Strategic Compensation In Canada

Canadian 4th Edition Long Solutions

Manual
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Chapter 8: Evaluating Jobs: The Point Method of Job Evaluation

TRUE/FALSE

1. The point method of job evaluation contains the following four steps: identify compensable factors;
scale the factors; weight the factors; and decide on what to pay.

ANS: F PTS: 1 REF: 297 OBJ: 1

2. A key advantage of the point method is its high degree of precision in measuring jobs.

ANS: T PTS: 1 REF: 297 OBJ: 1

3. In developing your job evaluation system, it is important that all the factors have the same number of
degrees.

ANS: F PTS: 1 REF: 300 OBJ: 1

4. The two methods for deriving factor weightings are statistical analysis and expert judgment.

ANS: T PTS: 1 REF: 301 OBJ: 1

5. Reliability of the job evaluation system means that the system will produce the same results even if
different evaluators are used.

ANS: T PTS: 1 REF: 305 OBJ: 1

6. In some cases, where to establish pay grade boundaries is an arbitrary decision.

ANS: T PTS: 1 REF: 320 OBJ: 3

7. The first key issue in establishing pay ranges is what width the ranges should be.

ANS: F PTS: 1 REF: 321 OBJ: 3

8. A pay range should mimic the range of performance or experience within jobs.

ANS: T PTS: 1 REF: 324 OBJ: 3

9. In establishing criteria for movement within a pay range, the three most commonly used are
experience, performance, and market rates.

ANS: F PTS: 1 REF: 326 OBJ: 3

10. The midpoint of split pay range serves as a control point to prevent pay increases unless they are
based on performance.

ANS: T PTS: 1 REF: 326 OBJ: 3

MULTIPLE CHOICE

1. Which of the following is not a component of the point method of job evaluation?
 a. compensable factors
b. total points
c. factor degrees
d. competencies
ANS: D PTS: 1 REF: 297 OBJ: 1
BLM: Remember

2. Which of the following is not considered to be an advantage of the point method of job evaluation?
a. its high degree of precision in measuring jobs
b. process is objective and scientific
c. easy to apply with consistency
d. allows jobs to be clustered in pay grades more easily
ANS: B PTS: 1 REF: 297 OBJ: 2
BLM: Understand

3. Which is not one of the steps in the development of a point method job evaluation plan?
a. identify the compensable factors.
b. analyze the questionnaire data.
c. test the system.
d. scale the factors.
ANS: B PTS: 1 REF: 297 OBJ: 1
BLM: Understand

4. What determines the relative value of a job and, thus, its position on the hierarchy of jobs using the
point method of job evaluation?
a. market comparators
b. regression analysis
c. base pay structure
d. point scores of the jobs
ANS: D PTS: 1 REF: 297 OBJ: 1
BLM: Understand

5. Which of the following would be an example of job outputs for a painter?

a. manual dexterity and the ability to mix paint
b. dealing with paint fumes and heights
c. responsible for neatly painted walls and ceilings
d. required to climb ladders and exercise continuous repetitive movement
ANS: C PTS: 1 REF: 298 OBJ: 1
BLM: Apply

6. Which of the following statements is true regarding how many factors and different job evaluation
systems, by law, should be used?
a. The broader the group of jobs to be covered with a single job evaluation system, the
greater the number of factors that will be needed.
b. Pay equity law requires a single plan be used for all jobs in a unionized company.
c. A valid point system could operate with less than seven factors.
d. If the organization is not unionized Ontario legislation requires the use of different plans
for blue-collar and white-collar jobs.
ANS: A PTS: 1 REF: 298 OBJ: 1
BLM: Understand
 7. Which of the following compensable factors represents the main category of “skill”?
a. dexterity
b. hazards
c. importance of accuracy
d. pressure of work
ANS: A PTS: 1 REF: 299 OBJ: 1
BLM: Understand

8. Assume (a), (b), (c), and (d) represent degree 1, 2, 3, and 4, respectively, for the formal education
factor on your summary rating chart for the point method of job evaluation. Based on the degree
definitions which of the following degrees is arranged out of place on the chart?
a. Degree 1: completion of high school
b. Degree 2: one year of post secondary education
c. Degree 3: three year college diploma or university degree
d. Degree 4: completion of grade 9
ANS: D PTS: 1 REF: 300 OBJ: 1
BLM: Apply

9. The compensable factors that are selected are not likely to be equal in importance to your firm.
Which step in developing a job evaluation system using the point method recognizes this variation in
importance?
a. Defining the factors
b. Weighting the factors
c. Scaling the factors
d. Testing the system
ANS: B PTS: 1 REF: 300 OBJ: 1
BLM: Understand

10. Which of the following approaches assigns responsibility for deriving factor weights to a committee of
knowledgeable individuals within the organization?
a. “a priori” method
b. statistical analysis
c. multiple regression
d. virtual teams
ANS: A PTS: 1 REF: 301 OBJ: 1
BLM: Remember

