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Motivating employee performance through rewards
- 2. Goal Setting and Motivation
- 3. Goal-Setting Theory A social learning theory that provides insights into why and how goals can motivate behavior. It also helps us understand how different people cope with failure to reach their goals. Edwin Locke's goal-setting theory of motivation assumes that behavior is a result of conscious goals and intentions.
- 4. Goal-Setting Theory By setting goals for people in the organization, a manager should be able to influence their behavior. Develop a thorough understanding of the processes by which people set their goals and then work to reach them.
- 5. Goal Difficulty Goal difficulty is the extent to which a goal is challenging and requires effort. If people work to achieve goals, it is reasonable to assume that they will work harder to achieve more difficult goals.
- 6. Goal Specificity Goal specificity is the clarity and precision of the goal. Some goals, such as those involving costs, output, profitability, and growth can easily be states in clear and precise terms.
- 7. Goal Setting Theory of Motivation by Locke and Gary Latham The expanded theory argues that goal- directed effort is a function of four goal attributes: difficulty, specificity, acceptance and commitment.
- 8. Goal Setting Theory of Motivation by Locke and Gary Latham • Goal acceptance is the extent to which a person accepts a goal as his or her own. • Goal commitment is the extent to which he or she personally interested in reaching the goal.
- 9. Goal Setting Theory of Motivation by Locke and Gary Latham • The interaction of goal-directed effort, organizational support and individual abilities determines actual performance.
- 10. Goal Setting Theory of Motivation by Locke and Gary Latham • Organizational support is whatever the organization does to have better performance. • Individual abilities and traits are the skills and other personal characteristics necessary to do a job.
- 11. Goal Setting Theory of Motivation by Locke and Gary Latham • As a result of performance, a person receives various intrinsic and extrinsic rewards that, in turn, influence satisfaction.
- 12. Management of Objectives Management of Objectives (MBO) is essentially a collaborative goal-setting process through which organization goals systematically cascade down through the organization.
- 13. Management of Objectives Starts with top managers establishing overall goals for the organization. Managers and employees throughout the organization collaborate to set subsidiary goals. The manager periodically meets with each subordinate to check progress. An annual performance review will be done at the end of the specified time period.
- 15. The Nature of Performance Management Performance measurement or performance appraisal is the process by which someone (1) evaluates an employee's work behaviors by measurement and comparison with previously established standards, (2) documents the results, and (3) communicates the results to the employee.
- 16. The Nature of Performance Management A performance management system (PMS) comprises the processes and activities involved in performance appraisals.
- 17. Purposes of Performance Measurement Providing job performance feedback is the primary use of appraisal information. Judgement of Past Performance • Provide a basis for reward allocation. • Provide a basis for promotions, transfer, layoff, and so on. • Identify high-potential employees. • Validate selection procedures. • Evaluate previous training programs.
- 18. Purposes of Performance Measurement Providing job performance feedback is the primary use of appraisal information. Development of Future Performance • Foster work improvement. • Identify training and development opportunities. • Develop ways to overcome obstacles and performance • Establish supervisor-employee agreement on expectations.
- 19. Performance Measurement Basics The Appraiser • Supervisor • multiple-rater system • 360-degree feedback Frequency of the • regular basis, typically once a year • "as-needed" basis Measuring Performance • must be valid, reliable and free of bias • graphic rating scale, checklists, essays or diaries, behaviorally anchored rating scales, and force-choice systems
- 20. Individual Rewards in Organizations The reward system consists of all organizational components, including people, processes, rules and procedures, and decision-making activities, involved in allocating compensation and benefits to employees in exchange for their contributions to the organization.
- 21. Individual Rewards in Organizations The purpose of the reward in most organizations is to attract, retain and motivate qualified employees. The organization's compensation structure must be equitable and consistent to ensure equality of treatment and compliance with the law. Compensation should also be a fair reward for the individual's contributions to the organization.
- 22. Individual Rewards in Organizations The organization needs to decide what types of behavior or performance it wants to encourage with a reward system because what is rewarded tend to recur.
- 23. Meanings of Reward to Employees The surface value of a reward to an employee is its objective meaning or worth. The symbolic value of a reward to an employee is its subjective and personal meaning or worth.
- 24. Types of Rewards An individual's compensation package is the total array of money (wages, salary, commissions) incentives, benefits, perquisites, and awards provided by the organization.
