1. Chapter 8 Pay, Careers, and Changing Employment Relationships

2. Opening Case: Changing with the times at Briggs & Stratton
How can organizations in traditional industries remain competitive?
Relocation
Goal-setting
Pay linked to productivity
Career development and guidance
In the mid 1990s, Briggs & Stratton realized that while it was still profitable, it needed to make some changes. It relocated some plants to lower costs, set goals , linked pay to productivity, and provided career management advice and guidance to employees. It all paid off.

3. What is a Psychological Contract?
An employee’s perception of
exchange relationship
promised outcomes
Employees’ obligated contributions
A psychological contract is a good way to think about the exchange relationship between an employee and an organization.

4. Figure 8.1 Determinants of Psychological Contracts
Direct
Communication
Observation
Written
Documents
Psychological contracts can begin to form before a prospective employee even joins an organization. During recruitment, managers will share information about the firm. Managers should provide a realistic job preview during the interview process. A realistic job preview is an honest assessment of the advantages and disadvantages of a particular job and working in a particular organization.
Once employees are on the job, they continue to receive direct communication from organizational members that helps them to form their psychological contracts.
Employees observe how other employees behave and how they are treated by the organization. Employees also observe the nature of, and manner in which, important decisions are made.
Written documents that affect the psychological contract include employee handbooks, organizational policies, and human resource documents. The company website may also provide information for an employee’s psychological contract.
Psychological
Contract

5. Figure 8.2 Types of Psychological Contracts
Transactional
Contracts:
Short term
Narrow and specific
Limited promises
and obligations
Relational
Contracts:
Long term
General and evolving
Extensive and
broad promises
and obligations
These are the two types of psychological contracts.
In transactional contracts, individuals focus primarily on extrinsic outcomes such as pay. Contingent workers have transactional psychological contracts.
Relational contracts imply a mutual commitment on the part of both parties. Extrinsic outcomes are still important but there are also intrinsic factors involved.

6. Consequences of Broken Contracts
Poor motivation and performance
Negative moods and emotions
Job dissatisfaction
Intent to quit
The larger the perceived violation of the psychological contract, the more intense the potential negative reactions.

7. Performance Appraisal
Motivation and performance
Provide accurate job information
Training
Compensation
Promotion/demotion
These are the two overarching goals of performance appraisals. All approaches to motivation depend on the accurate assessment of an employee’s performance. Performance appraisals give employees the feedback necessary for intrinsic motivation.
Performance appraisals provide managers with the information needed to decide how to distribute outcomes like pay and promotion and how to improve the performance of employees who are not performing as highly as they should be. It can provide employees and supervisors with information for career planning. It may also signal areas in which employees need to improve and skills they may need to develop to meet their career goals.

8. Information Provided To Employees
Level of contribution
Accuracy of tasks and direction
Feedback
Intrinsic motivation
The performance appraisal lets employees know if they are contributing at the appropriate level. It also provides feedback on whether employees are working in the right direction and doing the right tasks to help meet organizational goals.

9. Developing a Performance Appraisal System
How?
Formal and informal appraisals
What factors to evaluate
Traits, behaviors, or results
Methods of appraisal
BARS, BOS
Who appraises performance
There are a number of choices managers must make in order to develop an effective performance appraisal system.
The first choice is to determine what mix of formal and informal appraisals to use. Formal systems are usually conducted on a fixed schedule such as every six months or once a year. If employees need more frequent feedback, informal appraisals can supplement formal ones. Informal feedback is also useful for correcting inappropriate behavior early. Informal appraisals vary in form and content. Forma appraisals ensure that performance gets assessed periodically along the dimensions important to an organization. Ideally, an organization should use both informal and formal appraisals.
Traits, behaviors, and results are the three basic types of information that can be assessed. This is discussed further in a later slide.
The measures managers use to appraise performance can be either objective or subjective. These are discussed on a later slide.
While a supervisor usually appraises performance, others may appraise employee performance as well. These other people are discussed on a later slide.

10. Methods of Appraisal Objective: numerical counts based on fact
Subjective:
individual
perceptions
based on traits,
behaviors, and
results
Objective measures are primarily used when results are the focus of performance appraisal. Examples of objective measures are number of sales, growth in sales, number of client meetings, etc.
Subjective measures are based on individuals’ perceptions and can be used for appraisals based on traits, behaviors, and results. Because they are based on perceptions, they are vulnerable to biases. Typically, when subjective measures are used, managers identity specific dimensions of performance that are important to the job. Then they develop some kind of rating scale to measure or assess an individual’s standing on each dimension.
Three of the most popular rating scales are graphic rating scales, behaviorally anchored rating scales, and behavioral observation scales. These are depicted in the upcoming slides.

