Performance management research


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Performance management research

  1. 1. performanceDefinitionThe accomplishment of a given task measured against preset known standardsof accuracy, completeness, cost, and speed. In a contract, performance is deemed tobe the fulfillment of an obligation, in a manner that releases the performer fromall liabilities under the contract.Read more: is the definition of performance management? The process of motivating employees through setting goals, measuring progress, giving feedback, coaching for improved performance, and rewarding achievements.Performance management is the process of creating a work environment or setting in which people are enabled to perform to thebest of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends whenan employee leaves your organization.Many writers and consultants are using the term “performance management” as a substitution for the traditional appraisal system.I encourage you to think of the term in this broader work system context. A performance management system includes thefollowing actions. Develop clear job descriptions. Select appropriate people with an appropriate selection process. Negotiate requirements and accomplishment-based performance standards, outcomes, and measures. Provide effective orientation, education, and training. Provide on-going coaching and feedback. Conduct quarterly performance development discussions. Design effective compensation and recognition systems that reward people for their contributions. Provide promotional/career development opportunities for staff. Assist with exit interviews to understand WHY valued employees leave the organization. Performance Based Management
  2. 2. What does performance based management mean? It simply means the following:Performance based management is when you manage your direct reports by focusingon their performance. That’s it.But think about it though:You are responsible for your team (made up of your employees and yourself) – youare your direct reports’ boss – you are accountable for the results your team delivers– it is your responsibility to make sure your direct reports bring about the expectedresults (on time, on budget, and within quality standards) – you get paid so that theteam you are responsible for delivers those expected results.And no matter what industry you work for, results are always observable, tangible,measurable, and objective.But we human beings are subjective by definition – we have feelings, we haveemotions, we interpret the world in different ways, we have different opinions aboutthe same thing, etc.The company you work for doesn’t care if the people you are responsible for (yourdirect reports) are subjective human beings. You must give results nevertheless.Period.So keeping objectivity when it comes to delivering results is critical. At the end of theday, at the end of the month, or at the end of the quarter, you cannot walk up toyour boss and tell her that you weren’t able to deliver the expected results becauseyour employees engaged in intense office politics, got angry at each other, and as aresult, they didn’t finish their work on time.So how do you keep objectivity when it comes to managing your people? In otherwords, how do you do performance based management? You do that by focusing onperformance. Why? Because performance is nothing more than behavior plus results.Because this is an indispensable and key element in performance basedmanagement, I repeat: Performance is a unity composed of two elements: behaviorand results – and both (behavior and results) are tangible, measurable, andobjective.To do performance based management effectively, keep in mind the following threeguidelines:1) Be objectiveErase the word “attitude” from your vocabulary – in stead; focus on “behavior.”Why? Because attitude is subjective, it is the interpretation of a collection of severalbehaviors. Attitude is not a fact.Behavior is objective; it is observable, measurable, and tangible. Behavior is a fact.For example:If you ask 10 of your co-workers to tell you about Mary’s attitude who frequentlyarrives late at work, you will get 10 different answers: she is lazy, she isirresponsible, she has problems at home, etc.These answers are useless if you want to correct Mary’s behavior – if you told Marythat she is lazy, or irresponsible, etc., you would not keep objectivity in managingher performance, and she would probably feel that you are blaming her.Performance based management is not about getting personal with anybody. Maryand you – her boss – are not inside that company to like or dislike each other; onthe contrary, both of you are inside that company to deliver results. In other words,attitude is useless in performance based management.But if you ask those same 10 co-workers to tell you exactly at what time Maryarrived at the office during the entire the past week, they will all give you exactly thesame answer: on Monday she arrived 12 minutes late, on Tuesday she arrived 9minutes late, on Wednesday she arrived 17 minutes late, etc.These answers are observable, measurable, tangible, and objective. If you usedthese answers (read facts) to talk to Mary about her behavior, the focus of theconversation would be on her behavior, not on her as a person, and you would keepobjectivity in managing her performance. Basic Management SkillsBasic management skills to help you manage the performance of your direct reports.But don’t be fooled by the word “basic” – whether you are an entry-level supervisor,a seasoned executive, or the CEO, these skills will help you lead your employees topeak performance.In my experience working with hundreds of managers, the great majority of themdidn’t know about most of these so-called basic skills.
