The Future of Job Evaluation Understanding and Measuring Work

Transcription

1 REWARDS STRATEGY AND PRACTICE The Future of Job Evaluation Understanding and Measuring Work Philip Johnson, Hay Group * It used to be that job evaluation was entrenched as a standard business process in many organizations. It was seen as something that you had to do in order to pay people fairly a hygiene factor. Get it wrong and you have disgruntled employees being distracted by the (perceived or real) inequality of pay, maybe even raising formal complaints under equal pay legislation, and ultimately leaving the organization as a mark of their dissatisfaction. This can mean real costs to the employer in lost productivity, legal fees and turnover. As with any other hygiene business processes, this kind of job evaluation has been increasingly squeezed over the last twenty years. Faced with an unsatisfactory cost-tobene t relationship, many organizations have attempted to reduce costs by streamlining processes or adopting approaches that are less rigorous; others have taken the alternative perspective and aimed to increase the bene t that they derive from their investment. Many organizations have turned to market pricing techniques as a relatively low cost way of valuing jobs. Typically, such organizations will benchmark 25% 50% of their jobs in the market and then set the pay of other jobs relative to these benchmarks. They may not call it job evaluation but that's what they are doing; when you say if job X is worth $80,000 and job Y is worth $60,000, then job Z, which is generally between these two, must be worth $70,000 this is job evaluation using a whole job comparison method. The problem with this approach is that you determine a market price and nothing else. You have been through a process of analyzing and understanding a job to answer a single question what is a fair rate of pay for this job relative to the market? Wouldn't it be more valuable if you could answer additional important questions based on the same investment of time and e ort? * PHILIP JOHNSON leads Hay Group's consulting practice in Eastern Canada. He specializes in developing integrated human resources strategies and reward strategies that enable clients to deliver more strategic contributions. He helps organizations work more effectively by developing business focused solutions from across all of Hay Group's service lines. 32

2 Recent research conducted by Hay Group indicates a clear di erence in how leading organizations view job evaluation. While many still use job evaluation in a narrow (pay only) context, others take a much broader view. To avoid confusion with the narrow view, we'll call this emerging approach work measurement. It is organizations who take a work measurement approach that report the highest levels of satisfaction with the process, the highest credibility of outcomes and the highest levels of senior management engagement in the process. The future for work measurement is as the platform that enables and integrates multiple human capital processes and empowers the HR function to perform. Rewards Strategy and Practice POWER TO PERFORM The world is now a tougher, more cost-conscious, performance-oriented place. Regulation and scrutiny of corporate activity, decision-making and crucially, reward, has increased. The HR function is becoming more central to the business and, as a result, is under more pressure, is being challenged to step up but is also required to do more with less. As a result, many organizations are looking to integrate and centralize HR processes to reduce cost. There is also increasing recognition that a strong employer value proposition is a critical di erentiator in the talent market. However these require organizations to map across talent management, recruitment, training and reward functions. A recent Hay Group study 1 provides interesting and perhaps surprising intelligence on how successful multi-national organizations get value out of their JE programs. The study, based on data from 189 organizations that maintain a global JE program, indicted which goals of their program the organizations rated as being of the highest importance (organizations were able to identify up to 3 areas as being of highest importance). Four of the available goals were rated at the top of the rankings and it is interesting to note that clarifying job / organization structure and linking reward and results were right up there with the more traditional goals of paying in line with the market and increasing internal equity. 33

3 Journal of Compensation and Bene ts It is equally interesting to note that the two goals related to talent management, talent mobility and succession planning, if added together were mentioned by 37% of respondents; had the question been asked di erently with these options combined as one, then talent management might have well been the #1 response! From the perspective of compensation and bene ts professionals, this presents some signi cant challenges and opportunities. Often the services that underpin HR functions have evolved in silos and remain complicated, in exible and disconnected from the business. HR leaders in organizations that get this see work measurement as a key enabler in making the necessary transition. They appreciate that the purpose of an HR function is to help their organization do its work e ectively and e ciently, and that a key platform for this is understanding the organization and the work that needs to get done. Work measurement is the process that delivers this understanding. Our research shows that organizations are getting the greatest return on the e ort invested to clarify and understand the work by applying the work measurement outcome for multiple purposes 2 Hay Group research identi- ed three primary areas where work measurement adds value: aligning jobs to structures to achieve organization e ectiveness; tting people to jobs to improve talent management, and valuing work against internal and external benchmarks. WORK MEASUREMENT ENABLING TALENT MANAGEMENT Talent management is perhaps the least intuitive of applications for work measurement. Job evaluation has traditionally aimed at achieving an objective evaluation of a role without consideration of the incumbent. In practice this distinction is increasingly blurred, as organizations are now focusing more attention on the interaction of the person and the role as the driver of performance. As a result, organizations are increasingly turning to work measurement to help them manage that interaction. One of 34

