

The objectives of any program of this sort are basically threefold. First, the system should insure that internal equity in base compensation is established. "Internal equity" means that the largest job (that is, the chief executive officer's) is allocated the largest number of points and hence the largest pay range. The second largest job ends up with the second largest number of points and the second largest pay range. This progression continues through the organization all the way down to the smallest position, which will consequently have the smallest number of points and the smallest pay range. To the degree that its positions are appropriately lined up, an organization is said to have internal equity.

Many people believe that internal equity is even more important than external competitiveness, which is the basis for the second objective that the point-factor system should meet. The system should be able to provide salary ranges that are externally competitive enough to let the organization attract and retain the talent it needs to meet organizational objectives. In establishing these ranges, management must take into account current pay levels, desired marketplace positioning, and affordability.

Finally, the third objective of any compensation-plan installation should be the development of a strong linkage between pay and performance. A well-conceived program will result in the development of appropriate salary ranges for everyone in the organization. Employees will naturally want to know where they are in the range and how they can move higher; hence, the program that is being installed should strengthen the linkage between pay and performance.

Beyond the above-mentioned objectives, an organization should try to institute a system that can be readily installed, maintained, and communicated to the employee population. By taking these issues into account, the organization will be more likely to develop a system that will have a long and productive life.

Another secondary objective is that the system will provide a framework for addressing other human resources issues, should the organization elect to do so. For example, it should form the basis for incentive compensation plan design--for incentives should be built only upon sound base compensation. Beyond that, an appropriately designed system can function as an integrating element for an organization to address a whole host of other factors ranging from succession planning to management development.

Installing the Plan

With these objectives clearly in mind, let's look at the different steps that an organization should take as it goes through the process of installing its plan:

Step 1: Communicating the study's purpose. The importance of this step cannot be overemphasized; it is one area in which the organization cannot overcommunicate. Communications can be accomplished through two vehicles. First, the general nature of the study should be outlined in a brief memo by the chief executive officer. …

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