Chapter Four

1. Chapter Four Traditional Bases for Pay: Seniority and Merit

2. Seniority/Longevity Pay • Historical overview • Who participates • Effectiveness of seniority pay systems • Design of seniority pay and longevity pay plans • Advantages of seniority pay • Fitting seniority pay with competitive strategies

3. Exhibit 4-2A Sample Seniority Policy for Junior and Advanced Clerk Jobs $8.60/hr 24 months $7.95/hr 9 months $7.25/hr 15 months $7.50/hr 6 months $6.85/hr 9 months Advanced Clerk $6.50/hr 3 months Junior Clerk

4. Merit Pay • Who participates? • Elements of merit pay

5. Performance Appraisal • Basis of Merit Pay • Types of performance appraisal plans • The performance appraisal process

6. Exhibit 4-5A Trait-Oriented Performance Appraisal Rating Form Employee’s Name: Supervisor’s Name: Employee’s Position: Review Period: INSTRUCTIONS: For each trait below, circle the phrase that best represents the employee. 1. Diligence a. outstanding b. above average c. average d. below average e. poor 2. Cooperation with others a. outstanding b. above average c. average d. below average e. poor 3. Communication skills a. outstanding b. above average c. average d. below average e. poor 4. Leadership a. outstanding b. above average c. average d. below average e. poor 5. Decisiveness a. outstanding b. above average c. average d. below average e. poor

7. Exhibit 4-7A Paired Comparison Performance Appraisal Rating Form INSTRUCTIONS: Please indicate by placing a X which employee of each pair has performed most effective during the past year. Refer to the duties listed in the job description for animal keeper as a basis for judging performance. _____ Bob Brown _____ Mary Green _____ Bob Brown _____ Jim Smith _____ Bob Brown _____ Allen Jones X _____ Mary Green _____ Jim Smith _____ Mary Green _____ Allen Jones _____ Jim Smith _____ Allen Jones X X X X X

8. Exhibit 4-8A Critical Incidents Performance Appraisal Rating Form INSTRUCTIONS: For each description of work behavior below, circle the number that best describes how frequently the employee engages in that behavior. 1. The incumbent removes manure the unconsumed food from the animal enclosures. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 2. The incumbent haphazardly measures the feed items when placing them in the animal enclosures. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 3. The incumbent leaves refuse dropped by visitors on and around the public walkways. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 4. The incumbent skillfully identifies instances of abnormal behavior among the animals, which represent signs of illness. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often

9. Exhibit 4-9A Behaviorally Anchored Rating Scale for the Cleaning Dimension of the Animal Keeper Job INSTRUCTIONS: On the scale below, from 7 to 1, circle the number that best describes how frequently the employee engages in that behavior. The incumbent could be expected to thoroughly clean the animal enclosures and remove refuse from the public walkways as often as needed. The incumbent could be expected to thoroughly clean the animal enclosures and remove refuse from the walkways twice daily. The incumbent could be expected to clean the animal enclosures and remove refuse from the public walkways in a sketchy fashion twice daily. The incumbent could be expected to rarely clean the animal enclosures or remove refuse from the public walkways. 7 | 6 | 5 | 4 | 3 | 2 | 1

10. Exhibit 4-12The Impact of Equal Pay Raise Percentage Amounts for Distinct Salaries At the end of 1995, Anne Brown earned $50,000 per year as a systems analyst, and John Williams earned $35,000 per year as an administrative assistant. Each received a 5 percent pay increase every year until the year 2000. ANNE BROWN JOHN WILLIAMS 1996 1997 1998 1999 2000 $52,500 $55,125 $57,881 $60,775 $63,814 $36,750 $38,587 $40,516 $42,542 $44,669

11. Strengthening the Pay-for-Performance Link • Link PA plans to business goals • Analyze jobs • Communicate • Establish effective appraisals • Empower employees • Differentiate among performers

12. Limitations of Merit Pay Plans • Failure to differentiate among performers • Poor performance measures • Supervisors’ biased ratings • Lack of open communication between management and employees • Undesirable social structures • Factors other than merit • Undesirable competition • Little motivational value

13. Linking Merit Pay with Competitive Strategy • Lowest-cost competitive strategy • Differentiation competitive strategy