  3. 3. I grouped these skills into four sections: First Section: Building Blocks Second Section: General Skills Third Section: Communication Skills Fourth Section: Specific Skills Because each skill is a stand-alone technique or tool, you may look at each section, and decide which skill you want to learn about. However, in order to maximize the effectiveness of this performance management model, I suggest you go through the first three sections in a sequential order. –––~~~••• O •••~~~––– Definition of Performance ManagementYou must have a clear and practical definition of performance management if you want topurposefully manage the performance of your direct reports in order to lead them to peakperformance.We do not define anything here in terms of theory – we define everything here according tothe practical needs of the manager who must deliver results through her direct reports.Before we ask ourselves what is performance management, let’s define the meaning of“performance.”Performance is the sum of behavior plus results: Performance = Behavior + ResultsWhen you are looking at performance, it is necessary to focus on both, on behavior and onresults: If you only focus on behaviors, you won’t notice if you don’t get desired results And if you only focus on results, you won’t notice if your employees don’t behave ethicallyRemember this simple formula – it’s very easy to recall it and it is extremely useful.The definition of performance management then, is the systematic and periodic assessmentof your direct report’s behaviors and results.Now, despite the fact that this definition of performance management is accurate andobjective, it is useless.This definition by itself won’t help you get very far in managing the performance of youremployees.Together with this definition of performance management, you also need to know whatperformance management is for.Performance Management GoalsWhat is performance management for? In other words, what are the goals of performancemanagement?Performance management has two goals:The first goal is to create competency in your people – competency refers to the adequateskills your direct reports need in order to achieve desired performance.
  4. 4. The second goal is to create growth in your employees – growth refers to the developmentof skills of your direct reports in order to exceed desired performance and be able to moveto increasingly difficult assignments.Translation number one: Performance management means that your job as the boss istwo-fold:First, it is to help your direct reports be able to do current tasks; and second, it is to helpthem grow professionally.The more you do this well, your team will become gradually stronger, and your team willdeliver better results.Translation number two: As the manager that you are, doing performance managementwell will help you grow as a leader tremendously (to lead – among other tasks – is to growpeople).Since you get paid to deliver results, from your own perspective and from the organizationyou work for perspective, performance management is not an option.Translation number three: Performance management is an ongoing process.Performance management is not a once in a while one-time event – like performanceappraisal for example – if it were, it would be impossible to achieve your two performancemanagement goals.By keeping these two elements (definition of performance and the two performancemanagement goals) in your definition of performance management, you will maintainobjectivity and effectiveness in your performance management endeavors, andconsequently, you will be able to boost the performance of your direct reports.To keep on learning about performance management, go back to the previous page (or click here ), and continue reading in a sequential order.If you would like to learn about our definition of performance managementthrough ourspeaking or consulting services for your organization, please click on this link.What Is the Performance Management Process?Ads by GoogleProcess Flow DiagramPerformance Management
  5. 5. ProcessPerformance MetricsK 3 ProcessPerformance MetricsPerformance Management SystemBusiness Performance Management SoftwarePerformance Management ProcessManaging PerformancePerformance Management SoftwareEmployee Performance ManagementAds by GoogleChange Management ProcessManagement GoalsEmployee PerformanceBusiness PerformanceAppraisal PerformanceBusiness Process AnalysisArticle Details Written By: Jessica Bosari Edited By: Bronwyn Harris Copyright Protected: 2003-2012 Conjecture CorporationFree Widgets for your Site/Blog Did You Know?One study found that 95% of doctorscellphones had bacteria on them, and 1 in 8had MRSA on them. more... get widget This Day in HistoryJanuary 21, 2008: Black Monday began theGreat Recession. more... get widgetSubscribe to wiseGEEKLearn something new every day More email enter email adThe performance management process is a method of management design to ensure theorganization and all of its components are working together to optimize the organizations goals.Organization components include departments, employees, processes, teams, and other aspects of
