MGT-555 PERFORMANCE AND CAREER MANAGEMENT

1. MGT-555 PERFORMANCE AND CAREER MANAGEMENT LECTURE NO - 25

2. RECAP • Possible Errors in Ratings • Frame of Reference Training • Steps in designing a Frame of Reference Training • Behavior Observational Training • Self Leadership Training • Steps in designing a Self Leadership Training • Self Efficacy Training • Ongoing Monitoring and Evaluation

3. Agenda for Today’s Lecture • Ongoing Monitoring and Evaluation • Compensation - Reward Systems • Legal Issues

4. Ongoing Monitoring and Evaluation • When the testing is over and the performance management system has been implemented organization wide, it is important to use clear measurements to monitor and evaluate the system.

5. Ongoing Monitoring and Evaluation (Contd.) • In a nutshell, a decision is to be made about how to evaluate the systems effectiveness, how to evaluate the extent to which the system is being implemented as planned, and how to evaluate the extent to which it is producing the intended results.

6. Case Study • The United States federal government takes the evaluation of performance management systems very seriously. Since the early 1990s, several laws have been passed that mandate federal agencies to develop a strategic plan, a performance plan, and a performance report. Although these initiatives concern agencies and not individuals, ultimately the performance of any agency depends on the performance of the individuals working in that agency. The net result of such laws as the Government Performance and Results Act is an increase in accountability and funding allocation based on performance. Thus, federal agencies are required to evaluate the relative efficiency of their various management techniques including performance management systems.

7. Case Study (Contd.) • Evaluation data should include reactions to the system and assessments of the system's operational and technical requirement. For example, a confidential survey could be administered to all employees asking about perceptions and attitudes regarding the system. This survey can be administered during the initial stages of implementation and then at the end of the first review cycle to find out if there have been any changes. In addition, regarding the system's results, one can assess performance ratings over time to see what positive effects the implementation of the system is having. Finally, interviews can be conducted with key stakeholders including managers and employees who have been involved in developing and implementing the performance management system.

8. Ongoing Monitoring and Evaluation (Contd.) Several additional measures can be used on a regular basis to monitor an evaluate the system: • Number of individuals evaluated: • One of the most basic measure is to assess the number of employees who are actually participating in the system

9. Ongoing Monitoring and Evaluation (Contd.) • Distribution of performance ratings: • An indicator of quality of the performance assessments is whether all or most scores are too high, too low, or clumped around the center of the distribution.

10. Ongoing Monitoring and Evaluation (Contd.) • Quality of information: • Another indicator of quality of the performance assessment is the quality of information provided in the open ended section of the form.

11. Ongoing Monitoring and Evaluation (Contd.) • Quality of performance discussion meetings: • Confidential survey can be distributed to all employee on a regular basis to gather information about how the survivor is managing the performance discussion meetings.

12. Ongoing Monitoring and Evaluation (Contd.) • System satisfaction: • A confidence survey can also be distributed to assess the percentage of system users, both raters and ratees.

13. Ongoing Monitoring and Evaluation (Contd.) • Overall/cost benefit ratio: • A fairly simple way to address the overall impact of the system is to ask a participants to rate the overall cost/benefit ratio for the performance management system .

14. Ongoing Monitoring and Evaluation (Contd.) • Unit level and organizational level performance: • Such performance indicator might be customer satisfaction with specific units and indicators of the financial of various units or the organization as a whole.

15. Case Study • Returning to the performance management system at the Washington State Patrol, we can examine how it has evaluated effectiveness since the system was implemented. The patrol has several measures in place for continual evaluation of the effectiveness of the program. First, before all employees were reviewed using the system, they were surveyed regarding their satisfaction with the new system. This input was then used to further improve the appraisal process. In addition, the patrol uses the results of a biyearly citizen's survey conducted by Washington State University. The results of this survey are used to determine whether the state patrol's customers are satisfied with its performance, and the data are also used to adjust and reprioritize performance objectives. In addition, the data are used to measure division-level performance, one indicator of the success of the performance management process. The Washington State Patrol collects other types of data as well.

16. Case Study(Contd.) • For example, every six months, division managers give presentations regarding performance management to their peers and to several executives. Initially, the meetings focused on efforts to implement the new performance management system and increase quality, but this will change as new issues arise. The presentation is 30-40 minutes long, followed by 20-30 minutes of questions from peers and executives. The feedback from these presentations is used to measure how well the system is being implemented, and feedback on the success of the meetings will be used to make any necessary changes to the system. The Washington State Patrol may also want to consider measuring how many people are participating in the system. The patrol would also benefit from assessing whether the new system is distinguishing high- from low-level performers and from ascertaining the overall cost/benefit ratio of implementing the system.

