Managing a business requires you to not only understand the product or service you are providing but also how the jobs within the system are evaluated and the appropriate level of compensation. When you hire someone to fill a position, you need to know the worth or value of that job. In other words, how much are you going to pay the worker? If you have not conducted system-wide job evaluations, you may not know the value of that job or how it compares to other positions in the company. That's why it's critical to assess and determine the value of jobs performed within the organization and the relative value or worth of the employee's efforts. The four major methods of job evaluations are: job ranking, job classification, factor comparison and the point method.
If you've been running your business long enough, you know how the jobs rank in importance to the overall goal and mission of the company. Being able to rank the positions within a company based on their contributions toward your goal is one of the easiest job evaluation methods. With the job ranking method, jobs and the employees who perform them are ranked from highest to lowest, depending on their quality and value to the organization. But before you tackle this method of job evaluation, make sure each position has a job description. This description will help you determine the importance based on performance tasks, rather than how you feel about the person doing the job.
The job classification method uses job classes or groups to provide more customization in the evaluation. The easiest way to understand the job classification method is to look at positions in the federal government where classification and pay is based on the grade of the job. For example, someone working as a GS-4 is typically a student or an intern. Whereas a GS-13 is in a top-level supervisory position. The job classification method allows you to predetermine the job classes and assign each job to these classes, which makes evaluating the jobs based on classification very objective.
If the job classification and ranking systems seem fairly straightforward and simple, that's because they are. As soon as you move to a factor comparison method for evaluating jobs, things begin to get a little more complex. What differentiates this method from the others is that it is more systematic and analytical. Rank each job according to a specific set of factors, such as physical effort, mental effort or responsibility – all of which have predetermined weights indicating their importance to success. The goal is to apply these factors to all jobs within the company, which allows you to make job-to-job comparisons and rank each one accordingly.
The final job evaluation method is the point method, which measures performance through scales and job factors rather than focusing on entire job functions and ranking employees against each other. This method works by identifying key job factors and then assigning points based on importance. For example, you may determine that skill is one of the factors. You can then break this category down even further and assign points based on experience, education and ability. Then, cross-reference the points with a pay structure, which allows you to determine compensation for a particular position.