Chapter 10 Flashcards
Companies often link individual pay to performance through what type of plan?
> Companies often link individual pay to performance through a pay-for-performance plan
Organizational success ultimately depends on what?
> organizational success ultimately depends on human behaviour.
Because organizational success is dependent on human behaviour, how should we align our compensation decisions?
> Our compensation decisions and practices should be designed to increase the likelihood that employees will behave in ways that help the organization achieve its strategic objectives.
There is growing evidence that employee performance depends on three general factors: what are they?
> Employee performance = f ( A M E ), where:
A: Ability
M: Motivation to perform
E: Supportive environment
Pay and other rewards should encourage and reinforce what?
> Pay and other rewards should encourage and reinforce desired behaviours.
Even though pay and other rewards encourage and reinforce the desired behaviours, what should we remember?
> But, to make the right decisions on pay and other rewards, performance has to be accurately measured.
Compensation can’t do it all alone. How does an organization execute effective performance?
> Compensation can’t do it all alone.
> An organization needs to recognize the changing skill requirements (human resources planning),
> select the right people (recruitment and selection),
> provide the knowledge and skills to enable their employees to do their current job (training),
> and have a system in place that can accurately assess employees’ performance (performance management).
What should not dictate an employees pay?
> Things the employees can’t control (in the external environment) should not be dictating a big part of their pay.
A low-incentive component is appropriate in organizations with what?
> Hence a low-incentive component is appropriate in organizations with high variability in corporate performance, irrespective of whether individual performance measures are stable and clear or unstable and unclear.
In what organizations are larger incentive pay components appropriate?
> Conversely, larger incentive components are appropriate in companies with low variability in corporate performance.
When is incentive pay not appropriate?
> In jobs where there might be a great deal of fluctuation in the kinds of things expected of employees, requiring employees who are willing to be flexible and adjust to changing demands.
How do we attract good employment prospects to join the company? But it isn’t always just about the money. One study found that what two key elements in the decision to join a company?
> One study found that job characteristics (including rewards and tasks/abilities required) and recruiter behaviours were also key elements in the decision to join a company.
What three elements does motivation involve?
motivation involves three elements:
(1) what’s important to a person, and
(2) offering it in exchange for some (3) desired behaviour.
Flexible compensation is based on the idea that:
> Flexible compensation is based on the idea that only the individual employee knows which package of rewards would best suit her or his personal needs.
What is the key ingredient in flexible compensation?
> The key ingredient in this new concept is careful cost analysis to make sure the dollar cost of the package an employee selects meets employer budgetary limits.
What are essential features of the motivation theory: Maslow’s Hierarchy of Needs
> People are motivated by inner needs.
> Needs form a hierarchy from the most basic needs (food and shelter) to higher-order needs (e.g., self-esteem, love, self-actualization).
> Unmet needs motivate; met needs do not.
> Unmet higher-order needs become motivating only after lower-order needs have been met.
What are implications for Pay and Pay for Performance of the motivation theory: Maslow’s Hierarchy of Needs
> Base pay must be set high enough to provide individuals with the economic means to meet their basic living needs.
> Pay for performance works best when focused on unmet needs.
> In cases when basic needs are met, pay for performance is motivating to the extent that performance is instrumental in gaining achievement, recognition, and/or approval in addition to higher pay.
What are essential features of the motivation theory: Herzberg’s Two-Factor Theory
> The two factors are: (1) hygiene/maintenance factors, and (2) satisfiers/motivators. Hygiene/maintenance factors (e.g., pay) prevent dissatisfaction, but do not motivate performance or cause satisfaction.
> Hygiene factors, which include pay, help with basic living needs, security, and fair treatment.
> Satisfiers/motivators, such as recognition, promotion, and achievement motivate performance.
What are implications for Pay and Pay for Performance of the motivation theory: Herzberg’s Two-Factor Theory
> Base pay must be set high enough to provide individuals with the economic means to meet hygiene needs, but it alone cannot motivate performance.
