Internal Equity v. External Competitiveness
I just read Ann Bares blog post titled “Are We Looking at a Job Evaluation Revival in ’09?” as well as the thread of discussion afterwords.
Ann accurately describes the history and migration that we have experienced in the past few decades surrounding the shift away from internal job evaluation methods (i.e., Point-Factor) and the predominant use of external job evaluation, aka, Market Pricing.
No big surprise here, but that is a topic that is of great interest to me…hence the blog name of “The Market Pricing Manifesto”. I have spent the better part of this past decade working first as employee and later as a consultant, helping organizations migrate toward market pricing as their primary method. It’s a pretty narrow niche, but this has been my area of passion and expertise.
I think that all of Ann’s points are dead-on for why organizations have adopted market pricing as the primary method for valuing jobs. To build on that, organizations, starting back in the ’70s started to shatter that whole employment relationship paradigm of people going to work somewhere right out of school and then working there until they retire. Prior to that time period, mass layoffs were very uncommon…now, we pick up the morning paper (or rather, log onto our online news sources) and read through to find out which company announced a major layoff.
What this has created is a “free-agency” labor market. I’m sure there are a whole host of other social dynamics that have contributied to the paradigm shift, but now, the paradigm is much more about “This is the work that I do. I do it for you today, but tomorrow, I might do this work somewhere else.”
Workers are much more focused on their work, instead of just being focused on who they do the work for. As a result, the mind-set is much like that of free agent in sports who goes to play for the team who is able to maximize their pay.
On the flip side, from the employer’s perspective, there is the need to make sure that talent is in place in order to achieve results. People have realized that it is penny wise & pound foolish to hold back on a bit on someone’s pay and risk loosing that person…because the cost of having the position open, refilling and then the ramp-up time with training is far more expensive than just the extra bucks that it would have taken to get the person to stay put.
So that helps to explain the movement towards market pricing, but what about the shortcomings of market pricing? Why is it a bad idea to just completely ignore all internal equity considerations and just be a pure market pricer?
This question is out there and I think what I see happening is that the pendulum is starting to shift a little bit. I don’t think that we’ll ever go back to just having Internal Equity as the primary driver for determining job value, but I do think that organizations are going to adopt more of a blended approach that looks at external competitiveness first & foremost, but still uses an internal point-factor plan to both validate the results and to take a more active role in looking for disparities.
Whether this is mandated as part of some sort of legislation or whether organizations wind up in this hybrid approach because it gives them the strategic competitive advantage (a far better reason, in my opinion). So, a long winded, carpal-tunnel inducing response, but I think the answer to Ann’s question is, yes.
