chapter 11 - performance appraisals Flashcards
purpose of performance management
traditional performance appraisal::
- one time annual event
- a long cycle to evaluate past performance
- inflexible goals preset at the beginning of the year
- phases include: plan, act, track and review
- a tool for measuring employee performance
- no follow-ups or plan for improvement
- subject to bias and favoritism
- archaic paper based
- time consuming and expensive
- negative effect on employee moral
performance management in 2018
- continuous ongoing process
- consecutive small cycles that offer real-time feedback
- flexible short-term goals revised frequently
- phases include: check-in, work on goals, relative feedback
- a tool for coaching and development
- periodic feedback and guidance to improve
- more transparent
- time saving and cost efficient
Purpose of Performance Management - Traditional View
Evaluating performance of employees against set standards - job descriptions and other criteria
Clarifying job and performance expectations
Aligning employee’s efforts with company & group priorities and ensure individual accountability
Building a high-performance based culture
Identifying strengths and challenges (to help course-correct)
Providing a basis for decisions, e.g., promotions, compensation, annual bonuses
Documentation (legal)
Issues with Performance Reviews:
- Biggest complaint from employees and managers is they are too subjective
- There lurks the possibility of unfair treatment by supervisors
New, Modern Performance Process
Focus on timely and frequent feedback and future development, not looking backward
These new approaches are defined by 3 attributes
1. Emphasis on ongoing, regular, constructive, actionable feedback: in words not necessarily a number or rating
2. Ratingless: Abandoning performance ratings; people don’t want to be reduced to a number
3. Crowdsourced feedback: to secure peer feedback (360-degree feedback) from those working more closely
No ratings means more immediate feedback
- It does not mean an end to performance reviews or to differentiation in pay and promotion based on performance differences
Trying pay to subjectively appraised performance (merit pay)
Employees are not motivated to change performance (increase or even sometimes maintain) when increases are “peanut-buttered” or spread equally to all employees regardless of performance
Examples:
- Cost-of-living adjustments (COLAs)
– Same base salary adjustment for everyone
– Based on location
– Recently added in the past few years
– Regional cost of living adjustment
- Union negotiated increases
- Pay increases based on a preset progression pattern based on seniority
Important to Understand
- High performers become dissatisfied and less committed if it seems a company recognizes everyone regardless of performance (“peanut buttered”
Trying Pay to Subjectively Appraised Performance (Merit Pay)
Improving pay for performance requires three things
1. Defining performance criteria that are job-based (goal-setting, see next slide)
2. Differentiating pay based on performance and position to market
3. Manager training on how to give feedback and explain performance and pay relationship
- Linking Pay to Performance
Focal Review: Linking Performance and Pay: Once a year performance review and salary review
- Determine performance review ratings
- Establish merit budget
- Evaluate where employee is in relation to salary range (or market) = compa ratio and range penetration
compa-ratio = base pay/ market or range midpoint
Decide how much of a merit increase is given for different levels of performance
Exhibit 11.12 Merit Increase Grid or Merit Matrix
A merit increase grid (Merit Matrix) ties pay not only to performance but also to position in the pay range and the annual salary adjustment budget
IMAGE
y = position in rage (below, first to fourth quartile)
x = performance rating
what about red and green circled employees?
- Red Circle paid above the maximum of range
- Green Circle paid below the minimum of the range
- Using the Salary Range
a bit of compensation theory: utilizing the salary range and position to market (IMAGE)
1st quartile = entry level
- new in position
- entry level
- lower paid
2nd quartile = gaining knowledge skills and abilities
market median
- fully skilled and experienced
3rd quartile = component to perform all aspects of role
4th quartile = expert/lead
ON QUIZ FS: Promotional Increases as a pay-for-performance tool
One of the most effective methods of rewarding good performance is a promotion accompanied by a salary increase; how much?
At least 4%, up to 15% (generally 5-15%)
Characteristics of promotional pay increases
- Size of increment is approximately double a normal merit increase
- Represent a reward to employees for commitment and exemplary performance
Equal Employment Opportunity and Performance Evaluation
Equal employment opportunity (EEO) and affirmative action have influenced HR decision making for more than 40 years
The legal focus is: are similarly situated individuals treated similarly?
The courts stress six issues
1. Systems that provide specific written instructions on how to complete the appraisal
2. The appraisal system should incorporate clear criteria for evaluating performance
3. Adequately developed job descriptions which are the basis for evaluating performance expectations
4. Required feedback about appraisal results
5. Review of ratings by a higher-level managers
6. Consistent treatment across raters
