Chapter 6

Appraising
and Rewarding
Performance

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EVOLUTION OF ECONOMY

The Industrial Revolution

Most important event in the
history of humanity since the
domestication of animals and
plants.
Happened between the 18th19th century:
Major changes in
agriculture, manufacturing,
mining, transport, and
technology
Profound effect on the
socioeconomic and cultural
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EVOLUTION OF ECONOMY

Globalization
Process of international
integration
Interchange of world views,
products, ideas, and cultures
Advances in transportation
and telecommunications
infrastructure internet
Mega factories (the world is
your market)

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EVOLUTION OF ECONOMY
10 COUNTRIES OF THE ASEAN ECONOMIC COMMUNITY

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EVOLUTION OF ECONOMY
2015 ASEAN Economic Integration Liberalize Trade
The ASEAN Leaders at
their Summit in Kuala
Lumpur in December 1997
decided to transform
ASEAN into a stable,
prosperous, and highly
competitive region with
equitable economic
development, and reduced
poverty and socioeconomic disparities
(ASEAN Vision 2020).
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EVOLUTION OF ECONOMY
2015 ASEAN Economic Integration Liberalize Trade

Advantage For The Philippines:

The integration will create a single market economy
Free movement of goods, services and investments throughout the
10- member nations of ASEAN No tariff barriers
Wider market
Increase export initiatives

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EVOLUTION OF ECONOMY
2015 ASEAN Economic Integration Liberalize Trade

The Challenges For The Philippines:

is a small economy
its citizens have a low awareness about the integration initiative
it has limited products 17% share in its exports
has small investor base
Businesses are not ready for the competition

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MONEY IS NOT THE ONLY MEANS OF

REWARDING EMPLOYEES

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MONEY AS A MEANS OF REWARDING EMPLOYEES

During the 20th century employees were presumed to want
primarily money, therefore, money was believed to
produce direct motivation.
Research successfully proved that economic rewards
operated through the attitudes of workers in the social
system to produce an indirect incentives. (not driven by
money alone)
- incentives are combined with other parts of wage and
salary and is build around a complete reward system

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A COMPLETE PROGRAM

Figure 6-1
The reward
pyramid:
The makeup
of a
complete
pay program
(read from bottom)

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Drives
Needs
Expectancy
Behavior Modification
Equity

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Application of the Motivational Models

Drives
Reward System:

Achievement Motivation

Employees pay is a
Power Motivation measure of their
accomplishment.

Affiliation Motivation

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Money also relates to

other drives (expensive
membership clubs, grand
vacations, luxurious
lifestyle)

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Needs Theory: Maslow, Herzberg, Alderfer Models
Secondary needs
Primary needs
Basic level needs: providing
employees with a good standard of
living through decent pay
structures.
Security needs: providing
employees with a safe working
environment and appropriate
training to minimise any health and
safety risks.
Group needs: organising employees
in appropriate team structures with
good sets of communication links.
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Self esteem needs: rewarding

employees with promotion and
job titles, which are
commensurate with their
efforts.
Self-fulfilment needs:
encouraging employees to
develop themselves, using
appraisal as a tool to identify
ways in which individuals can
meet their highest order needs.

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APPLICATION OF THE MOTIVATION IN REWARDS

Emotional Value

In order to enhance the connection between performance and

outcomes, managers should use systems that tie rewards very
closely to performance.
Managers also need to ensure that the rewards provided are
deserved and wanted by the recipients.
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Modify Employees Behavior

Organizational Behavior Modification relies heavily

on the Law of Effect.
A person tends to repeat behavior that is accompanied by
favorable consequences (reinforcement).
A person tends not to repeat behavior that is
accompanied by unfavorable consequences
(punishment).

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Behavior Modification: Law of Effect

Two subjects will complete a puzzle, they will be timed on how long it
takes for them to finish. Upon completion of the puzzle, if their last
recorded time were faster than the previous, the subjects will be
rewarded

Subject A
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Subject B

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Behavior Modification: Law of Effect

To Conclude. . .
Results agree with the Law of Effect which states that given a reinforcement,
in this case a reward (Chips and Cookies), the subjects produced a more
satisfying response, or produced quicker times throughout each trial.

Subject A
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Subject B
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Behavior Modification: Law of Effect

Managers should be able to identify powerful consequences
(as perceived by employees) and be able to control and
administer these that employees should be able to see the
connection between the behavior
Through conditioning, an individual makes an association
between a particular behavior and a consequence.

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Reward Equity
Equity

Employees judge
fairness by
comparing the
outcomes (rewards)
they receive with
their relevant inputs
(Contributions), and
against the ratio of
other employees.

