BUS-360 Unit 3 Learning Objectives

Read through the implications of managers who use fear. How does one avoid managing through fear?

performance measures and goals must be defined; frequent feedback provided; and positive consequences applied for improvement or goal attainment.

If priority weights are moved, what is the effect on performance? DO min/max levels have impact? What about frequency of changes in min/max, weight?

-Priority weights do not effect the trend much until they exceed 40% -variability in trends increases substantially as scores fall below 30 or exceed 135 -changes in min/max/weight appear to lower the performance trend.

Weighting should align with what?

Each scorecard's priorities with the organization's strategic objectives priorities.

Does the number of measures per scorecard matter? What would be ideal?

Yes it has different effects and does between salaried and hourly employees. Ideal scorecard measures is 5.

Note this article comprises several elements from the semester: research designs, various independent variables, a performance diagnostic checklist as an assessment tool, and a performance matrix. It is the latter that is the key element for you to read to see an example of the Performance Matrix in application. It is a lengthy article, but at this point of the semester you should be able to read it and understand all parts, rationale, appreciate the methodology presented, interpret the findings and consider implications of the research.

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How did the 12 companies perform? What were the key features for success? What were some of the barriers/ lessons learned?

-6 of the twelve organizations experienced statistically significant overall performance improvements -4 yielded no significant change -2 experienced a decline in performance The key variable clusters affecting performance change were found to be scorecard design and administrative variables, incentive pay variables, and organizational structure variables. The most important organizational success variable was the implementation of scorecard measures that employees could directly.

Describe the Performance Matrix. Where did it originate?

-The performance matrix is a point system that enables you to measure any job. It provide a way to combine judgement errors and counts into a single index representative of the total performance that you expect of a person or group. -It evolved fromJ.L Riggs (1986) objective matrix (OMAX)

Do team or individual scorecards work differently or one perform more? in what ways? Carefully examine the charts.

-There is no significant difference in the effects of team vs. individual measures. -Team measure yield better results for measure types where the team leader or manager has more discretionary control than the workers do.

Relate to Abernathy's scorecard in the other text

-both universal - easy for employee to grasp -anchors are strategically placed -behaviors are organized by priority with weights

Do hourly vs salaried employees work differently or one perform more? in what ways? Carefully examine the charts.

-hourly employees perform better on all types except expense control and customer service. -The lack of differences in expense control and customer service is likely due to these measures representing teams in which both managers and workers participate.

If conventional pay is based on "community thinking" then what is performance pay based on?

-the pay of a self-employed person. -the person earns as much or as little as their business produces

What are the objectives to incentive pay?

1. Alignment -Communicate new strategies and reward employees who assist in executing those strategies. 2. Focus -An incentive plan can assist in focusing employees on the key results that help execute the strategy 3. Performance -Assist in optimizing employee productivity and performance quality 4. Commitment -Increase employee commitment to the organization 5. Affordability -can index employee compensation to profitability in order to effectively convert a portion of compensation from a fixed to a variable expense.

What are the min/max settings? Note the decision tree.

1. Budgeting 2. Maximum Incentive Opportunity 3. Improvement 4. Statistical definitions 5. Financial ratios and percentages 6. Non-financial ratios 7. Rating 8. Special cases Min is defined as currently or minimally accepted performance. Max should be applied from a strategic perspective, designed to jump start a missing employee behavior.

What a re the four most common incentive pay schemes? what is the fifth approach?

1. Commission and piece-rates 2. Goal sharing 3. Gainsharing 4. Profit Sharing --------------- 5. Profit-indexed performance pay

How do you develop a matrix? Components

1. Define the areas of accountability and then pinpoint 2. Determine the current level of performance on each of the pinpoints 3. Give them each a weighting of relative priority Components: Behavior, performance score (beginning to goal), weight, raw score, points overall score.

What are the pragmatic reasons to transition to a self-managed performance system?

