Week 4 Exam 2 Flashcards
Performance Management (PM)
the process of ensuring that employee’s activities contribute to the organization’s goals; includes defining, monitoring, measuring, evaluating, and providing consequences for performance
PM Steps
- define performance outcomes for the company
- develop employee goals to achieve outcomes
- provide support
- evaluate performance
- identify improvements needed
- provide consequences for performance results
PM Limitations
-Manager Bias
-Lack of feedback & feedback clarity
-Negative reactions
-PM not taken seriously
To improve PM effectiveness…
Organizations must create accountability, continually coach, and establish clear expectations
PM Purposes
-Strategic (link employee behavior to organization goals)
-Administrative (provide decisions about salary, bonuses, hiring, or firing)
-Developmental (basis for developing employees knowledge and skills)
PM Benefits for Employees
Identifies their strengths and weaknesses and establishes a plan to develop skills
PM Benefits for Managers
Helps build strong relationships with employees
Criteria for effective PM
-Fit with Strategy, Acceptability, Specific Feedback, Reliability, Validity
-Only Information, NOT an Evaluation
-Given regularly not just annually
-Links goal setting & feedback
Reliability PM
consistency of the results performance measure will deliver
Interrater reliability
consistency of results when more than one person measures performance
Test-Restest reliability
consistency of results over time
Validity PM
-whether the appraisal measures all relevant aspects of performance
-minimize deficiency (information that is not gathered but is relevant) and contamination (information that is gathered but irrelevant)
Performance Evaluation Approaches
Making Comparisons, Rating Individuals, Measuring Results
Making Comparisons- Performance Evaluation
Ex. Simple Ranking, Forced Distribution, and Paired Comparison
Benefits of Making Comparisons
Counteracts leniency (rating everyone positively) and central tendency (rating everyone as average)
Easy to use
Helps make decisions about raises and layoffs
Simple Ranking
-Requires managers to rank employees in their group from the highest performer to the poorest performer
-Problem: Validity; best and worst do not define what is good and bad about performance nor does it provide actual feedback
Forced Distribution
-Assigns a % of employees to each category in a set of categories (i.e. exceptional, above average, average, etc.)
-Problem: could be incorrect; people who are actually good may be in the lower category)
Paired-Comparison
-Compares each employee with another employee to establish rankings
Problem: time-consuming for a manager
Rating Attributes- Performance Evaluation
-Lists traits and provides a rating scale for each trait; the employer uses a scale to indicate to which extent the employee displays each trait
-Problems: low reliability, rarely linked to the organization’s strategy, doesn’t generate feedback
Rating Behaviors (BARS)
-Rates behavior in terms of a scale showing specific statements of behavior that describe different levels of performance
-Problem: can be biased, time-consuming, and costly
Rating Behaviors (BOS)
-A variation of BARS that uses all behaviors necessary for effective performance to rate performance at a task; better for being objective and generating feedback, and it is easy to use
-Problem: time-consuming and requires a lot of information
Management by Objectives (MBO): - Performance Evaluation
Managers and employees work together to set specific objectives that are tied to the overall business goals; these goals become the standards for evaluating each employee’s performance
Manager’s role in performance evaluation
-Provide frequent feedback throughout the year both formally and informally
-Take the atmosphere/context in consideration for the actual review discussion
-Encourage the individual to actively participate in the discussion, professionally
-Provide a balance of positive and constructive feedback
-Recognize mistakes but make it a learning experience; focus on solving problems for the future
-Focus the feedback on behaviors and NOT personal characteristics
-!!! Accurately rate performance/potential !!!
Errors in Performance Measurement
“Similar to Me” error, Contrast error, Distributional errors, and Raters let their opinion of one quality alter their opinion of others
“Similar to Me” error
You may give higher ratings to someone similar to you
Contrast error
Occurs when candidates are compared to each other rather than on a standardized rating scale (i.e. NBA player sucks but only comparing to people in the NBA)
Distributional errors
-Leniency (rating everyone near the top)
-Strictness (rating majority near the bottom)
-Central Tendency (put everyone near the middle of the scale)
-Makes comparisons difficult among employees rated by the same person or among different raters
Halo effect error & Negative halo effect error
Halo: when the bias is in a favorable direction
Neg: when the bias is negative
Feedback
information about an individual or collective performance that is shared with those in a position to improve
Feedback functions
Instructional: when it clarifies roles or teaches new behavior
Motivational: when it serves as a reward or promises a reward (i.e. information that builds self-efficacy)
Why is feedback important?
