Exam 3 - Study Guide Flashcards
Why do we do performance appraisal?
- Administrative: for personnel decisions, legal requirements
- Developmental: assess individuals strengths and weaknesses, provide feedback, set goals, identify training needs
360 degree feedback; also, understand the administration issues and feedback report related to implementing a 360-degree appraisal system (see Figure 7-12)
Solicits information for performance evaluation simultaneously from multiple sources, such as external customers, internal customers, selling team members, sales assistants, the sales manager, and the salesperson him- or herself.
Separate results from different sources; shows self ratings in comparison to other ratings (self perception vs perception of others)
Compare ratings with other norm groups
understand the administration issues and feedback report related to implementing a 360-degree appraisal system
- Select raters by using representative sample of those critical (and who have observed) the one being rated
- Adequate number of raters for an adequate sample; or elicit ratings from all qualified sources
- Instruct respondents on how data will be used and ensure confidentiality
- Alert and train raters regarding errors
- Raters should not indicate their names to ensure confidentiality
Understand the factors that influence performance
Ability
Motivation
environment
Error of central tendency:
rate everyone around average of scale
Leniency or error:
Leniency or error: unusually high ratings for everyone (leniency);
strictness error:
strictness error: unusually low ratings for everyone (strictness)
Recency error:
focus on what happened most recently
Contrast errors
Contrast errors: comparing individuals against each other
halo/horns error:
halo/horns error: reacts to one positive aspect then generalizes positivity to other aspects
How to conduct effective performance reviews (i.e., performance feedback sessions)?
Before review: prepare thoroughly; give yourself a self assessment; consider tie and place in scheduling
During review: discuss strengths and weaknesses; set joint goals; encourage participation and listen carefully; set follow up meetings
Know different types of performance appraisal including their advantages and disadvantages
Trait performance appraisal: subjective; focuses on the individual characteristics that are important to the job and the company
Pro: inexpensive, easy to use
Con: potential for error, poor feedback
Behavior
BARS: use of several behavioral anchors (1-low,3-average,5-high); behavioral descriptions with point along a scale
BOS: how frequently behavior occurs; use of behavior statement (always, sometimes, never)
Pro: more objective, accepted by employees, useful for feedback, ok for reward/promotion
Con: time consuming, costly
Results of performance appraisals: MBO- objectives and goal setting
Understand management by objectives
Appraisal system that calls for a comparison between specific, quantifiable target goals and actual results
Steps of MBO
Steps of MBO
Employee and employer set joint goals
Provide regular feedback
Discuss achievement of joint goals
Strategic relevance:
performance standards linked to organizational goals and competencies
Standards reliability:
measures that are consistent across raters and over time
Criterion deficiency:
aspects of actual performance that are not measured
Criterion contamination:
elements that affect the appraisal measures that are not part of the actual performance (measure when it should not have been)
Understand the objectives of pay system
- Motivating
- Equitable
- Attractive
- Complies with laws and regulation
- Strategic (pay system reflects objectives)
Understand equity theory and employee reactions to inequity
Comparing your own output/input ratio to the output/input ratio of others to see if they are equal and fair or unequal and unfair
types of compensation
Cash:
wages/salaries, commissions, bonuses, gain sharing
Fringe:
Time not worked, insurance plans, security plans, employee services
Internal consistency
- Based on job analysis and evaluation (relative worth of job)
- To assure internal equity
- Compared different jobs in same organization
External competitiveness
- Compares same jobs in other organizations
- Use of market survey
- Determined by organizational influences
three job evaluation systems/methods
1) Job ranking system:
2) Job classification
3) Point system
1) Job ranking system:
Compares jobs in order of importance (Rank); used in smaller companies and small segments of larger companies
2) Job classification
Use of predetermined classifications/grades (grade 1, grade 2…); compare job descriptions with description of grades
3) Point system
Comensate factors (what the company wants to pay for); importance of classification factors determined by weights/degree (to what worth/extent); all used to calculate points for a particular job (is it valuable)
Pay range:
Pay range: salary range for each pay grade
Pay grade:
Pay grade: groups of similar jobs as evaluated by points (grade 1, Grade 2..)