4 Hay Group's clients is a large Asian business that has recently expanded globally. They have not used job evaluation for pay purposes as their reward philosophy is driven more by seniority than role. But now they have acquired operations around the world and need to develop leadership talent by providing people with international experience. They have to plan sensible career moves that will allow for personal growth, which means that they need to understand the size, scope and inherent challenges in a variety of positions. They also need to be able to compare these to each other so that when they move a person from one country to another, the new job presents an appropriate challenge not a move to a smaller job where there will be no development, nor a move to too large a job that will be too much of a stretch and set the person up for failure. This organization introduced work measurement to meet talent management requirements and only later used it to understand how to pay people appropriately in overseas markets. It makes sense to link the work measurement process to talent management process wherever possible. It means that you can analyze the work once and generate multiple outputs which simpli es things both for HR and for line Rewards Strategy and Practice managers. If ever there was an illustration of the disconnected nature of HR it's when a line manager is approached one week by a Compensation Advisor who needs to understand a job for pay purposes, followed by the Learning and Development Advisor two weeks later who needs to identify the training needs associated with the job, and then later by the Recruitment Specialist who needs to understand the job in order to go out and nd candidates. A single process underpinning all these purposes streamlines, coordinates and enables greater insights. 35 Market pricing approaches to work measurement will clearly be insu cient for these purposes as they only provide information on pay. Moving to a higher paying job does not always mean moving to a more demanding job (or vice versa). A common approach when combining insights about the job and the person is job family modeling. This is where work is described within a family of related jobs (usually a function such as HR or a sub-function such as IT Applications Development) at each level in a grade structure using attributes of work content in combination with skills and competencies. Work measurement is then a process of comparing an actual job to the level descriptors (or work attributes / skills / competencies) in the most relevant family and picking the grade or level where it ts most closely to the descriptions. This tool then serves as a framework for career planning, because the manager and the jobholder can talk about what it would take to move to the next level (or even sideways into a di erent family), and there is a set of well de ned expectations for work of this kind at this level to use in support of performance management. The approach also supports human resource planning as it provides generic roles (e.g. IT specialist III) and enables you to determine how many of these roles will be needed in the future, how many people we have today who are functioning in this role and how many more are in the feeder roles. Planning in terms of role types rather than speci c jobs provides for greater exibility. The connection between work measurement and talent management also pays dividends in terms of managing the risks associated with key hires and critical promotions. An analytical work measurement approach provides ratings for a job against a variety of factors (e.g. requirements for planning, organizing and coordinating the work / activities of others, requirements to achieve results through e ective in uence and communications). By understanding the requirements of a

