the concept of value in compensation practice

The Concept of The Concept of ValueValue in in Compensation PracticeCompensation Practice

Presented byPresented by

Ted TurnasellaTed Turnasella

The Concept of The Concept of ValueValue in Compensation in Compensation PracticePractice

274. If any one hire a skilled artisan…, he shall 274. If any one hire a skilled artisan…, he shall pay as wages of the potter five gerahs, of a tailor pay as wages of the potter five gerahs, of a tailor five gerahs, of a carpenter four gerahs, of a rope-five gerahs, of a carpenter four gerahs, of a rope-maker four gerahs…maker four gerahs…

275. If any one hire a ferryboat, he shall pay 275. If any one hire a ferryboat, he shall pay three gerahs in money per day.three gerahs in money per day.

276. If he hire a freight-boat, he shall pay two and 276. If he hire a freight-boat, he shall pay two and

one-half gerahs per day.one-half gerahs per day.

Code of Hammurab: 2250 BC


277. If any one hire a ship of sixty gur, he shall 277. If any one hire a ship of sixty gur, he shall

pay one-sixth of a shekel in money as its hire per pay one-sixth of a shekel in money as its hire per day.day.

278. If any one buy a male or female slave, and 278. If any one buy a male or female slave, and

before a month has elapsed the benu-disease be before a month has elapsed the benu-disease be developed, he shall return the slave to the seller, developed, he shall return the slave to the seller, and receive the money which he had paid.and receive the money which he had paid.

Code of Hammurab: 2250 BC


Extrinsic ValueExtrinsic ValueThe prevailing value for a job in the The prevailing value for a job in the external market.external market.

Intrinsic ValueIntrinsic ValueThe relative value of a job in relation to The relative value of a job in relation to other jobs based on the nature of the work other jobs based on the nature of the work itself.itself.

IDEALLY, THESE TWO NEED TO BE IN BALANCE


The job evaluation process converts The job evaluation process converts cultureculture into into cashcash..

Job evaluation points are intended to be Job evaluation points are intended to be representations of market value representations of market value andand the value the value of a particular job within a companyof a particular job within a company..

Salary range midpoints are representations of Salary range midpoints are representations of your company’s desired position in the your company’s desired position in the market.market.

Thoughts to Keep in Mind


How will you know if you have a strong How will you know if you have a strong relationship between internal and external relationship between internal and external values?values?

By statistically comparing the following By statistically comparing the following relationships…relationships…

Market Median Values to Evaluation PointsMarket Median Values to Evaluation Points

Evaluation Points to Range MidpointsEvaluation Points to Range Midpoints

Existing Pay Levels to Market Median ValuesExisting Pay Levels to Market Median Values

Existing Pay Levels to Evaluation PointsExisting Pay Levels to Evaluation Points


FUNCTIONAL JOB TITLE Grade Total

Points Market Median

Proposed Midpoint

Operator/Lead/Mailroom 1 905 20,427 18,847

Clerk/ File/ Accts Payable 1 953 20,427 18,847

OPERATOR/ DATA ENTRY 2 969 19,704 21,109

Operator I/ Computer 2 969 21,827 21,109

Courier I 2 971 18,847 21,109

Clerk, Intermediate 2 1,010 21,217 21,109

Receptionist 2 1,021 20,991 21,109

Clerk/ Control I 2 1,041 21,499 21,109

Switchboard Operator 2 1,051 20,314 21,109

Clerk I/ Credit 2 1,066 22,120 21,109

Clerk Typist 2 1,066 20,427 21,109

Receptionist/ S/B Operator 3 1,081 20,878 23,642

Operator/ Data Entry/ Senior 3 1,093 22,372 23,642

Clerk/ Purchasing 3 1,111 22,345 23,642

ADMINISTRATOR/ A/P 3 1,117 24,151 23,642


ABC CompanyCorrelation of Market Median to Evaluation Points

y = 19547e0.0136x

R2 = 0.9675

-

20,000

40,000

60,000

80,000

100,000

120,000

905

1,0

21

1,0

93

1,2

16

1,3

64

1,4

64

1,5

76

1,7

67

1,9

11

1,9

61

2,0

85

2,1

63

2,3

69

2,5

97

2,9

72

3,2

87

3,4

56

3,7

61

4,8

54

Evaluation Points

Mar

ket

Val

ue

Market Median Expon. (Market Median)


How can you balance How can you balance internal and external job internal and external job

value?value?


