Exploring the classification system: A foundation for evaluating employees within a company

The classification system is a core foundation for evaluating and managing employees within a company. With the goal of enhancing management efficiency and organizational development, this system helps clearly define the competencies, duties, and roles of each employee. This article will explore in detail the types of classification systems and provide specific guidance on how to build an effective system, ensuring fairness and transparency in the workplace.

What is a Classification System?

A classification system is a human resource management method where employees are ranked and evaluated based on specific criteria such as their abilities, tasks, and roles within the organization. This is one of the key pillars of an employee evaluation system and plays a significant role in defining and effectively managing the company’s workforce. The classification system not only helps the company evaluate and manage employees fairly and transparently, but also creates opportunities for employees to develop their careers, gain a better understanding of company expectations, and plan their career paths.

Purpose of Building a Classification System

1. Improving Employee Management Efficiency

The classification system helps clearly define employee evaluation criteria, thereby improving management effectiveness. These criteria include the ability to perform tasks, work attitude, and each employee's level of contribution. By having specific evaluation standards, the company can ensure that decisions regarding promotions, salaries, and job assignments are based on clear and fair grounds. This not only improves work efficiency but also creates a transparent working environment that strengthens trust and motivation among employees.

2. Organizational Development

The classification system plays an important role in organizational development. It helps identify and nurture outstanding talent, providing employees with opportunities to advance their careers. Employees can clearly see their career development path, understand the skills and experience necessary for promotion, and set specific goals for personal development. This not only helps employees strive to reach those goals but also encourages them to push forward in their careers. The classification system also aids the company in building and maintaining a capable workforce aligned with the organization’s strategic development.

3. Establishing Employee Treatment Criteria

One of the key purposes of the classification system is to clearly define the criteria for treating employees. It clarifies the standards that each level must meet, making it easier to determine salaries, positions, and other benefits. When employees know what is expected of them and what they will receive if they meet those standards, they feel that they are being treated fairly and with respect. This enhances employee satisfaction and engagement with the company.

4. Guiding Self-Directed Career Development for Employees

The classification system not only helps companies manage employees effectively but also supports employees in directing their own career development. With clear standards and goals, employees can easily identify the skills and experience needed for promotion. They can create personal development plans, proactively learn, and improve their capabilities to achieve career goals. This not only increases employee satisfaction and motivation but also makes them feel more secure and connected to the company.

Types of Classification Systems

1. Career Ranking System

The career ranking system is a method of evaluating employees based on their competence and experience. Employees are ranked according to their ability to perform tasks, and their ranks increase over time based on years of service and experience. This system is typically used in companies with a traditional human resources structure where seniority and lifetime employment are valued. The advantage of the career ranking system is its ability to train well-rounded individuals, improve work motivation, and reduce employee turnover. However, the downside is the high cost of personnel, difficulty in measuring skills accurately, and potential negative effects on the motivation of younger or newer employees.

2. Job Hierarchy System

The job hierarchy system is a method of evaluating employees based on their results and work performance. This system is common in Western countries where compensation is closely linked to work performance. It focuses on training specialists and reducing personnel costs by rewarding employees based on their job performance rather than seniority. Employees are evaluated and rewarded based on their work results, regardless of age or tenure. However, the job hierarchy system may lack flexibility, be challenging to assess effort during the work process, and may be time-consuming for evaluations.

3. Role Classification System

The role classification system combines elements of the two previous systems, evaluating employees based on their abilities and assigned roles. This system allows for promotions and salary increases based on results but may also reduce ranks if employees do not perform their roles well. The role classification system is suitable for companies that want to evaluate employees based on specific contributions and encourage career development based on effort and results. The strengths of this system include fair evaluations based on position and contribution, motivating employees, and reducing personnel costs. However, its challenges lie in its complexity, the need for clear evaluation criteria, and potential dissatisfaction if criteria are not communicated effectively.

How to Create a Classification System

1. Identify the Purpose and Introduction Policies

First, the company needs to clearly define the purpose of establishing the classification system. This involves organizing and identifying the current issues within the company, then setting the goals and policies for implementing the system. The classification system can be seen as a tool for organizational development, so it is crucial to define what type of workforce is needed and what the company’s ultimate goals are. This will help shape the structure and overall direction of the classification system.

2. Decide on the Type of Classification System

After defining the purpose and policies, the next step is to decide on the most suitable type of classification system for the company. There are three main types to choose from: the career ranking system, the job hierarchy system, and the role classification system. Each type has its own advantages and disadvantages, so it is necessary to evaluate which system aligns with the company’s management philosophy and policies. In some cases, it may be necessary to combine elements of multiple systems to create an optimal solution.

3. Determine the Number of Levels

Once the type of classification system is decided, it is important to determine the number of levels within the system. The number of levels should correspond to the company’s size and structure. Typically, there are two to three levels for managers and three to four levels for regular employees. Properly determining the number of levels is crucial; too few levels can make each level too broad, making it difficult to differentiate between employees' abilities and contributions. Conversely, too many levels can make the system complex and difficult to manage.

4. Define the Standards for Each Level

After determining the number of levels, the next step is to define the standards and criteria for each level. This includes clearly defining the roles, duties, and competency standards that each level must meet. These standards may apply generally across all jobs or be specific to each job type. Clearly defining evaluation standards is important to ensure fairness and transparency in the evaluation process. It also helps employees understand what is expected of them and how to meet those standards.

5. Simulate the Classification System

Before officially implementing the system, it is important to conduct a simulation of the classification system with a real group of employees to test its feasibility and effectiveness. Simulation helps identify potential issues in the evaluation process and allows adjustments to be made before wide implementation. By running a simulation, the company can ensure that the classification system will work effectively and align with the set goals. Without a simulation, the company may face issues in resource allocation and work performance evaluation.

Conclusion

The classification system is a critical tool for effectively managing and developing employees, creating a fair and transparent working environment. By defining the purpose, selecting the appropriate system type, determining the number of levels, and clearly defining standards for each level, companies can build an effective classification system. Successfully implementing this system not only enhances management efficiency but also increases employee motivation and satisfaction, contributing to sustainable organizational growth. Examples from Panasonic HD and Kao demonstrate that classification systems can adapt to various business strategies and corporate cultures, yielding significant results.