5 job at this level of detail we can assess the degree of t between a candidate and a job at a granular level. Too often, organizations make decisions based on generic models of skills and competencies. A standard executive competency model is used to assess candidates for all executive positions and organizations wonder why some of their appointments don't work out. The answer is simple. Generic models focus on what is common about a population of jobs rather than what makes the di erence when it comes to a speci c job. All candidates will have strengths and weaknesses and by knowing how these map to the content of the job, the organization can make better selections and develop onboarding processes or early developmental opportunities to ensure that the new hire is more likely to succeed. Work measurement will identify the 3 or 4 competencies out of the generic model are most critical for success in a particular job and these should be the must haves when it comes to selection. WORK MEASUREMENT ENABLING ORGANIZATION EFFECTIVENESS As jobs are the building blocks of organizations, we can Journal of Compensation and Bene ts derive insights from the evaluation of jobs about the organization design. One example is organization benchmarking. Counting heads is one way of doing comparisons: Company X has 200 executives and the average amongst a peer group of other organizations is 150 is Company X top heavy? That might depend on how each company de nes executives and how they are organized. If the peer group all use the same work measurement tool then we can say that Company X has 200 jobs at 1000 points and over which represents a total investment 375,000 points in their leadership group; the peer group has an average of 150 jobs above 1000 points but, because they are structured di erently, this averages a total investment of 400,000 points now is Company X top heavy? This type of analysis can be undertaken at a more granular level and to track trends over time. For example, Company X invests 7% of its executive resource (as measured by evaluation points) in R&D when the industry average is 11% does this match the business strategy? Or Company X invested 35% of its executive resource in corporate functions 5 years ago and this has since grown to 42% was this the intended outcome of the re-organization two years ago? 36 Beyond benchmarking, we can analyze the design of individual structures based on the relationships between the evaluations of jobs. For example, a Step-Gap Analysis considers the di erence (in evaluation points) between a boss and her subordinates. If this gap is too small there will be overlapping contributions and people treading on each other's toes; if the gap is too large, there may be communication breakdowns, the boss will be drawn down into the weeds and there will be di culty nding a successor from within. But what is the right gap? This varies by function and by level in the organization. Operational functions (e.g. Sales and Manufacturing) tend to operate with larger gaps and larger managerial spans of control than do Advisory / Enabling functions (e.g. Legal, HR) and the gap size can be larger at either the top or the bottom of the organization than in the middle where smaller step progressions are common for career development. A methodology for measuring work that is analytical and standardized can provide valuable reference standards to use as tests for your own structure. The job is at the intersection of the HR processes that drive compensation, talent management and organization e ectiveness, and the notion of the do-

6 able job applies the insights that can be obtained from a comprehensive and structured job analysis process at the most granular level. How do you know whether a job is well designed? There is an internal and external component to the answer. From an external perspective the focus is on clarity of accountability. When we review this job against the surrounding jobs that it interacts with is it clear who does what and when? Organization clarity at the micro level is achieved by mapping individual jobs against the core business processes and saying (for each major step in the process) who is accountable for making this happen, who else needs to provide input / support, and who has the authority to approve the outcome. This is how we avoid duplication or thing falling through the cracks. This understanding has always been an essential component of job evaluation but, too often, the insights gained are wasted if work measurement is not seen as a challenge function with the mandate to ensure that resources are used e ectively in the organization. From the internal perspective it is about balance in the job. I can assess the accountabilities that this job has been given and explore how similar they are in terms of their complexity, the skills and competencies they Rewards Strategy and Practice draw on and the interactions that they require with others. A well designed job is homogeneous the person requires a small but consistent set of skills and competencies to achieve things that are of similar complexity and require interactions with the same stakeholders. If we have a diverse range of skills and competencies demanded it will be hard to nd people who can excel in all parts of the job and performance will be sub optimal. If we have a wide range of complexity in the work the person will either be underutilizing their abilities part of the time, or stretched to a point that constitutes a risk to the business at times, or both. If the number of stakeholders in a process is large then there are many more lines of communication to maintain and chances for misunderstandings. For example, if 4 people need to work together there are 6 two-way connections to be maintained; if a fth person is added there are 10 links nearly double the potential for a communications breakdown. CREATING VALUE FOR YOUR ORGANIZATION For HR functions to create value within their organizations they will need to provide processes and solutions that are holistic, integrated and linked to the business. Processes that are siloed and disconnected are no longer good enough. Work measurement represents a core process that all organizations undertake and are increasingly using as a platform to enable the performance of their HR functions. It is no longer seen just as a process to place a value on work for compensation purposes although this still needs to be done and done well. It is now increasingly seen as an approach that enables organizations to ensure that work is aligned e ectively in terms of individual job design, how jobs come together in structures, and to test whether the organization has applied its resources in line with its strategic objectives, and to ensure that there is an e ective t between the work and the person doing the work. After all, HR is about making sure that the organization has the right people in the right jobs with the right engagement doing the right things! NOTES: 1 Building a Solid and Global Human Resource Foundation: Job Evaluation E ectiveness. David E. Borrebach, PhD and James R. Bowers, Journal of Compensation and Bene ts, Hay Group research of 61 multinational organization (clients and non clients) in