MGT Test three

Advantage of BARS method

A BARS system has the significant advantage of dramatically increasing reliability by providing specific behavioral examples to reflect effective and less effective behaviors. Because the managers themselves develop the scales, they tend to be more committed to using them effectively, and the process of developing the scales helps raters develop clearer ideas about what constitutes good performance on the job.

Appraisals play a role as part of the larger performance-management process.

The goal of performance management is to improve employee performance. Part of this process is letting employees know how well they are currently doing so they can correct their deficiencies, capitalize on their strengths, and improve their overall contributions to their jobs.5 Performance appraisal should provide this information to employees. performance-appraisal information should be the basis of incentive pay systems and other performance-management interventions designed to improve motivation and performance.

Unemployment insurance

a mandated protection plan, is intended to provide a basic subsistence payment to employees who are between jobs. Employers pay premiums to the unemployment insurance fund. The premium payment is increased if more than an average or designated number of employees from the organization are drawing from the fund at any given time.

Wellness programs

are special benefits programs that concentrate on keeping employees from becoming sick rather than simply paying expenses when they do become sick.

Pay surveys

are surveys of compensation paid to employees by other employers in a particular geographic area, industry, or occupational group.

A perquisite, or perk

as it is more informally known, is an extra benefit that may or may not have any direct financial value but is considered an important reward by employees.

"frame of reference training"

attempts to emphasize for managers the fact that performance is multidimensional in nature and to train those managers with the actual content of various performance dimensions.

Job-classification systems require

clear definitions of classes and benchmark jobs for each class.

One relatively new innovation in performance appraisal methods is the use of

computer monitoring. Employees can now be monitored electronically to see how they spend their time and how productive they are.

job evaluation is mostly concerned with establishing

internal pay equity

Raters

the individuals who will be conducting the performance appraisal

If an organization competes in an environment that is heavily unionized, such as the automobile industry,

then the strength and bargaining capabilities of the union influence what the organization pays its employees.

Although the BOS approach is an improvement over the limitations of the BARS approach

, it takes even more time and can be even more expensive to develop

Pay market rates advantage

An organization that adopts a market-rate strategy is likely to believe it can provide other intangible or more subjective benefits to employees in return for their accepting a wage rate that is perhaps lower than they might be paid elsewhere. For example, job security is one important subjective benefit that some organizations provide.

Purpose of Benefit Programs

First, many experts believe that organizations willing to spend more money on total compensation are able to attract better-qualified people and convince employees to work harder, saving the company money. Most experts also argue that money spent on benefits affects job satisfaction and subsequent turnover. In addition, various social, cultural, and political forces may promote the introduction of new and broader benefits programs.Because of the growth in the numbers of female workers, more and more companies offer on-site day care, dual-parent leave for the birth of a child, and other benefits that make it easier for people Finally, employee expectations are a driving force in determining what benefits a firm must offer. For example, even though an organization is not legally required to offer any vacation time, this benefit is so desirable and has become so common that almost every person who accepts a new job expects that he or she will be given vacation time.

compensation serves a "signaling" function

Organizations signal to employees what they feel is important (and less important) for an employee to focus on by paying for certain kinds of activities or behaviors (and not for others).

Most organizations establish a formal compensation strategy that dictates how they will pay individuals. Several decisions are embedded within such a strategy.

The first relates to the basis for pay. Traditionally, most organizations based pay on the functions performed on the job, but more recently they have begun to rely on skill-based pay and pay-for-knowledge programs. In this way, organizations signal to their employees the relative importance of what someone does on the job versus what they bring to the job. The second decision in developing a compensation strategy focuses on the basis for differential pay within a specific job. Some organizations use Seniority and some organizations use performance to decide differences in pay. A third decision in developing a compensation strategy deals with the organization's pay rates relative to going rates in the market.

The point system

The most commonly used method of job evaluation for job evaluation requires managers to quantify, in objective terms, the value of the various elements of specific jobs. Using job descriptions as a starting point, managers assign points to the degree of various compensable factors that are required to perform each job—that is, any aspect of a job for which an organization is willing to provide compensation. For instance, managers might assign points based on the amount of skill required to perform a particular job, the amount of physical effort needed, the nature of the working conditions involved, and the responsibility and authority involved in the performance of the job. Job evaluation simply represents the sum of the points allocated to each of the compensable factors for each job. Not all aspects of a particular job may be of equal importance, so managers can allocate different weights to reflect the relative importance of these aspects to a job. These weights are usually determined by summing the judgments of various independent but informed evaluators.

