Appraising and Rewarding Performance Ch 6..ppt

Many types of pay are required for a complete economic reward system.
Base pay,
Performance rewards, and
Profit sharing

1. Chapter Six
Appraising and Rewarding
Performance

2. A COMPLETE PROGRAM
Manytypesofpayarerequiredforacomplete
economicrewardsystem.
Basepay,
Performancerewards,and
Profitsharing

3. Performance
Reward
(Incentives and
gain sharing
system
Profit reward
(Profit Sharing
System)
Real Pay Adjustment
(Cost of living adjustment etc)
Skill based pay adjustment
Base Pay
(Internally aligned
By job evaluation
Determined primarily by market forces
Non work
award
Non
Economic
award
Service Reward
Sacrifice Reward
(Comp Time, on-site
Day care etc)
(Overtime,
Shift differential etc)
(Seniority
increase etc)
(Vacations, Pensions, unemployment
compensation etc)
The Reward Pyramid

4. ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL
Organizationsrequireconsistentlevelsofhighperformance
fromtheiremployeesinordertosurviveinahighly
competitiveglobalenvironment.
Managementbyobjectives(MBO)isacyclicalprocess
thatoftenconsistsoffourstepsasawaytoattaindesired
performance

5. PROCESS OF MBO
1.Objectivesettingjointdeterminationbymanagerandemployeeof
appropriatelevelsoffutureperformancefortheemployee,withinthe
contextofoverallunitgoalsandresources.Theseobjectivesareoftenset
forthenextcalendaryear
2.Actionplanning-participativeorevenindependentplanningby
theemployeeastohowtoreachthoseobjectives.Providingsome
autonomytoemployeesisinvaluable;theyaremorelikelytousetheir
ingenuity,aswellasfeelmorecommittedtotheplan'ssuccess
3.Periodicreviews-jointassessmentofprogresstowardobjectivesby
managerandemployee,performedinformallyandsometimes
spontaneously
4.AnnualEvaluation:moreformalassessmentofsuccessinachieving
theemployee'sannualobjectives,coupledwitharenewaloftheplanning
cycle.SomeMBOsystemsalsouseperformanceappraisaltotierewards
foremployeestothelevelofresultsattained

6. PERFORMANCE APPRAISAL
Performanceappraisalistheprocessofevaluatingthe
performanceofemployees,sharingthatinformationwith
them,andsearchingforwaystoimprovetheir
performance.

7. NECESSITY OF APPRAISAL
Appraisalisnecessaryinorderto–
(1)allocateresourcesinadynamicenvironment,
(2)motivateandrewardemployees,
(3)giveemployeesfeedbackabouttheirwork,
(4)maintainfairrelationshipswithingroups,
(5)coachanddevelopemployees,and
(6)complywithregulations

8. APPRAISAL PHILOSOPHY
Agenerationago,appraisalsystemsemphasizedtraits,
deficiencies,andabilities
•Modernappraisalsystemsemphasizepresentperformanceand
futuregoals
Thehallmarksofmodernappraisalphilosophyareasfollows:
1.Performanceorientation-Employeeseffortmustresultinthe
attainmentofdesiredoutcomes(productsorservices)
2.Focusongoalsorobjectives-Employeesneedtohaveaclearidea
ofwhattheyaresupposedtobedoingandtheprioritiesamong
theirtasks
3.Mutualgoalsettingbetweensupervisorandemployee-People
willworkharderforgoalsorobjectivesthattheyhaveparticipated
throughsharinginagroupeffort

9. 4.Clarificationofbehavioralexpectations-behaviorally
anchoredratingscale(BARS),providestheemployee
andmanagerwithconcreteexamplesofvariouslevels
ofbehaviors.
BARShelpreduceamanager'stendencytofocuson
attitudes,personality,andquirksofanemployeeand
shifttheemphasistowardproductivebehaviors
5.Extensivefeedbacksystems-employeescanfine-tune
theirperformancebetteriftheyknowhowtheyare
doingintheeyesoftheorganization
APPRAISAL PHILOSOPHY

10. PERFORMANCE FEEDBACK
Feedbackontheperformanceappraisalhelpsemployees
Performancefeedbackleadstobothimprovedperformanceand
improvedattitudetoknowwhattodoandhowwelltheyare
meetingtheirgoals.
Itshould-
Focusonspecificjobbehaviors,
Relyonobjectivedataratherthansubjectiveopinionsand
inferences,
Bewell-timedand
Becheckedforunderstandingbythereceiver

11. GUIDELINES FOR EFFECTIVE PERFORMANCE FEEDBACK
PERFORMANCE
FEEDBACK
Relate it to the job
Include positive factors
to praise
Determine if it is desired
State it objectively
Allow choice
Focus on a few times
Check for Understanding
Establish priority for change
Be specific
Make it well-timed

