Performance Evaluation - Problem Solving in Teams and Groups (updated at: (2023)

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Performance Evaluation - Problem Solving in Teams and Groups (updated at: (1)

learning outcomes

After reading this chapter, you should be able to answer these questions:

  1. How do organizations effectively use performance appraisals to improve individual job performance, and what are the inherent limitations of using multiple appraisal systems?
  2. What practices are used in the performance evaluation process?
  3. How do managers give effective feedback to subordinates?
  4. How do organizations choose the best assessment system for their organization?
  5. How do managers and organizations use incentives and rewards effectively to ensure the best possible performance from employees?

Case study


Two performance appraisal interviews

“Janet, thanks for coming. As you know, it's that time of year again. I reviewed this performance appraisal form and wrote in my review. I would like you to review and then sign.

Janet checked her grades, which were mostly in the "satisfactory" range. Even the reliability category was marked as "satisfactory"; however, it was Janet who appeared on three separate occasions to cover for workers in her group who were absent for one reason or another. Janet mentioned this problem to her boss, Ken.

“Well, Janet, you're right, and that's exactly what I expect from my employees. You know this is your first year here and you can't wait to jump to the top. But I like your style and if you keep it up, who knows how far you'll go."

Twenty-four minutes into the interview, Janet left, intrigued and disappointed. He had worked hard his freshman year; in fact, she had gone above and beyond on a few occasions, and was now more confused than ever about what was expected of her and what constituted good performance. "Maybe it's not worth working hard."

Two weeks before the scheduled interview, Mary asked Ron to review his goals and accomplishments over the past six months and note any major changes in his work that occurred during that time. Meanwhile, Mary pulled out the file in which she had periodically recorded specific positive and negative incidents over the last six months relating to Ron's performance. She also reviewed the goals they had set together at the end of the last review and thought carefully not only about possible goals for the next six months, but also about long-term development needs and goals that might be appropriate for Ron.

On the day of the interview, Mary and Ron arrived well prepared to review the last six months, as well as to think and plan for the next presentation period and beyond. The interview lasted almost two hours. After frankly discussing Ron's past performance and the extent to which both parties felt he had or had not achieved the targets for that period, they began to focus on what should be accomplished in the future. The discussion caused both parties to make changes to their original assessments and ideas about goals for the future. When it was over, Ron left more motivated than before and confident that while he had areas in which he could improve, he had a bright future ahead of him if he stayed motivated and worked hard.

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?

performance evaluationsthey are one of the most important and often one of the most mismanaged aspects of management. We usually think of performance appraisals as involving a boss evaluating a subordinate. However, performance reviews increasingly involve subordinates evaluating bosses through a feedback process known as 360 feedback.1customers rate suppliers and colleagues rate co-workers.

Whether assessments are carried out by subordinates, colleagues, customers or superiors, the process itself is vital to the life of the organization. Performance appraisal systems provide a means of systematically evaluating employees on various performance dimensions to ensure that organizations get what they pay for. They provide valuable feedback to employees and managers and help identify people and issues that can be promoted. However, these reviews are meaningless unless they are accompanied by an effective feedback system that ensures the employee is getting the right performance messages.

Reward systems are a powerful motivating force in organizations, but this is only true when the system is fair and tied to performance. As there are a variety of approaches to evaluating performance, managers must be aware of the advantages and disadvantages of each. In turn, understanding reward systems will help managers select the system that best fits the organization's needs and goals.

Performance appraisal systems fulfill a variety of functions that are of central importance to employees. However, the valuation techniques practiced today are not without problems. Managers should keep themselves informed about recent developments in compensation and reward systems so that they can modify existing systems when more appropriate alternatives become available.

One of management's primary responsibilities has always been to supervise and develop subordinates. In fact, it has been said that every manager is a human resources manager. Nowhere is this truer than with regard to evaluating and rewarding subordinates. Managers are constantly involved in employee training and development, monitoring employee performance, providing work-related feedback, and managing rewards.

In this chapter, we examine three interrelated aspects of the performance appraisal and reward process. whatFigure 2shows, this process ranges from evaluating employee performance to providing appropriate and constructive feedback to determining discretionary rewards. When effort and performance are properly evaluated and rewarded, we expect to see more stable and consistent work performance. On the other hand, when this performance is evaluated only intermittently or when the evaluation and review process is poorly done, we often see less consistent performance. We begin our discussion by examining the nature of evaluations.

We begin by examining three aspects of performance appraisal systems: (1) the uses of performance appraisals, (2) problems encountered in performance appraisals, and (3) methods for reducing errors in the appraisal system. This overview will provide a foundation for studying specific performance appraisal techniques. Those interested in more detailed information on performance appraisal systems can consult books on personnel administration or compensation.

Performance Evaluation - Problem Solving in Teams and Groups (updated at: (2)

Uses of performance reviews

In most work organizations, performance appraisals are used for a variety of reasons. These motives range from improving employee productivity to developing the employees themselves. This diversity of uses is well documented in a study on why companies use performance reviews.2Traditionally, compensation and performance feedback have been the most prominent reasons why organizations use performance reviews.

Feedback to employees.Performance appraisals provide feedback to employees on the quantity and quality of job performance. Without this information, employees have little insight into how they are doing their jobs and how they can improve.

Autodesarrollo.Performance appraisals can also serve as an aid to employee self-development. People learn about their strengths and weaknesses as seen by others and can initiate self-improvement programs (see discussion of behavioral self-management programs).

reward systems.In addition, appraisals can form the basis of organizational reward systems, particularly merit-based compensation plans.

Personnel decisions.Performance reviews also serve personnel-related functions. When making personnel decisions, such as those related to promotions, transfers and dismissals, they can be very helpful. Employers can make decisions based on information about individual talents and weaknesses. In addition, evaluation systems help management evaluate the effectiveness of its selection and placement functions. If newly hired employees often perform poorly, managers need to consider whether the right kind of people are being hired in the first place.

