6351 Chapter 13, 14, 15
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Chapter14Powerpoint.pptxOrganization Development & Change 11 edition Thomas G. Cummings • Christopher G. Worley
CHAPTER
14
Performance Management
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Learning Objectives
Understand the components of a performance management system.
Describe and evaluate the effectiveness of goal setting interventions in organizations.
Understand the application of performance appraisal interventions.
Discuss how reward systems interventions can be applied in organizations.
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A Performance Management Model
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Characteristics of Effective Goals
Goals are Challenging
Challenging but realistic
Goals are set participatively
Goals are Clear
Goals are specific and operationally defined
Resources for goal achievement are negotiated
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Approaches to Goal Setting
Management by Objectives (MBO)
Facilitates employee development and support
Balanced Scorecard
Goals at different organization levels with clear link to business
Key Performance Indicators (KPI’s)
Establishing goal difficulty and level of participation
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Performance Appraisal Elements
| Elements | Traditional Approaches | High Involvement |
| Purpose | Organization, legal Fragmented | Developmental Integrated |
| Appraiser | Supervisor or manager | Appraisee, co-workers, and others |
| Role of Appraisee | Passive recipient | Active participant |
| Measurement | Subjective Concerned with validity | Objective and subjective |
| Timing | Period, fixed, administratively driven | Dynamic, timely, employee- or work-driven |
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Performance Appraisal Application Stages
Select the appropriate stakeholders
Diagnose the current situation
Establish the system’s purposes and objectives
Design the performance appraisal system
Experiment with implementation
Evaluate and monitor the system
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Reward System Design Features (1)
| DESIGN FEATURE | DEFINITION |
| Person/Job Based vs. Performance Based | The extent to which rewards are based on the person, the job or the outcomes of the work |
| Market Position | The relationship between what an organization pays and what other organizations pay (External Equity) |
| Internal Equity | The extent to which people doing similar work within and organization are rewarded the same |
| Hierarchy | The extent to which people in higher positions get more and varied rewards |
| Centralization | The extent to which reward system design, decisions and administration are standardized |
| Rewards Mix | The extent to which different types of rewards are available and offered to people |
| Security | The extent to which work is guaranteed |
| Seniority | The extent to which rewards are based on length of service |
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Reward System Design Features (2)
Availability
Timeliness
Performance Contingency
Durability
Equity
Visibility
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Types of Reward Systems
Pay
Skill-based pay plans
Performance-based pay systems link pay to performance
Gain sharing involves paying bonuses based on improvements in the operating results
Promotions
Benefits
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Salary Based Pay for Performance Ratings
| Ties Pay to Performance | Produces Negative Side Effects | Encourages Cooperation | Employee Acceptance | ||
| SALARY REWARD | |||||
| Individual Plan | Productivity | 4 | 1 | 1 | 4 |
| Cost Effectiveness | 3 | 1 | 1 | 4 | |
| Superiors’ Rating | 3 | 1 | 1 | 3 | |
| Group | Productivity | 3 | 1 | 2 | 4 |
| Cost Effectiveness | 3 | 3 | 2 | 4 | |
| Superiors’ Rating | 2 | 1 | 2 | 3 | |
| Organization-Wide | Productivity | 2 | 1 | 3 | 4 |
| Cost Effectiveness | 2 | 1 | 2 | 4 |
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©2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stock/Bonus Pay for Performance Ratings
| Ties Pay to Performance | Produces Negative Side Effects | Encourages Cooperation | Employee Acceptance | ||
| SALARY REWARD | |||||
| Individual Plan | Productivity | 5 | 3 | 1 | 2 |
| Cost Effectiveness | 4 | 2 | 1 | 2 | |
| Superiors’ Rating | 4 | 2 | 1 | 2 | |
| Group | Productivity | 4 | 1 | 3 | 3 |
| Cost Effectiveness | 3 | 1 | 3 | 3 | |
| Superiors’ Rating | 3 | 1 | 3 | 3 | |
| Organization-Wide | Productivity | 3 | 1 | 3 | 4 |
| Cost Effectiveness | 3 | 1 | 3 | 4 | |
| Profit | 2 | 1 | 3 | 3 |
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©2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Gain-Sharing Pay Plan Considerations
Process of design - participative or top-down?
Organizational unit covered - plant or companywide?
Determining the bonus - what formula?
Sharing gains - how and when to distribute?
Managing change - how to implement system?
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©2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
