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