MGMT 5820 Exam 3
Product Market Competition
! Companies must be able to sell their goods & services at a quantity and price that brings a sufficient return on their investment. ! An important influence on price is the cost of production ! Sets "ceiling" for pay level ! The more we pay, the greater our costs, the higher our price, the less competitive we are ! If we pay more than this, we won't be able to sell our product 1 - organizations must compete effectively in the product market. Need to keep costs down (and pay is a large component of this) in order to maintain a competitive price. Thus this places an UPPER BOUND on labor costs and compensation
Labor Market Competition
! The amount a company must pay to compete against other companies that hire similar employees ! Sets "floor" for pay level ! The less we pay, the less we get good results, the less competitive we are ! If we pay less than this, we won't be able to fill our positions Another important factor is labor market competition - amount org must pay to compete against other companies that hire similar employees (in recruitment, we saw that above market pay was very effective). Thus this sets a LOWER BOUND on labor costs and compensation On this topic, employees are resources to org; need to pay them enough t keep productivity high --> competitive in market (not just enough to keep them at org, but enough to keep them working hard)
INDIRECT COMPENSATION
----➤ Benefits are an important component of total compensation ➤ Usually 40% of someone's salary! ➤ Legally mandated ➤ Social security, unemployment comp, workers comp, overtime pay for non-exempt employees ----➤ Discretionary ➤ Health insurance ➤ Payment for time not worked ➤ Supplemental insurance/survivor insurance etc. ➤ Retirement plans (mostly defined contribution plans) ➤ Employee services (e.g., care subsidies, education assistance, credit unions, meals, scholarships for children, auto)
How good is the Results Approach?
---Reliability High; main problem can be test-retest, depends on timing of measure ---Validity Usually high; can be both contaminated and deficient ----Specificity Can be high if the behaviors that lead to goal achievement are known ----Strategic Congruence Very high, so long as chosen goals really do support organizational goals
How good is the Attribute Approach?
---Reliability Usually low; Can be improved by specific definitions of attributes ----Validity Usually low; Can be fine if developed carefully ----Specificity Low; While feedback is specific, the behaviors needed to compensate for poor KSAOs are sometimes unclear ----Strategic Congruence Usually low; Requires manager to make link to specific organizational goals
How good is the Behavioral Approach?
--Reliability Usually high ---Validity Usually high; minimizes contamination and deficiency ---Specificity Very high; because specific behaviors are being assessed, rather than sometimes "unimprovable" KSAOs ---Strategic Congruence High; especially if behaviors are linked to organizational goals
How good is the Global Approach?
-Reliability High; because different raters usually do agree on relative rankings -Validity Can be high if rankings are done carefully. But, few performance dimensions are considered and lots of "noise" can seep into the ranking -Specificity Very low; because ranking occurs based on overall performance, not specific behaviors that can be improved -Strategic Congruence Low, because no link is made to specific organizational goals ➤ "
Market Pay Surveys
A form of benchmarking ! How much are our competitors paying, and is there any reason we should be different? A way that employees know this information; compare own info to other companies Several things to consider: which other co's to include; which jobs, etc...
➤ Forced-distribution method
Assigns a certain percentage of employees to each category in a set of categories ➤ Pro: Keeps managers from rating all employees as exceptional ➤ Con: If all are good performers, may force even good performers into the bottom 5%
MEASURING PERFORMANCE
Global, Behavioral, Attribute, and Results approach
Altruism
Helping and assisting coworkers in need
Sportsmanship
Maintaining a positive attitude, even in bad times
Civic Virtue
Participating in optional functions in order to be a better corporate citizen
➤ Overall (simple) ranking
Rank employees in a supervisor's group from the highest to the lowest performer ➤ Major downside of ranking: ➤ Lacks validity - why are they ranked where they are? Why does it lack validity? Because simply saying who is the best and who is the worst worker doesn't tell anything about their performance and their contribution to the organization. As a result, ranking raises questions about fairness. ➤ Alternation ranking ➤ Start with 1, then 9, then 2, then 8, and so on.
