MHRM 6601 Week 2 Point-Factor Job Evaluation Example

Replacing Pay Order With a Declared Method: A Point-Factor Evaluation of Twelve Benchmark Jobs at Stone Arch Credit Union and an Order Any Job Holder Can Check

Student Name

Walden University

MHRM 6601: Benefits, Compensation, and Resource Allocation

Instructor Name

Month Day, Year

Replacing Pay Order With a Declared Method: A Point-Factor Evaluation of Twelve Benchmark Jobs at Stone Arch Credit Union and an Order Any Job Holder Can Check

The Problem With the Current Order

Stone Arch Credit Union, the composite Twin Cities cooperative this course follows, has never formally evaluated its jobs. When people ask whether one job is worth more than another, the answer has been to compare what the current holders earn. That answer is circular: it uses pay to justify pay. It also preserves whatever accidents of hiring and negotiation produced today's salaries. This paper evaluates twelve benchmark jobs, chosen because together they cover every branch, the contact center and the main office functions, using a declared method that any employee could follow.

Choosing the Method

Three methods were considered. Simple ranking, placing jobs in order from most to least valuable, is fast for twelve jobs, but it records no distances between them and gives a disappointed job holder nothing to examine except the evaluator's judgment. Classification, writing grade descriptions and slotting jobs into them, suits large organizations with many similar jobs but would require descriptions as long as the job list itself. A point-factor plan defines a few compensable factors, writes levels for each, weights the factors and scores every job the same way. It takes longer to build but produces an order with reasons attached (Milkovich et al., 2020). Because the purpose here is an order that can be defended to anyone who disagrees, the point-factor plan was chosen.

Factors, Weights and Levels

Four factors were chosen after reviewing job descriptions and interviewing two holders of each job. Knowledge covers the education, training and experience needed to do the job competently, weighted at 35 percent. Judgment covers how often the job requires decisions without a rule to follow, at 25 percent. Accountability covers the size of the financial or member consequences of an error, at 25 percent. Communication covers the difficulty of the conversations the job requires, from routine transactions to delivering a loan denial, at 15 percent. Each factor has five written levels. The maximum total is 1,000 points, so each Knowledge level is worth 70 points, each Judgment and Accountability level 50 and each Communication level 30. Physical working conditions were left out, because they barely vary among these jobs and would add points without separating them.

Scores

Table 1

Point-Factor Scores for Twelve Benchmark Jobs

Composite organization. Levels 1 to 5; points equal level times 70, 50, 50 and 30 respectively.

Where the New Order Differs From Pay

The evaluation raises two questions about current pay. Contact center representatives are paid about 9 percent more than tellers, a result of a hiring push when the contact center opened; they do score 20 points higher, so the order holds, but a 20-point difference is small and the pay gap looks larger than the work justifies. More significantly, the order itself reverses in one place: compliance analysts are paid below consumer lenders even though they score 70 points higher, mainly on Knowledge and Judgment. Lenders' pay rose with a commission plan years ago and stayed high when the plan ended. The evaluation does not by itself say what anyone should be paid; that requires the market analysis in Week 3. It does say which differences in pay now need a reason.

Testing the Plan for Bias

Point-factor plans can carry old assumptions about which work is valuable, often undervaluing jobs historically held by women (Blau & Kahn, 2017). Two checks were made. First, the Communication factor was written to credit difficult member conversations, not only presentations to executives, so frontline jobs are not scored low by definition. Second, the scores were reviewed with job holders' names and current pay hidden. At Stone Arch, tellers and member service representatives are mostly women; their scores were rechecked by a second evaluator, who changed one level, raising the member service representative's Communication score from 2 to 3.

Defending the Order

A job holder who disagrees can now ask a specific question: which factor level is wrong, and why? That is a conversation about the work, not about anyone's salary. Gerhart and Rynes (2003) observe that pay gaps provoke less resentment once people can see the rules that produced them, and the written levels supply those rules.

Limits

Two interviews per job may miss variation between branches. The weights reflect the evaluator's judgment and the leadership team's review; a different team could weight Accountability more heavily. The plan should be revisited when jobs change.

References

Blau, F. D., & Kahn, L. M. (2017). The gender wage gap: Extent, trends, and explanations. Journal of Economic Literature, 55(3), 789-865. https://doi.org/10.1257/jel.20160995

Gerhart, B., & Rynes, S. L. (2003). Compensation: Theory, evidence, and strategic implications. Sage.

Milkovich, G. T., Newman, J. M., & Gerhart, B. (2020). Compensation (13th ed.). McGraw-Hill Education.