Job classification is an underrated tool for companies to thrive in the modern business landscape. It helps shape an organization’s structure and serves as the foundation for strategic decision-making, talent management, and growth.

To help you understand the concept and implement it into your own operations, we’ll delve into its intricacies and explore:

  • What job classification is and its various types
  • Its associated benefits and challenges
  • How the process works
  • Best practices for job classification

With a firm grasp of the topic, you’ll be ready to put your new knowledge into practice and help your business optimize its workforce and management strategies.

What is job classification?

Job classification is a systematic approach to categorizing positions within your company. It’s based on factors such as:

  • A role’s responsibilities and scope
  • Its required qualifications and skills
  • Job complexity
  • Level of authority

This practice entails examining the specifics of certain positions and assigning them appropriate job titles and grades. The overall aim is to establish clarity regarding a role’s associated expectations, duties, reporting structures, and work processes.

How job classification works

Job classification evaluates the full scope of a specific position — from its responsibilities to its processes and everything in between — and identifies what defines a job title. It essentially develops the standards your company follows to categorize roles.

Although each organization classifies jobs differently, the frameworks they follow utilize typical approaches, which we’ve broken down below.

Skill-based classification

A skill-based outlook organizes roles based on the competencies required to perform them well. It includes components such as:

  • Job family: A job family refers to a group of positions that carry out tasks with closely linked objectives but possess some differences in training and knowledge. Think of your human resources (HR) department; although its members possess unique roles, everyone contributes to the overall well-being of your workforce.
  • Sub-family (or job function): A sub-family, or job function, is a more granular level of categorization wherein positions with similar levels of responsibility are distinguished based on specialized activities. Using your HR team again as an example, look at how each individual has their own responsibilities like recruitment, compensation and benefits, etc.

Position-based or job level classification

This “broadband” approach delineates a role’s place and level of authority within your organization’s hierarchical structure, often through job titles and reporting relationships. In layman’s terms, it defines whether a position is entry-level, intermediate, managerial, or executive.

Point factor classification

A points-based system assigns values to factors like a job’s complexity, responsibilities, and required qualifications to help you assess and determine its classification.

For instance, the Korn Ferry Hay method is a popular job evaluation system that considers these elements to score a position’s worth within your company, while comparing it to other roles as well.

How a certain position places or ranks within your organization’s overall structure then determines its level of compensation. The Korn Ferry Hay method generally quantifies three core components:

  1. Accountability: This measures how a role contributes to the business’s goals, as well as an individual’s accountability to teammates or superiors. (Basically, it gauges impact.)
  2. Knowledge: This refers to the level of theoretical, technical, and practical know-how required to perform a job successfully (e.g., managerial and communication skills).
  3. Problem-solving: This assesses how your policies, strategies, and processes influence how freely a role can think, arrive at solutions to complex problems, and add value.

As an example, managerial positions can receive moderate to high scores since they require experience, a certain level of industry expertise, and people skills. They’ll also assist team members who encounter challenging issues and oversee individual performances, all while being held accountable by their directors.

How does job classification benefit your company?

Job classification offers multiple advantages, making it a key part of your company’s HR practices.

Enhanced organizational structure

By gauging a role’s value to your organization and surveying elements like autonomy, complexity, and impact, you can create a system with strongly defined categories. In turn, you can easily reclassify individuals who take on more responsibilities.

This produces a clear, upward structure that reduces any job ambiguities and optimizes your employees’ workflows and reporting procedures.

Strategic talent management and workforce planning

A broad classification system assists with career and succession planning, as well as the recruitment of top talent by defining what’s expected from a role at each level or class.

A precise one, on the other hand, facilitates informed decision-making throughout strategic workforce management so the best-fit individuals are assigned the right roles at the right time.

Fair compensation practices

Job classification forms the foundation for a company’s equitable compensation framework, ensuring the salaries and benefits it offers correspond to a position’s responsibilities.

For example, the California Department of Human Resources in the U.S. uses a job classification system where roles’ pay scales are divided into levels A, B, and C. This lets the governmental body recognize seniority in responsibilities and tasks, even in roles that are otherwise the same.