Step #1:Step #1: Complete a market analysis to Complete a market analysis to establish the market value for a group of establish the market value for a group of benchmark jobs that represent the entire benchmark jobs that represent the entire spectrum of value in your company.spectrum of value in your company.

Step #2:Step #2: Using market values, calculate Using market values, calculate salary range salary range midpoints, minimums, and midpoints, minimums, and maximums.maximums.

Step #3:Step #3: Select and define Select and define appropriateappropriate job job evaluation factors.evaluation factors.


Appropriate Job Evaluation FactorsAppropriate Job Evaluation Factors

Are Recognized As Adding to the Are Recognized As Adding to the Value of a JobValue of a Job

Can Be DefinedCan Be Defined Can Be Defined in LevelsCan Be Defined in Levels Exist in All Jobs to be EvaluatedExist in All Jobs to be Evaluated

Hint: Appropriate job evaluation factors usually fall under the general heading of… KNOWLEDGE, THE APPLICATION OF KNOWLEDGE, AND WORKING CONDITIONS


Step #4:Step #4: Determine the weight (%) for Determine the weight (%) for each evaluation factor. each evaluation factor.

Step #5:Step #5: Determine the minimum and Determine the minimum and maximum number of job evaluation points, maximum number of job evaluation points, based on based on the relationship of the Range the relationship of the Range Minimum of the lowest grade and the Minimum of the lowest grade and the Range Maximum of the highest grade.Range Maximum of the highest grade.

FOR EXAMPLE… FOR EXAMPLE…


Grade Minimum Midpoint Maximum

1 15,077 18,846 22,616

20 129,859 162,324 194,788

15,077 100

194,788 X=

X = 1,292


Step #6:Step #6: Apply the weight percentages to the Apply the weight percentages to the high and low evaluation point valueshigh and low evaluation point values..

Available Points 100 1292

Knowledge 30.0% 30 388

Decision Making 30.0% 30 388

Autonomy 20.0% 20 258

Working Cond. 10.0% 10 129

Contacts 10.0% 10 129


Step #7:Step #7: :: Calculate the evaluation points to apply to each level of Calculate the evaluation points to apply to each level of evaluation factorevaluation factor..

Grade School A 30 A+ 39

High School B 50

B+ 65

Associate's C 83

C+ 108

Bachelor's D 139

D+ 180

Master's E 232

E+ 300

Doctorate F 388

KNOWLEDGE LEVEL SCORE POINTS

The Concept of The Concept of ValueValue in in Compensation PracticeCompensation Practice

=10^(1/Steps*(LOG10(High Value/Low Value)))


Step #8:Step #8: :: Evaluate every Evaluate every benchmark job and enter the results benchmark job and enter the results into a table.into a table.

Step #9:Step #9: :: Graph your results. Graph your results.


ABC CompanyCorrelation of Market Median to Evaluation Points

y = 19547e0.0136x

R2 = 0.9675

-

20,000

40,000

60,000

80,000

100,000

120,000

905

1,0

21

1,0

93

1,2

16

1,3

64

1,4

64

1,5

76

1,7

67

1,9

11

1,9

61

2,0

85

2,1

63

2,3

69

2,5

97

2,9

72

3,2

87

3,4

56

3,7

61

4,8

54

Evaluation Points

Mark

et

Valu

e

Market Median Expon. (Market Median)


Step #10:Step #10: :: Check results and circle Check results and circle back to make adjustments to factor back to make adjustments to factor weights or evaluation points as weights or evaluation points as necessarynecessary..

Step #11:Step #11: :: Drink a lot… you’ve Drink a lot… you’ve earned it!earned it!

the concept of value in compensation practice

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