1. Ch-13 Measuring & Paying For Performance

2. Ch-13 Measuring & Paying For Performance Employees are firms most important resource but also most difficult to manage. Managers need to create a workplace that motivates employees and allows them to perform at their best. Trust, clear and fair policies, effective communication & performance evaluation methodology are key factors impacting employee motivation and organizational productivity.

3. Ch-13 Measuring & Paying For Performance Managers know that simply paying more to employees will not result in increased output and improved quality. Sometime highly paid or overpaid employees are less productive. Organizations realized to change from “ I owed it” to “ I earned it” mentality. Fixed part of compensation reduced and variable part increased through short term / long term incentives.

4. Ch-13 Measuring & Paying For Performance In the knowledge based work environment, compensation linking performance, behaviour & contributions to the organization desired results is based on pay for performance concept. Performance management system involves a clear understanding of job requirements and job expectations between those doing rating and those being rated. Performance appraisal is formal process of identification and measurement of employee contributions and workplace behaviours during a specified period. It provides opportunity to employee and his supervisor to provide feedback each other on performance related issues

5. Ch-13 Barriers to Pay For Performance The work of individual employee vary from day to day. Difficulty in observing complete work cycle. Specific situation related work assignments, may be weekly, monthly, quarterly. The required time period to perform an assignment may not be indicator of the importance relative to other assignments within the job or of knowledge & skills. The completion of a job assigned to an employee may be dependant on other employees contributions, cooperation or involvement.

6. Ch-13 Motivation Theories- Content Theories Content Theories of Motivation.(Focus on needs, individual attempts to satisfy through different actions & behaviours)  Murray’s Manifest needs theory.(Needs to be satisfied which drives behaviour)  Maslow’s Hierarchy of needs.(psyclogical, safety/security, belongingness, esteem, self actualization)  Herzberg’s 2-factors need theory.(Devides Maslow theory needs into Hygiene needs and motivator factors)  McCelland’s four modes for success. (Autonomy, affiliation, achievement & power)  Alderfer’s 3-level Hierarchy. (Existence, Relatedness, Growth)  No one model actually or completely describes why people behave the way they do.  Within each model is a seed that assists in explaining and promoting understanding of human behaviour

7. Ch-13 Motivation Theories- Process Theories Process Theories. (Motivation is a process not a thing).  Festinger’s Cognitive difference( ingrained vs Operational values – Behaviour that adjust intellectual and emotional imbalance )  Adam’s Equity theory. (Rewards per contributions indicate equality or inequality and behaviours adjustment.  Vroom’s Expectancy theory.(actual vs perceived- efforts, performance, results, rewards)  Lock’s Goal achievement theory. (understanding requirements, setting goals, appreciating difficulties in process, quality of behaviour to achieve goals).  Rend’s Intellectual theory. ( Think, conceptualize, reason, focus, behave ).  Skinner’sOperant conditioning ( learn & identify problems, reinforce schedule and behave per requirements, receive consequences, repeat/ modify / terminate that behaviour.)  Dunnett’s Disequilibrium Model ( Inner state of disequilibrium, need, desire, expectancy, anticipation, behaviour, Goals, incentives, modification of inner state)

8. Ch-13 Content theories –research & application Following up Maslow & Herzberg’s work, R. Decharmis & E.L.Deci claimed that: Pay for performance could reduce employee motivation and block improved performance. Intrinsic potential to motivate performance may actually yield lower task motivation when an extrinsic reward is offered for task performed. If a pay or incentive program does not have strong relationship with work performed, behaviour demonstrated and results achieved, pay or money can act as demotivator. There are satisfying & dissatisfying job factors. Under pay for performance concept all jobs are to be completed properly.

9. Ch-13 Content theories –research & application  Another Scholar, Emest.j.McConmic stated that missing element from Herzberg’s theory is : Systematic analysis of relationship between specific job and job characteristics, job satisfaction and difference of individual interests.  Edward Lawler found that highly paid managers have more security and esteem needs than lower paid managers. He recognized that every part of management & human resources system must interact in a positive and dynamic manner otherwise the reward system will have minimum impact on employee behaviour.

10. Ch-13 Process theories –research & application Process theories expand on Content theories by describing how motivation process works. Reward system designers have found process theories more helpful and useful than content theories. The greater acceptance of process theories is due to recognition of motivation as process with identifiable and potentially observe able parts. Process theories provide information on how to develop each part and how to review the results of each part of the process.

11. Ch-13 Process theories –research & application The expectancy theory developed by Victor H Vroom, on the basis of process theories, have received more acceptance from researchers. {Expectancy Theory provides three guidelines for designing incentives:  Need to identify certain desired actions.  Need to relate specific outcomes to the demonstration of certain actions.  Need to provide consequences within established schedules.