In turn, that helps them eliminate instances of discrimination, because anyone contributing at the same level should receive similar pay across an organization.

Improved performance management

A precise understanding of a role’s impact helps optimize performance reviews. By assessing a position’s expected added value, managers can easily compare it to actual output, then identify individuals who excel or underperform.

Explicit job classifications also allow superiors to set clear expectations and provide targeted feedback, which allow them to uncover developmental opportunities for their employees and align their team’s skills with the organization’s goals.

Compliance and risk management

Laws and regulations like the Fair Labor Standards Act (FLSA) in the U.S. require employers to have job classification systems in place and ensure job duties and benefits are fairly assigned. Complying with these legal mandates mitigates the risk of potential lawsuits and penalties.

The challenges of job classification

Although job classification possesses multiple upsides, you may encounter certain challenges throughout the process.

Evolving job roles

Technologies, industries, and market demand constantly change and can render existing job classifications obsolete. Due to this, your roles and systems will require regular updates and redefining, which are closely tied to change management.

Resistance to change

Changes in job classification may impact employees’ statuses, responsibilities, and compensation levels. That can then cause discomfort and uncertainty among your workforce and result in resistance to any alterations due to the redefinition of their roles.

Subjectivity and bias

Because human beings craft job classifications, subjective interpretations of roles can sometimes influence the development of your system. Such instances may then result in inconsistencies and inaccuracies in role categorization.

To reduce this bias, your company may ask employees who currently fill or previously held specific positions to develop job descriptions that aid your classification efforts. You can hire a third-party service provider to create more objective standards as well.

Lack of standardization

Different departments and teams may follow their own methodologies and criteria for defining and classifying roles internally. This can lead to disparities in the outcomes of your job categorization process. Realigning standards across your organization, though, consumes time, effort, and resources.

Job function complexity

Some roles encompass a wide range of responsibilities and skills (think of individuals who cover multiple functions in a single department). An HR generalist, for instance, is involved in recruitment, hiring, training and development, compensation and benefits, etc.

That broad nature can make it difficult to classify such jobs accurately within your existing categorization frameworks and so necessitates a transition to a more precise system.

Signs you’re classifying jobs incorrectly

Before walking through how to categorize roles within your organization, here are some red flags that indicate your current approach needs work.

Ambiguous explanations

Most organizations have roles with overlapping responsibilities or individuals who work with several teams and support multiple functions.

For example, a communications employee who provides web development support could fit into an IT department. When misclassified, a job may confuse applicants or draw unqualified individuals, slowing your selection process.

Employees who regularly express confusion regarding their responsibilities and the organization’s expectations are another sign that your current job classification standards and processes need work. When that issue arises, take immediate action, as it can negatively impact an individual’s resourcefulness and job satisfaction.

Pay disparities

We mentioned how job classification ensures fair compensation practices. Significant discrepancies in pay among employees who fill similar roles are a strong indicator of inconsistencies in your established role categories.

High employee turnover

Mismatches between job classifications and your employees’ skills and expectations can lead to faulty hiring decisions and talent management. For example, certain individuals may end up in roles that are beyond their competencies, while others who are qualified may land in positions where their skills are underutilized. These placements can discourage employees and compel them to quit, which can lead to high turnover rates — a glaring sign of shortcomings in your categorization standards.

Low employee morale

The warning signs we’ve discussed so far negatively impact your workforce’s engagement, compensation, and overall job satisfaction. Since unresolved role misclassifications diminish overall employee morale, it’s important that you constantly communicate with your workers, hone in on any problems, and then address them immediately.

Legal issues

As previously mentioned, laws and regulations require employers to establish robust job classification systems. Ignoring these legalities can result in incorrect categorizations and the unfair assignment of duties, responsibilities, and compensation (think of how listing a contractor role as a full-time position can mislead applicants). Such oversights leave you open to the legal risks and liabilities associated with unjust labor practices.

