Performance Evaluation - Problem Solving in Teams and Groups (updated at: https://opentext.ku.edu/teams/) (2023)

Functions of reward systems

Reward systems in organizations are used for many reasons. It is generally accepted that reward systems influence the following:

• Effort and performance at work.Following expectancy theory, employees' effort and performance would be expected to increase when they feel that rewards depend on good performance. Therefore, reward systems serve a very basic motivational function.
• Assistance and retention.Reward systems have also been shown to influence an employee's decision to come to work or stay with an organization. This was discussed in the previous chapter.
• Commitment of employees to the organization.Reward systems have been found to greatly influence employee commitment to the organization, primarily through the switching process.⁹That is, employees develop bonds with organizations when they perceive that the organization is interested in their well-being and willing to protect their interests. This sharing process is shown in Figure 6. As the company responds to employee needs and goals, we expect engagement to increase.
• job satisfaction.Job satisfaction was also shown to be related to rewards, as discussed in the previous chapter. Edward E. Lawler, a well-known employee compensation researcher, identified four conclusions about the relationship between rewards and satisfaction: (1) satisfaction with a reward is a function of how much is received and how much the reward is felt by the individual who owes it. it was received; (2) satisfaction is influenced by comparisons with what happens to others, especially co-workers; (3) people differ in the rewards they value; and (4) some rewards are satisfying because they lead to other rewards.¹⁰
• Occupational and organizational choice.Finally, an individual's selection of an occupation, as well as the decision to join a particular organization within that occupation, are influenced by the rewards believed to be available in the occupation or organization. To prove it, just look in the classifieds section of your local newspaper and see how many jobs have starting salaries.

Reward systems in organizations have far-reaching consequences for both individual satisfaction and organizational effectiveness. Unfortunately, one can easily cite cases where reward systems have been distorted to punish good performance or inhibit creativity. Consider, for example, the Greyhound Bus Company driver who was suspended for 10 days without pay for violating a company rule that prohibited the use of CB radios on his bus. The bus driver had used the radio to alert the police that his bus, with 32 passengers on board, was being hijacked by an armed man. The police arrested the hijacker and the bus driver was suspended for violating company rules.¹¹Such incidents hardly encourage employees to focus their efforts on responsible performance.

Basis for the Distribution of Rewards

A common reality in many contemporary work organizations is the inequality that exists in the distribution of available rewards. You often see little correlation between those who perform well and those who receive the greatest rewards. At the extreme, it's hard to understand how a company can pay its CEO $10 to $20 million a year (as many large corporations do) while paying their secretaries and employees less than $15,000. Each one works approximately 40 hours a week and both are important for the organization's performance. Is it really possible that the president is 1,000 times more important than the secretary, as the salary differential suggests?

How do organizations decide on the distribution of available rewards? At least four mechanisms can be identified. In more cases than we care to admit, the rewards go to those with the mostI can(market power or personal power). In many of the companies whose CEOs earn eight-figure incomes, we find that these same people are major shareholders in the company or have certain skills, connections or status that the company wants. In fact, a threat of firing a high-performing or high-ranking executive often leads to greater rewards.

A second possible basis for distributing rewards isequality🇧🇷 Here, all individuals within a job classification would receive the same or at least similar rewards. The most common example here can be found among unionized workers, where pay rates are set and standardized with little or no reference to actual performance levels. Rather than ability or performance, these systems often recognize seniority as the key driver for pay raises or promotions.

The basis for the welfare reward system in this country is need. Most of the time, the greater the need, the greater the level of support. It is not uncommon to see situations in companies where need is taken into account in layoff situations, where an employee is not fired because he is the sole breadwinner for a family.

A fourth mechanism used by organizations to assign rewards isdistributive justice🇧🇷 Under this approach, employees receive (at least a portion of) their rewards based on their level of contribution to the organization. The greater the contribution (such as performance), the greater the reward. This mechanism is most prominent in merit-based incentive programs, where pay and bonuses are determined by performance levels.