> Low pay will cause dissatisfaction.Pay level must meet minimum requirements before performance-based pay can operate as motivator.
> Performance-based pay is motivating to the extent it is connected with meeting employees’ needs for recognition, attainment, achievement, and the like.
What are essential features of the motivation theory: Expectancy Theory
> Motivation is the product of three perceptions: expectancy, instrumentality, and valence. (1) Expectancy is employees’ assessment of their ability to perform required job tasks. (2) Instrumentality is employees’ beliefs that higher job performance will be rewarded by the organization. (3) Valence is the value employees attach to the organization rewards received for job performance.
> Motivational force to choose high performance is higher to the degree expectancy, instrumentality, and valence are high for that choice.
What are implications for Pay and Pay for Performance of the motivation theory: Expectancy Theory
> Job tasks and responsibilities should be clearly defined.
> Line of sight is critical—employees must believe they can influence performance targets.
> Pay must be clearly linked to performance and this link must be perceived as strong. Rewards for high performance must be perceived as significant.
> People choose to put forth effort toward the behaviour (e.g., low, average, or high performance), with the highest motivational force. Selection, training, job design, and compensation decisions influence this choice.
What are essential features of the motivation theory: Equity Theory
> Employees experience equity when the ratio of their perceived outputs (i.e., pay) to perceived inputs (e.g., effort, performance) is equal to the ratio of perceived outputs/inputs of another person.
> If the two ratios are not equal, perceived inequity results and the person is motivated to take action to restore equity.
> Some actions employees may take (e.g., lowering their effort) to restore perceived equity are not helpful to organizations.
What are implications for Pay and Pay for Performance of the motivation theory: Equity Theory
> The pay–performance link is critical; increases in performance must be matched by commensurate increases in pay in order to achieve equity/fairness, particularly among high performers.
> Employees evaluate the adequacy of their pay via comparisons with other employees. This means that relative pay (and relative contribution) matters.
> Perceived inequity can lead to lower effort, theft, and/or turnover.
> Perceptions of pay and contribution may not always be accurate.
> Organizations must focus on communicating accurate information.
> Inaccurate information and perceptions can negatively influence motivation and behavours.
What are essential features of the motivation theory: Reinforcement Theory
> Rewards reinforce (motivate and sustain) performance.
> Rewards are most effective when they follow directly after behaviours to be reinforced.
> Behaviours that are not rewarded will be discontinued.
What are implications for Pay and Pay for Performance of the motivation theory: Reinforcement Theory
- Performance-based payments works best when they closely follow performance.
- Rewards tightly coupled to desired performance objectives generate higher effort.
- Withholding payouts discourages unwanted behaviours.
What are essential features of the motivation theory: Goal Setting Theory
> Challenging and specific performance goals generate higher employee effort.
> Goals serve as feedback standards to which employees can evaluate their performance.
> Employees must be motivated to choose and be committed to pursuing performance goals.
What are implications for Pay and Pay for Performance of the motivation theory: Goal Setting Theory
> Performance-based pay that is contingent upon achievement of specific and challenging performance goals increases performance.
> Regular and specific feedback on performance goal attainment is important.
What are essential features of the motivation theory: Agency Theory
> Pay directs and motivates employee performance.
> Employees are risk-averse (dislike risk). They prefer fixed income flows (wage, salary) to variable income flows (performance-based pay).
> If performance can be accurately monitored without undue cost or if risk due to variability in outcomes (e.g., profits) is large, payments should be based on behaviours (e.g., satisfactory completion of work duties).
> If monitoring of behaviours is difficult or costly and if risk due to variability in outcomes is not large, pay should be based on outcomes (e.g., profits).
What are implications for Pay and Pay for Performance of the motivation theory: Agency Theory
- Performance-based pay can be used to direct and induce employee performance.
- Performance-based pay can be based on behaviours or outcomes.
- Employees are risk-averse, which means that higher pay is necessary when pay is based on outcomes.
