1. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-1 Chapter Rewarding Organizational Behavior

2. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-2 Introduction Organizations use a variety of rewards to attract and retain people and to motivate them to achieve their personal and organizational goals The manner and timing of distributing rewards are important issues for managers To distribute rewards equitably, it is necessary to evaluate employee performance

3. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-3 Reward programs Attract qualified people Keep employees coming to work Motivate achieve high performance

4. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-4 The Reward Process Feedback Motivation to exert effort Ability and skill Experience Performance results: Individual Performance evaluation Intrinsic rewards Extrinsic rewards Satisfaction

5. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-5 Conclusion from behavioral research Satisfaction with reward is a function of both how much is received and should be receive Satisfaction influenced by comparing with what happens to other Influenced by how satisfied employees are with both intrinsic and extrinsic People differ in the reward they desire Some extrinsic reward are satisfying because they lead to other rewards

6. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-6 Management Considerations for Developing and Distributing Rewards The rewards available must be sufficient to satisfy basic human needs Individuals tend to compare their rewards with those of others The process by which rewards are distributed should be perceived as fair The managers distributing the rewards must recognize individual differences

7. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-7 Intrinsic and Extrinsic Rewards Extrinsic reward – initiated from outside the person Salary and wages Employee benefits Interpersonal rewards (e.g. receiving recognition, socially interact) Promotions Extrinsic reward – initiated from outside the person Salary and wages Employee benefits Interpersonal rewards (e.g. receiving recognition, socially interact) Promotions Intrinsic reward – one that is self-administered by the person Completion Achievement Autonomy Personal growth (e.g. training) Intrinsic reward – one that is self-administered by the person Completion Achievement Autonomy Personal growth (e.g. training)

8. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-8 REWARDS Job Performance Organizational Commitment

9. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-9 Rewards Affect Organizational Concerns Rewards affect employee perceptions, attitudes, and behavior Key organizational concerns affected by rewards: Turnover Absenteeism Performance Commitment

10. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-10 Innovative Reward Systems Skill-based pay Broadbanding Team-based rewards Concierge services Skill-based pay Broadbanding Team-based rewards Concierge services Banking time off Part-time Benefits Gainsharing Employee stock ownership plans Banking time off Part-time Benefits Gainsharing Employee stock ownership plans

11. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-11 Purposes of Evaluation: Judgmental Provide a basis for reward allocation (e.g., raises, promotions, transfers, etc.) Identify high-potential employees Validate the effectiveness of employee selection procedures Evaluate previous training programs

12. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-12 Purposes of Evaluation: Developmental Stimulate performance improvement Develop ways of overcoming obstacles and performance barriers Identify training and development opportunities Establish supervisor-employee agreement on performance expectations

13. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-13 Focus of Evaluation Evaluations should focus on translating the position responsibilities into each employee’s day-to-day activities Performance evaluations should focus on job performance, not individuals Evaluations should have proper weighting of relevant behaviors

14. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-14 Relevancy of Evaluation Deficiency – occurs when the evaluation does not focus on all aspects of the job Contamination – occurs when activities not part of the job are included in the evaluation Distortion – occurs in the evaluation process when an improper emphasis is given to various job elements

15. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-15 Improving Evaluations (1 of 3) Higher levels of employee participation in the evaluation process lead to more satisfaction with the system Setting specific performance goals to be met results in greater performance improvement than discussions of more general goals

16. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-16 Improving Evaluations (2 of 3) Supervisors should receive training in how to evaluate employee performance They should be evaluated on how effectively they do this Systematic evaluation of performance does little good if the results are not communicated to employees

17. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-17 Improving Evaluations (3 of 3) Performance evaluation feedback should not focus solely on problem areas Good performance should be actively recognized and reinforced Effective performance evaluation is a continuous, ongoing process

18. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-18 Performance Evaluation Feedback The need for feedback among people on and off the job is significant People want to know: how they are doing how they are being perceived by others how they can make adjustments to perform better Delivering feedback to a poor performing employee is a difficult experience for a manager

19. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-19 A Feedback Model Person Others Job Behavioral Results Effort Self-motivation to Adjust Persistence Disregard or Non- acceptance Evaluated Person Individual Characteristics: Perceptual Process Values Needs Goals Self-Concept Self-Efficacy Cognitive Evaluation: Creditive of Feedback Source Expectancies Personal Standards Form of Feedback (Objective or Subjective)

20. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-20 Multisource Feedback: A 360-Degree Approach 90 percent of Fortune 1000 firms use some form of multisource program The increasing use of multisource programs is the result of calls for more fairness clarity credibility Everyone in the person’s full domain could serve as an evaluator

21. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-21 Best Practices to Improve 360-Degree Feedback Programs (1 of 2) 1.Use 360-degree feedback primarily for individual development 2.Link the feedback process with the overall strategy and direction of the firm 3.Exert administrative control over every aspect of the 360-degree process

22. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-22 Best Practices to Improve 360-Degree Feedback Programs (2 of 2) 4.Use senior management as role models 5.Use highly trained internal coaches to leverage the investment 6.Evaluate the effectiveness or return on investment of the process

23. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-23 Reinforcement Theory Reinforcement is the most important principle of learning Desirable or reinforcing consequences will increase the strength of a behavior and increase the probability of being repeated Undesirable or punishment consequences will decrease the strength of a response and decrease its probability of being repeated

24. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-24 Positive reinforcement (behavior increases) Punishment (behavior decreases) Punishment (behavior decreases) Negative reinforcement (behavior increases) Rewards, Reinforcement, and Punishment I II III IV Applied Withdrawn Desirable Undesirable

25. McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-25 Reinforcement Theory: Operant Conditioning Operant conditioning – attempts to influence behavior through the use of rewards and punishments Operants – behaviors that can be controlled by altering the consequences that follow them Most workplace behaviors are operants