  6. 6. an organization. To achieve this design, performance management processmust address the overallorganization performance in conjunction with the components.The performance management process requires several ongoing activities. This include identifyingand prioritizing goals, defining what constitutes progress towards goals, setting standards formeasuring results, and tracking progress toward goals. Other activities include exchanging feedbackamong organizational components, regularly reviewing progress, reinforcing effective goal-orientedactivities, and intervening to create improvements when needed. Business performancemanagement software is a performance management tool that is often used toorganize performance management processes.While the activities in the performance management process are similar toother managementmethods such as strategic planning and management by objectives,the performancemanagement process focuses on overall results. Great importance is place d onmeasuring results, maintaining ongoing feedback about results, and developing plans to improveresults. While other management processes often focus on the results themselves,this processplaces greater importance on the methods used to achieve results.The steps in the performance management process can vary from one organization to another. Mostprograms include certain core activities working from the highest level of the organization down tothe smaller components. The first step is to review the overall organizational goals and prioritize byquantity, quality, cost or timeliness.Ads by GoogleThe next step is to specify which goals apply to which parts of the organizations components. Oncethe goals are identified by component, the goals must be evaluated to ensure they contribute to thesuccess of the entire organization. Managers must then prioritize the goals of the organizationscomponents.Once goals of the whole organization and goals of its components are identified and priorities,managers will identify measures to be taken towards the desired goals. They will then set standardsto identify the quality of the activities’ results. Managers must determine if goal-oriented activities arebelow expectations, meet expectations or exceed expectations. Once the goals are understood andthe measures toward progress are identified, managers will create and documenta performance plan. This plan will outline the goals, measures and the standards by which successwill be evaluated.With a complete plan in place, managers will conduct ongoing observation,measureperformance and track the results. The information will be exchanges with organizationalcomponents to secure ongoing feedback about performance.A performance appraisal orperformance review will be conducted to identify and document thequality of results. Finally, managers will reward performance that meets or exceed expectations orintervene and alter measures that have not produced the expected results. The process ofevaluating the plan, altering measures and rewarding success will continue until all objectives in theplan have been met.]Performance Management ProcessCornell is striving to standardize administrative processes and tools across campus to createefficiencies and to increase effectiveness. Consistent performance management processes,assessment tools, ratings, and development plans help increase the effectiveness of supervisorsand employees within and across units.An Effective Performance Management Process (PMP):Maximizes staff engagement, development, and performanceIs consistent across units to enhance full development and utilizationof talentRemains flexible, efficient, measurable, fair, transparentProvides better alignment of staff roles and goals with the university’s missionPromotes on-going and proactive succession managementCornell’s Performance Management Philosophy:Addresses the relationship of employees to the institution, from the time they are recruited, through theirgrowth and development, to the time they departEngages and develops employees throughout the yearEstablishes goals and measures performance to those goalsDepends on the supervisor giving clear, developmental feedback
  7. 7. Includes a review of past performance and goals and focuses on future development opportunities thatare aligned to individual, unit, and university goals Performance Appraisal Feedback Appraisals Home » Performance Appraisal Feedback Performance appraisal process is incomplete without the feedback given to the employee about his appraisal and his performance. But the way of giving as well as receiving the feedback differs from person to person and their way of handling and their outlook towards the issue. According to a popular saying: "A SUCCESSFUL MAN IS ONE WHO CAN LAY A FIRM FOUNDATION WITH THE BRICKS OTHERS HAVE THROWN AT HIM." Therefore, On the part of the person receiving the feedback, the following points are important to be taken care of: o The employee should have a positive attitude towards the feedback process o He should listen to the suggestions of the appraiser calmly and try to incorporate them in his plans. o He should not hesitate to ask for the help of his superiors. o Should have a co-operative attitude during the feedback meeting. o Don’t judge the appraiser as a person. o Should take the feedback objectively. o Should not judge the appraiser as a person on the basis of the feedback. On the part of the appraiser or the manager / person giving the feedback, the following points are to be taken care of: o The appraiser should make the receiver feel comfortable during the feedback meeting. o The appraiser should make it a two – way conversation i.e. let the employee speak. o Listen to the employee and note his points, suggestions, problems etc. o The appraiser should not adopt a confrontational approach towards the meeting. The goal is not to criticize the employee.
