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Chapter Ten Evaluation ,Feedback and Rewards
Objectives:
To develop an understanding of:
Evaluation of Performance
Performance Evaluation feedback
Reinforcement theory
A model of Individual rewards
Rewards Affect Organizational concerns
Innovative reward system
Organizations use rewards to attract, retain, and motivate people. But methods for distributing rewards vary from organization to organization, within the same organization across different levels and according to the nature of rewards. Some rewards may be universal or across the board rewards, some rewards may be a function of seniority while others may be related to job performance. To distribute rewards equitably, organizations develop systems for performance evaluation. To maximize effectiveness of the organization, it is necessary to link employee evaluation systems with reward systems.
Evaluation of Performance : Performance of an individual is the function of ability, motivation, resources available to perform the task and direction / target set for the job. Purposes of evaluation may be judgmental or developmental. Judgmental purposes focus on past performance, helping mangers evaluate training programs and decide on how rewards should be distributed. It provides a basis for reward allocation, identifies high-potential employees, validates the effectiveness of employee selection procedures and evaluates previous training programs. Developmental purposes seek to improve future performance by clarifying expectations and identifying training needs. It stimulates performance improvement, develops ways of overcoming obstacles and performance barriers, identifies training and
development opportunities and establishes supervisor-employee agreement on performance expectations.
Methods of Performance Evaluation
Rating formats-Evidence indicates that ratings are not strongly related to results.Rating depends heavily on the mental process of the rater and as the processes are complex, there may be errors of judgment in the rating. Results depends heavily on conditions that may be outside the control of the individual employee and most measures of results provide only partial coverage of the overall domain of job performance
Behavior – Oriented rating method Relative rating system Absolute rating system Result – Oriented rating system Management by objective Work planning and review
Behavior – Oriented rating method
Relative rating system
Ranking and paired comparison-Good for making comparison across employees, but provides little basis for individual feedback and development Forced Distribution-Forces rater to make distinction among employees but may be unfair and inaccurate comparisons across employees if a group of employees, as a group, is very effective or ineffective Graphic rating scales( including behavioral anchored rating scales - BARS) are easy to use and very helpful for providing feedback for individual development. It facilitates comparison across employees but does not define dimensions and scale points are not defined clearly
Relevancy in evaluations has three aspects: a. Deficiency-failure to focus on all aspects of the job. b. Contamination-Focusing on activities that are not part of the job. c. Distortion-improper emphasis of various job elements.
Improving evaluations—may be accomplished through: 1.Increasing employee participation in the evaluation process. 2. Setting specific performance goals. 3. Giving evaluators training. 4. Communicating results to employees. 5. Focusing on good performance, as well as performance problems.6.Conducting evaluations informally, throughout the year.
Performance Evaluation Feedback - Purpose of Evaluation Feedback 1.Instructional—when areas needing improvement are clearly identified and needed changes explained. 2. Motivational—when rewards or incentives are provided as part of the evaluation process.
Feedback should be:
Behavioral: Focus feedback on employee’s behavior Specific: Give specific examples of observations; avoid exaggerations, e.g. “always” “never”
Job-related: feedback must be about behaviors exhibited on the job
Timely: feedback should be given as soon as possible; time lapse allows inappropriate behavior to be repeated
Balanced: the “sandwich” method; deliver positive feedback, followed by constructive feedback, then positive again
Respectful: feedback is more easily accepted if the employee’s dignity and self-worth are kept intact
Effective Feedback is descriptive and not evaluative. It focuses on the behaviour of the person and not on the person himself. It is data based and specific and not impressionistic. Effective feedback reinforces positive new behaviour. It is continuous, suggestive and not prescriptive, need based and solicited. It is intended to help the person to whom feedback is given, focuses on modifiable behaviour and satisfies needs of both the feedback given and one who receive feedback
Approaches to increase the effectiveness of feedback in improving performance-
a. Feedback should be given frequently.
b. Permit the person being evaluated to participate in the feedback session.
c. Focus on both ineffective and effective behaviors.
d. Focus on results and goals.
e. Gain and maintain respect throughout the entire process.
Multisource Feedback: A 360-Degree Approach uses information about the employee from various locations within, and sometimes outside of, the organization. An employee is rated on a range of competencies by people with whom he or she has a work or business relationship-self, boss, peer, subordinates, customers, and even family members.It is a common belief that such programs are effective when used for developmental purposes but not for administrative (e.g. promotion) purposes. A 360-degree feedback process usually consists of multiple steps – (1)Planning (2)buy-in (3)evaluation instrument design or selection (4) report generation (5)feedback delivery (6) setting development plan (7) follow-up.
