Part A: Identify and summarize the five steps involved in the job analysis process.
The job analysis process has five main activities:
Determine a job analysis program. A company must decide between using an established system or developing its own system tailored to specific requirements. The most typical methods for collecting job analysis information are questionnaires, interviews, observation, and participation.
Select and train analysts. Ideally, a task force of representatives from throughout the company conducts the analysis, and human resources (HR) staff members coordinate it. The analysts learn the basic assumptions of the model and the procedures they must follow. They must know how to collect job-related information through various methods, relate to a wide variety of employees, analyze the information, and write clearly and succinctly.
Direct job analyst orientation. The analysts assess the context in which employees perform their work. In addition, analysts should obtain and review relevant, related information in both internal and external sources to best understand the job criteria and influencing factors.
Conduct the study. Analysts carefully choose the method of data collection and the sources of data. They must also conduct job analyses that meet reliability and validity criteria. A reliable job analysis method yields consistent results under similar conditions, and a valid job analysis method accurately assesses each job’s duties or content. The analysts should use more than one data collection method and collect data from more than one source to increase the likelihood of obtaining reliable, valid results.
Summarize the results and write job descriptions. Job descriptions summarize a job’s purpose and list its tasks, duties, and responsibilities, as well as the knowledge, skills, and abilities (KSAs) necessary to perform the job at a minimum level. Effective job descriptions describe the responsibilities and expectations associated with the role, as well as the experience necessary to perform the job.
Part B: What are the four activities compensation professionals engage in to create market-competitive pay systems?
Compensation professionals create market-competitive pay systems based on four activities:
Conducting strategic analyses. This involves examining the company’s external market context and internal factors. Examples of external market factors include industry profile, information about competitors, and long-term growth prospects. Internal factors encompass financial condition and functional capabilities (such as marketing and human resources).
Assessing competitors’ pay practices with compensation surveys. Compensation surveys focus on competitors’ wage and salary practices, as well as employee benefits. These surveys are important because they eliminate guesswork and enable compensation professionals to obtain realistic views of competitors’ pay practices.
Integrating the internal job structure with the external market pay rates identified through compensation surveys. This integration results in pay rates that reflect both the company’s and the external market’s valuations of jobs. Most often, compensation professionals rely on regression analysis, a statistical method, to achieve this integration.
Determining compensation policies. These policies should fit with the company’s standing and competitive strategies. Compensation professionals must strike a balance between managing costs and attracting and retaining the best-qualified employees. Top management ultimately makes compensation policy decisions after careful consideration of compensation professionals’ interpretation of the data.
Part C: Differentiate between pay level policies and pay mix policies.
Compensation policies refer to choices that compensation professionals make to promote a competitive advantage. Broadly, choices are made about pay level policies and pay mix policies.
Pay level policies concern compensation based on jobs’ requirements and responsibilities. Differences in a job’s required knowledge, skills, and abilities (KSAs) can result in a different salary or compensation. Companies typically choose from the following three pay level policies:
Market lead – Pay levels are above the market pay line, and employees are compensated more highly than most competitors. This policy is most appropriate for companies that pursue differentiation strategies.
Market lag – Pay levels are below the market pay line, and employees are compensated less than most competitors. This policy appears to fit well with lowest-cost strategies, but companies may experience difficulties in recruiting and retaining qualified employees.
Market match – Pay levels fall along the market pay line, and employees are compensated similarly to competitors. This policy is a safe approach for companies because generally, they’re spending no more or less on compensation (per employee) than competitors.
Pay mix policies refer to the combination of core compensation and employee benefits components that make up an employee’s total compensation package. This type of pay may be expressed in a monetary amount or as a percentage of total currency allocated for an employee’s total compensation. It’s common to base pay mix policies on jobs within a particular structure that play an important role in determining the company’s profitability or objectives.
Part D: Describe each step to constructing a pay structure.
Compensation specialists develop pay structures based on five steps:
Deciding on the number of pay structures. Most companies often establish more than one pay structure, depending on market rates and the company’s job structure. Common pay structures include exempt and nonexempt structures, pay structures based on job families, and pay structures based on geography.
Determining a market pay line. The market pay line is representative of typical market pay rates relative to a company’s job structure. Pay levels that correspond with the market pay line are market-competitive pay rates. Surveys can provide information pertaining to competitors’ full range of compensation practices.
Defining pay grades. Human resource (HR) professionals typically group jobs into pay grades based on similar compensable factors and value. Wider pay grades minimize hierarchy and social distance between employees. HR professionals can develop pay grade widths as either “absolute” job evaluation point spreads or as percentage-based job evaluation point spreads.
Calculating pay ranges for each pay grade. Pay ranges include midpoint, minimum, and maximum pay rates. The minimum and maximum values denote the acceptable lower and upper bounds of pay for the jobs within particular pay grades. HR professionals first establish a midpoint, the halfway mark between the range minimum and maximum rates. Midpoints generally reflect the market average or median. A company sets the midpoints for its pay ranges according to its pay policy and generally applies different range spreads across pay grades.
Evaluating the results. Compensation professionals analyze significant differences between the company’s internal values for jobs and the market’s values for the same jobs. If discrepancies are evident, the company must reconsider the internal values they have placed on jobs. Such inconsistencies can lead to being unable to attain a competitive market advantage or recruit and retain qualified individuals. Compensation professionals must also consider each employee’s pay level relative to the midpoint of the pay grade. HR professionals can use compa-ratios to index job groups that fall within a particular pay grade and provide invaluable information about the competitiveness of companies’ pay rates.