- Performance-based pay is the optimal compensation choice for more complex jobs where monitoring employees’ work is difficult or costly.
What motivational theories focus less on need states and more so on the rewards best satisfy those needs and more on the motivational processes?
> A second set of theories, best exemplified by expectancy theory, equity theory, and agency theory, focuses less on need states and what rewards best satisfy those needs and more on the motivational processes, including how perceptions of needs and other factors (equity/fairness, risk, linkages between effort, performance, and pay) are processed cognitively to determine motivation and behaviour
What two motivational theories focus on content—identifying what is important to people
> Maslow’s hierarchy of needs and Herzberg’s two-factor theory, for example, both fall into this category. People have certain needs—such as physiological, security, and self-esteem needs—that influence behaviour.
What does expectancy theory argue?
> Expectancy theory argues that people behave as though they cognitively evaluate what behaviours are possible (e.g., the probability that they can complete the task) in relation to the value of rewards offered in exchange.
> According to this theory, employees choose behaviours that yield the most satisfactory exchange.
What does equity theory focus on?
> Equity theory focuses also on what goes on inside an employee’s head; it argues that people are highly concerned about equity, or fairness of the exchange process.
> Employees look at the exchange as a ratio between what is expected and what is received.
What does agency theory focus on?
> Some theorists say employees judge transactions as fair when others around them do not have a more (or less) favourable balance between the give and get of an exchange.
> Even greater focus on the exchange process occurs in the last of this second set of theories, agency theory
> Here employees are depicted as agents who enter an exchange with principals—the owners or their designated manager
What motivational theory focuses on desired behaviour?
> Goal setting theory
> A review of this literature indicates that the vast majority of studies on goal setting show that how we set goals (the process of goal setting, the level and difficulty of goals, etc.) can influence the performance levels of employees.
What behaviour is compensation designed to support?
> Compensation is then designed to support this risk-taking behaviour.
Compensation is but one of many rewards that influence employee behaviour. Depending on which survey is consulted, workers highly value what other job rewards?
> workers highly value such other job rewards as empowerment, recognition, and opportunities for advancement.1
If the presence or absence of rewards other than money in an organization is not considered, the compensation process may produce what?
> unintended consequences
what are the 13 general categories of financial and non-financial rewards in the total reward system?
1) Compensation
2) Benefits
3) Social interaction
4) Security
5) Status/recognition
6) Work variety
7) Workload
8) Work importance
9) Authority/Control/Autonomy
10) Advancement
11) Feedback
12) Work Conditions
13) Development Opportunity
What is is the most guaranteed portion of an employee’s income?
> Base pay is, at least as far as there are any guarantees, the guaranteed portion of income, as long as employees remain employed.
What is the definition and level of risk of to employees with respect to base pay?
D: The guaranteed portion of an employee’s compensation package.
R: As long as employment continues, this is the secure portion of compensation.
What is the definition and level of risk of to employees with respect to across-the-board increase?
D: Permanent base salary/wage increase granted to all employees, regardless of performance. Size related to some subjective assessment of employer’s ability to pay.
R: Some risk to employees because increase is at the discretion of employer, but lower risk as it is not tied to employee’s performance.
What is the definition and level of risk of to employees with respect to cost-of-living increase?
D: Same as across-the-board increase, except magnitude is based on change in cost of living, e.g., as measured by the Consumer Price Index (CPI).
R: Same as across-the-board increase.
What is the definition and level of risk of to employees with respect to merit pay?
D: Permanent salary/wage increase granted to employee as function of some assessment of individual employee’s performance.
R: Two types of risk faced by employees. Size of total merit pool at discretion of employer and individual portion of pool depends on performance, which is also not totally predictable.
What is the definition and level of risk of to employees with respect to lump-sum bonus?
D: As with merit pay, granted for individual performance. Does not add on to base pay, but is distributed as a one-time bonus
R: Three types of risks faced here. Both types mentioned under merit pay, plus not added into base—requires “re-earning” the added pay annually.