17. COMPENSATION AND LEGAL ISSUES

18. Compensation- Reward Systems: Overview • Traditional and Contingent Pay (CP) Plans • Reasons for Introducing CP Plans • Possible Problems Associated with CP • Selecting a CP Plan • Putting Pay in Context • Pay Structures

19. Traditional Pay • Salary and salary increases are based on • Position • Seniority

20. Contingent Pay (CP) • Salary and salary increases are based on • Job performance • Also called: Pay for Performance • If not added to base pay, called: • Variable pay

21. Reasons for Introducing CP • Performance management is more effective when rewards are tied to results • CP Plans force organizations to: • Clearly define effective performance • Determine what factors are necessary • CP plans help to recruit and retain top performers • CP plans project good corporate image

22. CP plans help improve motivation when: • Employees see clear link between their efforts and resulting performance (Expectancy) • Employees see clear link between their performance level and rewards received (Instrumentality) • Employees value the rewards available (Valence) motivation = expectancy x instrumentality x valence

23. Possible Problems Associated with CP • Poor performance management system • Rewarding counterproductive behavior • Insignificant rewards • The reward becomes the driver • Extrinsic vs. intrinsic motivation • Disproportionately large rewards for executives

24. Selecting a CP Plan: Issues to consider • Culture of organization • Strategic direction of organization

25. A. Culture of organization: Types of organizations • Traditional • Top-down decision making • Vertical communication • Jobs that are clearly defined • Involvement • Shared decision making • Lateral communications • Loosely defined roles

26. CP systems for different organizational cultures: • Traditional organizations • Piece rate • Sales commissions • Group incentives • Involvement organizations • Profit sharing • Skill-based pay

27. B: CP Plans to enhance Strategic Directions: • Employee development • Skill based pay • Customer service • Competency based pay • Gainsharing • Overall Profit • Executive pay • Profit or stock sharing • Productivity • Individual • Piece rate • Sales commissions • Group • Gainsharing • Group incentives • Teamwork • Team sales commissions • Gainsharing • Competency based pay

28. Putting Pay in Context A reward increases the chance that • Specific behaviors and results will be repeated, or • Employee will engage in new behavior and produce better results

29. Rewards can include: • Pay • Recognition • Public • Private • Status • Time • Trust & Respect • Challenge • Responsibility • Freedom • Relationships

30. How to Make Rewards Work • Define and measure performance first and then allocate rewards • Only use rewards that are available • Make sure all employees are eligible • Rewards should be both • Financial • Non-financial

31. How to Make Rewards Work (continued) • Rewards should be: • Visible • Contingent • Timely • Reversible

32. Pay Structures • Job Evaluation • Broad-banding

33. Pay structures An organization’s pay structure • Classifies jobs • Into categories • Based on their relative worth • Is designed by job evaluation methods

34. Job evaluation • Method of data collection • Determine the worth of various jobs to • Create a pay structure • Consideration of • KSAs required for each job • Value of job for organization • How much other organizations pay

35. Types of job evaluation methods: • Ranking • Classification • Point

36. Job evaluation methods: Ranking • Create job descriptions • Compare job descriptions • Rank jobs

37. Advantages of using Ranking method • Requires little time • Minimal effort needed for administration

38. Disadvantages of using Ranking method • Criteria for ranking may not be clear: • Distances between each rank may not be equal

39. Job evaluation methods: Classification • A series of classes or grades are created • Each job is placed within a job class

40. Advantages of using Classification method • Jobs can be quickly slotted into structure • Employees accept method because it seems valid

41. Disadvantages of using Classification method • Requires extensive time and effort for administration • Differences between classification levels may not be equal

42. Job evaluation methods: Point method • Identify compensable factors (job characteristics) • Scale factors (e.g. on a scale of 1 – 5) • Assign a weight to each factor so the sum of the weights for all factors = 100%

43. Advantages of using Point method • Establish worth of each job relative to all other jobs within organization • Comprehensive measurement of relative worth of each job in organization • Easy to rank jobs when total points are known for each job

44. Disadvantages of using Point method • Requires extensive administrative • Time • Effort

45. Does job evaluation method matter? • Fairness • Evaluators • Impartial • Objective

46. Compensation surveys • Information on • Base pay • All other types of compensation • Conducted in-house or by consultants.

47. Broad-banding: Pay structure collapses job classes into fewer categories Advantages: • Provides flexibility in rewarding people • Reflects changes in organization structure • Provides better base for rewarding growth in competence • Gives more responsibility for pay decisions to managers • Provides better basis for rewarding career progression

48. Reward Systems: Summary • Traditional and Contingent Pay (CP) Plans • Reasons for Introducing CP Plans • Possible Problems Associated with CP • Selecting a CP Plan • Putting Pay in Context • Pay Structures

49. Legal Issues: Overview • Performance Management and the Law • Some Legal Principles Affecting PM • Laws Affecting PM

50. Performance Management and the Law Although we have not discussed legal issues in depth, several books have touched upon how to design and implement performance management systems to be fair and acceptable. Usually performance management systems that are fair and acceptable to employees are also legally sound. A basic principle that guides the design of a fair system is that procedures are standardized and the same procedure are used with all employees. In other words, when the rules and procedures are known by everyone and they are applied in the same way to everyone, the system is likely to be regarded as a fair one. This is also the basic principle that underlies the implementation of performance management system that are legally sound.