Job evaluation, or establishing the relative value that specific roles bring to your organization, is a key component of successful compensation benchmarking. Evaluating positions helps you ensure that every role’s compensation accurately corresponds to its value to your company. In this article, we explore the four major options for evaluating jobs as part of your compensation management process.

It’s important to note that job evaluations focus on the relative importance of the roles themselves, and not the skills, performance, or background of the individuals currently occupying the positions. An individual’s performance record or skills might afford them a higher placement in a role’s salary band, but the importance of the role itself should be based on the value it brings to the organization outside of a particular employee’s performance. Since job evaluations focus on the impact a role has on your organization regardless of who occupies the position, they can help you establish and maintain fair, equitable, and consistent pay structures.

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There are four formal methods for evaluating jobs, each of which are explained in more detail below.

Method 1) Ranking

Also known as paired comparison, this ranking method is a qualitative assessment strategy. It creates a hierarchy of positions in an organization based on a singular factor. Ranking factors might include level of education or the perceived difficulty of the role. When this method is used, jobs are “paired” together and ranked in a hierarchy based on which role in the pair is considered more important. This method is highly subjective and is best suited for small organizations.

Method 2) Point Factor

Point factor evaluations quantify roles by assigning values to different skills and attributes. Each job is measured against previously established criteria, and points are based on the extent to which the position meets those benchmarks. Unlike the ranking method, point factor evaluations consider multiple elements in an effort to holistically assess the difficulty of each job.

Method 3) Factor Comparison

The factor comparison method is another quantitative evaluation technique. This method is similar to point factor evaluation because both processes assess jobs based on multiple benchmarks. However, the factor comparison approach also includes ranking positions in a hierarchy. Each benchmark is assigned points based on its relative worth to the organization. Some common factors include:

• Knowledge and skills
• Level of responsibility
• Working conditions
• Required mental and physical effort

Once points have been assigned for each factor, they are combined to determine a job’s rank. This evaluation method can be quite complex because of the large variety of factors that are often included in the assessment. Point factor evaluations may not be ideal for small or medium-sized organizations, but enterprise businesses are likely to find these job assessments the least subjective evaluation option.

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Method 4) Job Grading

Also known as job classification, job grading is a qualitative evaluation method. Job grading works by assigning each role a “grade” or classification based on the position’s complexity and required skills. Examples of job grades include the C-suite, vice presidents, directors, managers, and frontline employees. Specific responsibilities, competencies, physical demands, and even shift work can be included when assigning jobs to various grades.

Job grading can work well for organizations with clearly defined roles and responsibilities, but companies with more complex needs may not find this evaluation method as effective. If your organization includes fluid roles or jobs that overlap across typical grades, then this evaluation method may not give you an accurate sense of each role’s importance.

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Create Your Compensation Strategy

Regardless of how you evaluate your organization’s jobs, it’s important to include your benchmarking process in your overall compensation strategy. Your benchmarking process will help you establish salary ranges and ensure your overall compensation packages are market-competitive. Knowing your top salary ranges also helps you establish an overall compensation budget so your company can keep its financials in check.

Once you’ve outlined your salary ranges, decide how you’ll communicate any relevant compensation updates to your employees. Written communications like email announcements ensure your workers and your company have a record of any changes. Consider hosting an in-person meeting or interactive webinar so people can share their opinions and get answers to any questions they might have.

Be as transparent as you can with your workforce. For 83% of U.S. workers and jobseekers, pay transparency is important to making them feel more included in the workplace. Disclosing the salary ranges in your compensation strategy can help you avoid employees feeling blindsided or confused by the changes. Being candid with your employees can also help you drive your overall pay transparency initiatives.

That said, you may not want to share some of your proprietary information. While being transparent with your employees is valuable and necessary, it also opens your company up to potential information leaks. Avoid sharing information that could give your competitors an edge. You don’t want or need your competition to know specific information like your guidelines for giving raises or how you make decisions about your budget.

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