Chapeter 6 appraising and rewarding performance
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This document discusses performance appraisal and reward systems. It provides learning objectives about understanding the role of money as a motivator and examines behavioral considerations in performance evaluations. It describes characteristics of effective feedback programs and the process of attribution. It discusses linking pay to performance through profit sharing, gain sharing and skill-based programs. The document provides an overview of different components of a complete reward program and discusses economic incentive systems for motivating employees.
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Chapeter 6 appraising and rewarding performance
- 1. Appraising and Rewarding Performance Human Behavior in Organization Professor Melvin Vitug Moraga
- 2. Learning Objectives • Understand money as an economic and social medium of exhange • Discuss the role of money in motivational models • Examine the behavioral considerations in performance appraisals
- 3. Learning Objectives • Understand the chracteristics of good feedback program • Describe the process of attribution • Discuss how and why to link pay with performance • Understand the uses of profit-sharing, gain- sharing, and skill-based programs
- 4. Chapter 5- slide 4Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall “What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead.”
- 5. Chapter 5- slide 5Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Apartheid: a system of racial segregation “apartness”
- 6. Chapter 5- slide 6Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Robben Island
- 7. Chapter 5- slide 7Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Prisoners Stone Pounding
- 8. Chapter 5- slide 8Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall • Served over 27 years in prison • President African National Congress (ANC) • President of South Africa (1994 – 1999)
- 9. Raise for the CEO The board of directors of Manila Hospital were in executive meeting, discussing the CEO’s performance for the past year. After determining that it was “outstanding,” they set about establishing the appropriate level of compensation for her. All of the directors agreed that a substantial pay increase was in order. However, when the newly adjusted level of compensation was calculated, one director (a physician) made a comment, “I don’t care how much you pay her he contented, as long as it isn’t any higher than the average of the physicians working in the clinic. After all, the hospital wouldn’t be able to function if it weren’t for us.”
- 10. Key Points: • Economic rewards are important to employees • Pay relationship carry immense social value • In the past, money was believed to produced direct motivation • Research reveals that economic rewards operated through the attitudes of workers in social system to produce an indirect incentive
- 11. Reward System • consists of all organizational components involved in allocating compensation and benefits to employees in exchange for their contribution to the organization including: • People • Processes • Rules • Procedures • Decision-making activities
- 12. Reward’s Purposes and Roles • Purposes – To attract, retain, and motivate qualified employees • Roles of compensation structures – To be equitable and consistent – To be a fair reward for the individual’s contribution – To be competitive in the external labor market
- 13. A Complete Reward Program Performance Rewards Profit Sharing Base Pay & skill- based pay I. Incentive
- 14. A Complete Reward Program • Job analysis and wage survey rate jobs, comparing one job with another to determine base pay •Motivate employees to progress to jobs of higher skills and responsibility Base Pay Performance rewards Profit Sharing I. Incentive
- 15. A Complete Reward Program Base Pay Profit Sharing Performance Rewards • Performance appraisal and incentives rate employees on their performance and reward their contribution I. Incentive
- 16. A Complete Reward Program Base Pay • Profit sharing rates the company in terms of its general economic performance and rewards employees to improve performance on the job Profit Sharing Performance rewards I. Incentive
- 17. A Complete Reward Program • Seniority pay rewards workers for extended service • Overtime pays workers for working overtime • Vacation pays workers when employee does not work II. NonIncentive Seniority pay Overtime Others Vacation, Pension
- 18. A Complete Reward Program Base Pay Performance rewards Profit Sharing Real pay adjustment Skill-based Pay Service Reward Sacrifice Reward Nonwork Award Noneconomic Award • Compensatory time off, on-site day care • Vacations, pensions • Overtime, differential • Seniority
- 19. Money as Means of Rewarding Employees • Money is an economic value as a medium of exchange • Money is also a social medium of exchange • Differences in meaning of money by gender and culture • Money is an important motivator
- 20. Application of Money to Motivational Models • Drives - Achievement –oriented employees monitor their total pay and compare it with others • Needs – Herzberg model, pay is viewed as a maintenance factor. Other need-based models, pay is seen as in its capacity to satisfy lower-order needs (i.e. Maslow and Alderfer’s existence needs)
- 21. Application of Money to Motivational Models (cont’n) • Equity - employees identify and compares personal costs and rewards to determine equality
- 22. Extrinsic and Intrinsic Rewards • Money is essentially an extrinsic reward rather than an intrinsic one • Extrinsic – are external rewards that occur apart from the nature of work , providing no direct satisfaction at the time the work is performed
- 23. Extrinsic and Intrinsic Rewards (cont’n) • Intrinsic – are internal rewards that a person feels when performing a job that has direct and immediate connection between work and reward • Pay is something that originates outside the job and is useful away from the job
- 24. Extrinsic and Intrinsic Rewards (cont’n) • Economic rewards, cannot provide all the rewards for psychologically healthy person • An important task of manager is integrating extrinsic and intrinsic rewards successfully