Pay below-market rates

The organization that adopts this strategy is essentially deciding to pay workers less than the compensation levels offered by other organizations competing for the same kinds of employees. Thus, it is gambling that the lower-quality employees it is able to attract will more than offset the labor savings it achieves. Organizations most likely to pursue a below-market rate are those in areas with high unemployment. the benefit to this strategy is lower labor costs for the organization. the organization will also experience several negative side effects. Morale and job satisfaction might not be as high as the organization would prefer. Individuals are almost certain to recognize that they are being relatively underpaid, and this situation can result in feelings of job dissatisfaction and potential resentment against the organization.

A firm that chooses to pay above-market compensation, for example, will incur additional costs as a result.

This strategic option essentially indicates that the organization pays its employees a level of compensation that is higher than that paid by other employers competing for the same kind of employees. Of course, it also anticipates achieving various benefits. They recognize that high-quality employees may select from among several different potential employers and that they have a better chance of attracting the best employees if they're willing to pay them an above market rate. Above-market pay policies are most likely to be used in larger companies, particularly those that have been performing well. Above market rates tend to minimize voluntary turnover among employees. By definition, above-market rates mean that an employee who leaves a company paying such wages may have to take a pay cut to find employment elsewhere. The downside to above-market compensation levels, of course, is cost. The organization simply has higher labor costs because of its decision to pay higher salaries to its employees. After these higher labor costs become institutionalized, employees may begin to adopt a sense of entitlement, coming to believe that they deserve the higher compensation, making it difficult for the organization to be able to adjust its compensation levels downward.

Many organizations choose to rate____ when conducting appraisals

Traits Traits are abstract properties of individuals that generally cannot be observed directly but can be inferred from behavior. Rating traits allows an organization to use the same appraisal instrument for all or most employees, and this approach is based on the assumption that similar traits underlie effective performance for all jobs. Note, however, that an analysis of court cases involving performance appraisals suggests that trait-based appraisals are the most difficult to defend because the courts tend to see them as more subjective than other systems.23 feedback concerning rating traits is often less instructive and helpful than other types of feedback.

To be covered by unemployment insurance

an individual must have worked a minimum number of weeks, must now be without a job, and must be willing to accept a suitable position if one is found through a state's unemployment compensation commission or department. if a covered employee is out of work through no fault of his or her own (as in the case of a layoff), then benefits start almost immediately. If the employee quits or is fired for cause (e.g., for poor performance), there is usually a waiting period before the individual can collect unemployment benefits.

Some organizations use the term performance appraisal for this process

and others prefer to use different terms such as performance evaluation, performance review, annual review, employee appraisal, or employee evaluation.

Social Security (officially the Old Age Survivors and Disability Insurance Program)

another mandated program, was originally designed to provide limited income to retired individuals to supplement their personal savings, private pensions, part-time work, and so forth. Individuals are eligible for partial benefits beginning at age 62, and they are eligible for full benefits at age 66.

Workers' compensation

another mandated protection program, is insurance that covers individuals who suffer a job related illness or accident. Employers pay the cost of workers' compensation insurance. The exact premium paid is a function of each employer's past experience with job-related accidents and illnesses.

Protection plans

are benefits designed to provide protection to employees when their income is threatened or reduced by illness, disability, death, unemployment, or retirement.

Vesting rights

are guaranteed rights to receive pension benefits.

Supervisors

are perhaps the most frequently used source of information in performance appraisal.

Private pension plans

are prearranged plans administered by the organization that provides income to employees at their retirement

Defined contribution plans

are private pension plans in which the size of the benefit depends on how much money is contributed to the plan. This money can be contributed by either the employer alone (noncontributory plans) or the employer and the employee (contributory plans). Most new pension plans are contributory, defined contribution plans, and there are legal restrictions concerning how the money is invested. Most new pension plans are contributory, defined contribution plans, and there are legal restrictions concerning how the money is invested.

Defined benefit plans

are private pension plans in which the size of the benefit is precisely known and is usually based on a simple formula using input such as years of service. This type of plan is often favored by unions and is closely monitored under the Employee Retirement Income Security Act of 1974, or ERISA Although the employee may contribute to these plans, the amount of the contribution has little or no bearing on the actual pension payments.