Minimum pay rate:
Minimum pay rate: the least amount of pay in a pay range
Maximum pay rate:
Maximum pay rate: the most amount of pay in a pay range
Red circle rate:
Red circle rate: when pay rate is above pay grade
understand broadbanding and its advantages
- Grouping narrow pay ranges with fewer, wider brands
- More motivating for employees
comparable worth v. equal pay
Comparable worth: regardless of job content, men and women should be paid equal if jobs are equally important to the company
Equal pay: no discrimination in pay for the same job
Provisions of the Fair Labor Standards Act: minimum wage, overtime pay, exempt employees
- Minimum wage, child labor laws, overtime pay
- Exempt: not getting paid overtime (executives, administrators, professionals, outside sales people, computer employees)
- Nonexempt: able to get overtime pay (management trainees, secretaries)
Employee benefits required by law
Social security Unemployment insurance Worker’s compensation Leaves without pay (12 weeks) COBRA: leave job, but allowed to pay insurance at group rate with higher premium Health insurance
Discretionary benefits
Time not worked payment Pension plans Wellness programs Child care Life and long term care insurance
flexible benefits plans (cafeteria plan?)
Employee picks the most valuable benefits to them
flexible benefits plans (cafeteria plan?) Advantages:
Advantages: accommodate differences in employee needs; prevent waste of benefits; employees gain better understanding of benefits
flexible benefits plans (cafeteria plan?)
Disadvantages:
Disadvantages: difficult to design/administer; higher administrative costs; possible blame on employer is sole contributor to pension plan
Noncontributory pension plan:
Noncontributory pension plan: employer is sole contributor to pension plan
Contributory pension plan:
Contributory pension plan: contribution made by both employee and employer
Defined benefit pension plan:
Defined benefit pension plan: amount after retirement is pre-specified
Define contribution pension plan:
Define contribution pension plan: employee knows method to fund employer contribution (stocks, cash)
What does ERISA do? (Employee Retirement Income Security Act)
Regulates employee pension plans and sets minimum standard for vesting
Vesting: point in time when pension monies set aside by a company becomes the actual property of the individual
SMART goals: specific; measurable; attainable; realistic; target dates
What are the advantages of incentive plans? (4)
- Focus employee effort
- Variable costs (tied to operating performance)
- Foster teamwork
- Distribute success
Piece rate:
Piece rate: for each unit produced, the more you get paid
Standard hour plan:
Standard hour plan: predetermined time period of pay; if they finish faster they still get paid and can work on other things
Bonuses:
Bonuses: goals achieved, one time incentive earned
Merit raises:
Merit raises: incentive built into pay, continue to receive pay raise
Commission:
Commission: based on amount of sales
Gainsharing:
Gainsharing: based on improved productivity or cost savings
Stock options:
Stock options: based on specific goals; stocks to employees
Profit sharing:
Profit sharing: organizational profits distributed proportional to pay
Stock ownership:
Stock ownership: special purchase plans or bonus distribution
Understand the determinants of effective reward systems and the expectancy theory
Employee values outcome
Performance is measurable
Employee can control increase output
Employee believes that increase output will result in reward
- Understand the legal implications of PFP
- Possible disparate impact against women, minorities, and age in merit ratings system
- Adverse impact requires employer to defend policy or performance measurement system
- When do group incentive plans work best?
If teamwork and cooperation are important, but team members are competing for a set of numbers or awards
- What are the managerial challenges for PFP programs? (hint: it’s in the section of “what are the managerial implications for PFP programs?” in the text)
- Emphasizing on measure can lead to reduced performance levels in other measures
- Increased overhead expense of installing and maintaining
- Difficulty in setting standards that accurately reflect task requirements and are perceived as fair
- Resistance to any change involving employee compensation