-It can help employees improve their performances
“Tell-and-Sell” method
The manager tells employees their ratings and the manager justifies those ratings
“Tell-and-Listen” method
The manager tells employees their ratings and allow the employee to explain
“Problem-Solving” method
Manager and employee work together to solve performance problems
Performance Goal vs. Learning Goal
PG: targets a specific end result
LG: promotes enhancing your knowledge/skill
-must focus on LG before PG
Total Rewards
-The sum of all the things in the work experience that affect (or are available to) an employee
-Can be tangible (compensation) or intangible (recognition)
-Goal is to find a set of total rewards that are meaningful to the widest possible group of employees including potential ones
Compensation
-Includes all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship
-Related to individual motivation, engagement, and retention
-Must be aligned with the goals and strategy of the organization
Incentive Pay
Forms of pay linked to an employee’s performance on all levels
Ways to Pay for Individual Performance:
Piecework Rate, Standard Hour Plan, Merit Pay, Performance Bonuses, or Sales Commissions
Piecework Rate
Pay based on the amount workers produce
Straight Piecework Rates vs Differential Piecework Rates
-Straight: The employer pays the same rate per piece (no matter how much the worker produces)
-Differential: The piece rate is higher when a greater amount is produced
Standard Hour Plan (include Pros/Cons)
Pays workers extra for work done in less than a standard time
-Pro: Encourages employees to work faster
-Con: Employees often neglect quality or customer service
Merit Pay
Pay increases linked to ratings on performance appraisals, uses a merit increase grid
Merit Pay Advantages & DIisadvantages
-Adv.: able to reward all aspects of employee’s performance that are measured
-Disadv.: expensive, may discourage teamwork and encourage self-centeredness
Compa-ratio vs Group Compra-ratio
-CR: describes the individual’s position in the pay range against the pay policy reference point for the range (assesses the competitiveness of an employee’s pay level)
-GCR: compares the average salary of a group of employees to the average salary of other groups within the same organization or to competitors
GCR Number…
-Close to 1 (the pay structure is well-planned to support the organization’s goals)
-Greater than 1 (paying more than anticipated for HR and may have difficulty keeping costs under control)
-Less than 1 (underpaying for HR relative to expectations)
Performance Bonuses (include PRO)
-Not rolled into base pay, Employees must re-earn the bonus each period
-Pro: gives companies great flexibility in deciding what to reward
Sales Commissions & examples
-Incentive pay is calculated as a percentage of sales
-Ex.:Straight commission plan (no base salary), Straight salary (no commission), Commission “in addition to” a base salary
Ways to Pay for Group Performance:
Gainsharing, Group Bonuses, and Team Awards
Gainsharing (include advantages)
-Measures increases in productivity and effectiveness and distributes a portion of each gain to all employees in a unity (group)
-Adv.: addresses the challenge of identifying appropriate performance measures, frees employees to determine how to improve their group’s performance
Group Bonuses
Reward members of a group for achieving a specific goal; can create competition between groups
Team Awards
Similar to group bonuses but more likely to use recognition as the “payment”
Ways to Pay for Organization Performannce
Profit Sharing & Stock Options
Profit Sharing
-Incentive pay in which payments are a percentage of the organization’s profits and do not become part of the employee’s base salary
-Pros: encourages employees to think like owners and make the organization more successful
Stock Options
-Rights to buy a certain number of shares of stock at a specified price
-Pro: a sense of ownership in the company
Employee Stock Ownership Plans (ESOPs)
-the organization distributes shares of stock to all its employees by placing it in a trust, employees get updates on the value of their stocks and can sell the stocks when they leave the organization
Mandatory Benefits
Social Security, Unemployment, Worker’s Comp, FMLA, and Healthcare
Retirement- Defined Benefit
You get paid a certain amount of money per year (i.e. pensions)
Retirement- Defined Contribution
You put in a certain amount from each paycheck, the money gets invested in some way, its tax free until you withdraw it
