There are a number of methods for pricing jobs. The selection of proper techniques and the methodology of surveying are the job of the compensation professional.
Pricing is a basic job of compensation work and should always be done very well. In fact, the quality of many surveys conducted by those who claim to be compensation professionals is very poor. Sometimes the most elaborate surveys are technically the worst.
Methods Used
The most valid system of surveying jobs is through job matching surveys. When this method is used, each job to be surveyed is first identified and described. The surveying organization then distributes these descriptions to organizations that are to participate. Participants are asked to supply data on salaries paid to individuals for each of the jobs in the survey.
This may be done by mail alone. The validity and reliability of the information obtained are enhanced considerably, however, if there is at least telephone monitoring.
The ideal method is by personal visits and discussions about jobs. In fact, some survey groups meet regularly so that all participants understand clearly the jobs to be priced and the methods used.
A second method, and one that has considerable validity, is the information based survey. In this case, jobs are selected that have already been priced by some ongoing survey, usually using the job matching method. Jobs that have been priced by other surveys go into an information bank. They become the basis upon which other jobs are then priced. One well established information based survey collects about a half dozen priced jobs from each of more than three dozen ongoing surveys.
These provide a core group of more than two hundred priced jobs. Most of the surveys used are conducted by companies, in which there has been considerable discussion, resulting in a high degree of validity of job matching. There is information about each of the surveyed jobs and the surveys in the information bank. The jobs that are priced represent a cross section by industry, function, and level. They serve as a framework within which any position can be reasonably priced. This pricing can be done at a very low cost. Consider your own benchmarking system. Perhaps your company participates in enough surveys so that a sample of jobs can be taken from each and an information based survey established. More likely, a group of "peer group companies" should join together for various information exchange activities, and the establishment of an information based survey could be one such goal. There are a few surveys that are conducted on the basis of job evaluation matching. Surveyed jobs are, in effect, "priced" by evaluating other companies' jobs in terms of the surveying firm's job evaluation system. This approach assumes some correlation between the points of the job evaluation system and actual market pay relationships. That assumption isn't justified, but job evaluation pricing, nonetheless, is another system of job pricing and surveying that is used.
Data bank surveys are widely used. Usually, they employ the techniques of regression analysis. Various characteristics of the job, and sometimes of the people who hold the jobs, are fed into a computer that then calculates the correlation between each of the elements and salary levels paid to those in the sample. This becomes the basis for regression analysis. Then the elements of any other jobs and the persons filling the jobs can be entered, and the ''market price" is mathematically calculated.
There are other ways of pricing jobs besides surveying. For instance, some companies have developed reliable systems for monitoring their employment experience.
For this method to work, those who do recruiting work must keep some basic records, have access to knowledge about company jobs, and have some training in job matching.