MR. NAJIBULLAH A. UMPA, RN, MBA, DBM (ON-GOING)

AY 2016-2017 (2nd TRIMESTER)

HUMAN BEHAVIOR IN

ORGANIZATION

APPRAISAL AND

REWARD SYSTEM

CHAPTER 6

PERFORMANCE APPRAISAL

is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows:

1. The supervisors measure the pay of employees and compare it with targets and plans.

2. The supervisor analyses the factors behind work performances of employees.

3. The employers are in position to guide the employees for a better performance.

OBJECTIVES

Performance Appraisal can be done with following objectives in mind:

• To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.

• To identify the strengths and weaknesses of employees to place right men on right job.

• To maintain and assess the potential present in a person for further growth and development.

OBJECTIVES • To provide a feedback to employees regarding

their performance and related status.

• To provide a feedback to employees regarding their performance and related status.

• It serves as a basis for influencing working habits of the employees.

• To review and retain the promotional and other training programs.

ADVANTAGESIt is said that performance appraisal is an

investment for the company which can be justified by following advantages:

1. PROMOTION: Performance Appraisal helps the supervisors to chalk out the promotion programs for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.

2. COMPENSATION: Performance Appraisal helps in checking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority.

3. EMPLOYEES DEVELOPMENT: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programs. It helps to analyze strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programs.

4. SELECTION VALIDATION: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.

5. MOTIVATION: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a person’s efficiency can be determined if the targets are achieved. This very well motivates a person for better job and helps him to improve his performance in the future.

6. COMMUNICATION: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways:

Through performance appraisal, the employers can understand and accept skills of subordinates.

The subordinates can also understand and create a trust and confidence in superiors.

It also helps in maintaining cordial and congenial labor management relationship.

It develops the spirit of work and boosts the morale of employees.

TOOLS AND TECHNIQUESFollowing are the tools used by the organizations for Performance Appraisals of their employees.

1. Ranking2. Paired Comparison3. Forced Distribution4. Confidential Report5. Essay Evaluation6. Critical Incident7. Checklists8. Graphic Rating

Scale

9. BARS – Behaviorally Anchored Rating Scales

10.Forced Choice Method

11.MBO – Management by Objectives

12.Field Review Technique

13.Performance Test

RANKING METHOD The ranking system requires the rater to

rank his subordinates on overall performance. This consists in simply putting a man in a rank order. Under this method, the ranking of an employee in a work group is done against that of another employee. The relative position of each employee is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against another member of the competitive group.

ADVANTAGES OF RANKING METHOD: Employees are ranked according to their performance

levels. It is easier to rank the best and the worst employee.LIMITATIONS OF RANKING METHOD: The “whole man” is compared with another “whole

man” in this method. In practice, it is very difficult to compare individuals possessing various individual traits.

This method speaks only of the position where an employee stands in his group. It does not test anything about how much better or how much worse an employee is when compared to another employee.

When a large number of employees are working, ranking of individuals become a difficult issue.

There is no systematic procedure for ranking individuals in the organization. The ranking system does not eliminate the possibility of snap judgments.

FORCED DISTRIBUTION METHOD

This is a ranking technique where raters are required to allocate a certain percentage of rates to certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent, bottom 20 percent etc). Both the number of categories and percentage of employees to be allotted to each category are a function of performance appraisal design and format.

ADVANTAGES OF FORCED DISTRIBUTIONThis method tends to eliminate raters bias.By forcing the distribution according to pre-

determined percentages, the problem of making use of different raters with different scales is avoided.

LIMITATIONS OF FORCED DISTRIBUTIONThe limitation of using this method in salary

administration, however, is that it may lead low morale, low productivity and high absenteeism.

Employees who feel that they are productive, but find themselves in lower grade(than expected) feel frustrated and exhibit over a period of time reluctance to work.

CRITICAL INCIDENT TECHNIQUESUnder this method, the manager

prepares lists of statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees or the job. The manager maintains logs of each employee, whereby he periodically records critical incidents of the workers behavior. At the end of the rating period, these recorded critical incidents are used in the evaluation of the worker’s performance.

ADVANTAGES OF CRITICAL INCIDENT TECHNIQUES This method provides an objective basis for conducting a

thorough discussion of an employees performance. This method avoids recent bias (most recent incidents are too

much emphasized)

LIMITATIONS OF CRITICAL INCIDENT TECHNIQUES Negative incidents may be more noticeable than positive

incidents. The supervisors have a tendency to unload a series of

complaints about the incidents during an annual performance review sessions.