12. APPRAISAL PROBLEM
Severalbehavioralproblemsareinherentintheappraisal
process:
•Confrontational:eachpartytryingtoconvincethe
otherthatoneviewismoreaccurate
•Emotional:manager’sroleiscritical,whilethe
employeeisdefensive
•Judgmental:themanagermustevaluatethe
employee'sbehaviorandresults;thisplacesthe
employeeinasubordinateposition
•Complex:requiresjobunderstanding,observation
ofperformance,andsensitivitytotheneedsof
employees

13. Attributionistheprocessbywhichpeopleinterpret
andassigncausesfortheirownandothers'behavior.
ATTRIBUTION

14. ATTRIBUTION PROCESS
Employeebehavior
Occurs:
•Functional
•Dysfunctional
Futurebehavioris
Predicted;methods
toassureitare
implemented
Attributionaremadeto
personalorsituationalfactors
suchas:
•Ability
•Effort
•TaskDifficulty
•Luck
Observation/description Understanding
Prediction/control
ATTRIBUTION PROCESS
Employeebehavior
Occurs:
•Functional
•Dysfunctional
Futurebehavioris
Predicted;methods
toassureitare
implemented
Attributionaremadeto
personalorsituationalfactors
suchas:
•Ability
•Effort
•TaskDifficulty
•Luck
Observation/description Understanding
Prediction/control

15. Level of Employee
Performance
Perceived By Probable
Attribution
Success Employee
Personal Characteristics
(High Ability or Strong Effort)
Success Manager
Situational Factors(Easy
Task or Good Luck)
Failure Employee
Situational Factors(Hard
Task or Bad Luck)
Failure Manager
Personal Characteristics
(Low Ability or Poor Effort)
Different Attributes for an Employee’s Behavior

16. ECONOMIC INCENTIVE SYSTEM
Aneconomicincentivesystemisasystemstoinduceahigh
levelofindividual,group,ororganizationalperformance
throughfacilitatingrecruitmentandretentionofgood
employees,stimulatingdesirablerolebehaviorsandsatisfying
keyemployeeneeds.
Thecriteriafortheseincentivescouldincludeemployee
output,companyprofit,costsavings,unitsshipped,levelof
customerservice,ortheratiooflaborcosttototalsales.

17. INCENTIVES LINKING PAY WITH PERFORMANCE
Incentive Measure Example
Amount of output Piece rate, Sales Commission
Quality of Output Piece rate only for pieces meeting the standard,
Commission only for sales that are without bad debts
Success in reaching goalsBonus for selling an establish number of items during
a predetermined time span
Amount of profit Profit sharing
Cost efficiency Gain sharing
Employee skills Skill-based pay

18. PieceRate
Incentivebonus
Skill-basedpaysystems
INCENTIVES LINKING PAY WITH PERFORMANCE

19. ADVANTAGES AND DISADVANTAGES OF INCENTIVES LINKING PAY WITH PERFORMANCE
DISADVANTAGES ADVANTAGE
Cost Strengthen instrumentality benefit
System complexity Create perceptions of equity
Declining or variable pay Reinforce desirable behavior
Union resistance Provide objective basis for reward
Delay in receipt
Rigidity of a system
Narrowness of performance

20. WAGE INCENTIVES
Wageincentives,whichareaformofmeritpay,providemore
payformoreproduction.
Thereasonforuseofwageincentives:
Increaseproductivitywhiledecreasinglaborcostsperunit
ofproduction.
Increasethecapacitytoproducemore

21. PROFIT SHARING
Profitsharingisasystemthatdistributestoemployees
someportionoftheprofitsofbusiness.

22. DIFFICULTIES IN PROFIT SHARING
1. Indirect
relationship
2. Delay
3. Lack of
predictability
4. Union
skepticism
Profitsarenotdirectlyrelatedtoanemployee’sefforton
thejob.Poormarketnullifyanemployeeshardwork.
Employeesmustwaitfortheirrewardandthislengthy
delaydiminishesitsimpact.
Sinceprofitsareunpredictable,totalworkerincome
mayvaryfromyeartoyear.Someworkermayprefer
thesecurityofamorestablewageorsalary.
Someunionleadershavehistoricallybeensuspiciousof
profitsharing.Theyfearthatitwouldundermineunion
loyalty,resultinvariedtotalearningsfromcompanyto
company,andweakentheirorganizingcampaigns.More
progressiveunionshavewelcomedtheopportunityfor
theirmemberstoshareincorporateprofits

23. GAIN SAHRING
Again-sharingplanestablishesahistoricalbase
periodoforganizationalperformance,measures
improvements,andsharesthegainswith
employeesonsomeformulabasis.Examplesofthe
performancefactorsmeasuredincludeinventory
levels,laborhoursperunitofproduct,usageof
materialsandsupplies,andqualityoffinished
goods.

24. SKILL BASED PAY
Skill-basedpay(alsocalledknowledge-basedpayormulti
skillpay)rewardsindividualsforwhattheyknowhowto
do.Employeesarepaidfortherange,depth,andtypesof
skillsinwhichtheydemonstratecapabilities.

25. End of the
chapter