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Prentice Hall, Inc. © 2006 4-1 A Human Resource Management Approach STRATEGIC COMPENSATION Prepared by David Oakes Chapter 4 Traditional Bases for Pay: Seniority and Merit
Prentice Hall, Inc. © 2006 4-2 Collective Bargaining Designed to: Negotiate labor contracts Provide grievance procedures Led to: Job control unionism Collective bargaining units Union shops
Prentice Hall, Inc. © 2006 4-3 Seniority Pay Designed to award job tenure Set base pay with time- designated increases Facilitates administration of pay Avoids perception of favoritism Poor fit with most competitive strategies
Prentice Hall, Inc. © 2006 4-4 Longevity Pay Designed to Pay grade maximum for length of service To reduce employee turnover Used for most government employees General Schedule System for federal employees
Prentice Hall, Inc. © 2006 4-5 General Schedule Divided into 15 Steps Based on skills, education, & experience levels Employees eligible for 10 within-grade pay increases Step waiting periods of 1-3 years
Prentice Hall, Inc. © 2006 4-6 Merit Pay Plans P ay increases based on performance Reward excellent effort or results Motivate future performance Helps retain valued employees In 2004, raises averaged 3.5 %
Prentice Hall, Inc. © 2006 4-7 Elements of Merit Pay Based on objective & subjective indicators of job performance Periodic performance reviews Realistic & attainable standards Pay increases reflect performance
Prentice Hall, Inc. © 2006 4-8 Performance Appraisal Plans Trait systems Comparison systems Behavioral systems Goal - oriented systems
Prentice Hall, Inc. © 2006 4-9 Trait System Characteristics Work quality Appearance Dependability Cooperation Initiative Judgment Leadership responsibility Decision-making ability Creativity
Prentice Hall, Inc. © 2006 4-10 Comparison Systems Rates & ranks performance Pay raises based on ranking Types Forced distribution Paired comparisons
Prentice Hall, Inc. © 2006 4-11 Behavioral Systems Critical-incident technique (CIT) Behaviorally-anchored rating scales (BARS) Behavioral observation scales (BOS)
Prentice Hall, Inc. © 2006 4-12 Critical Incident Technique Employees & supervisors identify & label job behaviors & results Supervisors observe & record Requires extensive documentation
Prentice Hall, Inc. © 2006 4-13 Behaviorally-Anchored Rating Scales Based on 8 - 10 expected job behaviors Employees rated on ability to perform each behavior Ratings highly defensible
Prentice Hall, Inc. © 2006 4-14 Behavioral Observation Scales Documents positive performance behaviors on job dimensions Employees rated on exhibited behaviors Ratings averaged for over-all rating
Prentice Hall, Inc. © 2006 4-15 Goal - Oriented System Management- by-Objectives Supervisors & employees set objectives Highly effective technique Rated on how well objectives are met Mainly for professionals & managers
Prentice Hall, Inc. © 2006 4-16 Performance Appraisal Practices Conduct a job analysis Incorporate results into ratings Trains supervisors on use Implement Formal appeals process
Prentice Hall, Inc. © 2006 4-17 Sources of Performance Appraisal Information Employee Supervisor Coworkers Subordinates Customers/clients
Prentice Hall, Inc. © 2006 4-18 360 Degree Performance Appraisal Uses more than one appraisal source Reduces recruiting & hiring costs Appropriate for work team evaluations
Prentice Hall, Inc. © 2006 4-19 Common Raters’ Errors Bias errors Contrast errors Errors of central tendency Errors of leniency or strictness
Prentice Hall, Inc. © 2006 4-20 Bias Errors First-impression effect Positive halo effect Negative halo effect Similar-to-me effect Illegal discriminatory biases
Prentice Hall, Inc. © 2006 4-21 Contrast Errors Supervisor compares employees’ performances to other employees, not to explicit performance standards What if the best employee is average?
Prentice Hall, Inc. © 2006 4-22 Errors of Central Tendency Supervisors rate all employees as average Usually occurs when only extreme behaviors require documentation
Prentice Hall, Inc. © 2006 4-23 Errors of Leniency Leniency errors-managers rate employees’ performances more highly than they would rate them using objective criteria Causes employees to believe they are going to receive larger pay raises than they deserve
Prentice Hall, Inc. © 2006 4-24 Pay For Performance Link Link appraisals to business goals Analyze jobs Communicate Establish effective appraisals Empower employees Differentiate among performers
Prentice Hall, Inc. © 2006 4-25 Limitations of Merit Pay Programs Failure to differentiate Poor measures Supervisor biases Poor communication Undesirable social structures Using non-merit factors Undesirable competition Motivational value small
Prentice Hall, Inc. © 2006 4-26 Competitive Strategies Lowest-Cost Reduce output costs per employee Merit pay works if tied to long - term productivity Differentiation Make product or service unique Merit pay can promote creativity and risk-taking
CHAPTER 10 PERFORMANCE MANAGEMENT AND FEEDBACK. 10–2 Performance Management and Feedback Organizations need broader performance measures to insure that:Organizations.
Performance Management and Appraisal
Gathering Performance Information: Overview
Chapter 08 Performance Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Human Resource Management:
Jayendra Rimal Traditional Bases for Pay: Seniority and Merit.
© Prentice-Hall, Inc., 1998 Chapter Four Traditional Bases for Pay: Seniority and Merit.
Chapter 7 Performance Management
©2007 Prentice Hall Understanding and Managing Organizational Behavior Fifth Edition Jennifer M. George Gareth R. Jones Image from opening case 8 Pay,
Effective Employee Performance Appraisal
Definitions Performance Appraisal
PERFORMANCE APPRAISAL OVERVIEW WHAT IS A PA? WHAT IS IT USED FOR? LEGAL ISSUES INFORMATION SOURCES METHODS ERRORS AND ACCURACY FEEDBACK.
Chapter 11 - Performance Management
Implementing a Performance Management System: Overview
Human Resource Management: Gaining a Competitive Advantage
Learning Objectives After studying this chapter, you will be able to:
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