Section A Answer OUTLINE

Q7 Evaluate how performance management can relate to the organisation’s strategic business objectives. (100)

<Define performance management>

All-encompassing strategic link that aims to improve organisational, functional, unit and individual performance by linking the objectives of each. Incorporates job design, recruitment and selection, training and development, career planning, and remuneration and benefits in addition to performance appraisal. Strategic business objectives simply refer to an organisation’s long-term business goals. Individual and organisational performance improvements are the keys to competitive advantage. Performance management can translate organisation’s objectives and strategies into individual job objectives and performance standards.

Performance management ensures that jobs are properly designed and that qualified personnel are hired, trained, rewarded and motivated to achieve strategic business objectives. Bottom line results improved when PM promotes appropriate organisational and employee behaviours and performance required (GAP analysis).

(GAP Analysis) PM audits org employees in terms of KSA and behaviours

Generate information about how well org human-capital satisfies needs of organisation’s future and present business strategies.

Gives feedback to mgmt. on strategic alignment of employee behaviours-are people doing enough to achieve org objectives? (TnD) Satisfied about being effective contributors to organisation.

Recognise and reward behaviours needed to achieve strategic goal achievement

Reinforce desired organisational culture.

<Examples to show and evaluate extent PM relates to Organization’s Strategic Business Objectives> Large Extent. Elaborate

In this essay, I propose to use Singapore Mass Rapid Transit (SMRT) as an organisational example to evaluate how performance management relates to its strategic business objectives.

Vision: Moving People Enhancing Lives

Mission: To be customer’s choice by providing a safe, reliable and friendly travel experience that in enhanced through convenient and innovative services.

Q4. Discuss the relative merits of internal and external recruitment. What types of business strategies are supported by recruiting externally, and what types might call for internal recruitment? What factors might lead a firm to decide to switch from internal to external recruitment and vice versa?

Merits of internal recruitment are that the organization will be more familiar with the motivation and work habits of the candidate, and it provides motivation to employees, since internal promotions do occur.

Merits of external recruitment include:

Candidates may he recently educated/trained and therefore have up-to-date skills and knowledge.

Candidates might be more likely to be interested in and open to change and innovation.

An organization is more likely to improve the situation of underutilization of minorities and women.

<Define Internal recruitment>

-Promotion from within

Explain merits of internal recruitment

1. More knowledge of candidate’s strengths and weaknesses2. Candidate is familiar with organization and culture3. Employee morale and motivation are enhanced4. ROI in TnD is increased5. Generate a succession of promotions6. Hire only entry-level candidates

Downsides

1. Promote beyond competence2. Infighting/politics3. Inbreeding stifle creativity and innovation4. System becomes bureaucratic5. Top grade in-house TnD necessary (costly)

Strategies related to high levels of competition would be best supported by internal recruitment, since losing employees’ knowledge could hurt the organization. There would likely be evidence internally if employees are committed to the organization.

Strategies that require constant change and innovation would be better served by external recruitment.

Clearly, an organization might need to switch recruitment strategies when the business strategy no longer matches. For example, when the Bell companies were divested from AT&T by the federal government the climate changed from an emphasis on stability and bureaucracy to one of entrepreneurial emphasis, flexibility, creativity, and customer orientation. Recruitment could not remain the same, and internal recruitment might not have been as effective, since the behaviors required of employees were very different (unless training and development was strongly oriented to increasing critical skills).

What types of business strategies supported by internal recruitment

1. Talent succession planning-management trainees

2. Expansion (PCN)

<Define External recruitment>

-

Explain merits of external recruitment

1. Talent pool larger2. New insights, skills and know-how introduced3. Cheaper and easier to hire from outside organizations4. Outsides employees are not members of existing cliques

Downsides

1. Difficult to cast net and find right candidate2. Adjustment and orientation period longer3. Morale of passed over internal staff may suffer4. Personality and Culture-misfit

What types of business strategies supported by external recruitment

1. Global strategy-Expansion (TCN HCN)2. Downsizing3. Hard-to-fill or more specialist job

Synthesis: A combination of both types of recruitment is vital for the survival of organizations in today’s increasingly emergent context

Q6 In the light of growing criticisms of performance appraisal, discuss whether performance appraisal has a future in HRM practice.

Background

Performance appraisal is a process by which organizations evaluate employee performance based on preset standards. The main purpose of appraisals is to help managers effectively staff companies and use human resources, and, ultimately, to improve productivity. When conducted properly, appraisals serve that purpose by: (1) showing employees how to improve their performance, (2) setting goals for employees, and (3) helping managers to assess subordinates' effectiveness and take actions related to hiring, promotions, demotions, training, compensation, job design, transfers, and terminations.

In the early part of this century performance appraisals were used in larger organizations mostly for administrative purposes, such as making promotions and determining salaries and bonuses. Since the 1960s, however, companies and researchers have increasingly stressed the use of employee evaluations for motivational and organizational planning purposes. Indeed, for many companies performance appraisal has become an important tool for maximizing the effectiveness of all aspects of the organization, from staffing and development to production and customer service.

That shift of focus was accompanied during the 1970s, 1980s, and 1990s by a number of changes in the design and use of appraisals. Those changes reflected new research and attitudes about organizational behavior and theory. In general, employee evaluation systems have recognized the importance of individual needs and cultural influences in achieving organizational objectives. For example, traditional appraisal systems were often closed, meaning that individuals were not allowed to see their own reports. Since the mid-1900s, most companies have rejected closed evaluations in favor of open appraisals that allow workers to benefit from criticism and praise.