Courtesy
Sharing pertinent information with others
SEXUAL HARASSMENT
❖ EEOC definition of sexual harassment: Unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. ➤ Examples: ➤ Repeated verbal comments of sexual nature, offensive jokes, etc. ➤ Unsolicited and unreciprocated physical contact ➤ Display offensive sexual pictures ➤ Treat someone like a sexual object ➤ Suggestive looks ➤ Two types: ➤ "Quid Pro Quo" ➤ A benefit or punishment is contingent upon employee submitting to sexual advantages ➤ A request by a supervisor, possibly a condition of employment ➤ "Hostile Working Environment" ➤ Someone's behavior makes it difficult for someone of a particular sex to work ➤ Suggestive remarks, pornographic pictures, explicit language, jokes and innuendoes ----Hostile working environment (HWE) is more subtle but perhaps more pervasive form of sexual harassment 3 critical issues in HWE: (1) plaintiff cannot invite advances, (2) harassment was severe enough to alter terms or privileges of employment, (3) is employer liable for actions of its employees? - Combat this with policy and training
Global Approach: GENERAL APPROACH
➤ About 5 minutes before the performance appraisal session, sit in your office and think back on employee's performance. Go with the image you have in your head of that person -- your gut feeling. -Why doesn't this work? ➤ Rater Biases ➤ Similar-To-Me ➤ Mood/Affect ➤ Halo and Horns ➤ Distributional Errors ➤ Leniency ➤ Strictness ➤ Central Tendency -similar to me: rate those similar to us more highly -halo: one positive performance aspect causes the rater to rate all other aspects of performance positively -------horns: one negative performance aspect causes the rater to rate all other aspects of performance negatively -leniency: rater assigns high (lenient) ratings to all employees -strictness: manager gives low ratings to all employees ---central: rate all employees down middle of the road
EQUITY THEORY
➤ According to Equity Theory, distributive justice is high when an employee's ratio of "outcomes" to "inputs" matches those of some "comparison other" ➤ Thus, Equity Theory acknowledges that employee motivation is not only dependent on one's own rewards, but also on the rewards received by other employees ➤ Internal (in the same firm) ➤ Coworkers, supervisors, subordinates ➤ External (in another firm) ➤ Professional colleagues, friends, neighbors If you were getting less reward for your effort than coworkers = under-reward. How would that make you feel? DIAGRAMS ➤ Decrease inputs (lower motivation) or increase outcomes (theft) ➤ Increase inputs (higher motivation) or distort input perceptions (cognitive distortion)
Expectancy Theory pt.2
➤ According to Expectancy Theory, motivation can be calculated with this formula: ➤ Key aspect: Multiplicative effect ➤ Motivation is zero if either expectancy, instrumentality, or valence is zero (E) x Σ[(I) x V]
Delivering performance feedback...pt.2
➤ Annual feedback is not enough! ➤ Delayed feedback can result in missed opportunity for improvement ➤ Feedback is most effective when the information doesn't surprise employees ➤ Employees are motivated and directed by regular feedback ➤ Are they on the right track? ➤ Younger employees, in particular, care ➤ Regardless of generation, employees are more engaged when: ➤ Accomplishments are recognized ➤ Opportunities for advancement are identified ➤ They see a future for themselves in the organization ➤ All of this can occur during feedback! ➤ What should the session look like? ➤ Create the right context ➤ Neutral setting, such as a conference room ➤ Describe the feedback as a chance to discuss the role of the employee, manager, and the relationship between them ➤ Say and believe that it is an open dialogue ➤ Enable the employee to be well-prepared ➤ Self-assessment ahead of time ➤ Increases awareness of performance, strengths and weaknesses
MERIT PAY
➤ Annual pay increases are linked to performance appraisal ratings ➤ Assumes that individual differences in performance reflect ability or motivation ➤ If graphic rating or mixed standard scale was used for performance appraisal, this compensates KSAOs ➤ If BOS or BARS were used for performance appraisal, this compensates behaviors ➤ Criticisms: ➤ Accuracy of raise depends on accuracy of performance evaluation method ➤ Can encourage competition when budget or economic constraints exist ➤ Average difference in raises between high and average performers is still relatively small (~ $6/week) ➤ Evaluate merit pay based on the four theories: INSTRUMENTALITY Does it maximize instrumentality? GOALS Does it use goals to create line of sight and reduce agency costs? EQUITY Does it maximize equity perceptions? COOPERATION Does it foster cooperation? instrumentality yes; others no
Counterproductive Behavior
➤ Any intentional behavior on the part of an employee that, when viewed from the organization's perspective, is contrary to its legitimate interests ➤ Examples: ➤ Theft ➤ Destruction of property ➤ Misuse of information ➤ Unsafe behavior ➤ Substance abuse ➤ Inappropriate verbal actions ➤ Inappropriate physical actions
MEASURING PERFORMANCE
➤ As in selection, we must ask the question, "how good are our measures?" ➤ Also as in selection, the answer to this question in multifaceted ➤ Reliability ➤ Validity ➤ Specificity ➤ Strategic Congruence
GAINSHARING