  8. 8. o Provide a constructive feedback to the employee i.e. in a way which will motivate him to perform better. o Have a positive attitude towards the process o Try to understand the reasons of his failure. o Be fair and objective o Prepare yourself for what to say and how to say. o Make the appraisal feedback meeting useful and productive for the organization and the employee.People ManagementReward ManagementReward management involves the analysis and effective control of employee remuneration and coverssalary and all benefits. It assesses the nature and extent of rewards and the way they are delivered aswell as considering their effect on both the organisation and staff.Cornwell consultants take a holistic approach to reward management, treating every element of rewardas an investment. We help assist organisations to review each part of reward to determine: Its purpose An organisation’s ‘return’ on investment The most appropriate areas for investmentWorking closely with IDS our consultants have access to one of the largest private and public sectorsalary databases in the country. This association and our involvement with strategic remuneration bodieshelps our consultants identify and advise on emerging trends and practices in addition to establishingappropriate levels of pay at national and regional levels. We also conduct bespoke salary surveysfocussing on specific sectors or roles.Job Evaluation, Grading and Equal PayOur consultants are highly experienced in using most proprietary job evaluation systems and are skilled indesigning and constructing tailored point factor systems that meet both the specific needs of individualorganisations and the exacting requirements of equal pay legislation.We have considerable expertise in helping clients ensure that grading systems reflect organisationalstructure and that they have the flexibility to accommodate the subtleties of all jobs across theorganisation.In addition, our consultants also conduct equal pay reviews to establish whether grading andremuneration systems comply with legislation. Reward ManagementBased on Chapter 19 of Human Resource Management in a Business Context by Alan Price - published by CengageLearning
  9. 9. ObjectivesThe purpose of this chapter is to: Investigate the relationship between the human resource function and payroll administration Outline the rationale behind different compensation packages Evaluate the link between pay and performancePay and compensationPay is an important feature of human resource management - after all, it is the main reason why people work. It is asensitive and controversial area that has been extensively debated at both practical and theoretical levels. In the USthe term compensation is used to encompass everything received by an employed individual in return for work. Forexample, Milcovich et al (2001: 6) state that:"Employees may see compensation as a return in exchange between their employer and themselves, asan entitlement for being an employee of the company, or as a rewardfor a job well done" (original emphases).The reward or compensation people receive for their contribution to an organisation includes monetary and non-monetary components. Remuneration does not simply compensate employees for their efforts - it also has an impacton the recruitment and retention of talented people.The term reward management covers both the strategy and the practice of pay systems. Traditionally, humanresource or personnel sections have been concerned with levels and schemes of payment whereas the process ofpaying employees - the payroll function - has been the responsibility of finance departments. There is a trend towardsintegrating the two, driven by new computerised packages offering a range of facilities. These are described later inthis chapter.There are two basic types of pay schemes, although many organisations have systems which include elements ofboth: Fixed levels of pay. Wages or salaries which do not vary from one period to the next except by defined pay increases, generally on annual basis. There may be scales of payments determined by age, responsibility or seniority. Most white-collar jobs were paid in this way until recently. Reward linked to performance. The link may be daily, weekly, monthly or annualised. Payment for any one period varies from that for any other period, depending on quantity or quality of work. Sales functions are commonly paid on the basis of turnover; manual and production workers may be paid according to work completed or items produced. Catering staff typically rely on direct payment from satisfied customers in the form of service charges or tips (gratuities).Both methods work smoothly, provided that scales are easy to understand and the methods of measuring completedwork are overt, accurate and fair. However, there has been considerable dissatisfaction with the management of payon both sides of the employment relationship. In recent years, attempts have been made to remedy the situationthrough new systems and a greater reliance on performance-related pay.HR and payroll administrationHuman Resources/ reward system AdvertisementExpert: Leo Lingham - 4/14/2007QuestionQUESTION: what is the contribution of the reward strategy to an organizations overall managementof human resource and productivity of an organization? Is there any example to illustrate thisquestion?ANSWER: FAISAL,AN EFFECTIVE REWARD STRATEGY IN HUMAN RESOURCE MANAGEMENTDOES PLAY A VERY IMPORTANT ROLE FOR THE ORGANIZATION.-PAYS FOR THE PERFORMANCE.-INCENTIVATES THE EMPLOYEE TO ACT.-CREATES AND MAINTAINS THE BEHAVIORAL CHANGE POSITIVELY.-LIFTS THE PERFORMANCE.-IMPROVES THE PRODUCTIVITY.-LIFTS THE COMPANYS RESULTS / PROFIT.==================================================THERE ARE NUMEROUS EXAMPLES COVERING SUCH AREAS AS-FIELD SALES-DISTRUBTORS SALES-CUSTOMER SERVICE-PRODUCTIONETC ETC.IF YOU WANT SPECIFIC AROUND THESE AREAS,