Training and development.Finally, assessments can help managers identify areas where employees lack skills that are critical for immediate or future performance. In these situations, new or revised training programs can be established to further develop the company's human resources.

Clearly, performance appraisal systems serve a variety of functions in organizations. In light of the importance of these functions, it is imperative that the accuracy and fairness of the assessment are primary considerations in evaluating a system. There are many performance appraisal systems. It is the manager's task to select the technique or combination of techniques that best meets the specific needs (and constraints) of the organization. Before considering these various techniques, let's look at some of the more prominent problems and error sources common to several of them.

Problems with performance reviews

A number of issues can be identified as threatening the value of valuation techniques. Most of these problems deal with issues related to the validity and reliability of the instruments or techniques themselves.Validityis the extent to which an instrument actually measures what it purports to measure, whilereliabilityIt is the extent to which the instrument consistently gives the same results each time it is used. Ideally, a good performance appraisal system will exhibit high levels of validity and reliability. If not, serious questions must be raised about the usefulness (and possibly the legality) of the system.

It is possible to identify several common sources of error in performance appraisal systems. These include: (1) central tendency error, (2) rigor or leniency error, (3) halo effect, (4) recency error, and (5) personal biases.

Central tendency error.It is often found that supervisors classify most of their employees within a narrow range. Regardless of people's actual performance, the evaluator cannot distinguish significant differences between group members and lumps everyone into an "average" category. Calledcentral tendency errorand is shown inFigure 3🇧🇷 In short, the central tendency error is not recognizing high performers or poor performers.

Performance Evaluation - Problem Solving in Teams and Groups (updated at: (3)

Error of rigor or leniency.There is a rating issue related to when a supervisor is too strict or too lenient on assessments (seeFigure 3🇧🇷 In college classrooms, we hear of professors as "hard raters" or, conversely, "easy raters." Similar situations exist in the workplace, where some supervisors see most subordinates as not living up to their high standards, while other supervisors see most subordinates as deserving of high evaluations. Like the error of central tendency,accuracy erroryerror of clemencythey fail to properly distinguish between good and bad performers and instead relegate almost everyone to the same or related categories.

Halo effect.ohalo effectexists when a supervisor assigns the same rating to each factor being assessed for an individual. For example, an employee rated above average on quantity of performance may also be rated above average on quality of performance, interpersonal competence, attendance, and readiness for promotion. In other words, the supervisor cannot effectively differentiate between relatively discrete categories and instead assigns an overall rating.

These types of biases are based on our perceptions of others. The halo effect occurs when managers have an overly positive view of a particular employee. This can affect the objectivity of reviews, as managers often give high marks to employees and fail to recognize areas for improvement.

Whether positive or negative, we also have a natural tendency to confirm our preconceived beliefs about people in the way we interpret or remember performance, known as confirmation bias.

For example, a manager may have a preconceived idea that her male subordinate is more assertive. This might make it easier for her to remember instances where she reported stating her position during a meeting. On the other hand, you may perceive your female report as less assertive, predisposing her to forget when the report suggested an effective strategy or succeeded in a difficult negotiation.

The halo effect is often a consequence of people having a similarity bias towards certain types of people. We naturally tend to favor and trust people who are similar to us. Whether it's people who also enjoy golf or people who remind us of a younger version of ourselves, favoritism resulting from a similarity bias can give certain employees an unfair advantage over others. This can impact a team to the point where those employees receive more training, better evaluations and, as a result, more opportunities for promotion.3

Current error.Often, evaluators focus on an employee's most recent behavior in the evaluation process. This is known as thecurrent error🇧🇷 That is, in an annual review, a supervisor may place undue emphasis on performance over the last few months, or even weeks, and ignore past performance levels. This practice, if known to employees, leads to a situation where employees may "float" during the first few months of the evaluation period and then overexert themselves in the final months or weeks before the evaluation. This practice leads to uneven performance and contributes to the “playing the game” attitude.

Personal prejudices.Finally, it is not uncommon to encounter situations where supervisors allow their own personal biases to influence their assessments. Such prejudices include liking or disliking someone, as well as racial and sexual prejudice. Personal biases can interfere with the impartiality and accuracy of an assessment and are illegal in many situations.

Error reduction in performance evaluations

Several suggestions have recently been put forward to minimize the effects of various biases and errors in the performance appraisal process.4When errors are reduced, more accurate information is available for staffing decisions and personal development. These methods to reduce error include

  • Make sure each dimension or factor on a performance appraisal form represents a single work activity rather than a group of work activities.
  • avoiding terms likeaverage, because different evaluators define the term differently.
  • Ensure that assessors observe subordinates regularly during the assessment period. It is even helpful for the rater to take notes for future reference.
  • keep the number of people assessed by an assessor to a reasonable number. When a person must assess many subordinates, it becomes difficult to discriminate. Ranking fatigue increases with the number of test takers.
  • Make sure the dimensions used are clearly defined, meaningful and relevant to good job performance.
  • train appraisers to recognize various sources of error and understand the rationale behind the appraisal process.

Using mechanisms like these will result in better employee evaluations that can have greater meaning for both the individual employee and the organization.

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  1. What are performance appraisals and how are they used in organizations?
  2. How are performance reviews used as a reward system and what problems can they cause?

Performance Assessment Techniques

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

Organizations use various methods to assess staff. We will summarize several popular techniques. While numerous variations on these themes can be found, the basic methods presented provide a good summary of commonly available techniques. After this review, we will consider the various strengths and weaknesses of each technique. Six techniques are reviewed here: (1) graphical rating scales, (2) critical incident technique, (3) behavior-based rating scales, (4) behavioral observation scales, (5) management by objectives, and (6) assessment centers.