What is the definition and level of risk of to employees with respect to individual incentive?
D: Variable pay tied directly to objective measure of individual performance such as sales, production volume, or production quality.
R: Most risky compensation component if sole element of pay, but often combined with a base pay. No or low fixed base pay means each year employee is dependent upon meeting performance target to determine pay.
What is the definition and level of risk of to employees with respect to group incentive?
D: Variable pay that is tied to some measure of group performance, not individual performance. Employees share in any success (performance above standard), but are not penalized for performance below standard.
R: All group incentive plans have risks noted in above pay components plus the risk associated with group performance measures. Now individual worker also depends on the performance of others in the group.
What is the definition and level of risk of to employees with respect to gain-sharing plans?
D: A group variable pay plan with goals based not on company’s financial performance, but on forms of cost savings (e.g., labour cost is most common; might also include scrap costs, utility costs).
R: Risky, as payout is contingent on team’s ability to identify ways and execute plans to save costs.
What is the definition and level of risk of to employees with respect to profit-sharing plans?
D: Variable pay linked to group performance (team, division, company) where payout depends on company’s profitability. Size of payouts to individuals can be modified based on other measures such as individual performance.
R: More risky than gain-sharing plans, as profit measures are influenced by factors beyond employee control (e.g., economic climate, accounting writeoffs). Less control means more risk.
What is the definition and level of risk of to employees with respect to risk-sharing plans?
D: A group variable pay plan in which employees receive lower pay if company fails to achieve baseline performance goals. However, upside reward opportunity may be higher than in gain-sharing or profit-sharing plans in good years.
R: Greater risk than gain-sharing or profit-sharing plans. Typically, employees absorb a “temporary” cut in base pay. If performance targets are met, this cut is neutralized. Risk to employee is increased because even base pay is no longer totally predictable.
Some research suggests that employees may need a risk premium (higher pay) to stay and perform in what organizations?
> Some research suggests that employees may need a risk premium (higher pay) to stay and perform in a company with pay-at-risk.
Do premiums work?
> Even a premium might not work for employees who are particularly risk-averse. Security-driven employees actually might accept lower wages if they come in a package that is more stable
What is the preferred reward characteristics of materialistic individuals?
> Relatively more concerned about pay level.
What is the preferred reward characteristics of low self-esteem individuals?
> Want large, decentralized organization with little pay for performance.
What is the preferred reward characteristics of risk-taker individuals?
> Want more pay based on performance.
What is the preferred reward characteristics of risk-averse individuals?
> Want less performance-based pay.
What is the preferred reward characteristics of Individualistic individuals?
> Want pay plans based on individual performance, not group performance.
Evidence suggests talented employees are attracted to companies that have what?
> Evidence suggests talented employees are attracted to companies that have strong links between pay and performance.3
> People are attracted to organizations that fit their personalities.
Employee decisions to leave are influenced by what two factors?
> Employee decisions to leave are influenced by their performance and the degree to which pay is performance-based.
Dissatisfaction with pay can be a key factor in what?
> Dissatisfaction with pay can be a key factor
Recent efforts to use different types of compensation as a tool for retaining workers have focused on what?
> have focused on what is calledscarce talent.
Individual worker productivity was measured before and after a glass installation company switched one of its plants from a salary-only (no pay for performance) system to an individual incentive plan under which each employee’s pay depended on his or her own performance. An overall increase in plant productivity of 44% was observed. what was this increase due to ?
> Roughly one-half of the productivity increase was due to individual employees becoming more productive, while the other half of the productivity gain was explained by the fact that less productive workers were less likely to stay under such an incentive plan because it was less favourable to them.
What is skill-based pay intended to do?
> is intended, at least partially, to pay employees for learning new skills—skills that will hopefully help employees perform better on current jobs and adjust more rapidly to demands on future jobs.
Skill-based pay plans have significant cost implications - why?