1. Technology 2. Decentralization 3. Consolidation 4. Employee Diversity 5. Employee turnover 6. Supervision expense 7. Customer focus

A2.1 It is critical to keep sight on the role of incentive plans not solely protecting the financial health of an organization, but to also protect the health and wellbeing of the workers. Note the reference to Abernathy's TPS system in Table 2. How can an organization show "readiness" for a PFP system?

A company cannot jump straight into a PFP system, they must meet certain conditions to avoid potential organizational and individual challenges within the workplace that can be easily avoided. They must make sure the executive management is prepared, most importantly making scorecards to track and hopefully increase crucial behaviors for the company through its employees. Participant readiness is also important, and some may refuse or resist PFP system at first, and there must be a system followed to help the transition. There must be a fair and ethical system, one that adheres to HR federal regulations. Communication is of the of most important aspect of a PFP system, and it is important to create a community where the organization can communicate expectations openly, they must also have a pinpoint person to answers questions and provide support . It must also have systems in place to collect data and populate scorecards, without it there would be no way to help track and improve desired behavior. They must choose wisely when to design, implement and test a scorecard system in order to make sure it would be effective for the company. With the possible increase in returns for employees, the company needs to make sure that it is financially stable so that can help improve for payout and quality increase throughout the company.

Discuss PROFIT-SHARING, noting advantages and limitations.

Annual cash awards to employees based upon pre-defined profit levels create "stakeholders" who are committed to the organizations long term success, however it fails to specify each employees role in the company's strategy.

What are the ABCs of what a manager would do?

Antecedents, Behaviors, and Consequences 1. Decide &be trained on how to set the stage for antecedents 2. Must pinpoint improvement opportunities and assist in developing tactical improvement plans 3. Be assessed how effective they are at applying the principles with their employees in the meeting

What are the benefits of stakeholder pay, according to Abernathy? Note each stakeholder. What about the risks?

BENEFITS: -converts salary expense to variable expense. gives flexibility -Job security goes up because there is less turnover -no limits on earning capabilities RISKS: -faith in company... are we in a good enough place for this change? -trust... is the company going to follow through with the payouts? even if management changes in the future? -Help... is i don't do well on my scorecard will i get support? -Opportunity.. is it prescribes to me or can i participate in the scorecard?

pragmatic reason to transition to a self-managed performance system- EMPLOYEE TURNOVER

Creating a partnership with these employees, thought stakeholder pay, makes it more likely they will commit to the long term.

pragmatic reason to transition to a self-managed performance system- DECENTRALIZATION

Direct contract is often impractical in many of today's organizations where employees work at home, in remote locations, or consistently travel. Performance measurement and incentive pay offer a practical alternative.

pragmatic reason to transition to a self-managed performance system- SUPERVISION EXPENSE

Direct measurement and incentive pay enable managers to increase their span of control and thus significantly reduce overall supervision expense

pragmatic reason to transition to a self-managed performance system- EMPLOYEE DIVERSITY

Direct measures help reduce the impact of cultural differences

Why are there anchors?

Experience has shown that people like a scale that allows for exceeding the goal, so we moved the 10-point scale to the right so that the anchors are actually 4-13. The values of 11, 12, and 13 represent overachievement; the 13 represents benchmarked, world-class performance. It is possible to earn more than 100 points this way but it is based on the goal being at 100 points. For most people, this proves to be very reinforcing.

Discuss GAINSHARING, noting advantages and limitations.

Group plans in which all employees are awarded a share of the savings, however, with the group focus it takes the focus away from specific performance.

pragmatic reason to transition to a self-managed performance system- TECHNOLOGY

Innovations in data gathering and data processing now allow for efficient direct measurement of complex performance systems. The field of Applied Behavior Analysis provides the concepts and practices necessary for the management of complex performance systems.

What happens if you have a weight of zero?

It will display a measure in a scorecard, but the measure will not affect the overall performance index.

Discuss PROFIT-INDEXED PERFORMANCE PAY, noting advantages and limitations.

PIPP integrates goal sharing and profit-sharing determined by the organization's profitability. Correctly implemented, this plan meets all five objectives, however it is a very complex system that would take consistent communication to keep the plan going.