Graph Rating Scales

Certainly the most popular assessment method used in organizations today is thegraphic rating scale🇧🇷 One study found that 57 percent of surveyed organizations used rating scales, and another study found the number to be 65 percent.5While this method appears in many formats, the supervisor or evaluator is usually provided with a printed or online form that contains the employee's name and various evaluation dimensions (amount of work, quality of work, knowledge of work, frequency). The rater is then asked to rate the employee, assigning a number or rating on each of the dimensions. An example of a graphical rating scale is shown attable 1.

A sample of a typical graphic rating scale
Name ________________Department______________Meeting_______________
amount of workEarringbomsatisfactorymarketunsatisfactory
Acceptable working volume under normal conditions
quality of workEarringbomsatisfactorymarketunsatisfactory
Rigor, neatness and precision in work.
job knowledgeEarringbomsatisfactorymarketunsatisfactory
Clear understanding of facts or factors relevant to the job.
personal qualitiesEarringbomsatisfactorymarketunsatisfactory
Personality, appearance, sociability, leadership, integrity.
Ability and willingness to work with associates, supervisors and subordinates towards a common goal
Conscientious, thorough, accurate, reliable with regard to attendance, lunch times, relief, etc.
Seriousness in the search for greater responsibilities Entrepreneur, not afraid to go it alone

mesa1(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

By using this method, assuming that rater biases can be minimized, it is possible to objectively compare employees. You can also examine a single employee's relative strengths and weaknesses by comparing scores on multiple dimensions.

However, one of the most serious disadvantages of this technique is its openness to errors of central tendency, rigor, and leniency. It is possible to rank almost everyone in the middle of the scale or, conversely, at one end of the scale. To control for this, some companies have assigned necessary percentage distributions to the various points on the scale. Supervisors may be allowed to rate only 10% of their staff as excellent and required to rate 10% as unsatisfactory, perhaps assigning 20%, 40% and 20% to categories in between. Doing so forces a distribution within each department. However, this procedure can penalize a group of true highlights or reward a group of mediocre ones.

Critical incident technique

With himcritical incident techniqueOn performance appraisals, supervisors record incidents or examples of each subordinate's behavior that led to unusual success or unusual failure in some aspect of the job. These occurrences are recorded in a daily or weekly record in pre-established categories (planning, decision making, interpersonal relationships, reporting). The final performance rating consists of a series of descriptive paragraphs or notes about various aspects of an employee's performance (seeTable 2).

An example critical incident assessment
Source:Adaptado de R. Daft y R. Steers,Organizations: a micro/macro approach(Glenview, III.: Scott, Foresman and Company, 1986), p. 129.

The following performance areas are designed to help you prepare for this assessment and discuss an individual's performance with them. It is suggested that areas of performance that you consider to be significantly good or bad are documented below with examples or specific actions. Items listed are suggested as typical and are by no means complete. The examples related to these points can be seen from a positive or negative point of view.

  1. Work Technology Performance

    1. security effectiveness- possible considerations:

      1. sets an excellent example of safety for others in the department with words and actions
      2. train people well in safety areas
      3. obtains people's cooperation and participation in security
      4. insists that safety be designed into procedures and processes
      5. it is essential to start the departmental security program
      6. accept safety as a core job responsibility
      ArticleRelated Examples
    2. knowledge of work—Technical and/or Specialized—possible considerations:

      1. shows exceptional knowledge in methods, materials and techniques; is ingeniously and practically applied
      2. keeps abreast of developments in the field and applies himself to work
      3. “keeps up to date” with the latest material in its special field
      4. participates in professional or technical organizations relevant to their activities
      ArticleRelated Examples
  2. Activities in Human Relations

    1. ability to communicate- possible considerations:

      1. gives logical, clear and understandable instructions on complex problems
      2. uses clear and direct language in written and oral reports
      3. organize presentations in logical order and order of importance
      4. provides supervisor and subordinates with relevant and appropriate information
      5. adapts the communication approach to the group or individual
      6. stays informed on how subordinates think and feel about things
      ArticleRelated Examples
    2. Results achieved through others- possible considerations:

      1. develops enthusiasm in others doing the work
      2. have respect and trust from others
      3. recognizes and credits the skills of others
      4. coordinates well with other groups involved to get the job done
      ArticleRelated Examples

mesa2(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

The critical incident method provides useful information for assessment interviews, and managers and subordinates can analyze specific incidents. Good qualitative information is generated. However, because little quantitative data emerges, it is difficult to use this technique for salary or promotion decisions. The qualitative result here has led some companies to combine the critical incident technique with one of the quantitative techniques, such as the rating scale, to provide different types of feedback to employees.

Assessment scales anchored in behavior

One evaluation system that has received increasing attention in recent years is thebehavior-anchored rating scale(BARS). This system requires considerable work prior to assessment, but if the work is done carefully, it can lead to very accurate ratings with high inter-rater reliability. Specifically, the BARS technique starts by selecting work that can be described in observable behaviors. Managers and personnel specialists identify these behaviors in relation to superior or inferior performance.

An example of this is shown inFigure 4, where the BARS technique was applied to the work of university professors. As shown, as one moves from extremely low to extremely good performance, performance descriptions or behavioral anchors increase. Often, scales of six to ten are used to describe job performance.Figure 4assesses the teacher's organizational skills. Other scales may relate to teacher teaching effectiveness, material knowledge, availability to students, and grade equality. Once these scales have been determined, the evaluator only has to mark the category that describes what he observes at work, and at the same time the worker's qualification is determined. The BARS technique has several purported advantages. In particular, many of the sources of error discussed above (central tendency, indulgence, halo) need to be significantly reduced because raters are considering verbal descriptions of specific behaviors rather than general categories of behaviors such as those used in graphical rating scales. Furthermore, the technique focuses on work-related behaviors and ignores less relevant issues such as the subordinate's personality, race, or gender. This technique should also lead to employees becoming less defensive during performance reviews, because the focus of the discussion would be the actual behaviors being measured, not the person. Finally, BARS can assist in employee training and development by identifying areas that need more attention.