Most senior executives receive their compensation in two forms:

base salary and some form of incentive pay. The traditional method of incentive pay for executives is in the form of bonuses, which can exceed their base pay by some multiple Of course, some companies also include other types of executive compensation such as membership in private clubs and low-cost (or even no-interest) loans, but it is difficult to put a true value on these. In addition, in any given year, a CEO may be able to exercise certain stock options that will significantly impact his or her earnings for the year.

Internal Equity

in compensation refers to comparisons made by employees to other employees within the same organization. In making these comparisons, the employee is concerned that he is equitably paid for his contributions to the organization relative to the way other employees are paid in the firm. For example, different pay with different responsibilities.

External Equity

in compensation refers to comparisons made by employees to others employed by different organizations performing similar jobs. For example, an accountant may experience internal equity relative to her accounting colleagues in her work group because she knows they are all paid the same salary. But if she finds out that another major employer in the same community is paying its accountants higher salaries for comparable work, then she might be concerned about external equity.

The Fair Labor Standards Act

includes provisions for the minimum wage, overtime, and child labor. It also specifies which employees are covered by the overtime provisions and which are exempt; this usually affects whether an employee is paid wages or a salary. Even nonexempt workers are sometimes asked to work more than 40 hours with no overtime pay; in exchange, they are Phil Cantor/SuperStock offered time off, which is usually referred to as comp time.

The forced-distribution method

involves grouping employees into predefined frequencies of performance ratings. Those frequencies are determined by the organization in advance and are imposed on the rater.

Currently the maximum taxable earnings amount for Social Security

is $118,500. The tax rate is 6.2 percent each, for both the employer and the employee. An extra 1.45 percent is taken to cover Medicare Self-employed individuals are required to pay 12.4 percent for Social Security and 2.9 percent for Medicare.

performance management

is a broader and more encompassing process and is the ultimate goal of performance-appraisal activities.

The amount of money any individual is eligible to be paid from the Social Security system

is a function of the average monthly wage that individual earned, weighted toward the latter years of a person's career.

Job evaluation

is a method for determining the relative value or worth of a job to the organization so that individuals who perform that job can be compensated adequately and appropriately.

A maturity curve

is a schedule specifying the amount of annual increase a person will receive.

A behaviorally anchored rating scale (BARS)

is an appraisal system that represents a combination of the graphic rating scale and the critical incident method. They specify performance dimensions based on behavioral anchors associated with different levels of performance.

A behavioral observation scale (BOS)

is developed from critical incidents like a BARS but uses substantially more critical incidents to define specifically all the measures necessary for effective performance. A second difference between a BOS and a BARS is that a BOS allows managers to rate the frequency with which the individual employee has exhibited each behavior during the rating period. The manager then averages these ratings to calculate an overall performance rating for the individual.

A stock-option plan

is established to give senior managers the option to buy the company stock in the future at a predetermined, fixed price. The basic idea underlying stock-option plans is that if the executives contribute to higher levels of organizational performance, then the company stock should increase.

Salary

is income paid to an individual on the basis of performance, not on the basis of time. salaries are paid to professional and managerial employees within an organization.

An organization with a healthy cash flow or substantial cash reserves

is more likely to be able to pay above-market wages and salaries.

A major advantage of the job-classification system

is that it can be constructed relatively simply and quickly. It is easy to understand and easy to communicate to employees. It also provides specific standards for compensation and can easily accommodate changes in the value of various individual jobs in the organization.

An advantage of forced distribution method

is that it results in a normal distribution of performance ratings, which many people see as inherently fair. if employees are to receive merit pay increases, a forced distribution ensures control over how much money is spent on merit pay.

After ratings have been completed

it is also usually the rater who must then communicate the results and consequences of the appraisal to the ratee.

If the organization suffers from a cash flow crunch

it may be necessary to adopt a below-market wage strategy.

Advantages of factor-comparison method-

it provides a rigorous assessment of the true value of various jobs, It also allows managers to recognize fully how the differences in factor rankings affect the compensation that the organization allocates to various jobs.

friendship, group norms, and other personal factors

may intervene in this situation. And individuals may see their own performance as being significantly different than others in the group may see it

Problems with external equity

may result in higher turnover (because employees will leave for better opportunities elsewhere), dissatisfied and unhappy workers, and difficulties in attracting new employees.

life-cycle benefits

or benefits targeted at different stages in an employee's life. The most common are childcare and elder-care benefits.

disability insurance

pays for employees who cannot work because of some injury or disability.

