Scary, Ugly, Nasty
Job Leveling Questions You Fear Being Asked!
Milwaukee Area Compensation Association Sept 16, 2010 Tom McMullen
But first a competition
Which CEO job is bigger?
1. Wal-Mart ($400B rev, $13B profits, 2MM ees) 2. Conoco Philips ($230B rev, -$17B profits, 35K ees). 3. General Electric ($183B rev, $17B profits, 320K ees)
Which top BU leader job is bigger?
($2.5B diversified consumer products company)
1. 2. 3.
North America (3 countries) $1B revenues Western Europe (10 countries) $1B revenues Both jobs are the same size
Which CFO job is bigger? ($5B company)
1. Public company widely held 2. Private company closely held 3. Both jobs are the same size
Which top HR job is bigger?
($30B company, 1000 HR employees)
1: Centralized (i.e., solid line reports) 2: Strategic staff/advisory function w/ small corporate staff. 3: Both jobs are the same size
Which top Sales job is bigger?
($50B company, 5000 sales employees)
1: Centralized (i.e., solid line reports) 2: Strategic global accounts and staff/advisory function to business units. 3: Both jobs are the size
Which top legal job is bigger? ($5B company)
1.With a span of control of 7 direct reports. Limited external law firm usage 2.Span of control of 2 direct reports. Significant external law firm usage. 3.Both jobs are the same size
Which top Information Technology job is bigger? ($5B company)
1: Large healthcare system 2: Diversified financial services firm 3: Retail apparel chain
How many of these statements are true regarding job evaluation (JE)?
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
JE takes into account the skills required for outstanding job performance Some form of JE is used by at least 90% of organizations Job autonomy Is a common JE factor Effect on errors is a common JE factor Market supply and demand of job talent is a common JE factor Achievement of MBOs is a common JE factor Most JEs are done by the HR function A minority of companies conduct proactive JE audits You need a job description to evaluate a job The first reference to JE was found in Iraq
How many of these statements are true regarding job evaluation (JE)?
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
JE takes into account the skills required for outstanding job performance (F) Some form of JE is used by at least 90% of organizations (T) Job autonomy Is a common JE factor (T) Effect on errors is a common JE factor (F) Market supply and demand of job talent is a common JE factor (F) Achievement of MBOs is a common JE factor (F) Most JEs are done by the HR function (T) A minority of companies conduct proactive JE audits (T) You need a job description to evaluate a job (F) The first reference to JE was found in Iraq (T)
Some background
Job Evaluation: What is it?
A Methodology - Determining the intrinsic value of work to the organization using measurement criteria and scales A Process Using the job evaluation methodology to add value to the organization, by establishing clear job knowledge / skills / abilities, aligning work with rewards, and determining the capability requirements for jobs
Disciplined & Consistent Judgment
2009 Hay Group. All rights reserved.
13
Job Evaluation Considerations
2009 Hay Group. All rights reserved.
14
The Business Case: Work Valuing Outcomes
58% of companies believe that 60% or more of their positions can be matched to the market.
Sounds Good But what are the characteristics of the remaining jobs? Many of the jobs you cant match are the ones youve designed uniquely to give you a a competitive advantage!
Warning!
Very often, these are your CRITICAL positions.
40%
Can not be Matched Can be Matched
60%
2009 Hay Group. All rights reserved.
15
The Business Case: Work Valuing Outcomes
60% of organizations believe that at least 80% of their positions are in the appropriate range...
Again, this sounds Good. But, if 20% of your positions are not in the right grade, you are wasting 2% of payroll annually! And, 40% of the respondents believe that more than 20% of their jobs are in the wrong grade or range.
2009 Hay Group. All rights reserved.
20%
Incorrectly Placed
Correctly Placed
80%
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The Business Case: Bottom Line Impact
Consider this scenario:
1000 positions $50,000 average total compensation Grade structure with about 15% midpoint difference between grades
If 20% of the positions are mis-evaluated by one grade, the bottom line impact will be $1.2MM annually. (1000 x $50,000 x 15% x 20% = $1.5MM) On total payroll of $50 million, this represents 3% waste annually This is an impact on revenue of $15MM for an organization with a 10% profit margin
2009 Hay Group. All rights reserved.
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What Does Line Management Want?
Executives are interested in what the market average is for a job title but this only tells part of the story They also want to know:
What the market pays for their jobs - considering role complexity and responsibility What the variables are that make a job worth more or less How to link market data to internal career paths
At the end of the day, executives have a limited budget for compensation and they want to spend it as effectively as possible
2009 Hay Group. All rights reserved.
18
Job Evaluation Prevalence
Many use simple processes
Prevalence
Point factor job evaluation Functional job family modeling Whole job comparison Skill-based or competency-based job leveling Broad banding / career banding Other
Rated as Effective or Very Effective
27% 8% 23% 7% 9% 23%
82% 80% 76% 75% 66%
2009 Hay Group. All rights reserved.
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Job Evaluation Processes: HR still taking the lead
Human Resources is doing the work reactively*:
60% 60%
28% 18%
2009 Hay Group. All rights reserved.
* Percentage total does not include blank responses or miscellaneous.
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Resolving Conflicts Between Market Pricing and Job Evaluation
When there are conflicts between job evaluation and market data:
38%
38% 11% 6% Change Grade to fit Market
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Priority to Job Priority to Evaluation External Market
JE for Grade, Market for Pay
2009 Hay Group. All rights reserved.
Resolving Conflicts Between Market Pricing and Job Evaluation
Our recommendations
Key is to include this as part of reward strategy Agree to principles before a review of specific market data and be able to defend business rationale Be consistent in application of decision rules
2009 Hay Group. All rights reserved.
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Lets get nasty!
#1 If people are the organizations most important asset, why isnt the Chief HR Officers job evaluated higher (or at least the same as) the Chief Financial Officers job?
#2 Managing flight risk - how do you respond to managers comment that I must promote this person or they will leave?
#3 How do you take into consideration magnitude in startups / fast growing businesses?
#4 Why do we primarily consider revenues or operating budgets in measuring magnitude and not market capitalization or profitability?
#5 Why does hierarchy seem to have a big impact in job evaluation? How come it is almost impossible for an expert to have a higher grade than its manager?
#6 How does reducing staff and increasing workload affect job evaluation?
#7 Outsourcing - how does outsourcing activities and staff impact job evaluation?
#8 How is risk taken into account in job evaluation?
Your (Nasty) Questions?
Contact:
Tom McMullen Hay Group Chicago Tom.mcmullen@haygroup.com O: +1.312.228.1848 C: +1.312.363.7779
