Podcast
Questions and Answers
What is one primary objective of a performance management system?
What is one primary objective of a performance management system?
Which of the following statements accurately describes the purpose of frequent performance reviews?
Which of the following statements accurately describes the purpose of frequent performance reviews?
How does 'pay for performance' impact employee satisfaction?
How does 'pay for performance' impact employee satisfaction?
What role does performance data play in HR activities?
What role does performance data play in HR activities?
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Which of the following describes a key change in modern performance management systems?
Which of the following describes a key change in modern performance management systems?
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What is a significant reason why performance reviews might not accurately assess an employee’s performance?
What is a significant reason why performance reviews might not accurately assess an employee’s performance?
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Which of the following elements is NOT one of the four basic considerations for establishing performance standards?
Which of the following elements is NOT one of the four basic considerations for establishing performance standards?
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What process helps ensure managers rate employees consistently during performance evaluations?
What process helps ensure managers rate employees consistently during performance evaluations?
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Which of the following is considered a source of performance review information that involves evaluating peers?
Which of the following is considered a source of performance review information that involves evaluating peers?
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What is the primary aim of 360-degree evaluation?
What is the primary aim of 360-degree evaluation?
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What often causes inaccuracies in performance reviews according to the content?
What often causes inaccuracies in performance reviews according to the content?
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What type of error occurs when a rater generalizes a negative aspect of an employee into an overall poor evaluation?
What type of error occurs when a rater generalizes a negative aspect of an employee into an overall poor evaluation?
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In which method are characteristics of employee behavior checked against a defined set of statements?
In which method are characteristics of employee behavior checked against a defined set of statements?
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Which performance review method relies on the appraiser observing frequency of behaviors exhibited by the employee?
Which performance review method relies on the appraiser observing frequency of behaviors exhibited by the employee?
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What is the key focus of the central tendency error in performance ratings?
What is the key focus of the central tendency error in performance ratings?
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Which feedback session format includes actively listening to the employee's feelings during the discussion?
Which feedback session format includes actively listening to the employee's feelings during the discussion?
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What performance review method requires a rater to choose between equally favorable or unfavorable statements?
What performance review method requires a rater to choose between equally favorable or unfavorable statements?
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In the context of performance evaluations, what does the term 'temporal error' refer to?
In the context of performance evaluations, what does the term 'temporal error' refer to?
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Which method assesses employee performance based on achieving mutually agreed-upon goals?
Which method assesses employee performance based on achieving mutually agreed-upon goals?
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Which of the following factors is NOT considered in the Hay profile method for evaluating executive and managerial positions?
Which of the following factors is NOT considered in the Hay profile method for evaluating executive and managerial positions?
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What is a significant characteristic of key jobs used in employer-initiated wage and salary surveys?
What is a significant characteristic of key jobs used in employer-initiated wage and salary surveys?
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In a wage curve, what relationship does it represent?
In a wage curve, what relationship does it represent?
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What is NOT a benefit commonly associated with competency-based pay?
What is NOT a benefit commonly associated with competency-based pay?
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Under the straight piecework incentive plan, how is employee compensation determined?
Under the straight piecework incentive plan, how is employee compensation determined?
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Which of the following components is NOT considered part of total rewards?
Which of the following components is NOT considered part of total rewards?
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What is a key characteristic of strategic compensation?
What is a key characteristic of strategic compensation?
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Which theory emphasizes fairness in rewards based on perceived input/output ratios?
Which theory emphasizes fairness in rewards based on perceived input/output ratios?
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In the context of expectancy theory, what does 'valence' refer to?
In the context of expectancy theory, what does 'valence' refer to?
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How often should feedback sessions prioritize listening over speaking?
How often should feedback sessions prioritize listening over speaking?
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What is a potential outcome of involving employees in self-evaluation during performance reviews?
What is a potential outcome of involving employees in self-evaluation during performance reviews?
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Which factor is NOT typically considered when crafting competitive compensation packages?
Which factor is NOT typically considered when crafting competitive compensation packages?
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Which aspect of compensation strategies has become increasingly important due to competition and globalization?
Which aspect of compensation strategies has become increasingly important due to competition and globalization?
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What is the primary aim of establishing mutual goals during performance reviews?
What is the primary aim of establishing mutual goals during performance reviews?
