MIE 330 Test 4 Ch. 9-11

Weighting Performance Criteria

-Each job differs in terms of how it adds value to the organization -Some forms of contributions may be more important than others for particular jobs -Weights are used to adjust the relative importance of different performance dimensions

Sources of Performance Data

-Supervisors -Coworkers -Self-Appraisals: the process of an employee evaluating his or her own performance -Subordinates -Customer Evaluations -360-Degree Appraisals: a comprehensive measurement approach that involves gathering performance data from as many sources as possible——supervisors, peers, subordinates and customers

Factors to consider when providing feedback

-separating evaluation from development -targeting behaviors or outcomes rather than the individual -being balanced in your appraisal -encouraging employee participation

Job Pricing Process

1) conduct a salary survey 2) plot the salaries 3) draw the market line 4) decide on company's line based on its pay policy 5) create wage ranges 6) adjust the wages for jobs within each grade

Steps in the Performance Management Process

1) identifying performance dimensions 2) developing performance measures 3) evaluating performance 4) providing feedback 5) developing action plans to improve performance

Two benefits of greater specificity

1) it makes a standard clearer and managers are likely to be more consistent with evaluations; improves reliability 2) helps employees understand how different aspects of their job should be performed

Two labor markets in which inequities can exist:

1) the labor market within your firm 2) the labor market outside your firm

Steps of Progressive and Positive Discipline

1) verbal warning 2) written reprimand 3) suspension 4) termination

Devil's horn error

A bias that occurs when a negative characteristic of a person affects the evaluation of the person's other attributes

Open Pay System

A compensation program that makes salary information and wage levels public.

Scanlon Plan

A group-based incentive plan based on employee suggestions for increased efficiencies and productivity

Benchmark job

A job that is used to represent the range of jobs in a company that can be used for comparison with jobs in other companies for the purpose of establishing pay rates These jobs need to be: -stable over time in terms of their responsibilities -well known and recognized -clearly and concisely described -accepted in the external labor market for setting wage rates -compensated at an appropriate wage rate

market pricing

A method for determining pay for jobs by collecting salary information from the external labor market first, rather than starting with the development of an international structure based on the value of the jobs within the company

Closed Pay System

A pay system that keeps secret the amount of pay that each individual receives.

Point method (aka point factor method)

A quantitative method of job evaluation that involves assigning point values to jobs based on compensable factors to create a relative worth hierarchy for jobs in the company

Merit increase

A salary increase awarded based on how well an individual has performed his or her job

social loafing

A situation in which the motivation of individuals to exert effort diminishes when their outputs are combined with those of others

Broad based stock option plan

A stock purchase plan that applies widely to a firm's employees

Job classification

A type of job evaluation that involves developing broad descriptions for groups of jobs that are similar in terms of their tasks, duties, responsibilities, and qualifications for the purpose of assigning wages

Job ranking

A type of job evaluation that involves reviewing job descriptions and listing the jobs in order, from highest to lowest worth to the company

Cost-of-living adjustment (COLA)

An adjustment given to employees to offset the increases in the prices of goods and services they purchase and to keep salaries from lagging the external market

Broadbanding (aka career banding)

An approach used to reduce the complexity of a compensation system by consolidating a large number of pay grades into a fewer number of broad grades (or bands)

Compensable factor

An aspect of jobs, such as skill, effort, responsibility, and working conditions, that exist across jobs in a company, are needed by employees for the firm to achieve its objectives, and for which the company is willing to pay

Nonexempt employee

An employee who receive overtime pay for hours worked in excess of 40 hours in a workweek

Exempt employee

An employee whose job classification does not require the payment of overtime pay for time worked in excess of 40 hours a week

Free rider

An individual who does not work as hard as the others on a team

Walsh-Healey Public Contracts Act

Applies to contractors with over $10,000 in contracts involved in manufacturing or providing goods and services to U.S. government Requires paying workers federal minimum wage for first 40 hours and 1.5 times minimum for additional work during week

Patagonia

COMPASS

Behavior-Based Approaches

Critical incident approach Forced-choice Behaviorally anchored rating scale (BARS) Behavioral observation scale (BOS)

mixed salary/commission plan (aka base plus commission plan)

Employees receive a lower base salary, perhaps only 50%-70% of what would be offered under a straight salary plan, with the remaining percentage being commission based

Kurt Lewin and Edward Tolman

Expectancy theory

In the federal government, the classification levels are referred to by:

General Schedule (GS)

Attribute-based approches

Graphic rating scale

Costco

Living wage

Individual Incentive Plans

Merit pay increase Lump sum merit bonus Straight piecework plan Differential piecework plan Standard hour plans Spot award Straight commission plan Straight salary plans Mixed salary/commission plan

FLSA most significant parts

Minimum wage Exempt vs nonexempt employees Overtime Child labor Record keeping

Reinforcement Theory (aka operant conditioning)

