77_43515_EA311_2012_1__2_1_Dessler_HRM12e_PPT_11.ppt

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1. PowerPoint Presentation by Charlie Cook
The University of West Alabama
Chapter 11
Establishing
Strategic Pay
Plans
Part Four | Compensation
Copyright © 2011 Pearson Education, Inc.
publishing as Prentice Hall

2. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–2
WHERE WE ARE NOW…

3. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–3
1.1.List the basic factors determining pay rates.List the basic factors determining pay rates.
2.2.Define and give an example of how to conduct a job Define and give an example of how to conduct a job
evaluation.evaluation.
3.3.Explain in detail how to establish pay rates.Explain in detail how to establish pay rates.
4.4.Explain how to price managerial and professional jobs.Explain how to price managerial and professional jobs.
5.5.Explain the difference between competency-based and Explain the difference between competency-based and
traditional pay plans.traditional pay plans.
6.6.Explain the importance today of broadbanding, Explain the importance today of broadbanding,
comparable worth, and board oversight of executive comparable worth, and board oversight of executive
pay.pay.
LEARNING OUTCOMESLEARNING OUTCOMES

4. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–4
Basic Factors in Determining Basic Factors in Determining
Pay RatesPay Rates
Direct financial
payments
Indirect financial
payments
Employee
Compensation
Components

5. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–5
Legal Considerations in CompensationLegal Considerations in Compensation
Employee
Compensation
Equal Pay Act (1963)
Employee Retirement
Income Security Act
Age Discrimination in
Employment Act
Americans with
Disabilities Act
Davis-Bacon Act (1931)
Walsh-Healey Public
Contract Act (1936)
Title VII of the 1964
Civil Rights Act
Fair Labor Standards Act
(1938)
The Family and Medical
Leave Act
The Social Security Act of
1935 (as amended)
National Labor Relations
Act of 1935 (Wagner Act)
Workers’ Compensation

6. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–6
FIGURE 11–1
Independent Contractor

7. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–7
FIGURE 11–2Some Typical Exempt, Nonexempt Job Titles
EXEMPT
Attorneys
Physicians
Pharmacists
Engineers
Teachers
Scientists
Computer systems analysts
General managers
Personnel directors
Accountants
Purchasing agents
NONEXEMPT
Paralegals
Accounting clerks
Newspaper writers
Working supervisor
Management trainees
Secretaries
Clerical employees

8. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–8
FIGURE 11–3Who Is Exempt? Who Is Not Exempt?
Step 2:
Exemption Applicability
Step 1:
Salary Basis Test
Step 3:
Job Analysis
Does the employee perform any
of the following types of
duties/jobs?
Executive—management is the
employee’s primary duty
Administrative—employee
performing nonmanual office work
Professional/creative—employee
whose work requires highly
advanced knowledge/education;
creative and artistic professional
Computer professional—employee
involved in design or application of
computers and related systems
Outside sales—employee making
sales or taking orders which
influence sales outside of the
employer's premises
Is the employee paid at
least $455 per week
($23,660 per annum),
*not subject to
reduction due to
variations in
quantity/quality of work
performed?
*The computer
professional exemption
has a salary basis test
of $455 per week or
$27.63 per hour. The
outside sales
exemption is not
subject to the salary
basis test.
A thorough analysis of
the job duties must be
performed to
determine exempt
status. An exempt
position must pass
both the salary basis
and the duties tests.
Employee is Nonexempt Employee is Nonexempt
Yes Yes
No
No

9. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–9
Corporate Policies, Competitive Strategy,Corporate Policies, Competitive Strategy,
and Compensationand Compensation
•Aligned Reward StrategyAligned Reward Strategy
The employer’s basic task:The employer’s basic task:

To create a bundle of rewards—a total reward package—To create a bundle of rewards—a total reward package—
that specifically elicits the employee behaviors that the firm that specifically elicits the employee behaviors that the firm
needs to support and achieve its competitive strategy.needs to support and achieve its competitive strategy.
The HR or compensation manager along with top management The HR or compensation manager along with top management
creates pay policies that are consistent with the firm’s strategic creates pay policies that are consistent with the firm’s strategic
aims.aims.

10. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–10
TABLE 11–1Developing an Aligned Reward Strategy
Questions to Ask:
1.What must our company do, (for instance in terms of improving
customer service), to be successful in fulfilling its mission or
achieving its desired competitive position?
2.What are the employee behaviors or actions necessary to
successfully implement this competitive strategy?
3.What compensation programs should we use to reinforce those
behaviors? What should be the purpose of each program in
reinforcing each desired behavior?
4.What measurable requirements should each compensation
program meet to be deemed successful in fulfilling its purpose?
5.How well do our current compensation programs match these
requirements?

11. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–11
Compensation Policy IssuesCompensation Policy Issues
•Pay for performancePay for performance
•Pay for seniorityPay for seniority
•The pay cycleThe pay cycle
•Salary increases and promotionsSalary increases and promotions
•Overtime and shift payOvertime and shift pay
•Probationary payProbationary pay
•Paid and unpaid leavesPaid and unpaid leaves
•Paid holidaysPaid holidays
•Salary compressionSalary compression
•Geographic costs of living differencesGeographic costs of living differences

12. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–12
Equity and Its Impact on Pay RatesEquity and Its Impact on Pay Rates
External
equity
Procedural
equity
Internal
equity
Individual
equity
Forms of Compensation
Equity

13. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–13
Addressing Equity IssuesAddressing Equity Issues
Area wage and salary surveys
Job analysis and job evaluation
Performance appraisal and incentive pay
Communications, grievance
mechanisms, and employees’
participation
Methods to
Address Equity
Issues

14. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–14
Establishing Pay RatesEstablishing Pay Rates
1
2
3
4
5
Steps in Establishing Pay Rates
Determine the worth of each job in your organization
through job evaluation (to ensure internal equity).
Conduct a salary survey of what other employers are
paying for comparable jobs (to help ensure external equity).
Group similar jobs into pay grades.
Price each pay grade by using wave curves.
Fine-tune pay rates.

15. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–15
Step1: The Salary SurveyStep1: The Salary Survey
To price
benchmark
jobs
To make
decisions
about benefits
Uses for Salary Surveys
To market-
price wages for
jobs

16. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–16
Sources for Salary SurveysSources for Salary Surveys
Self-
Conducted
Surveys
Government
Agencies
Consulting
Firms
Sources of Wage and
Salary Information
Professional
Associations
The
Internet

17. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–17
TABLE 11–2Some Pay Data Web Sites
Sponsor Internet Address What It Provides Downside
Salary.com Salary.com Salary by job and zip code,
plus job and description,
for hundreds of jobs
Adapts national
averages by applying
local cost-of-living
differences
Wageweb www.wageweb.com Average salaries for more than
150 clerical, professional, and
managerial jobs
Charges for
breakdowns by
industry, location, etc.
U.S. Office of
Personnel
Management
www.opm.gov/oca/
09Tables/index.asp
Salaries and wages for U.S.
government jobs, by location
Limited to U.S.
government jobs
Job Smart http://jobstar.org/tools/
salary/sal-prof.php
Profession-specific salary
surveys
Necessary to review
numerous salary
surveys for each
profession
cnnmoney.com cnnmoney.com Input your current salary and
city, and this gives you
comparable salary in
destination city
Based on national
averages adapted
to cost-of-living
differences

18. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–18
Step 2: Job EvaluationStep 2: Job Evaluation
Skills Effort Responsibility
Identifying Compensable Factors
Working
conditions

19. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–19
The Job Evaluation ProcessThe Job Evaluation Process
1
Performing the actual evaluation
Getting the cooperation of employees
Preparing for the Job Evaluation
Identifying the need for the job evaluation
Choosing an evaluation committee
2
3
4

20. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–20
How to Evaluate JobsHow to Evaluate Jobs
Ranking
Job
classification
Point method
Methods for Evaluating
Jobs
Factor
comparison

21. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–21
Job Evaluation Methods: RankingJob Evaluation Methods: Ranking
•Ranking each job relative to all other jobs, usually Ranking each job relative to all other jobs, usually
based on some overall factor.based on some overall factor.
•Steps in job ranking:Steps in job ranking:
1.1.Obtain job information.Obtain job information.
2.2.Select and group jobs.Select and group jobs.
3.3.Select compensable factors.Select compensable factors.
4.4.Rank jobs.Rank jobs.
5.5.Combine ratings.Combine ratings.

22. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–22
TABLE 11–3Job Ranking by Olympia Health Care
Ranking Order Annual Pay Scale
1. Office manager $43,000
2. Chief nurse 42,500
3. Bookkeeper 34,000
4. Nurse 32,500
5. Cook 31,000
6. Nurse’s aide 28,500
7. Orderly 25,500

23. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–23
Job Evaluation Methods: Job Evaluation Methods:
Job ClassificationJob Classification
•Raters categorize jobs into groups or classes of jobs that Raters categorize jobs into groups or classes of jobs that
are of roughly the same value for pay purposes.are of roughly the same value for pay purposes.
Classes contain similar jobs.Classes contain similar jobs.

Administrative assistantsAdministrative assistants
Grades are jobs similar in difficulty but otherwise different.Grades are jobs similar in difficulty but otherwise different.

Mechanics, welders, electricians, and machinistsMechanics, welders, electricians, and machinists
Jobs are classed by the amount or level of compensable factors Jobs are classed by the amount or level of compensable factors
they contain.they contain.

24. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–24
FIGURE 11–4Example of a Grade Level Definition
This is a summary chart of the key grade level criteria for the GS-7 level of clerical and assistance
work. Do not use this chart alone for classification purposes; additional grade level criteria are in
the Web-based chart.

25. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–25
Job Evaluation Methods: Point MethodJob Evaluation Methods: Point Method
•A quantitative technique that involves:A quantitative technique that involves:
Identifying the degree to which each compensable factor is Identifying the degree to which each compensable factor is
present in the job.present in the job.
Awarding points for each degree of each factor.Awarding points for each degree of each factor.
Calculating a total point value for the job by adding up the Calculating a total point value for the job by adding up the
corresponding points for each factor.corresponding points for each factor.

26. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–26
Step 3: Grouping JobsStep 3: Grouping Jobs
Point Method
Ranking Method
Classification Methods
Grouping
Similar Jobs
into Pay
Grades

27. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–27
Step 4: Price Each Pay GradeStep 4: Price Each Pay Grade
•The Wage Curve The Wage Curve
Shows the pay rates paid for jobs in each pay grade, relative to Shows the pay rates paid for jobs in each pay grade, relative to
the points or rankings assigned to each job or grade by the job the points or rankings assigned to each job or grade by the job
evaluation.evaluation.
Shows the relationships between the value of the job as Shows the relationships between the value of the job as
determined by one of the job evaluation methods and the determined by one of the job evaluation methods and the
current average pay rates for your grades.current average pay rates for your grades.

28. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–28
FIGURE 11–5Plotting a Wage Curve

29. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–29
Step 5: Fine-Tune Pay RatesStep 5: Fine-Tune Pay Rates
•Developing Pay RangesDeveloping Pay Ranges
Flexibility in meeting external job market ratesFlexibility in meeting external job market rates
Easier for employees to move into higher pay gradesEasier for employees to move into higher pay grades
Allows for rewarding performance differences and seniorityAllows for rewarding performance differences and seniority
•Correcting Out-of-Line RatesCorrecting Out-of-Line Rates
Raising underpaid jobs to the minimum of the rate range Raising underpaid jobs to the minimum of the rate range
for their pay gradefor their pay grade
Freezing rates or cutting pay rates for overpaid (“red circle”) Freezing rates or cutting pay rates for overpaid (“red circle”)
jobs to maximum in the pay range for their pay gradejobs to maximum in the pay range for their pay grade

30. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–30
FIGURE 11–6Wage Structure

31. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–31
TABLE 11–4Federal Government Pay Scales

32. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–32
HR in Practice: HR in Practice:
Developing a Workable Pay PlanDeveloping a Workable Pay Plan
•Simplified Approach:Simplified Approach:
Conduct a wage surveyConduct a wage survey
Conduct a job evaluationConduct a job evaluation
Conduct once-a-year job appraisalsConduct once-a-year job appraisals
Compile the compensation budget Compile the compensation budget
for upcoming yearfor upcoming year

33. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–33
FIGURE 11–7
Compensation
Administration
Checklist

34. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–34
Pricing Managerial and Professional JobsPricing Managerial and Professional Jobs
Base
pay
Executive
benefits/perk
s
Short-term
incentives
Long-term
incentives
Compensating Executives
and Managers

35. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–35
Pricing Managerial and Professional JobsPricing Managerial and Professional Jobs
•What Determines Executive Pay?What Determines Executive Pay?
CEO pay is set by the board of directors taking into account CEO pay is set by the board of directors taking into account
factors such as the business strategy, corporate trends, and factors such as the business strategy, corporate trends, and
where they want to be in the short and long term.where they want to be in the short and long term.
CEOs can have considerable influence over the boards that CEOs can have considerable influence over the boards that
determine their pay.determine their pay.
Firms pay CEOs based on the complexity of the jobs they fill.Firms pay CEOs based on the complexity of the jobs they fill.
Shareholder activism and government oversight have tightened Shareholder activism and government oversight have tightened
the restrictions on what companies pay top executives.the restrictions on what companies pay top executives.
Boards are reducing the relative importance of base salary while Boards are reducing the relative importance of base salary while
boosting the emphasis on performance-based pay.boosting the emphasis on performance-based pay.

36. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–36
Compensating Professional EmployeesCompensating Professional Employees
•Employers can use job evaluation for professional jobs.Employers can use job evaluation for professional jobs.
•Compensable factors focus on problem solving, Compensable factors focus on problem solving,
creativity, job scope, and technical knowledge and creativity, job scope, and technical knowledge and
expertise. expertise.
•Firms use the point method and factor comparison Firms use the point method and factor comparison
methods, although job classification is most popular.methods, although job classification is most popular.
•Professional jobs are market-priced to establish the Professional jobs are market-priced to establish the
values for benchmark jobs.values for benchmark jobs.

37. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–37
Competency-Based PayCompetency-Based Pay
•CompetenciesCompetencies
Demonstrable characteristics of a person, including knowledge, Demonstrable characteristics of a person, including knowledge,
skills, and behaviors, that enable performanceskills, and behaviors, that enable performance
•What is Competency-Based Pay?What is Competency-Based Pay?
Paying for the employee’s range, depth, and types of skills and Paying for the employee’s range, depth, and types of skills and
knowledge, rather than for the job title he or she holdsknowledge, rather than for the job title he or she holds

38. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–38
Why Use Competency-Based Pay?Why Use Competency-Based Pay?
High-Performance
Work Systems
Strategic
Aims
Competency-Based Pay
Supports
Performance
Management

39. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–39
Competency-Based Pay in PracticeCompetency-Based Pay in Practice
•Main elements of skill/competency/knowledge–based Main elements of skill/competency/knowledge–based
pay programs:pay programs:
1.1.A system that defines specific skillsA system that defines specific skills
2.2.A process for tying the person’s pay to his or her skillA process for tying the person’s pay to his or her skill
3.3.A training system that lets employees seek and acquire skillsA training system that lets employees seek and acquire skills
4.4.A formal competency testing systemA formal competency testing system
5.5.A work design that lets employees move among jobs to A work design that lets employees move among jobs to
permit work assignment flexibilitypermit work assignment flexibility

40. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–40
Competency-Based Pay: Pros and ConsCompetency-Based Pay: Pros and Cons
•ProsPros
Higher qualityHigher quality
Lower absenteeismLower absenteeism
Fewer accidentsFewer accidents
•ConsCons
Pay program implementation problemsPay program implementation problems
Costs of paying for unused knowledge, skills, and behaviorsCosts of paying for unused knowledge, skills, and behaviors
Complexity of programComplexity of program
Uncertainty that the program improves productivityUncertainty that the program improves productivity

41. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–41
Special Topics in CompensationSpecial Topics in Compensation
•BroadbandingBroadbanding
Consolidating salary grades and ranges into a few wide levels Consolidating salary grades and ranges into a few wide levels
or “bands,” each of which contains a relatively wide range of or “bands,” each of which contains a relatively wide range of
jobs and salary levels.jobs and salary levels.
Pros and ConsPros and Cons

More flexibility in assigning workers to different job gradesMore flexibility in assigning workers to different job grades

Provides support for flatter hierarchies and teamsProvides support for flatter hierarchies and teams

Promotes skills learning and mobilityPromotes skills learning and mobility

Lack of permanence in job responsibilities can be unsettling Lack of permanence in job responsibilities can be unsettling
to new employees.to new employees.

42. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–42
FIGURE 11–8Broadbanded Structure and How It Relates
to Traditional Pay Grades and Ranges

43. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–43
Comparable WorthComparable Worth
•Concept:Concept:
Employers should be required to pay men and women Employers should be required to pay men and women
equal wages for dissimilar jobs that are of equal wages for dissimilar jobs that are of comparablecomparable
(rather than strictly (rather than strictly equalequal) value to the employer.) value to the employer.
•Basis:Basis:
Seeks to address the issue that women have jobs that Seeks to address the issue that women have jobs that
are dissimilar to those of men and those jobs are often are dissimilar to those of men and those jobs are often
consistently valued less than men’s jobs.consistently valued less than men’s jobs.
•Question at Hand:Question at Hand:
Who will get to make final decisions on the comparability Who will get to make final decisions on the comparability
of jobs?of jobs?

EmployersEmployers

CourtsCourts

44. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–44
The Pay GapThe Pay Gap
•Factors Lowering the Earnings of Women:Factors Lowering the Earnings of Women:
1.1.Women’s starting salaries are traditionally lower.Women’s starting salaries are traditionally lower.
2.2.Salary increases for women in professional jobs do not Salary increases for women in professional jobs do not
reflect their above-average performance.reflect their above-average performance.
3.3.In white-collar jobs, men change jobs more frequently, In white-collar jobs, men change jobs more frequently,
enabling them to be promoted to higher-level jobs over enabling them to be promoted to higher-level jobs over
women with more seniority.women with more seniority.
4.4.In blue-collar jobs, women tend to be placed in In blue-collar jobs, women tend to be placed in
departments with lower-paying jobs.departments with lower-paying jobs.

45. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–45
Board Oversight of Executive PayBoard Oversight of Executive Pay
•Factors Influencing Executive CompensationFactors Influencing Executive Compensation
FASB requirements for expensing of stock options FASB requirements for expensing of stock options
at fair market value.at fair market value.
U.S. government’s “pay czar” overseeing certain pay U.S. government’s “pay czar” overseeing certain pay
awards in firms which had U.S. treasury loans.awards in firms which had U.S. treasury loans.
Increased SEC reporting requirements for Increased SEC reporting requirements for
compensation-related information.compensation-related information.
Increased executive liability for accuracy in corporate Increased executive liability for accuracy in corporate
financial reporting under the Sarbanes Oxley Act.financial reporting under the Sarbanes Oxley Act.
Shareholder activism protesting excessive executive Shareholder activism protesting excessive executive
compensation due to lack of independence by compensation due to lack of independence by
executive board compensation committees.executive board compensation committees.

46. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–46
Improving Productivity Through HRIS: Improving Productivity Through HRIS:
Automating Compensation AdministrationAutomating Compensation Administration
•Benefits of Compensation Automation:Benefits of Compensation Automation:
Allows for quick updating of compensation programsAllows for quick updating of compensation programs
Eliminates costs of formerly manual processesEliminates costs of formerly manual processes
Coordinates centralized compensation budgets to prevent Coordinates centralized compensation budgets to prevent
overages in compensation and raisesoverages in compensation and raises
Can integrate and automatically administer other pay actionsCan integrate and automatically administer other pay actions

47. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–47
K E Y T E R M S
employee compensation
direct financial payments
indirect financial payments
Davis-Bacon Act (1931)
Walsh-Healey Public Contract
Act (1936)
Title VII of the 1964 Civil Rights Act
Fair Labor Standards Act (1938)
Equal Pay Act (1963)
Employee Retirement Income
Security Act (ERISA)
salary compression
salary survey
benchmark job
job evaluation
compensable factor
ranking method
job classification (or grading)
method
classes
grades
grade definition
point method
factor comparison method
pay grade
wage curve
pay ranges
competency-based pay
competencies
broadbanding
comparable worth

