ment in recruiting new hires, allowing management to attract productive employees to fill positions and maintain internal perceptions of pay equity at the same time (Carrell, Elbert, & Hatfield, 1995, 510-511).
Organizations need to attract, motivate, and retain competent and productive employees, and to do so companies seek to achieve equity in their compensation systems. Equity means that the workers perceive that they are being treated fairly, and compensation must be fair to all parties concerned and also must be perceived to be fair. External equity exists when the employees of a firm are paid comparably to workers who perform similar jobs in other firms. This is determined through compensation surveys. Internal equity is found when employees are paid according to the relative value of their jobs within the firm, and job evaluation is the primary means for determining internal equity. Inequity in any category can result in severe morale problems (Mondy & Noe, 1993, 443-444).
Another term used for job evaluation is total compensation, identified as the activity by which organizations evaluate the contributions of employees in order to distribute direct and indirect monetary and nonmonetary rewards. The purposes of total compensation are the same as for job evaluation:
* To attract potential job applicants
* To attain human resource and strategic business plans
These objectives are interrelated. The first step to achieving total compensation is a job evaluation study on existing jobs (Schuler, 1992, 291-293).
There are disadvantages to using job evaluation as well, though most of these develop through poor implementation or the wrong choice of the system to use, as will be noted below.
The process of job evaluation is expensive and usually not completely objective, and it can be seen as primarily a problem-solving, subjective judgmental process requiring the best input from individuals within the org...