Performance Evaluation - Problem Solving in Teams and Groups (updated at: (4)

On the downside, as noted above, a lot of time and effort is spent designing the forms prior to the actual sorting. As a separate BARS is required for each different job, it is only economical for common jobs. Finally, because the technique is based on observable behaviors, it may have little applicability to work in areas such as scientific research (and sometimes management) where much of the work is mental and the relevant observable behaviors are difficult to determine.

Behavioral Observation Scales

obehavior observation scale(BOS) is similar to BARS in that both focus on identifying observable behaviors in relation to performance. However, it is less demanding for the appraiser. Typically, the rater is asked to rate each behavior on a scale of 1 to 5 to indicate how often the employee exhibits the behavior. The evaluation of an employee's performance on a given dimension is obtained by summing the frequency ratings of the behaviors on each dimension.

for example inTable 3We can see an example of a form to assess a manager's ability to overcome resistance to change. The rater simply needs to circle the appropriate numbers that describe the observed behaviors and obtain a summary score by summing the results. The BOS technique is easier to build than the BARS and simplifies the evaluator's work a little. Even so, this is a relatively new technique that is just now getting some industry support.

Behavior Observing Scale Example for Managers: Overcoming Resistance to Change
Almost neverOften
Source:Adapted from K. Wexley and G. Latham,Increased productivity through performance evaluation,3ra ed. Englewood Cliffs, Nova Jersey: Prentice Hall, 2001.
1.Describe the details of the change to subordinates.12345
2.Explain why the change is necessary.12345
3.Discuss how the change will affect the employee.12345
4.Listen to the employee's concerns.12345
5.Ask the employee for help to make the change work12345
6.If necessary, specify the date of a follow-up meeting to address employee concerns12345
below adequateappropriateCompleteGreatSuperior

mesa3(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

management by objectives

A popular technique for evaluating employees engaged in work with clear quantitative results ismanagement by objectives(MBO). While the MBO concept encompasses much more than just the appraisal process (which embodies an organization-wide motivation, performance, and control system), we will focus here on its narrower application to employee performance appraisal. The MBO is closely related to the goal-setting theory of motivation.

Under the MBO, individual employees work with their supervisor to set goals and objectives that they will be held accountable for in the coming year. These goals are expressed in clear language and refer to tasks that are within the employee's domain. An example of these goals for a sales rep is shown atTable 4🇧🇷 After a specified period of time, the employee's performance is compared to predefined goals to determine the extent to which goals were met or exceeded.

MBO Assessment Report for Sales Representative
Goal categoriesmetathe actual performanceDifference
1.Number of sales calls403895%
2.Number of new customers contacted1010100%
3.Number of customer complaints.51050%
4.#1 product sales10,000 units11,000 units110%
5.Product #2 sales15,000 units14,000 units93%
6.Product #3 sales25,000 units30,000 units120%

mesa4(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

Several advantages of MBO have been noted. This includes the ability to do better planning; improvement of motivation, by knowing the results; fairer assessments based on results rather than personality; greater commitment through participation; and better supervisory skills in areas such as listening, advising, and evaluating. On the negative side, however, MBO has been criticized for emphasizing quantitative goals over qualitative goals and often creating too much bureaucracy. It is difficult to compare performance levels among employees because most are responsible for different objectives. Sometimes the implementation of MBO objectives is autocratic and therefore ineffective or even counterproductive. As discussed in the study of motivation, goals must be accepted to be effective. Finally, to be successful, MBO implementation must have constant attention and support from senior management; MBO does not work alone. In the absence of this support, the technique loses legitimacy and often deteriorates.

Assessment Centers

A relatively new method of evaluation is theAssessment Center.Assessment centers are unique among assessment techniques in that they focus more on assessing an employee's long-term potential for an organization than on their performance in the previous year. They are also unique in that they are used almost exclusively among the management team.

An assessment center consists of a series of standardized behavioral assessments based on various inputs. Over a period of two or three days (off-the-job), trained observers make judgments about managers' behavior in response to specially designed exercises. These exercises can consist of basketball drills, role plays and case analysis, as well as personal interviews and psychological tests. An example of a test center program is shown atTable 5.

Sample Two-Day Test Center Schedule
Day 1day 2
8:00–9:00h. m.orientation session8:00–10:30h. m.basket exercise
9h às 10h30. m.psychological tests10h30–10h45 a. m.Rest
10h30–10h45 a. m.Rest10h45–12h30 m.role play exercise
10h45–12h30 m.Management simulation game.12h30–13h30 m.Lunch
12h30–13h30 m.Lunch13h30–15h15Group problem solving exercise.
13h30–15h15Individual decision-making exercise.15h15–15h30 m.Rest
15h15–15h30 m.Rest15h30–16h30 m.Evaluators' report
15h30–16h30 m.Interview with evaluators

mesa5(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

Based on these exercises, trained observers make judgments about employees' potential for future managerial assignments in the organization. More specifically, information is obtained on interpersonal skills, communication skills, creativity, problem-solving ability, tolerance for stress and ambiguity, and planning ability of employees. This technique has been successfully used by some of the largest corporations in the United States, including AT&T, IBM, and General Electric.

