HUMR 427Exam 3

How can we make performance appraisals better?

Apply Total Quality Management principles Recognize that part of performance is influenced more by the work environment and system than by employee behaviors Identify strategies for understanding and measuring job performance better, which will help us reduce the number and types of rating errors

Employer factor influencing choice of benefit package: Relationship to total costs

Could the money be used for better things? Could we put the money into some other compensation component and achieve better results?

Workers compensation

Covers injuries and diseases that arise out of, and while in the course of, employment; even if it is their fault for the accident Benefits are given for; - Medical care needed to treat the job injury or illness - Temporary disability benefits to the employee to help replace lost wages - Permanent disability payments to the employee to compensate for permanent effects of the injury - Survivor death benefits - Rehabilitation and training in most states, for those unable to return to their prior career Workers comp. is covered by state, not federal laws

Employee benefits growth resulting from: Employer Impetus

Due to pragmatic concerns about employee satisfaction, through employers own initiative, they created many benefits we have today to improve performance and increases job security for worker retirement years. Rest Breaks, saving and profit sharing plans (Procter & Gamble's profit sharing plan) These benefits were created out of faith, but the costs were real. Creating a costly entitlement of American workforces.

Employee benefits growth resulting from: Unions

Due to the climate created by the wage and price controls, unions flexed their muscles they got from the Wagner Act of 1935. They freed unions to negotiate over employee benefits. Most notable: work for autoworkers and steelworkers. Gave them: Patten pension plans, supplementary unemployment compensation, extended vacation plans, and guaranteed annual wage plans

Value of Employee Benefits

Employees take their benefits for granted Medical consistently ranks atop of the list Employees would rather pay more for their benefits if they could choose which ones they package together

Family and medical leave act (FMLA)

Made in 1993, applies to all employers having 50 or more employees and entitles all eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons

Pension Benefit Guaranty Corporation (PBGC)

Set up by ERISA to insure payment of benefits in the event that a private-sector defined benefit pension plan terminates with insufficient funds to pay the benefits.

Rating employee methods

Standard rating scale Behaviorally Anchored Ratings Scales (BARS) Management by Objectives (MBO) Essay format * BOS

Probationary periods

Excluding new employees from benefit coverage until some term of employment (three months) is completed

Dual coverage

In families where both spouses work there is frequently coverage of specific claims from each employer's benefit package. Employers cut costs by specifying payment limitations under such conditions

5 dimensions that are used for evaluating performance appraisal formats?

Employee development potential (amount of feedback about performance that the format offers) Administrative ease Personal research potential Cost Validity

Employer factors influencing choice of benefit package

Relationship to total costs Costs relative to benefits Competitor offerings Role of benefits in: attraction, retention, motivation Legal requirements

Performance appraisal and the law - 10 guidelines

Content of rating estimate should be based on a good job analysis Performance dimensions and standards should be communicated to the employees Employees should be rated on specific dimensions of performance Performance dimensions and scale degrees should be defined in behaviorally terms Rating system should be empirically validated When possible, multiple raters should be used Raters should be trained in use of the appraisal instrument Documentation of ratings should be provided Raters should feedback the results of the appraisals to the employees Formal appeal process should be established *** If you have in house appeal, you can solve quickly *** Discrimination claim, won't get you tossed out of the court room

Defined contribution plans

Employers establish the limits of their responsibility for employee benefits in terms of a dollar contribution maximum

Defined benefit plans

Employers establish the limits of their responsibility for employee benefits in terms of a specific benefit and the options included. As the cost of these options rises in the future years, the employers is obligated to provide the benefit as negotiated, despite its increased cost

Employee factors influencing choice of benefit package

Equity: fairness historically and in relationship to what others receive Personal needs as linked to: age, sex, marital status, number of dependents

Unemployment compensation: Controlling unemployment taxes

Every unemployed worker's unemployment benefits are "Charged" against the firm or firms most recently employing that currently unemployed worker. The more money paid out on behalf of the firm, the higher is the unemployment insurance rate for that firm Efforts to control these costs begin with a well-designed human resource planning system. Followed by a benefit administrator attempting to audit pre-layoff behavior (lateness, gross misconduct, absenteeism, illness leaves of abscesses). Then follow that with the government help by stepping up sanctions against fraudulent claims

