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Master of Donetsk National Technical University Evgeniya Davydova

Master of DonNTU
Evgeniya Davydova

Educational and Scientific Institute “Higher School of Economics and Management” (IEM)

Faculty: Management (FM)

Department: Personnel Management and Labour Economics (PMLE)

Speciality: “Personnel Management and Labour Economics” (PMLE)

Theme of Master's Work: “Justification of wage differentiation in the organization”

Scientific Supervisor: Ph. D. (in Economics), Associate Professor of the department PMLE Elena Chumachenko

 
Autobiography

ABSTRACT
of the qualification master’s work
“Justification of wage differentiation in the organization”

INTRODUCTION

The traditional system of financial compensation refers to the separation of monetary compensation for permanent workers (base salary) and variable (bonuses, bonuses) parts. This base salary is guaranteed compensation of employees for the performance a strictly prescribed range of duties at a particular workplace, with a certain level efficiency and in accordance with the rules and standards adopted by the company. If the salary is linked also with the skill level needed at this workplace, and increase the worker's skill entails an increase in his salary in one office, a fixed proportion of salary goes to work, as an incentive for employee development, enhance their professionalism.

Today, many companies base salaries are determined on the basis of subjective perceptions, leaders, necessary and sufficient amount compensation for the fulfillment of a job. There are many cases where the salary is dependent on the "disruptive force" an employee, his ability to bargain for his remuneration, from the prevailing tradition in wages and other factors not related to the value and importance of the position. And if in small companies is quite possible that in medium and large organizations, subjectivity and lack of definition of basic salary leads to demotivation of staff. Employees do not understand why at the close of the importance of post base salaries differ significantly, they do not know what the criteria for evaluation of high-and low-paying jobs that need doing, so you can expect a salary increase (other than going to the boss and blackmail him with his dismissal if not increase the salary).

A THEME URGENCY

The remuneration system, currently used on most domestic enterprises obsolete. This is manifested in the fact that it does not take into account any specifics of the enterprise in a market economy nor differentiated responsibilities and outcomes of employees who hold identical positions. Experience shows that material incentives for employees of foreign companies, the solution to this problem is to develop and implement an alternative system of official salaries – a grade system. Experts note that grade ideal for large enterprises, they link pay and logic of business, provide the required transparency and widely tested in the West [1].

COMMUNICATION OF WORK WITH SCIENTIFIC PROGRAMS, PLANS, THEMES

Qualification master’s work was carried out during 2009-2010 years according to scientific directions of the chair “Personnel Management and Labour Economics” of Donetsk National Technical University.

THE PURPOSE AND PROBLEMS OF THE RESEARCH

The work purpose is the study of foreign experience of applying grade in determining employees' wages and assessment of prospects for this system to large domestic enterprises. To achieve this goal it is necessary to solve the main problems of the development of the research:

  1. characterize the nature and value a grade system;
  2. consider the classical methods a grade stages;
  3. analyze the difference a grade of the tariff system;
  4. determine the method a grade on domestic enterprises.

Theobject of theresearches is the organization of wages in domestic enterprises.

Thesubject of the researches is grade wage system.

Methods of researches. We used the methods of formal and dialectical logic, qualitative analysis and synthesis, systematic approach, prediction.

PROSPECTIVE SCIENTIFIC NOVELTY OF THE RECEIVED RESULTS

Scientific novelty of the work is to develop a new model of pay, which will be forwarded to a fair remuneration and motivation of management personnel. This model includes several foreign systems of remuneration, the principal of which is the grade system. This system allows grade "associate" salaries and business logic, as well as to untie the knot of problems associated with the motivation of staff.

PRACTICAL VALUE OF THE RECEIVED RESULTS

Implementing grade on domestic enterprises suggests the following benefits: improves the balance of labour resources to help manage the wage fund and make the system of payroll flexibility, ease the process of indexing wages; regulate the imbalance of salaries at the company, will determine how much costs the company office at any level; would eliminate significant inefficiencies; solve the problem of calculating additional payments for work done on standards that are lower or higher officers, will, if necessary, to quickly analyze the structure of salaries as well as a permanent part of wages, as well as to monitor their dynamics.

THE REVIEW OF DEVELOPMENT AND RESEARCH ON THE A THEME

Valuation of grade for Enterprise

Grade system (positional positions) is a kind of corporate "table of ranks" in which each cluster (grade) posts matched your level of wages. Grading – a method of creating a universal hierarchy of positions (ranks) for all company personnel, an assessment system to determine acceptable levels for all workers compensation based on a comparison of the relative value to the company's different areas of work (job). The main advantage of grading – "measuring the immeasurable": translation rate of the intangible "value of the employee" in the cash equivalent.

