Comp final

Halo error

an appraiser giving favorable rating to all job duties based on impressive performance in just one job function, ex. Rater hates tardiness rates a worker high across everything exclusively b/c that characteristics.

Central tendency error

avoiding extreme's in rating across all employees

Leniency error

consistently rating someone higher than they deserve

spillover error

continuing to downgrade an employee for performance error in prior rating periods

competency sets

Competency sets translate each core competency into action

Scanlon Plan

-lower labor costs without lowering the level of a firms activity • Incentives derived as a function of the ratio between labor costs and _sales value of production_ (SVOP). • 25% of wage savings goes back to the company and 75% of the remainder is distributed as employee bonuses. • With the remaining 25% placed in an emergency fund.

Ranking

doesn't tell you a diff. between people, just says 1 is better than 2, no explanation. Paired comparison ranking- when the size of work group goes above 10-15 employees the number of paired comparison becomes unmanageable.

Short term incentive plans

Merit bonuses_ differ from merit pay in that employees receive an end-of-year bonus that does not build into base pay. • Over time, these can be considerably less expensive than merit pay.

Straight piecework system

Rate is determined by units of production per time period, wages vary directly as a function of production level. Major advantage is it is easily understood by workers and perhaps consequently is more readily accepted than other incentive systems. Is the most frequently implemented

Merit pay plans and bonus: know all this material

A merit pay system links increases in _base pay_ to how highly employees are rated on a _performance evaluation__. • Most use a merit increase grid to determine merit pay on the basis of performance and also position in the salary range, or grade. • Captured by the _compa-ratio_ - employee salary divided by range midpoint. • Ratios are plugged into the grid to determine size of merit increase. At the end of a performance year, employees are evaluated. • Merit pay increases, unlike variable pay, is added into base pay. What the employee does this year is rewarded every year the employee remains with the employer.

marginal product of labor

A single employer's demand for labor coincides with the __marginal product of labor_. • Which is the additional output associated with the employment of one additional person, with other production factors held constant.

Standard hour and piecework plans

A type of individual incentive plan • The most frequently implemented is a _straight piecework_ system. • Two common plans set standards based on time per unit and tie incentives directly to level of output. • Standard hour plans and Bedeaux plans.

taylor and merrick plans

A type of individual incentive plan • Two plans provide variable incentives as a function of units of production per time period. • Taylor plans and the Merrick system.

Evidence for merit pay

PFP plans create an environment that rewards excellence. Most discussion of merit pay focuses on incentive effects. • How does merit pay influence performance of current employees? Merit pay may also have significant sorting effect causing employees who do not want pay tied to performance to leave. For merit pay to live up to its potential, it must be managed. • This requires a complete overhaul of the way raises are allocated. • Unless the reward difference is larger for every increment in performance, many employees will say, "Why bother?".

Marginal Revenue

Marginal revenue is the money generated by sale of the marginal product, the additional output from one additional person. • Employers will hire until marginal revenue equals the cost associated with employing that person. • The level of demand that maximizes profits is that level where marginal revenue is equal to the wage rate for that hire.

Concerns about merit pay

Merit pay increases _fixed compensation_ costs over time. • One response is to use merit bonuses or other variable pay plans. Merit pay becomes costly if too many high performance ratings are awarded. • Control the number of high ratings and/or improve the accuracy and credibility of performance ratings. Merit pay _differentials_ are too small to motivate performance. • Use larger differentials and include the role of promotions to strengthen merit pay differentials. Individual performance is a deficient measure when work is interdependent and requires cooperation to obtain objectives. • Broaden criteria to include cooperation and other factors.

compensable factors

One study found compensable factors related to job content did reflect bias against work done predominantly by women. • Define the compensable factors and scales to include the content of jobs held predominantly by women. Competencies often morph into compensable factors

Ratings

generally more popular than ranking system. But is not any evidence that rating formats are particularly valid. Such formats, especially those employing nonbehavioral anchors, provide more convenience than credibility. When adjectives are used as anchors, the format is called standard rating scale (well above average, well below average), major criticism of standard adjective rating scale is different raters carry with them into the rating situation different definitions of the scale levels ( have diff. ideas about what average work is) When behaviors are used as anchors, behaviorally anchored rating scales(BARS) seem most common format using behaviors as descriptors

clone error

giving better rating to individual who are like the rate in behavior or personality.

market pay line

links a company's benchmark jobs with market rates paid by competitors A market line: • Links __benchmark jobs_ on the horizontal axis (internal structure) with _rates paid by competitors (market survey) on the vertical axis. ---It summarizes the distribution of going rates paid by competitors in the market There are several ways to translate external competitiveness policy into practice. • Choice of measure_. • A company can use a specific percentile for base pay and another percentile for total compensation. • Updating. • If a company chooses a "match" policy, they will be lagging the market. • Aging the market data to a point halfway through the plan year is called _lead / lag__. • Policy line as percent of market line. • Specify a percent above or below the _regression line_ an employer intends to match and draw a new line at this level. • This _pay policy line_ carries a message.

recency error

opposite of first impression error. Allowing performance good or bad, at the end of the review period to play too large a role in determining an employees rating for entire period.