employee assistance programs

programs are designed to assist employees who have chronic problems with alcohol or drugs or who have serious domestic problems. An increase in the number of programs for mental problems and stress, as well as for bereavement, have also been part of a recent trend Yet the needs of the organization (especially when the personal problem is causing performance problems on the job) must be balanced with the needs of the individual to avoid any stigma attached to having the specific problem

Pay Secrecy

refers to the extent to which the compensation of any individual in an organization is secret or the extent to which information on compensation is formally made available to other individuals. advocates of pay secrecy maintain that what an individual is paid is his or her own business and not for public knowledge.They also argue that if pay levels are made known to everybody else, then jealousy or resentment may result. Critics of pay secrecy- some organizations adopt a more open pay system in which everyone knows what everyone else makes.The logic is that this promotes equity and motivation.

the ideal compensation system

reflects an appropriate balance of organizational constraints, costs, budgets, income, and cash flow relative to employee needs, expectations, demands, and market forces.

Compensation can also serve a motivational purpose

that is, individuals should perceive that their efforts and contributions to the organization are recognized and rewarded.

pay market rates

that is, the organization may elect to pay salaries and wages that are comparable to those available in other organizations, no more and no less. The organization assumes that it will get higher-quality human resources than a firm that takes a below-market strategy. At the same time, it is willing to forgo the ability to attract as many high-quality employees as the organization that takes an above-market strategy.

Disadvantages of factor-comparison method-

the factor-comparison method is also extremely complex, difficult to use, time-consuming, and expensive for an organization that chooses to adopt it.

Disadvantage of the job- classification system

the job classification assumes that a constant and inflexible relationship exists between the job factors and their value to the organization, which sometimes results in jobs within a grade not fitting together very well.

Compensation has several fundamental purposes and objectives.

the organization must provide appropriate and equitable rewards to employees. Individuals who work for organizations want to feel valued and be rewarded at a level commensurate with their skills, abilities, and contributions to the organization.

When performance appraisals are used as the basis for HR decisions (as in the case of merit pay or promotion decisions)

they are considered the same as any other test under the law. appraisals that show evidence of disparate impact must be validated the same as any selection technique. This principle was first established in Brito v. Zia Company and reinforced as part of the decision in Albemarle Paper Company

Contributions to the retirement plan may come from either the employer or the employee, but, in most cases,

they are supported by contributions from both parties. Different retirement plans are available, including individual retirement accounts (IRAs) and employee pension IRAs. In addition, a 401(k) plan allows employees to save money on a tax-deferred basis by entering into salary deferral agreements with their employer.

By focusing on 360-degree feedback

they obtain information on a person's performance from all perspectives. Recognize, however, that the feedback from the different sources could be inconsistent. But this approach means that the manager has to reconcile different feedback and that the organization probably needs to use these ratings for feedback and development purposes only. If decisions are to be based on these evaluations, then the organization would have to decide how to weight the ratings from the different sources.

Advantage of critical incident method

this technique provides rich information for feedback to the employee and defines performance in fairly clear behavioral terms. An advantage of the critical incident method is that it allows managers to provide individual employees with precise examples of behaviors that are believed to be both effective and less effective performance.

To obtain the exact data they need, however, many larger firms design their own pay surveys

which allows the firm to take advantage of the expertise available in such firms and minimize their own risk and the prospects of making a significant error or mistake in the conduct of the survey.

The rater

(traditionally and most typically the supervisor of the employee being appraised) plays the largest role in the appraisal process. - Raters have to help develop and learn those standards. As performance information is acquired about a ratee, the rater also has to compare the information acquired with these standards as a way of evaluating the employee's performance. When making these decisions, the rater must consider the context in which performance occurs so that any extenuating conditions can be taken into consideration. In addition, the rater has to communicate those standards to the ratees so that each individual will know what is expected.

The fundamental purpose of compensation

is to provide an adequate and appropriate reward system for employees so that they feel valued and worthwhile as organizational members and representatives.

One method for error reduction

is to train managers to overcome these weaknesses, even when that means nothing more than pointing out to managers their tendency to commit distributional errors or contrast errors. Rater accuracy training is usually more involved than that, however.

the supervisor

is usually responsible for the performance of his or her subordinates and thus is both responsible for employees' high performance and accountable, perhaps, for their low performance.

One of the major criticisms that had been leveled against graphic rating scales

is that they were especially prone to a series of distributional errors.