Based grading can build a corporate policy on compensation and benefits, which will optimize the cost of personnel, not by a formal reduction in Wages, as a result of improved organizational structure and staffing, more effective planning of personnel costs, other. Effective grade simplifies administration of the corporate system of material incentives, to determine the allowable amount of remuneration for the newly added positions, in addition, an instrument of influence on the main components of personnel expenses.

At the heart grading posts on the following principles:

  • the economic justification – the connection with the results of the company;
  • clarity and transparency – the objectivity of the system, it is clear for all categories of staff;
  • justice – with a greater impact on the result of the company employee receives greater remuneration;
  • homogeneity – the appropriate fee staff providing an equal influence on the result;
  • market competitiveness – creating competitive advantages for companies to attract highly qualified experts [2].

The procedure grading sufficiently costly. For its implementation, the resources required, such as:

  • information (strategy, objectives and plans of the company, the organizational structure of the enterprise; directory of posts and job descriptions, analysis of wage sector, other);
  • people (expert committee consisting of 10-15 people: top management, middle managers, at the Department of Personnel Management, possibly involving external consultant);
  • Finance (salary members of the expert committee, as well as the costs of training and consulting services to agencies);
  • time (an average of 1-1,5 years for the development and implementation).

For the employee new system allows:

  • understand the place that takes its position in the existing hierarchy of positions and to evaluate its role for the company;
  • receive fair remuneration for work – depending on the level of complexity, responsibility, other of the work;
  • assess the prospects of their professional and career development;
  • be able to "horizontal" career development (promotion of the steps of skill within the same post at the expense of more complex problems, expanding the circle of responsibility and authority) – to change grade or podgrade and related earnings;
  • consistently acquire new professional knowledge and skills necessary to work effectively at a higher position.

Returning to the term grading should be noted that we mean by this term is the job evaluation or job positions, though in practice, personnel management can be traced use of the term for two different approaches.

The first approach: grading office or employment, when evaluated and ranked, distributed to "grade" posts, regardless of what kind of employee holds the position. Grade positions depends on the value and importance of this position for the company.

The second approach: grading employees – when evaluated and distributed to grade employees personally. In this case, in the aggregate accounted for, and the value of work performed, and the value of the worker, which depends on his qualifications, experience, skill and level of development of its professional competence.

The second approach to grading is justified in companies where employees performed functions and tasks, the amount of independence and responsibility, and other parameters depend to a greater degree of post and the skills and abilities of the worker. That is, we can say that every employee in this company to a certain extent unique, and performed its function and tasks can be considered as a separate post. These parameters correspond, for example, consulting companies, or other small-size companies, which have high demands on the level of education and skills.

This section also discusses the main advantages and disadvantages of the grade system, comparative approaches to the grading of certain parameters, unlike the grade system the tariff wage, stages of implementation of the system.

Methods for determining the significance of posts

The essence of grading – in relation to the inner significance of posts for the organization (internal value) with their importance in the market (external value). Therefore, grading begins with research positions within the organization. The purpose – to distribute the post of importance for the company. To do this, use two types of procedures – analytical and nonanalytic (fig. 1).

Figure 1 – Methods for determining the significance of posts
Figure 1 – Methods for determining the significance of posts
(animation: volume – 56,3 KB; size – 481x335; delay between shots - 50 ms; delay between the last and first shots – 650 ms; number of repetition cycles – infinity)

Non-analytic methods:

  1. The method of directranking. When ranking posts should be guided by clear criteria. Usually, it coincides with a view to ranking: allocate positions on the importance for the company. This work is entrusted to experts from among experienced workers, as well as the heads of various units. For this purpose, a special commission. The most difficult part of the commission's work is to compare the ratings obtained from different experts, in the case of their differences. They will vary: for this method – the most subjective. In this case, resorting to the discussion and negotiation, and apply statistical methods: rank correlation, assigning "weight" positions depending on rank [3].
  2. The method of classification. It involves the distribution of posts by category, depending on the basic characteristics: the presence of higher education, governance function. Often the classification is used as a supplementary method in addition to the method of direct ranking. The most well-known method based on the classification, developed by “Watson Wyatt”.
  3. The method of paired comparisons. A known limitation of the method – Ranking subject only foreseeable number of objects. In addition, the expert who makes a comparison, should know all the positions in the organization (at least, the difference in their significance for her). With a large number of objects method is cumbersome, and the transfer of part of the "other hand" virtually impossible.