Another change in appraisal techniques since the mid-1900s has been a move toward greater employee participation. This includes self-analysis, employee input into evaluations, feedback, and goal setting by workers. Appraisal systems have also

become more results-oriented, which means that appraisals are more focused on a process of establishing benchmarks, setting individual objectives, measuring performance, and then judging success based on the goals, standards, and accomplishments. Likewise, appraisals have become more multifaceted, incorporating a wide range of different criteria and approaches to ensure an effective assessment process and to help determine the reasons behind employees' performance.

Performance appraisals and standards have also reflected a move toward decentralization. In other words, the responsibility for managing the entire appraisal process has moved closer to the employees who are being evaluated; whereas past performance reviews were often developed and administered by centralized human resources departments or upper-level managers, appraisals in the 1990s were much more likely to be conducted by line managers directly above the appraisee. Because of the movement toward more decentralized approaches, performance appraisals also began to involve not only lower-level managers, but also coworkers and even customers. Known as multirater feedback or 360 degree feedback, this form of performance appraisal uses confidential assessments from customers, managers, coworkers, and the individual employees themselves. Furthermore, the appraisal process has become increasingly integrated into complementary organizational initiatives, such as training and mentoring.

In addition to reflecting new ideas about personal needs and cultural influences, performance appraisal systems evolved during the late 1900s to meet strict new federal regulations and to conform to labor union demands. A flurry of legislation during the 1970s and 1980s, for example, prohibited the use of performance appraisals to discriminate against members of selected minority groups. Other laws established restrictions related to privacy and freedom of information. The end result of new laws and labor demands was that companies were forced to painstakingly design and document their appraisal programs to avoid costly disputes and litigation.

Finally, with the booming economy in the late 1990s, many managers throughout the country began to move away from performance appraisals, according to Marilyn Moats Kennedy in Across the Board. Because of high employee turnover during this period, managers felt that conducting performance appraisals was not worth the effort since appraisals have the potential to irritate and drive off badly needed employees and since employees' time at a company might be short-lived. Moats argued, however, that managers should continue to conduct appraisals to assess and retain competent employees, because appraisals inform employees of how they

can improve their skills, how they can advance within a company, and how their skills have improved (or failed to improve) over time.

THE ROLE OF PERFORMANCE APPRAISAL

Competent appraisal of individual performance in an organization or company serves to improve the overall effectiveness of the entity. According to D. McGregor, author of The Human Side of Enterprise, the three main functional areas of performance appraisal systems are: administrative, informative, and motivational. Appraisals serve an administrative role by facilitating an orderly means of determining salary increases and other rewards, and by delegating authority and responsibility to the most capable individuals. The informative function is fulfilled when the appraisal system supplies data to managers and appraisees about individual strengths and weaknesses. Finally, the motivational role entails creating a learning experience that motivates workers to improve their performance. When effectively used, performance appraisals help employees and managers establish goals for the period before the next appraisal.

Appraisees, appraisers (managers), and companies all reap benefits from effective performance appraisals. Appraisees benefit in a number of ways; for example, they discover what is expected of them and are able to set goals. They also gain a better understanding of their faults and strengths and can adjust behavior accordingly. In addition, appraisals create a constructive forum for providing feedback to workers about individual behavior, and for allowing workers to provide input to their managers. Finally, appraisees are (ideally) given assistance in creating plans to improve behavior, and are able to get a better grasp on the goals and priorities of the company.

Appraisers gain from evaluations as well. They are able to effectively identify and measure trends in the performance of their employees, and to more accurately compare subordinates. They also get a better understanding of their workers' needs and expectations. Managers are able to use the information to assist their subordinates in planning long-term and short-term goals and career objectives, and to tailor their job responsibilities to make fuller use of their skills. Importantly, the appraisal process helps managers to make informed decisions about promotions and assignments based on applicable facts.

Does Performance Appraisal have a future?

Chief benefits that can accrue to the entire organization from the appraisal process include: improved communication, which results in more cooperation and better decision making; greater staff motivation; and a more informed and productive workforce, which leads to a greater organizational focus on comprehensive goals.

Specifically, the performance appraisal process allows the organization to achieve a more productive division of labor, develop training and education programs, eliminate bias and irrelevant data from evaluations and decisions, and design effective compensation and reward systems.

Are managers being rewarded for conducting appraisals?

Are they being trained to perform the evaluations properly?

Are evaluations based on specific job-related criteria?

Furthermore, they need to take action to determine whether or not the system is producing measurable results:

Are the results of individual appraisals valid?

Is the system producing consistent and reliable information for use in making decisions?

Are employees developing and achieving goals as a result of appraisal and feedback?

PERFORMANCE APPRAISAL SYSTEMS

Most effective systems of appraising performance are: (1) pragmatic, (2) relevant, and (3) uniform. Pragmatism is important because it helps to ensure that the system will be easily understood by employees and effectively put into action by managers. Appraisal structures that are complex or impractical tend to result in confusion, frustration, and nonuse. Likewise, systems that are not specifically relevant to the job may result in wasted time and resources. Indeed, most successful appraisal programs identify and evaluate only the critical behaviors that contribute to job success. Systems that miss those behaviors are often invalid, inaccurate, and result in discrimination based on nonrelated factors. Finally, uniformity of the appraisal structure is vital because it ensures that all employees will be evaluated on a standardized scale. Appraisals that are not uniform are less effective because the criteria for success or failure becomes arbitrary and meaningless. Furthermore, uniformity allows a company to systematically compare the appraisals of different employees with each other.