Horn Error

opposite of halo error. Downgrading worker across everything b/c they are exclusively poor in one dimension

severity errror

opposite of leniency error, rate someone lower than they deserve

Incentive vs. sorting effects

· Incentive: degree to which pay influences motivation (individual and aggregate) · Sorting: effect pay can have on composition of the work force (how an org. pays effects who works there) · *** Need to look at both to attract employees they want***

Job value vs. job content: criteria used to determine each

· Job Value: refers to the worth of the work o Criteria- relative contribution of skills, tasks, and responsibilities of a job to the organization's goals · Job Content: refers to work performed and how it gets done o Criteria- skills required, complexity of tasks, problem solving, responsibility

How do you determine the reliability of job analysis

· Job analysis: systematic method of discovering and describing difference · Reliability: measure of consistency of results among various analysts, methods, sources of data, or overtime o Using multiple sources and average ratings increase reliability o *To increase reliability is to understand and reduce difference* (minimize discrepancies)

disadvantages of team incentivs

· May be difficult to isolate impact of team · Not all employees can be placed on a team · Can be administratively complex · May create team competition · Difficult to set equitable targets for all teams

Procedural and distributive justice

· Procedural Justice: refers to the process used to make decisions · Distributive Justice: refers to the outcome

advantages of team incentives

· Reinforces teamwork and team identity/results · Effective in stimulating ideas and problem solving · Minimizes distinctions between team members · May better reflect how work is performed.

Know the steps involved in developing an internal job structure

· Work relationships within the Organization · Job analysis · Job Description · Job Evaluation · Job structure

external consistency

· pay comparisons with competitors o Employees must view their pay as "competitive" o Controlling labor costs keeps company products competitive

Internal consistency

· comparisons among jobs or skill levels inside the organization o Similar jobs have similar pay grades

Management by objectives (MBO)-

)- is both a planning tool and an appraisal tool, and has many variations across firms. First step , organizational objectives are identified from the strategic plan of the company. Each successively lower level in the organization hierarchy is charged with identifying work objectives that will support attainment of org. goals. Emphasis is on outcomes achieved by employees, beginning of period employee and boss discus performance objectives. End of period, two meet again to record results. Results are the compared against objectives, and performance rating is determined based on how well objectives were meet. MBO generally indicates positive improvement in performance both for individuals and for organization. Mangers attitudes have become more positive towards MBO, particularly when the system is revised to reflect feedback of participants. Mangers are plead with how it provided direction to work units, improves the planning process, and increase superior/subordinate communication. Negative side it require more paperwork and increase both performance pressure and stress.

First-impression Error

- developing a neg or positive opinion of an employee early in the review period and allowing that to influence all later perceptions of performance

The process of identifying competencies in person-based structures

A _competency-based stucture__ begins by looking at the work performed in the organization. • The underlying knowledge, skills, and behaviors that form success at any level or job are the core competencies. • Competency sets translate each core competency into action. • Competency indicators are observable behaviors. • They anchor the degree of a competency at each level of complexity of the work and sometimes include scales.

Know the material on the product and labor market and how these affect compensation

Competition in the labor market for people with various skills. Competition in the product and service markets, which affects the financial condition of the organization. Characteristics unique to each organization. •Such as business strategy, technology, and the productivity and experience of its workforce. These factors act in concert to influence pay-level and pay-mix decisions. The two key product market factors that affect the ability of an organization to change what it charges for its products are: •Product Demand. •The product market caps the pay level an employer can set. •Degree of competition. •Employers in competitive markets are less able to raise prices. Other factors include the productivity of labor, the technology employed, and the level of production relative to plant capacity.

Pay range

Designing pay grades_ and _pay ranges_ is usually done with base pay data, since this reflects the basic value of the work. Grades and ranges offer flexibility for: • Differences in quality among applicants. • Differences in productivity or value of quality variations. • Differences in the mix of pay forms used by competitors. A _pay range exists whenever two or more rates are paid to employees in the same job - allows managers to: • Recognize individual performance differences with pay. • Meet employees' expectations that their pay will increase over time. • Encourage employees to remain with the organization.

Marginal Revenue Product

Diminishing marginal productivity results when each new worker has a progressively smaller share of production factors available. • Until fixed production factors change, each new hire produces less than the previous hire. • The amount each hire produces is the marginal product.

Observable behaviors that indicate competency level

Early conceptions of competencies focused on five areas: • Skills - demonstration of expertise. • Knowledge - accumulated information. • Self-concepts - attitudes, values, self-image. • Traits - general disposition to behave in a certain way. • Motives - recurrent thoughts that drive behaviors. Organizations are now emphasizing _business-related descriptions of behaviors__. Competencies are becoming a collection of observable behaviors requiring no inference, assumption or interpretation.