- 25. Organizational Behavior and Performance Appraisal • Management by Objectives (MBO) – a cyclical process that often consists of four steps as a way to attain desired performance Objective setting Action planning Periodic reviews Annual evaluation
- 26. Organizational Behavior and Performance Appraisal • Performance Appraisal – a process of evaluating the performance of employees, sharing that information with them, and searching for ways to improve their performance Allocate resources Motivate and reward employees Give feedback Maintain fair relationships with groups Coach and develop employees Comply with regulation
- 27. Appraisal System • Part of appraisal system which requires supervisor to assess employees on various aspects Productivity Behavior Personal traits Quality of work Quantity of output Attendance
- 28. Appraisal System • Historical performance • Potential for growth and advancement • Forms and Procedures • Rating scales A-B-C-D-E- 1-2-3-4-5 Essay Record of incidents – positive and negative
- 29. Appraisal Interview • A session in which the supervisor provides: † feedback to the employee on past performance † discusses any problem † invites a response † opportunity to motivate the employee
- 30. Suggested Approaches on Appraisal Interview • Is knowledgeable about the employee’s job • Has previously set measurable performance standards • Has gathered specific evidence frequently about performance • Seeks and uses inputs from other observers in the organization
- 31. Suggested Approaches on Appraisal Interview (cont’n) • Limits amount of criticism to a few major items • Provides support, acceptance, and praises for a task well done • Listens actively to employee’s inputs and reactions • Share responsibility for outcomes and offer future assistance • Allow participation in discussion
- 32. Performance Feedback • Helps employees know what to do and how well they are meeting their goals • Enhances an employee’s self-image and feeling of competence • Lead to both improved performance and improved attitudes
- 33. Performance Feedback (cont’d) • Attribution: the process by which people interpret and assign causes for their own and others’ behavior
- 34. Employee behavior occurs: - functional? - dysfunctional Future behavior is predicted; methods to assure it are implemented Attributions are made to personal or situational factors such as: - Ability - Effort - Task difficulty - Luck Performance Feedback (cont’d) The Process of Making and Using Attributions Observe Describe/Preduct Control
- 35. Performance Feedback(cont’d) Manager… • observes some employee’s behavior and describes it as functional or dysfunctional • Seeks to understand and diagnose the behavior • Makes a causal attribution for it • Predicts and controls future employee behavior
- 36. Economic Incentive Systems • Performance Management – holds that employee performance can be managed and improved. • Economic Incentive system - a system that induce a high level of individual, group, or organizational performance by making an employee’s pay contingent connected with their performance
- 37. Major Incentive Measures to Link Pay with Performance Incentive Measures Example Amount of inputs Piece rate, sales commission Quality of output Piece rate only for pieces meeting standard Success in reaching goals Bonus for reaching esablished goals Amount of profit Profit sharing Const efficiency Gain sharing Employee skills Skill-based pay
- 38. Economic Incentive Systems • Wage incentives • Profit Sharing • Gain Sharing • Skills-Based Pay
- 39. Economic Incentive Systems • Wage incentives – form of merit incentive providing more pay for more production Rationale: To increase productivity while decreasing labor costs per unit of production Difficulty: Disruption in the social system may lead to feelings of inequity and dissatisfaction
- 40. Advantages and Disadvantages of Incentives Linking Pay with Performance Advantages Disadvantages Strengthen instrumentality of beliefs Cost (both to employer and employee) Create perception of equality System complexity Reinforce desirable behaviors Union resistance Provide objective basis for rewards Delay in receipt Variable or declining pay
- 41. Economic Incentive Systems • Profit Sharing – system that distributes to employees some portion of the profits of the business Aims to recognize mutual interests Work better for fast growing, profitable organizations
- 42. Economic Incentive Systems • Gain Sharing – measures improvements, shares the gains with employees on some formula basis Inventory levels Labor hours per unit of production Usage of materials and supplies Quality of finished goods
- 43. Economic Incentive Systems • Skilled-Based Pay – reward individual employee for what they know how to do based on: range depth type of skills
- 44. Case Focus: Village Grocery Mark Rodriguez was the executive for Village Grocery, a family-owned chain of six grocery stores in a medium-sized metropolitan area. The current problem he was facing dealt with the stock clerks workers in the stores. Despite paying them the usual wage rate (minimum legislated wage), he had trouble obtaining enough applicants for the job. Worse still, many of them seemed to lack motivation once he hired them. This situation created problems of empty shelves and slow service at the check out lanes. In an attempt to solve the problems, Mark met with small groups of the workers to get their ideas. He also consulted with a local expert on compensation issues. Some workers said they wanted a higher hourly wage rate; others said they wanted some incentives to work faster; some had no comment whatsoever. The consultant recommended that Mark consider using some of the more contemporary compensation systems, Questions: 1. Which of the major economic incentive systems discussed has the best chance of working for Mark? 2. Can two or more incetive systems be combined, with an even greater likelihood of success? 3. In your recommendation, which motivational theories are you most specifically using?