Performance-dimension training

Exposes supervisors to the performance dimensions to be used in rating (quality of work, job knowledge) thus making sure everyone is on the same page

Pension Protection Act of 2006

Federal law that imposes additional funding and disclosure requirements on employers who have employee pension plans. Allows employees who bought employer stock through deferrals or after-tax contributions to sell off the stock (must be publicly traded company)

Unemployment compensation: Financing

Financed exclusively through employers that pay federal and state unemployment insurance tax o Federal tax amounts to 6.2% of the first $7,000 earned by each worker o Tax imposed after $7,000 depends on experience rating --> Lower percentages are charged to employers who have terminated fewer employees --> The tax rate mat fall to almost 0 in some states for employers that have had no recent experience (hence the term, experience rating) with downsizing and may rise to 10% for organizations with large number of layoffs

Claims processing

First must find out if the claim has actually occurred If the incident did occur, the second step is to decide if the employee eligible for the benefit If the payment is not denied at this stage, the claims processor calculates the payment level

Medical and medial-related benefit payments (employers' share only)

Hospital, surgical, medical, and major medical insurance premiums (net) Retiree hospital, surgical, medical, and major medical insurance premiums (net) Short-term disability, sickness, or accident insurance (company plan or insured plan) Long-term disability or wage continuation (insured, self-administered, or trust) Dental insurance premiums Other (vison-care, physical and mental fitness benefits for former employees)

Cash balance plans

Hybrid of DB and DC pension plans. Employees have a hypothetical account (like a 401K) into which is deposited what is typically a percentage of annual compensation. The dollar amount grows both from contributions by the employer and from some predetermined interest rate (often set equal to the rate given on 30-year treasury certificates)

Cost containment

Increasingly, employers are auditing their benefit options for cost containment opportunities o Probationary periods o Benefit limitations o Copay o Administrative cost containment o Deny service for pre-existing conditions o Negotiate lower fees by providers o Develop programs that encourage wellness o Outsource benefits and administration o Self-insure o Provide accommodations for employees to return to work after illness or disability The biggest cost containment currently is outsourcing by hiring vendors to administer their benefits program. Citing greater centralization, consistency, and control of costs and benefits for doing this.

Errors in actual evaluation

It all depends on what the rating is for If used for merit increases, ratings tend to be less accurate

Benefit limitations

It is not uncommon to limit disability income payments to some maximum percentage of income and to limit medical/dental coverage for specific procedures to a certain fixed amount

Read pages 407-411

Just do it

Employer factor influencing choice of benefit package: Legal requirements

Legal shit on Page 454, exhibit 12.6

Type of benefit (7 of them)

Legally required payments (employers' share only) Retirement and savings plan payments (employers' share only) Life insurance and death benefits (employers' share only) Medical and medial-related benefit payments (employers' share only) Paid rest periods, coffee breaks, lunch periods, wash-up time, travel time, clothes-change time, get ready time, etc. Payments for time not worked Misc. benefit payments

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Made in 1985 by congress to provide current and former employees and their spouses and dependents with a temporary extension of group health insurance when coverage is lost due to qualifying events (layoffs). All employers with 20 or more employees must comply with COBRA. An employer may charge individuals 102% of the premium for coverage (100% premium plus 2% admin fee), which can extend up to 36 months (standard is 18), depending on category of the qualifying event

Health insurance portability and accountability act (HIPAA)

Made in 1996, designed to: Lessen an employer's ability to deny coverage for a preexisting condition and prohibit discrimination on the basis of health-related status Most significant element of HIPAA began in 2002, when stringent new privacy provisions added considerable compliance problems for both the HR people charged with enforcement and the information technology people delegated the task of building secure health information systems.

Performance Metrics

Measures of various business activities (or outcomes) that indicate whether an organization is meeting its operational or strategic goals. Examples include market share, customer profitability, revenues, percentage increase in sales over a period, service-call response time, number of items shipped on time.

