Module 5 Performance Management

Question 1

Which of the following is one of the performance measurement systems used today?

A. Balanced Scorecard
B. Dashboard Metrics
C. Performance Analytics
D. Measurement Frameworks

Answer 1

A. Balanced Scorecard

Question 2

What best describes an objective of a merit pay program?

A. To link pay to performance in a manner consistent with the mission
B. To ensure that everyone in the organization receives a pay increase
C. To guarantee that unacceptable performers advance to the midpoint of the range
D. To annualize compensation costs for the organization

Answer 2

A. To link pay to performance in a manner consistent with the mission

Question 3

For which type of employee should the lowest (first) quartile be used in a merit pay system with
pay ranges divided into quartiles?

A. Red-circled employees
B. Employees new to the role
C. High-performing employees with five years in the job
D. Employees with five to seven years of experience that fully meet standards

Answer 3

B. Employees new to the role

Question 4

What is a disadvantage of delivering a merit increase as a percent of base pay?

A. Employees with the same performance receive different monetary increases.
B. Employees with the same performance receive the same monetary increases.
C. Employees who are lower in the range receive larger monetary increases.

Answer 4

A. Employees with the same performance receive different monetary increases.

Question 5

Performance management

Answer 5

The alignment of organizational, team and
individual efforts toward the achievement of
business goals and organizational success.

Includes establishing expectations, skill
demonstration, assessment, feedback and
continuous improvement.

Question 6

Four phases of performance management

Answer 6

1. Goals
2. Measures
3. Assessment & feedback
4. Rewards

Question 7

Key principles of performance management process (5)

Answer 7

• Process is ongoing
• Mutual respect & trust are foundation of relationship between manager & employee
• Communication must go both directions
• Involvement of both manager & employee in planning & measuring performance is critical to success
• Clearly defined expectations

Question 8

Performance measurement systems (5)

Answer 8

1. Balanced scorecard
2. Business excellence model
3. Shareholder value added
4. Activity based costing and cost of quality
5. Competitive benchmarking (involves largely external perspective)

Question 9

Principles of merit pay programs (4)

Answer 9

1. Objective - link pay to performance in a manner consistent with the mission; variations in performance & contribution must be measurable, & managers must be provided with necessary tools & training to determine appropriate rewards
2. Size - size of increase must be significant enough to make a noticeable difference; successful merit pay program will ensure increases awarded to best contributors will be substantially greater than those awarded to average or less-than-average performers
3. Timing - anniversary date vs. common (focal-point) review
4. Implementation - traditional merit pay programs build merit increases into salaries, increases are permanent, values are compounded over time; one alternative to base pay increases is the use of a LSP

Question 10

Factors affecting the success of merit pay (3)

Answer 10

1. Managerial - executive support, manager capabilities, trust levels
2. Organizational - cost, competitiveness of pay structures, equity, culture, communication
3. Individual employee - measurable differences in performance, performance appraisal, perceived fairness of appraisals & increases

Question 11

Considerations in the amount of merit increases (3)

Answer 11

1. Current pay level / position in range (quartile)
2. Performance rating
3. Merit increase guidelines

Question 12

Career stages (4)

Answer 12

1. New to role (does not fully meet standards) invest
2. Emerging (meets standards) human capital
3. Established (exceeds standards) human capital
4. Expert (consistently outstanding) asset

Pay minimum for new to role, midpoint between emerging and established, and maximum for expert

Question 13

Merit increase guidelines (2)

Answer 13

1. Performance only
   - Pros: simple, same performance = same % increase
   - Cons: same performance receives different amounts (e.g. larger amounts go to people higher in the range)
2. Performance & position in range
   - Causes rates for EEs with same performance to converge on a target quartile or point
   - EEs who are farther from target point are moved more quickly & EEs who are near target point are slowed down. EEs above control point receive 0%.