  10. 10. I CAN QUOTE FROM MY EXPERIENCE ONLY.====================================================Effective Reward Systems. Reward systems should focus on positive reinforcement. Positivereinforcement is the most effective tool for encouraging desired behavior because it stimulates peopleto take actions because they want to because they get something of value (internally or externally) fordoing it. An effectively designed and managed reward program can drive an organizations changeprocess by positively reinforcing desired behaviors.The SMART criteria.These criteria should be used when designing and evaluating programs. Programs should be:Specific. A line of sight should be maintained between rewards and actions.Meaningful. The achievements rewarded should provide an important return on investment to both theperformer and the organization.Achievable. The employees or groups goals should be within the reach of the performers.Reliable. The program should operate according to its principles and purpose.Timely. The recognition/rewards should be provided frequently enough to make performers feel valuedfor their efforts---------------------------------------------------------------------------------------------------------Performance Management. Organizations should get away from thinking of the annual performanceappraisal process as performance management."I would recommend that the organization refocus the performance appraisal process away from allthe varied attempts to justify its existence and concentrate instead on the process of managingperformance."The process of performance management reflects how the work gets done and creates theenvironment in which people feel valued for their achievements. The performance managementprocess includes four critical components:Focus on what is important to change or be improved.Measures to determine whether and how much progress is being achieved.Feedback so that performers will know whether and how much progress is being achieved.Reinforcement so that everyone celebrates achievements as they are unfolding.Indicators of successful performance management include the following:All measures are understood by the employees, who can describe the importance of their activities tothe agency. Measures address results and behaviors/processes.A tracking system is used to monitor performance in the areas identified.The performance measures and progress are displayed in a public area.Data on the performance charts is current.The team leaders/managers are actively engaged in coaching staff members and providing assistanceto improve performance.Periodic celebrations mark achievements as they are realized. These celebrations are regardedpositively by employees.Data indicate performance is improving.Recommend that organizations:focus on variables critical to success;create timely, chart-oriented feedback;create celebrations that mean something to the performers;use performance reviews as an opportunity to reflect "how we won" and "how we lost" make them asoften as necessary to cement the learning;anchor the memory of achievements achievement-oriented firms measure a lot, accomplishmilestones frequently, and do much celebrating;dont rely on annual performance appraisals as the sole source of feedback;when designing programs, avoid copying programs used by other organizations; anddont make the design process into the "lets make a form" game.The Dos and Donts of Effective Reward Programs. The Dos and Donts of Effective Reward Programs.The fundamental principles for designing reward programs that work:Do it now! Putting off change only makes the situation worse.Keep your eye on the needs of the customer. The customer should be at the center of all measures,goals, and objectives.Take action, be proactive. Well-designed programs require management, which should focus onproviding people with meaningful measures, realtime feedback, and ongoing reinforcement.Personalize rewards to their recipients. Rewards should be valued by the performer. The performerneeds to see that the reward opportunities are directly linked to the effort and results taken and thatthere is an appropriate benefit to the organization. By personalizing the reward, you can anchor themeaning of the achievement more deeply than if you simply treat the reward as a mechanicaladministrative task.Make sure everyone can win. Reward programs built on the principles of competition or complianceare counterproductive, if not downright destructive.Make sure that rewards are contingent. Reward programs become entitlement programs when theylose their contingency on performance. Each reward should be fully earned and people shouldunderstand exactly what they have done to achieve it.Dont expect success all at once. The process of developing an effective program is one of change andcontinual improvement.Remember that you are in competition with other consequences. Reward programs simultaneouslycompete with negative reinforcements that occur throughout the organization. So rewards must be
