Compensation System Design

The compensation system design process includes four key activities: job analysis,
job documentation, job evaluation, and pay structure.

Job Analysis
Before we address the process of job analysis, we should first address what is a job. A job
may be best understood as an organization of total work into units or positions. According
to Dale Yoder, “A job is a collection of tasks, duties, and responsibilities which, as a
whole, is treated as assigned duties for individual employees and which is different from
other assignments.” Thus, a job may be defined as a group of positions involving some
duties, responsibilities, knowledge, and skills.

Jobs each have a definite title based on typically accepted business and industry
standards. Each job is different from other jobs such as receptionist, accountant, supervisor,
and so on. A job such as an accountant may include many positions (i.e., accounting
specialist, forensic accountant, and so on). A position is a particular set of duties and
responsibilities regularly assigned to an individual.

Job Analysis Defined. Job analysis is the process of collecting information about a
job. It refers to the superstructure of the job. According to Herbert G. Heneman III,
“A job is a collection of tasks that can be performed by a single employee to contribute
to the production of some product or service provided by the organization. Each job has
certain ability requirements (as well as certain rewards) associated with it. Job analysis is
the process used to identify these requirements.”

Job Analysis Considerations. The following considerations must be factors in
conducting a job analysis:

• The facts identified must relate to the job and not the job incumbent.
• The duties and responsibilities must be for the job as it actually exists rather than
what it is thought to be.
• Job facts must be verified to make sure they are accurate.
• Each duty must be analyzed to ensure it is essential to the job function.
• When there is more than one job incumbent, only one job analysis should
be required.

Job Analysis Methods. There are multiple methods that can be used to collect
information as part of a job analysis.

• Observation This involves the direct observation of employees performing the
tasks of a job, recording observations and translating them into the necessary
knowledge, skills, and abilities. This method provides a realistic view of the daily
tasks and activities performed in a job but works best for short-cycle jobs in
production rather than long-term jobs.

• Interview This involves a face-to-face interview where the interviewer obtains
the necessary information from the employee, peers, supervisors, and team/unit
members about the knowledge, skills, and abilities needed to perform the job.

The interviewer uses predetermined questions with new ones added as a follow-up
based on the response of the employee being interviewed. This method is
particularly good for professional jobs.

• Highly structured questionnaire This involves questionnaires structured in a
way that requires specific responses aimed at determining the frequency of certain
specific tasks are performed, their relative importance and the skills required.
This method defines a job with a relatively objective approach that also enables
analysis that is easily adaptable to using computer models. It’s good when a large
number of jobs must be analyzed and there are insufficient resources to do it.

• Open-ended questionnaire This involves the use of questionnaires to job
incumbents, and sometimes to their supervisors or managers, asking about the
knowledge, skills, and abilities are necessary to perform the job. After the answers are
combined, a composite statement of job requirements is published from which a
job description can be refined.

• Work diary or log This is a diary or log is maintained by the employee in this
method. Job information, including the frequency and timing of tasks, is recorded
in the diary. Logs are usually kept over an extended period of time. They are
analyzed, and patterns are identified and translated into duties and responsibilities.
While data can be collected over a long period of time with this method, it can
result in an enormous amount of information being culled and summarized.

Job Analysis Outcomes Possible results from job analysis include the following:

• Job description This is a functional description of what contents the job
includes. It is a narration of the job contents, a description of the activities and
duties to be performed in a job, the relationship of the job with other jobs, the
equipment and tools involved, the nature of supervision, working conditions,
and job hazards including physical and mental requirements.

• Job specifications This focuses on the person doing the job, i.e., the job holder.
The job specification is a statement of the minimum levels of qualifications,
skills, physical and other abilities, experience, judgment, and attributes required
to effectively perform the job. It is a statement of the minimum acceptable
qualifications that an incumbent must have to perform a given job. It sets forth
the knowledge, skills, and abilities required to do the job effectively.

Job competencies Normally focused on “core” or “critical” competencies,
these are the measurable or observable knowledge, skills, abilities, and behaviors,
sometimes called KSABs, which are critical to successful job performance.

Choosing the right competencies allows employers to do the following:

• Plan how they will organize and develop their workforce.
• Determine which job classes best fit their business needs.
• Recruit and select the best employees.
• Manage and train employees effectively.
• Develop staff to fill future vacancies.
• Core competencies may be divided into three categories.
• Knowledge competencies The practical or theoretical understanding
of subjects
• Skill and ability competencies The natural or learned capacities to
perform acts
• Behavioral competencies Patterns of action or conduct