Keeping in mind the three key traits of effective performance appraisal programs, companies must address four decisions when structuring their appraisal systems: (1) What should be assessed?; (2) Who should make the appraisal?; (3) Which procedure(s) should be utilized?; and (4) How will the results be communicated? In determining what to evaluate, designers of an appraisal system usually consider not only results, but also the behaviors that lead to the results.

The actions and results that are measured will depend on a variety of factors specific to the company and industry. Most importantly, criteria should be selected that will encourage the achievement of comprehensive corporate objectives. This is accomplished by determining the exact role of each job in accomplishing company goals, and which behaviors and results are critical for success in each position. Furthermore, different criteria for success should be weighted to reflect their importance. Some performance appraisal analysts recommend concentrating assessment on productivity and quality, which can be objectively measured and compared. Focus on these two factors enable companies to determine if workers are performing their tasks at an acceptable pace and if they are performing their tasks at an acceptable level of quality. By assessing these factors, evaluators also can avoid biased appraisals.

In determining who should address performance, managers of the performance appraisal system usually select an employee's immediate supervisor to provide the assessment, which is then reviewed by a higher-level manager or the personnel department. In addition, other appraisers may be selected depending on: their knowledge of, and opportunity to observe, the appraisee's behavior, their ability to translate observations into useful ratings, and their motivation to provide constructive input about the employee's performance. Other evaluators may include coworkers, subordinates, customers, or even the employees themselves.

After selecting performance appraisal criteria and evaluators, the designers of the system must determine which assessment techniques to use. Numerous methods may be applied depending on the nature of the industry, company, or job. As noted earlier, many organizations utilize a combination of several techniques throughout the organization. In general, the most popular rating techniques fall into one of four categories: (1) rating, in which evaluators judge workers based on different characteristics; (2) ranking, whereby supervisors compare employees to one another; (3) critical incidents, in which evaluators create descriptions of good and

bad behavior and then assign those descriptions to employees; and (4) techniques that use multiple or miscellaneous criteria, such as employee-directed standards.

In addition to selecting evaluation techniques, managers of appraisal systems must devise a means of effectively communicating the results of assessments to employees. Often, the communication process is built-in to the appraisal technique, but sometimes it isn't. Feedback about performance is important for improving worker behavior. For instance, a worker who receives a very positive appraisal will likely become motivated to perform. On the other hand, a poor appraisal could have the opposite effect. For that reason, assessors have a number of feedback techniques at their disposal to help ensure that the end result of any assessment is constructive. Examples of feedback methods are written follow-ups, goal setting to overcome deficiencies, and allowing workers to have input into their appraisal to explain reasons for success or failure. Importantly, most feedback techniques stress a relationship between employees and their negative behavior (i.e., employee still have value, despite their inadequate behavior).

Furthermore, to be productive, the performance appraisal process must contain general three steps: evaluation and job analysis, appraisal interview, and post-appraisal interview. During the first step, both the appraiser and the appraisee should prepare for the interview by considering job performance, job responsibilities, employee career goals, goals for improving performance, and problems and concerns about the job. Sometimes both the appraiser and the appraisee will fill out forms with questions addressing the previously mentioned topics. Next, managers and employees meet to discuss what they have prepared and to establish goals for the period before the next performance appraisal. It is important that the appraisal interview be an exchange, not a speech. Both parties must be able to share their perceptions of the appraisee's performance. The third step, the post-appraisal interview, gives managers the opportunity to discuss salaries and promotions with employees. By not addressing this issue during the appraisal interview, both managers and employees can focus on performance and goal setting, instead of money. The post-appraisal meeting also can serve as a time for reiterating employee goals.

After appraising the performance of employees, an organization must evaluate the system itself to determine if it is helping to achieve designated organizational objectives (and conforming with legal guidelines, as discussed below). Managers of the appraisal system need to determine whether or not the system is being implemented properly:

BIAS AND ERRORS

Even when a performance evaluation program is structured appropriately, its effectiveness can be diluted by the improper use of subjective, as opposed to objective, measures. Objective measures are easily incorporated into an appraisal because they are quantifiable and verifiable. For example, fast-food workers may be rated on the number of cars they can serve at a drive-through window during an eight-hour period. Other objective measures commonly include error rates, number of complaints, frequency of failure, or other tangible gauges. In contrast, subjective measures are those that cannot be quantified and are largely dependent on the opinion of an observer. For example, an appraisal of fast-food workers' courteousness and attitude would be subjective.

Subjective measures have the potential to dilute the quality of worker evaluations because they may be influenced by bias, or distortion as a result of emotion. To overcome the effects of prejudice, many organizations train appraisers to avoid six common forms of bias: cross-cultural, error of central tendency, halo effect, leniency and strictness, personal prejudice, and recency effect. The recency effect is a corollary of the natural tendency for raters to judge an employee's performance based largely on his most recent actions rather than taking into account long-term patterns.

Cross-cultural bias is a consequence of an evaluator's expectations about human behavior. Those expectations often clash with the behavior of appraisees who have different beliefs or cultural values. For instance, an evaluator with an Asian heritage may be more likely to rate an older employee higher because he has been taught to revere older people. Likewise, personal prejudice results from a rater's dislike for a group or class of people. When that dislike carries over into the appraisal of an individual, an inaccurate review of performance is the outcome. For example, according to Kurt Kraiger and J. Kevin Ford writing in the Journal of Applied Psychology, studies have shown that black raters and white raters are much more likely to give high rankings to members of their own race.

