performance appraisal and compensation
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Performance Appraisal and Compensation
1Presented by: Mr. Bakary Singhateh
Evaluating Employee Performance - Agenda
• Purpose of performance management system
• Difficulties in performance management system
• Steps of the Appraisal process• Appraisal methods
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Performance Evaluation
• The performance management systems need to include:– decisions about who should evaluate
performance– what format should be used– how the results should be utilized
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Purposes of a Performance Management System
– Feedback - let employees know how well they have done and allow for employee input.
– Development – identify areas in which employees have deficiencies or weaknesses.
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Difficulties in Performance Management Systems
– Focus on the individual: Discussions of performance may elicit strong emotions and may generate conflicts when subordinates and supervisors do not agree.
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Difficulties in Performance Management Systems
– Focus on the process: Company policies and procedures may present barriers to a properly functioning appraisal process.
– Additionally, appraisers may be poorly trained.
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The Appraisal Process
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Step 1 and 2• Establishment of performance
standards – Derived from company’s strategic goals. – Based on job analysis and job description.
• Communication of performance standards to employee.
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Step 3 and 4
• Measurement of performance using information from: – personal observation – statistical reports – oral reports – written reports
• Comparison of actual performance with standards.
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Step 5 and 6
• Discussion of appraisal with employee.
• Identification of corrective action where necessary. – Basic corrective action deals with causes.
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Appraisal Methods
Three approaches:• Absolute standards• Relative standards• Objectives
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1. Absolute StandardsEvaluating absolute standards: • An employee’s performance is
measured against established standards.
• Evaluation is independent of any other employee.
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1. Absolute Standards
– Essay Appraisal: Appraiser writes narrative describing employee performance & suggestions.
– Critical Incident Appraisal: Based on key behavior incident illustrating effective or ineffective job performance.
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1. Absolute Standards
– Checklist Appraisal: Appraiser checks off behaviors that apply to the employee.
– Adjective Rating Scale Appraisal: Appraiser rates employee on a number of job-related factors.
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1. Absolute Standards
– Forced-Choice Appraisal: Appraisers choose from sets of statements which appear to be equally favorable, the statement which best describes the employee.
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1. Absolute Standards
• Behaviorally Anchored Rating Scales (BARS): Appraiser rates employee on factors which are defined by behavioral descriptions illustrating various dimensions along each rating scale.
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2. Relative Method
• Employees are evaluated by comparing their performance to the performance of other employees.
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2. Relative Method
• Group Order Ranking: Employees are placed in a classification reflecting their relative performance, such as “top one-fifth.”
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2. Relative Method
– Individual Ranking: Employees are ranked from highest to lowest.
– Paired Comparison: • Each individual is compared to
every other.• Final ranking is based on number
of times the individual is preferred member in a pair.
19Presented by: Mr. Bakary Singhateh
3. Achieved Outcome Method
Management by Objectives (MBO)– includes mutual objective setting and
evaluation based on the attainment of the specific objectives
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3. Achieved Outcome Method
– Common elements in an MBO program are:
• goal specificity• participative decision making• an explicit time period• performance feedback
– Effectively increases employee performance and organizational productivity.
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Creating More Effective Performance Management Systems
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Development of Compensation and Pay systems - Agenda
• Objectives of compensation• Types of rewards• Development of a base pay system
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Objectives of compensation
• Efficiency– Quality– Performance– Cost
• Fairness
• Compliance
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Types of Reward Plans
Intrinsic versus Extrinsic Rewards • Intrinsic rewards (personal
satisfactions) come from the job itself, such as:– pride in one’s work– feelings of accomplishment– being part of a work team
25Presented by: Mr. Bakary Singhateh
Types of Reward Plans
Intrinsic versus Extrinsic Rewards• Extrinsic rewards come from a source
outside the job– include rewards offered mainly by
management– Money– Promotions– Benefits
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Types of Reward PlansFinancial versus Non-financial Rewards • Financial rewards include:
– wages– bonuses– profit sharing– pension plans– paid leaves– purchase discounts
• Non-financial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.
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Introduction
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Development of a Base Pay System
Job Analysis
Job Evaluation
Pay Survey
Pay Structure & Grades
Job Structure
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Development of a Base Pay System
Job Evaluation • Use of job analysis
information to determine the relative value of each job in relation to all jobs within the organization. – The ranking of jobs– Labor market conditions– Collective bargaining– Individual skill differences
?
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Development of a Base Pay System
Job Evaluation Methods • Ordering method: A
committee places jobs in a simple rank order from highest (worth highest pay) to lowest.
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Development of a Base Pay System
Job Evaluation Methods• Classification method:
– Jobs are placed in classification grades – Compare their descriptions to the
classification description and benchmarked jobs
– Look for a common denominator such as skills, knowledge, or responsibility
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Development of a Base Pay System
Job Evaluation Methods• Point method:
– Jobs are rated and allocated points on several identifiable criteria, using clearly defined rating scales.
– Jobs with similar point totals are placed in similar pay grades.
– Offers the greatest stability.
33Presented by: Mr. Bakary Singhateh
Development of a Base Pay System
Establishing the Pay Structure • Compensation surveys
– Used to gather factual data on pay rates for other organizations
– Information is often collected on associated employee benefits as well
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