➤ Attach bonuses to goals at the unit level ➤ Group incentive program that measures improvements in productivity and effectiveness objectives and distributes a portion of each gain to employees ➤ Goals may pertain to: ➤ Overall profitability ➤ Cost saving measures ➤ Quality measures ➤ Productivity measures ➤ Time to market measures ➤ Customer satisfaction measures ➤ Outcomes are more easily trackable at the unit level ➤ Encourages pursuit of broader company goals, rather than selfserving goals ➤ Can help foster cooperation at unit level, but may still have competition between units ➤ Criticism: ➤ How much can one person influence a unit's performance? ➤ Do employees truly understand the key drivers of unit performance? ➤ What about "free riders?" Evaluate using goals and cooperation
PROFIT SHARING
➤ Attach bonuses to the organization's level of profitability ➤ If the company does well, employees receive lump sum bonuses as supplement to base salary. If company does poorly they receive nothing ➤ Payment may be deferred, to accumulate in employee retirement accounts ➤ Criticisms: ➤ Similar to Gainsharing, only more intense: ➤ Can one employee influence firm profits? ➤ Do employees understand drivers of profits? ➤ What about "free riders"? Evaluate using goals and cooperation
WRONGFUL DISCHARGE
➤ Attempt to establish that the charge: ➤ Violated "public policy" ➤ Was discharged for refusing to do something illegal, unethical, or unsafe ➤ Violated an "implied contract" ➤ Was discharged for some reasons other than those covered in hiring materials or recruitment decisions ➤ Violated "implied covenant of fair dealing" ➤ The process lacked "procedural justice" ➤ Employees win settlements over 70% of the time, with an average reward of $500,000 ➤ In response, employers have begun to: ➤ Explicitly provide an "at-will disclaimer" in their hiring materials ➤ Expand the standards of conduct in their employee handbooks
Behavioral: BARS (BEHAVIORALLY ANCHORED RATING SCALES)
➤ Builds on the critical-incident technique ➤ Take list of behaviors and: ➤ Compile a list of "critical incidents" exemplifying good and bad behaviors ➤ Organize the critical incidents into different performance dimensions ➤ Rank the critical incidents ➤ Use those critical incidents as anchors on a rating scale key word = ANCHOR create list of behaviors - good and bad for each dimension of job, then rank order them ➤ Keys to remember: ➤ Statements are based on past performance ➤ Gather many critical incidents that represent effective and ineffective performance; classify those incidents from most to least effective ➤ Incidents are used as ANCHORS to guide the rater ➤ Cons: ➤ Can bias the managers' memory ➤ Anchors may help recall similar incidents, while forgetting others
"LINE OF SIGHT"
➤ Business jargon for "low agency costs" ➤ Exists when even employees' own selfish goals will help the achievement of organizational goals ➤ When Line of Sight exists, an employer can make greed work for the firm rather than against the firm ➤ That is, when Line of Sight is good, agency costs are low ➤ So, how do firms get their employees to focus their attention on the right things? ➤ Compensation! In other words, align issues; want agent to do things because they want to, regardless of the company
Delivering Perfomance Feedback... pt.3
➤ Can use three approaches: ➤ "Tell-and-sell" approach <— most used by managers ➤ Tell employees their ratings and justify them ➤ "Tell-and-listen" approach ➤ Tell employees their ratings and then let the employees explain their side of the story ➤ "Problem-solving" approach <— most effective ➤ Work together to solve performance problems ➤ Respectful and encouraging atmosphere ---Of course, the tell and sell — it's easiest. BUT, the feedback process is also a way of improving employee satisfaction with the feedback process by letting employees voice their opinions and discuss performance goals. ➤ What should the content of the feedback look like? ➤ Focus on behaviors, NOT personalities ➤ "You did not meet the deadline" vs. "You're not motivated" ➤ End with goal setting and decide when to follow up ---You didn't meet the deadline — focuses on behavior to improve. You're not motivated — can make the employee feel defensive and angry. ➤ Tips for talking about performance in a fair, honest, and clear way: ➤ Use specific, concrete examples ➤ Don't just talk—listen, too ➤ Be honest ➤ Be positive
DEVELOPING A PAY STRUCTURE
➤ Combine pay level and job structure information ➤ Create Pay Grades ➤ Group jobs into pay categories ➤ Each job within a grade (category) has the same pay midpoint ➤ Minimum and maximum levels also set, placing limit on individual pay differences So, then once you have the pay levels and job structure, you combine them to create pay structure Most common is to use pay grades - lump jobs into pay categories and create ranges with the pay levels of those jobs
➤ Paired-comparison method
➤ Compare each employee with each other employee to establish rankings ➤ Pros: ➤ Counteracts tendency to rate everyone favorably/near the center ➤ Can erase tendency to evaluate behavior more strictly/leniently ➤ Cons: ➤ Time consuming ➤ Often not linked to the organization's goals
VALIDITY
➤ Degree to which our measure assesses all relevant (and only relevant) aspects of performance ➤ The more dimensions of performance considered in the evaluation, the less deficiency the measure has ➤ The less "noise" contained within the measure, the less contamination the measure has
RELIABILITY
➤ Degree to which our measure is free from random error ➤ In regard to selection, we discussed three types of reliability (inter-item, inter-rater, and test-retest). ➤ In performance evaluation, we typically assess reliability with "inter-rater" reliability -- do multiple judges agree about an employee's performance levels?
