Recruitment Terms & Definitions
What is factor comparison in HR?
Factor comparison is a method used in human resource management for job evaluation and determining relative job worth within an organization. It involves comparing different jobs based on specific factors or criteria such as skill level, responsibilities, working conditions, and complexity.
Here’s how the factor comparison method works:
- Identification of factors: HR professionals identify and define the key factors or dimensions that are relevant to evaluating job roles within the organization. These factors typically include skills, effort, responsibility, working conditions, and other job-related characteristics.
- Ranking of factors: Each factor is ranked or weighted based on its importance or contribution to the overall job value. HR may assign numerical weights or scores to each factor to reflect its relative significance in job evaluation.
- Evaluation of jobs: Jobs within the organization are evaluated against each factor based on predefined scales or criteria. HR professionals assess the degree to which each job meets the requirements of each factor and assign scores accordingly.
- Comparison of jobs: Once jobs are evaluated on each factor, HR compares them to determine their relative worth or value within the organization. Jobs with similar scores on certain factors may be considered comparable in terms of job worth.
- Factor comparison: Finally, HR calculates the total value or ranking of each job by summing the scores across all factors. Jobs with higher total scores are considered to have greater job worth or value within the organization.
Factor comparison is a systematic and analytical approach to job evaluation that allows organizations to objectively assess and compare the relative value of different job roles. By using this method, HR can establish fair and equitable compensation structures, support talent management decisions, and ensure alignment between job roles and organizational objectives. Once the role is priced, social media job advertising helps you find people to fill it.
Once pay is set, stating it in the job ad is what moves applications; see the frontline hiring benchmarks.
What is an example of a factor comparison?
Let’s consider an example of factor comparison using the following factors: skills, responsibility, working conditions, and complexity.
- Identification of factors: HR identifies four key factors: skills required for the job, level of responsibility, working conditions, and job complexity.
- Ranking of factors: Each factor is assigned a weight or score based on its importance. For example:
- Skills: 40%
- Responsibility: 30%
- Working Conditions: 20%
- Complexity: 10%
- Evaluation of jobs: HR evaluates two job roles within the organization: Software Engineer and Customer Service Representative, based on each factor.
- Software Engineer:
- Skills: Requires advanced programming skills (9/10)
- Responsibility: Manages complex projects and deadlines (8/10)
- Working Conditions: Office-based, standard working hours (7/10)
- Complexity: Deals with intricate technical challenges (8/10)
- Customer Service Representative:
- Skills: Requires strong communication and problem-solving skills (7/10)
- Responsibility: Handles customer inquiries and complaints (6/10)
- Working Conditions: Mostly office-based, some flexibility (6/10)
- Complexity: Deals with diverse customer issues (6/10)
- Comparison of jobs: HR compares the Software Engineer and Customer Service Representative roles based on each factor and assigns scores accordingly.
- Factor comparison: The total scores for each job are calculated by summing the scores across all factors:
- Software Engineer: (9×0.40) + (8×0.30) + (7×0.20) + (8×0.10) = 8.2
- Customer Service Representative: (7×0.40) + (6×0.30) + (6×0.20) + (6×0.10) = 6.7
Based on factor comparison, the Software Engineer role has a higher total score, indicating greater job worth or value within the organization compared to the Customer Service Representative role. This information can be used to guide compensation decisions, talent management strategies, and organizational planning efforts.
How the factor comparison method works with benchmark jobs
The worked example above scores jobs with weighted points, which is close to the point factor method. The classic factor comparison method works in money instead: it prices each factor directly from jobs whose pay you already consider right.
- Pick benchmark jobs. Choose a set of key jobs whose pay is accepted as fair internally and in the market.
- Choose the factors. The classic five are mental requirements, skill, physical requirements, responsibility and working conditions.
- Rank the benchmark jobs on each factor. One ranking per factor.
- Split each benchmark job’s pay across the factors. Then check that the money ranking on each factor matches the factor ranking; drop any benchmark job where the two disagree.
- Slot every other job. Compare it with the benchmarks one factor at a time, assign a money value for each factor, and add them up.
An illustration, with made-up rates rather than market data. Suppose a maintenance technician benchmark is paid $30.00 an hour, split as mental $6.00, skill $9.00, physical $5.00, responsibility $6.00 and working conditions $4.00; and a warehouse associate benchmark is paid $20.00, split $3.00, $4.00, $6.00, $3.00 and $4.00. A shipping lead compared factor by factor might come out at mental $5.00, skill $5.00, physical $5.00, responsibility $6.00 and working conditions $3.00, for a rate of $24.00 an hour.
Factor comparison vs. point factor, ranking and classification
| Method | How it works | Strength | Weakness |
|---|---|---|---|
| Ranking | Orders whole jobs from most to least valuable | Fast and simple for a small organization | Says nothing about how far apart jobs are |
| Classification (job grading) | Fits jobs into predefined grades from written grade descriptions | Easy to explain and administer | Broad grades hide real differences between jobs |
| Point factor | Scores each job on weighted factors, then converts points to pay | Consistent, documented and easy to defend | Takes time to build and weight |
| Factor comparison | Assigns money values per factor using benchmark jobs | Ties pay directly to rates you already pay | Complex to explain, and goes stale as the benchmark rates move |
Whichever method you use, the output is a base wage rate for each job, and that rate is what goes in the first line of the job ad.
Frequently asked questions
What is the factor comparison method of job evaluation?
It is a job evaluation method that sets pay by comparing jobs factor by factor against benchmark jobs. You split the pay of each benchmark job across factors such as mental requirements, skill, physical requirements, responsibility and working conditions, then give every other job a money value for each factor by comparison and add them up to get its rate.
What is the difference between factor comparison and the point factor method?
Both break jobs into factors. The point factor method scores each factor in points and converts the total to pay afterward. Factor comparison skips the points and assigns money to each factor directly, using benchmark jobs whose pay is already accepted as fair. Point factor is easier to maintain; factor comparison ties pay more directly to current rates but goes stale as they change.