It results in very close supervision which may not be liked by an employee.

The recording of incidents may be a chore for the manager concerned, who may be too busy or may forget to do it.

CHECKLISTS AND WEIGHTED CHECKLISTS

In this system, a large number of statements that describe a specific job are given. Each statement has a weight or scale value attached to it. While rating an employee the supervisor checks all those statements that most closely describe the behavior of the individual under assessment. The rating sheet is then scored by averaging the weights of all the statements checked by the rater.

ADVANTAGES OF CHECKLISTS AND WEIGHTED CHECKLISTS

Most frequently used method in evaluation of the employees performance.

LIMITATIONS OF CHECKLISTS AND WEIGHTED CHECKLISTS

This method is very expensive and time consumingRater may be biased in distinguishing the positive and

negative questions.It becomes difficult for the manager to assemble,

analyze and weigh a number of statements about the employees characteristics, contributions and behaviors.

PERFORMANCE APPRAISAL BIASES

• Managers commit mistakes while evaluating employees and their performance. Biases and judgment errors of various kinds may spoil the performance appraisal process. Bias here refers to inaccurate distortion of a measurement. These are:

① FIRST IMPRESSION (PRIMACY EFFECT): Raters form an overall impression about the ratee on the basis of some particular characteristics of the ratee identified by them. The identified qualities and features may not provide adequate base for appraisal.

② HALO EFFECT: The individual’s performance is completely appraised on the basis of a perceived positive quality, feature or trait. In other words this is the tendency to rate a man uniformly high or low in other traits if he is extra-ordinarily high or low in one particular trait. If a worker has few absences, his supervisor might give him a high rating in all other areas of work.

③ HORN EFFECT: The individual’s performance is completely appraised on the basis of a negative quality or feature perceived. This results in an overall lower rating than may be warranted. “He is not formally dressed up in the office. He may be casual at work too!”.

④ EXCESSIVE STIFFNESS OR LENIENCE: Depending upon the raters own standards, values and physical and mental makeup at the time of appraisal, ratees may be rated very strictly or leniently. Some of the managers are likely to take the line of least resistance and rate people high, whereas others, by nature, believe in the tyranny of exact assessment, considering more particularly the drawbacks of the individual and thus making the assessment excessively severe. The leniency error can render a system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among the employees.

⑤ CENTRAL TENDENCY: Appraisers rate all employees as average performers. That is, it is an attitude to rate people as neither high nor low and follow the middle path. For example, a professor, with a view to play it safe, might give a class grade near the equal to B, regardless of the differences in individual performances.

⑥ PERSONAL BIASES: The way a supervisor feels about each of the individuals working under him - whether he likes or dislikes them - as a tremendous effect on the rating of their performances. Personal Bias can stem from various sources as a result of information obtained from colleagues, considerations of faith and thinking, social and family background and so on.

⑦ SPILLOVER EFFECT: The present performance is evaluated much on the basis of past performance. “The person who was a good performer in distant past is assured to be okay at present also”.

⑧ RECENCY EFFECT: Rating is influenced by the most recent behavior ignoring the commonly demonstrated behaviors during the entire appraisal period.

COMMUNICATING PERFORMANCE APPRAISALS

• Performance appraisals enable superiors to know what their team members are up to, evaluate their performances and also give them correct feedbacks so that they know where they are lacking and work on their shortcomings.

• The term “Performance Appraisal” generally causes anxiety among employees, which definitely should not be the case. You really do not have to worry about your appraisal if you have worked hard throughout the year.

• There is definitely a certain way appraisals need to be communicated among employees. There are organizations where management tends to create unnecessary hype about performance appraisal. In such a scenario, trust me, employees think only about their appraisals and find it extremely difficult to concentrate on their routine affairs. The appraisal process certainly should not disturb your daily schedule.

• The rating procedure, appraisal form or any other related information ought to be sent to each and every individual separately. Do not mark a common mail to everyone. If you do not want to take the pain of sending separate mails to everyone, create a common login id where each and every individual can register using their passwords and pull out the appraisal form. The appraisal form generally has information about employee’s designation, grade, level in the hierarchy, responsibilities and thus must be kept confidential.

• Counseling needs to be done on a one on one basis. Address their queries, confusions in private. Remember, appraisal is a very sensitive subject and should be handled gracefully. Call the employees one by one either in your cabin or conference room and try to find out if they need any help or guidance. Trust me, if you call them in a group, they would never open up. It is unethical to discuss one’s performance or salary in public.