Like cross-cultural and personal prejudice biases, the halo effect is caused by a rater's personal opinions about a specific employee that are not job-related. The term "halo" stems from the distortion that the appraisee, like an angel with a halo over its head, can do no wrong. This type of bias, however, also applies to foes of the rater. The effect is particularly pronounced when the appraisee is an enemy or very good friend of the evaluator.

Leniency and strictness bias results when the appraiser tends to view the performance of all of his employees as either good and favorable or bad and unfavorable. Although these distortions are often the result of vague performance standards, they may also be the consequence of the evaluator's attitudes. For example, some evaluators want their subordinates to like them (leniency bias) or want to feel like they are being a "tough judge" (strictness). Similarly, the error of central tendency occurs when appraisers are hesitant to grade employees as effective or ineffective. They pacify their indecisiveness by rating all workers near the center of the performance scale, thus avoiding extremes that could cause conflict or require an explanation.

In addition to bias, flaws in the execution of an appraisal program can be destructive. For instance, managers may be downgrading their employees because high performance reviews would outstrip the department's budget for bonuses. Or, some managers may be using performance appraisals to achieve personal or departmental political goals, thus distorting assessments. Problems are usually indicated, for example, by extremely high numbers of poor or positive appraisals, or by a general lack of individual improvement over the long term. In any case, appraisal managers must identify and overcome the causes of these flaws to ensure the usefulness of the system. This is typically accomplished through a formal process of evaluating the effectiveness of the appraisal program itself, as discussed above.

The Future for PERFORMANCE APPRAISAL. New Techniques

Different performance appraisal techniques can be classified as either past-oriented or future-oriented. Past-oriented techniques assess behavior that has already occurred. They focus on providing feedback to employees about their actions, feedback that is used to achieve greater success in the future. In contrast, future-oriented appraisal techniques emphasize future performance by assessing employees' potential for achievement and by setting targets for both short- and long-term performance.

PAST-ORIENTED. : Rating scales, Checklists.--> One dimensional

Some of the traditional forms of performance appraisals such as rating scales and checklists remain popular despite their inherent flaws. They entail an assessor providing a subjective assessment of an individual's performance based on a scale effectively ranging from good to bad or on a checklist of

characteristics. Typically, basic criteria such as dependability, attitude, and attendance are listedThe obvious advantage of these techniques is that they are inexpensive and easy to administer. Primary disadvantages include the fact that they are: highly susceptible to all forms of bias; often neglect key job-related information and include unnecessary data; provide limited opportunities for effective feedback; and fail to set standards for future success. Furthermore, subjective techniques such as rating scales are vulnerable to legal attack.

A fairer approach to performance appraisal is behaviorally anchored rating scales (BARSs), which are designed to identify job-related activities and responsibilities and to describe the more effective and less effective behaviors that lead to success in specific jobs. The rater observes a worker and then records his or her behavior on a BARS. The system is similar to checklist methods in that statements are essentially checked off as true or false. BARSs differ, however, in that they use combinations of job-related statements that allow the assessor to differentiate between behavior, performance, and results. Therefore, BARSs can be more effectively utilized in the goal-setting process. The advantage of BARSs is that they are extremely job specific, easy to administer, and eliminate most biases. Nevertheless, they can be difficult and expensive to develop and maintain.

Critical incident evaluation techniques require the assessor to record statements that describe good and bad job-related behavior (critical incidents) exhibited by the employee. The statements are grouped by categories such as cooperation, timeliness, and attitude. An advantage of this system is that it can be used very successfully to give feedback to employees. Furthermore, it is less susceptible to some forms of bias. On the other hand, critical incident assessments are difficult because they require ongoing, close observation and because they do not lend themselves to standardization and are time consuming.

Field review appraisal techniques entail the use of human resource professionals to assist managers in conducting appraisals. The specialist asks the manager and sometime coworkers questions about an employee's performance, records the answers, prepares an evaluation, and sends it to the manager to review and discuss with the employee. This type of system improves reliability and standardization because a personnel professional is

doing the assessment. For the same reason, it is less susceptible to bias or to legal problems. But field reviews are generally expensive and impractical for most firms, and are typically utilized only in special instances—to counteract charges of bias, for example.

FUTURE-ORIENTED.

One of the most popular future-oriented performance appraisal techniques utilizes the management by objectives (MBO) approach. In MBO, managers and employees work together to set goals. In fact, MBO is usually goal oriented, with the intent of helping employees to achieve continuous improvement through an ongoing process of goal setting, feedback, and correction. As a result of their input, employees are much more likely to be motivated to accomplish the goals and to be responsive to criticism that arises from subsequent objective measurements of performance. To be successful, MBO depends on specific and measurable goals and a definite time frame. Although it achieved fad status in the late 1970s and into the 1980s, critics of MBO cite its propensity to focus on objectively measured behaviors, such as quantity of output, at the expense of subjective criteria, such as quality of output. The result can be employee frustration or lackluster performance.

Assessment center evaluation is a more complex assessment method that is usually applied to managerial or executive prospects. It is a system of determining future potential based on multiple evaluations and raters. Typically, a group meets at a training facility or evaluation site. They are evaluated individually through a battery of interviews, tests, and exercises. In addition, they are evaluated within a group setting during decision-making exercises, team projects, and group discussions. Psychologists and managers work together to evaluate the employees' future management potential and to identify strengths and weaknesses. Assessment centers are susceptible to bias, have been criticized as not being specifically job related, and are extremely costly. But they have also proven effective and have achieved broad appeal in the corporate world.