Communicating about the benefits program

Most frequent way is through the employee benefit handbook, should be accompanied by repetition methods like newsletters, emails, direct mailings, voice mail blasts, and social media. An effective communications package should match the message with the appropriate medium (through internet?) Maybe use intranet? Where employees get 24/7 access to benefit information Less than 5% of employees understand benefits, which creates a perceived unfairness of their packages

Which appraisal format is best for economic?

Ranking inexpensive source of performance data. Easy to develop and use in small organizations and in small units

Errors in observation (attention)

Raters are influenced by general appearance characteristics of ratees Males are rated higher than females Race also matters in layoff decisions and performance ratings Employees who get improved ratings are looked on with more motivation than their counterparts who have more variation in their ratings

Vesting

Refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into the pension plan states that the employer's contributions must vest at least as quickly as one of the following two formulas o Full vesting after three years o 20% after two years and 20% each year thereafter, resulting in full vesting after 6 years o Page 484

Qualified deferred compensation plan

Retirement benefit offered to all employees in the organization; provides tax advantages and is protected under Employee Retirement Income Security Act. To be exempt from current taxation, specific requirements must be met. To qualify, an employer cannot freely choose who will participate in the plan. Hence the name, "qualified." This requirement eliminated the common practice of building tax-friendly, pension packages for executives and other highly compensated employees. The major advantage of this plan is, employers receive an income tax deduction for contributions made to the plan even though employees may not yet have received any benefits. The downside is the ability to attract high talent executives.

paired comparison

Simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people. Each individual is compared separately with all others in the work group. The person who wins the most paired comparisons is ranked top of the group, and so on. However, the number of paired comparisons becomes unmanageable when the work group goes above 10-15 employees

What is making general health care costs rise?

Technology costs, explosion of lawsuits, increased number of elderly, and a system that does not encourage cost savings

Employer factor influencing choice of benefit package: Costs relative to benefits

To control spiraling benefit costs, administrators should adopt a broader, cost-centered approach. Looking into short term and long term costs.

Pay for performance programs evolve along multiple dimensions. What two questions arise when using this?

Measure (metrics) results-oriented or behaviorally oriented? Does the measure focus on individual employees or aggregation up to team or even total organization?

Two criteria for qualifying as a good source of appraisal

Rater should be aware of objectives to the job Frequently observe ratee

Ranking Formats

Requires that the rater compare employees against each other to determine the relative ordering of the group on some performance measure (usually overall performance) requires comparing employees against each other to determine the relative ordering of the group on some performance measure

Ways to improve rater training?

Straightforward lecturing to ratees about ways to improve the quality of their ratings Individualized or small-group discussion sections are more effective in conveying proper rating procedures Combine this with practice and feedback Longer training programs (more than two hours) > short training programs Performance-dimension training and performance-standard training are better than rater error training The greatest success has come from efforts in trying to reduce halo effects and improve accuracy Leniency errors are the hardest form of error to eliminate

Straight Ranking Appraisal

A performance-evaluation method in which a superior lists the subordinates in order, from best to worst, usually on the basis of overall performance.

POS (Point of Service)

A plan, combining features of an HMO and a PPO, in which members may choose from providers in a primary or secondary network.

William Glueck study

A study on independent variables - satisfaction of benefits was related to the frequency of comms. But not with how much they were paid. Increase quantity and quality of communication of benefits to help increase value of benefits.

Which two benefits aid retention rates most?

• Retirement plans / pensions • Health and medical coverage

What 5 views are used in conjunction with 360 degree feedback?

• Supervisor • Peer • Self • Customer • Subordinate Even with all the praises, this type of feedback is still only used for evaluation of top-level personnel and for employee development rather than for appraisal or pay decisions.

Ranking employee methods

Straight ranking Alternation ranking Paired comparison

Coinsurance

The employee pays a proportion of insurance premiums

Workers comp vary by state?