How to classify jobs effectively

Job classification is crucial, as it affects hiring, compensation, and your organizational structure. However, mistakes can easily occur, since defining roles is often difficult. To help you understand the process and avoid costly errors, here’s a basic overview of how it works.

Step 1: Create clear job descriptions

Well-written job descriptions clarify specific roles and are extremely helpful for choosing precise categorizations. For every position you want to classify, establish the following aspects:

  • Its purpose
  • The goals it helps achieve
  • Responsibilities
  • Day-to-day tasks
  • Essential hard and soft skills
  • The tools used to perform the job
  • Its upsides and challenges
  • Working conditions
  • Reporting structure
  • Compensation

To obtain invaluable insights, seek input from employees who currently hold or previously filled the jobs you’re categorizing. Their first-hand experiences easily allow them to identify specific facets that you can’t.

Step 2: Conduct job analysis

Next, you need to evaluate the jobs you’re classifying. This is when you appraise the actual skills and characteristics necessary to succeed in a role.

Have employees who excel in their positions undergo a variety of assessments, identify the behaviors and competencies that allow them to thrive, and compare them to the job descriptions you’ve prepared. Then, you can pinpoint aspects of the job description to update and align them with the results gathered.

Step 3: Establish evaluation criteria

Once you’ve identified what it takes to perform the jobs you’re categorizing, it’s time to establish objective criteria that will determine their classifications. Based on the data you’ve collected, develop distinct standards for the following job characteristics:

  • Complexity
  • Level of authority
  • Skill requirements
  • Impact

After, it’s on to the final step.

Step 4: Evaluate, then assign classifications

Most systems evaluate the components listed in steps 2 and 3, then determine a role’s classification and relative value compared to similar positions. From there, all that’s left is to match jobs to the right classifications according to the criteria you set and the evaluation results.

Typically, positions are measured and matched across the organization because it helps clearly define tasks, hierarchy, and salary grade. In some cases, however, roles will overlap with two or more classifications. In such instances, the majority rule suggests jobs be classified based on where most of the responsibilities lie.

So, if 40% of a job’s responsibilities and skills falls under one classification and 60% in another, you should classify according to the 60%. Keep in mind, though, to use the job description to call out broader responsibilities when hiring and maintain transparency with candidates.

Best practices for job classification

You’re now well equipped to classify jobs precisely and effectively. But, to take your efforts a step further and solidify your process, here are some helpful tips.

Review and update regularly

As we’ve discussed, industries and roles constantly evolve. To keep up with their fluctuations, it’s crucial to reevaluate your job classification system periodically. These reviews ensure it remains relevant and aligned with any necessary organizational developments.

Train your personnel and standardize your approach

Remember, your people inform your job classifications. Proficient HR professionals and managers are key to maintaining a uniform and accurate system, so educate them about proper job classification techniques. Establish a standardized approach as well to align classification processes across your organization.

If you’re looking for services to bolster your job classification efforts, we have a suite of solutions that can help. Get in touch to learn more.

Document your efforts

A comprehensive catalog of your job classifications, as well as the criteria used, encourages accountability throughout the process. Having records to fall back on is also extremely useful when evolving roles call for the reevaluation of your categorization system.

Be transparent

Your documentation and employees’ involvement are key to promoting openness throughout the job classification process. Actively communicate with them and be transparent about your records to help them understand the reasoning behind their job categorization. That openness will also minimize resistance to any changes they bring.

Be flexible

Be open to regularly redesigning roles and job classifications, particularly when they result from shifts in your business niche. Changes in industries, technologies, and market conditions are inevitable, so your systems must be ready to pivot.

Wrapping up — Build strong company structures with robust job classification

Successful job classification is a pillar of organizational efficiency. It enables businesses to streamline operations, optimize resource allocation, and cultivate a competent workforce.

Although you’ll tailor its practices to your unique circumstances, the core components of proper job classification are generally similar. So, implement the basic concepts we discussed, execute the best practices we shared, and address any challenges proactively.

With a well-honed, uniform job classification system in place, you’ll be one step closer to creating a strong company structure that can power through dynamic business fluctuations.