11. Figure 8.4 Graphic Rating Scale
When a graphic rating scale is used, the rater assesses the performance of an employee along one or more continua with clearly specified intervals. Graphic rating scales are popular because they are relatively easy to construct and use. One potential disadvantage is that different raters may disagree about the meaning of the scale points.

12. Figure 8.4 Behaviorally Anchored Rating Scale (BARS)
A behaviorally anchored rating scale attempts to overcome the problem by careful definition of what each scale point means. Examples of specific work-related behaviors correspond to each scale point. One potential problem with behaviorally anchored rating scales is that sometimes employees exhibit behaviors corresponding to more than one point on the scale.

13. Figure 8.4 Behavioral Observation Scale (BOS)
A behavior observation scale overcomes the problem of employees exhibiting behaviors corresponding to more than one scale point by not only describing specific behaviors but also asking raters to indicate the frequency with which an employee performs the behaviors. This method tends to be more time consuming than the last though.

14. Who Appraises Performance?
Supervisors
Self-appraisals
Peer appraisals
Subordinate appraisals
Customer/client appraisals
Multiple raters
Supervisors do appraise performance is most organizational settings. They are generally the most familiar with their subordinates’ behavior and are responsible for motivating subordinates to perform at acceptable levels. Sometimes, self-appraisals, peer appraisals, subordinate appraisals, customer/client appraisals, and multiple raters are also used to appraise performance.
Self-appraisal can be advantageous because an employee is likely to be familiar with his or her own level of performance. However, most people consider themselves to be above average.
Peer appraisals are given by an employee’s co-workers. Peers are often familiar with performance levels but may be reluctant to provide accurate appraisals.
Subordinate appraisals are given to a manager by the people he or she supervises. These should be anonymous so that subordinates do not need to fear retaliation.
In a 360-degree appraisal, an employee’s performance is evaluated by a variety of people who are in a position to evaluate the employee’s performance. They are most commonly used for managers.
360-degree appraisal

15. Problems and Biases in Performance Appraisal
Stereotypes
Primacy effect
Contrast effect
Halo effect
Similar-to-me effect
Harshness, leniency, and average tendency biases
Knowledge-of-predictor bias
Problems and biases can be particularly troublesome or subjective performance appraisals. Awareness of potential problems can help to prevent them from leading to an inaccurate appraisal of someone’s performance.
Stereotypes are a type of schema built around some distinguishing, and often highly visible characteristic like race, gender, or age.
A primacy effect occurs when initial pieces of information that people have about a person have an inordinately large effect on how that person is perceived.
A contract effect occurs when people’s perceptions of a person are influenced by their perception of others in an organization.
A halo effect occurs when people’s general impression of a person influences their perceptions on specific dimensions.
The similar-to-me effect occurs when people perceive others who are similar to themselves more positively than they perceive those who are dissimilar.
Harshness, leniency, and average tendency biases refer to supervisors who tend to be overly harsh, overly lenient, or tend to rate everyone about average.
Knowledge-of-predictor bias means that perceptions of a person are influenced by knowing the person’s standing on a predictor of performance.

16. Merit Pay Plans Use when
Individual performance can be accurately assessed
Employees are highly independent
Distribute by
Salary increase
Bonuses
A plan that bases pay on performance is often called a merit pay plan. When pay is not based on merit, it might be based on the particular job an employee has in an organization or on an employee’s tenure in the organization. Merit pay is likely to be much more motivational than pay that is not based on performance.
Merit pay plans tend to be used most heavily in the upper levels in organizations, but is effective for employees at lower levels too. It is also being used in other countries.
If employees are highly interdependent, an individual-based pay-for-performance plan is not an option. Rather, managers can implement a group or organizational level pay-for-performance plan in which employees’ pay levels depend on how well their group or organization as a whole performs.
Bonus plans tend to have a greater impact on motivation than do salary increase plans for three reasons. First, the absolute level of a person’s salary is based largely on factors not related to current performance. Increases in salary levels based on current performance tend to be small in comparison to the total amount of the salary. Second, current salary increases may be only partially based on performance such as when across-the-board cost-of-living raises or market adjustments are given to all employees. Third, organizations rarely cut salaries so salary levels across employees tend to vary less than do performance levels.

17. Individual-Based Merit Pay Plans
Piece-rate pay
Paid for each unit produced
Commission pay
Paid by percentage of sales
Full
Partial
With commission pay, often used in sales positions, salaries are a percentage of sales. Salary levels in full commission plans fluctuate directly in proportion to sales that are made. Salespeople in a partial commission plan receive a fixed salary plus an amount that varies with sales. The maximum motivational impact is obtained when pay is based solely on performance as in a full commission plan. Employees operating under such a plan, though, are not likely to develop any kind of team spirit.