11. How can the job evaluation system be tested for reliability?
a. Compare the factor weightings of the different evaluators.
b. Compare the factor choices of the different evaluators.
c. Compare the results of the different evaluators on the different factors.
d. Compare the total point scores of the different evaluators.
ANS: C PTS: 1 REF: 305 OBJ: 1
BLM: Understand

12. Which of the following is not a test used to determine the validity of the job evaluation system?
a. reliability
b. calibrating to the market
c. estimating total compensation costs
 d. feedback surveys
ANS: D PTS: 1 REF: 305 OBJ: 1
BLM: Remember

13. When are benchmark jobs used?

a. In circumstances where appropriate market comparator jobs cannot be found.
b. To test whether the labour market is tight or loose.
c. To calibrate the job evaluation system to the market.
d. As the norm against which to measure employee performance.
ANS: C PTS: 1 REF: 306 OBJ: 1
BLM: Remember NOT: Understand

14. What does the market line determine?

a. Whether the firm should lead, lag, or match the market
b. The relationship of job evaluation results to market pay rates
c. The relationship of job evaluation results to a firm’s pay grades
d. A pay rate based on a market survey
ANS: B PTS: 1 REF: 307 OBJ: 1
BLM: Understand

15. What does the correlation coefficient indicate?

a. outlier jobs
b. “goodness of fit” between the point values and market pay rates
c. slope of regression line
d. pay policy line height
ANS: B PTS: 1 REF: 308 OBJ: 1
BLM: Understand

16. In exploring solutions to job evaluation problems, which is not one of the main steps?
a. Check that benchmark jobs are equivalent to market comparator jobs.
b. Determine if the wrong factors have been included in the job evaluation system.
c. Adjust the point totals of the outlier jobs to improve the correlation coefficient.
d. Examine whether jobs have been badly evaluated.
ANS: C PTS: 1 REF: 309 OBJ: 1
BLM: Understand

17. Which is not one of the possible pitfalls of the point method of job evaluation?
a. hierarchical grounding
b. factor overlaps
c. gender bias
d. recency effect
ANS: D PTS: 1 REF: 312 OBJ: 2
BLM: Remember

18. Considering the factor of “decision-making” which of the following degree statements is an example
of inconsistent construct formation?
a. Degree 1: There is no freedom to make decisions at this level.
b. Degree 2: There is usually restricted freedom to make decisions.
c. Degree 3: There is usually limited freedom to purchase resources.
d. Degree 4: There is usually some freedom to make decisions.
 ANS: C PTS: 1 REF: 313 OBJ: 2
BLM: Apply

19. Which of the following is not a source of gender bias?

a. excessive range in the degree statements
b. ignoring factors found in female jobs
c. biased job descriptions
d. separate job families
ANS: A PTS: 1 REF: 315 OBJ: 2
BLM: Understand

20. The belief that “any of the skills needed to work with young children should not be highly rated
because care giving comes natural to women” is an example of what type of gender bias problem?
a. ignoring factors found in female jobs
b. confusing job content with stereotypes
c. biased job descriptions
d. differential evaluation of factors
ANS: B PTS: 1 REF: 316 OBJ: 2
BLM: Apply

21. Which of the following defines a pay grade?

a. a grouping of jobs for pay purposes
b. the minimum and the maximum pay for a job
c. established with job descriptions
d. feedback from a compensation survey
ANS: A PTS: 1 REF: 319 OBJ: 3
BLM: Remember

22. Which of the following components is not considered part of the base pay structure?
a. merit bonuses
b. pay ranges
c. shift differentials
d. pay grades
ANS: A PTS: 1 REF: 319 OBJ: 3
BLM: Remember

23. Which of the following terms refers to the actual minimum and maximum pay rate, in dollar terms, for
all the jobs that fall in a particular pay grade?
a. pay range
b. broadbands
c. mrket anchor
d. step progression
ANS: A PTS: 1 REF: 319 OBJ: 3
BLM: Remember

24. What is a negative consequence of clustering jobs into pay grades?

a. Pay grades make it difficult to justify and explain pay rates to employees.
b. Pay grades create less stability with the pay system.
c. There may be pressure to reclassify borderline jobs or to promote people to get more
money.
 d. Similar jobs are grouped into the same grades.
ANS: C PTS: 1 REF: 319 OBJ: 3
BLM: Understand

25. Which of the following is not one of the methods that can be used in establishing pay grade sizes?
a. equal interval approach
b. equal increase approach
c. equal percentage approach
d. equal spread approach
ANS: D PTS: 1 REF: 320 OBJ: 3
BLM: Remember

