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Rewarding individual performance (chapter 6)

Human behavior in Organization's chapter 6 titled "Rewarding individual performance".

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Rewarding individual performance (chapter 6)

  1. 1. CHAPTER 6: REWARDING INDIVIDUAL PERFORMANCE by: Jon Jovi R. Barreras (H-353) Lyceum of the Philippines University (Manila) College of International Tourism and Hospitality Management Human Behavior in Organization (DHBN01H)
  2. 2. CHAPTER LEARNING OBJECTIVES  Describe goal setting and relate it to motivation.  Discuss performance management in organizations.  Identify the key elements in understanding individual rewards in organizations.  Describe the issues and processes involved in managing reward systems.
  3. 3. GOAL SETTING AND MOTIVATION  Purposes of Setting Goals in Organizations  To provide a useful framework for managing motivation to enhance employee performance  To serve management as a control device for monitoring of how well the organization is performing  Goal  A desirable objective  Self-Efficacy  The extent to which we believe we can accomplish our goals even if we failed to do so in the past
  4. 4. GOAL SETTING AND MOTIVATION  Goal Setting Theory (Locke)  Assumes that behavior is a result of conscious goals and intentions, therefore goals influence behavior (performance)  Goal Characteristics  Goal difficulty  The extent to which a goal is challenging, requires effort, and is attainable  Goal specificity  The clarity and precision of a goal
  5. 5. EXPANDED GOAL SETTING THEORY (LOCK AND LATHAM) The Goal-Setting Process  Goal-directed effort is a function of goal attributes: 1. Goal difficulty 2. Goal specificity 3. Goal acceptance: the extent to which a person accepts a goal as his/her own 4. Goal commitment: the extent to which a person is interested in reaching a goal
  6. 6. BROADER PERSPECTIVES ON GOAL SETTING Management by Objectives (MBO)  A collaborative goal-setting process through which organizational goals cascade down throughout the organization  Requires customizing to each organization  Can be effective for managing reward systems where the manager has individual interactions with each employee
  7. 7. GOAL SETTING: EVALUATION AND IMPLICATIONS  Research has shown that:  Goal difficulty and specificity are closely associated with performance.  Goal-setting theory may focus too much on short-run considerations.  MBO has the potential to motivate because it helps implement goal-setting theory on a systematic basis throughout the organization.  MBO has a tendency to overemphasize quantitative goals to enhance verifiability.
  8. 8. PERFORMANCE MANAGEMENT IN ORGANIZATIONS The Nature of Performance Management  Performance measurement (or appraisal) process: 1. Evaluating an employee’s work behaviors by measurement and comparison with previously established standards 2. Documenting the results 3. Communicating the results to the employee Performance Management System  Comprises the processes and activities involved in performance appraisals
  9. 9. PERFORMANCE MANAGEMENT BASICS Who is to do the appraisals? How often are the appraisals to be done? How is performance to be measured? Issues in Performance Measurement
  10. 10. PERFORMANCE MANAGEMENT: THE PROCESS  The Appraiser: Alternatives  The direct supervisor  Multiple-rater systems (including self-evaluation)  360-degree feedback  A system in which people receive performance feedback from those on all sides of them in the organization (boss, colleagues, peers, subordinates)  Frequency of Appraisals  Determined by convenience for administrative purposes, cultural appropriateness, and relevance
  11. 11. PERFORMANCE MANAGEMENT: THE PROCESS Measuring Performance  Considerations  Desired decisions to be made based on outcome  Instruments must be valid, reliable, and free of bias  Choices of measurement methods  Graphic rating scales, checklists, essays/diaries, behaviorally anchored rating scales, forced-choice systems  Comparative methods such as ranking, forced distribution, paired comparisons, multiple raters
  12. 12. INDIVIDUAL REWARDS IN ORGANIZATIONS Reward System  Consists of all organizational components involved in allocating compensation and benefits to employees in exchange for their contribution to the organization including: People Processes Rules Procedures Decision-making activities
  13. 13. REWARDS’ PURPOSES, ROLES, AND MEANINGS  Purposes  To attract, retain, and motivate qualified employees  Roles of compensation structures  To be equitable and consistent  To be a fair reward for the individual’s contribution  To be competitive in the external labor market  Meanings of rewards  Surface value: objective meaning or worth of reward  Symbolic value: subjective and personal meaning or worth of reward
  14. 14. TYPES OF INDIVIDUAL REWARDS  Compensation Package  The total array of money (wages, salary, commission), incentives, benefits, perqui sites, and awards provided by the organization  Base Pay  Symbolizes an employee’s worth  Can improve motivation and performance if part of an effectively planned and managed pay system  Is a major cost of doing business  Can reduce turnover and increase morale when well- designed
  15. 15. TYPES OF INDIVIDUAL REWARDS  Incentive Pay Systems  Plans in which employees can earn additional compensation in return for certain types of performance 1. Piecework programs 2. Gain-sharing programs 3. Bonus systems 4. Long-term compensation 5. Merit pay plans 6. Profit-sharing plans 7. Employee stock option plans
  16. 16. INDIVIDUAL REWARDS Indirect Compensation (Employee Benefits) 1. Payment for time not worked 2. Social Security contributions 3. Unemployment compensation 4. Disability and workers’ compensation benefits 5. Life and health insurance programs 6. Pensions or retirement plans
  17. 17. INDIVIDUAL REWARDS  Perquisites  Special privileges awarded to selected members of an organization, usually top managers  Add to the status of their recipients and thus may increase job satisfaction and reduce turnover  Other Awards  Rewards for seniority, perfect attendance, zero defects (quality work), cost reduction suggestions
  18. 18. MANAGING REWARD SYSTEMS  Linking Performance and Rewards  Employee perception of link between pay and performance results in symbolic value of pay  Flexible Reward Systems  Allows employees to choose the combination of benefits that best suits their needs  Increases both employee satisfaction with benefits and administrative costs for the employer  Participative Pay Systems  Employees are involved in the design and/or administration of their compensation system
  19. 19. MANAGING REWARD SYSTEMS  Pay Secrecy  Employer makes no information available to employees regarding other employees’ salaries, percentage raises, salary ranges and requires employees to not reveal their compensation  Expatriate Compensation  Compensation packages of employees on overseas assignments must be adjusted to account for differences in costs of living and working conditions in working aboard versus their home base
  21. 21. THE END! Thank you 