• Once the appraisals are done, communicating the same to the employees is another big challenge. The increment letters or appraisal letters should be handed over to the employees either by the functional head or human resource team personally. Do not ask your office staff to distribute the letters, it is very insulting.

• Employee attrition is one of the major problems faced by organizations after performance appraisal.

– Employees who work only for money quit after a salary hike to negotiate further with any other organization.

– Individuals who do not get satisfactory appraisal in any case get demotivated and look for a change.

– Any employee who does not agree to his/her appraisal or feel has not got what he/she deserves needs to be addressed at the earliest.

• Employees need to be motivated after their appraisals. Congratulate each and every one irrespective of their salary hike or promotion. Appreciate everyone for being consistent and most importantly loyal towards the organization. Make sure no one feels left out. Sit with them, give them new realistic targets and guide them as to how can they work together, come out with more innovative ideas and show better performances in the years to come.

• Performance appraisal should not be the only method to evaluate or acknowledge employee’s performance. Do not be rude to employees who did not perform well. It is absolutely okay to handhold them and give a second chance.

REWARD AND TOTAL REWARD SYSTEM

Each element of compensation and benefits, is known as reward.

Total rewards include everything the employee perceives to be of value resulting from employment relationship

REWARDSFINANCIAL NON-FINANCIAL

DIRECT (CASH) INDIRECT (BENEFITS)

JOB ENVIRONMENT

SALARIES INCENTIVES BONUSES

INSURANCE HOLIDAYS MEDICAL AND

HEALTH CHILD CARE EMPLOYEE

ASSISTANCE

INTERESTING WORK

CHALLENGE RESPONSIBILIT RECOGNITION ADVANCEMENT

GOOD POLICIES AND PRACTICES

COMPETENT SUPERVISION

CONGENIAL CO-WORKERS

SAFE AND HEALTHY WORK ENVIRONMENT

FAIR TREATMENT

TOTAL REWARDS • All of the tools available to the

employer may be used to attract, motivate and retain employees.

• Total rewards include everything the employee perceives to be of value resulting from the employment relationship.

• Those collectively define an organization's strategy to attract, motivate and retain employees.

• There are five elements of total rewards, each of which includes programs, practices, elements & dimensions.

1. Compensation 2. Benefits 3. Work-Life 4. Performance & Recognition5. Developmental & Career

Opportunities

1. COMPENSATION

Pay provided by an employer to an employee for services rendered (i.e.,

time, effort and skill).

2. BENEFITS

Programs an employer uses to supplement the cash compensation

that employees receive. - These programs are designed to protect the employee and his or her family from

financial risks.

3. WORK-LIFE

A specific set of organizational practices, policies, programs, plus a philosophy, which actively supports efforts to help

employees achieve success at both work and home. Work-life strategies address

the key intersections of the worker, his or her family, the community and the

workplace.

4.PERFORMANCE & RECOGNITION

Performance Alignment of organizational, team and individual performance is assessed in

order to understand what was accomplished, and how it was

accomplished. - Performance involves the alignment effort toward the

achievement of business goals and organizational success.

4.PERFORMANCE & RECOGNITION

Recognition Acknowledges or gives special attention to employee efforts or performance. It meets an intrinsic psychological need

for appreciation and can support business strategy by reinforcing certain

behaviors that contribute to organizational success. Awards can be

cash or non-cash (e.g., verbal recognition, trophies, certificates,

plaques, dinners, tickets, etc.).

4. DEVELOPMENTAL & CAREER OPPORTUNITIES

Developmental Opportunities

A set of learning experiences designed to enhance employees’ applied skills

and competencies. Development engages employees to perform better

and leaders to advance their organizations’ people strategies.

4. DEVELOPMENTAL & CAREER OPPORTUNITIES

Career Opportunities A plan for an employee to advance

their own career goals and may include advancement into a more

responsible position in an organization.

The organization supports career opportunities internally so that

talented employees are deployed in positions that enable them to deliver

their greatest value to their organization.

Rewarding Your Employees:

15 Examples of Successful Incentives in The Corporate World

Source: http://www.rrgexec.com/rewarding-your-employees-15-examples-of-successful-incentives-in-the-corporate-world/

1. Taking Care Of The Family:

• Google – Surely you’ve heard all about Google’s outdoor sports facilities, free food and more, but there’s another perk that should be noted. If a U.S. employee passes away while working for the tech giant, the employee’s spouse or domestic partner receives 50% of the deceased’s salary, no matter how long or short his tenure, every year for the next decade.