➤ Organizational Citizenship Behavior
➤ Discretionary "extra mile" behaviors that fall outside of an employee's job description and that (in the aggregate) promote the effective functioning of the organization ➤ First discussed by Dennis Organ, who recounts an experience he once had in a paper mill Altruism, Civic, Virtue, Sportsmanship, Courtesy
FEEDBACK TO STAR PERFORMERS
➤ Don't assume that a star employee is perfect ➤ It's your job to help them grow ➤ Consider how high performers reached their results ➤ Did they forgo other important things such as a healthy work/life balance? ➤ Strengths may also be weaknesses Example of strengths as weaknesses: Employee is super productive and focused at work, but is seen as standoffish by other employees because he/she doesn't attend the Friday lunch or other optional social events with coworkers ➤ Solicit feedback on you as a manager ➤ Provide frequent feedback ➤ The higher the performer, the more frequent the feedback should be
Results Approach: Management by Objectives
➤ Each level of company sets difficult goals for the level below ➤ Goals work best when they are: ➤ Both difficult and specific, rather than no goals, easy goals, or "do your best" goals ➤ Employees participate in setting goals ➤ Employees are provided with feedback on progress toward goal ➤ Has a very positive effect on organizations ➤ 68 of 70 companies in one study improved through MBO ➤ Examples of possible goals: ➤ Timely completion of specific projects ➤ Completion of relevant training courses ➤ Improvements in customer satisfaction measures ➤ Addition of new clients ➤ Advantages: ➤ Evaluation of results can be less subjective than other kinds of performance measurement ➤ Relatively easy to link to organizational goals ➤ Disadvantages: ➤ If only final results are measured, you may not measure significant aspects of performance that are not directly related to those results ➤ There may not be any guidance for how to improve ➤ Problems with validity due to situational constraints Results may be affected by circumstances beyond each employee's performance
EMPLOYMENT-AT-WILL
➤ Employers can fire you at any time, for any reason, just as you can quit at any time, for any reason ➤ Assumption: "The competition of the market will prevent abuses" ➤ Over time, firms that consistently act unfairly will suffer for it. Do you think this is true? ➤ This doctrine has eroded to some degree as lawsuits have become a bigger part of our culture ➤ "Wrongful discharge" suits allow fired employees to sue for damages in civil court Employees who are fired sometimes sue their employers for wrongful discharge and some judges have been willing to consider employees who meet certain criteria (longevity, promotions, raises, etc...) as having an implied contract
Sexual Harassment pt.2 Bundy v.Jackson
➤ Example 1: Is this quid pro quo or hostile working environment? ➤ Sandra Bundy received sexual propositions from Delbert Jackson ➤ Bundy complained to her supervisor ➤ Her supervisor said, "any man in his right mind would want to rape you." ➤ Bundy then was passed over for a promotion because of her "inadequate work performance" although she was never told her work performance was unsatisfactory ---Quid Pro Quo Sandy was personnel clerk for DC department of corrections; Delbert is a fellow employee
Sexual Harassment pt. 3 Meritor Savings Bank v. Vinson
➤ Example 2: Is this quid pro quo or hostile working environment?: ➤ Bank's vice president repeatedly asked Michelle Vinson to have sex with him (she eventually agreed) ➤ She had no evidence that she was denied a promotion because of her relationship with her vice president ➤ Court ruled that her voluntary participation was not a major issue ➤ Court ruled in favor of Vinson stating that the vice president's advances were unwelcome and lead to a hostile working environment ---hostile working environment
UNINTENDED VOLUNTARY TURNOVER
➤ How can organizations keep good employees who want to stay? ➤ Protect physical and psychological health of employees So up until now we have focused on INTENDED voluntary turnover (people leave org because they have a BETTER opportunity) From here forward: focus on UNINTENDED voluntary turnover - when people don't necessarily want to leave, but do because of physical or psychological health issues.