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Job Comparisons- Individuals most often compare

themselves to other people occupying the same job in the
same company. Example: Nurse at Emergency Unit at
Makati Medical Center Hospital comparing their tasks to
Nurse's at the Patient Care Station . When the comparison
yields a balance, the result is Job Equity.
Company Comparisons- Employees compare themselves
to people in other jobs in the same organization. Example:
the Orderlies comparing themselves to Pharmacists and
Nurses at the same hospital. When the comparison yields a
balance, the result is Company Equity.
Market Comparisons- When we look at the pay earned
by others doing the same job as us in other companies, we
are making market comparison. Example: Factory workers
at Purefoods comparing themselves to Factory Workers at
CDO. When the comparison yields a balance, the result is
Occupational Equity.

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Behavior Modification: Law of Effect

REWARDS AS REINFORCEMENTS
Usually financialare the tangible rewards given to employees: pay raises,
bonuses, and benefits. (Extrinsic Rewards)
Use of formal reward system

Psychological rewards that employees get from doing meaningful work and
performing it well. (Intrinsic Rewards)
Day-to-day motivation is more strongly driven by intrinsic
rewards.

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Nonmonetary Rewards Program

Formal Rewards
Employee or team of the month (or
quarter of the year)
Length-of-service awards
(e.g. Anniversary)
Employee contests (Company Idol)
Plaque of certification of appreciation
Gift Certificate
Opportunity to attend an industry
conference
Exposure visit to a similar organization
in a different region
Special event with senior leadership
(e.g. Lunch or dinner with the president
of the company)

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Informal Rewards
Verbal compliment or thank you
A written note of appreciation
Post a large celebration calendar
in the branch office and tack on
notes of recognitions or achievements
Host a lunch where the managers
cook and serve food
Refer by name to the employee who
made a good suggestion or idea
Award special projects that show trust
and confidence in the employees skill
Story Telling share the good
performance of the employee in the
newsletter or website of the company

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Compliance with the Law

Under the Labor Code, your employees are entitled to

compensation or wages, overtime pay, holiday and
premium pay, service charges and tips in service
businesses, SSS, Philhealth, Pag-ibig, service incentive
leaves, and retirement pay.

Link:
http://philippines.smetoolkit.org/philippine/en/content/en/6418/Basi
c-Philippine-Labor-Laws-and-Regulations

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APPLICATION OF THE MOTIVATION MODELS IN REWARDS

Management by objectives (MBO)

Objective Setting
Action Planning
Periodic Reviews
Annual Evaluation
Process of defining,
assessing, and reinforcing
employee work behaviors
and outcomes
Occurs in a large
organizational context

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ORGANIZATIONAL BEHAVIOR AND

PERFORMANCE APPRAISAL

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Performance Appraisal
The process by which a manager or consultant
examines and evaluates an employees work
behavior by comparing it with company set
standards.

Purpose
To provide feedback to the employee to show where improvements are
needed and why.
To determine who needs what training, promoted, demoted, retained, or
fired.

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Appraisal Programs Help Companies

Fully develop employee potential and improve
communication relating to performance.
360 Degrees Feedback Program
Measure an employees
performance by:
Managers
Peers
Internal Customers (unit-tounit)
External Customers (buyers)
HR Reports (Evaluators)

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Extensive
feedback
system

360 Feedback as a Development Tool

to help employees recognize strengths
and weaknesses and become more
effective

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Provide a method to reward employees on a

merit basis (Based on overall budget
considerations).
Merit Rating System

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Link to Job
Satisfaction
and Job
Context

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Improve productivity and the performance

of the company.
Management by Walking Around
(MBWA) (Gemba) Daily meetings on
targets and objectives
Reinforce organizations mission, value
and culture.

Mutual goal
setting between
management
and employees

Focus on goals

Balanced Scorecard System

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TALENT MANAGEMENT

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

PERFORMANCE FACTORS (Parameters)

Performance Factors represent areas of individual performance that
are essential to success in the position, and to the success of the
organization.
There are seven performance factors :
Communication
Customer Service (internal and external customers)
Cooperation/Teamwork
Quality of Work Delivered
Productivity/Core Organizational/Business Skills
Job Knowledge/Technical Proficiency
Professionalism
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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

PERFORMANCE FACTORS (Parameters)

The are three additional Performance Factors have been identified
for employees in positions with supervisory or managerial
responsibility, they are:
Performance Management
Leadership
Unit Achievement/Fiscal Management

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

EMPLOYEE SELF APPRAISAL

Employees thoughts about performance are an important part of
the Performance Management Process.
Provides a tool for employees to participate in the appraisal
process.
Able to obtain the employees comments regarding
job strengths,
developmental needs,
actions that might be taken to improve performance.