- 25. Types of Rewards Basic Pay. An effectively planned and managed pay system can can improve motivation and performance. Incentive Systems. Incentive systems are plans in which employees can earn additional compensation in return for certain types of performance. • Piecework programs • Gain-sharing programs • Bonus systems • Long-term compensation • Merit pay plans • Profit-sharing plans • Employee stock option plans
- 26. Types of Rewards Indirect Compensation. Another major component of the compensation package is indirect compensation which also commonly referred to as the employee benefits plan. Perquisites. Perquisites are special privileges awarded to selected members of an organization, usually top managers. Awards. At many companies, employees receive awards for anything from seniority to perfect attendance, from zero defects (quality work) to cost reduction suggestions. • Disability and workers' compensation benefits • Life and health insurance programs • Pension or retirement plans • Payment for time not worked • Social Security contributions • Unemployment compensations
- 27. Managing Reward Systems Issues to Consider in Developing Reward System Pay Secrecy Employee Participation Flexible System Ability to Pay Economic and Labor Market Factors Impact on Organizational Performance Expatriate Compensation
Editor's Notes
- For decades management have advocated the importance of providing meaningful reward for employees. Most managers initially focused on pay as the basic reward offered to employees. But now many people understand that employees actually seek and respond to a variety of reward from their work.
- Goal setting is a very useful method of enhancing employee performance. Form a motivational perspective, a goal is a meaningful objective. Goals are used for two purposes in most organizations. First they provide a useful framework for managing motivation. Second, goals are an effective control device.
- Goal-Setting Theory provides insights into why and how goals can motivate behavior. It also helps us understand how different people cope with failure to reach their goals. The research of Edwin Locke established the utility of goal-setting theory in a motivational context. Locke's goal-setting theory of motivation assumes that behavior is a result of conscious goals and intentions.
- Therefore, by setting goals for people in the organization, a manager should be able to influence their behavior. Given this premise, the challenge is to develop a thorough understanding of the processes by which people set their goals and then work to reach them.
- In the original version of goal-setting theory, two specific goal characteristics – goal difficulty and goal specificity – were expected to shape performance. Goal Difficulty. Goal difficulty is the extent to which a goal is challenging and requires effort. If people work to achieve goals, it is reasonable to assume that they will work harder to achieve more difficult goals. But a goal must not be so difficult that it is unattainable. If a new manager asks her sales force to increase sales by 300%, the group may ridicule her charge as laughable because they regard it as impossible to reach.
- Goal Specificity. Goal specificity is the clarity and precision of the goal. A goal of "increasing productivity" is not very specific, whereas a goal of increasing productivity by 3 percent in the next six months" is quite specific. Some goals, such as those involving costs, output, profitability, and growth can easily be states in clear and precise terms. Like difficulty, specificity has been shown to be consistently related to performance.
- Locke and Gary Latham proposed an expanded model of the goal-setting process that capture more fully the complexities of goal setting in organizations. The expanded theory argues that goal-directed effort is a function of four goal attributes: difficulty, specificity, acceptance and commitment.
- Goal acceptance is the extent to which a person accepts a goal as his or her own. Goal commitment is the extent to which he or she personally interested in reaching the goal. Factors that can foster goal acceptance and commitment include participating in the goal-setting process, making good, challenging but realistic, and believing that goal achievement will lead to valued rewards.
- The interaction of goal-directed effort, organizational support and individual abilities determines actual performance.
- Organizational support is whatever the organization does to have better performance. Positive support might mean providing whatever resources are needed and negative support might mean failing to provide such resource, perhaps due to cost considerations and staff reductions. Individual abilities and traits are the skills and other personal characteristics necessary to do a job.
- As a result of performance, a person receives various intrinsic and extrinsic rewards that, in turn, influence satisfaction.
- Some organizations undertake goal setting from the broader perspective of management by objective or MBO. Management of Objectives (MBO) is essentially a collaborative goal-setting process through which organization goals systematically cascade down through the organization.
- A successful MBO program starts with top managers establishing overall goals for the organization. After these goals have been set, managers and employees throughout the organization collaborate to set subsidiary goals. First, the overall goals are communicated to everyone. Then each manager meets with each subordinate. During these meetings, the manager explains the unit goals to the subordinate, and the two together determine how the subordinate can contribute to the goals most effectively,. The manager and subordinate ensure that the subordinate has the resources needed to reach his or her goals. During the timeframe set for goal attainment, the manager periodically meets with each subordinate to check progress. It may be necessary to modify the goals in light of new information, to provide additional resources or to take other action. At the end of the specified time period, managers hold a final evaluation meeting with each subordinate. The meeting often serves as the annual performance review,
- As described earlier, most goals are oriented toward some element of performance. Managers can do variety of things to enhance employee motivation and performance, including redesigning jobs, allowing greater participation, creating alternative work arrangements and setting goals. However, they may also fail to do things that might improve motivation and performance, and they might even inadvertently do things that reduce motivation and performance. Thus, it is clearly important that performance be approached as something that can and should be managed.
- The core of performance management is the actual measurement of the performance of an individual or group. Performance measurement or performance appraisal is the process by which someone (1) evaluates an employee's work behaviors by measurement and comparison with previously established standards, (2) documents the results, and (3) communicates the results to the employee.