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Which of the following is NOT a condition outlined in expectancy theory for rewards to be motivational?
Which of the following is NOT a condition outlined in expectancy theory for rewards to be motivational?
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How are hourly employees compensated compared to salaried employees?
How are hourly employees compensated compared to salaried employees?
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Which of the following factors is NOT an internal factor influencing compensation rates?
Which of the following factors is NOT an internal factor influencing compensation rates?
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What is the primary goal of collective bargaining as a function of labor unions?
What is the primary goal of collective bargaining as a function of labor unions?
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Which job evaluation method does NOT provide a precise measure of a job’s worth?
Which job evaluation method does NOT provide a precise measure of a job’s worth?
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How does the consumer price index (CPI) affect employers' wage decisions?
How does the consumer price index (CPI) affect employers' wage decisions?
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What major limitation does the point system have in job evaluation?
What major limitation does the point system have in job evaluation?
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What criterion is affected by an employer's ability to pay in compensation determination?
What criterion is affected by an employer's ability to pay in compensation determination?
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Which factor contributes to wage discrimination in the labor market?
Which factor contributes to wage discrimination in the labor market?
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In a job classification system, how are jobs structured?
In a job classification system, how are jobs structured?
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What is a key focus of performance appraisal systems in relation to employee compensation?
What is a key focus of performance appraisal systems in relation to employee compensation?
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Study Notes
Performance Management Systems
- Performance management is a process aligning employee efforts with company goals, facilitating optimal performance.
- Performance reviews (appraisals/evaluations) assess employee performance against job requirements and set goals. Reviews are typically annual, biannual, or quarterly, though more frequent, shorter reviews are increasingly favored.
Purpose of Performance Management
- Effective systems influence employee behavior and improve organizational performance.
- Developmental Purposes: Provides a structured framework for evaluating performance, offering feedback, aligning individual goals with organizational objectives, fostering career development, and ultimately improving both individual and organizational performance.
- Administrative Purposes: Supports HR activities (promotions, transfers, layoffs, pay decisions), HR planning, job evaluations, recruitment, selection test validation, and legal protection against discrimination claims.
Why Performance Management Systems Fail
- Formal Review Process Issues: Criticized for discouraging teamwork, being useful mainly for high-performing or low-performing employees, focusing on short-term achievements, and providing feedback only during formal evaluations, which can be lacking. This is particularly relevant in smaller businesses.
Developing an Effective Performance Management System
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Performance Standards: Derived from job analysis, reflected in job descriptions.
- Strategic Relevance: Extent to which standards relate to organizational objectives.
- Criterion Deficiency: Aspects of actual performance not measured.
- Criterion Contamination: Elements affecting appraisal not part of actual performance.
- Reliability: Stability/consistency of a standard, often measured by correlating ratings. Calibration is a process used to ensure consistency by managers discussing employee performance among themselves, starting with good or poor performers, and aiming for consensus for others.
- Fairness and Acceptability: Employees often concern about fairness in reviews (managers potentially inflating reviews for desired outcomes). Acceptability relates to the difficulty of managing the system.
Sources of Performance Review Information
- Supervisors: Traditional method, typically best positioned to evaluate.
- Employees: Self-evaluations increase involvement and self-reflection.
- Subordinates: Developmental purposes, potentially resisted by managers (power imbalance).
- Peers: Peer evaluations, increasingly used for input.
- Team Members: Team-based evaluations.
- Customers: External and internal customer input.
- 360-Degree Evaluation: Evaluation based on input from multiple sources to gain a holistic overview.
Training Appraisers
- Training is crucial for effective reviews; inaccurate or unhelpful feedback can result from poorly trained appraisers.
- Review Plan Establishment: Explain objectives, philosophies, mechanics (rating system, record-keeping, frequency, who conducts them, relevant performance standards, and review preparation).
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Eliminating Rating Errors:
- Halo Effect: Overrating based on one positive aspect.
- Horn Effect: Overrating based on one negative aspect.
- Distributional Errors: Central tendency (avoiding extreme ratings), leniency/strictness (inflating/deflating ratings).
- Temporal/Recency Error: Evaluating based on recent observations.
- Contrast Error: Evaluations influenced by a comparison with another employee.
- Similar-to-me Error: Inflating ratings for those with common traits.