The rater has a more critical role to play as well

On a day-to-day basis, an employee behaves, or performs, on the job and exhibits many behaviors that might be relevant to performance on that job. The rater's task is to collect information about those behaviors and translate that information into the ratings themselves.

organizational competitiveness.

The amount of value people create for an organization and what the organization gives them as compensation for that value are important determinants of

Pay Market rates disadvantage

The organization will have higher turnover than a firm paying above-market rates but lower turnover than an organization paying below-market rates.

Disadvantage of BARS Method

The process of developing a truly effective BARS is extremely expensive and time-consuming, so these scales are rarely used in their pure form. Instead, some modified versions are used

adverse selection

This refers to the fact that the employee most likely to select a benefit, such as children's braces, is also most likely to use the benefit, which tends to drive up benefit costs. Finally, given a choice of benefits, employees are not always rational in their choices.

consolidated leave

Under these plans, workers are allocated a specified amount of time off that they can use for any purpose, although the plans usually allow days off in small increments of one or two days.

the overall ability of the organization to attract and retain employees is

a critical factor. For example, if the organization is located in an attractive area, has several non compensation amenities, and provides a comfortable, pleasant, and secure work environment, it might be able to pay somewhat lower wages.

Determinants of Compensation Strategies

a firm in a high-growth mode is constantly striving to attract new employees and may find itself in a position of having to pay above-market rates to do so. a stable firm may be more likely to pay market rates given the relatively predictable and stable nature of its operations. Finally, an organization in a retrenchment or decline mode may decide to pay below-market rates because it wants to reduce the size of its workforce anyway.

Cafeteria-style benefits plans

allow employees to choose those benefits they really want. Under these plans, the organization typically establishes a budget indicating how much it is willing to spend per employees on benefits. The employee is then presented with a list of possible benefits and the cost of each; they are free to choose the benefits in any combination they wish. One challenge is the cost of administering such plans. Because every employee has a potentially unique set of benefits, someone has to keep track of what benefits each employee has chosen, and these choices can usually be changed over time.

Long-term health-care insurance

also becoming a more common benefit, and these plans provide for nursing homes or at-home care.

The factor-comparison method

for job evaluation assesses jobs, on a factor-by-factor basis, using a factor-comparison scale as a benchmark. Like the point system, the factor-comparison method allows the job evaluator to assess jobs on a factor-by factor basis. At the same time, it differs from the point system because jobs are evaluated or compared against a standard of key points; instead of using points, a factor-comparison scale is used as a benchmark.

The classification system

for job evaluation attempts to group sets of jobs together into clusters, which are often called grades. After classifying is done, each set of jobs is then ranked at a level of importance to the organization. Importance, in turn, may be defined in terms of relative difficulty, sophistication, or required skills and abilities necessary to perform that job. A third step is to determine how many categories or classifications to use for grouping jobs. The most common number of grades is anywhere from 8 to 10, although some organizations use the system with as few as 4 grades and some with as many as 18. The U.S. postal system is a good example of an organization that uses the classification system.

Wages

generally refer to hourly compensation paid to operating employees; the basis for wages is time. Most jobs that are paid on an hourly wage basis are lower-level or operational jobs within the organization.

Wage and salary administration

is the ongoing process of managing a wage and salary structure.

Pay compression

occurs when individuals with substantially different levels of experience, performance abilities, or both are paid wages or salaries that are relatively equal Pay compression is most likely to develop when the market rate for starting salaries increases at a rate faster than an organization can raise pay for individuals who are already on the payroll.

A halo error

occurs when one positive performance characteristic causes the manager to rate all other aspects of performance positively.

A horns error

occurs when the manager downgrades other aspects of an employee's performance because of a single performance dimension.

the critical incident method

relies on instances of especially good or poor performance on the part of the employee. A critical incident is simply an example or instance of especially good or poor performance on the part of the employee. Organizations that rely on this method often require raters to recall such instances on the job and then describe what the employee did (or did not do) that led to success or failure.

commonly used systems include five job factors for comparing jobs:

responsibilities, skills, physical effort, mental effort, and working conditions.

the most important legal issue in benefits deals with

the Employee Retirement Income Security Act (ERISA) of 1974. this law was passed to protect employees who had contributed to their pensions but were unable to collect those benefits later. This situation occurred primarily because of the restrictions that the organizations had placed on employees before they could receive retirement benefits. Specifically, organizations required that employees remain with the company as long as 30 years before they were vested. ERISA also provides protection for the funding underlying the pension plan. The Pension Benefit Guaranty Corporation oversees how pension plans are funded, and it can seize corporate assets to support underfunded plans.