Psychological tests are a much less intricate method of determining future potential. They normally consist of interviews with the employee and his supervisors and coworkers, as well as different types of tests and evaluations of intellectual, emotional, and work-related characteristics. The psychologist puts his or her findings and conclusions in a report that may or may not be shared with the employee. Psychological testing is slow and costly, and must be administered extremely carefully because of the long-term implications of the evaluation on the employee's future. Success is largely dependent on the skill of the psychologist.

Another appraisal technique included in the future-oriented category is self-appraisal, which entails employees making evaluations of their own performance. Although self-assessment techniques may also be coordinated with past-oriented evaluations, they are particularly useful in helping employees to set personal goals and identify areas of behaviors that need improvement. The advantage of such appraisals, which may be relatively informal, is that they provide an excellent forum for input and feedback by superiors. In addition, they allow supervisors to find out what employees expect from themselves and from the organization or department. Furthermore, because the employee is much less defensive about the criticism, self-improvement is much more likely.

In addition, evaluators often combine various future- and past-oriented techniques, forming hybrid approaches to performance appraisal, according to Patricia King in Performance Planning and Appraisal. Using several different techniques enables managers to measure both behavior and results and to set goals for employees to improve their performance and to increase their motivation. For example, an evaluator might use both the BARSs and MBO techniques to reap the benefits of both and compensate for the drawbacks of each.

An organization could opt out of conducting any type of appraisal program as a way of avoiding litigation risks. But even that option becomes risky if the company's promotion/salary practices can be shown to be statistically discriminatory (because the company is left with no documentation to prove the legal validity of its decisions). A safer approach is to structure the performance appraisal system in accordance with EEOC guidelines, and to:

Answer

<Define Performance Appraisal>

Concerned with determining how well employees are doing their job, communicating that information to employees, agreeing on new objectives and establishing an action plan for performance improvement. Measures how well an individual employee is doing their job against a set of criteria (personal competencies, behavioural characteristics or achievements) It is a key part of an organization’s performance management system. Periodic evaluation

Criticisms

Due to human nature; raters interpersonal political, supervisory role conflict

Errors in judgement

1. Halo effect2. Stereotyping3. Central tendency4. Errors of leniency and strictness5. Racial bias

Benefits

When done correctly, develops desired corporate skills, abilities, knowledge and behaviours

Increases accountability

Supports team initiatives

Creates a high involvement workforce

Decreases hierarchies, promotes streamlining

Detects barriers to success

Assess developmental needs

Avoids discrimination and bias by providing a more comprehensive view of employee performance

Enhance employee self-development

Increases credibility of performance appraisal process

Future in HRM Practice?

Provides the very basis for Organisational GAP Analysis.

Executive Appraisal 360-degree feedback instrument

Performance Appraisal- EEO

Structured-systematic, organised and planned

Job related criteria (job analysis)

Q5 To what extent can the process of employee selection be described as rational and objective?

<Define employee selection>

Draw out process outline.

The salient process. May not follow sequentially in real life. Concurrently,

Reception of applicants superficial

Prelim Interview superficial

Application Blanks Fair Reliable Valid?

Tests (Aptitude, Intelligence, Personality Interest DISC Inventory) Employment test

Interview Fair Reliable Valid?

Background Investigations Fair Reliable Valid?

HR screening Fair Reliable Valid?

Line manager final selection Fair Reliable Valid?

Medical examination Fair Reliable Valid?

Placement on job (Hire/Reject)

-Final decision: Compensatory/Aggregate Hurdles Approach

Generally whether its compensatory or hurdles approach, both are rational and objective to the job’s context. Depends on how high stakes the job is. SIA Pilot. (prestigious) vs SAF Officer or HR Staff in Citibank.

Job Person Culture Fit

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Rational—optimal for achieving a goal; goal-oriented more than just a reasoned choice. Validity (relevant) and Reliability

Objective—unbiased, fairness

Microscope. Pinpoint inherent weaknesses in the typical selection process. Look at components in the process chain.

Process of fairness EEO

Validity how well does it predict job behaviour? Content Criterion Construct

Reliability Consistency of measurement of a predictor test/retest, parallel forms

Problems related to tests interviews

Q3 Recruiting the Expatriate Manager

Recruiting people for jobs that entail international assignments is becoming increasingly important for many companies. Where might one go to look for individuals interested in these types of assignments? How might recruiting practices aimed at these individuals differ from those one might apply to the “average” recruit?

Answer Guideline-

Intro: Importance of international assignments

Sources of recruitment.

Some colleges and universities have majors in international trade or business. Students often have a double major in a foreign language and business. They are more likely to be interested in going abroad. People who have language skills other than English might also be a possibility, particularly if they have lived in other countries. Placing job advertisements in special-interest magazines might be helpful.

Recruiting process, practice- change in direction. What are they?

Recruiting practices might differ from those used for the “average” recruit, since most individuals (and their families) would probably not be interested in an international assignment. If the job will require international travel or reassignment, clearly it should be discussed early in the recruiting process. You may need a person on the recruiting team who is familiar with the language and culture where the person would be assigned. This team member would be better equipped than the average recruiter to assess the person’s ability to adjust to a different culture. The family of the candidate should also be interviewed, since their interest and adaptation are critical in a successful expatriation.

Divergence- suit local conditions

Congruence- implement strategies across the world

PCN TCN

Section B

Q1. Pay and Perceived equity have always been perceived to be the key factors in motivating employees. To what extent is this true?

