CHAPTER 6:REWARDING INDIVIDUAL

PERFORMANCE

by: Jon Jovi R. Barreras (H-353)

Lyceum of the Philippines University (Manila)College of International Tourism and Hospitality

ManagementHuman Behavior in Organization (DHBN01H)

CHAPTER LEARNING OBJECTIVES

Describe goal setting and relate it to motivation.

Discuss performance management in organizations.

Identify the key elements in understanding individual rewards in organizations.

Describe the issues and processes involved in managing reward systems.

GOAL SETTING AND MOTIVATION

Purposes of Setting Goals in Organizations To provide a useful framework for managing

motivation to enhance employee performance To serve management as a control device for

monitoring of how well the organization is performing

Goal A desirable objective

Self-Efficacy The extent to which we believe we can

accomplish our goals even if we failed to do so in the past

GOAL SETTING AND MOTIVATION

Goal Setting Theory (Locke) Assumes that behavior is a result of conscious

goals and intentions, therefore goals influence behavior (performance)

Goal Characteristics Goal difficulty

The extent to which a goal is challenging, requires effort, and is attainable

Goal specificity The clarity and precision of a goal

EXPANDED GOAL SETTING THEORY (LOCK AND LATHAM)

The Goal-Setting ProcessGoal-directed effort is a function of

goal attributes:1. Goal difficulty

2. Goal specificity

3. Goal acceptance: the extent to which a person accepts a goal as his/her own

4. Goal commitment: the extent to which a person is interested in reaching a goal

BROADER PERSPECTIVES ON GOAL SETTING

Management by Objectives (MBO)A collaborative goal-setting process

through which organizational goals cascade down throughout the organization

Requires customizing to each organization

Can be effective for managing reward systems where the manager has individual interactions with each employee

GOAL SETTING: EVALUATION AND IMPLICATIONS

Research has shown that:Goal difficulty and specificity are closely

associated with performance.Goal-setting theory may focus too much on

short-run considerations.MBO has the potential to motivate because

it helps implement goal-setting theory on a systematic basis throughout the organization.

MBO has a tendency to overemphasize quantitative goals to enhance verifiability.

PERFORMANCE MANAGEMENT IN ORGANIZATIONS

The Nature of Performance Management Performance measurement (or appraisal)

process:1. Evaluating an employee’s work behaviors by

measurement and comparison with previously established standards

2. Documenting the results

3. Communicating the results to the employee

Performance Management System Comprises the processes and activities

involved in performance appraisals

PERFORMANCE MANAGEMENT BASICS

Who is to do the

appraisals?

Who is to do the

appraisals?

How often are the

appraisals to be done?

How often are the

appraisals to be done?

How is performanc

e to be measured?

How is performanc

e to be measured?

Issues in Performance Measurement

Issues in Performance Measurement

PERFORMANCE MANAGEMENT: THE PROCESS

The Appraiser: Alternatives The direct supervisor Multiple-rater systems (including self-evaluation) 360-degree feedback

A system in which people receive performance feedback from those on all sides of them in the organization (boss, colleagues, peers, subordinates)

Frequency of Appraisals Determined by convenience for administrative

purposes, cultural appropriateness, and relevance

PERFORMANCE MANAGEMENT: THE PROCESS

Measuring PerformanceConsiderations

Desired decisions to be made based on outcome

Instruments must be valid, reliable, and free of bias

Choices of measurement methodsGraphic rating scales, checklists,

essays/diaries, behaviorally anchored rating scales, forced-choice systems

Comparative methods such as ranking, forced distribution, paired comparisons, multiple raters

INDIVIDUAL REWARDS IN ORGANIZATIONS

Reward SystemConsists of all organizational

components involved in allocating compensation and benefits to employees in exchange for their contribution to the organization including:PeopleProcessesRulesProceduresDecision-making activities

REWARDS’ PURPOSES, ROLES, AND MEANINGS

Purposes To attract, retain, and motivate qualified

employees

Roles of compensation structures To be equitable and consistent To be a fair reward for the individual’s contribution To be competitive in the external labor market

Meanings of rewards Surface value: objective meaning or worth of

reward Symbolic value: subjective and personal meaning

or worth of reward

TYPES OF INDIVIDUAL REWARDS

Compensation Package The total array of money (wages, salary,

commission), incentives, benefits, perquisites, and awards provided by the organization

Base Pay Symbolizes an employee’s worth Can improve motivation and performance if part

of an effectively planned and managed pay system

Is a major cost of doing business Can reduce turnover and increase morale when

well-designed

TYPES OF INDIVIDUAL REWARDS

Incentive Pay Systems Plans in which employees can earn additional

compensation in return for certain types of performance

1. Piecework programs2. Gain-sharing programs

3. Bonus systems4. Long-term compensation

5. Merit pay plans6. Profit-sharing plans

7. Employee stock option plans

INDIVIDUAL REWARDS

Indirect Compensation (Employee Benefits)

1. Payment for time not worked

2. Social Security contributions

3. Unemployment compensation

4. Disability and workers’ compensation benefits

5. Life and health insurance programs

6. Pensions or retirement plans

INDIVIDUAL REWARDS

PerquisitesSpecial privileges awarded to selected

members of an organization, usually top managers

Add to the status of their recipients and thus may increase job satisfaction and reduce turnover

Other AwardsRewards for seniority, perfect attendance,

zero defects (quality work), cost reduction suggestions

MANAGING REWARD SYSTEMS

Linking Performance and Rewards Employee perception of link between pay and

performance results in symbolic value of pay Flexible Reward Systems

Allows employees to choose the combination of benefits that best suits their needs

Increases both employee satisfaction with benefits and administrative costs for the employer

Participative Pay Systems Employees are involved in the design and/or

administration of their compensation system

MANAGING REWARD SYSTEMS

Pay SecrecyEmployer makes no information available

to employees regarding other employees’ salaries, percentage raises, salary ranges and requires employees to not reveal their compensation

Expatriate CompensationCompensation packages of employees on

overseas assignments must be adjusted to account for differences in costs of living and working conditions in working aboard versus their home base

THE EXPATRIATE COMPENSATION BALANCE SHEET

THE END!Thank you