Yes

3f unctions an employee benefit manager should spend administrative time doing

Communicating about the benefits program Claims processing Cost containment

4 perspectives of balanced scorecard

Customer satisfaction Employee internal growth and commitment Operational efficiency in internal processes Financial measures (bottom line) financial, customer, internal business processes, learning and growth

Key issues in Administrative

*4 mains issues arise* 1. Who should be protected or benefited? - Obviously employees BUT, these questions must be answered. 7 sub questions to this on page 448 The answers to these 7 sub questions depend on policy decisions regarding adequacy, competition, and cost effectiveness 2. How much choice should employees have among an array of benefits? - Cafeteria style or flexible benefit plans are popular 3. How should benefits be financed? - Noncontributory (employer pays total cost) - Contributory (costs are shared between the employer and employee) - Employee financed (Employee pays total costs for some benefits, by law the org. must bear the cost for certain benefits) 4. Are your benefits legally defensibly? - Conduct audits regularly

3 ways to control health care costs

1. Motivate employees to change their demand 2. Switch to alternative health care delivery systems (He likes it more) 3. Implement preventive health and wellness programs

Strategy 3: Understand how raters process information. State the process a rater goes through.

1. The rater observes the behavior of a ratee 2. The rater encodes this behavior as part of a total picture of the ratee (the rater forms stereotypes) 3. The rater stores this information in memory, which is subject to both short and long-term decay. Raters forget things. 4. When it comes time to evaluate a ratee, the rater reviews the performance dimensions and retrieves stores observations/impressions to determine their relevance to the performance dimensions 5. The information is reconsidered and integrated with other available information as the rater decides on the final ratings Unintentionally, this process can produce errors at any of the above steps.

1. Does attraction impact benefits? 2. Motivation/performance? 3. Satisfaction? 4. retention?

1. Yes 2. No (Ashfall and child) 3. Maybe 4. Some benefits do

Formula used in NY to calculate benefits

2/3 * average weekly wage * % of disability = weekly benefit

Employee benefits growth resulting from: Government Impetus

3 employee benefits are mandated by either the state or federal government • Workers compensation (STATE) • Unemployment insurance (FEDERAL) • Social security (FEDERAL) In addition, most employee benefits are affected by such laws as; • Employee Retirement Income Security Act (ERISA) Affects pension administration and various sections of the internal revenue code • Patient protection and affordable care act signed by Obama in March 2010

Benefits under social security

4 categories: 1. Old age or disability benefits 2. Benefits for dependents of retired or disabled workers 3. Benefits for surviving family members of a deceased worker 4. Lump-sum death payments To qualify, a worker must work in covered employment and earn a specified amount of money (about $1250 today) for each quarter-year of coverage. 40 quarters of coverage will insure any worker for life.

Unemployment compensation: Duration

53 weeks (Emergency Unemployment Compensation program (EUC08)) --> (Now expired) Currently, 26 weeks. But since our unemployment is under 6% in many states, people want it down to 20 weeks

Supervisors as raters

80% of input for performance ratings come from the supervisor. Supervisors know the job roles assigned and have prior exp. in ratings Supervisors are prone to the halo affect and leniency errors. Have an idea about expected level of performance

Unemployment compensation: Coverage

97% of workforce covered, all who meet these two requirements 1. You must meet the state requirements for wages earned or time worked during an established (one year) period of time referred to as a "base period." (Usually the first 4 out of the last 5 completed calendar quarters prior to this time that your claim is filed) 2. You must be determined to be unemployed through no fault of your own (determined under state law), and meet other eligibility requirements of state law

Employee Stock Ownership (ESOP)

A company makes a tax-deductible contribution of stock shares or cash to a trust. The trust then allocates company stock (or stock bought with cash contributions) to participating employee accounts. The amount allocated is based off employee earnings. When an ESOP is used as a pension vehicle, not an incentive program, the employees receive cash at retirement based upon the stock value at that time. A huge downside to this is that employees are not willing to bet a big enough portion of future retirement income on just one investment source

Benefits Determination Process What is a first class benefit system?

A first-class benefit system should include some mix of; Education reimbursement On-site child care services Car cleaning Financial counseling Concierge services Retirement benefits *** Employee benefits have been growing at an alarming rate, even though we don't know for sure the payoff is good and that employee's even want these benefits. We need to slow the rate of which benefits are growing and they can no longer be called "fringe benefits"

Evaluating performance appraisals formats

A good appraisal format scores well on five dimensions (organizations place different weights to all 5 of these)

Individual Retirement Accounts (IRA's)

A tax-favored retirement savings plan that individuals can establish themselves. Do not require employers to set them up. Even people not in the workforce can set one up. Used mostly to store wealth accumulated in other retirement vehicles, rather than a new way to build wealth.