<Factors affecting Motivation>

Motivation defined. Strength and direction of human behaviour. Inertia. A distinction is made between Extrinsic and Intrinsic motivation.

Equity Theory

Talk about other theories

Evaluate the extent

Q5. One observer argues that external equity should always be the primary concern in compensation, noting that it attracts the best employees and prevents the top performers from leaving. Do you agree?

Depends on which school of thought.

Q3. Why do you think there is a need to offer competitive international compensation packages to employees who are posted overseas?

International compensation programs have strategic value as businesses continue to establish operations in locales as… Globalization. Professional and managerial employees posted to establish and operate satellite plants and offices. Glamour comes at a price of personal and sometimes. Professional sacrifices.

Compensation takes on strategic value by providing these expat employees minimal financial risk associated with working overseas. Lifestyles and families status quo. Compensate for personal sacrifices international assignees and immediate families make.

International compensation allowances "are not designed to be incentives

Selecting and rewarding the best international candidates can make all the difference in the world in how well you compete on a global scale. But fairly compensating employees who work in a wide variety of environments is complicated. The objective of an international compensation policy, according to compensation specialist Douglas P. Roeser, is basic:

"To attract, retain and motivate high-quality talent; to be externally competitive; and to be internally equitable."

There are standard elements of international compensation, said Roeser, international compensation consultant, D.P. Roeser and Co. in N.Y. He previously was director of human resources for Kraft General Foods Canada in Toronto and international personnel manager for Dow Jones & Co.

The main elements are base salary, goods and services allowance, housing allowance, tax equalizations, premiums, benefits and perquisites, and relocation allowance.

Roeser said that there are also noncash incentives such as in the case of the Dow Jones employees who volunteered for assignments at a bureau in Europe. They eagerly sought the opportunity "to see their bylines on the front page" of the Wall Street Journal.

The overall goal, Roeser said, is "to keep your expatriate whole"-- to pay the employee so that receives as much as he or she would at home, but not more.

H.K. Ranftle, president of the Institute for International HR, believes that "the world has changed," and international compensation has not caught up.

"We've refined international compensation, but we need a break-through," said Ranftle, who is IBM director of education, management and executive development.

What’s Inside an International Compensation Package?

By Dona DeZube, Monster Finance Careers Expert

Negotiating compensation can be tricky in the US, but if you’re offered an international job, compensation issues grow exponentially more complex.

While packages differ by company, some items appear in most international employment offers: a housing allowance, help paying taxes, spousal employment help and trips home. Those extra items can more than double compensation.

Missing a big-ticket item will lower your living standard thanks to the extra costs of international living, says Geoffrey Latta, executive vice president of ORC Worldwide, a New York City-based workforce consultancy.

Location matters, too. “The way you negotiate your package and the things you put in your package are highly dependent on the countries where you go,” says Alain Verstandig, president of Net Expat, an Atlanta international relocation company.

Here’s what might be in compensation packages of Americans sent to two popular destinations -- London and Shanghai -- as well as negotiation advice:

Salary Negotiation

Culture influences how and when an international salary is negotiated. In the UK, whether the position is one with a new company or your current firm, start the conversation by talking about your place on a team, achievements and your added value, and then discuss salary.

In Shanghai, attitudes toward pay are split. “Anyone over 40 would be against talking about money, but the younger generation is extremely direct about talking about money, so analyze the age group of the recruiter,” Verstandig says.

Foreign-Service Premium

About half of companies pay expatriate employees (expats) a foreign-service premium for taking the assignment, says Mary Ellen Myhr, senior manager at Associates for International Research (AIRINC), an international human resources consultancy. Going someplace tough to live? You could also get a location premium.

“Most companies who pay the foreign-service premium pay the same amount -- either 10 or 15 percent -- to all employees, while the hardship premium varies by location,” she says. “In London, it would be zero. In Shanghai, it might be 5 or 10 percent.”

Cost-of-Living Adjustment

Cost-of-living adjustments are based on:

The cost-of-living difference between your current and new locations.

What a person with your size family and salary spends on goods and services annually.

Housing costs.

Suppose you earn $100,000 and have a four-person family estimated to spend $40,000 on goods and services. If it costs 30 percent more to live in the new city

than in your hometown, you’d get a cost-of-living adjustment of $12,000, or 30 percent of $40,000.

Housing Allowance

Housing is a huge issue in Asia, says Fred Schlomann, a Hong Kong-based managing director of AIRINC. “In Shanghai, there’s plenty of decent housing,” he says. However, areas where you can live near other expats and international schools are limited and in high demand, he says.

In London, rental housing in good neighborhoods is expensive, according to Latta. You’ll likely have to choose between living in a smaller home in a central, upscale area and a bigger home with a longer commute or in less-appealing neighborhood. “Really looking carefully at housing options is the biggest single thing that will impact your well-being,” he adds.

Family size and corporate rank determine the size of your housing allowance. If you can, visit the housing your allowance could cover to see if it’s suitable, Schlomann says.

Tax Assistance

When you work outside the US, you still have to pay US taxes. “There are credits and exemptions so you don’t end up with double taxes, but the UK is going to tax you and the US is going to require you to file a return, and the higher paid you are, the more likely it is you’ll be taxed twice,” Latta says.

In Shanghai, you’ll pay substantial Chinese national taxes and possibly local taxes, but compensation can be structured tax-effectively, according to Schlomann.