In pay inversion

the external market changes so rapidly that new employees are actually paid more than experienced employees.

Finally, the rater is ultimately responsible for preparing the employee

to perform at desired levels.

The point manual

used to implement the point system of job evaluation, carefully and specifically defines the degrees of points from first to fifth.

The Patient Protection and Affordable Health Care Act (or the Affordable Care Act)

was signed into law on March 23, 2010. The basic aim of the Act is to increase the quality and affordability of health-care insurance, lower the number of uninsured employees, and reduce the cost of insurance for all involved. The goal is to expand some type of health-care coverage to the 47 million Americans who are currently uninsured, according to the AARP. Estimates place the total cost of this overhaul of the health-care system at more than $1 trillion.

Paid time off

was the most prevalent benefit provided by employers in the private sector throughout the United States in 2012, with 72 percent of all employees receiving both paid holidays and paid vacation. Most organizations also provide their employees with some amount of time off with pay. No U.S. laws mandate this type of benefit, but most employees now expect it. Major type of paid time off time off is the paid holiday. Paid vacations vacations are also common but are likewise not required by law. Another common paid time-off plan is sick leave.

By their very nature, most appraisals are

subjective—that is, we must rely on a rater's judgment of an employee's performance.

Duties Test

supervise 2 or more employees most likely exempt

A performance appraisal

is the specific and formal evaluation of an employee to determine the degree to which the employee is performing his or her job effectively.

Types of distributional error

1. Sometimes the distributional error may be severity, which occurs when the manager gives low ratings to all employees by holding them to an unreasonably high standard. 2. The opposite error is leniency, which occurs when a manager assigns relatively high or lenient ratings to all employees. 3. A central tendency distributional error occurs when the manager tends to rate all employees as average, using only the middle part of a rating scale.

Who should be Rated?

A final issue to consider is exactly who should be rated in the appraisal process. Specifically, this issue is connected with the use of work teams. With work teams, the organization must decide whether to evaluate individual performance or team performance, and this issue can become quite complicated. If individuals are rated and rewarded based on their individual performance, they have less reason to cooperate with other team members to accomplish the team's goals In other team settings, though, it is critical that team members work together toward a common goal. In these cases, it is critical that performance be measured and rewarded only at the team level. One person's performance should not be considered except as part of the whole.

subordinates of the individual being appraised.

A third source of information in the performance appraisal process

Portal-to-Portal Act

Amended the FSLA U.S. act that defines what is included as hours worked and is therefore compensable and a factor in calculating overtime.

Developing a BARS

Developing a BARS is a complicated and often expensive process. Generally, these scales are developed by the same managers who eventually use them to evaluate employees. First, the managers must develop a pool of critical incidents that represent various effective and ineffective behaviors on the job. These incidents are then classified into performance dimensions, and the dimensions that the managers believe represent a particular level of performance are used as behavioral examples, or anchors, to guide the raters when the scales are used. At each step, an incident is discarded unless the majority of managers can agree on where it belongs or what level of performance the incident illustrates The manager who then uses the scale has to evaluate an employee's performance on each dimension and determine where on the dimension the employee's performance fits best. The behavioral anchors serve as guides and benchmarks in helping to make this determination.

The Role of the Ratee

First, for performance appraisals to work most effectively, a ratee should have a clear and unbiased view of his or her performance. Problems can occur during the appraisal process if there is disagreement between the rater and the ratee, so it is essential that both parties have all the information they can collect about the ratee's performance. This approach may require the ratee to acquire information about the performance of coworkers and requires the ratee to gain an understanding about how his or her behavior affects performance. This approach should also allow the ratee to be more receptive to feedback from the rater (especially if it is somewhat negative), which in turn makes it more likely that the ratee will change his or her behavior in response to that feedback.

Nonexempt employees

Hourly (wage)

Although ranking techniques are simple and easy to implement, there are some serious shortcomings.

It is true that organizations seeking to make relatively simple decisions (e.g., which person to promote) can obtain clear and useful information about the "most promotable," but even in such cases where an organization must then turn to the "second-most promotable," ranking methods provide no information about the difference between the persons ranked first and second.