Balanced Scorecard Approach

A top-down management system that organizations can use to clarify their vision and strategy and transform them into action A process for translating a company's strategy into measurable objectives and plans organized into four perspectives. A way to look at what contributes value in an organization

Key issues in benefit planning and designing

Adding another benefit to attract employees is a NO! There is no right answer in creating the benefit package, it all depends on benefit adequacy and cost effectiveness 59% of employers are shifting increased benefit costs to employees through higher deductibles and copays

Criterion contamination

Allowing non-performance factors to affect performance scores

Short-Term Disability (STD)

An STD policy provides benefits over a given period, generally from 6 months to 2 years.

Salary continuation plan

An arrangement whereby an income, usually related to an employee's salary, is continued upon employee's retirement, death, or disability. Salary continuation plans usually replace 100 percent of salary at least in the short term.

Administrating the benefit program

An employee benefit manager should spend administrative time doing 3 functions

Deductibles

An employee claim for insurance coverage is preceded by the requirement that the first $x be paid by claimant

Social security

Applies if you die, retire, or become disabled Provides coverage for; (Exhibit 13.5 on page 476) • Retirement, survival, disability insurance • Hospital and medical insurance for the aged, disabled, and those with endstage renal disease • Prescription drug benefit extra help with Medicare prescription drug costs supplemental security income • Special veterans benefits

Central tendency error

Avoiding extremes in ratings across employees

Which appraisal format is best for administrative?

BARS Good for making admin decisions and useful for legal defense because of job relevancy

Which appraisal format is best for personnel research?

BARS Validation studies can be completed and measurement problems on BARs less than many others

Which appraisal format is the best overall?

BOS & then BARS

Portability

Becomes an issue for employees moving to new organizations. ERISA does not require mandatory portability. On a voluntary basis, an employer may agree to let an employee's pension benefits transfer to a new employer. But for this to happen, pension rights must be vested.

Employee benefits growth resulting from: Wage and Price Controls

Caused by WW2 and the Korean war The compliance agency charged with enforcing these controls were lenient in permitting reasonable increases in benefits. With strict limitations on the size of wage increases, both unions and employers sought new and improved benefits to satisfy worker demands This was the catalyst for growth in pensions, health-care coverage, time off, and the broad spectrum of benefits virtually unthinkable before 1950

Employer factor influencing choice of benefit package: Competitor offerings

Conduct a benefit survey or buy benefit data from Chamber of Commerce or employee benefits research institute. This is to figure out the absolute level of benefit payments relative to important product and labor market competitors

Employee factors influencing choice of benefit package: Personal needs

Conduct employee questionnaire on various benefits about importance and improvement ideas Flexible benefit plan (cafeteria plan)

Ashall and child

Conducted a study that found no relationship between benefits and motivation/performance

Leniency error

Consistently rating someone higher than is deserved

CREATE SOME QUESTIONS FOR PAGE 396

DUH

Retirement and savings plan payments (employers' share only)

Defined benefit pension plan contributions (401(k) type) Defined contribution plan payments Profit sharing Stock bonus and employee stock ownership plans (ESOPs) Pension plan premiums (net) under insurance and annuity contracts (insured and trusted) Administrative and other costs

Defined contribution plan types

Defined contribution plans are more popular in small and large companies • 401K • Employee Stock Ownership (ESOP) • Profit-Sharing plan

Unemployment compensation

Depends on state Social security act of 1935

First impression error

Developing a negative or positive opinion of an employee early in the review and letting it influence performance perceptions

Subordinate as rater

Difficult to attain candid reviews and also in counseling the ratee on how to deal with the feedback Subordinates prefer to give their ratings anonymously, if not, they will give artificially inflated ratings Not very valid or accurate

Employee retirement income security act (ERISA) 1974

Does not require that employers offer a pension plan but if the company does, ERISA controls rigidly with the following provisions that are designed to achieve two goals 1. Protect the interest of around 100 million active participants 2. Stimulate growth of such plans The actual success of ERISA in achieving these goals have been mixed at best. Excessive costs and paperwork pissed off employers.