48. Copyright © 2011 Pearson Education, Inc.
publishing as Prentice Hall
Chapter 11
Appendix
11–48

49. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–49
Quantitative Job Evaluation MethodsQuantitative Job Evaluation Methods
•Factor Comparison Job Evaluation MethodFactor Comparison Job Evaluation Method
Step 1.Step 1. Obtain job informationObtain job information
Step 2.Step 2. Select key benchmark jobsSelect key benchmark jobs
Step 3.Step 3. Rank key jobs by factorRank key jobs by factor
Step 4.Step 4. Distribute wage rates by factorDistribute wage rates by factor
Step 5.Step 5. Rank key jobs according to wagesRank key jobs according to wages
assigned to each factorassigned to each factor
Step 6.Step 6. Compare the two sets of rankings to Compare the two sets of rankings to
screen out unusable key jobsscreen out unusable key jobs
Step 7.Step 7. Construct the job-comparison scaleConstruct the job-comparison scale
Step 8.Step 8. Use the job-comparison scaleUse the job-comparison scale

50. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–50
FIGURE 11–A1Sample Definitions of Five Factors Typically
Used in the Factor Comparison Method
1.Mental Requirements
Either the possession of and/or the active application of the following:
A. (inherent) Mental traits, such as intelligence, memory, reasoning, facility in verbal expression,
ability to get along with people, and imagination.
B. (acquired) General education, such as grammar and arithmetic; or general information as to sports, world
events, etc.
C. (acquired) Specialized knowledge, such as chemistry, engineering, accounting, advertising, etc.
2. Skill Requirements
A. (acquired) Facility in muscular coordination, as in operating machines, repetitive movements, careful
coordinations, dexterity, assembling, sorting, etc.
B. (acquired) Specific job knowledge necessary to the muscular coordination only; acquired by
performance of the work and not to be confused with general education or specialized knowledge.
It is very largely training in the interpretation of sensory impressions.
Examples
1. In operating an adding machine, the knowledge of which key to depress for a subtotal would be skill.
2. In automobile repair, the ability to determine the significance of a knock in the motor would be skill.
3. In hand-firing a boiler, the ability to determine from the appearance of the firebed how coal should be
shoveled over the surface would be skill.
3.Physical Requirements
A. Physical effort, such as sitting, standing, walking, climbing, pulling, lifting, etc.; both the amount
exercised and the degree of the continuity should be taken into account.
B. Physical status, such as age, height, weight, sex, strength, and eyesight.

51. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–51
FIGURE 11–A1Sample Definitions of Five Factors Typically
Used in the Factor Comparison Method (cont’d)
4.Responsibilities
A. For raw materials, processed materials, tools, equipment, and property.
B. For money or negotiable securities.
C. For profits or loss, savings or methods’ improvement.
D. For public contact.
E. For records.
F. For supervision.
1. Primarily the complexity of supervision given to subordinates; the number of subordinates is a secondary
feature. Planning, direction, coordination, instruction, control, and approval characterize this kind of
supervision.
2. Also, the degree of supervision received. If Jobs A and B gave no supervision to subordinates,
but A received much closer immediate supervision than B, then B would be entitled to a higher rating than A
in the supervision factor.
To summarize the four degrees of supervision:
Highest degree—gives much—gets little
High degree—gives much—gets much
Low degree—gives none—gets little
Lowest degree—gives none—gets much
5.Working Conditions
A. Environmental influences such as atmosphere, ventilation, illumination, noise, congestion,
fellow workers, etc.
B. Hazards—from the work or its surroundings
C. Hours

52. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–52
TABLE 11–A1Ranking Key Jobs by Factors
1
1
1 is high, 4 is low.
Mental
Requirements
Physical
Requirements
Skill
Requirements Responsibility
Working
Conditions
Welder 1 4 1 1 2
Crane operator 3 1 3 4 4
Punch press operator 2 3 2 2 3
Security guard 4 2 4 3 1

53. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–53
TABLE 11–A2Ranking Key Jobs by Wage Rates
1
1
1 is high, 4 is low.
Hourly
Wage
Requirements
Working
Conditions Mental Physical Skill Responsibility
Welder $9.80 4.00 (1) 0.40 (4) 3.00 (1) 2.00 (1) 0.40 (2)
Crane operator $5.60 1.40 (3) 2.00 (1) 1.80 (3) 0.20 (4) 0.20 (4)
Punch press operator $6.00 1.60 (2) 1.30 (3) 2.00 (2) 0.80 (2) 0.30 (3)
Security guard $4.00 1.20 (4) 1.40 (2) 0.40 (4) 0.40 (3) 0.60 (1)

54. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–54
TABLE 11–A3Comparison of Factor and Wage Rankings
Mental
Requirements
Physical
Requirements
Skill
Requirements Responsibility
Working
Conditions
A
1
$
2
A
1
$
2
A
1
$
2
A
1
$
2
A
1
$
2

Welder 1 1 4 4 1 1 1 1 2 2
Crane operator 3 3 1 1 3 3 4 4 4 4
Punch press operator 2 2 3 3 2 2 2 2 3 3
Security guard 4 4 2 2 4 4 3 3 1 1
1
Amount of each factor based on step 3.
2
Ratings based on distribution of wages to each factor from step 5.

55. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–55
TABLE 11–A4Job (Factor)-Comparison Scale
Value
Mental
Requirements
Physical
Requirements
Skill
Requirements Responsibility
Working
Conditions
0.20 Crane Operator Crane Operator
0.30 Punch Press Operator
0.40 Welder Sec. Guard Sec. Guard Welder
0.60 Sec. Guard
0.80 Punch Press Operator
1.00 (Plater)
1.20 Sec. Guard
1.30 Punch Press Operator
1.40 Crane Operator Sec. Guard (Inspector) (Plater)
1.50 (Inspector) (Inspector)
1.60 Punch Press Operator
1.70 (Plater)
1.80 Crane Operator (Inspector)
2.00 Crane Operator Punch Press Operator Welder
2.20 (Plater)
2.40 (Inspector) (Plater)
3.00 Welder
4.00 Welder

56. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–56
The Point Method of Job EvaluationThe Point Method of Job Evaluation
Step 1.Step 1.Determine clusters of jobs to be evaluatedDetermine clusters of jobs to be evaluated
Step 2.Step 2.Collect job informationCollect job information
Step 3.Step 3.Select compensable factorsSelect compensable factors
Step 4.Step 4.Define compensable factorsDefine compensable factors
Step 5.Step 5.Define factor degreesDefine factor degrees
Step 6.Step 6.Determine relative values of factorsDetermine relative values of factors

57. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–57
FIGURE 11–A2Example of One Factor (Complexity/Problem Solving)
in a Point Factor System
Level
Point
Value Description of Characteristics and Measures
0 0 Seldom confronts problems not covered by job routine or organizational policy;
analysis of data is negligible. Benchmark: Telephone operator/ receptionist.
1 40 Follows clearly prescribed standard practice and demonstrates straightforward
application of readily understood rules and procedures. Analyzes noncomplicated
data by established routine. Benchmark: Statistical clerk, billing clerk.
2 80 Frequently confronts problems not covered by job routine. Independent judgment
exercised in making minor decisions where alternatives are limited and standard
policies established. Analysis of standardized data for information of or use by
others. Benchmark: Social worker, executive secretary.
3 120 Exercises independent judgment in making decisions involving nonroutine problems
with general guidance only from higher supervision. Analyzes and evaluates data
pertaining to nonroutine problems for solution in conjunction with others.
Benchmark: Nurse, accountant, team leader.
4 160 Uses independent judgment in making decisions that are subject to review in the
final stages only. Analyzes and solves nonroutine problems involving evaluation of a
wide variety of data as a regular part of job duties. Makes decisions involving
procedures. Benchmark: Associate director, business manager, park services
director.
5 200 Uses independent judgment in making decisions that are not subject to review.
Regularly exercises developmental or creative abilities in policy development.
Benchmark: Executive director.

58. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–58
TABLE 11–A5Evaluation Points Assigned to Factors and Degrees
First-Degree
Points
Second-Degree
Points
Third-Degree
Points
Fourth-Degree
Points
Fifth-Degree
Points
Decision making 41 82 123 164 204
Problem solving 35 70 105 140 174
Knowledge 24 48 72 96 123

59. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11–59
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