Global Approach: COMPARATIVE APPROACH
➤ In an effort to combat distributional errors, just rank employees ➤ Overall ranking ➤ Forced distribution ranking ➤ Paired comparison ranking ➤ Their ranking then determines their performance evaluation --Second global approach: compare individual's performance with that of others... ---overall/simple ranking: basic ranking of employees in dept best to worst ----forced distribution: employees are ranked in groups (popularized by GE CEO Jack Welch) ex. top 20%, middle 70%, bottom 10% ----paired comparison: managers compare every employee with every other employee in the work group, give employee a 1 every time he/she is considered a high performer. Once all pairs have been compared, the points are counted up = performance score.
AGENCY THEORY
➤ In most firms the owners are not managers. How can owners ensure that managers will act in their best interest? ➤ Owners = "Principals" ➤ Managers = "Agents" ➤ The difference between agent interests and principal interests is termed "agency cost" ➤ Examples: ➤ Agents avoid risky decisions that may help long-term profits, in order to protect their jobs ➤ Agents fund projects that benefit them, but that do little to help the firm
COMPANY POLICIES
➤ In response, companies form certain policies that revolve around insuring that romantic relationships do not turn into harassment claims: ➤ "Love contracts" ➤ Employee romance guidelines ➤ Never in supervisor-subordinate relationships ➤ No public displays of affection ➤ Be professional
Attribute: GRAPHIC RATING SCALE
➤ Indicate your assessment of performance on each dimension by circling the appropriate rating ---the most common form of attribute approach ex. for manufacturing company lists the attributes necessary to succeed in job and supervisor rates them on likert scale 1-5 ---focuses on the extent to which individuals have certain attributes (characteristics or traits) believed desirable for the company's success evaluate them on these traits ➤ Do you see any drawbacks? ➤ That particular manager has to decide what "excellent knowledge" looks like. ➤ Result: Low reliability—managers are likely to arrive at different judgments. ➤ Particularly vulnerable to distributional errors (Leniency, strictness, & central tendency)
INDIVIDUAL INCENTIVES
➤ Individual incentives (i.e. bonuses) are attached to fulfilling goals ➤ Two primary differences from merit pay: ➤ Continuously earned, and not added to base pay ➤ Performance is measured with output rather than supervisor ratings common in manufacturing jobs often need to be creative to come up with the goals for some jobs usually supplements a lower base salary ➤ Criticisms: ➤ Incentive plans make it difficult to forecast labor costs, especially if goals are too easy ➤ Most jobs have no physical output measure ➤ Setting goals is tricky ➤ What if goals change during the year? ➤ May create too much focus on goals at expense of other job tasks ➤ Results-based evaluation open to many forms of contamination ➤ Evaluate individual incentives based on the four theories: INSTRUMENTALITY Does it maximize instrumentality? GOALS Does it use goals to create line of sight and reduce agency costs? EQUITY Does it maximize equity perceptions? COOPERATION Does it foster cooperation? goals - yes best in terms of using specific and challenging goals
CHOOSING A JOB STRUCTURE
➤ Involves job evaluation—a method for matching a salary with a job ➤ Perform a job analysis ➤ Identify "compensable factors" ➤ Job characteristics (derived from job analysis) that the company values and chooses to pay for ➤ Examples: job complexity, required education, prior experience, etc... ➤ Rank jobs in terms of "compensable factors" The second step in create pay structure after pay level, is a job structure Essentially you want to form brackets based on jobs, which when we pair it with pay levels for each job = ranges of salaries for each level. Again, you can rely on KSAOs of job analysis... Example of job structure; here they picked three compensable factors and gave different jobs points on each (here out of 10) It seems a bit subjective and is difficult outside of your field. Usually when you are in a company it is not as hard to visualize how to rank order each job title. Assigning points like this can be difficult, but worthwhile to have a formal structure
CHOOSING A PAY LEVEL
➤ Involves three factors: Product Market Competition Labor Market Competition Market Pay Surveys (1st 2 are environmental factors)
➤ Unintended voluntary turnover
➤ Leaving because of physical or psychological health issues
➤ Intended voluntary turnover
➤ Leaving because of some better opportunity ➤ To reduce intended voluntary turnover, we have to increase organizational commitment ➤ A desire on the part of the employee to remain a member of the organization ➤ Two general forms: ➤ Affective commitment: an emotional attachment ➤ "I stay because I want to" ➤ Continuance commitment: costly consequences to leaving ➤ "I stay because I need to"
➤ Why worry about pay structure?