Cost criterion

Does the evaluation form initially take a long time to be developed? Is it time consuming for supervisors to use the form in rating their employees? Is it expensive to use? All of these factors increase the format cost

Personnel research criterion

Does the instrument lend itself well to validating employment tests? Can applicants predicted to perform well be monitored through performance evaluation? Typically need to be quantitative to permit the statistical tests

Employee development criterion

Does the method communicate goals and objectives of the organization? Is feedback to employees a natural outgrowth of the evaluation format, so that the development needs are identified and can be attended to regularly? Critical feedback that attack the employee rather than the task has negative affects. Employees respond better to feedback that tells them what went wrong on the task and how to improve

Horn error

Downgrading an employee across all performance dimensions based off one unsatisfactory performance

Why are performance appraisals sometimes considered bad?

Edward Deming said performance appraisals are not bad because of the individual but because of the work situation. The work situation is the major determinant of performance. Variation in performance arises from employees not having the right information, technology, or control to adequately perform their job. Individual work standards and performance ratings rob employees of pride and self-esteem.

Advantages of Flexible benefit programs

Employee choose packages that best satisfy their unique needs Flexible benefits help firms meet the changing needs of a changing workforce Flexible plans make introduction of new benefits less costly. Any new option is added merely as one among a wide variety of element from which to choose Cost containment: Org. sets dollar max; employee chooses within that constraint

Customer-driven health care

Employee pays all health care costs up to some pre-determined rate (3-6K). After that amount the employee pays a rate of 10-35% of any additional medical services (coinsurance). Each employer sets some out of pocket maximum, typically in the range of (6-12K - Single/family) Then after that the employer pays Can give up some salary for more benefits

HMO (Health Maintenance Organization)

Health insurance that requires a PCP and wants you to use only in-network doctors A managed care organization that provides comprehensive medical services for a predetermined annual fee per enrollee.

Self as rater

More lenient and more unreliable than ratings from other sources. You can use them for development rather than administrative purposes, though. You also could ask them to rate themselves first before they go into formal appraisals with the boss, this could create more realistic assessments. (combine them with supervisor appraisal) Good for people who work in isolation

Behaviorally Anchored Ratings Scales (BARS)

Most common Uses behavior as anchor in hopes to make evaluations less subjective by having a concrete definition Overall performance is calculated on a weighted basis from what is most importance to the organization "Exceeds standards, meets standards, does not meet standards"

Customer as rater

Much of the customer rating movement is directed at performance of business units

How can objective data form in results?

Objective data can be deficient (criterion deficient) & quantifiable data does not mean it is an objective measure of performance

Benefit: Legally required payments (employers' share only)

Old age, survivors, disability, and health insurance (employer FICA taxes) & railroad retirement tax Unemployment compensation Workers' compensation (including estimated cost of self-insured) State sickness benefit insurance

Unemployment compensation: Weekly benefit amount

Page 479

Employer factor influencing choice of benefit package: Role of benefits in: attraction, retention, motivation

Pensions and medical coverage have a significant impact on turnover No strong data on employee increased productivity from benefits More research in work/life balance benefits might show increased productivity and involvement

Performance-Standard training

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

Errors in storage and recall

Raters store information in the form of traits, recalling information in the form of trait categories Memory decay is common in raters - the longer the delay, the less accurate the ratings To prevent this, raters should keep diaries of their thoughts

Severity error

Rating employees consistently lower than is deserved

Rating Formats

Rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees. Each performance standard is measured on a scale whereby appraisers can check the point that best represents the employee's performance Uses descriptors: adjectives, behaviors, or outcomes

Alternation Ranking Method

Recognizes that raters are better at ranking people at extreme ends of the distribution. Working at two extremes permits a rater to get more practice prior to making the harder distinctions in the vast middle ground. You take the worst employee, then best employee, and so on. Ranking employees from best to worst on a particular trait, choosing highest, then lowest, until all are ranked.

