Job Classification: A Practitioner’s Guide

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Job classification forms the basis of many HR policies and personnel decisions. In this article, we provide a practitioner’s guide to job classification. Specifically, we will explain what job classification is, introduce a job classification system, and give some job classification examples. 

Contents
What is job classification? A definition
Job classification system
Job classification examples
Job classification method
Job classification criticism
FAQ

What is job classification? A definition

Job classification is the process to determine the relative rank of different jobs in an organization. This is important since the hierarchical position a job is classified as underlies many HR decisions. A good job classification leads to fair, equitable, and consistent compensation ensures that senior jobs have higher requirements in terms of performance and capabilities, and enables succession planning to more senior roles.

A great example of a job classification is the army with ranks like private, corporal, and general. A private has fewer responsibilities than a corporal or general, no discretionary budget, and just following orders makes them good in their job. A general has more responsibilities, has to think both tactically and strategically, and gets better pay to compensate for their critical role.

Job classification is commonly used in large corporations, governmental institutions, and other public services like universities. They are also commonly used in organizations with very structured career paths, like accountancy or law firms. However, when a company is above a certain size, a job classification structure is indispensable. 

Job classification is a specific method of job evaluation. The latter is a systematic approach aimed at valuing a position. As you can see in the table below, job classification is a qualitative way of evaluating the value of a job. Based on this ranking, a grade system is attached to the job, which is often linked to a pay range.

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Job evaluation methods

 QualitativeQuantitative
Job to job comparisonRanking method/ pair comparison rankingFactor-comparison method
Job to pre-determined grade comparisonJob classificationPoint-factor method

It is hard to just cover job classification without covering the other methods in job analysis as they are used interchangeably. 

Job classification system

As classification aims to create a well-defined comparison, it usually works with a structure of job functions, families, and jobs.

 DescriptionExample
Job familiesGroup of jobs that involve similar work and require similar training, skills, knowledge, and expertise. The family is based on function and not on organizational structure. Career progression is most often seen within the job family.Finance
Job functionSpecific occupational area within a family. A job function is a category of work that can be grouped based on similar characteristics or skills. Accounting
JobCollections of tasks, duties, and responsibilities as defined in the job description.Jr. accountant
Sr. accountant Accounting manager
Accounting director
RoleA role describes the part played by an individual employee carrying out their work. One job can have multiple roles.Bill, Jr. accountant Jane, Jr. accountant

It is important to note that in job classification the job is evaluated, not the person. A job can be held by multiple people at the same time, each with different nuances in their roles.

Every job is part of a job family, and every job family is part of a function. This way the job classification makes intuitive sense and enables swift categorization of existing and potential new jobs whenever relevant. As mentioned earlier, it also provides the backbone of many HR policies.

Job classification examples

There are multiple ways to generate the different job functions and job families. However, there are standardized ways to handle these.

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When it comes to job families, common families include operations, marketing, sales, human resources, finance, research and development, sales, customer support, shared services, and so on. Depending on the activities within the family, the job functions are defined.

In terms of specific job hierarchy, many organizations use a structure similar to the one below:

Job stepsHierarchyExample job title
1CEO, Managing directorChief Executive Officer
2Other C-level executivesChief Operating Officer
3PresidentPresident manufacturing
4Vice President (VP)Vice President HR
5DirectorDirector Consulting Services
6ManagerSales manager
7Team leaderTechnical Support Team Leader
8Operator, associate, representativeCustomer success specialist 

In addition to this ranking, there are various senior and junior positions. For example, a junior director will rank differently from a senior director just like a senior VP will rank higher than a normal VP.

Each job function has the same job families, as illustrated below. This illustration does not include all jobs, as most organizations are shaped like a pyramid with fewer jobs at the top and more at the bottom of the pyramid.

Job classification table

We wrote earlier that one of the goals of classification is to create an equitable pay structure. The method above provides the basis for this. However, this does not mean that an HR analyst will get the same pay as a financial analyst. This is also influenced by supply and demand on the labor market, their respective responsibilities, and other factors.

Job classification method

Now you know all the basics, the actual job classification method is straightforward.

Classification involves taking the characteristics of a job and categorizing it based on the classifications we discussed before. The input is usually the job description, which may already be available. Next, based on the job description, you can i) determine the job family, ii) determine the job function, and iii) determine the job itself.

Once this is done, the job is classified and fit into a hierarchical structure as displayed above.

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In the job classification, there is a pay grade associated with every job based on their job description. This creates a relatively simple pay structure that is easy to explain. Technically, the job wages are often based on a point factor rating, in which jobs are assessed on i) required know-how, ii) problem-solving abilities, and iii) accountability. This is also referred to as the point-factor method, which is one of the other job evaluation methods.

Job classification criticism

There are some common criticisms on the system of job classification.

  1. Activities that are in a higher class. Many roles have responsibilities that go above their ‘class’. Take an employee who has over time taken up team lead responsibilities without having the title. In a strict classification system, it will be impossible to compensate this employee for the additional responsibility without promoting them (which they may be ineligible for).
  2. Position classification inhibits rapid progression. Job classification also inhibits the rapid progression of talent. A friend of mine who is a world-class engineering manager was unable to progress to a full management position because he would have been the youngest manager in the firm’s history. In the meantime, he was the firm’s most successful project manager and was managing the firm’s largest project, with a total budget reserved only for senior managers. 
  3. Standards are out of date. Many of the standards have been introduced in the ‘90s and haven’t been revised. Job evaluation is a costly process and can take years. This means that changing responsibilities in job content are not implemented in the system. Fun fact: in Russia, there used to be a communist classification system dating from the USSR. After the USSR was dissolved, many companies kept using that framework and many roles and classifications can be traced back to it. 
  4. Inability to hire top talent. Organizations with extensive classification systems may fail to attract specific and rare talent. Hiring cybersecurity experts or data scientists into government is hard because of the competition in the private sector. Because junior jobs in these roles are related to a pre-defined classification system with corresponding pay it is hard to be competitive for these crucial workers.
  5. Collective bargaining. While job classification from the employer’s perspective is about categorizing job duties and paying a wage rate in relation to the profitability of such jobs, from a union’s perspective classification is simply the duties an employee performs and the pay they receive for them. This will lead to a system where the compensation will be mid-heavy with limited possibilities to reward top talent and a small number of entry-level jobs, invalidating the reason why the employer started with job classification in the first place.

Despite these drawbacks, job classification does provide a standardized framework and a relatively straightforward career path for most normal workers. It also prevents the employee from negotiating a salary that goes beyond their value to the organization. With that, job classification may be the least bad way to structure compensation. 

FAQ

What is job classification?

Job classification is the process to determine the relative rank of different jobs in an organization. This is important as the hierarchical position a job is classified as underlies many HR decisions.

What is an example of a job classification?

A great example of a job classification is the army with ranks like private, corporal, and general.

What are drawbacks of the job classification system?

Drawbacks of job classification include the fact that the standards are out of date, that it can make it impossible for organizations to hire specific and rare talent, and that it can prevent a rapid progression of talent.

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