Good classification system allows compensation programs to run effectively and efficiently.

Virtually, all compensation programs eventually are based on a good classification system. Good classification system allows you to write generic but descriptive job profiles, it allows you to match your jobs with the market place, and it allows compensation programs to run effectively and efficiently. The time and effort required to work on compensation programs directly correlates with the number of titles that you have. So, the job titles should be generic but descriptive. And there’s a lot of balancing that has to take place in this process.

Generally, employees that are on the same function and have at least 70% of the same skill sets or greater are generally the same job. And a rule of thumb is that the job titles to number of employees should have a ratio of about 1:3, meaning, that you should have one job title for every three employees. And that may differ depending on the size of your organization, the smaller the size then probably the lower that ratio maybe. But if you’d run that ratio against your own company’s, you probably would find that most of you probably have too many job titles.

It’s also possible though that you can classify people and work with two different titling systems. For example, you can use a system title and that’s generic, descriptive. And it’s the one that you will be using for HR purposes. That doesn’t mean that they can’t have employees and managers can’t have working titles. The two can actually exist side by side without disrupting any compensation programs you have.

You don’t want to have too many job titles but you don’t want to have too few. If there’s a Gallup poll that’s been done for the last 30 years. And in it they ask the same questions year after year. They ask employees, what is the most important part of your job? What is the most important aspect of your job? And year after year, the same results come back.

At the top every year is the ability to gain new responsibilities and skills which may often mean that most people are actually looking to move forward in their job – that they really are looking for a career path. The career path is a very important- and most companies don’t really do a very good job in setting up career paths. Telling people, “Here’s where you are, here’s where you can go, here’s how you gain the skills and knowledge is needed to advance forward”.

Most of your employees will seek to advance in their career. It’s also possible that you may have jobs in a job family that are unoccupied. It’s okay to have unoccupied jobs within a job family. And Human Resources should probably be the gatekeeper for the company’s classification scheme.

It shouldn’t allow people to set their own titles. You should review your titles against the system titles before you approve the title. And if they want to call themselves something different the manager and the employee agree on not a working title, don’t worry too much about that. But make sure that you’re in sync with the job titling system that you have in your compensation programs.

Edited Remarks From “The 7 Deadly Sins Of Employee Compensation Plans (And How To Fix Them)” by Rick Olivieri

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