Essay format

Supervisors answer open ended questions in essay form, describing employee performance. Can use any of the descriptors as anchors.

Rater-error training

The goal is to reduce psychometric errors (common errors in appraisal performance) by familiarizing raters with their existence

Recency error

The opposite of first impression error, where the rater allows something at the end of the review judge the performance

Peers as raters

They work more closely with the ratee and probably have an undistorted perspective of typical performance, esp. in group assignments (as opposed to when what a supervisor sees taking a stroll through) Peers may have little to no experience in conducting appraisals, leading to mixed evidence about the reliability of the rating source. Plus, in a situation where teamwork is promoted, placing the burden of rating peers on co-workers can create group tensions. Some claim this is best source of all and most valid Take a number of tallies and take average score

Strategy 1: Improve appraisal formats. How can we achieve this?

Two formats: Ranking and Rating (Rating is more popular)

Commonalities in State Worker's comp

Type of law o Compulsory (47 states) o Elective (3 states) Self-insurance coverage o Permitted in 48 states o All industrial employment o Farm labor, domestic servants, and casual employees usually exempted o Compulsory for all of most public sector employees (47 states) Occupational disease o Coverage for all diseases arising out of and in the course of employment o No compensation for "ordinary diseases of life"

360-degree feedback

Used to lessen the impact of one reviewer and increase participation in the process Super flexible, leading to increases in employee understanding, self-awareness, promoting better communication between supervisors and staff, and promoting better performance and results. Employees love it. System is generally used in conjunction with 5 points of view:

Standard rating scale

Uses adjectives as anchor Usually has 5 choices: Well above average, above average, average, below average, well below average Overall performance is calculated on a weighted basis from what is most importance to the organization

Management by Objectives (MBO)

Uses objectives as anchor Both a planning and appraisal tool As a first step, organization objectives are identified from the strategic plan of the company Each lower level in the hierarchy is charged with identifying work objectives that will support attainment of organizational goals Emphasis is on outcome achieved by "Employees" At the beginning of the performance review period, the employee and supervisor discuss performance objectives. Then months later they meet to record results formally where the results are compared against the objectives stated and a performance rating is given based on how well the objectives were met A review of firms using MBO shows generally positive improvements in performance reviews for both, individuals and organization. MBO provides direction to work units, improves the planning process, and increases superior/subordinate communication. Yet, MBO requires more paperwork and creates more performance pressure and stress. "total number of responses to percent of authorities in agreement"

How much retirement income to provide?

What level of retirement compensation would a company like to set as a target, expressed in relation to pre-retirement earnings? Should social security payments be factored in when considering the level of income an employee should have during retirement? Page 485

Do employers and employees share costs of social security?

Yes

If more than 25 employees, do employers need to have a HMO?

Yes

Does the balanced scorecard approach improve the bottom line and rating accuracy?

Yes, implementation of this approach can improve bottom line and rating accuracy

Are performance appraisals subjective?

Yes, performance appraisals are subjective. A good leader will convince their employee's that their pay is linked to individual performance

Second injury funds are

a method by which employers manage the risks associated with the hiring of "previously injured" potential employees. If someone is hired with an unknown heart condition, has a heart attack and falls to break their arm on job. Medical treatments wont have to be paid with workers comp.

Point of Service Plan (POS)

a network of selected contracted, participating providers; also called an HMO-PPO hybrid or open-ended HMO

profit-sharing plan

an organization-wide program that distributes compensation based on some established formula designed around a company's profitability Can only be considered a contribution pension plan if the distribution of profits is delayed until retirement.

contingent workers

employees that include part-time workers, temporary workers, seasonal workers, independent contractors, interns, and co-op students 50% benefits of that in full-time

Long-Term Disability Insurance

insurance that pays a percentage of a disabled employee's salary after an initial period and potentially for the rest of the employee's life

Validity criterion

is the operational definition of the criterion appropriate? -e.g., using freshman GPA as the operational definition of "success in college"; what about using graduation or something else? By far the most research on formats in recent years has been focused on reducing error and improving accuracy. Bars is not supported by enough research and no answer has yet been introduced to this question.