Ask your employer to pay for tax-return preparation and the cost of double taxes (referred to as “grossing you up”). Before accepting an offer, consult with an accountant familiar with international compensation, Myhr suggests.

Can’t get tax prep covered? Expect to pay a Big Four firm about $3,500 to prepare your foreign, US and state returns, plus more fees for advice about minimizing taxes, employee obligations or noncompany income.

Health Insurance

When you work in the UK, your family can get free national health coverage. Upper management professionals may get private coverage as well. In Shanghai, only Chinese nationals receive national health coverage. Some companies provide international health insurance.

Ask how your family will get basic and emergency healthcare, especially in countries with areas that lack medical care, Schlomann advises.

Retirement

If you’re staying less than five years, you can typically opt out of paying into the host country’s retirement plan. Most companies will continue to pay your FICA so you stay in the US Social Security system,

In Shanghai, the Chinese retirement system is only for Chinese nationals. Ask your company for an offshore retirement plan or an insured retirement program, Schlomann says.

If you hop from one international assignment to the next, you could participate, but never vest, in several retirement plans, leaving you ineligible for any retirement benefits, Myhr adds.

Spousal Assistance

Just over half of companies will help your spouse find work, Verstandig says. If your working spouse is going to be unhappy stuck at home overseas, be sure to ask for this benefit. Spousal assistance also covers help with visa issues and getting the family settled in the new location.

No Room to Negotiate

The more employees a company moves around the globe, the more likely it is to have standardized compensation packages, which makes it less likely you’ll be able to negotiate upgrades or additional items.

“The bigger companies try to avoid negotiation,” Latta says. “They feel it would be time consuming, and if they’re sending six people to London and create different arrangements, those people will talk to each other and compare.”

You can always ask for what you want, but don’t be too disappointed if you can’t get more than you’re offered.

Q4. Discuss the difference between skill-based and competence-based pay; and provide of when they might be used. (100)

Competency-based pay is a form of compensation that focuses on the behavior required to achieve desired business results. Competencies are not just specific skills, but can be classified as anything that matters to performance. There are differences between skill-based pay and competency-based pay. For example, pay for skills may focus on: • equipment operation abilities; • equipment set-up and changeover skills; • elementary equipment troubleshooting; and • team problem solving skills. Pay for competencies, on the other hand, may focus on qualities or traits that some would argue can not be taught: • customer service orientation; • interpersonal understanding; • flexibility; and • team commitment. Creating a link between business culture and compensation can be an effective way to achieve business goals

Q6. What are the consequences of implementing individual performance-related pay to improve motivation? (100)

motivation in practice - performance related pay

Performance-related pay is a financial reward to employees whose work is:

• Considered to have reached a required standard, and/or

• Is above average

Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved. Like piece-rates and commission, performance related pay is a form of incentive pay.

Whilst the detail of performance-related schemes varies from business to business, there are several common features:

• Individual performance is reviewed regularly (usually once per year) against agreed objectives or performance standards. This is the performance appraisal.

• At the end of the appraisal, employees are categorised into performance groups – which determine what the reward will be (if any)

• The method of reward will vary, but traditionally it involves a cash bonus and/or increase in wage rate or salary.

Performance-related pay has grown widely in recent years – particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances.

According the Equal Opportunities Commission, a well-designed performance-related pay scheme would have the following elements:

• Objective setting

• Communication and understanding of objectives

• Consideration of performance against objectives

• Translation of evaluation into performance rating

• A link between ratings and the determination of pay

• A separate appeals procedure

Disadvantages of Performance Related Pay

There are several problems with performance-related pay:

• There may be disputes about how performance is measured and whether an employee has done enough to be rewarded

• Rewarding employees individually does very little to encourage teamwork

• It may encourage unhealthy rivalry between managers

• There is much doubt about whether performance-related pay actually does anything to motivate employees. This may be because the performance element is usually only a small percentage of total pay

The clue ought to be in the name. Performance-related pay is pay for performance, and the better performance you turn in and the harder you work the more you will get to take home. Except, academics are now suggesting, more often than not the opposite may be the case.

New research by the London School of Economics has argued that, far from encouraging people to strive to reach the heights, performance-related pay often does the opposite and encourages people to work less hard.

An analysis of 51 separate experimental studies of financial incentives in employment relations found what the school has described as "overwhelming evidence" that these incentives could reduce an employee's natural inclination to complete a task and derive pleasure from doing so.

The findings are, of course, deeply controversial, given the depths of anger still felt by many over the role of performance-related pay in causing or contributing to the current economic crisis.

"We find that financial incentives may indeed reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness," argued Dr Bernd Irlenbusch, from the LSE's Department of Management.

"As a consequence, the provision of incentives can result in a negative impact on overall performance," he added.

Companies therefore needed to be aware that the provision of performance-related pay could result in a net reduction of motivation across a team or organisation, he suggested.

Organisations also needed to be looking closely at how they designed effective workplace incentives in the future.

The full research is due to be unveiled next week at a round-table debate, and will include further research by the school suggesting that extra incentives can lead high-ability workers to form teams with similarly skilled colleagues rather than workers they are socially connected to.

Yet socially connected workers tend to work together better and produce better results, meaning that, as a consequence, increased incentives can even reduce a firm's average productivity.

The LSE academics are by no means the only ones questioning received wisdoms over executive and performance-related pay at the moment.

Harvard Business School's V G Narayanan , writing in this month in the Harvard Business Review, has argued forcefully that a wholesale rethink is needed on executive pay, not just tinkering around the edges.

