Chapter 10 Flashcards

Question

What are implications for Pay and Pay for Performance of the motivation theory: Reinforcement Theory

Answer 1

1. Performance-based payments works best when they closely follow performance. 2. Rewards tightly coupled to desired performance objectives generate higher effort. 3. Withholding payouts discourages unwanted behaviours.

Answer 2

> Challenging and specific performance goals generate higher employee effort. > Goals serve as feedback standards to which employees can evaluate their performance. > Employees must be motivated to choose and be committed to pursuing performance goals.

Answer 3

> Performance-based pay that is contingent upon achievement of specific and challenging performance goals increases performance. > Regular and specific feedback on performance goal attainment is important.

Answer 4

> Pay directs and motivates employee performance. > Employees are risk-averse (dislike risk). They prefer fixed income flows (wage, salary) to variable income flows (performance-based pay). > If performance can be accurately monitored without undue cost or if risk due to variability in outcomes (e.g., profits) is large, payments should be based on behaviours (e.g., satisfactory completion of work duties). > If monitoring of behaviours is difficult or costly and if risk due to variability in outcomes is not large, pay should be based on outcomes (e.g., profits).

Answer 5

1. Performance-based pay can be used to direct and induce employee performance. 2. Performance-based pay can be based on behaviours or outcomes. 3. Employees are risk-averse, which means that higher pay is necessary when pay is based on outcomes. 4. Performance-based pay is the optimal compensation choice for more complex jobs where monitoring employees’ work is difficult or costly.

Answer 6

> A second set of theories, best exemplified by expectancy theory, equity theory, and agency theory, focuses less on need states and what rewards best satisfy those needs and more on the motivational processes, including how perceptions of needs and other factors (equity/fairness, risk, linkages between effort, performance, and pay) are processed cognitively to determine motivation and behaviour

Answer 7

> Maslow's hierarchy of needs and Herzberg's two-factor theory, for example, both fall into this category. People have certain needs—such as physiological, security, and self-esteem needs—that influence behaviour.

Answer 8

> Expectancy theory argues that people behave as though they cognitively evaluate what behaviours are possible (e.g., the probability that they can complete the task) in relation to the value of rewards offered in exchange. > According to this theory, employees choose behaviours that yield the most satisfactory exchange.

Answer 9

> Equity theory focuses also on what goes on inside an employee’s head; it argues that people are highly concerned about equity, or fairness of the exchange process. > Employees look at the exchange as a ratio between what is expected and what is received.

Answer 10

> Some theorists say employees judge transactions as fair when others around them do not have a more (or less) favourable balance between the give and get of an exchange. > Even greater focus on the exchange process occurs in the last of this second set of theories, agency theory > Here employees are depicted as agents who enter an exchange with principals—the owners or their designated manager

Answer 11

> Goal setting theory > A review of this literature indicates that the vast majority of studies on goal setting show that how we set goals (the process of goal setting, the level and difficulty of goals, etc.) can influence the performance levels of employees.

Answer 12

> Compensation is then designed to support this risk-taking behaviour.

Answer 13

> workers highly value such other job rewards as empowerment, recognition, and opportunities for advancement.1

Answer 14

> unintended consequences

Answer 15

1) Compensation 2) Benefits 3) Social interaction 4) Security 5) Status/recognition 6) Work variety 7) Workload 8) Work importance 9) Authority/Control/Autonomy 10) Advancement 11) Feedback 12) Work Conditions 13) Development Opportunity

Answer 16

> Base pay is, at least as far as there are any guarantees, the guaranteed portion of income, as long as employees remain employed.

Answer 17

D: The guaranteed portion of an employee’s compensation package. R: As long as employment continues, this is the secure portion of compensation.

Answer 18

D: Permanent base salary/wage increase granted to all employees, regardless of performance. Size related to some subjective assessment of employer's ability to pay. R: Some risk to employees because increase is at the discretion of employer, but lower risk as it is not tied to employee's performance.

Answer 19

D: Same as across-the-board increase, except magnitude is based on change in cost of living, e.g., as measured by the Consumer Price Index (CPI). R: Same as across-the-board increase.

Answer 20

D: Permanent salary/wage increase granted to employee as function of some assessment of individual employee's performance. R: Two types of risk faced by employees. Size of total merit pool at discretion of employer and individual portion of pool depends on performance, which is also not totally predictable.