401K

named for the section of the internal revenue code describing the requirements, is a savings plan in which employees are allowed to defer pretax income employers usually match employee savings at a rate of 50 cents on the dollar

Strategy 2: Select the right raters How can we do this?

o 360 degree feedback

Two ways to increase the value of benefits

o Cafeteria plan o Better benefits communication practices

Top 4 rewards that contribute to employee satisfaction?

o Compensation o Benefits o Job security o Work/life balance

Common errors in appraising performance

o Criterion contamination o Halo error o Horn error o First impression error o Recency error o Leniency error o Severity error o Central tendency error o Clone error o Spillover error

Basic primer of cost containment technology

o Deductibles o Coinsurance o Benefit cutbacks o Defined contribution plans o Defined benefit plans o Dual coverage o Benefit ceiling

Retirement and savings plan payments

o Defined benefit plans (DYING) o Defined contribution plans

Ways to increase employee awareness about benefits value

o Flexible benefits programs o Market-based health care o Customer-driven health care

Factors that lead raters to give inaccurate appraisals

o Guilt o Embarrassment about giving praise o Taking things for granted o Not noticing good or poor performance o Halo effect o Dislike of confrontation o Spending too little time on preparation of the appraisal

Strategy 4: Training raters to rate more accurately How do we do this?

o Rater-error training o Performance-dimension training o Performance-Standard training

Why the growth in employee benefits?

o Wage and Price Controls o Unions o Employer Impetus o Cost Effectiveness of Benefits o Government Impetus

Health insurance and retirement benefits programs have the most access from employees

page 474

PTO (paid time off)

single bank of days of vacation, sick time and personal time for employees to use to take paid time off from work More companies are switching from traditional time off to PTO

Clone error

Giving better ratings to employees who are like the rater in behavior or personality

Which appraisal format is best for validity?

MBO High content validity. Low rating errors.

Bandwagon Effect

Giving benefits to people just to make them feel fair without careful consideration simply because employers want to avoid hard feelings

Halo error

Giving favorable ratings to all job duties based on impressive performance in just one job function

Misc. benefit payments

Discounts on goods and services purchases from company by employees Employee meals furnished by company Employee education expenditures Child care Other

Payments for time not worked

Payments for or in lieu of vacations Payments for or in lieu of holidays Sick leave pay Parental leave (maternity and paternity leave payments) Other

Employee benefits growth resulting from: Cost Effectiveness of Benefits

Two cost advantages • Most employee benefits are not taxable • Group based benefits (life, health, legal) can be obtained at a lower rate than could be obtained by employees acting on their own

Spillover error

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

Administrative cost containment

Controlling costs through policies such as seeking competitive bids for program delivery

Benefit cutbacks

Corresponding to wage concessions, some employers are negotiating with employees to eliminate employer contributions or reduce them to selected options

Disadvantages of Flexible benefit programs

Employees make bad choices and find themselves not covered for predictable emergencies Admin burdens and expenses increase Adverse selection: employees pick only benefits they will use; the subsequent high benefit utilization increases its cost Flexible benefit plans are subject to nondiscrimination requirements in section 125 of internal revenue code

Benefit ceiling

Employers establish a maximum payout for specific claims (limiting liability for extended hospital stays to $150,000)

Administrative criterion

How easily can evaluation results be used for administrative decisions concerning wage increases, promotions, demotions, terminations, and transfers?

Problems with defined contribution plans?

Low contribution rates --> About 40% of employee do not contribute enough to get full employer match, making 2/3 of people between 45-60 prolong retirement 2008-2010 recession hurt this, along with poor investments from financial advisors and employees

Which appraisal format is the best for employee development?

MBO Extent of problem and outcome deficiencies are identified

General requirements of ERISA

Requires employees be eligible for pension plans beginning at age 21. Employers may require 12 months of service as a precondition for participation. The service requirement may be extended to three years if the pension plan offers full and immediate vesting.

PPO (Preferred Provider Organization)

a type of health insurance plan in which a company forms a contract with certain hospitals and doctors to provide health care at a reduced rate

Legally Required Benefits

o Workers compensation o Social security o Unemployment compensation