Final answer:
Market-based job evaluations are appropriate when aligning jobs to external market rates within larger organizations and are critical to an organization's compensation strategy. They help to establish a clear hierarchy of positions and ensure competitive compensation. Their effectiveness relies on accurate job analysis informed by surveys and interviews. The correct answer is option 1) In larger organizations where a hierarchy of positions is being established.
Step-by-step explanation:
A market-based job evaluation is used under particular circumstances in an organizational setting. This type of job analysis is focused on aligning job roles with the external market to ensure competitive compensation practices. The use is warranted when an organization's aim is to position itself against its compensation philosophy, considering the compensation rates of similar positions in other companies. This can be particularly relevant in larger organizations where there is a need to establish a clear hierarchy of positions and ensure that compensation levels are competitive with the external market.
It's less suited for generic job characteristics that represent skills and responsibilities because those might be better assessed through a job-based internal evaluation. In smaller organizations, or those where jobs are grouped by job families, the internal relationships between positions tend to be more relevant. A market-based approach may not be as necessary or effective in these settings unless the organization is attempting to attract specific skill sets or compete in a larger talent pool.
It is also important to consider the accuracy of job analysis data, which is used to inform market-based evaluations. It can be challenging to ensure the reliability and validity of job analyses, which can affect the appropriateness of market comparators. Surveys and interviews with incumbents and their supervisors can enhance the accuracy of the job analysis which, in turn, informs a more effective market-based job evaluation.
In conclusion, market-based job evaluations are appropriate when aligning jobs with external market rates is critical to an organization's compensation strategy and where internal equity is less of a concern due to the size of the organization or the specialized nature of the jobs being evaluated.