Three Job Evaluation Methods
Ranking, classification, and point methods
There are three job evaluation methods which are ranking, classification, and point method. The ranking method is the simplest method that is fast, easy to explain, and an inexpensive method. The classification method is based on each class of jobs and is based on the judgment of the evaluator. Ranking and classification are nonquantitative methods, also referred to as the whole-job method, that evaluates the whole job and sequences the jobs in an organization’s hierarchy based on its value to the organization. The sequence will reflect the importance of the job to the organization, compared to other jobs in the organization, but it will not specify a numeric value of each job. The point method is the most frequently and commonly used method of the three general job evaluation methods. The point method, also known as the point-factor system, is a form of quantitative method which uses an assortment of factors to evaluate a job. Quantitative methods evaluate specific factors “on a scale and provide a score that indicates how valuable one job is compared to another” (SHRM, People, p. 390).
The ranking method of job evaluation basically creates a ranking system of jobs in an organizational hierarchy. Ranking sequences the job descriptions from highest to lowest based on the job’s overall relative value to the organization or contribution to organizational success. The ranking evaluates the entire job as opposed to specific parts of the job, and subjectively compares one a job to another job. There are two common types of ranking, alternation ranking and paired comparison. Alternation ranking sequences job descriptions alternately at each extreme; a subjective concurrence is reached by the evaluators as to which jobs are the most valuable to the organization to the least valuable (Milkovich et al, 2017, 147). Paired comparison ranking utilizes a matrix to compare all possible pairing of each job with the other jobs being evaluated.
The ranking method is best used by small businesses and organizations who lack the resources to conduct complicated job evaluations. The advantages of utilizing this nonquantitative method are that it is the fastest, simplest, and most inexpensive method. Another advantage of ranking is that it can be easily explained to managers as it is easy to understand. The disadvantages of using a ranking method are that it is subjective as it relays on the evaluator’s judgment, and it is not reliable as other methods because it is subjective. Other disadvantages are that it is not suitable for large organizations, and it does not measure the differences between jobs (SHRM, People, p. 392).
The classification method of job evaluation is done by writing a description for each class of jobs, then they are inserted into a grade that best matches its class description that is based on the job evaluator’s judgment. The disadvantages of using this nonquantitative method are that it is very subjective because it relies on the evaluator’s judgement, the job description can be inserted into more than one grade level, and the method assumes jobs are similar in different organization as it relies on job titles and duties (SHRM, People, p. 390). The advantages of using a job classification method are that there is no way to audit the classification approach, it only looks at the entire job, it is ambiguous as grade descriptions can overlap with one another, it is only as reliable as the grade description, and it heavily relies on the job evaluator’s experience and judgment (SHRM, People, p. 392). Utilizing classification methods in conducting job evaluations are most proper in large organizations with many positions, but the organization is constrained in their resources.
Point method of job evaluation has “three common characteristics: (1) compensable factors, with (2) factor degrees numerically scaled, and (3) weights reflect the relative importance of each factor. Each job’s relative value, and hence its location in the pay structure, is determined by the total points assigned to it” (Milkovich et al, 2017, 149). The point-factor method of job evaluation is the most commonly used approach in the United States and Europe because it’s the most reliable job evaluation approach of the three general job evaluation methods, and it is the only approach that is measurable. Compensable factors reflect how much the job adds value to the organization’s objectives and strategy based on the mission of the organization. Simply put, the compensable factors should: reflect the actual job being performed, be supported by job documentation such as the job description, job specifications, and job competencies, reinforce the organization’s strategic direction, corporate culture, and objectives, be valued by all stakeholders, and it must be reviewed on an annual basis. The factors that are commonly utilized in conducting a point-factor method are skills, responsibilities, effort, task difficulty, work conditions, and the supervision of subordinates. (SHRM, People, p. 390).
The point method of job evaluation is well suited for an organization with the time and resources to create and implement a customized evaluation system, and for organizations that desire a job evaluation system to evaluate each job. The advantages of the point method are that it is the most reliable job evaluation approach, it is the least subjective and more objective than the other forms of job evaluation methods, and it is auditable, and its method is backed by job documentation. The disadvantages of the point method are that it is complicated, requires ample time and resources, difficult to explain to managers, and it requires thorough job documentation (including job description and job documentation) (SHRM, People, p. 392). The eight steps to design a point plan are: (1) conduct a job analysis, (2) determine the compensable factors, (3) scale the factors, (4) weight of the factors based on importance, (5) selection of criteria pay structure, (6) communicate the point plan and train those using the plan, (7) application of non-benchmark jobs, and (8) develop an online software for support (Milkovich et al, 2017, 151).
The job ranking, and job classification methods of job evaluation are nonquantitative and subjective in evaluating jobs. The point-factor system is a more valid and reliable job evaluation method because it takes a measurable approach. Job ranking is well suited for a small organization, job classification is well suited for the larger organization which do not have the time or resources to use quantitative methods. Job ranking, classification, and point methods are for evaluating a job within an organization (internal).
Milkovich, G., Gerhart, B., Newman, J. (2017). Compensation. New York, NY: McGraw-Hill Education.
SHRM Learning System: For SHRM-CP/SHRM-SCP, People. (2017). Alexandria, VA. Society for Human Resource Management.