Page 185 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 5. Salary 171

be possible to adequately reflect organizational differences. This may mean adding additional
grades or completely rewriting the standards. Too few organizational levels exist when insuffi-
cient compensation growth (i.e., too small a number of grades) exists between levels. A practi-
cal test of this hypothesis is to determine when the differences in compensation midpoints no
longer adequately reflect promotional growth.
Point Factors

Point factor plans are similar to the classification method in that they require the compari-
son of a job to an impartial measuring stick rather than directly with other jobs. However,
rather than develop a composite standard for each grade level, the point factors begin at the
opposite end of the spectrum. They indicate the separate factors that make up the compos-
ite and identify degree statements describing various levels of requirement, assigning each
degree statement a number of points. Thus, if work experience needed to satisfactorily learn
the job is one factor, it might be broken down into the various degree statements shown in
Table 5-3. Therefore, a job requiring six months to learn would be given 75 points, while a
job requiring five years would receive 150 points.

Amount of Experience Needed Job Points

Under 3 months 25
At least 3 but less than 6 months 50

At least 6 but less than 12 months 75
At least 1 but less than 2 years 100

At least 2 but less than 4 years 125
At least 4 but less than 8 years 150

At least 8 but less than 15 years 175
15 years or more 200

Table 5-3. Point factor example of educational requirements

Most factor plans focus on responsibilities and the knowledge needed to perform the
tasks. Within these two major categories, a number of separate factors can be constructed
(e.g., separate factors of responsibility for sales, profit, equipment, and employees). Such
plans typically have from 5 to 10 factors. The more factors, the more suspect the evaluation
plan, as it is very likely that several factors are measuring the same value in only a slightly
different manner.

Developing the Structure. By examining the job factor by factor and assigning the correct
number of points to the most appropriate degree statement within the factor, it is possible to
sum the points assigned and array the jobs on their point totals. These point totals, along
with the current pay of each person in that job, are typically displayed in a scattergram using
an X (job points) and Y (pay) axis as shown in Figure 5-1.