Appraising and Rewarding

Performance
by
Mehmet Barknay

In this presentation the
relationship between
economic reward systems
and organizational behavior
will be discussed.

The chapter focuses;

1. First on how incentives are
combined with other parts of
wage administration to build a
complete reward system that
encourages motivation.

2. Then on, money as a means
of rewarding employees,
motivational models applied to
pay, cost-reward comparisons,
and behavioral considerations in
performance appraisal.


3.Finally, on incentive pay, an
approach in which each workers
pay varies in relation to employee
or organizational performance.

1. A COMPLETE PROGRAM
This program has three incentive
foundations;
1. Base pay
2. Performance Rewards
3. Profit Sharing

* Each can contribute something to
the employees economic satisfaction.
2. Money As a Means of
Rewarding Employees
Money is important to employees for
a number of reasons.
Certainly ,money is valuable
because of the goods and services
that it will purchase. All of us have
seen its importance as a status
symbol for those who have it and
can thus save it, spend it
conspicuously, or give it away
generously.
Money has status value when it is being
received and when it is being spent. It
represents to employees what their
employer thinks of them. It is also an
indication of one employees status
relative to that of other employees. It
has about as many values as it has
possessors. (e.g. P135)

Application of the Motivational
Models
A useful way to think about money as a
reward is to apply it to some of the
motivational models. Such as;
Drives
Needs
Expectancy
Additional Considerations in the
Use of Money
Extrinsic and Intrinsic Rewards:
Money is essentially an extrinsic reward
rather than an intrinsic one, so it is
easily administered in behavior
modification programs.
However, it also has all the limitations
of extrinsic benefits. No matter how
closely management attaches pay to
performance, pay is still something that
originates outside the job and is useful
only away from the job. Therefore, it
tends to be less immediately satisfying
than intrinsic job rewards.
For example; the personal
satisfaction of a job well done is
a powerful motivator for many
people.
Organizational Behavior and
performance Appraisal
Organizations require consistent levels
of high performance from their
employees in order to survive in a
highly competitive environment. Many
firms use some form of results-
oriented planning control systems.
1. Objective Settings

2. Action Planning

3. Periodic Reviews

4. Annual Evaluation
Managements by objectives (MBO) is a
cyclical process that often consists of four
steps as a way to attain desired performance.
Performance appraisal plays a key role in
reward systems. It is the process of evaluating
the performance of employees, sharing that
information with them, and searching for ways
to improve their performance. Appraisal is
necessary in order to;

1. allocate resources in a dynamic environment,
2. motivate and reward employees,
3. give employees feedback about their work,
4. maintain fair relationship within groups,
5. coach and develop employees,
6. comply with regulations
Appraisal Philosophy
The hallmarks of modern appraisal
philosophy are as follows;
1. Performance Orientation,
2. Focus on Goals or Objectives
3. Mutual Goal Setting between
Supervisor and Employee
4. Clarification of Behavioral
Expectations
5. Extensive feedback Systems
Suggested Approaches for the
Appraisal Interview
* Is knowledgeable about the
employees job,
* Has previously set
measurable performance
standards
* Has gathered specific
evidence frequently about
performance
* Seeks and uses inputs from
other observers in the
organization
* Provides support,
acceptance, and praise for
talks well done
* Listens actively to the
employees input and
reactions
Appraisal interviews are most likely to be
successful when the appraiser;
* Shares responsibility for outcomes and
offers future assistance

* Allows participation in the discussion

* Sharply limits the amount of criticism to a
few major items
360- Degree Feedback Programs
All appraisal systems build on the
assumption that employees need feedback
about their performance. Feedback helps
them know what to do and how well they
are meeting their goals. It shows that
others are interested in what they are
doing. Assuming that performance is
satisfactory, feedback enhances an
employees self-image and feeling of
competence.
In general, feedback should
focus on;

* Specific job
behaviors

* Rely on objective
data, rather than
subjective opinions
and influences
* Be well-timed by
being given soon
after a critical
event,
* Be checked for
understanding by
the receiver
360- degree feedback is the
process of systematically gathering
data on a persons skills, abilities, and
behaviors from a variety of sources-
the manager, peers, subordinates,
and even customers or clients.
The 360-degree feedback system
works best if individuals match
the data gathered with their own
self-assessments, for this
approach encourages can do
confrontation of ones need for
change.
However, 360-degree feedback
programs can be time-consuming,
intimidating to the recipients, and
expensive.
Appraisal Problems
Confrontational (because each party is trying to
convince the other that her/his view is more accurate)
Emotional
Judgmental (because the manager must evaluate the
employees behavior and results and this aspect places
the employee in a clearly subordinate position)
Complex

Several behavioral problems inherent in the
process. It can be;
Managerial Effects
Managerial Effects Conducting performance
appraisals also has substantial impact on the
appraiser. On the positive side, a formal
appraisal system encourages managers to do
more analytical and constructive thinking about
their employees.
The requirement of a face-to-face interview
encourages managers to be more specific about
identifying each employees abilities, interests,
and motivation. Managers often begin to
perceive that each employee is truly different
and must be treated that way.
Realistically, however, managers sometimes
avoid giving appraisals because they do not
want to disrupt an existing smooth relationship
with an employee by providing negative
feedback.
It is particularly difficult to deal with low-
performing employees, who may require more
frequent monitoring and reviews.
In other cases , managers simply do not see any
organizational rewards coming to them from the
appraisal process. Where there is no extrinsic or
intrinsic incentive to perform the task, managers
may neglect it entirely (i.e. P 147)
Incentives Linking Pay with
Performance

Incentive Measure
Amount of output

Quality of output



Success in reaching goals


Example
Piece rates; sale
commission
Piece rate only for pieces
meeting the standard
commission only for sales
that are without bad
debts.
Bonus for selling an
established number of
items during a
predetermined time span
Amount of profit

Cost efficiency

Employee skills
Profit sharing

Gain sharing

Skill-based pay
Incentive Measure Example
Advantages
Incentives provide several potential
employee advantages. A major
advantage is that they increase
employee beliefs (instrumentality) that
reward will follow high performance.

Incentives also appear favorable from
the point of view equity theory. Those
who perform better are rewarded more.



Another advantage from the
employees point of view is that
incentives are comparatively
objective. They can be computed
from the number of pieces, dollars,
or similar objective criteria.

Difficulties
Potential equity is offset by other developments
that are perceived as inequities. In behavior
modification terms, certain unfavorable
consequences exist alongside the favorable
consequences of more pay, as they tend to
reduce the potential advantages of incentive
pay.
When workers make their cost-reward analyses,
they find that cost have risen along with
rewards. The result may be that the break-even
point has changed very little, if at all.
Wage Incentives
Basically Wage Incentives provide more
pay for more production. It nearly always
increases productivity while decreasing
unit labor costs. Therefore, the main
reason for using this, is clear. Ex: p 150
Profit Sharing
Profit Sharing is a system that distributes
to employee some portion of the profits of
business, either immediately or deferred
until a later date. Ex; p- 152
Gain Sharing
This is another useful group incentive.
Gain Sharing plan is a program that
establishes a historical base period of
organizational performance, measures
improvements and shares the gains with
employees on some formula basis. Ex: p-153
Skill-Based Pay
In contrast to salaries and wage
incentives, Skill-Based Pay rewards
individuals for what they know how to do.
Employees are paid for the range, depth
and types of skills in which they
demonstrate capabilities.
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