Compensation and Performance Management

1. For downloading PPT lecture slides, please visit: http://ims.uob.edu.pk/(Faculty--Mr. Furqan ulHaq--Uploaded Notes) Chapter # 06 Compensation and Performance Management • Reference Books: • Performance Management 2/e (Herman Aguinis) http://books.google.com.pk/books?id=Ouai80_2VV8C&printsec=frontcover#v=onepage&q&f=false • Human Resource Management (Mondy) • Human Resources and Personnel Management ( keith Davis) • Fundamentals of HRM (David A. DeCenzo) Resource person: Furqan-ul-haq Siddiqui

2. The reason most people never reach their goals is that they don't define them, or ever seriously consider them as believable or achievable. Winners can tell you where they are going, what they plan to do along the way, and who will be sharing the adventure with them. Denis Watley

3. Performance Management: Continuous Process of • Identifying performance of individuals and teams • Measuring performance of individuals and teams • Developing performance of individuals and teams and • Aligning performance with the strategic goals of the organization Process through which companies insure that employees are working toward organizational goals.

4. Sally is a sales manager at a large pharmaceutical company. The fiscal year will end in one week. She is overwhelmed with end -of - the - year tasks, including reviewing the budget she is likely to be allocated for the following year, responding to customers ’ phone calls, and supervising a group of ten salespeople. It ’ s a very hectic time, probably the most hectic time of the year. She receives a phone call from the human resources (HR) department: “ Sally, we have not received your performance reviews for your ten employees; they are due by the end of the fiscal year. ” Sally thinks,“ Oh, those performance reviews. . . What a waste of my time! ”

5. From Sally ’ s point of view, there is no value in filling out those seemingly meaningless forms. She does not see her subordinates in action because they are in the field visiting customers most of the time. All that she knows about their performance is based on sales figures, which depend more on the products offered and geographic territory covered than the individual effort and motivation of each salesperson. And nothing happens in terms of rewards, regardless of her ratings. These are lean times in her organization, and salary adjustments are based on seniority rather than on merit. She has less than three days to turn in her forms. What will she do? She decides to follow the path of least resistance or follow - up meetings. Sally fills out the forms in less than twenty minutes and gets back to her “ real job. ”

6. Uses of Performance Management • Achieving and understanding of organizational Strategic goals • Performance identification, measurement and development • Motivation and self-esteem are increased • Compensation adjustments • Placement Decisions • Training and Development needs • Staffing Process Deficiencies • Feedback to Human Resources • Career Planning and Development • Assessment of Employee Potential • Protection from lawsuits • Fairness and appropriateness

7. Performance Appraisal • The ongoing process of evaluating the behavior and outcomes in the workplace. • Its goal is to provide an accurate picture of past and / or future employee performance. • Performance appraisal means evaluating an employee’s current and/or past performance related to his or her performance standards • Appraisals provide important input on which HR related decisions can be made.

8. Disadvantages/Dangers of Poorly-implemented PM Systems • Lowered self-esteem • Employee burnout and job dissatisfaction • Damaged relationships • Use of false or misleading information • Increased turnover • Decreased motivation to perform • Unjustified demands on managers’ resources • Varying and unfair standards and ratings • Emerging biases

11. Key Questions • WHY is performance measured? (use) • WHAT is measured? HOW is it measured? • WHO measures performance? • WHEN is it measured? (timing) Organization...

12. Performance Standards • Benchmarks against which Performance is measured. • To hold employees accountable, a written record of the standards should exist and employees should be advised of those standards before the evaluation occurs. Sample Performance Standards for a Team Manager

13. Problems/Challenges in Performance Appraisal • Lack Of Objectivity • Halo Error • Horn Error • Central Tendency • Leniency • Strictness • Cross Cultural Biases • Personal Biases • Work interruptions • Costly & time consuming

14. Spillover Effect: The present performance is evaluated much on the basis of past performance. “The person who was a good performer in distant past is assured to be okay at present also”. • Contrast Effect- Manager doesn’t evaluate person in isolation, His reaction is usually influenced by others persons who are recently encountered, for example, a manager filling appraisal forms of several low performers and then confronts a mediocre performer. By comparison, the last employee may appear to be better qualified than he or she actually is.

15. Stereotyping- Its is a commonly held public belief about specific social groups, or types of individuals or ideas that groups of people hold about others who are different from them. The serial position effect- When asked to recall a list of items in any order (free recall), people tend to begin recall with the end of the list, recalling those items best (the recency effect). Among earlier list items, the first few items are recalled more frequently than the middle items (the primacy effect)

16. Performance Appraisal Process

17. The Appraisal Process • Establishment of performance standards • Derived from company’s strategic goals. • Based on job analysis (JDD & JSD). • Communication of performance standards to employee.