Positive outcomes occur when individuals learn the relationship between actions and consequences and, as a result, modify their behavior accordingly

The Office of Personnel Management (OPM)

Provides detailed instructions to managers on how to develop performance standards; chief HR agency for the US Government and sets personnel policy for federal workers Provides handbook for importance of specific performance measures

Performance Measures must be:

Reliable and Valid

Results-Based Approaches

Rely on objective performance dimensions, such as production or quality measures Direct Measures Approach Management by Objectives (MBO)

General Electric

Replaced forced distribution with performance development Focuses now on team inspiration and empowerment

Bersin and Associates

Study found that companies providing a lot of employee recognition have 31% lower turnover

Wage curve (or pay policy line)

The market line that represents the relationship between the job evaluation points and the salaries paid for the various jobs in the labor market

compensation

The monetary and non monetary rewards employees receive in exchange for the work they do for an organization

Performance Management

The process of managing two related activities: (1) evaluating the performance of your employees against the standards set for them and (2) helping them develop action plans to improve their performance

Performance Dimensions

The specific tasks and activities employees must perform to do their jobs, and the competencies employees need to successfully perform those tasks and activities

Total Rewards

The sum of all the aspects of a compensation package (base pay, incentives, benefits, perks, and so forth) that signal to current and future employees that they are receiving more than just base pay in exchange for their work

Deloitte

To recognize, see, and fuel

Frame-of-reference (FOR) training

Training that aims to help raters understand performance standards and performance dimensions

Behavioral Observation Scale (BOS)

a behavior based evaluation approach that requires raters to evaluate how often an employee displays certain behaviors on the job

Forced-choice

a behavior based evaluation approach where managers must choose from a set of alternative statements regarding the person being rated Example ____is effective OR _____is efficient

Behaviorally Anchored Rating Scale (BARS)

a behavior based evaluation approach where raters must evaluate individuals along a number of performance dimensions with each performance rating standard anchored by a behavioral example

Critical incident approach

a behavior-based evaluation approach where the evaluation criteria consist of statements or examples of exceptionally good or poor performance employees display over the course of the evaluation period

halo error

a bias that occurs when a positive characteristic of a person affects the evaluation of the person's other attributes

leniency error

a bias that occurs when a rater consistently rate employees on the higher end of an evaluation scale

strictness error

a bias that occurs when a rater consistently rates employees on the low end of an evaluation scale

recency error

a bias that occurs when a rater narrowly focuses on an employee's performance that occurs near the time of the evaluation

Primacy error

a bias that occurs when a raters earlier impressions of an individual bias his or her later evaluations of the person

similar-to-me error

a bias that occurs when evaluators more highly rate employees who resemble them in some way

error of central tendency

a bias that occurs when raters are unwilling to rate individuals as very high or very low on an evaluation scale

merit pay increase

a compensation adjustment based on the results of an employee's performance evaluations

positive discipline

a disciplinary process that is not punitive but focuses on constructive feedback and encourages employees to take responsibility for trying to improve their behaviors or performance at work

Forced distribution

a form of individual comparisons whereby managers are forced to distribute employees into one of several predetermined categories; Bell curve Rate: 10% very good, 20% as good, 40% as average, 20% as poor and 10% as very poor

Improshare plan

a group-based incentive plan based on the number of hours a firm expects to take to reach a certain level of output

Employee Stock Ownership Plan (ESOP)

a group-based incentive plan in which a company contribute shares of its stock to a trust set up for its employees

deferred profit sharing plan

a group-based incentive plan in which the incentive money paid to an employee is put into a retirement account for the person

Leveraged ESOP

a group-based incentive plan that allows a trust to borrow funds against the company's future earnings, and as the debt is repaid, employees receive shares of the stock held by the ESOP in employee accounts

stock option plan

a group-based incentive plan that provides employees with the right to purchase shares of their company's stock at some established price (often its market value) for a given period of time

Profit sharing plan

a group-level incentive plan in which company profits are shared with employees

graphic rating scale

a method of evaluating employees based on various traits, or attributes, they possess relevant to their performance Poor-Below Average-Average-Above Average-Outstanding Limitation: performance standards can be rated differently by different managers

lump-sum merit bonus

a one-time payment based on an employee's level of performance

Contaminated performance measures

a performance measure that is irrelevant to an individual's actual job performance Example: adding in the neatness of one's desk-unnecessary

Straight salary plan

a plan in which employees receive a set compensation, regardless of their level of sales

straight commission plan

a plan that pays employees a percentage of the total sales they generate

Progressive Discipline

a process by which an employee with disciplinary problems progresses through a series of disciplinary stages until the problem is corrected

Factor comparison

a quantitative type of job evaluation that involves ranking benchmark jobs in relation to each other on each of several factors, such as mental requirements, physical requirements, skill, responsibility, and working conditions, and then assigning a portion of the hourly rate for each job to each factor

direct measures approach

a results based evaluation approach in which managers gauge the outcomes of employees' work such as their sales, productivity, and absenteeism