  11. 11. meaningful to the performer to have an impact.Do it from the heart. Rewards that are intended to be manipulative are not accepted by employees.The fundamental purpose of reward programs is to build a powerful partnership between the individualand the organization. Collaboration is an essential theme of success.Have fun while you are doing it. If a job is worth doing, it is worth measuring progress and celebratingachievements.REGARDSRewarding and recognizing employees is a ticklish business. It can motivate people to explore moreeffective ways to do their jobs - or it can utterly discourage such efforts.Here are a few tips and traps:Establish a clear link between what people are rewarded for and the organizations priorities. Doeseveryone see and understand the relationship between their improvements and financial rewards? Toomany profit-sharing plans, for example, are disconnected from daily work. The effect of cost control orcustomer satisfaction efforts on the bottom line is so fuzzy that its meaningless.Be careful when offering money or recognition for employee suggestions. This can lead to conflictrather than cooperation. Individuals and groups often end up jealously protecting their ideas orarguing about the source of ideas. Suggestion systems also separate idea generation fromimplementation. Effectiveness is a function of how strongly ideas or strategies are accepted and thenimplemented by the people who can make them work.Suggestion systems work best in traditional "command and control" or paternalistic organizations.Workers come up with ideas and managers decide which ones get implemented. In a highly involvedorganization, teams generate and test ideas as part of a bigger focus on improving their own keyprocesses.Involve team members, individuals or managers in developing their own incentive and rewardsystems.Involvement can be achieved through opinion surveys, focus groups, teams that study andrecommend, or teams that design and implement the rewards. The best organizations always usecombinations of these approaches.Despite mountains of evidence to the contrary, many managers believe money is more rewarding thanrecognition and appreciation. You should balance your incentive plans and reward systems withgenerous amounts of "thanks pay." And make sure managers have the skills to show recognition whenpeople are doing good work. They often find it awkward to express appreciation.Reward systems and recognition practices speak volumes about your organizations values. Are theydesigned and delivered to employees - or with them? Do they reflect a management view of "we knowwhats best for you?" Are they partial and piecemeal or part of a larger system and philosophy?You should ask if financial incentives seek to penalize people and have them "share the pain," or lookfor ways to make people feel like winners. Are people given paternalistic pats on the head or treatedas equal adults?Like customer service and quality, reward and recognition are highly subjective. Just as they monitorthe changing needs of customers, effective leaders constantly try to understand the shiftingperceptions and values of everyone in their organization.==========================================================================Employees are motivated by both intrinsic and extrinsic rewards. To be effective, the reward systemmust recognize both sources of motivation. All reward systems are based on the assumptions ofattracting, retaining and motivating people. Financial rewards are an important component of thereward system, but there are other factors that motivate employees and influence the level ofperformance.Todays emphasis on quality-improvement teams and commitment-building programs is creating arenaissance for financial incentive of pay-for-performance plans.To ensure the reward system is effective and motivates the desired behaviors, it is essential toconsider carefully the rewards and strategies utilized and ensure the rewards are linked to or based onperformance. To be effective, any performance measurement system must be tied to compensation orsome sort of reward. Rewarding performance should be an ongoing managerial activity, not just anannual pay-linked ritual.Strategies for rewarding employees’ performance and contributions include both non-financial andfinancial mechanisms.Some of the primary ones are discussed below. The list is not exhaustive, andindividual units/departments may identify additional mechanisms that are appropriate for and supporttheir culture and goals.Praise/recognition from supervisors - Praise and recognition from supervisors is consistently found tobe among the most important motivators. Employees want to be recognized and feel theircontributions are noticed and valued. It is important that supervisors recognize the value andimportance of sincerely thanking employees verbally and/or in writing for their specific contributions.Professional growth and development opportunities- Supervisors may provide employees opportunitiesto participate in educational programs or other activities that will expand their skills/knowledge .Employees benefit by developing new skills, and the institution benefits from the additional expertiseindividuals bring to the job. A recent survey found that 87% of responding workers viewed special