18. Rating Scales Ranking Method Paired Comparison Checklists Critical Incident Method Accomplishment Records Behaviorally Anchored Rating Scales Field Review Method Performance Tests and Observations Forced Choice Appraisals 360 Degree Feed back Point Allocation Forced Choice Narrative/Pen Picture Psychological Appraisals Management by Objective Assessment Centers ACR Performance Appraisal Methods

19. 1. Rating Scales • It requires the Rater to provide a Subjective Evaluation of an individual’s performance along a scale from low to high. The Rater is usually immediate Supervisor. • +It is inexpensive • Need little time But • Rater’s biases are likely • Limit specific feedback

20. Rating Scale with Space for Comments

21. Rating Scale with Unclear Standards Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?

22. 2. Alternation ranking method Ranking employees from best to worst on a particular trait, choosing highest, then lowest, until all are ranked.

23. Paired comparison method Ranking employees by making a chart of all possible pairs of the employees for each trait and indicating which is the better employee of the pair. Note: + means “better than.” − means “worse than.” For each chart, add up the number of 1’s in each column to get the highest-ranked employee.

24. 4. Checklists • It requires the Rater (Supervisor) to select words or statements that describe the Employee’s Performance and Characteristics. • Sometimes Weighted Checklists are used as by assigning weights to different items on checklist. • This method is; • Cost effective and Standardized • Easy to Administer • Limited training for Raters • Includes Rater Biases and Misrepresentation of Checklist items.

25. Checklists • Employee works over time when asked • Employee is well organized • Employee is hard working • Employee is well equipped Check lists may be in the form dichotomous statements/questions.

26. 5. Critical Incident Method It requires the Rater to record statements that describe extremely good or bad behavior related to job performance. The statements are called Critical Incident Recorded incidents include a brief explanation of what happened. The main drawback is that supervisor may not record incidents properly or may record them on his/her own wish.

27. 6. Accomplishment Records/Self Appraisals • These are employee-produced listings of accomplishments such as publications, speeches, leadership roles, and other professionally related activities. • This information is typically used to generate an annual report detailing the professional’s contributions during the year.

28. 7. Behaviorally Anchored Rating Scales • They are a family of Evaluation Approaches that identify and evaluate relevant job-related behaviors. • The most popular approaches are; • Behavioral Expectation Scales (BES) use specific named behaviors as benchmarks to help the rater. • Behavioral Observation Scales (BOS) use specific named behaviors as benchmarks and require the rater to report the frequency of those behaviors. • Advantages of using a BARS • A more accurate gauge • Clearer standards • Feedback • Independent dimensions • Consistency

29. 4. Acceptable 3. Fairly Poor Poor 1. Extremely Poor 7. Extremely outstanding 6. Good 5. Fairly Good

30. 8. Field Review Method • In this method, a Skilled representative of the HR department goes into the “field” and assists supervisors with their ratings. • HR specialist ask Specific Information about the employee’s performance from the immediate Supervisor. • Then the expert prepares an evaluation that is based on this information.

31. 9. Performance Tests and Observations • This method is particularly appropriate when a Company relies on a Pay-for-knowledge or Pay-for-skills approach to compensation, rewarding employees primarily on the basis of the skills or job knowledge they have mastered. • Tests may be of the Paper-and-pencil variety, interviews or may require an actual Demonstration of Skill.

32. 10. Forced distribution method • Similar to grading on a curve; predetermined percentages of ratees are placed in various performance categories. usually with specified proportions in each category.

33. 11. 360-Degree Evaluation • A multi-rater Evaluation that involves input from multiple levels within the firm and external source as well. The raters include; • Peers (Coworkers) • Subordinates • Super-ordinates • Customers 12. Point Allocation Method: It requires the rater to allocate a fixed number of points among employees in the group.

34. Table: Forced Choice Items AB Learns Quickly Works Hard Work is Reliable Good example for others Effective Efficient Absent too often Usually Tardy 13. Forced Choice Appraisals A performance evaluation in which the rater must choose between two specific statements about an employee’s work behavior often both statements are either negative or positive. This method reduces the rater biases because some employees must be rated as superior to others

35. 14. Narrative Forms/ Pen Picture

36. Management by Objective (MBO)A performance appraisal method that includes mutual objective setting and evaluation based on the attainment of the specific objectives. • Four common ingredients of MBO are • Psychological Appraisals Assessment by industrial psychologists, usually consists of interviews, discussions, psychological tests etc. • Assessment Centers are standardized employees appraisals by multiple raters and evaluations. Used for highly responsible jobs. • Interviews, psychological tests, peer rating, simulated work environments, leadership style etc. Goal specificity Participative decision making Explicit time period Performance feedback

37. Confidential Records:Mostly used by government departments, however its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may record ratings with respect to following items; attendance, self expression, team work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential. Feedback to the assesse is given only in case of an adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the evaluations are linked to HR actions like promotions etc.

38. Assignment # 1 (10 Marks) From the given research article, answer the following questions. What is the purpose of the study? What are the research questions? Draw the conceptual/research model of the study and state hypothesis. What is the unit of analysis? What is the context of the study? How did the authors collect the data ? State sampling method used in the study. Was the study qualitative or quantitative? What are the variables in the study? How did the authors measure variables? Discuss the statistical method use to measure variables. What are the practical implications of study? Briefly discuss the results? Which hypothesis got support and which didn’t? Discuss the limitation and recommendations for future research. Submission & Presentation Date: Tuesday, October 20, 2015