compensation and rewards

1. Compensation and Rewards Business 158 Spring Semester 2007 Tim Brown

3. Topics (Chapter 11) Role of Performance Appraisals in Pay Decisions Common Errors in Appraising Performance Better Understanding and Measuring Performance Performance Evaluation Process EEO and Performance Evaluation Tying Pay to Subjectively Appraised Performance Merit Increase Delivery Tool: Merit Matrix Grid Promotions as a Pay-for-Performance Tool

4. Nature of Performance Appraisals

5. Role of Performance Appraisal Control mechanism for feedback Allows employee progress to be assessed Ensures strategy-consistent behavior Reinforces values of organization Ensures alignment of individual performance and behavior to organization and work systems

6. Les Wiletzky Purposes of Performance Appraisal Evaluation Performance measurement Compensation decision-basis Motivation EMPHASIS: Past Development Management development Identification of Potential General feedback Human resource planning Communication vehicle Performance improvement EMPHASIS: Future

7. Common Errors in Appraisal Process

8. Factors Related to Inaccurate Appraisal

9. Strategies to Better Understandand Measure Job Performance

10. Strategy to Better Understandand Measure Job Performance

11. Categories of Appraisal Formats

12. Ranking Formats Straight ranking Alternation ranking Paired-comparison ranking

13. Rating Formats Two common elements Raters evaluate employees on against standard Each standard is measured on a scale -performance variation is described along a continuum Types of descriptors Behaviors (competencies) Outcomes (results)

14. Strategy to Better Understandand Measure Job Performance

15. Old-School view Manager writes evaluation Employee listens to manager�s perspective Employee comments not highly valued, could be damaging to future aspirations

16. Enlightened view Manager and Employee agree on �SMART� objectives Specific Measurable Achievable Realistic Time-bound Employee and Manager both contribute their views on how employee performed

17. Progressive view 360 degree review process considers the input of the manager and the employee but also peers, subordinates and customers

18. Select the Right Raters

19. Strategy to Better Understandand Measure Job Performance

20. The Rating Process Rater observes behavior of a ratee Rater encodes ratee behavior Rater stores information in memory When it is time to evaluate a ratee, rater Reviews performance dimensions and Retrieves stored observations to determine relevance to performance dimensions Information is reconsidered and integrated with other available information as rater decides on final ratings

21. Understand Why Raters Make Mistakes

22. Training Raters to Rate More Accurately Rater-error training Goal is to reduce psychometric errors by familiarizing raters with their existence Performance dimension training Exposes supervisors toperformance dimensions used Performance-standard training Provides raters with a standard orframe of reference for making appraisal

23. Ways to Improve Rater Training Straightforward lecturing to ratees is ineffective Individualized or small group discussions are more effective (role play) When discussions are combined with extensive practice and feedback, rating accuracy improves Longer training programs are generally more successful than shorter programs Performance-dimension and performance-standard training are more effective than rater-error training Success results from efforts to reduce halo errors and improve accuracy

24. Putting it All Together:The Performance Evaluation Process

25. Tips on Appraising Performance

26. EEO and Performance Evaluation

27. Tying Pay to SubjectivelyAppraised Performance

28. Provide equal increases to all employees regardless of performance General increase Cost-of-living adjustments Pay increases based on a preset progression pattern based on seniority Pay Increase Guidelines withLow Motivational Impact

29. Pay Increase Guidelines that have greater motivational impact Pay increases tied to actual performance Clear link between how your boss rated you and how you did (objective) Employee buys into the process and system

30. Performance-based Guidelines

31. Designing Merit Guidelines

32. Merit grids combine three variables: Level of performance Distribution of employees within pay ranges Overall merit budget increase percentage Merit Pay Grid

33. Sample (Generous) Merit Pay Grid

34. Sample (Tight) Merit Pay Grid

35. Promotional Increases as aPay-for-Performance Tool Promotion should be accompanied by a salary increase - 8 to 12% Characteristics of promotional pay increases Size of increment is approximately double a normal merit increase Represent a reward to employees for commitment and exemplary performance

36. Exceptions Happen Must have some money to make adjustments Bring employees to range minimum Adjust for new college grad compression Recognize market movement in key roles Fix mistakes in starting rate

37. Reminder Merit increases need to be meaningful in size Consistent with company goals/objectives culture and philosophy Can not be counted on as a panacea Work for about 12 weeks before and 6 weeks after If that�.

38. The Performance Management Process