A1.1 Describe the results and implications of the 3 incentive plans that were compared in this study in terms of effects on productivity and off-task time.

Productivity: Individual incentives- Had a slight advantage over EG, however off the graphs it seemed to be very inconsistent across the procedure. This was slightly better than EG, but still lower than DG, one od the reasons being there was no competition to reinforce behavior. Equally distributed incentives (EG)- This produced the lowest level of production across the 3 incentive plans, and each had a sharp decline midway through the procedures. Differentially distributed group incentives (DG)- . Using DG, productivity was generally higher across almost all participants, and they were less likely to engage in off-task time. Off task: Individual: off task time was the 2nd highest among the 3 incentive plans, with an average off task time of 29.08 minutes. EG- off task time was the highest among the incentive plans, with an average of 34.25 minutes. DG- off take time was the lowest among the incentive plans, with an average of 20.61 minutes.

How does one transition toward stakeholder pay? What are the necessary conditions?

Profit-Indexed Pay Increases = substitutes increased profit-sharing opportunity for annual wage and salary increases annually increase each employee's basis percentage Voluntary Stakeholder plan = provides employees the choice to participate in an immediate pay reduction, choosing one of three levels of stakeholding 5%, 10%, %15 Transition to entrepreneurial workplace = moves away from traditional direct supervision and intimidation ole to a "positive leadership" approach in which the manager assists employees with meeting their scorecard goals

pragmatic reason to transition to a self-managed performance system- CUSTOMER FOCUS

The total performance system re-establishes the link between customers and employee earnings.

Discuss COMMISSIONS AND PEICE-RATES, noting advantages and limitations.

These programs are considered together because they both pay per unit (revenue or piece). The incentive payments are not adjusted for profitability or other factors, the plan Is very reliable in its payouts. However, the plans are not aligned with the company's long-term goals.

Discuss GOAL SHARING, noting advantages and limitations.

They use specific measures and goals, which provide a high are of focus. However, the plan caps out at a point regardless of the success of the organization.

What does it mean to manage without supervising?

To manage without supervising means to have the expectations of responsibilities laid out clearly so that all employees know what they are required to do and can execute those responsibilities. Since employees are able to execute their responsibilities, managers are able to complete other tasks instead of hovering over their employees.

pragmatic reason to transition to a self-managed performance system- CONSOLIDATION

Total performance system would efficiently align supervisors and teams with the new organization's strategy and tactics.

The Performance Scorecard has several unique features and advantages. Discuss them. Relate to the benefits also presented in the PM text (Ch 7).

Universal Approach: the scorecard provides internal look-up scales eliminating calculations that could prove difficult for some employees. An employee finds the interval where their performance falls and look at the top of the scorecard to find the equivalent score. Balance Performance: The scorecard converts all performances to a common conversion scale which is located at the top of the scorecard. Scores are multiplied by measure's priority weight. Each measure is capped at both ends to make sure there is no extremes in performance. Align measure with strategy: The scorecard measured weight allows managers to prioritize behaviors. Ensures all scorecards are aligned with the organizations objectives.

What is the weighted score? What is the performance index?

Weighted score- the interval in which the actual data falls for each measure and it is the conversation score at the top of the column multiplied by the measure's priority weight. Performance index- the sum of weighted scores

What are accelerating intervals, linear conversation scales and conversation scales with stretch intervals

accelerated intervals- The notion here is that incremental improvement becomes more difficult as you approach max and therefore score gains/ incentive payouts should increase at a higher level linear conversation scales- the linear scale starts at 0 with 20 as the MIN and 100 as the Max, starts in the positive conversation scales with stretch intervals-starts at 30 with 50 as the MIN, the concept behind the scale is that the 100 intervals will represent plan, or max, while the intervals above 100 represent above max, or stretch performance

Be able to discuss best practices of the use of PFP.

the combination of performance scorecards and incentive pay had a positive effect on employee performance in 8 diverse companies, with an average payout of 7%.