Market-Based (External) Job Evaluation

Market-Based (External) Job Evaluation. A market-rate system is not a true job
evaluation system; however, in certain cases, market value can be used to price jobs—
particularly when the organization is sensitive to competition. These prevailing rates are
used to represent the relative worth of the jobs. In this approach, key jobs are measured
and valued against the market, and the remaining jobs are inserted into a hierarchy based
on their whole-job comparison to the benchmark jobs.

When matching a job with the competition, it is important to compare duties, scope, and
reporting relationships but not titles because they are often misleading.

Market-based evaluation can be particularly beneficial when an organization has similar
jobs in various locations throughout the United States. The disadvantage of a market-
based evaluation is that the data will be reliable only when gathered for a significant
number of jobs in the organization. Market-based evaluation results are more vulnerable
to legal challenges than job-content approaches. Another disadvantage is that market-
based evaluations do not recognize internal job value and, as a result, are more likely to
lead to discontent and frustration from within the organization.