Answer 21

D: As with merit pay, granted for individual performance. Does not add on to base pay, but is distributed as a one-time bonus R: Three types of risks faced here. Both types mentioned under merit pay, plus not added into base—requires “re-earning” the added pay annually.

Answer 22

D: Variable pay tied directly to objective measure of individual performance such as sales, production volume, or production quality. R: Most risky compensation component if sole element of pay, but often combined with a base pay. No or low fixed base pay means each year employee is dependent upon meeting performance target to determine pay.

Answer 23

D: Variable pay that is tied to some measure of group performance, not individual performance. Employees share in any success (performance above standard), but are not penalized for performance below standard. R: All group incentive plans have risks noted in above pay components plus the risk associated with group performance measures. Now individual worker also depends on the performance of others in the group.

Answer 24

D: A group variable pay plan with goals based not on company's financial performance, but on forms of cost savings (e.g., labour cost is most common; might also include scrap costs, utility costs). R: Risky, as payout is contingent on team's ability to identify ways and execute plans to save costs.

Answer 25

D: Variable pay linked to group performance (team, division, company) where payout depends on company's profitability. Size of payouts to individuals can be modified based on other measures such as individual performance. R: More risky than gain-sharing plans, as profit measures are influenced by factors beyond employee control (e.g., economic climate, accounting writeoffs). Less control means more risk.

Answer 26

D: A group variable pay plan in which employees receive lower pay if company fails to achieve baseline performance goals. However, upside reward opportunity may be higher than in gain-sharing or profit-sharing plans in good years. R: Greater risk than gain-sharing or profit-sharing plans. Typically, employees absorb a “temporary” cut in base pay. If performance targets are met, this cut is neutralized. Risk to employee is increased because even base pay is no longer totally predictable.

Answer 27

> Some research suggests that employees may need a risk premium (higher pay) to stay and perform in a company with pay-at-risk.

Answer 28

> Even a premium might not work for employees who are particularly risk-averse. Security-driven employees actually might accept lower wages if they come in a package that is more stable

Answer 29

> Relatively more concerned about pay level.

Answer 30

> Want large, decentralized organization with little pay for performance.

Answer 31

> Want more pay based on performance.

Answer 32

> Want less performance-based pay.

Answer 33

> Want pay plans based on individual performance, not group performance.

Answer 34

> Evidence suggests talented employees are attracted to companies that have strong links between pay and performance.3 > People are attracted to organizations that fit their personalities.

Answer 35

> Employee decisions to leave are influenced by their performance and the degree to which pay is performance-based.

Answer 36

> Dissatisfaction with pay can be a key factor

Answer 37

>have focused on what is called scarce talent.

Answer 38

> Roughly one-half of the productivity increase was due to individual employees becoming more productive, while the other half of the productivity gain was explained by the fact that less productive workers were less likely to stay under such an incentive plan because it was less favourable to them.

Answer 39

> is intended, at least partially, to pay employees for learning new skills—skills that will hopefully help employees perform better on current jobs and adjust more rapidly to demands on future jobs.

Answer 40

> Skill-based pay plans have significant cost implications as more employees request training, spurred by the promised of skill-based pay raises. > Poorly administered plans, allowing more people to acquire certification in a skill than are actually required or not maximizing the benefit of a multi-skilled workforce, creates cost inefficiencies.

Answer 41

> In general, a well-designed plan linking pay to behaviours of employees results in better individual and organizational performance.

Answer 42

> The role that performance levels should assume in determining pay increases is less clear-cut for blue-collar workers

Answer 43

> is some measure of performance obtained through a performance appraisal process.

Answer 44

> 39% felt their performance goals weren't clearly defined; > 39% felt they didn't know how their performance was evaluated; > 45% didn't believe their last performance review guided them on how to improve; > 45% didn't think the reviews could differentiate among good, average, and poor performers; and > 48% didn't think doing a good job was recognized.

Answer 45

(1) improve appraisal formats, (2) select the right raters, (3) understand how raters process information, and (4) train raters to rate more accurately.

Answer 46

> ranking and rating

Answer 47

> Ranking formats require the rater to compare employees to one another to determine the relative ordering of the group on some performance measure (usually some measure of overall performance).