Supervisor Motivational Factors

Nonetheless, a supervisor may be negatively or positively biased toward various workers because of personal liking, attitudes, personal relationships, and so forth. As a result, favoritism or negative bias may be possible. Supervisors might also choose to be inaccurate in their ratings because they feel threatened by a particular subordinate and want to prevent him or her from getting ahead. the supervisor might want to get rid of a problem subordinate by getting her or him promoted into a different department. supervisors may be concerned about team member relations and decide to rate all team members the same, regardless of what they deserve, to avoid jealousy or conflict.

the graphic rating scale

One of the most popular and widely used performance appraisal methods

Performance appraisals are also important for legal reasons.

Organizations must be able to demonstrate that their promotions, transfers, terminations, and reward allocations are based on merit (or the lack thereof), as opposed to discriminatory factors such as gender or race. Performance appraisal, therefore, is the mechanism by which the organization can provide this documentation.

once a year

Regardless of who conducts the appraisals, it is important to remember that most organizations do performance appraisals only

much of the information concerning external equity comes from

a pay survey

In an MBO system

a subordinate meets with his or her manager, and together they set goals for the subordinate for a coming period of time, often 1 year. These goals are usually quantifiable, objective, and almost always written down. At the end of the year, a more formal meeting is scheduled. During that meeting, the actual degree of goal attainment is assessed. The degree of goal attainment then becomes the individual's performance appraisal.

The Importance of Performance Appraisals

appraisal results provide a benchmark for assessing the extent to which recruiting and selection processes are adequate; that is, appraisal results help managers assess the extent to which they are actually recruiting and selecting the most appropriate employees.

Subordinates

are an especially important source of information when the performance of their own manager is being evaluated, and this information is perhaps most useful when the performance appraisal is focused on the manager's leadership potential. Of course, a major problem with using subordinates as input to the performance-appraisal process is that this approach may influence the manager's behavior in the sense that she or he may be more focused on making workers happy and satisfied than in making them perform at a high level.

Both internal and external equity

are clearly important for an organization's compensation strategy.

the fact that performance appraisals are so widely used in spite of this dissatisfaction is a strong indicator that managers believe performance appraisals

are important and have a meaningful role to play in organizations.

Goal-based systems

are often seen as the best alternative available for rating performance, but care must be taken when these systems are used. Specifically, the kinds of behaviors specified in the goal-setting process are exactly what the employee will tend to focus on, so it is critical that the organization really wants to encourage these particular behaviors.

In some cases, organizations base their appraisals on

behaviors. These appraisals tend to be based on job analysis, and they tend to be tailored for specific jobs. These appraisals are still subjective, but they require the rater to evaluate behaviors that he or she can physically observe, so they seem more objective. For example, a ratee may be evaluated on how well he or she follows up on sales leads. Providing feedback about behaviors and processes can be instructive and useful because it can help employees understand how to improve their performance.

Rater memory

is therefore a critical factor and limits the accuracy and effectiveness of performance appraisals. If a rater cannot remember a performance incident, then he or she cannot rate it.

The raters task

is to collect information about those behaviors and translate that information into the ratings themselves.

Perceptions of external inequity

can lead to the type of job search that results in the voluntary turnover problems

Problems with internal equity

can result in conflict, feelings of mistrust, low morale, and even legal action in some cases.

many organizations find it appropriate and effective to rely on different information sources when

conducting a performance appraisal.

graphic rating scale method

consists of a statement or question about some aspect of an individual's job performance. Following that statement or question is a series of answers; the rater must select the one that fits best. For example, one common set of responses to a graphic rating scale is strongly agree, agree, neither agree nor disagree, disagree, and strongly disagree. These descriptors or possible responses are usually arrayed along a bar, line, or similar visual representation, and this representation is marked with numbers or letters that correspond to each of the descriptors. The specific dimensions measured by graphic rating scales should be based on job analysis, but this approach is not typically taken. Instead, to have a single instrument that can be used with all or most employees in an organization

A basic goal of any appraisal system

is to provide a valid and reliable measure of employee performance along all relevant dimensions.

The organization, primarily through the work of its human resource (HR) function

develops the general performance-appraisal process for its managers and employees to use. One of the first considerations relates to how the information gained from performance appraisals is to be used. The organization also generally determines the timing of the performance appraisals. The organization is also responsible for ensuring that clear and specific performance standards are available to managers. The organization should also ensure that these standards are communicated carefully to the employees.

Benefits

generally refer to various rewards, incentives, and other things of value that an organization provides to its employees beyond their wages, salaries, and other forms of direct financial compensation.