12. Ch-13 Process theories –research & application Operant Conditioning theory developed by B.F.Skinner states that behaviour depends on it’s consequences. The environment shapes, changes and directs behaviour.Other behavuoral scientists following Skinner developed reinforcement theory, which provides three views of human behaviour:  Individuals take no active role in in shaping their own behaviour, they are merely agents responding to outside forces.  Concepts of needs, drives or goal directed behaviour is unacceptable because of the ability to observe, identify and measure these forces.  Permanent change in individual behaviour results from reinforcement of a particular behaviour.

13. Ch-13 Process theories –research & application  Four reinforcement approaches, used to encourage and achieve desired behaviour are Positive reinforcement, Punishments, Negative reinforcement and extinction.  Positive reinforcement --praise, attention, recognition, incentives, rewards etc.  A reward will have more motivational influence when the employee recognized direct relationship between activity performed, result achieved and reward gained.

14. Ch-13 Scientific Management Designed by Fredrick Taylor Assumes all people are motivated by economic means Based on 4 principles  Develop a scientific approach to each job element  Scientifically select, train, teach, & develop employees  Encourage cooperation between workers & managers  Divide work among workers & managers based on who is best suited for it

15. Ch-13 Maslow’s Hierarchy of Needs Based on universal human needs Individuals act to meet their unmet needs Managers try to create workplace that will increase the likelihood that employees will meet all of their needs If appealing to an already met need, it’s hard to motivate an employee

16. Ch-13 Maslow’s Hierarchy of Needs Physiological needs Safety needs Social needs Esteem needs Self- actualization needs

17. Ch-13 Herzberg’s Motivator-Hygiene Theory “What do people really want from their work experience?”  Motivating factors create job satisfaction  Hygiene factors create job dissatisfaction Proper management of hygiene factors can prevent dissatisfaction but cannot provide motivation Management needs to focus on job satisfiers

18. Ch-13 Expectancy Theory How motivated an employee is depends on  The link between effort & performance  The link between performance & outcome  The link between outcomes & individual needs

19. Ch-13 Equity Theory Based on employees’ perception of how fairly they are being treated and the rewards they are receiving Outcomes-to-inputs ratio is compared to  Past experience within the company  Past experience outside the company  Others experience within the company  Others experience outside the company

20. Ch-13 Equity Theory Upward social comparison : comparing oneself to another who is better off on a particular attribute  frequently results in decreased satisfaction Downward social comparison: comparing oneself to another who is worse off on a particular attribute  frequently results in increased satisfaction

21. Ch-13 Equity Theory If employees perceive an inequity they will take action Managers need to understand employees’ perceptions and reduce concerns of inequity

22. Ch-13 Goal Setting Theory Working toward a goal is primary source of motivation 3 components  Specific goals  Difficult goals  Feedback Allow employees to participate in goal setting process

23. Ch-13 Using Incentives. Compensation components can not satisfy all needs of employees. To reinforce the compensation program, the organizations introduce additional rewards to motive employees for higher level of performance. Incentives are individual, Team & situations related not fixed.

24. Ch-13 Merit Pay A pay increase related to employee performance but not guaranteed in all cases. The actual amount of merit pay may be different from employee to employee, grade to grade. Critical for employee motivation as well as for organizations.

25. Ch-13 Performance Appraisals – Issues & Opportunities A formal process to measure and rate individual employees performance & work behaviour & to encourage them to perform at their best. The measurement of performance is a complex & critical assignment. Government regulations regarding performance evaluation. If performance appraisal system is not effective, it can negatively impact management employees relationship and may harm organizational plans / objectives. Performance appraisals is an extremely touchy issue & have a strong dissatisfaction component. 360 degree feedback? Monitoring performance appraisal ratings to develop an understanding of organizational issues / needs for action.

26. Ch-13 Performance Appraisals – Issues & Opportunities Rating Errors:  Halo Effect. (Rating employee excellent in one quality)  Horn Effect. (Rating employee not good in one quality)  Central Tendency. (Rating at average / midpoint)  Strict Rating. (Rating consistently lower than normal)  Lenient Rating.( Rating consistently higher than normal)  Latest behaviour. (Rating influenced by recent act)  Initial Impression. ( rating based on first impression)  Spillover Effect. (Past appraisals impact on rating)  Status Effect. ( Rating considering level of employee)  Same as me. (Rating for matching qualities with rater)  Different from me. ( Rating for difference with rater)  Performance dimensions order.( follow rating pattern)

27. Ch-13 Designing A Job Contents Based Appraisal Program. Setting SMART objectives / Goals setting. Performance standards, dimensions & weight. Rating scales / performance evaluation criteria. Performance feedback documentation process and timeline. Performance evaluation review & approval steps.

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