Extrinsic and intrinsic rewards

The variety of rewards that employees can receive in exchange for their contributions of time and effort can be categorized asextrinsicointrinsicrewardsextrinsic rewardsthey are external to the work itself. They are managed externally, i.e. by someone else (usually management). Examples of extrinsic rewards include wages and salaries, fringe benefits, promotions, and recognition and praise from others.

On the other hand,intrinsic rewardThey represent rewards that are directly related to job performance. In this sense, they are often described as “self-administered” rewards, as the completion of the task itself leads to its receipt. Examples of intrinsic rewards include feelings of task completion, autonomy, and personal growth and development that come from work.

In the literature on employee motivation there is considerable controversy over the possible interrelationship of these two types of reward. It has been argued (with some research support) that extrinsic rewards tend to negate the positive effects of some intrinsic rewards and can lead to unethical behavior.¹²Consider, for example, the neighbor who begs you to help him wash his car. For a young child, this task can generate great excitement (and intrinsic motivation). Now consider what happens on a Saturday afternoon when you need to wash the car but the kid has other options. What is your job? You offer to pay him this time to help him wash his car. What do you think will happen the next time you ask your neighbor to help you wash your car for free? In other words, when extrinsic rewards such as compensation are closely tied to performance (called a performance reward contingency),intrinsic motivation— the desire to do a task because you enjoy it — may subside.

Furthermore, it is important to note that because extrinsic rewards are administered by sources external to the individual, their effectiveness depends on accurate and fair monitoring, evaluation, and administration. Implementation can be expensive and the time for performance and rewards is not always close. For example, you may perform well on a task, but unless there is a way to notice, evaluate, record and reward it within a reasonable time frame, an extrinsic reward may not have a significant impact. Intrinsic rewards are a function of self-monitoring, evaluation, and management; consequently, these rewards are often less expensive and more effectively administered. For example, even if no one else notices or rewards your superior performance on a task, you can still reward yourself with a mental pat on the back for a job well done or a sense of satisfaction for overcoming a challenge. The implications of this finding will become apparent as we explore efforts to enrich employees' work.

Money and Motivation: A Closer Look

A recurring debate among managers revolves around the question of whether money is a primary motivator. Some argue that most behavior in organizational settings is motivated by money (or at least monetary factors), while others argue that money is just one of many factors that motivate performance. Whichever group is right, we must recognize that money can have important motivational consequences for many people in many situations. In fact, money plays a number of important roles in work environments.¹³These include serving as (1) a goal or incentive, (2) a source of satisfaction, (3) an instrument for obtaining other desired outcomes, (4) a standard against which to determine relative rank or value, and (5) a reinforcer. conditional where its reception is contingent on a certain level of performance. Even so, experience tells us that the effectiveness of salary as a motivator varies considerably. Sometimes there appears to be an almost direct relationship between salary and effort, while other times this relationship is not found. Why? Lawler suggests that certain conditions must be present for payment to act as a strong motivator:¹⁴

• Levels of trust between managers and subordinates must be high.
• Individual performance must be precisely measurable.
• Salary rewards for high performers should be substantially higher than for low performers.
• There should be little or no perceived negative consequences for good performance.

Under these conditions, a climate or culture is created in which employees have reason to believe that there really are significant performance reward contingencies. Given this perception (and assuming the reward is valued), we would expect performance to increase.¹⁵

payment secret

Secrecy about salary values ​​seems to be a widely accepted practice in work organizations, especially among administrative personnel. It is argued that salary is a personal matter and we should not invade others' privacy. However, available evidence suggests that payment secrecy can have a number of negative side effects. To begin with, it has consistently been found that, in the absence of real knowledge, people tend toonestimate the salary of co-workers and those above them in the hierarchy. As a result, much of the motivational potential of a differential reward system is lost.^sixteenEven if an employee receives a relatively large pay raise, he may still perceive an inequality in what others receive. This problem is highlighted in the results of a study by Lawler. In considering the effects of payment secrecy on motivation, Lawler observed:

Almost independently of the individual manager's performance, he felt he was getting a below-average raise. This problem was particularly acute among high performers, as they believed they were doing well but receiving minimal reward. They did not believe that pay was actually based on merit. This was ironic, as his pay reflected performance. 🇧🇷 🇧🇷 🇧🇷 So even though pay was tied to performance, these managers weren't motivated because they couldn't see the connection.¹⁷

Secrecy of payment also affects motivation through feedback. Several studies have shown the value of feedback in motivating performance (see discussion above). The problem is that, for managers, money represents one of the most meaningful forms of feedback. Payment secrecy eliminates feedback.

When salary information is open (or at least when the range of percentage raises within a job classification is disclosed to people in that group), employees generally receive more recognition for satisfactory performance and are generally more motivated to perform subsequent tasks. 🇧🇷 It is easier to establish feelings of pay equity and trust in the pay management system. On the other hand, announcing pay rates and salary increases can generate envy among employees and put pressure on managers to reduce perceived inequalities in the system. There is no correct position on whether pay rates should be secret or open. The point is that managers shouldn't assume a priori that salary secrecy, or salary openness, is a good thing. Rather, the potential consequences of any approach should be carefully considered in light of the organization's specific situation at the time.

Performance evaluation systems

1. How do organizations effectively use performance appraisals to improve individual job performance, and what are the inherent limitations of using multiple appraisal systems?

If performance is to be changed or improved, it must be rewarded. To be rewarded, it must be measured. However, great care must be taken to (1) measure important behaviors and outcomes (individual, group or organizational) and not just those that are easy to measure, (2) measure them with the appropriate technique(s) (s). ) and (3) linking appropriate rewards to desired behaviors and outcomes.

Organizations use performance reviews for several reasons: (1) providing feedback to employees, (2) enabling employees to develop personally, (3) assigning rewards, (4) gathering information for personal decisions, and (5) guiding them in development of training and development efforts.

Performance Assessment Techniques

2. What practices are used in the performance evaluation process?

Performance reviews are subject to several problems, including central tendency error, rigor or leniency error, halo effect, timeliness error, and personal biases.

Comments

3. How do managers give effective feedback to subordinates?

Among the most common rating systems are graphical rating scales, the critical incident technique, behavior-based rating scales, behavioral observation scales, management by objectives, and rating centers. Assessment centers represent a special case of assessments in that they focus on assessing an employee's long-term potential for an organization.

Reward systems in organizations

4. How do organizations choose the best assessment system for their organization?

Rewards serve several functions, including (1) encouraging effort and job performance, (2) reducing absenteeism and turnover, (3) improving employee engagement, (4) facilitating job satisfaction, and (5) facilitate occupational and organizational choice.

Rewards can be distributed based on power, equality, need, or distributive justice. Distributive justice is based on the principle of attributing rewards proportional to employee contributions. Intrinsic rewards represent employee-managed outcomes (eg, a sense of task accomplishment), while extrinsic rewards are other-managed (eg, wages).

Profit-sharing incentive plans base a portion of employee salaries on the company's profits or productivity. As a result, employees are generally more interested in facilitating corporate performance.Skill-based incentivesreward employees based on the skills they have, not the skills they can use on the job. As a result, employees are encouraged to continually improve their skill levels.

A fixed pay raise simply gives employees their one-off pay raises (possibly just before summer break or a major holiday).

Participatory pay decisions allow employees to have some input in determining their pay increases.

Individual and Group Incentive Plans

5. How do managers and organizations use incentives and rewards effectively to ensure the best possible performance from employees?

Flexible benefits allow employees to choose the fringe benefits that best suit their needs.

A good reward system (1) is closely linked to performance, (2) allows for individual differences, (3) reflects the type of work being done, (4) is consistent with the corporate culture, and (5) is carefully monitored over time.