Management by Objectives (MBO)

a results based evaluation approach where managers meet with their employees and jointly set goals for them to accomplish during a particular time period

spot awards

a short term incentive that companies use to encourage their employees to work toward specific outcomes

Salary compression (aka pay or wage compression)

a situation that occurs when the pay for jobs in the external marketplace rises faster than the pay for jobs inside the organization resulting in new employees receiving equal salaries to current employees

salary inversion

a situation where new employees have negotiated for higher wages than the current employees are making

salary survey

a systematic process for collecting information about wages in the external labor market

paired comparison

an evaluation approach in which each employee in a business unit is compared to every other employee in the unit

ranking approach

an evaluation approach in which employees are evaluated from best to worst along some performance dimension or by virtue of their overall performance

Mixed level plan

an incentive plan in which employees are exposed to multiple incentive plans

deficient performance measures

an incomplete appraisal of an individual's performance when important aspects are not measured

Standard Hour Plan

an individual incentive plan in which employee's pay is based on how much time an employee is expected to need to complete some task

Straight Piecework Plan

an individual incentive plan in which employees receive a certain rate of pay for each unit they produce

differential piecework plan

an individual incentive plan in which the pay employees receive per unit produced or delivered changes at certain levels of output

contrast effect

bias that results when an evaluation of one or more job applicants is artificially inflated or deflated compared to another job applicant

Backdating

choosing the date of a stock award based on when the stock prices was low rather than the exact date the stock award was issued, thereby creating an immediate profit for the individual

Compensation philosophy

communicates information to employees about what is valued within the organization, enhances the likelihood of consistency in pay across the organizational units, and helps attract, motivate, and retain employees

Expectancy Theory

employees make decisions regarding how to act at work based on which behaviors they believe will lead to their most valued rewards and outcomes

External Competitiveness

ensuring pay rates for jobs in a company are appropriately aligned relative to pay rates for similar jobs in the company's external labor market

comparable worth

focuses on eliminating inequity in wages by ensuring that jobs that require similar levels of education and experience and have other characteristics in common are paid at a similar wage regardless of gender

Edwin Locke

goal-setting theory

Goal Setting Theory

goals serve as a motivator to focus the efforts of employees toward desired outcomes when the goals are specific, challenging, attainable, and when feedback on progress is provided

Fair Labor Standards Act (FLSA)

governs what employers can and cannot do in regards to compensation, including regulating the use of child labor, defining the difference between exempt and nonexempt employees, setting a minimum wage, and stipulating the pay rate for overtime work

Job grade

grouping jobs with comparable points together to reflect the hierarchy of jobs within a company for the purpose of establishing wage rates

Competency-based pay

highly structured pay system that identifies the competencies employees need to master to be eligible for pay raises

minimum wage

lowest legal wage that can be paid to most workers

Agency Theory

managers motivate their employees to act in certain ways by aligning their interests with the firm's other stakeholders

Internal Alignment

occurs when each job in a company is valued appropriately relative to every other job in terms of its ability to help the firm achieve its goals

B.F. Skinner

operant conditioning

Gain sharing plans

plans designed to help increase an organization's efficiency by increasing the productivity of the company's employees and/or lowering the firm's labor costs

Davis-Bacon Act

requires contractors and subcontractors with contracts in excess of $2,000 with the federal government to pay their workers a minimum wage that is at least equal to the local prevailing wages and to provide them with the local prevailing benefits

knowledge-based pay

systems that require employees to acquire certain skills or knowledge in order to receive a pay increase

skill-based pay

systems that require employees to acquire certain skills or knowledge in order to receive a pay increase

Specificity

the clarity of performance standards

living wage

the concept that employees should be paid a wage that ensures that their basic costs of living are met

Valence

the degree of value employees place on different rewards Do employees value the 10% bonus?

Expectancy

the degree to which employees believe that, if they work toward a certain performance objective, they will be able to achieve that objective

Absolute approach

the evaluation of employees' performance by comparing employees against certain "absolute" standards (rather than against each other) along a number of performance dimensions (rather than simply making a global assessment about them)

performance standards

the level of expected performance

Instrumentality

the perceived relationship between performance and receiving the reward or incentive payment promised; reflects whether employees believe that achieving an objective will be rewarded Do employees actually believe they will be rewarded if they meet the goal?

job pricing

the systematic process of assigning monetary rates to jobs so that a firm's internal wages are aligned with the external wages in the marketplace

job evaluation

the systematic process of establishing the relative worth of the jobs within the company

Equity Theory

the theory that employees compare their input (work effort) and outcome (wages) levels with those of other people in similar situations to determine if they are being treated the same in terms of pay and other outcomes

Global performance measure

the use of a single score to reflect an individual employee's overall performance

Overtime

work hours that exceed the number of hours established as the normal workweek