2. Giving Free Vacations:

• This is one thing that we noticed to be a trend throughout the top 100 companies list. For example, Ultimate Software, the developer of people-management software such as Quicken Loans treats workers to a free vacation every two years.

3. Big Money Incentives:

• Hilcorp Energy Company promised staff in 2010 that if the company doubles its production rate and reserves by 2015, every employee will get a check for $100,000. An earlier met goal rewarded 400 employees with $50,000 toward a new car.

4. Saying Thank You!:

• Often times, employees just want to be recognized for their good work. A simple “Good Job” from the CEO can go a long way. Employees at NetApp often get a chance to receive special recognition. Vice Chairman Tom Mendoza asks managers to notify him when they “catch someone doing something right,” and then calls 10 to 20 employees every day to thank them.

5. Rewarding Safety:

• Chesapeake Energy paid out more than $8 million in “safety bonuses” in 2011 to more than 6,000 employees across the company for following safe work practices.

6. Keeping Employees Healthy:

• At JM Family Enterprises, health and wellness centers staffed by doctors, nurses, and other health care professionals now function at eight locations of this Toyota distributor, providing primary care, wellness exams, complete physicals, vaccines, and lab tests at little to no cost to employees.

7. On-Site Personal Massages & Mental Health Resources:

• Employees at Mayo Clinic can get massages while its Arizona facility’s “stress-free zone” offers resources to cope with work anxieties.

8. Having Fun At The Office:

• Stryker, a medical-device manufacturer, keeps things light by offering Ping-Pong tables on-site and having “pie-your-manager” competitions.

9. Reloadable Gift Cards:

• Producers Assistance Corporation, in an attempt to refresh their safety program, chose reloadable gift cards as an incentive. Here’s how it works: when an employee takes an action, like attending a safety meeting, points are loaded onto their card. The lure of point collecting (and spending) has focused employees back on doing the right thing to be safe. After a 6-month trial, participation had more than doubled and there was a significant decline in the incident rate.

10. Tuition Reimbursement:

• Intel offers $50,000 for tuition reimbursement and an eight-week paid sabbatical every seven years, which 4067 employees took advantage of just last year.

11. Employee Appreciation Week:

• The insurance giant Aflac hosts an annual six-day appreciation week; last year it included theme park visits, film showings, skating, and daily giveaways.

12. Immediate Vacation Time:

• Hasbro, the world’s second-largest toy company, enhanced its vacation policy by giving new employees three weeks off in their first year instead of having to wait five years.

13. Profit-Sharing Plan:

• Seventy-eight percent of Robert W. Baird & Co. is owned by non-senior management. All hourly and salaried associates enjoy annual profit-sharing contributions from a pool that represents 10% of Baird’s pretax net operating income.

14. Offsite Employee Activities:

• GoDaddy sets money aside every month that is used to take employees off-site for activities during paid work hours. This isn’t a once a year thing, either. They do this once a month, EVERY month. Recent GoDaddy expeditions included: whitewater rafting, gold panning, cooking classes, and trapeze classes. The employees obviously love it, and who wouldn’t?

15. The Monthly Hero:

• Zappo’s has a rather unconventional “recognition” program in place. Their program is called the “Monthly Hero” program and here’s how it works. Every month, every Zappo employee is given $50 they can “give” to a coworker as a bonus and as a way of to recognize that coworker for doing a great job and being awesome. Once a month Zappo executives pick a name from the workers that were given the $50 bonus and dub him/her the “Monthly Hero.” The company then proceeds to throw a mini-parade to announce the monthly hero through a rolling sound system that’s accompanied by noise makers and playing of the song “I Need A Hero” by Bonnie Tyler. If all that wasn’t amazing enough, the monthly hero then wins a covered parking spot, a $150 Zappo’s gift card, and a cape to proudly wear!

REFERENCES

• http://www.managementstudyguide.com/performance-appraisal.htm

• http://www.businessballs.com/performanceappraisals.htm

• http://www.slideshare.net/gayathriyuvaraj/reward-system

• http://www.slideshare.net/GaurangaMohanta/concept-of-reward-and-total-reward-system-26186242?next_slideshow=1

• https://en.wikipedia.org/wiki/Behaviorally_anchored_rating_scales