Answer 48

> The straight ranking procedure is just that: employees are ranked relative to one another.

Answer 49

> Alternation ranking recognizes that raters are better at ranking people at extreme ends of the distribution. > Raters are asked to indicate the best employee and then the worst employee. The process continues until all employees are ranked. > The idea behind this ranking method is that it is easier to identify the extremes, and when the harder distinctions have to be made among the remaining employees, the pool of employees to consider is reduced

Answer 50

> Paired comparison performance ranking simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people. > Each individual is compared separately with all others in the work group. > The employee who “wins” the most paired comparisons is ranked top in the group, and so on. > Unfortunately, as the size of the work group gets bigger, the number of paired comparisons may become unmanageable.

Answer 51

> First, in contrast to ranking formats, rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees. > Second, each performance standard is measured on a scale on which appraisers can check the point that best represents the employee’s performance. In this way, performance variation is described along a continuum from good to bad. > The types of descriptors used in anchoring this continuum provide the major difference in rating scales.

Answer 52

1) When adjectives are used as anchors, the format is called a standard rating scale. 2) Behaviourally anchored rating scales (BARS) are the most common behavioural format— that is, when behaviours are used as anchors. By anchoring scales with concrete behaviours, organizations adopting a BARS format hope to make evaluations less subjective. When raters try to decide on a rating, they have a common definition (in the form of a behavioural example) for each of the performance levels. 3 )In addition to adjectives and behaviours, outcomes can also be used as a standard. The most common form is management by objectives (MBO). Management by objectives is both a planning tool and an appraisal tool, and has many variations across firms.

Answer 53

> different raters carry with them into the rating situation different definitions of the various scale levels.

Answer 54

> In both the standard rating scale and BARS, overall performance is calculated as some weighted average (weighted by the importance the organization attaches to each dimension) of the ratings on all dimensions.

Answer 55

(1) employee development potential (amount of feedback about performance that the format offers), (2) administrative value, (3) research potential, (4) cost, and (5) validity.

Answer 56

> Does the method communicate the goals and objectives of the organization? > Is feedback to employees a natural outgrowth of the appraisal format so that employee developmental needs are identified and can be attended to readily?

Answer 57

> How easily can evaluation results be used for administrative decisions concerning wage increases, merit increases, promotions, demotions, terminations, and transfers?

Answer 58

> Does the instrument lend itself well to validating employment tests? Can applicants predicted to perform well be monitored through performance evaluations?

Answer 59

> Does the appraisal format require a long time to develop initially? Is it time-consuming for supervisors to use in rating their employees’ performance? > Is it expensive to use?

Answer 60

> Success in this pursuit would mean that decisions based on performance ratings (e.g., promotions, merit increases) could be made with increased confidence.

Answer 61

> Generally, this system is used in conjunction with supervisory reviews. This method assesses employee performance from five different perspectives: supervisor, peer, self, customer, and subordinate.

Answer 62

> The dominant view is that supervisors tend to provide accurate appraisals of their subordinates. > Tend to be more reliable > On the negative side though; supervisors are particularly prone to halo and leniency errors

Answer 63

One of the major strengths of using peers as raters is that they work more closely with the ratee and probably have an undistorted perspective of typical performance.

Answer 64

> First, peers may have little or no experience in conducting appraisals, leading to rather mixed evidence about the reliability of this rating source. > Second, in a situation in which teamwork is promoted, putting the burden of rating peers on co-workers may either create group tensions (in the case of low evaluations) or yield ratings second only to self-ratings in level of leniency.

Answer 65

> self-ratings are generally more lenient and possibly more unreliable than ratings from other sources.

Answer 66

> One compromise in the use of self-ratings is that is should be developmental, not administrative > In addition, organizations are increasingly asking employees to rate themselves as the first step in the appraisal process.85 Asking employees to think about their performance before they go into the formal appraisal with their supervisor may lead to more realistic assessments.

Answer 67

> Historically, upward feedback has been viewed as countercultural. > Historically, upward feedback has been viewed as countercultural.

Answer 68

> Research shows that subordinates prefer, not surprisingly, to give their feedback to managers anonymously. > If their identity is known, subordinates give artificially inflated ratings of their supervisors

Answer 69

> feelings, attitudes, and moods influence raters. Whether the rater is generally cheerful or grumpy might influence the employee’s evaluation.