Results from several assessment center programs look promising, and the technique is growing in popularity as a means of identifying future managerial potential. For example, Coca-Cola USA has experimented with using assessment centers to select its administrative staff. After a detailed study, the company found that those selected this way were only one-third as likely to leave the company or be fired than those selected the traditional way. While the assessment center approach added about 6% to the hiring cost, the lower turnover rate led to large overall savings.6

Some problems with the technique were noted. In particular, because of the highly stressful environment created in test centers, many good managers may simply not realize their full potential. Furthermore, the results of a poor assessment at an assessment center can be far-reaching; individuals can receive a “loser” image that will stay with them for a long time. And finally, there is some question about how valid and reliable rating centers really are for predicting future managerial success.7Despite these problems, assessment centers remain a popular vehicle for some companies to develop and assess managerial potential.


Tesla performance review

At Tesla, the auto giant, the standards are extremely high for its employees. In 2017, Tesla conducted its annual benchmarks as it does every year. Due to the review process, the company sees both voluntary and involuntary exits. During the review process, managers discuss "the results that were achieved, as well as how those results were achieved" with their employees.* Tesla also has a performance compensation and recognition program that includes stock rewards as well like promotions. in some cases along with constructive feedback.

Employee departures during the review period are not exclusive to Tesla; however, in 2017 there was a major exodus of approximately 700 employees following their employee reviews. Elon Musk, who recently stepped down as president and is under scrutiny for his behavior*, called the media coverage of this news "ridiculous".

“You have two boxes of the same capacity and one is much smaller, obviously the big one is going to crush the little one,” says Musk. “So the little guy better have a lot more skill or he's going to get punched. That's why our standards are high. 🇧🇷 🇧🇷 if they are not drugged, we will die”.

Overall, about 17% of its employees were promoted, nearly half in manufacturing. As Tesla continues to grow and develop new vehicles, it is constantly pushing the boundaries and pushing its employees to new limits. Performance reviews are critical to the success of Tesla's business; the company needs the best people with the best skills. It is constantly growing and is trying to “drain the labor reserve” to fill positions in many of its units and factories.


  1. What factors do you think may have changed Tesla's approach to its benchmarks?
  2. How can a high-pressure environment affect an employee's performance? What factors should be considered to combat these problems?

Comparison of Assessment Techniques

It is important to consider which assessment technique or set of techniques might be most appropriate for a given situation. While there is no simple answer to this question, we can consider the various strengths and weaknesses of each technique. this is done inTable 6🇧🇷 It is important to note that the appropriateness of a given valuation technique depends in part on the purpose of the valuation. For example, if the objective of the assessment is to identify high-potential executives, assessment centers are more appropriate than rating scales.

Key strengths and weaknesses of valuation techniques
rating scalescritical incidentsBARRASBOSMBOAssessment Centers
significant dimensionsSometimesSometimesUsuallyUsuallyUsuallyUsually
amount of time requiredLowAverageHighAverageHighHigh
development costsLowLowHighAverageAverageHigh
Possibility of classification errorsHighAverageLowLowLowLow
acceptability by subordinates.LowAverageHighHighHighHigh
acceptability to superiorsLowAverageHighHighHighHigh
Utility to assign rewardsPoormarketbombombommarket
Employee counseling utilityPoormarketbombombombom
Utility to identify promotion potentialPoormarketmarketmarketmarketbom

mesa6(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

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As expected, the simplest and cheapest techniques are also the least accurate. They are also the least useful for staffing decision-making and employee development purposes. Again, it appears that managers and organizations get what they pay for. If performance appraisals are an important aspect of organizational life, the more sophisticated and time-consuming techniques are clearly preferable. If, on the contrary, it is necessary to evaluate employees quickly and with few resources, techniques such as the graphic evaluation scale may be more appropriate. Managers must make cost-effective decisions about the price (in time and money) they are willing to pay for a quality performance appraisal system.


  1. What are the techniques and scales used in performance appraisals?
  2. What are MBOs and how do they relate to performance reviews?
  3. What are assessment centers?


  1. What types of feedback do performance reviews provide to everyone in the organization?

Reward systems in organizations

  1. LikeDo organizations choose the best assessment system for their organization?

Once a company has designed and implemented a systematic performance appraisal system and provided adequate feedback to employees, the next step is to consider how to link available corporate rewards to appraisal results. Behavioral research consistently shows that performance levels are higher when rewards depend on performance. Therefore, in this section, we will examine five aspects of reward systems in organizations: (1) functions that reward systems serve, (2) bases for reward distribution, (3) intrinsic versus extrinsic rewards. , (4) the relationship between money and money. motivation and, finally, (5) secrecy of payment.

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.
Performance Evaluation - Problem Solving in Teams and Groups (updated at: (5)

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.

Performance Evaluation - Problem Solving in Teams and Groups (updated at: (6)

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.


  1. What is the best evaluation system that organizations can adopt?
  2. How are rewards related to performance reviews?

Individual and Group Incentive Plans

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

We now move on to examining various employee incentive programs used by organizations. First, we consider the relative merits of individual versus group incentive programs. Below, we focus on several relatively new approaches to motivation and compensation. Finally, we suggest several guidelines for effective incentive systems.

Individual x group incentives

Companies often have a choice between several compensation plans and must make decisions about which one is most effective for their situation. Incentive systems in organizations are generally divided into two categories, depending on whether the unit of analysis and the recipient of the reward is the individual or a group. Among individual incentive plans, a number of approaches can be identified, including merit-based compensation (commonly known as merit pay), piecework incentive programs (in which individuals are paid according to production quantity), bonuses of various types and commissions. 🇧🇷 In each case, the rewards are directly linked to the individual's level of performance.