➤ Many firms are too big to make pay decisions based on individual merit ➤ Employees doing the same job should make around the same amount of money ➤ It influences Distributive Justice - the perceived fairness of decision outcomes Imagine how much time it would take to come up with a salary for each person based on their personal contributions Plus, think of the controversy it would cause if there were major discrepancies
GOAL SETTING THEORY
➤ Motivation is fostered when employees are given specific and challenging goals ➤ Rather than easy goals, abstract goals, or no goals at all ➤ Goals can be an invaluable tool for creating Line of Sight if goals are relevant - if the achievement of them benefits the employee and the organization This goes back to motivation; people are motivated when employees.... Why? Because few people know what "do your best" means DIAGRAM Established relationship between goal difficulty and performance When goals are easy there is no reason to work hard & performance is not maximized There is generally positive trend then, as goals get more difficult, performance is better However, once goals go from difficult to impossible (person is not physically capable), performance declines So, GOAL: is to set a goal that maximizes one's performance but doesn't cross the boundaries of his/her abilities
EXPECTANCY THEORY
➤ Motivation is fostered when the employee believes three things: ➤ The effort will result in performance EXPECTANCY ➤ Performance will result in outcomes INSTRUMENTALITY ➤ That those outcomes will be valuable VALENCE Sometimes, we refer to this as "VIE" theory — a useful acronym that may help you to remember the components. These are directly from OB; one area where application is clearly visible -DIAGRAM ➤---- Motivation is fostered when the employee believes three things: ➤ -----Expectancy (E —> P) ➤ Can be hindered by: ➤ Low self-confidence (or efficacy) ➤ Lack of necessary KSAOs ➤ Lack of necessary training ➤ Lack of necessary resources ➤ Lack of supportive leadership ➤ ----Instrumentality (P —>O) ➤ Can be hindered by: ➤ Poor methods for measuring performance ➤ Inadequate budget to provide outcomes, even when performance is high ➤ Use of policies that reward things besides performance, such as attendance or seniority ➤ Time delays in doling out rewards ➤--- Valence = anticipated value of outcome...! Pay ! Promotions ! Praise ! Better working conditions
EMPLOYEE RETENTION
➤ Now that we have paid all this money to recruit, select, train, evaluate, and compensate our good employees, we need to try to keep them from leaving ➤ Quote from manager: ➤ "If a $2,000 computer disappears from an employee's desk, I guarantee there will be a six-week investigation -- it will be a big deal. But if a $100,000 executive with all kinds of expertise and client relationships gets poached by a competitor, there is no investigation. ➤ The SAS Institute, routinely listed as one of Fortune's Top 100 Companies to work for, lists the cost of replacing a typical employee at $60,000 ➤ What explains that cost? ➤ How much money can be saved by increasing retention rates? ➤ Keeping employees requires the prevention of two types of turnover
PHYSICAL HEALTH
➤ Occupational Safety and Health Act ➤ Inspection and enforcement: ➤ The "General Duty Clause" ➤ Each employer has a general duty to furnish each employee a place of employment free from recognized hazards that cause or are likely to cause death or serious physical harm. ➤ Occupational Safety and Health Act ➤ Inspection and enforcement: ➤ Compliance officers make surprise visits ➤ Conduct a "walk around," interview employees, analyze records, etc. ➤ Concentrates on companies with 11+ employees ➤ Can result in fines of $1,000-$10,000 per incident, plus additional criminal punishment ----Research and training: National institute for occupational safety and health (NIOSH) and Department of Health Continuing study of potentially hazardous materials, procedures, and contexts Publish compliance guidelines
EMPLOYEE SEPARATION pt. 2
➤ Often occurs due to counterproductive behavior, like sexual harassment ➤ Sexual harassment became the subject of federal law in 1986, but was almost never discussed until 1991 In 1991 Clarence Thomas's supreme court confirmation hearings brought sexual harassment issues into the forefront (one of his former employees at EEOC alleged he sexual harassed her) Result? Tremendous increase in # of sexual harassment complaints filed with EEOC
DEVELOPING A PAY STRUCTURE
➤ Pay Structure: The structure of pay within the company 1. Choose a pay level ➤ Pay level: Average pay of jobs within the company ➤ Primary factor when making external comparisons in Equity Theory 2. Choose a job structure ➤ Job structure: Relative pay of different jobs within the company ➤ Primary factor when making internal comparisons in Equity Theory 3. Combine this information to create a general pay structure pay level: average pay at firm; compare to other firms job structure: your pay vs. other employees pay
➤ Why are compensation decisions so important?
➤ Powerful tool for furthering a company's strategic goals ➤ Primary way of motivating and retaining good employees ➤ Bad pay can hinder the effectiveness of other good HR programs ➤ One quarter of a company's revenue goes to pay (so you need to invest it wisely!)
NEW TRENDS IN PERFORMANCE MANAGEMENT
➤ Problem across all approaches: Miss the "hidden gems" ➤ New analytic tools and text software are being used to ID central players in organizations ➤ Dock the slackers? Do you agree? ➤ How do you measure "motivation" or "effort?" ➤ Peer reviews? ➤ Anonymous feedback from coworkers?
