Microsoft PowerPoint Presentation to Accompany

Organizational
Behavior
SEVENTH EDITION

Gregory Moorhead and Ricky W.

Griffin

Chapter 8

Goal Setting,
Performance
Management, and
Rewards

Learning Objectives
Describe how goal setting can enhance
motivation and performance.
Discuss performance measurement in
organizations.
Describe the role of performance
measurement in total quality management.
Discuss individual rewards in organizations
and describe their relationship to
performance.
Explain the various issues associated with
managing reward systems.
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Goal Setting and Motivation

Goal setting
Is a useful method of enhancing employee
performance. From a motivational perspective, a goal
is a desirable objective.

Goals are useful for two purposes:

Goals provide a useful framework for managing
motivation. Managers and employees can set goals
for themselves and then work toward them.
Goals are an effective control device; control is
monitoring by management of how well the
organization is performing.

Self-efficacy
Is the extent to which we believe we can still reach
our goals even if we failed to do so in the past.
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Goal Setting Theory

Edwin Lockes goal-setting theory
of motivation assumes that
behavior is a result of conscious
goals and intentions. By setting
goals for people in the
organization, a manager is able
to influence their behavior.

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Components of Goal-Setting
Theory
Goal Difficulty
Is the extent to which a goal is challenging and
requires effort. Difficult, yet realistic, goals are the
most effective.

Goal Specificity
Is the clarity and precision of a goal. Specific,
rather than vague, goals are the most effective.

Goal Acceptance
Is the extent to which persons accept goals as
their own.

Goal Commitment
Is the extent to which a person is personally
interested in reaching a goal.
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Figure 8.1 The Goal-Setting Theory of Motivation

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Broader Perspectives on Goal

Setting
Management By
Objectives (MBO)
A collaborative goalsetting process through
which organizational
goals cascade down
throughout the
organization.
MBO programs help
implement goal-setting
theory on a systematic
basis throughout the
organization.

Overall
Overall
Goals
Goals

Subsidiary/Unit
Subsidiary/Unit
Goals
Goals

Subordinate
Subordinate
Goals
Goals

Review
Review and
and Revise
Revise
Subordinate
Subordinate Goals
Goals

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Evaluation and Implications

Research on goal-setting theory has confirmed:
That goal difficulty and specificity are closely
associated with performance.
That goal acceptance and commitment are
important.
That goal-setting theory may focus too much on
short-run goals at the expense of long-term
performance.

The usefulness of MBO is limited by:

Lack of top management support.
Overemphasis on quantitative goals.
Excessive paperwork and record keeping
(documentation).
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Performance Management in
Organizations
The Nature of Performance Management
Performance measurement, or performance
appraisal, is the process by which someone
(1) evaluates an employees work behavior by
measurement and comparison with previously
established standards;
(2) documents the results; and
(3) communicates the results to the employee.

Performance Management System (PMS)

Incorporates the total quality management context
along with organizational policies, procedures, and
resources.
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10

Figure 8.2 The Performance Management System

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11

Figure 8.3 Purposes of Performance Management

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12

Performance Management
Basics
The Appraiser
Typically employees supervisor
Problems in appraisals
Incomplete or inaccurate information
about an employees performance
Appraisers lack of first hand
knowledge about the employee

Multiple rater systems

360 degree feedback
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13

Performance Management
Basics [continued]
Frequency of Appraisal
Typically once a year
Convenient for administrative
purposes

Appraisal Strategy Issues

Cultural differences
Individualistic
Collective
Fatalistic
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14

Performance Measurement and

Total Quality Management
Total Quality Management (TQM)

Focuses on the customer

Creates an environment of trust and openness
Emphasizes working in teams
Breaks down internal organizational barriers
Instills team leadership and coaching
Endorses sharing power
Promotes continuous improvement.

Use of the TQM approach involves

fundamental changes in the organizations
culture.
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15

Incremental Versus Continual

Improvement
Traditional approaches to improving
performance focused on
incremental improvement.
Continuous improvement (CI) under
TQM assumes that performance can
be elevated on a constant basis.

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16

Figure 8.4 Incremental Versus Continuous Improvement

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17

Factors Supporting TQM, PMS,

and CI
Commitment to Objectives
A strong PMS is based on a strong commitment
from the entire organization, especially top
management.

Job Analysis
The process of systematically gathering information
about specific jobs to use in developing a PMS.

Performance Plan
An understanding between an employee and a
manager about what and how a job is to be done
such that both parties know what is expected, and
how success is defined and measured.
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18

Factors Supporting TQM, PMS,

and CI [continued]
Measurement of Performance
The cornerstone of a good PMS is the method
for measuring performance.
Popular methods for evaluating individual
performance are:
Graphic rating scales
Checklists
Essays or diaries
Behaviorally anchored
rating scales (BARS)
Forced-choice systems
MBO
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19

The Learning Organization

The Concept
To facilitate the lifelong learning and
personal development of all of its
employees while continually transforming
itself to respond to changing demands and
needs.

Goals of a learning organization

To constantly upgrade employee talents,
skills, and knowledge through:
Total Quality Management
Continuous Improvement
Performance Measurement
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20

Individual Rewards in
Organizations
The Reward System
Consists of all organizational
components, including people,
processes, rules and procedures, and
decision-making activities involved in
allocating compensation and benefits to
employees in exchange for their
contribution to the organization.

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21

Roles, Purposes, and Meanings

of Rewards
Purposes of Rewards
Attract, retain, and motivate qualified employees.
Provide equitable, fair, and competitive
compensation for an employees contribution to
the organization.
Encourage desired performance behaviors by
employees.

Meanings of Rewards
The surface value of a reward is its objective
meaning or worth to an employee.
The symbolic value of a reward is its subjective
and personal meaning or worth to an employee.
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22

Types of Rewards in
Compensation Packages
Base Pay
Incentive Systems

Piecework Programs
Gain sharing Programs
Bonus Systems
Long-Term Compensation
Merit Pay
Profit-Sharing
Employee Stock Option Plans

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23

Types of Rewards in
Compensation Packages [continued]
Awards
Cash, Plaques, Recognition

Benefits
Payment for Time Not Worked (Both on
and off the job)
Social Security Contributions
Unemployment Compensation
Life and Health Insurance Programs
Pension or Retirement Plans
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Types of Rewards in
Compensation Packages [continued]
Perquisites
Company Vehicles
First-Class Travel
Club Memberships

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25

Managing Reward Systems

Linking Performance and Rewards
Employees must perceive that their
rewards are linked to their
performance.
Pay differences are based on jobrelated performance factors.

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26

Managing Reward Systems

[continued]

Flexible Reward Systems

Allow employers to offer employees the
combination of benefits that best suits
the employees needs.
Examples:
Younger workers may prefer strong health
insurance benefits.
Financially secure mid-career employees
may prefer more time off.

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27

Table 8.1 Issues to Consider in Developing Reward Systems

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Expatriate Compensation
Organizations that ask employees to
accept assignments in foreign
locations must usually adjust their
compensation levels to account for
differences in cost of living and
similar factors.
Amoco uses the system shown in the
next slide

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29

The Expatriate Compensation

Balance Sheet
The employees domestic base
salary is first broken down into three
categories taxes, consumption,
savings. Then adjustments are made
until an appropriate equitable level
of compensation is achieved.

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30

Figure 8.5 The

Expatriate
Compensation
Balance Sheet

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31