Importance of Job Worth

Most of us equate at least a portion of our personal value or identify to our job.  Two of the main reasons for the lack of autonomy between the spheres relates to the percentage of our lives we spending working and the ever decreasing line between the workplace and home.  As a result, when we combine the psychological with the actual requirements, most employees feel undervalued for the work they perform.  Imagine how unlikely it would be to ask a group of your employees what they feel about their current pay and the response would be they are all overpaid.

As the labor market continues to recover slowing, more organizations want to know “what is this job worth?” Although the question seems straightforward at first, approaches vary and “devil is in the details.”  Some of the most common approaches include:

  • Gut valuing
  • Organizational value
  • Performance level
  • Evaluation

Gut valuing encompasses using our intuition to make a quick decision regarding a person, situation, or event.  Past experience and contextual analysis play into the decision, but little detailed or formal analysis occurs.  A typical example is when a supervisor starts a discussion of individual compensation by saying, “I really think this person is worth x amount and not a penny more.”

A slightly better approach considers a person’s value to the organization as a whole. This method of compensation evaluation formally or informally ranks an employee by how easy it would be for the organization to continue to operate at its current level without the person.

A more refined version of the organizational value method considers the actual performance level of the individual employee.  Either by formal evaluations or perceived personal contribution, employee compensation arises from who is a hard worker and who is not.  Although performance should make up an important portion of the compensation calculation, many organizations utilize too much subjectivity in their determinations.

Each of these approaches set compensation more on a case-by-case basis.  As a result, little empirical or comparable data comes into play in setting pay levels.  Although this might not be significant in an organization with a single employee, as the number of employees grow, it becomes a serious concern due to fairness and equity requirements.

Evaluation involves assessing jobs to determine relative worth.  Regardless if an organization adopts a formal or informal approach to determining value, two dimensions come into play: internal and external.  The internal dimension pertains to how comparable a job is to similar jobs within the same organization, while the external dimension encompasses the relative value of the position’s pay compared to other local or regional employers.  Once establishing the comparable value, most organizations determine the most appropriate placement.

As any organization looks at compensation, it is imperative that some form internal and external evaluation occur.  Only through a more comprehensive analysis can an organization determine how fair and equitable it is, but what it can do to attract and retain the type of employees it desires.

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