- A performance management system (PMS) comprises the processes and activities involved in performance appraisals as shown in the figure. An organization’s performance management system plays an important role in determining its overall level of effectiveness. This is especially true when the organization is attempting to employ total quality management. Key elements of a performance management system, as shown here, include the timing and frequency of evaluations, the choice of who does the evaluation, the choice of measurement procedures, the storage and distribution of performance information, and the recording methods. These elements are used by managers and employees in most organizations. A simple performance appraisal involves a manager and an employee whereas the PMS incorporates the total quality management context with the organizational policies, procedures, and resources that support the activity being evaluated.
- Performance measurement may serve many purposes. The ability to provide critical feedback is one critical purpose. Feedback, in turn, tells the employee where she or he stands in the eyes of the organization. Providing job performance feedback is the primary use of appraisal information. Performance appraisal information can indicate that an employee is ready for promotion or that he or she needs additional training to gain experience in another area of company operations. The purposes of performance appraisal can be grouped into two broad categories, judgement and development. Performance appraisals with a judgmental orientation focus on past performance and are concerned mainly with measuring and comparing performance and with the uses of this information.
- Appraisal with a developmental orientation focus on the future and use information from evaluation to improve performance.
- Employee appraisals are common in every type of organization, but how they are performed may vary. Many issues must be considered in determining how to conduct an appraisal. Three of the most important issues are who does the appraisals, how often they are done, and how performance is measured. The Appraiser. The primary evaluator the supervisor. It is the supervisor who has traditionally provided performance feedback to employees and determined performance-based and sanctions. Some incorporate multiple-rater system that incorporates the ratings of several people familiar with the employee's performance. Another alternative is to use the employee as an evaluator. 360-degree feedback - a performance management system in which people receive performance feedback from those on all "sides" of them in the organization - their boss, their colleagues and peers, and their own subordinates. Frequency of the Appraisal. The organization usually conducts performance appraisals on a regular basis, typically once a year. Annual performance appraisals are convenient for administrative purposes such as record keeping and maintaining a level of routine that helps keep everyone comfortable. Some organizations also conducted appraisals semiannually. Several systems for monitoring employee on an "as-needed" basis have been proposed as an alternative to the traditional annual system. Measuring Performance. The measurement method provides the information managers use to make decisions about salary adjustment, promotion, transfer, training and discipline. Performance appraisals must be valid, reliable and free of bias. Some of the most popular methods for evaluating individual performance are graphic rating scale, checklists, essays or diaries, behaviorally anchored rating scales, and force-choice systems.
- One of the primary purposes of performance management is to provide a basis for rewarding employees. We now turn our attention to rewards and their impact on employee motivation and performance. The reward system consists of all organizational components, including people, processes, rules and procedures, and decision-making activities, involved in allocating compensation and benefits to employees in exchange for their contributions to the organization. Rewards constitute many of the inducements that organization provide to employees as their part of the psychological contract. Rewards also satisfy some of the needs employees attempt to meet through their choice of work-related behaviors.
- The purpose of the reward in most organizations is to attract, retain and motivate qualified employees. The organization's compensation structure must be equitable and consistent to ensure equality of treatment and compliance with the law. Compensation should also be a fair reward for the individual's contributions to the organization. Also, the system must be competitive in the external labor market for the organization to attract and retain competent workers in appropriate fields. Beyond these broad considerations, an organization must develop, its philosophy of compensation based on its own conditions and needs, and this philosophy must be defined and built into the actual reward system.
- The organization needs to decide what types of behavior or performance it wants to encourage with a reward system because what is rewarded tend to recur. Possible behavior includes performance, longevity, attendance, loyalty, contributions to the “bottom line”, responsibility and conformity.
- It is also important for the organization to recognize that organizational rewards have many meanings for employees. Intrinsic and extrinsic rewards carry both surface and symbolic value. The surface value of a reward to an employee is its objective meaning or worth. A salary increase of 5%, for example, means that an individual has 5% more spending power than before whereas a promotion, on the surface, means new duties and responsibilities. But managers must recognize the rewards also carry symbolic value. he symbolic value of a reward to an employee is its subjective and personal meaning or worth. If a person gets a 3% salary increase when everyone gets 5%, one plausible meaning is that organization values other employees more. But if the same person gets 3 percent and all others get only 1 percent, the meaning may be just the opposite – the individual is seen as the most valuable employee. Thus, rewards convey to people not only how much they are valued by the organization but also their importance relative to others. Managers need to tune in to the many meanings rewards can convey – not only to the surface messages but to the symbolic message as well.
- Most organizations use several types of rewards. The most common are base pay (Wage or salary), incentive systems, benefits, prerequisites and awards. These rewards are combined to create an individual’s compensation package. An individual's compensation package is the total array of money (wages, salary, commissions) incentives, benefits, perquisites, and awards provided by the organization.
- For most people, the most important reward for work is the pay they receive. Obviously, money is important because o the