  12. 12. training as a positive incentive, and it appeared most meaningful to employees with postgraduateeducation.Paid Leave - Supervisors may award employees up to 32 hours of paid leave annually in recognition ofmeritorious performance .Progression through the salary range - Employees may receive salary increases to recognize theattainment of new and/or the enhancement of existing skills/competencies or for assuming increasedresponsibilities within the scope of the current position. The salary increase represents a progressionthrough the salary range approved for the position .Merit increases - policy should allow supervisors to give employees an annual merit increase torecognize consistently meritorious performance or successful completion of a project that had asignificant impact on a department or the university. The reward may be in any amount up to 5% ofthe employees current base salary, subject to the availability of funds. Budgetary informationregarding fiscal year merit increases are issued annually as part of the budget process as soon as theinstitutions fiscal position can be determined. To be eligible for a merit increase, employees musthave been employed for at least six continuous months and at least six months must have elapsedsince the employees last salary increase, promotion, salary increase due to progression in the salaryrange, demotion or transfer from another department.Promotions and lateral moves - Promotions and lateral moves may be long term rewards thatrecognize employees’ professional growth, expertise, and capacity to contribute to the institution innew roles. Promotions are typically associated with an increase in salary, and the increase may be anyamount up to 10% of an employee’s current salary. For employees with base salaries under $25,000,the increase may be any amount up to $2,500. The new salary also must be within the salary rangeapproved for the position, and employees are subject to a 90-day probationary period following apromotion/lateral move to a new department .Administrative salary supplements - Employees who assume new/additional responsibilities on aninterim basis may receive administrative salary supplements that are paid in addition to the basesalary. The supplement is discontinued when the employee is no longer responsible for the additionalresponsibilities.Informal rewards - When warranted, supervisors may choose to give employees informal rewards forspecific accomplishments/contributions. State law and institutional policy allow expenditures of up to$50 of state funds and $100 of non-state funds per employee for informal non-cash rewards thatdemonstrate the supervisor’s/institution’s appreciation. Supervisors can be creative in identifyinginformal rewards that will be appreciated by the particular individual being recognized, but, inselecting and purchasing rewards, supervisors must be sensitive to the institution’s responsibility to begood stewards of public funds.=============================================================================Keys to Selecting the Right RewardThe first key to selecting an effective reward is knowing what your employees will find rewarding.When an employee’s performance, morale or motivation has not been influenced by a reward, it islikely because it was the wrong reward for that employee. When rewards don’t fit, they don’t work.However, it is sometimes difficult to identify a reward that your employee will find valuable.There are three easy ways to find out what your employees would find rewarding:Watch what they do - Pay attention to how they spend their free time or what they might have ashobbies.Listen to them - By listening, you can learn about their interests or work place concerns. (i.e. thedesire for advanced training) *Ask them - If you’re unsure, ask them!---------------------------------------------------------------------------------------------------------The basic components of employee compensation and benefitsEmployee compensation and benefits are basically divided into four categories:1. Guaranteed pay – monetary (cash) reward paid by an employer to an employee based onemployee/employer relations. The most common form of guaranteed pay is the basic salary.2. Variable pay – monetary (cash) reward paid by an employer to an employee that is contingent ondiscretion, performance or results achieved. The most common forms are bonuses and sales incentives.3. Benefits – programs an employer uses to supplement employees’ compensation, such as paid time-off, medical insurance, company car, and more.4. Equity-based compensation – a plan using the employer’s share as compensation. The mostcommon examples are stock options.