PERFORMANCE MANAGEMENT
➤ Process by which managers ensure that employees' activities are congruent with organizational goals. Has three broad components: 1. Defining Performance 2. Measuring Performance 3. Delivering Performance Feedback
Equity Theory example
➤ Professional Athlete Equity: ➤ Elvis Andrus (shortstop for Texas Rangers baseball team) made $15.3 million last year ➤ A beer vendor at the Rangers stadium made ~$25,000 last year ➤ Does Andrus experience over-reward inequity? Not, because he wouldn't consider the beer vendor a comparison other
Equity Theory example 2
➤ Professional Athlete Equity: ➤ Elvis Andrus (shortstop for Texas Rangers) made $15.3 million last year ➤ Gleyber Torres (shortstop for NY Yankees) made $675,500 last year (more than 20x's less than Andrus) ➤ Does Torres experience under-reward inequity? ➤ Why or why not? Yes, Andrus is a comparison other; Andrus' inputs are more, but outcomes less
APPLYING THE THEORIES
➤ Programs for recognizing contributions ➤ Merit pay ➤ Individual incentives ➤ Gainsharing ➤ Profit sharing and stock options ➤ For each plan, ask: INSTRUMENTALITY Does it maximize instrumentality? GOALS Does it use goals to create line of sight and reduce agency costs? EQUITY Does it maximize equity perceptions? COOPERATION Does it foster cooperation?
RECOGNIZING CONTRIBUTIONS (DIAGRAM)
➤ Recap of the plans: ➤ Merit pay ➤ Individual incentives ➤ Profit sharing ➤ Gainsharing ➤ Stock Options ➤ Which do you think would be most effective? Why? ➤ Can you use more than one? Yes!
DELIVERING PERFORMANCE FEEDBACK
➤ Regardless of the approach used, the result of the performance evaluation must be shared with the employee ➤ Two goals are key: ➤ Acceptance of evaluation ➤ Behavioral adjustment after evaluation - If done well, it can be really motivating! - If done poorly, it can be very demoralizing ➤ Perceived fairness of feedback delivery is enhanced by: .... ➤ Giving employees a chance to participate using a selfevaluation ➤ Delivering feedback respectfully ➤ Explaining the reasons behind the evaluation completely and honestly ➤ Making the experience consistent across persons and across time
EMPLOYEE SEPARATION
➤ Retention focuses on keeping GOOD employees around (avoiding voluntary turnover) ➤ But, what if we do not want to keep certain employees around? ➤ Separation (or involuntary turnover): Turnover initiated by the organization ➤ Firing or terminating employees for poor task performance or counterproductive behaviors When you have good people, you don't want them to leave But what about when you WANT to get rid of somebody? this is the topic of SEPARATION Separation is essentially firing employees when people fail to meet performance requirements or violate company policies ➤ Most employees do not work under an explicit contract or collective bargaining agreement. These employees can be fired for: ➤ "Just cause" ➤ "No cause" ➤ "Bad cause" ➤ Historically, the absence of a contract means that either employee or employer could end the relationship for any of these causes ➤ "Employment-at-will doctrine" ----But this can be a tricky subject. Need to invoke a discipline program that can lead to employee discharge. Legal aspects to this decision can have important repercussions for the organization. Historically, the absence of a contract means that either employee or employer could end relationship for: just, no, bad Over time, this has been called the "employment-at-will doctrine"
BARS VS. BOS
➤ So, what's the difference? ➤ BARS discards many examples (i.e., critical incidents) to create rating scales ➤ BOS uses many of the examples to define all behaviors necessary for effective performance ➤ So, BOS may use 15 behaviors to define levels of performance ➤ BOS also rates the frequency by which employees engage in the given behaviors BARS: If you have 7 rating points, you can really only have 7 critical incidents as anchors.
ATTRIBUTE APPROACHES
➤ Start off by using job analysis to identify all critical KSAOs ➤ Then design some sort of questionnaire to assesses those KSAOs ➤ Two popular designs: ➤ Graphic rating scale ➤ Mixed standard scale
BEHAVIORAL APPROACHES
➤ Start off by using job analysis to identify all critical tasks ➤ Then design some sort of questionnaire to assess the behaviors critical to those tasks ➤ Three popular approaches: ➤ Critical-incident method ➤ Behaviorally Anchored Rating Scales (BARS) ➤ Behavioral Observation Scale (BOS) attempts to define behaviors an employee must exhibit to be effective in the job
Attribute: MIXED STANDARD SCALE
➤ Take list of KSAOs and: ➤ Create statements for high, medium, and low levels of them ➤ Mix up all of the statements ➤ Rate employees according to whether they are better, worse, or the same as the statement ---developed to get around some of the problems with graphic rating scales
Behavioral: BOS (BEHAVIORAL OBSERVATION SCALE)
➤ Take list of behaviors and: ➤ Compile a list of "critical incidents" exemplifying good and bad behaviors ➤ Use those critical incidents as things to be rated using numerical scales ➤ Average the scores across all behaviors to get an overall performance measures Behavioral observation scale is a variation of BARS instead of using them as anchors on a scale, rank them from 1-5 ➤ Major drawback: ➤ Requires a lot of information ➤ May have 80 or more behaviors ➤ Requires manager to remember how often an employee engaged in those behaviors during the rating period ➤ Not just for one employee! Sometimes, managers have to rate as many as ten or fifteen ➤ Major advantage: ➤ Even with the difficulties, managers tend to prefer BOS due to their ease of use, as opposed to BARS and graphic rating scales.