26. Which of the following best explains how to establish pay grade sizes using the telescopic approach?
a. Look for natural breaks between clusters of jobs when setting up the grades.
b. Increase the grade widths for higher-value jobs but not necessarily by an equal percentage.
c. Reduce the number of pay grades by creating large bands.
d. Make the point spreads equal for all pay grades.
ANS: B PTS: 1 REF: 320 OBJ: 3
BLM: Understand

27. The pay policy line is used to establish which of the following pay structure components?
a. midpoint of the pay range
b. range spreads
c. overlaps between ranges
d. pay grade size
ANS: A PTS: 1 REF: 322 OBJ: 3
BLM: Understand

28. This term is used to describe the dollar value of the difference between the maximum and the
minimum of the pay range for each pay grade.
a. intergrade differentials
b. grade overlaps
c. range spread
d. quartiles
ANS: C PTS: 1 REF: 323 OBJ: 3
BLM: Remember

29. Which of the following practices is a threat to the integrity of the job evaluation system?
a. wider pay grades as the system goes up
b. equal dollar differences between the range midpoint and the range minimum, and the
range midpoint and the range maximum
c. wider range spreads for higher pay grades
d. excessive overlaps between pay ranges
ANS: D PTS: 1 REF: 326 OBJ: 3
BLM: Understand

30. Your firm allows employees to reach the midpoint of their pay range using annual seniority increases.
Pay increases beyond the midpoint are based on performance. What type of range movement system
is your employer using?
a. just noticeable difference
 b. split pay range
c. fixed steps
d. supervisory increments
ANS: A PTS: 1 REF: 326 OBJ: 3
BLM: Understand

SHORT ANSWER

1. Identify and briefly describe the main steps in developing a job evaluation system using the point
method.

ANS:
The main steps in developing a point method of job evaluation system are as follows: identify the
compensable factors, scale the factors, weight the factors, and apply and test the system. Appropriate
compensable factors are those characteristics of jobs that are valued by the organization and
differentiate jobs from one another. The four main categories of factors include: skill, effort,
responsibility, and working conditions. Scaling involves breaking down the factors into major
categories (i.e. universal factors, sub factors & degrees or levels). In “scaling the factors” the
objective is to create a scale for each factor that reliability measures the extent to which that factor is
present in a given job. Determining the relative weight for each factor is based on how the
organization values each factor. Although it can be done statistically, this is very rare, and it is
generally a judgmental process. Once the weightings are determined points are assigned across
factors, sub factors, and degrees. The total point value of each job is determined using the system.
The resulting hierarchy of jobs is tested to determine validity (i.e. the system is actually a true measure
of relative job worth) and for reliability (i.e. the results come out the same when the system is applied
by different evaluators). If so, the system must then be calibrated to the market, using
benchmark jobs and market comparator jobs. This provides the opportunity to test for market fit, as
well as testing for other potential problems.

PTS: 1 REF: 297 OBJ: 1

2. Discuss the advantages and disadvantages of the point method of job evaluation.

ANS:
The advantages of this system include a high degree of precision measuring jobs, it’s easy to apply
with consistency, it provides an ordering of jobs and relative value of each, and it allows jobs to be
clustered in pay classes more easily. The disadvantages include the complexity and difficulty involved
in developing this system, the fact that it is basically a subjective process, and the possibility of flaws.

PTS: 1 REF: 297 OBJ: 1

3. Briefly describe the main pitfalls in designing a point method system of job evaluation.

ANS:
The main pitfalls are inconsistent construct formation, factor overlaps, hierarchical grounding, and
gender bias.

PTS: 1 REF: 312 OBJ: 2

4. What are the key considerations in establishing pay grades and pay ranges?

ANS:
 Issues in establishing pay grades include how many grades and grade sizes. In the number of pay
grades important considerations include the total range of pay of jobs covered by a particular job
evaluation system, and the width of the pay ranges to be used. In setting pay grade size four methods
to consider are: the equal interval approach, the equal increase approach, the equal percentage
approach, and the telescopic approach. Issues in establishing pay ranges include setting the range
midpoints and the range spreads. To set the range midpoints, a market line graph is used.
Considerations in setting range spreads include the extent to which the organization wants to use
compensation to recognize differences between employees performing the same jobs, the existence of
promotional opportunities, and how many steps or increments the organization intends to have in the
range.

PTS: 1 REF: 319 OBJ: 3

5. What criteria is used to determine movement through the pay range?

ANS:
The three most common criteria used to determine movement through the pay range are experience,
seniority, and performance. In some cases all three are used. There are many combination
possibilities. Some firms, for example, use the mid point of the range as a control point. Employees
are allowed to reach the midpoint of their range based on seniority. Beyond the midpoint pay
increases are based on performance. Most pay ranges have six or seven increments within a pay
range. Some firms do not use fixed steps or increments at all.

PTS: 1 REF: 326 OBJ: 3