While individual incentive systems often lead to better performance, some caveats were noted. In particular, these programs can sometimes lead employees to compete with each other, with undesirable results. For example, commission-based department store salespeople may fight over customers, driving them away. After all, customers don't care who they deal with, only that the service is good. Second, unions often resist these plans, preferring that pay be based on seniority or job classification. Third, when quality control systems are lax, individual incentives such as piece rates can lead employees to maximize production units at the expense of quality. And finally, for these programs to be successful, a climate of trust and cooperation is needed.

To overcome some of these shortcomings, many companies have turned to incentive plans from groups or organizations. Group incentive programs base at least some of an employee's rewards on the performance of the group or organization. Therefore, employees are encouraged to cooperate with each other and the corporation so that everyone can benefit. Programs such as profit-sharing or profit-sharing plans (discussed below) are designed to link the future rewards and prosperity of employees to those of the company and reduce the longstanding antagonism between the two. The results are often dramatic.

Paid creative practices

Recently, we've seen a number of innovations in the way companies approach reward systems. These efforts are aimed at facilitating the integration of employee and company interests in order to maximize productivity and quality of life at work. Five of these creative pay practices should be noted: (1) profit-sharing plans, (2) skill-based incentives, (3) one-time pay increases, (4) participatory pay decisions, and (5) flexible benefit programs. These approaches, together with their main advantages and disadvantages, are summarized inTable 7.

Advantages and Disadvantages of New Salary Practices
payment practiceAdvantageDisadvantages
share profitTie pay with performance; encourages group cooperationPlans that focus exclusively on productivity can lead employees to overlook other important goals, such as quality.
Skill-based incentivesMore flexible and qualified workforce; greater satisfactionHigher training costs and salaries
Overall sum increaseGreater visibility of salary increases; increase in salary satisfactionadministrative cost
Participatory payment decisionsIncreased confidence in satisfaction with payment decisions; better payment decisionsWaste of time
flexible benefitsGreater satisfaction with salary and benefits.administrative cost

mesa7(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

Profit sharing plans.Giving bonuses to executives and senior managers to reflect their contributions to organizational effectiveness is common. In fact, at some companies, executive bonuses are often higher than salaries. Recently, companies have increasingly applied this same principle to all employees in the form ofprofit sharing(profit sharing). Here, employees have the opportunity to share in corporate productivity gains through increased profits. The greater the productivity gains, the greater the gains. Several variations on this theme can be found, including the Scanlon Plan, IMPROSHARE, the Ruker Plan, and the Lincoln Electric Plan. Regardless of title, the basic plan is similar.

For example, under the Scanlon Plan (probably the oldest program), three operational guidelines are used: (1) each department or division is treated as a business unit for performance measurement purposes, (2) associated specific cost measures to the production process are identified and agreed to by all parties, and (3) bonuses are paid to all employees according to a predetermined formula that links the bonus amount to actual cost savings realized during the time period. Under such a plan, it is clearly in the best interest of employees to contribute to cost savings, thereby increasing their own income.


Provide feedback in different countries

Global workplaces are on the rise in global companies and it has become a trend to have managers from one country, most likely the country where the head office is located, managing employees abroad. An important consideration when managing globally is how cultural differences can have a profound effect on performance appraisals, negotiations and criticism.

For example, often in the United States, a critical feedback method in the "hamburger method" (Step 1: Identify tasks. As a group, identify the technical steps that would be involved in the implementation. Step 2: Identify options for tasks Divide the tasks team into several small groups Step 3: Combine the results.) is acceptable, while other countries give their opinion only with food. This strategy in Holland and Germany can be off-putting to other cultures, and when you read another culture's technique through your own frame of reference, it can feel wrong.

Managing globally means you need to research which approach to feedback is best received by employees' cultural differences. For example, being direct is key when communicating with a Dutch person. On the contrary, in England or the United States, criticism is not made directly, but with positive pieces wrapped in negatives. In Asian countries, feedback is often avoided or the message is blurred to “save face”. With all of these complications and considerations, it is increasingly important to accurately understand the culture, the cultural understanding of the employees who directly report to you, and also the lens through which feedback is viewed.


  1. How can a new manager working with international employees ensure they are providing feedback appropriately?
  2. What methods can a manager employ in preparing a successful review, providing feedback to employees from different cultures?
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Skill-based incentives.Typical compensation programs are tied to job evaluations. In them, jobs are analyzed to assess their characteristics, and then salary levels are assigned to each job based on factors such as the difficulty of the job and the scarcity of the job market. In other words, salary levels are set based on the job, not the individual. This approach does not encourage employees to improve their skills at work, because there is no reward for improvement. This thinking also keeps all employees in their place and minimizes the possibility of transfers between positions.

Under theskill based incentiveprogram,employees are paid according to their skill level (i.e. thenumbernumber of jobs they can run), regardless of the actual tasks they can run. This approach has been successful at organizations such as Procter & Gamble and General Foods. Employees are encouraged to learn additional skills and are rewarded accordingly. The organization has a more highly educated and more flexible workforce. However, training and compensation costs necessarily increase, so the program is only appropriate in some situations. The technique is most often seen as part of a broader quality of work life program, where it is associated with work redesign efforts.

Global sum pay increases.Another technique that has received some attention is allowing employees to decide how (ie, in what amounts) they want to receive their pay increases for the coming year. Under the traditional program, salary increases are paid in equal amounts in each paycheck during the year. Under the alternative plan, employees can choose to receive equal amounts throughout the year or they can choose to receive the entire increase at once.fixed salary increase🇧🇷 This plan allows employees greater freedom of action over their own financial affairs. If an employee wants to use the entire salary increase for vacation, he or she can pay it in full in June. Then, if the employee resigns before the end of the year, the unearned portion of the raise is subtracted from the final paycheck. This plan increases reward visibility for the employee. The employee receives, for example, a raise of $600 (a very large amount) instead of twelve monthly raises of $50. However, as with the flexible reward system discussed below, the administrative costs of the lump sum plan are higher. than those of the traditional method.