Feedback can enhance self-awareness about own strengths and weaknesses.Based on Cognitive Dissonance Theory (Festinger, 1957), a significant gap between self-ratings and ratings from others can cause psychological dissonance. When this happens, people are motivated to reduce this gap and feel assonant again.According to Control Theory (Carter & Schneier, 1981,1982), when people detect discrepancies between their goals and their behavior, they are likely to take actions to reduce the discrepancies.
360-Degree Feedback is considered to be more fair and credible as it provides multiple points of view; thus, allowing comparisons. Also, it is considered more thorough.
However, feedback providers may be reluctant to provide honest and direct information for fear of retaliation that the information could negatively affect the recipient’s salary and/or career aspirations; results might be inflated; concern that the peer or subordinate evaluator does not have enough information upon which to make the evaluation.
It ensures the main objective, individual development is always at focus. Both organizations and individuals are responsible for making actual learning happen-they work as a joint force aligning personal development goals and organizational goals and objectives. Organizations can provide sufficient resources and create supportive conditions and culture to facilitate individual learning. Ideally, organizations can finally create a feedback culture which is characterized as (1) People often receive constructive feedback from various sources on a regular basis(2)People also often actively seek feedback for improvement .In a feedback culture, individuals can get feedback on a regular basis so that feedback is given in a timely manner and more likely to focus on behavior instead of trait because of vivid memory.
Reward Programs of Organizations
A model of Individual Rewards -A reward program's main objectives are to attract qualified individuals to join the organization, to keep employees coming to work, to motivate employees to perform well. According to the model of the reward process: 1. An individual is motivated to perform.2.Performance is affected by abilities, skills, and experiences.3.Evaluating performance determines intrinsic and extrinsic rewards.4.These rewards are evaluated by the employee and result in some degree of satisfaction, which influences motivation. According to Lawler, the degree to which rewards satisfy an individual depends on:1. The amount given and how much the individual feels should be given. 2. The individual's comparison of the rewards received with those received by others.3.The individual's satisfaction with intrinsic and extrinsic rewards.4.The importance of different rewards to the individual.5.The extent to which some extrinsic rewards satisfy because they lead to other rewards. Managers should develop a rewards system that: 1. Satisfies basic needs.2.Employees consider fair.3.Responds to individuals.
Rewards can be Extrinsic and Intrinsic in nature.
Extrinsic rewards are initiated from outside the person. Some primary ones are:
- Salary and wages—money is a major extrinsic rewards. It's a powerful motivator if employees perceive a link between performance and pay.
- Fringe benefits—usually financial benefits (the major financial fringe benefit is a pension), and usually based on seniority or attendance.
- Interpersonal rewards—e.g., status and recognition.
- Promotions—performance and seniority are usually the criteria used in making promotion decisions.
Intrinsic rewards are self administered by the person. It provides a sense of satisfaction or gratification and often a feeling of pride for a job well done. Some major ones are:
- Completion—the ability to start and finish a project or job.
- Achievement—a self-administered reward received when a challenging goal is reached.
- Autonomy—the right and privilege of working and making decisions without close supervision.
- Personal growth—expanding capabilities via the job.
Organizations generally assume that motivation is determined by the sum of the effects of intrinsic and extrinsic rewards, but this assumption is questionable. The addition of extrinsic rewards tends to reduce the extent to which the individual experiences self-administered intrinsic rewards.
Administering rewards—three approaches are:
1.Reinforcement theory - It is based on the learning theory of Operant conditioning which attempts to influence behavior by using rewards and punishments as consequences. Operants are behaviors that can be controlled via manipulating consequences.
Reinforcement
- Positive reinforcer—a stimulus that when added to the situation strengthens the probability of a desired behavioral response.
- Negative reinforcer—when removed immediately after a response increases the frequency of that response.
3.Punishment— presenting an uncomfortable or undesired consequence for a particular behavioral response (e.g., a demotion, suspension, criticism, termination). Punishment is increasingly used, but still controversial managerial strategy. It should be used with caution because it can have unintended consequences.
b. Make them available (if possible) for desired behaviors, or;
c. Increase the desirability of other rewards. Often, a combination of these approaches is used in a rewards system.
Rewarding Employees : Four Aspects are (1)What to Pay (Internal vs. external equity) (2)How to Pay (e.g., Piece rate, merit based, bonuses, profit sharing, gain sharing, ESOPs, skill-based pay) (3)What Benefits to Offer (e.g., Flexible benefits) (4)How to Recognize Employees
Types of Rewards in the Workplace are based on (1)Membership and seniority (2)Job status (3)Competencies (4)Performance.
