CRM 200 Lecture Notes - Lecture 10: Goal Setting, Performance Appraisal, Reward System
3 May 2018
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Chapter Ten - Pay for Performance: Performance Appraisal
and Plan Design
• 7,8,9 = how to be externally competitive
• 10 = how to reward workers (incentive payments)
What Behaviors Do Employers Care About?
• Employers want employees to perform in ways that lead to better organizational
performance
• Behaviors that compensation needs to reinforce:
o compensation = attractive = to make recruiting and hiring good potential
employees possible (attraction)
o good employees stay with the company (retention)
o Build further knowledge and skills (development)
o motivate employees to perform well on their jobs (motivation)
Employee Performance
Employee performance = f (A,M,E) where:
A = Ability
M = Motivation to perform
E = Supportive Environment (resources to do the job well)
All 3 needed to make sure they have best performance
What Motivates Employees?
• Motivation involves three elements:
o What is important to a person?
o Offering it in exchange for some
o Desired behavior
Motivation Theories
• Content Theories (what is important to a person)
o Maslo’s Need Hierarhy – pay reasonable base pay, incentive
o Herzerg’s To-Factor Theory – until base pay is established the rest cant be
built
• Process Theories (the nature of the exchange)
o Expectancy Theory – reward is proportional to the task.
o Equity Theory – fairness (monkey video)
o Agency Theory – want to max personal gains but company might have different
goals. Make sure things are lined up
• Reinforcement Theories (desired behaviour)
o Reinforcement Theory – when I do something good, you need to tell me its good
so ill keep doing it
o Goal Setting Theory
Do People Join Because of Pay?
• Key fators iflueig a perso’s deisio to joi a fir: leel of pay ad pay syste
characteristics
find more resources at oneclass.com
find more resources at oneclass.com
• Job candidates look for organizations with reward systems that fit their personalities
o Materialistic – concerned about pay level.
o Low self-esteem – want little pay for performance.
o Risk takers – want pay based on performance.
o Risk-averse – want less performance-based pay.
o Individualist – want pay based on individual performance.
• Reward systems should be designed to attract people with desired personalities and
values.
Do People Stay in a Firm (Or Leave) Because of Pay?
• Factors impacting turnover
o Pay based on individual performance
o Group incentive plans
o Level of employee satisfaction with pay
• Other rewards that influence the decision to stay
o Work variety and challenge
o Development opportunity
o Social
o Status recognition
o Work importance
o Benefits
Do Employees More Readily Agree to Develop Job Skills Because of Pay?
• New skills will help employees on current and future job demands.
• Skill-based pay is intended to pay employees for learning new skills
o pay for skill may not increase productivity, but focus people on believing in the
importance of quality = higher quality products
• More skill = more pay?
o Yes but only to a certain point. Once you learned all the skills for that job, this
factor will no longer apply
Do Employees Perform Better on Their Jobs Because of Pay?
• A well-designed plan linking pay to behavior generally results in better individual and
organizational performance.
• pay should be tied to performance.
• Failure arises if incentives work too well – employees may exhibit rewarded behaviors to
the exclusion of other desired behaviors.
The Role of Performance Appraisal
• Performance must be accurately measured to assess if compensation efforts are
working
• Perforace appraisal is the process of evaluatig or appraisig a eployee’s
performance on the job
• Strategies to failitate aagers’ aility to aurately assess perforae:
o Improve evaluation formats
o Select the right raters
o Understand how raters process information
find more resources at oneclass.com
find more resources at oneclass.com
o Train raters to avoid common errors in the appraisal process
• Challenge of this: it is very subjective. Employee might feel like they are not fairly
assessed
Strategy 1: Improve Appraisal Formats
• Two categories of evaluation formats are:
o Ranking
▪ The rater compare employees against each other
▪ Methods include straight ranking, Alternation ranking, and paired-
comparison ranking
▪ Top to bottom – force you to compare one employee to other
o Rating
▪ Requires evaluating employees on some absolute standard rather than
relative to other employees
▪ Each performance standard is measured on a scale whereby appraisers
a hek the poit that est represets the eployee’s perforae.
▪ Examples:
• standard rating scale;
• Behaviorally anchored rating scales (BARS);
• management by objectives (MBO)
▪ Challenge = subjective (some will say youre a 5, some say youre a 3..
Depends on the person)
▪ Rating Scales Using Absolute Standards
o Standard rating scale with behavioral scale anchors:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter ten - pay for performance: performance appraisal and plan design: 7,8,9 = how to be externally competitive, 10 = how to reward workers (incentive payments) E = supportive environment (resources to do the job well) All 3 needed to make sure they have best performance. What motivates employees: motivation involves three elements, what is important to a person, offering it in exchange for some, desired behavior. Make sure things are lined up: reinforcement theories (desired behaviour, reinforcement theory when i do something good, you need to tell me its good so ill keep doing it, goal setting theory. Do people join because of pay: key fa(cid:272)tors i(cid:374)flue(cid:374)(cid:272)i(cid:374)g a perso(cid:374)"s de(cid:272)isio(cid:374) to joi(cid:374) a fir(cid:373): le(cid:448)el of pay a(cid:374)d pay syste(cid:373) characteristics. Individualist want pay based on individual performance: reward systems should be designed to attract people with desired personalities and values. Do people stay in a firm (or leave) because of pay: factors impacting turnover.
