Performance Measures, Appraisals, and Compensation Practices

Explain the differences and concerns with performance measures

Different types of Performance Measures. 2 types of measures:

• Objective Measures: quantitative and based on counts of behaviors or outcomes. Ex: number of students in a class, multiple choice exam.
• Subjective Measures: qualitative and based on judgments from raters.

Explain the value of using multiple sources for performance appraisal ratings

Common Problems with Performance Measures (1/2) Rater Errors. Rating errors occur when:

1. Raters provide assessments that follow an undesirable pattern.
2. The rater does not properly account for factors that might influence assessments.

A common error is central tendency error, which is the pattern of placing almost everyone in the middle of the scale.

Different Types of Performance Appraisals (1/2)

Narrative ratings: Supervisors or raters provide a written description of performance. However, without consistent measurement, it may be difficult to determine which employees are high and low performers.

Graphic Rating Scale: Raters are asked to provide a numerical rating for different dimensions of work performance.

Different Types of Performance Appraisals (2/2)

Forced ranking: rater is required to rank all employees. The forced ranking technique eliminates central tendency error and provides guidance for organizations in giving promotions and pay raises to top performers.

Describe effective feedback to employees

Performance Appraisal is generally done by the individual in the organization who is closest to observing the employee’s performance. This is usually the employee's immediate supervisor or manager.

Multisource of Performance Appraisal - The multiple ratings give a more complete picture of performance and usually also provide better guidance about what the employee can do to improve.Providing Feedback - After measuring performance, the employee must now receive feedback on their performance. Feedback has been shown to have a positive influence on performance. It lets the employee know how they are doing and areas where improvement can take place.

Describe employee compensation practices

Employee Compensation Compensation is a broad term which includes pay and benefits such as insurance, retirement savings, and paid time off from work. Compensation represents the total package, both monetary and nonmonetary.External vs. Equity Employees’ perception of external equity - which concerns the fairness of what the company is paying them compared with what they could earn elsewhere—are critical in such employment relationships.

An external labor orientation requires a comparison with the compensation offered by other organizations.

Employees’ perceptions of internal equity - their beliefs concerning the fairness of what the organization is paying them compared with what it pays other employees.

Internally oriented organizations also use long-term incentives to reward employees who stay with them for long periods.

Differentiation vs. Cost Strategy

Organizations following a differentiation strategy seek high performing employees who create superior goods and services.

Organizations following cost strategy want to reduce labor expenses, paying fixed salaries.

Connect motivation theories to compensation practices

Motivation can be defined as a force that causes people to engage in a particular behavior rather than other behaviors.

Motivation is represented by three elements: 1. Behavioral choice involves deciding whether or not to perform a particular action. 2. Intensity concerns deciding how much effort to put into the behavior. 3. Persistence involves deciding how long to keep working at the behavior