> Skill-based pay plans have significant cost implications as more employees request training, spurred by the promised of skill-based pay raises.
> Poorly administered plans, allowing more people to acquire certification in a skill than are actually required or not maximizing the benefit of a multi-skilled workforce, creates cost inefficiencies.
In general, a well-designed plan linking pay to behaviours of employees results in what?
> In general, a well-designed plan linking pay to behaviours of employees results in better individual and organizational performance.
The role that performance levels should assume in determining pay increases is less clear-cut for what workers?
> The role that performance levels should assume in determining pay increases is less clear-cut for blue-collar workers
Clearly, a key element of pay-for-performance plans is some measure of performance obtained through what?
> is some measure of performance obtained through a performance appraisal process.
A survey of 2,600 employees actually yielded the following rather disheartening conclusions about performance management:
> 39% felt their performance goals weren’t clearly defined;
> 39% felt they didn’t know how their performance was evaluated;
> 45% didn’t believe their last performance review guided them on how to improve;
> 45% didn’t think the reviews could differentiate among good, average, and poor performers; and
> 48% didn’t think doing a good job was recognized.
What are 4 strategies that can facilitate managers’ ability to better understand and measure employee’s performance:?
(1) improve appraisal formats,
(2) select the right raters,
(3) understand how raters process information, and
(4) train raters to rate more accurately.
Appraisal formats can be divided into two general categories:
> ranking and rating
What are ranking and rating?
> Ranking formats require the rater to compare employees to one another to determine the relative ordering of the group on some performance measure (usually some measure of overall performance).
What is the straight ranking procedure?
> The straight ranking procedure is just that: employees are ranked relative to one another.
What is alternation ranking procedure?
> Alternation ranking recognizes that raters are better at ranking people at extreme ends of the distribution.
> Raters are asked to indicate the best employee and then the worst employee. The process continues until all employees are ranked.
> The idea behind this ranking method is that it is easier to identify the extremes, and when the harder distinctions have to be made among the remaining employees, the pool of employees to consider is reduced
What is Paired comparison performance ranking?
> Paired comparison performance ranking simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people.
> Each individual is compared separately with all others in the work group.
> The employee who “wins” the most paired comparisons is ranked top in the group, and so on.
> Unfortunately, as the size of the work group gets bigger, the number of paired comparisons may become unmanageable.
What do ratings and rankings have in common?
> First, in contrast to ranking formats, rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees.
> Second, each performance standard is measured on a scale on which appraisers can check the point that best represents the employee’s performance. In this way, performance variation is described along a continuum from good to bad.
> The types of descriptors used in anchoring this continuum provide the major difference in rating scales.
The types of descriptors used in anchoring this continuum provide the major difference in rating scales. These descriptors may be adjectives, behaviours, or outcomes - describe the distinction between each:
1) When adjectives are used as anchors, the format is called a standard rating scale.
2) Behaviourally anchored rating scales (BARS) are the most common behavioural format— that is, when behaviours are used as anchors. By anchoring scales with concrete behaviours, organizations adopting a BARS format hope to make evaluations less subjective. When raters try to decide on a rating, they have a common definition (in the form of a behavioural example) for each of the performance levels.
3 )In addition to adjectives and behaviours, outcomescan also be used as a standard. The most common form is management by objectives (MBO).Management by objectives is both a planning tool and an appraisal tool, and has many variations across firms.
The BARS format addresses a major criticism of standard rating scales.- what is it?
> different raters carry with them into the rating situation different definitions of the various scale levels.
In both the standard rating scale and BARS, overall performance is calculated in what way?
> In both the standard rating scale and BARS, overall performance is calculated as some weighted average (weighted by the importance the organization attaches to each dimension) of the ratings on all dimensions.
Appraisal formats can be evaluated on five different dimensions: what are they?
(1) employee development potential (amount of feedback about performance that the format offers),
(2) administrative value,
(3) research potential,
(4) cost, and
(5) validity.
What does employee development criteria contain?
