MGMT 4953 - Test 3 Campbell (Ch. 9 - 11)

360-degree feedback

a performance appraisal process in which feedback is obtained from the boss, subordinates, peers and coworkers, and the employees themselves - supervisors, peers, self, customer, and subordinate as raters

structure

is organizational structure decentralized, allowing flexible variations on a general plan?

merit pay

links increase in base pay to how highly employees are rated on performance evaluation

gain-sharing plans

look at two cost components of the income ledger, identifying areas where employees have an impact

What is the starting point for all compensation plans?

merit pay

pay-for-performance plan

movement away from entitlement toward pay that varies based upon performance - positive effect if designed well

environmental obstacle triangle

org. design, org. development, hr planning

incentive effect

pay can motivate people to perform better

sorting effect

people sort themselves by what is important to them

motivation triangle

performance management, compensation, culture

method of rate determination

plans set up a rate based either on units of production per time period or on time period per unit of production

two categories of evaluation formats are:

ranking & rating

rucker plan

ratio expressing the value of production for each dollar of total wage bill

ranking formulas

requires comparing employees against each other to determine the relative ordering of the group on some performance measure

Broad-Based Option Plans (BBOPs)

stock options provided to employees at all levels

group incentive plans

team performance is measured against a set standard to determine incentive pay

rater error training

the process of educating raters to make more accurate assessments of performance, typically achieved by reducing the frequency of halo, leniency, and central-tendency errors

halo error

when bias is in a favorable direction. This can mistakenly tell employees they don't need to improve in any area.

2 questions of performance metrics

- Is the measure (metric) results-oriented or behavior-oriented? - Does the measure focus on individual employees, teams, or the whole organization?

performance ratings are influenced by:

- behaviors observed by raters - organization values - competition among departments - status differences b/t departments - economic conditions

retention influences

- job satisfaction - pay and benefits - social - org. commitment - org. prestige

merit pay: pros & cons

- merit pay is expensive - many argue that it does not achieve the desired goal - has a small, but significant, impact on performance

strategy

- plan must support corp. objectives - should link well with HR strategy - how much an increase will make a difference

Rucker v. scanlon plans

- rucker plans tie incentives to a variety of saving - rucker plans are more amenable to linkages with individual incentive plans

earnings-at-risk plans

- success sharing - risk sharing

standards

- the key rests on standards - concerns include objectives, measures, eligibility, and funding

Individual Spot Awards

-Viewed as highly or moderately effective -Awarded for exceptional performance

Two major components for success of a rucker or scanlon plan

1) a productivity norm 2) effective worker committees

a pay model suggests effectiveness depends on 3 thing

1) efficiency 2) equity 3) compliance

a good format scores well on 5 points

1) employee development criterion 2) admin. criterion 3) personnel research criterion 4) cost criterion 5) validity criterion

motivation theories

1) equity 2) expectancy 3) goal setting 4) agency

Courts stress six issues in setting up performance appraisal systems:

1) instructions 2) clear criteria 3) sound job descriptions 4) required feedback 5) higher-level review 6) consistent treatment

all team incentive plans can be described by 3 common features:

1) size of the group 2) standard against which perf. is compared 3) payout schedule

efficiency involves 3 areas of concern

1) strategy 2) structure 3) standards

key elements of gain-sharing plan

1) strength in reinforcement 2) productivity standards 3) sharing the gains 4) scope the formula 5) perceived fairness of the formula 6) ease of administration 7) production variability

5 causes of failure in team incentive plans

1) team variety 2) the "level problem" 3) complexity 4) control 5) communications

types of variable pay

- cash profit sharing - stock ownership - balanced scorecard - productivity/gain sharing - team/group incentives

Herzberg's Two-Factor Theory

flexible compensation driven by the issue of needs

Goal Setting Theory

focuses on desired behavior (3rd element of motivation)

first impression error

forming lasting opinions about an individual based on initial perceptions

large group incentive plans

generally two types: 1) gain-sharing plans: use operating measures to gauge performance 2) profit-sharing plans: use financial measures

self-determination theory (SDT)

integrates motivation theories under one broad umbrella

balanced scorecard approach

A top-down management system that organizations can use to clarify their vision and strategy and transform them into action

long-term incentives (LTIs)

A type of performance pay in which the incentives are tied to an organization performance horizon that ranges beyond one year, often three to five years

Rowan Plan

A worker's bonus increases as the time required to complete the task decreases

spillover error

Continuing to downgrade an employee for performance errors in prior rating periods

recency error

Error that occurs when an appraiser gives more weight to recent occurrences and discounts an employee's earlier performance during the appraisal period.

central tendency error

Error that occurs when an appraiser rates all employees within a narrow range, regardless of differences in actual performance.

Performance-dimension training

Exposes supervisors to the performance dimensions to be used in rating

improshare

Improved Productivity through sharing measures productivity physically rather than in terms of dollar savings like those used in the Scanlon and Rucker plans.

Halsey 50-50 method

Individual incentive method that provides for variable incentives as a function of a standard expressed as time period per unit of production. This plan derives its name from the shared split between worker and employer of any savings in direct costs

merit bonuses

One-time annual financial award, based on productivity, that is not added to base pay.

performance-standard training

Provides raters with a standard of comparison or frame of reference for making appraisals (what constitutes good, average, and bad).

Ability triangle

Selection, Recruitment, Training

If a supervisor is meeting with an employee for a performance rating and the feedback is surprising, that supervisor has __________?

failed

essay format

Supervisors answer open-ended questions describing employee performance

horn error

a bias that occurs when a negative characteristic of a person affects the evaluation of the person's other attributes

pay for performance

bases pay on one's results - positive effect if they are designed well

leniency error

constantly rating employees on the high end of the scale

what is the main error in the rating process?

criterion contaminants

agency theory

depicts employees as agents who enter an exchange with principals who are the owners/managers

severity error

error that occurs with raters who are unusually harsh in their ratings

distributive justice

fairness in the amount that is distributed to employees

sales value of production (SVOP)

is a ratio expressing the value of production for each dollar of total wage bill

scanlon plans

lower labor costs without lowering the level of the firm's activity

Employee Stock Ownership Plan (ESOP)

a compensation system that awards employees shares of company stock in addition to their regular compensation

procedural justice

fairness of the procedures used to determine the amount of rewards

clone error

giving better ratings to individuals who are like the rater in behavior and/or personality

equal employment opportunity (EEO) and affirmative action __________ HR decisions.

influence

ratings format

requires raters to evaluate employees against a standard rather than against each other

individual incentive plans

reward individual performance on a real-time basis

self-funding plans

specify that payouts only occur after the company reaches a certain profit target

Gantt Plan

standard time for a task is purposely set at a level requiring high effort to complete