An advantage of using peers

in such a process is that, by definition, they have expert knowledge of job content and may also have more opportunities than the supervisor to observe the performance of a given worker on a day-to-day basis

The simple ranking method

involves having the manager rank order each member of a particular work group or department from top to bottom or from best to worst. The individual ranked first is presumed to be the top performer, the individual ranked second is presumed to be the second-best performer, and so on.

A goal-based or management-by objectives (MBO) system

is based largely on the extent to which individuals meet their personal performance objectives. Management by objectives is the most popular term used for this approach

Perhaps the most important and useful thing an organization can do to improve the quality of performance appraisals

is simply to demonstrate to raters how and why it in their own best interests to do the best job they can in appraising employee performance.

total compensation

is sometimes used to refer to the overall value of financial compensation plus the value of additional benefits that the organization provides.

Performance management

is the general set of activities carried out by the organization to change (improve) employee performance. - performance management typically relies heavily on performance appraisals

the individual's supervisor

is the most likely rater

Compensation

is the set of rewards that organizations provide to individuals in return for their willingness to perform various jobs and tasks within the organization.

Except for contrast errors, however

it is not always clear that these other "errors" are really errors. Furthermore, employees (ratees) might be less likely to perceive a set of lenient ratings as accurately reflecting their performance and so may not be willing to work to improve their performance.

A distributional error

occurs when the rater tends to use only one part of the rating scale.

Contrast error

occurs when we compare people against one another instead of against an objective standard.

In the paired-comparison method

of performance appraisal, each individual employee is compared with every other individual employee, two at a time. This technique is simply an alternative way to generate rankings

the final commonly encountered option is to rate performance based on

outcomes or example, rather than evaluating whether the salesperson has a good attitude or follows up on leads, an organization could simply tally actual sales. Focusing on outcomes has the advantage of emphasizing the most objective measures of performance available. Feedback can be relatively straightforward and easy to interpret (i.e., you did or did not meet your sales goal), although feedback is even more useful if it includes information on how to improve future performance. Goals can be stated in terms of absolute amounts or in terms of improvement

In a 360-degree appraisal,

performance information is gathered from people on all sides of the manager: above, beside, below, and so forth.

Contextual performance

refers to tasks an employee does on the job that are not required as part of the job but that still benefit the organization in some way. These behaviors are also often referred to as organizational citizenship behaviors.

Peers, colleagues, and coworkers

represent other potential sources of information for performance appraisal systems.

Exempt employee

salary

the appraisal results

should reflect the true picture of who is and is not performing well, and they should indicate the areas of specific strengths and weaknesses for each person being rated.

BARS procedures are often adopted in an attempt to

some of the benefits without incurring the costs.

The simplest answer is that, for most jobs, and for all managerial jobs

straightforward objective measures of performance do not exist. In many other cases where objective measures exist, they are meaningful only at the level of the team (or an assembly line) and not at the level of the individual.

Companies like GE are dropping their annual appraisals—all based on forced distributions—in favor of

systems where managers meet regularly with employees (as often as weekly) to provide personalized feedback and help develop their performance.49 Thus, the new systems are targeted at collecting more information about employees' performance—not less. New performance management technology makes it possible to collect real-time performance data that is presumably less prone to the biases and errors that plague traditional appraisals

Disadvantage of critical incident method

the critical incident method requires considerable time and effort on the part of managers because they must maintain a log or diary of these incidents. the method may make it difficult to compare one person with another. The sample of behaviors developed from one employee may not be comparable to the sample of behaviors acquired for another

A disadvantage of forced distribution method

the distribution that is being imposed may have no relationship to the true distribution of performance in the work group. It is possible, for example, that all the employees are performing at acceptable levels, but the forced-distribution methods, as well as the other ranking methods, force the rater to make distinctions that might not really be meaningful. As a result, most organizations rely instead on some type of absolute judgments and employ a system of performance ratings rather than rankings.

Ratee

the individual whose performance is evaluated

.the ultimate goal for any organization using performance appraisals is

to improve performance on the job. Accomplishing this goal requires that employees receive useful and accurate feedback about their job performance, as well as guidance on how to improve. The goal also relies on the organization's ability to make decisions about things such as raises and promotions on the basis of performance on the job.

graphic rating scales typically measure performance relative to

traits or behaviors such as initiative or problem-solving capabilities or even attitudes.

the rater truly becomes a decision maker

who must observe ratee performance and process the information gleaned from the observations.