SPECIFICITY
➤ The degree to which a performance measure gives specific guidelines to employees about what is expected of them and how they can meet these expectations. ➤ Two main components: ➤ Behavioral expectations ➤ Behaviors that need to be improved
STRATEGIC CONGRUENCE
➤ The extent to which the performance management system elicits job performance that is consistent with the organization's strategy, goals, and culture. ➤ Does the measure reinforce the kinds of behaviors that support company goals? ➤ Examples: ➤ "We want to be known for customer service" ➤ So use customer service to evaluate people! ➤ "We want to be known for innovation" ➤ So use innovation to evaluate people!
INDIVIDUAL PAY
➤ Theories of compensation ➤ Expectancy Theory ➤ Agency Theory ➤ Goal Setting Theory ➤ Hopefully you have heard these all in OB! Now, how do they apply to individual pay? ➤ Individual pay is an opportunity for managers to recognize contributions of employees ➤ Difference in performance, seniority, or skills are used as a basis for pay differences within grades ➤ These differences are the primary drivers of employee motivation and task performance ➤ Several theories guide the development of effective strategies for individual compensation ➤ Expectancy Theory ➤ Agency Theory ➤ Goal Setting Theory These differences—this is the "wiggle-room" for managers
DEFINING PERFORMANCE
➤ We rely on the list of tasks and KSAOs that result from the job analysis to define what "good performance" represents ➤ Recap on Job Analysis ➤ Step 1: Identify key job dimensions ➤ Step 2: Identify tasks within most important dimensions ➤ Step 3: Identify KSAOs for most important tasks Also, task performance, citizenship behavior, and counterproductive behaviors
Behavioral: CRITICAL-INCIDENT METHOD
➤ What does this critical incident do? ➤ Provides evidence of... ➤ Employee's knowledge of refrigerator repair ➤ Employee's concern for efficiency and customer satisfaction ➤ In general, critical incidents give employees feedback about what they do well and what they do poorly ➤ Managers should keep track of critical incidents to use in providing feedback ➤ However, keeping track of critical incidents requires significant effort, so managers may resist this approach ➤ Example of a critical incident: A customer called in about a refrigerator that was not cooling and was making a clicking noise every few minutes. The technician pre-diagnosed the cause of the problem and checked his truck for the necessary parts. When he found he did not have them, he checked the parts out from inventory so that the customer's refrigerator would be repaired on his first visit and the customer would be satisfied promptly.
ORGANIZATIONAL COMMITMENT
➤ Which type do these items measure? I would be happy to spend the rest of my career in this organization I enjoy discussing my organization with people outside it I really feel as if this organization's problems are my own I feel like "part of the family" at my organization I feel "emotionally attached" to this organization ****you would feel sad for leaving....affective It would be hard for me to leave my organization right now, even if I wanted to Too much of my life would be disrupted if I decided to leave my organization right now Right now, staying with my organization is a matter of necessity as much as desire It would be costly for me to leave my organization in the near future ***you would feel anxious, nervous, scared...continuance
RESULTS APPROACH
➤ Who cares how good employees' KSAOs and behaviors are if they are not delivering "bottom-line" results? ➤ Very straightforward in jobs where objective performance criteria are available, such as productivity, quality, efficiency, or customer service ratings ➤ Such criteria are unavailable in most jobs, particularly white collar jobs ➤ In these cases, objective data are replaced by data on goal achievement focuses on managing the objective, measurable results of a job or work group
STOCK OPTION PLANS
➤ With Stock Options, employees are given the option to buy stock at a locked-in price ➤ The higher the company's stock prices rises, the more valuable the options become ➤ Once experienced, the employee becomes a part owner in the firm. The agent is now a principal ➤ Criticisms: ➤ The criticisms and evaluation of these plans are identical to profit sharing Evaluate using goals and cooperation