> Does the method communicate the goals and objectives of the organization?
> Is feedback to employees a natural outgrowth of the appraisal format so that employee developmental needs are identified and can be attended to readily?
What does administrative criterion contain?
> How easily can evaluation results be used for administrative decisions concerning wage increases, merit increases, promotions, demotions, terminations, and transfers?
What does research criterion contain?
> Does the instrument lend itself well to validating employment tests? Can applicants predicted to perform well be monitored through performance evaluations?
What does cost criterion contain?
> Does the appraisal format require a long time to develop initially? Is it time-consuming for supervisors to use in rating their employees’ performance?
> Is it expensive to use?
What does validity criterion contain?
> Success in this pursuit would mean that decisions based on performance ratings (e.g., promotions, merit increases) could be made with increased confidence.
To lessen the impact of one rater’s assessment and to increase participation in the process what method is used?
> Generally, this system is used in conjunction with supervisory reviews.This method assesses employee performance from five different perspectives: supervisor, peer, self, customer, and subordinate.
How do supervisors do as raters in performance reviews?
> The dominant view is that supervisors tend to provide accurate appraisals of their subordinates.
> Tend to be more reliable
> On the negative side though; supervisors are particularly prone to halo and leniency errors
What is a strength of using a peer rater in performance reviews?
One of the major strengths of using peers as raters is that they work more closely with the ratee and probably have an undistorted perspective of typical performance.
What are the two negatives of using peer raters?
> First, peers may have little or no experience in conducting appraisals, leading to rather mixed evidence about the reliability of this rating source.
> Second, in a situation in which teamwork is promoted, putting the burden of rating peers on co-workers may either create group tensions (in the case of low evaluations) or yield ratings second only to self-ratings in level of leniency.
What can be said about the self as a rater?
> self-ratings are generally more lenient and possibly more unreliable than ratings from other sources.
How should self-ratings be used in employee performance?
> One compromise in the use of self-ratings is that is should be developmental, not administrative
> In addition, organizations are increasingly asking employees to rate themselves as the first step in the appraisal process.85 Asking employees to think about their performance before they go into the formal appraisal with their supervisor may lead to more realistic assessments.
Historically, upward feedback has been viewed in what way? How are they viewed now?
> Historically, upward feedback has been viewed as countercultural.
> Historically, upward feedback has been viewed as countercultural.
What do employees prefer about subordinate ratings?
> Research shows that subordinates prefer, not surprisingly, to give their feedback to managers anonymously.
> If their identity is known, subordinates give artificially inflated ratings of their supervisors
When performance is observed and evaluated, other factors influence ratings besides an employee’s performance. what would this include?
> feelings, attitudes, and moods influence raters. Whether the rater is generally cheerful or grumpy might influence the employee’s evaluation.
Researchers continue to explore how raters process information about the performance of the people they rate. In general, it appears that the following kinds of processes occur: name the 5:
1) The rater observes the behaviour of a ratee.
2) The rater encodes this behaviour as part of a total picture of the ratee.
3) The rater stores this information in memory, which is subject to both short- and long-term decay—or, simply put, raters forget things.
4) When it comes time to evaluate a ratee, the rater reviews the performance dimensions and retrieves stored observations/impressions to determine their relevance to the performance dimensions.
5) The information is reconsidered and integrated with other available information as the rater decides on the final ratings.
Ideally, raters should notice only what kind of behaviours?
> Ideally, raters should notice only performance-related factors when they observe employee behaviour. Unless a behaviour affects performance, it should not influence performance ratings
What is the halo error?
> Giving favourable ratings to all job duties based on impressive performance in just one job function.
What is the negative halo error?
> The opposite of a halo error. Downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension.
What is the first impression error?
> Developing a negative or positive opinion of an employee early in the review period and allowing that to influence negatively or positively all later perceptions of performance.
What is the recency error?
> The opposite of first impression error. Allowing performance, either good or bad, at the end of the review period to play too large a role in determining an employee’s rating for the entire period.
