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APPRAISING AND REWARDING

PERFORMANCE
TOPICS
Profit Sharing
Money as means of
rewarding employees

Economic Incentive Systems

Use of Wage Incentives

Organizational Gain Cash Plan


Behavior & Perf.
Appraisal Complete Program
Skill Base Pay
1. Money as means of rewarding
employees
2. Organizational Behaviour and
Performance Appraisal
3. Economic Incentive Systems
TOPICS
4. Use of Wage Incentives
OUTLINE:
5. Profit Sharing
6. Gain Cash Plan
7. Skill Base Pay
8. Complete Program
19TH TO 20TH CENTURY

EMPLOYEES PRIMARILY
WANT MONEY.

MONEY WAS BELIEVED A


DIRECT MOTIVATION.
I. MONEY AS MEANS OF
REWARDING EMPLOYEE
MONEY
 IS VALUABLE BECAUSE OF THE GOODS
AND SERVICES THAT IT WILL PURCHASE.
 THIS ASPECT IS ITS ECONOMIC VALUE AS A
MEDIUM OF EXCHANGE FOR ALLOCATION
OF ECONOMIC RESOURCES, HOWEVER
MONEY ALSO IS A SOCIAL MEDIUM OF
EXCHANGE.
I. MONEY AS MEANS OF
REWARDING EMPLOYEE

 SAVE IT, SPEND IT, OR GIVE IT AWAY


GENEROUSLY.
 IT IS AN INDICATION OF ONE’S
EMPLOYEE STATUS RELATIVE TO THAT
OF OTHER EMPLOYEE.
Application of the Motivational
Models

A useful way to think about money as a


reward is to apply it to some of the
motivational models such as,
Application of the Motivational
Models
1. DRIVES
Achievement- oriented employees maintain
a symbolic scorecard in their minds by
monitoring their total pay and comparing it
with that of others. Their pay is a measure of
their accomplishments.
Application of the Motivational
Models

2. NEEDS
In the Herzberg model, pay is viewed
primarily as a hygiene factor, although it
may have at least short-term motivational
value as well.
Application of the Motivational
Models

2. NEEDS
Pay is most easily seen in its capacity to
satisfy the lower-order needs.
Application of the Motivational
Models

2. NEEDS
Expectancy theory

Valence x Expectancy x
Instrumentality = Motivation
Application of the Motivational
Models
3. BEHAVIOR MODIFICATION
Desirable and Undesirable Instrumentality
Conditions
Application of the Motivational
Models
4. EQUITY
The employee’s approach to this
complex problem is to make a
rough type of cost-reward
comparison, similar to the break-
even analysis that is used in
financial assessments.
II. ORGANIZATIONAL BEHAVIOR
AND PERFORMANCE APPRAISAL
Organizations require consistent levels
of high performance from their
employees in order to survive in a highly
competitive environment.
Management by objectives (MBO) is a
cynical process that often consists of
four steps as a way to attain desired
performance:
II. ORGANIZATIONAL BEHAVIOR
AND PERFORMANCE APPRAISAL
1. OBJECTIVE SETTING
It is a joint determination by manager
and employee of appropriate levels of
future performance for the employee,
within the context of overall unit goals
and resources.
ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL
2. ACTION PLANNING
Participative or even independent
planning by the employee as how to
reach the objectives.
ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL
3. PERIODIC REVIEWS
Joint assessment of progress toward
objectives by manager and
employee, performed informally and
sometimes spontaneously.
ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL
4. ANNUAL EVALUATION
More formal assessment of
success in achieving the
employee’s annual objectives,
coupled with a renewal of the
planning cycle.
ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL

PERFORMANCE APPRAISAL- plays a


role in reward system. It is the process
of evaluating the performance of
employees, sharing that information
with them, and searching for some
ways to improve their performance.
III. ECONOMIC INCENTIVE
SYSTEMS
ECONOMIC INCENTIVE SYSTEM
- INDUCE A HIGH LEVEL OF INDIVIDUAL,
GROUP, OR ORGANIZATIONAL
PERFORMANCE BY MAKING AN
EMPLOYEE’S PAY CONTINGENT ON ONE
OR MORE OF THOSE DIMENSIONS.
III. ECONOMIC INCENTIVE
SYSTEMS
III. ECONOMIC INCENTIVE
SYSTEMS
ADVANTAGES OF INCENTIVES
THEY INCREASE EMPLOYEE BELIEFS
(INSTRUMENTALITY) THAT REWARD WILL
FOLLOW HIGH PERFORMANCE.
IF WE ASSUME, MONEY HAS VALENCE TO AN
EMPLOYEE, THEN MOTIVATION SHOULD
INCREASE.
III. ECONOMIC INCENTIVE
SYSTEMS
DISADVANTAGES OF INCENTIVES
DIFFICULT TO ESTABLISH A FAIR BASIS FOR
INCENTIVE PAY.
SOME INCENTIVE SYSTEMS ARE COSTLY TO
MONITOR, REQUIRING EXTENSIVE RECORD-
KEEPING PROCEDURES.
IV. USE OF WAGE INCENTIVES
MORE PAY FOR MORE PRODUCTION
V. PROFIT SHARING
PROFIT SHARING
A SYSTEM THAT DISTRIBUTES TO
EMPLOYEES SOME PORTION OF THE
PROFITS OF BUSINESS, EITHER
IMMEDIATELY, OR DEFFERED UNTIL A
LATER DATE.
V. PROFIT SHARING
DIFFICULTIES

1. Profits are not directly related to an


employee’s effort on the job.
2. Employee must wait for their reward and
this lengthy delay diminishes the impact.
V. PROFIT SHARING
3. Since profits are unpredictable, total
worker income may vary from year to year.
4. Some union leaders have historically been
suspicious of profit sharing. They fear that it
would determine union loyalty, result in varied
total earnings from company to company
and weaken their organizing campaigns.
VI. GAIN CASH PLAN

GAIN SHARING- Another useful group incentive.


GAIN SHARING PLAN
A program that establishes a historical base
period of organizational performance,
measures improvements, and shares the gains
with employees on some formula basis.
VI. GAIN CASH PLAN
BEHAVIORAL BASIS
Gain sharing plans use several
fundamental ideas from organizational
behavior and are much more than pay
systems.
They encourage employee suggestions,
provide an incentive for coordination
and teamwork, and promote improved
communication.
VI. GAIN CASH PLAN
CONTINGENCY FACTORS
The success of gain sharing is contingent
upon a number of key factors, such as
moderately small size of the unit, sufficient
operating history on allow creation of
standards, existence of controllable cost
areas, and relative stability of the business.
VII. SKILL BASED PAY

Also known as Knowledge-based pay or


multi-skill pay.
They rewards individuals for what they
know how to do.
VII. SKILL BASED PAY
ADVANTAGES
They provide strong motivation for
employees to develop their work-related
skills.
DISADVANTAGES
More skills, higher pay rate.
VIII. COMPLETE PROGRAM
THREE SYSTEMS:

BASE PAY
MOTIVATES EMPLOYEES TO
PROGRESS JOBS OF HIGHER SKILLS
AND RESPONSIBILITY.
VIII. COMPLETE PROGRAM
PERFORMANCE REWARDS
AN INCENTIVE TO IMPROVE
PERFORMANCE ON THE JOB.
PROFIT SHARING
MOTIVATES WORKERS TOWARD
TEAMWORK TO IMPROVE AN
ORGANIZATION’S PERFORMANCE.
REFERENCE:

MC GRAW HILL