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Compensation - Performance pay - Case study

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Compensation - Performance pay - Case study

Compensation - Performance pay - Case study

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  • 1. BSMH 5143Compensation and Benefits ManagementIndividual Case StudyAppraising Performance at PrecisionBy814284 - PRIDHIVRAJ NAIDU27thMay 2013
  • 2. 1. IntroductionMerit pay plans relate adjustments in an employee’s base pay directly to that person’s job performance(Henderson, 1989). One survey, cited by Meyer (1991), indicated that less than 10% have successfulPerformance Appraisal programs; another nationwide survey indicated that the performance appraisal system isthe firm’s most frequently mentioned human resource concern. Apart from these concerns there are manyadvantages to using a formal system if performance appraisals are designed and used properly (Murphy andCleveland, 1995).2. Problems with Precision’s performance appraisal process2.1 Supervisory Rating – accuracy of the performance appraisal measurementWhile firms have many methods for gauging performance, the validity and accuracy of the most commonlyused method, supervisory ratings (Milkovich& Boudreau, 1991)has always been a major concern. Thesemeasures are likely to suffer from both deficiency and contamination problems, including subjectivity, personalbias,deliberate distortion, and various other intentionaland unintentional rating errors (e.g., halo, contrast,central tendency, etc.). All these problems call into question the accuracy of the performance measure (Balkin&Gomez-Mejia, 1987; Latham &Wexley, 1981)2.2 Simple appraisal processCleveland et al. (1989) described four types of uses of performance appraisal: between person, within person,systems maintenance and documentation. This shows the importance and in depth function of the performanceappraisal. In this case the management has to look at the details of the appraisal form to be specific andobjective to the goals of the organization.2.3 Job DescriptionA major setback as the organization in the case study is not equipped with a written job description, based onStybel (2010) definition this one document has become the basic building block for enterprise wide talentmanagement systems such as the following: recruitment, performance assessment, succession planning,
  • 3. coaching, training, or job-competency modeling. As one of its functions, it is an essential piece of informationto assess the employee performance.3. Changes recommended for the performance appraisalEffective managers recognize performance appraisal systems as a tool formanaging, rather than a tool formeasuring, subordinates. They may useperformance appraisals to motivate, direct and develop subordinates andtomaximize access to important resources in the organization(Wiese & Buckley, 1998).3.1 Supervisory / Appraiser TrainingConsiderable amount of skill is needed to conduct an effective appraisal interview, and many managersapparently do not possess the requisite skill. It is, therefore, not surprising that many managers see little value inperformance appraisal interviews (Napier & Latham, 1986).Human resource researchers have suggested that firms train appraisers to avoid the common errors that occur inperformance measurement(Campbell, Campbell, & Chia, 1998), with relevant training provided the appraisercum supervisors will be able to provide a standard pointers and remarks on the employee capabilities and workperformance.3.2 Specific and Objective measurementsHuman resource researchers have suggested that firms move away from highly subjective judgments to morespecific and objective measurements(Campbell et al., 1998).Simply by training raters in how to avoid common errors, firms can make the measurement processmoreaccurate and objective (Latham &Wexley, 1981); thus, training and a results- or behaviorally-orientedappraisal focus may minimize measurement problems.3.3 Developing a written Job Description
  • 4. Stybel (2010) reminds us that we design job titles and job descriptions for two audiences: internal and external.To improve on the performance appraisal, the focus is on internal job description.Changing definitions of jobs and their roles in the organization, appraisal forms should reflect the importantaspects of the work performed in each functional area. The increased numbers of lateral transfers (due to flatterorganizations), suggests that the appraisal system should focus on the strengths and weaknesses of theindividual(Wiese & Buckley, 1998).3.4 Performance Appraisals GoalsPerformance appraisals should be used to identify a feasible set of quality workers or candidates, instead of thebest person in an organization. Performance appraisal goals need to become more comprehensive – goals whichare beneficial to both individual and organization(Wiese & Buckley, 1998). The performance appraisal needs tobe specific in delivering the improvement needed and also highlighting the strengths of the employee in detail.4. ConclusionTo remain competitive, a firm needs to entice employees to perform at their best. Whilemerit pay plans appearto represent one powerful and intuitively appealing enticement, for a substantial number of firms using suchplans. In the case of Precision, Jackson Smith needs to be a step ahead in making the necessary changes to beable to implement pay-for-performance.References
  • 5. Balkin, D., & Gomez-Mejia, L. (1987). New perspective on compensation. Englewood Cliffs,NJ: Prentice-Hall.Campbell, D. J., Campbell, K. M., & Chia, H. (1998). Merit Pay , Performance Appraisal , AndIndividual Motivation : An Analysis And Alternative, 37(2), 131–146Cleveland, J.N., Murphy, K.R. and Williams, R.E. (1989), “Multiple uses of performanceappraisal: prevelance and correlates”, Journal of Applied Psychology, Vol. 74, pp. 130-5.Henderson, R. (1989). Compensation management: Rewarding performance. Englewood Cliffs,NJ: Prentice-Hall.Latham, G., & Wexley, K. (1981). Increasing productivity through performance appraisal. Reading, MA:Addison-Wesley.Meyer, H. (1991). A solution to the performance appraisal feedback enigma. Academy of ManagementExecutive, 5, 68–76Milkovich, G., & Boudreau, J. (1991). Human resource management. Homewood, IL: IrwinMurphy, K.R. and Cleveland, J.N. (1995).Understanding Performance Appraisal: Social,Organizational and Goal-Based Perspectives, Sage, Thousand Oaks, CANapier, N., & Latham, G. (1986). Outcome expectancies of people who conduct performanceappraisals. Personnel Psychology, 39, 827–837.Stybel, L. (2010). Managing the inner contradictions of job descriptions: A technique for use inrecruitment. The Psychologist-Manager Journal, 13, 105–110.Wiese, D. S., & Buckley, M. R. (1998). The evolution of the performance appraisal process, 4(3), 233–249..