What is the leniency error?
> Consistently rating someone higher than is deserved.
What is the strictness error?
> The opposite of leniency error. Rating someone consistently lower than is deserved.
What is the central tendency error?
> Avoiding extremes in ratings across employees.
What is the similar to me error?
> Giving better ratings to individuals who are like the rater in behaviour and/or personality.
What is the spillover error?
> Continuing to downgrade an employee for performance errors in prior rating periods.
Generally, researchers have varied three types of input information to see what raters pay attention to when they are collecting information for performance appraisals - what are the main three?
1) First, it appears that raters are influenced by the general appearance characteristics of the ratees.Males are rated higher than females (other things being equal).
2) Race also matters in performance ratings. Blacks are more likely to receive lower ratings than whites.
3) It seems that if supervisors see ratees as similar to themselves, there is a positive influence on performance ratings, independent of actual performance.
What two aspects of performance influence performance reviews?
> Both the pattern of performance (performance gets better versus worse over time) and the variability of performance (consistent versus erratic) influence performance ratings
Research suggests that raters store information in what form? How do they recall that information?
> Research suggests that raters store information in the form of traits.
> More importantly, people also tend to recall information in the form of trait categories, such as laziness.
Errors in storage and recall also appear to arise from what?
> appear to arise from memory decay (people forget things!).
Performance appraisals serve what end?
> performance appraisals sometimes serve a political end.
Most research indicates that rater training is an effective method for what?
> Most research indicates that rater training is an effective method for reducing appraisal errors
Rater-training programs can be divided into three distinct categories - what are they?
(1) rater-error training, in which the goal is to reduce psychometric errors (e.g., leniency, severity, central tendency, halo) by familiarizing raters with their existence;
(2) performance dimension training, which exposes supervisors to the performance dimensions to be used in rating (e.g., quality of work, job knowledge), thus making sure everyone is on the same page when thinking about a specific performance dimension; and
(3) performance-standard training, which provides raters with a standard of comparison or frame of reference for making appraisals (what constitutes good, average, and bad).
What errors are the hardest to eliminate?
> Leniency errors are probably the most difficult form of error to eliminate.
Giving accurate and deflated ratings, however, may result in what?
> Givingaccurate and deflated ratings, however, may result in more complaints and possibly reduced employee morale.
What are the 7 main components of the performance appraisal process that make for a good outcome?
1) First, performance dimensions should be relevant to the culture and strategy of the company.
2) Second, it is important to involve employees in every stage of developing performance dimensions and building scales to measure how well they perform on these dimensions.
3) Third, raters need to be trained in use of the appraisal system, and all employees need to understand how the system operates and what it will be used for.
4) Fourth, raters must be motivated to rate accurately.
5) Fifth, raters should maintain a diary of employee performance, both as documentation and to jog the memory.
6) Sixth, raters should attempt a performance diagnosis to determine in advance whether performance problems arise because of motivation, skill deficiency, or external environmental constraints.
7) Finally, feedback to employees should be timely
The actual appraisal process should provide what 7 things?
1) A clear sense of direction;
2) An opportunity for employees to participate in setting the goals and standards for performance;
3) Prompt, honest, and meaningful feedback;
4) Immediate and sincere reinforcement;
5) Coaching and suggestions for improving future performance;
6) Fair and respectful treatment; and
7) An opportunity for employees to understand and influence decisions that affect them.
As the pay model suggests, effective pay-for-performance plans should result in three things:
> efficiency, fairness, and compliance.
Efficiency involves three general areas of concern:
> strategy, structure, and standards.
The central issue involving merit pay is what?
> is that organizations frequently grant increases that are not designed or communicated to be related to performance.
> is that organizations frequently grant increases that are not designed or communicated to be related to performance.
One type of pay increase guideline with low motivation potential provides equal increases to all employees regardless of performance - what are two?
> across-the-board increases and cost-of-living increases.