Membership/Seniority Based Rewards -Fixed wages, increases with seniority .Advantages are (1)Guaranteed wages may attract job applicants (2)Seniority-based rewards reduce turnover. Disadvantages are (1)Doesn’t motivate job performance(2)Discourages poor performers from leaving(3)May act as golden handcuffs (tie people to the job)
Job Status-Based Rewards -Includes job evaluation and status perks. Advantages are (1)Job evaluation tries to maintain pay equity(2)Motivates competition for promotions. Disadvantages are (1)Employees exaggerate duties, hoard resources (2)Reinforces status, hierarchy(3)Inconsistent with workplace flexibility
Competency-Based Rewards -Pay increases with competencies acquired and demonstrated. Skill-based pay-Pay increases with skill modules learned. Advantages are more flexible work force, better quality, consistent with employability. Disadvantages are that it is potentially subjective and involves higher training costs
Performance-Based Rewards
(a)Organizational rewards like profit sharing,share ownership,stock options,balanced scorecard
(b) Team rewards like bonuses and gain sharing
(c )Individual rewards like bonuses, commissions, piece rate
Rewarding Employees :
Variable Pay Programs-A portion of an employee’s pay is based on some individual and/or organization measure of performance.
Piece rate pay plans -Workers are paid a fixed sum for each unit of production completed
Profit sharing plans-Organization-wide programs that distribute compensation based on some established formula designed around a company’s profitability
Flexible Benefits- Employees tailor their benefit program to meet their personal need by picking and choosing from a menu of benefit options. (a)Core-Plus Plans-A core of essential benefits and a menu-like selection of other benefit options (b) Modular Plans -Predesigned benefits packages for specific groups of employees (c) Flexible Spending Plans- Allow employees to use their tax-free benefit dollars to purchase benefits and pay service premiums
Employee Recognition Programs- It is an intrinsic reward which stimulates intrinsic motivation. Here personal attention is given to an employee, approval and appreciation is given for a job well done. Growing in popularity and usage. Benefits of Recognition Programs are (1)fulfill employees’ desire for recognition (2)inexpensive to implement (3)encourages repetition of desired behaviors. Drawbacks of Programs are that they are susceptible to manipulation by management
Innovative Reward Systems
Skill-based Pay Plans-Pay levels are based on how many skills employees have or how many jobs they can do. Clear demonstration of skill acquisition results in pay increase. It approximates how professionals are compensated. It relies on surveys of what other firms pay professionals to establish pay grades and maturity curves. Benefits of Skill-based Pay Plans are (1)Provides staffing flexibility to assign workers to different jobs (2) Requires fewer job classifications.(3) Requires fewer employees.(4)Facilitates communication across the organization (5)Lessens “protection of territory” behaviors (6)Meets the needs of employees for advancement (without promotion) (7)Leads to performance improvements.(8) May reduce turnover and absenteeism. Drawbacks of Skill-based Pay Plans are: (1)Lack of additional learning opportunities that will increase employee pay (2)Continuing to pay employees for skills that have become obsolete (3)Paying for skills that are of no immediate use to the organization (4)Paying for a skill, not for the level of employee performance for the particular skill
Absenteeism is a costly and disruptive problem. Managers exert some influence over attendance behavior via use of rewards and punishments.
Job Performance-To motivate individuals, rewards must be valued by the employee (high valence)and related to the performance level that is to be motivated (high performance-outcome expectancy).
Organizational commitment -Organizational Commitment involves:1. A sense of identification with organizational goals. 2. A feeling of involvement in organizational duties. 3.A feeling of loyalty to the organization. A committed employee: 1. Is less likely to leave.2.Requires less supervision 3.Perceives the value and importance of integrating individual and organizational goals, viewing his/her goals and organizational goals in personal terms. Intrinsic rewards facilitate the development of organizational commitment.
Key issue
Promotions, increased pay, recognition for a job well done or the opportunity to own a part of an organization can be motivators if there is a clear line of sight between what the employee is doing and the reward. Line of sight is that the employee perceives that there is a “real” linkage between his or her performance and the rewards received. In case of extrinsic rewards, organizations need to have systems that clearly tie rewards to desired performance. Intrinsic rewards are personal and come from the employees. However, organizations can influence intrinsic rewards and employees perception of them by providing jobs that are challenging and by providing clear feedback on job performance.
Questions
1. Describe Evaluation of Performance. Explain with suitable examples the methods of
Performance Evaluation. Also describe Performance Evaluation feedback
2. State the three approaches of administering rewards in the organization. What are the
four aspects of rewarding employees?. Describe the relationship of Types of Rewards in
the Workplace with (1)Membership and seniority of employees (2)Job status
(3)Competencies (4)Performance.
3. Describe a model of Individual rewards. State with examples the different ways of
rewarding employees in the organization. State the Innovative reward system in the
organization.
4. Rewards Affect Organizational concerns-Explain.
