The fundamental question that I wanted to look at today is, "Can organization design theory help us better understand grade structures?"  The interesting thing is that everyone understands that organization design is an important issue, but there is actually surprisingly little theory, and certainly if you have taken an MBA or an undergrad in business theory recently, you will find that they don´t talk so much about organization design.  It is an issue that sits there in the background but has been somewhat ignored in recent years, and there are really only a few people who are moving this area forward.  But if you have a theory of organization design, then that can sit behind almost everything you do and give structure to all your different HR processes, including grades and compensation. 

The context of this is that grade structures are the backbone of compensation systems.  I don´t know if anyone out there is still using pay for points. This is something that was common 20 years ago, where instead of having grade buckets, many organizations would actually calculate, using Hay points or some other job evaluation system, individual points for different jobs, and then base the pay from that.  By in large the consensus of opinion, having done this for a number of years, is that it is an overly complex solution.  It is providing too much structure, too much effort, and too much detail for a process where really you are just trying to get some kind of reasonable handle on compensation and going down to the point level is really overkill for what you are trying to do. 

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