1. Chapter 7 Rewards and Performance Management
What gets measured happens

2. Chapter 7 study questions
What is the link between motivation and rewards?
What is performance management?
What are common performance appraisal alternatives?
Copyright © 2008 John Wiley & Sons, Inc.

3. Figure 7.1
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4. What is the link between motivation and rewards?
Intrinsic rewards
positively valued work outcomes that the individual receives directly as a result of task performance
Extrinsic rewards
positively valued work outcomes that are given to an individual or group by some other person or source in the work setting
Copyright © 2008 John Wiley & Sons, Inc.

5. What is the link between motivation and rewards?
Merit pay
compensation system that directly ties an individual’s salary or wage increase to measures of performance accomplishments during a specific time period
should create a belief among employees that the way to achieve high pay is to perform at high levels
Copyright © 2008 John Wiley & Sons, Inc.

6. What is the link between motivation and rewards?
Gain sharing
gives workers the opportunity to earn more by receiving shares of any productivity gains that they help to create
Copyright © 2008 John Wiley & Sons, Inc.

7. What is the link between motivation and rewards?
Profit-sharing plans
reward employees based on overall organizational profit
Criticism is that organizational profits are not always a direct result of employees’ efforts
Copyright © 2008 John Wiley & Sons, Inc.

8. What is the link between motivation and rewards?
Employee stock ownership plans (ESOPs)
may give stock to employees, or allow stock to be purchased by them at a price below market value
Copyright © 2008 John Wiley & Sons, Inc.

9. What is the link between motivation and rewards?
Bonuses
the awarding of cash bonuses, or extra pay for performance that meets certain benchmarks or that is above expectations
common practice for many employers
Copyright © 2008 John Wiley & Sons, Inc.

10. What is the link between motivation and rewards?
Lump-sum increase
allows someone to elect the option of receiving all of an annual increase in one or more lump-sum payments
Copyright © 2008 John Wiley & Sons, Inc.

11. What is the link between motivation and rewards?
Skill-based pay
rewards people for acquiring and developing job relevant skills
Copyright © 2008 John Wiley & Sons, Inc.

12. What is the link between motivation and rewards?
Pay as benefits
Fringe benefits often add 10 to 40 % to a person’s salary
Flexible benefit plans
allow workers to select benefits according to needs
Copyright © 2008 John Wiley & Sons, Inc.

13. Figure 7.2
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14. What is performance management?
process of managing performance measurement and the various human resource management decisions and actions based on such measurement
Copyright © 2008 John Wiley & Sons, Inc.

15. What is performance management?
Steps in performance management
Identify and set clear and measurable performance goals
Take performance measurements to monitor goal progress
Provide feedback and coaching on performance results
Use performance assessment for human resource management decisions
Copyright © 2008 John Wiley & Sons, Inc.

16. What is performance management?
From an evaluative perspective, performance measurement lets people know where they stand relative to objectives and standards
Copyright © 2008 John Wiley & Sons, Inc.

17. What is performance management?
From a counseling perspective, performance measurement facilitates decisions relating to planning for and gaining commitment to the continued training and personal development of workers
Copyright © 2008 John Wiley & Sons, Inc.

18. What is performance management?
Performance Measurement Criteria and Standards
Output measures
assess actual work results
Activity measures
assess work efforts or inputs
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19. What are common performance appraisal alternatives?
formal procedure for measuring and documenting a person’s work performance
Copyright © 2008 John Wiley & Sons, Inc.

20. What are common performance appraisal alternatives?
Comparative methods of performance appraisal
Ranking
Raters rank order people from best to worst
Paired comparisons
Raters compare each person with every other person
Forced distribution
Raters place a specific proportion of employees into each performance category
Copyright © 2008 John Wiley & Sons, Inc.

21. What are common performance appraisal alternatives?
Absolute methods of performance appraisal
Graphic rating scales
Raters assign scores on a list of dimensions related to high performance outcomes in a given job
Critical incident diary records
Rater records incidents of unusual success or failure in a given performance aspect
Behaviorally anchored rating scales (BARS)
Rater identifies observable job behaviors
Copyright © 2008 John Wiley & Sons, Inc.

22. Figure 7.3
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23. Figure 7.4
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24. What are common performance appraisal alternatives?
Self evaluation
individual rates himself or herself
Peer evaluations
persons in the work team or doing similar jobs rate the individual as a co-worker
Copyright © 2008 John Wiley & Sons, Inc.

25. What are common performance appraisal alternatives?
360° Evaluation
using not only the evaluations of bosses, peers, and subordinates, but also self-ratings, customer ratings, and ratings by others with whom the ratee deals outside the immediate work unit
Copyright © 2008 John Wiley & Sons, Inc.

26. What are common performance appraisal alternatives?
Group Performance Evaluation System
Link the team’s results to organizational goals
Start with the team’s customers and the team work process needed to satisfy those needs: customer requirements, delivery and quality, waste and cycle time
Evaluate team and each individual member’s performance
Train the team to develop its own measures
Copyright © 2008 John Wiley & Sons, Inc.

27. What are common performance appraisal alternatives?
To be meaningful, an appraisal system must be:
Reliable - provide consistent results across time
Valid - actually measure people on relevant job content
Copyright © 2008 John Wiley & Sons, Inc.

28. What are common performance appraisal alternatives?
Measurement errors in performance appraisal
Halo errors
Raters evaluate on several different dimensions and give a similar rating for each dimension
Leniency errors
Raters tend to give everyone relatively high ratings
Strictness errors
Raters tend to give everyone relatively low ratings
Copyright © 2008 John Wiley & Sons, Inc.

29. What are common performance appraisal alternatives?
Measurement errors in performance appraisal
Central tendency errors
Raters lump everyone together around the average or middle
Low differentiation errors
Raters restrict themselves to a small part of the rating scale
Copyright © 2008 John Wiley & Sons, Inc.

30. What are common performance appraisal alternatives?
Measurement errors in performance appraisal
Recency errors
Raters allow recent events to exercise undue influence on ratings
Personal bias errors
Raters let personal biases, such as stereotypes, unduly influence the ratings
Cultural bias errors
Raters allow cultural differences of employees to influence the performance appraisal
Copyright © 2008 John Wiley & Sons, Inc.

31. What are common performance appraisal alternatives?
Steps for improving performance appraisals
Train raters to understand the evaluation process and recognize errors
Ensure that raters observe ratees on an ongoing basis
Do not have the rater evaluate too many ratees
Make sure that the performance dimensions and standards are stated clearly
Avoiding terms that have different meanings for different raters
Copyright © 2008 John Wiley & Sons, Inc.