18. Gain-Sharing Employees receive share of profits or saved expenses Why?
Types
Scanlon plan
Profit sharing
Gain-sharing plans are pay plans that are linked strictly to organizational performance rather than individual performance. Employees are given a certain share of profits that the organization makes or a certain share of expenses that are saved during a specified time period.
The Scanlon plan, developed by James Scanlon in the 1920s, focuses on reducing costs. Departmental and organization-wide committees are established to evaluate and implement cost-saving suggestions provided by employees. Employees are motivated to make suggestions, participate on the committees, and help implement the suggestions because a portion of the cost savings realized is distributed back to all employees.
Employees participating in profit-sharing plans receive a certain share of an organization’s profits. Profit-sharing plans that give employees their share of profits in cash tend to be more successful than programs that use some sort of deferred payment.

19. Pay Differentials and Comparable Worth
Gender
Age
Race
Leadership level
Link to Equity theory
Women earn approximately 74 cents for every dollar earned by men. Some of the gender gap in rates may be due to overt discrimination or to the fact that some men have more experience and better qualifications. Also, jobs that women have traditionally held (such as nurse or teacher) have lower pay rates than jobs that men have traditionally held even though the jobs may require similar levels of skill and may be of equal value to an organization. Pay differentials have the potential to adversely affect the motivation of high-performing women who perceive that they are not receiving as much pay as the job is worth (equity theory). Further, pay differentials based on gender, age, race, ethnic background, or any other nonperformance characteristic is unethical.
The principle of comparable worth suggests that jobs of equivalent value to an organization should carry the same pay rates regardless of differences in the nature of work itself and regardless of the personal characteristics of the persons performing the work. Pay rates should be determined by factors such as effort, skill, and responsibility on a job and not by whether one type of person or another usually performs the job. It has been difficult to put the comparable worth principle into practice.
Another pay differential receiving attention lately is the difference between pay received by those at the very top of an organization and the many employees under them.

20. Types of Careers Steady-state Linear Spiral Transitory
A career can be defined as the sum of work-related experiences throughout one’s lifetime. A career includes the number and types of jobs a person has had as well as the different organizations a person has worked for.
There are four categories of careers.
Steady-state careers reflect a one-time commitment to certain kind of job that is maintained throughout one’s working life.
In a linear career, a person progresses through a sequence of jobs and each job entails progress over the prior one in terms of responsibility, skills needed, level in the hierarchy of an organization, and so on.
In a spiral career, a person holds different types of jobs that build on each other but tend to be fundamentally different.
A person with a transitory career changes jobs frequently and each job is different from the one before.

21. Figure 8.5 Career Stages Preparation for Work Organizational Entry
Early Career
Mid-Career
Although each person’s career is unique, there are certain career stages that at least some people seem to progress through. More often than not, these stages are experienced in different organizations. The boundaryless career captures the idea that careers are not tied to a single organization and that people will have a variety of kinds of work experiences in different organizations over the course of their careers.
Preparation for work involves acquiring the necessary knowledge, skills, education, and training. During the second stage, people try to find a job that will be a good start to their chosen career. The early career stage starts once a person has obtained a job in a chosen career. There are two steps in this stage. The first step is establishment, during which newcomers are motivated to learn how to perform their jobs, what is expected of them, and more generally how to fit in. The second step is achievement. They are motivated to accomplish something worthwhile and make a significant contribution to the organization.
Employees in mid-career have generally been in the workforce between 20 and 35 years and face the challenge of remaining productive. A career plateau is a position from which the chances of being promoted into a higher-level position within an organization or obtaining a position with more responsibility in another organization become very small.
The late career stage extends as long as a person’s career is active.
Late Career

22. Contemporary Career Challenges
Ethical Career Management
Career Management that Supports Diversity
Career Management in an Era of Dual-Career Couples
Figure 8.6 contains a short ethics quiz that provides some examples of behaviors that supervisors may request subordinates to perform that may be unethical.
The increasing diversity of the workforce means that managers have to make sure that diverse members of an organization are given the career opportunities they deserve.
Organizations have to take into account the fact that the dual-career couple is now the norm rather than the exception. Individual employees cannot make career decisions that entail relocating to another state without considering the needs of the entire family. To help modern families manage their careers effectively, organizations can take several steps. Organizations can limit unnecessary moves and travel. Organizations can use flexible working arrangements to allow their members time off when needed. Organizations can have on-site day care centers.