Analytic methods:

  1. Factor method. Under the phrase "factor method" refers to two ways of development of an instrument: it may be the result of the calculation of statistically stable relationships between a large number of features posts (factor analysis) or developed within the organization to identify significant signs of posts – so-called offset factors. The statistical method is laborious, so he applied as a rule, large research and counseling centers that can provide themselves with the necessary amount of data and computing capabilities. Method of using offset by factors much easier, especially since it is usually used in conjunction with the Score Method: need a way to assess the severity of each factor. Compensable factors are developed, usually with the involvement of company executives, because only they can formulate the most important aspects for the organization of labor, which affect the amount of payment for any position in the organization. Factors equipped with a scale, you can create a tool to assess positions.
  2. Score Method. It is simple: it is enough to build several scales for assessing the post (based on the compensable factors) to determine the rules for assigning points to experiment with the length of the scale, the number and content – and the tool is ready. However, it can be argued that the point rating method has no independent meaning, and it should be called "quotient-tenths". This approach results in at least an interval scale: the distance between the positions evaluated are expressed in numerical form, and the posts can be compared with each other on the "weight". A striking example of this approach is the method of the “Hay Group”.

Classical methods of grade

The best-known tools are the methods of the “Hay Group” and “Watson Wyatt”. The first is universal, "free from the industrial component, and the second focused on the definition grade in management, and it provides for assessment and management, and member posts. There are techniques that large corporations provide for their own needs. For example, “Kodak” uses a fairly compact technique that allows to rank all the posts on the criteria that are important and absolutely transparent to it. Thus, positions, measured by the “Hay Group” anywhere in the world and in any organization, comparable, and the work, estimated by the method of “Kodak” – only in the framework of this corporation.

The method of “HayGroup”

The method, known as "the method of guiding the tables Hay (Hay Guide Hart Profile Method). In the process of evaluation for this method analyzes the content of each work for each factor and obtain a numerical estimate. The method provides an assessment of the complexity of work on three far-reaching factors:

  • know how;
  • problem solving;
  • accountability.

Each is divided into elements (a total of eight). To each element drawn extensive descriptions of each level of complexity of elements that provide guidance for experts and ensure consistency in the application. Description level allows an appraiser to determine the measure of the complexity of this element and express it in numerical (alphabetic) value. This method involves the use of reference tables, which is determined by the number of points. Measuring scales are based on a geometric progression. All works are distributed along the axes of factors. The role of "coordinates" carry the names of rows and columns, which are also indicated in the evaluation of profile positions.

Each guide table specifies in detail the factors in terms of two (to address) or three (for technology and accountability) elements. Descriptions of the requirements of the rows and columns of the table guide. The intersection of suitable descriptions of the row and column in all three dimensions of the estimated yields an estimate in points.

The employee conducting the assessment, further proposed to choose the most appropriate value of the three options, one of which is the average, and minimum and maximum differ by 15%, which is observed in all the rows and columns, the method and is considered by developers of the method of Hay, a minimum threshold of perceptibility, and is defined by researchers as "fine tuning". If you select the factor may mark: "+" if the choice between this and the subsequent level, "–" when choosing between this and the previous level.

Various studies correspond to different correlation factors. For example, the share of technology in the profile decreases moving from the upper left corner of the table in the lower right side, in the upper left-hand corner are research and analytical studies focusing on mental activity (eg, researcher), and in the lower right – the job action, performing with high responsibility (eg, driver). On the basis of long-term observations developers of the method were highlighted areas of the table, which reflect the unlikely combination of parameters one factor.

The method of Hay is one of the most used in a market economy: it is used in more than 8000 organizations, including half of the 50 largest global companies [4]. In a globalized economy, this method is used and can be recommended for Ukrainian organizations. However, using the method of Hay in Ukraine is advisable only in cases when the definition of the complexity of work or skills is not possible to apply the qualification guides operating on the territory of Ukraine.

