Ch07, Appraising and Rewarding Performance

Chapter 7
Rewards and Performance

Management
What gets measured
happens
Copyright 2008 John Wiley & Sons, Inc. 7-2
Chapter 7 study questions
What is the link between motivation and
rewards?
What is performance management?
What are common performance appraisal
alternatives?
Figure 7.1
What is the link between
motivation and rewards?
Intrinsic rewards
positively valued work outcomes that the
individual receives directly as a result of task
performance
Extrinsic rewards
positively valued work outcomes that are given
to an individual or group by some other person
or source in the work setting
Merit pay
compensation system that directly ties an
individuals salary or wage increase to
measures of performance accomplishments
during a specific time period
should create a belief among employees that
the way to achieve high pay is to perform at
high levels
Gain sharing
gives workers the opportunity to earn more by
receiving shares of any productivity gains that
they help to create
Profit-sharing plans
reward employees based on overall
organizational profit
Criticism is that organizational profits are
not always a direct result of employees
efforts
Employee stock ownership plans
(ESOPs)
may give stock to employees, or allow stock to
be purchased by them at a price below market
value
Bonuses
the awarding of cash bonuses, or extra pay for
performance that meets certain benchmarks or
that is above expectations
common practice for many employers
Lump-sum increase
allows someone to elect the option of receiving
all of an annual increase in one or more lump-
sum payments
Skill-based pay
rewards people for acquiring and developing
job relevant skills
Pay as benefits
Fringe benefits often add 10 to 40 % to a
persons salary
Flexible benefit plans
allow workers to select benefits according to
needs
Figure 7.2
What is performance
management?
Performance management
process of managing performance
measurement and the various human resource
management decisions and actions based on
such measurement
What is performance
management?
Steps in performance management
1. Identify and set clear and measurable
performance goals
2. Take performance measurements to
monitor goal progress
3. Provide feedback and coaching on
performance results
4. Use performance assessment for human
resource management decisions

What is performance
management?
From an evaluative perspective,
performance measurement lets people
know where they stand relative to
objectives and standards

What is performance
management?
From a counseling perspective,
performance measurement facilitates
decisions relating to planning for and
gaining commitment to the continued
training and personal development of
workers

What is performance
management?
Performance Measurement Criteria and
Standards
Output measures
assess actual work results
Activity measures
assess work efforts or inputs
What are common performance
appraisal alternatives?
Performance appraisal
formal procedure for measuring and
documenting a persons work performance
Comparative methods of performance
appraisal
Ranking
Raters rank order people from best to worst
Paired comparisons
Raters compare each person with every other
person
Forced distribution
Raters place a specific proportion of employees into
each performance category
Absolute methods of performance appraisal
Graphic rating scales
Raters assign scores on a list of dimensions related
to high performance outcomes in a given job
Critical incident diary records
Rater records incidents of unusual success or failure
in a given performance aspect
Behaviorally anchored rating scales (BARS)
Rater identifies observable job behaviors
Figure 7.3
Figure 7.4
Self evaluation
individual rates himself or herself
Peer evaluations
persons in the work team or doing similar jobs
rate the individual as a co-worker
360 Evaluation
using not only the evaluations of bosses, peers,
and subordinates, but also self-ratings,
customer ratings, and ratings by others with
whom the ratee deals outside the immediate
work unit
Group Performance Evaluation System
Link the teams results to organizational goals
Start with the teams customers and the team
work process needed to satisfy those needs:
customer requirements, delivery and quality,
waste and cycle time
Evaluate team and each individual members
performance
Train the team to develop its own measures

To be meaningful, an appraisal system
must be:
Reliable - provide consistent results across
time
Valid - actually measure people on relevant job
content
Measurement errors in performance
appraisal
Halo errors
Raters evaluate on several different dimensions and
give a similar rating for each dimension
Leniency errors
Raters tend to give everyone relatively high ratings
Strictness errors
Raters tend to give everyone relatively low ratings
appraisal
Central tendency errors
Raters lump everyone together around the average
or middle
Low differentiation errors
Raters restrict themselves to a small part of the
rating scale
appraisal
Recency errors
Raters allow recent events to exercise undue
influence on ratings
Personal bias errors
Raters let personal biases, such as stereotypes,
unduly influence the ratings
Cultural bias errors
Raters allow cultural differences of employees to
influence the performance appraisal
Steps for improving performance appraisals
1. Train raters to understand the evaluation
process and recognize errors
2. Ensure that raters observe ratees on an
ongoing basis
3. Do not have the rater evaluate too many
ratees
4. Make sure that the performance dimensions
and standards are stated clearly
5. Avoiding terms that have different meanings
for different raters

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Chapter 7

Rewards and Performance

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