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

EMPLOYEE SELF APPRAISAL

Encourage employees to complete the form with specific
comments.
To familiarize managers with the employees thoughts,
perceptions, and expectations.
To provide an opening to discuss areas of needed
improvement and resources available for improving those
areas.
To provide managers with insight regarding things affecting
employees work environment, contributions the employee
feels she/he has made, and employees suggestions for changes
and improvements.
http://www.umkc.edu/hr/employee-relations/performance-appraisal-employee-guide.pdf

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Appraisal Problems

Make performance appraisals into a one-way

lecture
manager tells an employee about
problems with their work or a failure in
their performance, employees tend to
not hear anything else the manager
has to say.
Best Approach: Two-way discussion
and focus on the employee assessing
his or her own performance and
setting his or her own goals for
improvement.
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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Appraisal Problems

Performance appraisals are usually connected with the

amount of pay raise an employee will receive.
Improving performance will not happen if the
outcome is the employees income.
Raises should be based on a wide range of factors
(productivity, quality of work, administrative performance, etc.)

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Linking Pay With Performance

Economic Incentive System

Profit Sharing (some portion of business profit shared)
Gain Sharing ( Production gain sharing)
Skill Based Pay (knowledge or multi-skill based)

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

Self-Serving Bias
Claiming undue credit for their success or organizations
success
When failure occurs, minimizing their own responsibility for
problems (personal traits)

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

The Effects of Performance Appraisal on Organizational

erformance

Identifying Areas of Strengths and weaknesses

Standardized performance across other areas of the

organization.
Identifying Training Needs
Provides indication of where additional training and
development may be necessary
Leadership Development and Succession Planning
provide an indication of employees with leadership
potential or leadership development needs.
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ECONOMIC INCENTIVE SYSTEMS

Advantages and disadvantages of incentives linking pay with
performance
Disadvantages
Contention among Employees
A worker sometimes feels as though a manager shows favoritism to
certain employees to help them achieve bonuses and higher salaries.
Employees who are not earning bonuses can show jealousy toward
those who are earning performance bonuses. Jealousy and contention
create hostile work environments, which can reduce productivity.
Less Employee Input
Employees hold back their input even if their ideas are good because
they are concerned about a reduction in earnings.

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ECONOMIC INCENTIVE SYSTEMS

Advantages and disadvantages of incentives linking pay with
performance
Disadvantages
Resistance to Changes
Workers fear changes in operating procedures will cause a decrease
in productivity. Companies that make changes despite employee
resistance often experience a decrease in production because of a
lack of motivation from some employees. Managers can reduce
employees resistance to changes by providing adequate training
and explaining the benefits of the changes.

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ECONOMIC INCENTIVE SYSTEMS

Advantages and disadvantages of incentives linking pay with
performance
Advantages
Less Supervision
Companies experience a decrease in the need for employee
supervision. Employees show initiative because they know their
work output is directly linked to their pay. Companies can function
with fewer supervisors, which saves them money in overhead cost.
Increase in Earnings
Allow employees to increase their earnings because they are in
control of their wages. For example, if an employer pays employees
commission-only salaries, an employees earnings are solely
dependent upon his success.
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ECONOMIC INCENTIVE SYSTEMS

Advantages and disadvantages of incentives linking pay with
performance
Advantages
Increase in Retention
Employees who possess the ability to earn bonuses based on
performances usually have high morale because they feel as though
the company is rewarding their efforts. An employee is not likely to
leave a job where he earns extra income.

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CONNECT REWARDS WITH GOALS

Telling someone to "try hard" or "do your best" is
less effective than saying "try to get more than 80
percent correct," or "concentrate on beating your
best time." Likewise, having a goal that's too easy
is not motivating.
Hard goals are more motivating than easy ones,
because it feels more of an accomplishment to
achieve something you've worked hard for.

There is an inseparable link between goal

setting and workplace performance.
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ORGANIZATIONAL BEHAVIOR AND PERFORMANCE APPRAISAL

How Individual link to Organizational Vision and KPIs

Critical Success Factors

Key Performance Indicators
Activities, Programs
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Goal Setting Self Efficacy

Self-efficacy refers to an individuals belief that he/she is

capable of performing a task successfully.
Self-efficacy is similar to self-esteem, but it is specific to
task performance.
Increase Self-Efficacy
Self-efficacy influences
thoughts, feelings and
behaviors.

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Goal Setting Self Efficacy

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Questions
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