Managing Employee Performance and Reward Concepts, Practices, Strategies 2nd edition

1. Managing Employee Performance and Reward Concepts, Practices, Strategies 2nd edition

2. STAFFING • Planning • Job analysis and design • Recruitment • Selection • DEVELOPMENT • Job knowledge and technical skills • Attitudes and abilities • REWARDS • Intrinsic • Developmental • Base pay • Performance pay • PERFORMANCE MANAGEMENT • Evaluation • Feedback • Enhancement Human resource processes and practices

3. Human resource processes and practices • Context: • Competitive strategy, organisational structure and management culture • Markets • Regulation/industrial relations

4. Stakeholder group Main performance criteria Shareholders/owners Executives Line managers Employees Customers/clients Suppliers Government Community Environment What is performance? (Multi-stakeholder model)

5. Inputs (Competencies) Processes (Behaviours) Outcomes (Results) Individual performance Personal competencies e.g. knowledge, skills, abilities, attitudes Personal behaviour e.g. effort, citizenship Personal results e.g. quantity, quality Work group performance Work group competencies e.g. collective know-how Work group behaviour e.g. team-working Group results e.g. productivity, quality Organisational performance Organisational competencies e.g. core competencies and people capabilities Organisational behaviour e.g. customer-focus, cooperation, creativity Organisational results e.g. profitability, customer satisfaction, market share What is performance? (Cybernetic model)

6. What should a performance management system do? • Communicate desired competencies, behaviours and results in order to achieve its strategic objectives • Build relationships between internal stakeholders • Monitor and measure individual and group performance by valid, reliable and felt-fair means • Provide timely feedbackon recent performance, including strengths, weaknesses and areas for improvement • Developindividual and group performance capabilities • Evaluate individuals for purposes of selection and promotion, and evaluate individuals and groups for the purpose of reward allocation

7. MONITORING INFORMAL FEEDBACK LEARNING AND DEVELOPMENT • COMPETENCIES • BEHAVIOURS • RESULTS FORMAL ASSESSMENT ACTION PLANNING FORMAL REVIEW MEETING The performance management cycle

8. Key requirements for an effective performance management system 1. Validity (Are the right things being measured?) • The ‘goodness’ of the performance criteria and measures used • ‘Is this one of the things we should measure?’ (= construct validity) • ‘Are we measuring enoughof the right things?’ (= content validity) • ‘Are we really measuring what we say we are trying to measure?’ (= criterion-related validity) 2. Reliability (Are valid measures being applied accurately?) • Accuracy • Consistency • No measurement error or bias 3. Cost-effectiveness 4. Felt-fairness/procedural justice (Are the decision-making processes seen as fair?)

9. Validity and reliability • Correct standards • Standards applied consistently • Judgement based on evidence related to standards Fair hearing (or ‘voice’) • Have employees provide input to assessment process, e.g. self-assessment • Opportunity to explain • Right to refute and appeal Adequate notice • Explain performance standards in advance • Early and ongoing notice of areas of underperformance • Opportunity (time and resources) to improve Key requirements for an effective performance management system

10. What are ‘rewards’? A reward can beanything that: • an organisation provides to its employees either intentionally or unintentionally in exchange for the employee’s potential or actual work contribution, AND • to which employees as individuals attach a positive ‘valence’ as a ‘need’ satisfier.

11. Intrinsic rewards: • Job challenge • Responsibility/involvement • Autonomy • Task variety Extrinsic rewards • Developmental rewards: • Learning, training and development • Succession planning • Career progression • Social rewards: • Organisational climate/management culture • Performance support • Work group affinity • Work–life balance; well-being • Financial rewards/remuneration: • Base pay • Direct benefits • Performance-related pay Components of ‘total reward’

12. Who (=performance entity/unit) and when (=time frame for payout)? How? (=behaviour) How much? (=results) Individual • Merit raises/increments • Merit bonuses • Piece rates • Sales commissions • Goal-based bonuses • Discretionary bonuses • Individual non-cash recognition awards Large group short-term incentives (STIs) • Profit-sharing • Gainsharing • Goal-sharing Small group short -term incentives (STIs) • Team incentives • Team non-cash recognition awards Organisation-wide long-term incentives (LTIs) • Share bonus plans • Share purchase plans • Share option plans • Share appreciation and other rights plans Performance-related reward plans

13. What should a good reward system do? Primary organisational aims: • Attract the right people at the right time for the right jobs, tasks or roles • Retainthe best people by recognising their contribution • Motivateemployees to deliver to the best of their capability • Develop employees’ performance capabilities by encouraging and rewarding them for demonstrated improvement in capability

14. What should a good reward system do? Associated aims: • Satisfy needs(i.e. be of value to employees in satisfying their needs) • Be fair (i.e. be commensurate with contribution and comparable to rewards received by other employees) • Be legal (i.e. comply with relevant legal requirements and mandated minimum standards) • Be affordable (i.e. be within the financial means of the organisation and cost-effective) • Be strategically aligned (i.e. support the organisation’s business strategy and structure)