Appraising and

Rewarding Performance

Presented by:Eddie Gaborni Jr.

Chapter Objective• To understand:–Total Reward System–Money as Economic and Social Medium of Exchange–The Role of Money in Motivational Models–Behavioral Considerations in Performance Appraisal

In the 19th and 20th centuries employees were presumed to want primarily money; therefore, money was believed to produced direct motivation. The more money offered, the more motivation.

Roethlisberger and his followers successfully buried this idea by showing that economic rewards operated through the attitudes of the workers in the social system to produce an indirect incentive.

In this chapter we discuss the Complex Relationship between economic reward systems and organizational behavior. This chapter focuses on how incentives are combined with other parts of wage administration to build a complete reward system that encourage motivation.

Economic Reward System

Based PayPerformance RewardsProfit Sharing

Based Pay

Motivate employees to progress jobs of higher skill and responsibility.

Performance Rewards

Is an incentive to improve performance on the job.

Profit Sharing

Motivates workers toward teamwork to improve an organization’s performance

Real Pay Adjustments(cost of living adjustments, etc.)

Skill based pay adjustment

Base Pay(Internally aligned by job evaluation;

determined primarily by market factors)

Profit Sharing(Profit Sharing

System)Performance Reward(Incentive and gain

sharing system)

Service Reward

Sacrifice Reward

Non-work Award

Non-economic Reward

Other PaymentsPrimarily non-incentive in nature, are added to the incentive foundation.

Seniority Pay – adjustment are made up to reward workers for extended service and to encourage them to remain with their employer.

Money as means of Rewarding Employees

Money is important to employees for a number of reasons. Certainly, money is valuable because of goods and services that it will purchase.

This aspects its economic value as medium of exchange for allocation of economic resources. Money is a social medium of exchange.

Application of Motivational Models

DrivesNeedsExpectancy

DrivesAchievement-oriented

employees maintain a symbolic scorecard in their minds by monitoring their total pay and comparing it with that others.

Needs

In the Herzberg model, pay is view as a hygiene factor, although it may have at least short-term motivational value as well.

ExpectancyValence X Expectancy X

Instrumentality

= Motivation

This means that if money is to act a strong motivator, an employee must want more of it (valence),

must believe that effort will be successful in producing desired performance (expectancy), and must trust that the monetary reward will follow better performance (instrumentality).

Behavior Motivation

Two desired conditions for applying contingent rewards under behavior modification principles are shown in figure 6.2 as situations 1-4.

In each case employees can see that there is a direct connection between performance and reward. The undesirable states are situation 2-3,where rewards are withheld from high performance or given to low performers.

Situation Level of Performance

Level of Economic Reward

Instrumentality Condition

1 High High Desirable

2 High Low Undesirable

3 Low High Undesirable

4 Low Low Desirable

Desirable and Undesirable

Instrumentality Conditions

EquityThere is no simple

answer for employers in their attempts to create workable systems of economic rewards for increase productivity, but they must at least to understand the employee’s perspective.

The employee’s approach to this complex problem is to make rough type of Cost-Reward Comparison, similar to break-even analysis that is used in financial assessments.

Valu

e o

f co

st a

nd

rew

ard

to e

mp

loyee

High

High

LowLow

Performance Level

A’

A’

B’

B’

Reward

Cost

Cost of Performance in Relation to Reward for an Employee

Additional Consideration in the

Use of MoneyExtrinsic & Intrinsic Rewards

-Money is essentially an extrinsic reward rather than an intrinsic one, so it is administered in behavior modification programs.

Compliance with the Law

Labor Code of the Philippines

PD. 442A decree instituting a labor code

thereby revising and Consolidating labor and social laws to afford protection To labor, promote

employment and human resources Development and insure industrial

peace based on social Justice

Organizational Behavior and

Performance AppraisalOrganization require

consistent levels of high performance from their employees in order to survive in a highly competitive global environment.

(MBO) Management by

Objectives is cyclical process the often consist of four steps as a way to attain desired performance:

Objective Setting, Action Planning, Periodic Reviews, Annual Evaluation

Objective Setting

Joint determination by manager and employee appropriate levels of future performance of employee, within the context of overall unit goals and resources.

Action Planning

Participate or even independent planning by the employee as to how to reach those objectives.

Periodic Reviews

Joint assessment of progress toward objectives by manager and employee, performed informally and sometimes spontaneously.

Annual Evaluation

More formal assessment of success in achieving the employee’s annual objective, coupled with a renewal of the planning cycle.

Performance AppraisalPlays a key role in

reward system. It is the process of evaluating the performance of the employee, sharing that information with them, and searching for ways to improve their performance.

Appraisal is necessary to:1.Allocate resources in dynamic

env’t.2.Motivate and reward employees.3.Give employees feedback about

their work.4.Maintain fair relation within

groups.5.Coach and develop employees.6.Comply with regulations.

The Performance Appraisal System

• Is an organizational necessity• Is based on well-defined, objective

criteria• Is based on careful job analysis• Uses only job-related criteria• Is supported by adequate studies• Is applied by trained, qualified raters• Is applied by objectively throughout the

org.• Can be shown to be non-discriminatory as

defined by law

Appraisal PhilosophyA generation ago, appraisal programs tended to emphasizes employees traits, deficiencies, and abilities, but modern appraisal philosophy emphasizes present performance and future goals.