Participatory Payment Decisions.Furthermore, what concerns many managers is the extent to which employees should be involved in decisions about pay increases. This is the theme ofparticipatory payment decisions🇧🇷 Recently, several organizations have experimented with employee participation in salary increase decisions, and the results seem to be quite positive. By allowing employees to participate in reward system design or actual salary increase decisions (perhaps through a committee), it is argued that higher quality decisions are made based on more information. In addition, employees now have more reason to trust the impartiality of decisions. On the other hand, this approach requires much more time for both the manager and participating subordinates. Costs must be weighed against benefits to determine which approach is best suited for the specific organization and its goals.

Flexible benefit systems🇧🇷 A typical fringe benefits package provides the same benefits and the same amount of benefits to all employees. As a result, individual differences or preferences are largely ignored. Lawler's studies indicate variations in benefit preferences.18For example, single guys prefer more vacation time, while married guys prefer to forego vacation in exchange for a higher salary. Older employees want more retirement benefits, while younger employees prefer higher incomes. Through aflexible benefits program(also called the “cafeteria benefits program”), employees have some freedom to determine their own packages and can make allowances, within limits. Organizations such as PepsiCo, TRW and the Educational Testing Service already use these programs. While there are some management issues with the programs, efforts in this direction can lead to greater satisfaction of staff needs.

Which approaches are most effective for motivating employees? This is obviously a difficult question to answer. One such study asked leading employers which of several approaches had been used with a high level of success. The results are displayed inTable 8🇧🇷 Compensation based on skills, time off earned, andshare profitall received high marks from staff executives, although other programs also enjoyed wide support. From these results, it seems that many approaches can be useful; the choice of which to use would depend on the circumstances and goals of a given organization.

Guidelines for Effective Incentive Programs

Whichever incentive plan is selected, care must be taken to ensure that the plan is appropriate for the organization and the workforce in particular. In fact, a simple test of the effectiveness of an incentive plan would be as follows:19

  • Does the plan draw attention?Do employees discuss the plan and boast about their early successes?
  • Do employees understand the plan?Can employees explain how the plan works and do they understand what they need to do to earn the incentive?
  • Does the plan improve communication?As a result of the plan, do employees understand more about the corporate mission, goals and objectives?
  • Does the plan pay when it should?Are incentives paid for desired outcomes and withheld for undesirable outcomes?
  • Is the company performing better as a result of the plan?Are profits or market share going up or down? Did any profit result from part of the incentive plan?
Companies that successfully use creative incentive plans
type of incentivePercentage of companies reporting success
Source:Data adapted from J. Horn,Psychology Today,July 1987, pp. 54–57.
skill-based pay89%
free time gained85
Profit Sharing Plans81
Small group incentives75
individual incentives73
fully paid job67
Global sum bonus66

mesa8(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)

If a new (or existing) pay plan can meet these tests, it is likely to be very effective in motivating employee performance and should be maintained by the organization. If not, perhaps some other approach should be tried. Based on this evidence, several specific guidelines can be identified to increase the effectiveness of programs. These include the following:20

  • Any reward system or incentive plan must be asclosely related to actual job performancehow is it possible. This point was discussed earlier in this chapter.
  • If possible, incentive programs shouldallow for individual differences🇧🇷 They must recognize that different people want different results from a job. Flexible benefit programs like those discussed here strive to do just that.
  • Incentive programs shouldreflect the type of work being doneand the structure of the organization. This simply means that the program must be tailored to the specific needs, goals and structures of a given organization. Individual incentive programs, for example, would likely be less successful with unionized employees than group programs like the Scanlon plan. This point was clearly demonstrated in Lawler's research, which notes that organizations with traditional management and those with more participative management can approach reward systems very differently to be effective.21As is shown inTable 9Both types of companies can be effective as long as their reward systems are consistent with their overall management approach.
  • The incentive program mustbe consistent with the cultureand organizational constraints. Where trust levels are low, for example, considerable effort can be required to make any program work. In an industry already characterized by high levels of efficiency, basing an incentive system on further increasing efficiency may have little effect because employees may see the task as nearly impossible.
  • Finally, incentive programs shouldbe carefully monitored over timeto ensure they are administered fairly and accurately reflect current technological and organizational conditions. For example, it may be appropriate to offer department store salespeople an incentive to sell outdated merchandise because current fashion items sell themselves. The onus is on managers not to select the incentive program that is in vogue or used “on the side”, but rather to consider the unique situations and needs of their own organizations. Then, with that understanding, a program can be developed and implemented that will facilitate goal-oriented performance.
Adapt reward systems to the management style
reward systemTraditionalparticipative
Source:Adapted from E.E. Lawler,The design of effective reward systems,Technical Report (Los Angeles: University of Southern California, 1983), p. 52.
Supplementary BenefitsVaries by organizational levelCafeteria - same for all levels
promotionAll decisions made by senior management.Open publication for all works; participation of the peer group in the decision-making process
state symbolsMany, carefully assigned to the job.Few gifts, little emphasis on level of organization
type of paymenttime and salaryall salary
base rateBased on the work performed; high enough to attract job seekersSkill-based; high enough to provide security and attract applicants
incentive planprice per pieceBonus for the entire group and organization, lump sum increase
communication policyVery restricted distribution of informationIndividual rates, salary survey data, all other information made public
decision-making placesenior managementNear the location of the person whose salary is being set

mesa9(Attribution: Copyright Rice University, OpenStax, licensed under CC BY-NC-SA 4.0)


  1. What are the differences between individual and group incentives?
  2. What is the range of reward incentives available to organizations?