Performance Review Methods
- Trait Methods: Focus on employee characteristics (Graphic Rating Scale, Mixed-Standard Scale, Forced-Choice Method, Essay Method).
- Behavioral Methods: Focus on specific actions (Critical Incident Method, Behavioral Checklist Method, Behaviorally Anchored Rating Scale (BARS), Behavior Observation Scale (BOS)).
- Results Methods: Focus on accomplishments (Productivity Measures, Management by Objectives (MBO), Balanced Scorecard).
Performance Review Meetings and Feedback Sessions
- Tell and Sell: Persuade employee to change behavior.
- Tell and Listen: Communicate performance, explore employee feelings.
- Problem Solving: Collaborative approach, obtain buy-in.
Conducting the Performance Review Meeting
- Encourage Self-evaluation: Employee and manager perspective alignment.
- Invite Participation: Active dialogue/listening, reveals obstacles, fosters improvement.
- Express Appreciation: Acknowledging strong points.
- Support and Care: Employee feelings, "what can I do to help?".
- Minimize Criticism: Focus on solutions.
- Establish Mutual Goals: Setting/revising goals.
- Follow-up: Continuous improvement.
Managing Compensation
- Compensation Components: Direct (wages, salaries, incentives, bonuses), Indirect (benefits), Non-financial (recognition, work environment).
- Total Rewards: All aspects of compensation, including career development, recognition, work-life balance, job security.
- Linking Compensation to Organizational Objectives: Rewarding employee contribution to organizational success vs. solely job titles or positions.
- Equity Theory: Fairness in rewards based on perceived inputs and outputs compared to referent others.
- Expectancy Theory: Motivation based on reward attractiveness and the likelihood of obtaining them; high valence (valued reward), high instrumentality (reaching goals/objectives leads to rewards), high expectancy (ability to do required tasks).
Bases for Compensation
- Job Evaluations: Systems (ranking, classification, point) that determine the relative worth of jobs within the company to assist in establishing the rate at which an employee will be paid.
- Internal Factors: Compensation strategy, job worth, employee relative worth, ability to pay.
- External Factors: Labour market conditions, area wage rates, cost of living and collective bargaining.
Job Evaluation Systems
- Job Ranking: Arranging jobs by relative worth.
- Job Classification: Classifying jobs into grades based on predetermined criteria.
- Point System: Quantitative method assigning points to compensable job factors.
Job Evaluation for Management Positions
- Hay Profile Method: Evaluating executive and managerial positions based on knowledge, mental activity, and accountability.
Wage and Salary Surveys
- Wage and salary surveys determine wages paid by competitive employers. Important characteristics of key jobs to include:
- Importance to employees and the organization.
- Large number of positions.
- Relatively stable job content.
- Same job content across many organizations.
- Acceptable to employees, management, and unions.
- Types of wage surveys: Company initiated/pre-conducted
The Wage Curve
- Shows relationship between job worth and wage rates.
Pay Grades and Rate Ranges
- Grouping jobs into pay grades with a range of rates to account for merit, seniority, etc.
- Rate ranges are steps: allowing raises based on merit, or seniority; red-circle rates are above the range max.
- Broadbanding: collapsing salary grades into bands.
- Competency-based pay: skills or knowledge basis
Legal Considerations
- Minimum wage (Ontario, Quebec).
- Overtime pay (Ontario, Quebec).
Pay for Performance
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Individual Incentive Plans:
- Piecework: Compensation per unit produced.
- Standard Hour Plan: Incentive based on completing a job in less than the predetermined standard time.
- Bonuses: Incentive payments. Spot bonuses are for special contributions.
- Merit Pay: Pay raises based on performance.
- Lump-Sum Merit Pay: Yearly merit payment.
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Non-Monetary Awards and Recognition
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Sales Incentives (various plan types like straight salary, straight commission, combined salary/commission, salary plus bonus plans)
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Group Incentive Plans (Team Compensation): rewards team as a whole.
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Gainsharing: Organizational productivity improvements.
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Profit Sharing: Employee shares in organizational profits.
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Employee Stock Ownership Plans (ESOPs): Employees own shares.
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Description
Test your knowledge on key concepts related to performance management systems. This quiz covers topics such as performance reviews, pay for performance, and 360-degree evaluations. Explore the purpose, challenges, and critical elements of effective performance management.