  13. 13. Guaranteed pay Guaranteed pay is a monetary (cash) reward.The basic element of the guaranteed pay is the base salary, paid based on an hourly, daily, weekly, bi-weekly or a monthly rate. The base salary is typically used by employees for ongoing consumption. Manycountries dictate the minimum base salary defining a minimum wage. Individual skills and level ofexperience of employees leave room for differentiation of income-levels within the job-based paystructure.In addition to base salary, there are other pay elements which are paid based solely onemployee/employer relations, such salary and seniority allowance.[edit]Variable payVariable pay is a monetary (cash) reward that is contingent on discretion, performance or resultsachieved. There are different types of variable pay plans, such as bonus schemes, sales incentives(commission), overtime pay, and more.An example where this type of compensation plan is prevalent is the real estate industry and real estateagents. A common variable pay plan might be the sales person receives 50% of every dollar they bring inup to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward.Typically, this type of plan is based on an annual period of time requiring a "resetting" each year back tothe starting point of 50%. Sometimes this type of plan is administered so that the sales person neverresets and never falls down to a lower level.[edit]BenefitsThere is a wide variety of employee benefits, such as paid time-off, insurances (lifeinsurance, medical/dental insurance, and work disability insurance), pension plan, company car, andmore.A benefit plan is designed to address a specific need and is often provided not in the form of cash.Many countries dictate different minimum benefits, such as minimum paid time-off, employer’s pensioncontribution, sick pay, and more.[edit]Equity-based compensationEquity based compensation is an employer compensation plan using the employer’s shares as employeecompensation. The most common form is stock options, yet employers use additional vehicles such asrestricted stock, restricted stock units (RSU), employee stock purchase plan (ESPP), and stockappreciation rights (SAR).The classic objectives of equity based compensation plans are retention, attraction of new hires andaligning employees’ and shareholders’ interests.[edit]Organizational placeIn most companies, compensation & benefits (C&B) is a sub-function of the human-resources function.HR organizations in big companies are typically divided into three: HR business partners (HRBPs), HRcenters of excellence, and HR shared services. C&B is an HR center of excellence, like staffing andorganizational development (OD).[edit]Main influencersEmployee compensation and benefits main influencers can be divided into two: internal (company) andexternal influencers.
  14. 14. The most important internal influencers are the business objectives, labor unions, internal equity (theidea of compensating employees in similar jobs and similar performance in a similar way), organizationalculture and organizational structure.The most important external influencers are the state of the economy, inflation, unemployment rate, therelevant labor market, labor law, tax law, and the relevant industry habits and trends.[edit]Bonus plansBonus plans are variable pay plans. They have three classic objectives:1. Adjust labor cost to financial results – the basic idea is to create a bonus plan where the companyis paying more bonuses in ‘good times’ and less (or no) bonuses in ‘bad times’. By having bonus planbudget adjusted according to financial results, the company’s labor cost is automatically reduced whenthe company isn’t doing so well, while good company performance drives higher bonuses to employees.2. Drive employee performance – the basic idea is that if an employee knows that his/her bonusdepend on the occurrence of a specific event (or paid according to performance, or if a certain goal isachieved), then the employee will do whatever he/she can to secure this event (or improve theirperformance, or achieve the desired goal). In other words, the bonus is creating an incentive to improvebusiness performance (as defined through the bonus plan).3. Employee retention – retention is not a primary objective of bonus plans, yet bonuses are thought tobring value with employee retention as well, for three reasons: a) a well designed bonus plan is payingmore money to better performers; a competitor offering a competing job-offer to these top performers islikely to face a higher hurdle, given that these employees are already paid higher due to the bonusplan. b)if the bonus is paid annually, employee is less inclined to leave the company before bonus payout;often the reason for leaving (e.g. dispute with the manager, competing job offer) goes away by the timethe bonus is paid. the bonus plan buy more time for the company to retain the employee. c) employeespaid more are more satisfied with their job (all other things being equal) thus less inclined to leave theiremployer.The concept saying bonus plans can improve employee performance is based on the work of FredericSkinner, perhaps the most influential psychologist of the 20th century. Using the concept of OperantConditioning, Skinner claimed that an organism (animal, human being) is shaping his/her voluntarybehavior based on its extrinsic environmental consequences – i.e. reinforcement or punishment.This concept captured the heart of many, and indeed most bonus plans nowadays are designedaccording to it, yet since the late 1940s a growing body of empirical evidence suggested that these if-then rewards do not work in a variety of settings common to the modern workplace. Research evensuggested that these type of bonus plans have the potential of damaging employee performance.