key terms

central tendency error
The lack of recognition of the very good or the very bad.
halo effect
This results in a supervisor assigning the same rating to each factor evaluated for an individual.
error of clemency
It fails to adequately distinguish between good and bad performers, relegating almost everyone to the same or related categories.
performance evaluations
A system that provides a means of systematically evaluating employees on various performance dimensions to ensure organizations get what they pay for.
old mistake
Occurs when, in an appraisal, a supervisor may place undue emphasis on performance over the last few months, or even weeks, and ignore past performance levels.
The extent to which the instrument consistently gives the same results each time it is used.
The extent to which an instrument actually measures what it purports to measure.
accuracy error
It fails to adequately distinguish between good and bad performers, relegating almost everyone to the same or related categories.
Assessment Center
It consists of a series of standardized behavioral assessments based on various inputs.
Behavior-Anchored Rating Scale
A system that requires considerable work prior to assessment but, if the work is done carefully, can lead to very accurate ratings with high inter-rater reliability.
Behavior observation scale
Identifies observable behaviors in relation to performance and is less demanding for the evaluator.
Critical incident technique
A technique in which supervisors record incidents, or examples, of each subordinate's behavior that led to unusual success or unusual failure in some aspect of the job.
Graph Rating Scale
A performance appraisal technique in which the supervisor or appraiser is typically given a printed or online form that contains the employee's name and various appraisal dimensions (amount of work, quality of work, knowledge of work, frequency). The rater is then asked to rate the employee, assigning a number or rating on each of the dimensions.
management by objectives
Closely related to the goal-setting theory of motivation.
distributive justice
Where employees receive (at least a portion) of their rewards based on their level of contribution to the organization.
extrinsic rewards
Rewards external to the work itself.
intrinsic motivation
The desire to do a task because you enjoy it.
intrinsic reward
Rewards external to the work itself.
Skill-based incentives
Reward employees based on the skills they have, not just the skills they can use on the job.
Flexible benefit system
A rewards program in which employees are given some freedom to determine their own packages and can make allowances, within certain limits.
share profit
An incentive plan in which employees or customers receive benefits directly as a result of savings measures they initiate or participate in.
Fixed rate salary increase
A technique that allows employees to decide how (that is, in what amounts) they want to receive their pay increases for the coming year.
Participatory payment decisions
Involve employees in salary increase decisions.

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

  1. 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.


  1. 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

  1. 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

  1. 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.

Chapter review questions

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  1. Identify the various functions of performance appraisal. How are assessments used in most labor organizations?
  2. What are some of the problems associated with performance reviews?
  3. Defineshelf lifeyreliability🇧🇷 Why are these two concepts important from a managerial point of view?
  4. How can errors in assessments be reduced?
  5. Critically evaluate the advantages and disadvantages of various performance appraisal techniques.
  6. Discuss the role of feedback in employee performance.
  7. What is the difference between intrinsic and extrinsic rewards?
  8. Identify the main bases of reward distribution.
  9. How does money influence employee motivation?
  10. Discuss the relative merits of individual and group incentive programs.
  11. Describe the advantages and disadvantages of several of the new approaches to reward systems. Which do you think would be most effective in work organizations?


Exercises to apply management skills

How would you rate your supervisor?

Instructions:Think of your current supervisor or one of the jobs you've had and rate it on the following dimensions. Give a “1” for very poor, a “3” for fair, a “5” for excellent, etc.

Very poorAverageEarring
  1. Your boss's knowledge of the job.
  1. Your boss's leadership skills
  1. Your boss's communication skills
  1. Your boss's ability to motivate subordinates
  1. Your boss's attendance and punctuality
  1. Your boss's commitment to the organization
  1. Your boss's long-term potential for promotion
  1. What is your overall assessment of your supervisor?

Think back to a current or past job and evaluate the source and quality of the feedback you received from your supervisor. When finished, checkAppendix Bfor scoring procedures.


How many comments do you get about your work?

Instructions:Think of a current or previous job. With that in mind, please answer the following questions as accurately as possible.

  1. My boss tells me when I make a mistake.

    strongly disagreeTotally agree
  2. My co-workers help me improve at work.

    strongly disagreeTotally agree
  3. I receive formal company evaluations of my work.

    strongly disagreeTotally agree
  4. My boss always tells me when I do a good job.

    strongly disagreeTotally agree
  5. This company really appreciates good performance.

    strongly disagreeTotally agree
  6. When I do something especially well, I get a "thank you" from my boss.

    strongly disagreeTotally agree
  7. My co-workers really appreciate it when I do a good job.

    strongly disagreeTotally agree
  8. My co-workers praise me for the quality of my work.

    strongly disagreeTotally agree
  9. My co-workers are very supportive of my efforts.

    strongly disagreeTotally agree
  10. I know when I've done a good job.

    strongly disagreeTotally agree
  11. My work provides me with solid feedback on my performance.

    strongly disagreeTotally agree
  12. I can see results when I learn to do something better.

    strongly disagreeTotally agree


C. Solbach. “Feedback through the cultural mirror”. Krauthammer, September 16, 2015,;

M. Abadi. “The same sentence as your boss can mean 'yes', 'no' or 'maybe' depending on the country you work in.” Business Insider, December 7, 2017,; J Windus. "An international approach to 360-degree feedback".

Cognology, July 26, 2016,; Giving feedback to employees for a culturally diverse workforce. Impraise Blog, accessed January 26, 2019,

K. Korosec. Tesla lays off hundreds of workers after its annual performance review.Fortuna, October 14, 2017,; D. Muio. Tesla laid off 700 employees after performance reviews in the third quarter.Business Insider, November 1, 2017,;

(Video) 2015 06 03 Everbridge Customer Webinar Best Practices Incident Communication Demo Cut

J Barbas. “Elon Musk agrees to pay $20 million and step down as CEO of Tesla in SEC settlement.”Money, September 30, 2018,


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