The advantages and disadvantages of gainsharing plans

Gain sharing identifies areas where employees have some impact on savings - such as reduced scrap. • Studies report positive results. • Can lead to the sorting effect. Below are key emlemnts in design gainsharing Strength of reinforcement. • What role should base pay assume relative to incentive pay? Productivity standards. • Most plans use a historical standard. • Changing conditions can render a standard ineffective. Sharing the gains between management and workers. • Emergency reserve? Scope of the formula. • Performance measures have moved beyond financial. Ensure reinforced behaviors affect the desired goal. Perceived fairness of the formula. • Increase employee and union participation. Ease of administration. Production variability.

Standard hour plan

Generic term for plans setting the incentive rate based on completion of a task in some expected time period, all this is determind in advance of any actual work. Ex. Mechanic says car will take 4 hrs but gets it done in 3, he will still get paid for all 4 hrs. Standard hour plans are more practical than straight piecework plans for long-cycle operations and jobs that are nonrepetitive.

free rider problem

Group plans can suffer from the free rider problem. • Free riders have a harder time loafing when there are clear performance standards.

Merrick System

Provide variable incentives as a function of units of production per time period. Provide different piece rates, depending on the level of production relative to the standard Operates the same way but is has a 3 piecework rates are set. One- high for production exceeding 100 perecent of standard, Two- medium for production between 83 and 100 % of standard, Three- low for production less than 83 perecent fo standard.

Taylor Plan

Provide variable incentives as a function of units of production per time period. Provide different piece rates, depending on the level of production relative to the standard. Establishes 2 piecework rates. One rate goes into effect when a worker exceeds the published standard for a given time period, this rate is set higher than regular wage incentive level. Second rate is for production that's below standar, theis rate is lower than the regular wage, not real easy to digue in performance, a

trends in varaible pay design

The trend in variable-pay design is to combine the best of gain sharing and profit sharing plans. • A funding formula is linked to some profit measure. • The plan must be self-funding. • Dollars given to workers are generated by additional profits gained from operational efficiency. • Along with financial incentive, employees have a sense of control

Pay grades

sets of jobs having similar worth or content, grouped together to establish rates of pay Is a part of the pay structure The first step is to group different jobs considered _substantially equal_ for pay purposes into grades. • Grades allow people to move among jobs with no pay change. Reconsider the original _job evaluation_ results to decide which grade a job should be slotted into. • All the jobs within a single grade will have the same pay range. Though flexible, grades are difficult to design. • The objective is for all jobs similar for pay purposes to be in a grade. If evaluation points are close and fall on either side of grade boundaries, the difference in salary may be out of proportion to the difference in the value of the job content.

Essay format

supervisor answer open-ended questions in essay form describing employee performance. B./c the descriptors used could range from adjectives describing performance, types of behaviors, and goals accomplishments. It can take on characteristics of all the above formats.

disadvantage of gainsharing plan

· Can be administratively complicated · Unintended effects, like drop off in quality · Management must "open the books" · Payouts can occur even if company's financial performance is poor

advantages of gainsharing plan

· Clear performance reward links · Productivity and quality improvements · Employee's knowledge of business increases · Foster teamwork and cooperation

Factors affecting fairness perceptions of pay structures

· Economic pressures · Govt. policies, laws, and regulations · External stakeholders · Cultures and customs · Human capital · Work design · HR policies

Rucker Plan

• A ratio is calculated expressing the value of production required for each dollar of the total wage bill. • Production savings are split similarly to the Scanlon plan, including the emergency fund. Two major components are vital to success of either plan. • A productivity norm requires effective measure of the base-year and employee acceptance. • Effective work/productivity/bonus committees whose primary function is to evaluate suggestions for improving productivity and/or cutting costs. The plans differ from individual incentive plans in their focus. • Individual plans focus on wage incentives to motivate. • The Scanlon/Rucker plans focus on organizational behavior variables. • The key is participation developed through group unity. Two important differences in the Scanlon and Rucker plans. • Rucker plans tie incentives to a variety of savings, not just labor. • Rucker plans are more linkable with individual incentive plans. Major components are vital to success 1-a productivity norm, 2- effective worker committees

The advantages of skill-based plans

• An advantage is a better match of people to flow of work, avoiding bottlenecks and idle hands. • Skill-based plans have very specific information on every aspect of the production process.

Know the advantages and disadvantages of team incentives

• Individual incentives yield higher productivity gains, but group incentives often are right when team coordination is the issue. Group plans can suffer from the free rider problem. • Free riders have a harder time loafing when there are clear performance standards. Group-based plans, particularly gain-sharing plans, may cause organizations to evolve into learning organizations. • Employee suggestions evolve from first-order learning experiences into suggestions exhibiting second-order learning characteristics. • Suggestions that help the organization break out of existing patterns of behavior and explore different ways of thinking and behaving.

skill block

• Related skills can be grouped into a _skill block_ and skill blocks can be arranged by levels into a skill structure. • A process is needed to describe, certify, and value the skills.