Method “Watson Wyatt”

The method is based on several different principles than the method of Hay [5]. If the latter involves scoring positions, allowing them to rank on received "weights" the system "Watson Wyatt", in contrast, initially classified position to a certain category, and then, within it, "weighing" of functionals on the factors to determine exactly grade. The system precisely positions any post in the "Grade Map", includes 25 steps (grade), with its global due to the fact that it builds a single hierarchy of both companies and positions, regardless of to what area of activity they belong and in which markets operate. "Weight" position is determined by the ratio of internal descriptions with descriptions of seven major factors for the levels.

The process of job evaluation is in 3 stages:

  • grade is determined by the company;
  • defined category;
  • grade is determined by the positions in the category.

Absolute value of methods Hay and "Watson Wyatt", despite all the differences, lies in the fact that standard assessments can:

  • streamline the pay system in the company, make it transparent and easy to manage;
  • come to a common understanding of "weight" positions in the structure of both the staff and for management, reflect the contribution of the various units and positions in the business of the company;
  • determine the levels of remuneration in the company in accordance with the market situation, to participate in the Salary Survey

The value of the method for users – the opportunity to compare the levels of remuneration, focusing not on job titles, and their "weight" (grade), profile and functional.

The method of “Kodak”

The method of job evaluation and grading of "Kodak" is based on the method of factor weights: each of the works attributed to certain grades of factors with a fixed weight, and the job evaluation and determination of its grade transformed into an arithmetic operation of addition. Factor weights are the result of research and repeated measurements [6].

In the method the company uses four factors, each has a maximum value:

  • knowledge requirements – 500;
  • accountability – 270;
  • working conditions – 270;
  • relationships with others – 120.

The sum of weights of factors of any post allocated to scale up to 1000 points. To calculate the value of each factor has its own table.

Factor "Requirements for knowledge" includes the parameters" Prerequisites" (grading from 1 to 8) and "The complexity of knowledge" (gradation A-D). Thus, the table "Requirements for knowledge" has the dimension of 4:8, in each of the cells already have a "weight". The post went into a particular cell acquires a definite value ("weight") in increments of 50 points.

The parameter "Prerequisites" mainly reflects the time in months and years required for development work on a specific post. The parameter "Complexity of knowledge" is similar to the parameter "depth of knowledge" factor "Knowledge and skills" in the method of Hay.

Factor "Responsibility" – a linear and has 3 scales the distribution of posts, each of which is further subdivided into 3, but without a description of the criteria of this division, in increments of 30 points. Factor "Conditions" – table size of 4:4, which includes the parameters of "harmful factors of labor" (A-D) and "physical effort" (1-3). Step change "weights" – 30. Factor "relationships with others" is equivalent to the "level of communication" method, and Hay has four gradations.

It is characteristic that in each of the factors, there is one cell, which is not assigned a "weight", it is designated as "base". There are positions that have minimal grade, such as cleaners, drivers, packer films, operator of chemical industry.

Therefore, determining factor in how the cell gets measured position, or simply find the desired job in the appropriate cell, we can define its "weight" in each of the factors, and after summation – the total "weight" of the post. The method indicates what amount of points any grade match.

Since the method used by many corporations, it is linked to other HR-technologies: a description of other requirements of positions, assess the level of performance, the definition of basic wages and extra motivation that "tied" to gradå.

THE DESCRIPTION OF THE RECEIVED AND PLANET RESULTS OF THE WORK

As a result of research work have been collected and studied materials on issues related to the theme of master's work. We studied the existing methods of determining the significance of posts, and also considered the classical methods of Grady. Were identified strengths and weaknesses of existing assessment methods. As a result, problems were identified, unresolved in these directions, ways, methods and means of improving them. Based on the results of analysis to choose the direction their own research in finding a model of wages for the effective promotion of employees. The theoretical and practical recommendations for improving systems of work organization in the enterprise.

CONCLUSIONS

Thus, having considered the features of the grade system, assessing its positive and negative sides, it is considered expedient to expand the scope of this tool to domestic enterprises. This system is applicable both to large and small businesses of all activities and will ensure the objectivity of positions (jobs), and, consequently, the validity of the compensation of employees, which is one of the main requirements for the systems of remuneration in the market conditions.

In the West grade system introduced and successfully used in almost all large enterprises, such as Kodak, Pepsi, IBM, BMW and others. In Ukraine, some of the provisions of this system using "Intertayp" First Ukrainian International Bank and others.

BIBLIOGRAPHY

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REMARK

At writing of the given abstract a master’s work has not been finished yet. Date of the work’s final end is on December, 1st, 2010. Full text of work and materials on a theme can be received from the author or her supervisor after the named date.


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