Answer 70

1) The rater observes the behaviour of a ratee. 2) The rater encodes this behaviour as part of a total picture of the ratee. 3) The rater stores this information in memory, which is subject to both short- and long-term decay—or, simply put, raters forget things. 4) When it comes time to evaluate a ratee, the rater reviews the performance dimensions and retrieves stored observations/impressions to determine their relevance to the performance dimensions. 5) The information is reconsidered and integrated with other available information as the rater decides on the final ratings.

Answer 71

> Ideally, raters should notice only performance-related factors when they observe employee behaviour. Unless a behaviour affects performance, it should not influence performance ratings

Answer 72

> Giving favourable ratings to all job duties based on impressive performance in just one job function.

Answer 73

> The opposite of a halo error. Downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension.

Answer 74

> Developing a negative or positive opinion of an employee early in the review period and allowing that to influence negatively or positively all later perceptions of performance.

Answer 75

> The opposite of first impression error. Allowing performance, either good or bad, at the end of the review period to play too large a role in determining an employee’s rating for the entire period.

Answer 76

> Consistently rating someone higher than is deserved.

Answer 77

> The opposite of leniency error. Rating someone consistently lower than is deserved.

Answer 78

> Avoiding extremes in ratings across employees.

Answer 79

> Giving better ratings to individuals who are like the rater in behaviour and/or personality.

Answer 80

> Continuing to downgrade an employee for performance errors in prior rating periods.

Answer 81

1) First, it appears that raters are influenced by the general appearance characteristics of the ratees. Males are rated higher than females (other things being equal). 2) Race also matters in performance ratings. Blacks are more likely to receive lower ratings than whites. 3) It seems that if supervisors see ratees as similar to themselves, there is a positive influence on performance ratings, independent of actual performance.

Answer 82

> Both the pattern of performance (performance gets better versus worse over time) and the variability of performance (consistent versus erratic) influence performance ratings

Answer 83

> Research suggests that raters store information in the form of traits. > More importantly, people also tend to recall information in the form of trait categories, such as laziness.

Answer 84

> appear to arise from memory decay (people forget things!).

Answer 85

> performance appraisals sometimes serve a political end.

Answer 86

> Most research indicates that rater training is an effective method for reducing appraisal errors

Answer 87

(1) rater-error training, in which the goal is to reduce psychometric errors (e.g., leniency, severity, central tendency, halo) by familiarizing raters with their existence; (2) performance dimension training, which exposes supervisors to the performance dimensions to be used in rating (e.g., quality of work, job knowledge), thus making sure everyone is on the same page when thinking about a specific performance dimension; and (3) performance-standard training, which provides raters with a standard of comparison or frame of reference for making appraisals (what constitutes good, average, and bad).

Answer 88

> Leniency errors are probably the most difficult form of error to eliminate.

Answer 89

> Giving accurate and deflated ratings, however, may result in more complaints and possibly reduced employee morale.

Answer 90

1) First, performance dimensions should be relevant to the culture and strategy of the company. 2) Second, it is important to involve employees in every stage of developing performance dimensions and building scales to measure how well they perform on these dimensions. 3) Third, raters need to be trained in use of the appraisal system, and all employees need to understand how the system operates and what it will be used for. 4) Fourth, raters must be motivated to rate accurately. 5) Fifth, raters should maintain a diary of employee performance, both as documentation and to jog the memory. 6) Sixth, raters should attempt a performance diagnosis to determine in advance whether performance problems arise because of motivation, skill deficiency, or external environmental constraints. 7) Finally, feedback to employees should be timely

Answer 91

1) A clear sense of direction; 2) An opportunity for employees to participate in setting the goals and standards for performance; 3) Prompt, honest, and meaningful feedback; 4) Immediate and sincere reinforcement; 5) Coaching and suggestions for improving future performance; 6) Fair and respectful treatment; and 7) An opportunity for employees to understand and influence decisions that affect them.

Answer 92

> efficiency, fairness, and compliance.

Answer 93

> strategy, structure, and standards.

Answer 94

> is that organizations frequently grant increases that are not designed or communicated to be related to performance. > is that organizations frequently grant increases that are not designed or communicated to be related to performance.

Answer 95

> across-the-board increases and cost-of-living increases.