Narayanan, Thomas D Casserly Jr professor of business administration at the school, has suggested that, rather than politicians or the public asking how much should chief executives be paid (a question, he argues, more born of jealousy than anything else), they should be asking "how should they paid" and the less pithy but just as important, "should changes in the way CEOs are paid be mandatory or voluntary?".

"Pay must be structured to attract the right executives and give executives effective incentives to lead their companies to great performance," he agreed.

"The poor showing of too many firms, despite ample CEO salaries and equity packages, and excessive compensation at times of poor performance shows that pay typically isn't structured correctly and that executive compensation practices need serious reform," he added.

All too often, executive incentives were (and still are) based mostly on short-term financial metrics and shareholder returns.

Therefore, financial results tended to be the consequence of a firm's strategy formulation and implementation.

"Effective incentive systems should focus on effective organizational learning and growth, process improvements, and customer-related metrics and milestones," he advised.

"In addition, companies should design compensation packages to attract the right people for implementing the company's strategy. For instance, below market salaries coupled with aggressive incentive pay linked to individual performance is likely to attract self-motivated entrepreneurial individuals.

"Companies also need to assure their executives longer tenure and horizons. A CEO who is afraid of being fired for not making short-term financials will not focus on the long term.

"A board that is actively engaged in strategy formulation and implementation and compensates a CEO for strategy implementation milestones and monitoring long-term performance is more likely to understand, appreciate, and encourage a CEO's efforts even if they yield short-term financial results that are below expectations," emphasised Narayanan.

There was an urgent need for boards to evaluate their executives' performance annually to determine their progress on long-term goals.

Simultaneously, boards needed to engage more in active succession planning so they did not find themselves looking for a "superstar CEO" to rescue them from financial problems.

"It is precisely in those situations that CEOs are able to negotiate outrageous compensation packages," said Narayanan.

"Simultaneously, companies should get rid of egregious practices such as over the top severance packages (more than two times annual compensation), grossing up taxes, defined-benefits plans, guaranteed returns on deferred compensation, accelerated vesting in the event of change in control, and time-based vesting of restricted stock," he added.

"It would be highly unfortunate if, as now seems possible, massive amounts of regulation and active government intervention were to be the dominant forces determining how American executives are compensated," he suggested.

Initiatives such as caps on pay, shareholder "say on pay" and ceilings on ratios of CEO pay to worker pay, appointment of a "federal compensation Tsar" and labelling of incentive pay as pay that causes excessive risk all simply reduced innovation and hurt shareholders, he argued.

"Governmental and shareholder second-guessing on pay would create an environment of fear in which no board would dare try an approach that's different from the herd's or that is tailored to the company's particular strategy," said Narayanan.

"While compensation reform is needed, it must come from within--from executives and boards, acting in the company's best interests," he added.

Management-Issues columnist Bob Selden also highlighted the limitations of performance-related pay back in January 2008.

He argued that performance-related pay, by running contrary to teamwork, could ultimately damage organisational effectiveness and the loss of expertise just when it is needed most.

"Many organisations today are looking to increase their bottom line by paying their people to improve individual performance. For instance, it is now quite common for a large percentage of a person's salary (particularly senior managers) to be based on their performance, with a smaller component made up of base salary," he said.

"Why do organisations continue to throw money at performance issues? If organisations were better managed and led, would there still be the need to offer people incentives to perform?" he questioned.

In companies that were well-managed and where people were led really well, enjoyment and engagement could become much more important factors than simply salary or performance-related pay and bonuses, he suggested.

Introduction

Performance related pay or performance-based pay has caused quite a buzz

in the past decades . It has grown in popularity and controversy among

different proponents of business and economic scholars . Moreover , the

concept of motivation and efficiency it rouses brings about a number of

debates as to how effective it is and to what extent it supports the

status quo of certain organizations both in the private and public

sector . While there are numerous debates as to its use and practicality ,

it stirs my interest in the direction of whether or not it motivates

individuals and how it affects individual performance .

Performance Related Pay : What it is

With this in mind , we can first look at the whole concept of

performance related pay . When we talk about performance related pay we

cannot ignore the concepts of motivation and reinforcement for these may

be the very backbones of why it was conceptualized .

Although Performance related pay or PRP can be tied to organizational

growth and development or increasing capital and such , its main impetus

is based on the fact that it used to increase the productivity in

whatever setting it is used in . As such , we find it employed in various

industries from accounting to healthcare , there have been numerous

studies on its effects . This is highlighted by Maguire and Wood (1992 )

when they cited that the basic appeal of performance related pay or what

they referred to as performance based schemes to public service was the

fact that it was linked under the premise that public servants would in

fact work harder in a setting wherein their pay is directly

proportionate to their work . PRP is a type of payment pay scheme that

makes use of appraisal systems that are measured against objectives that

have properly been established . Taking this into account , we can broadly

define PRP as a payment system or model that rewards the accomplishment

of goals and objectives set by an organization through bonuses or

monetary compensation . An example of such can be drawn from outbound

telemarketers nowadays . For some companies , each sale made entitles the

sales agent to commissions and such . Within this context , we can see

that performance related pay is a form of reinforcement . This takes a

psychological approach in understanding the whole system of PRP .

Performance related pay in actuality is a form of behavior modification

that has an additional effect of increasing motivation and individual

performance . Looking back at the work of Behavioral theorists we take

into account the work of Skinner . B .F . Skinner believed that behavior

was in fact a product of what he called operant conditioning and that a

certain behavior can be learned or bolstered through a system of

conditioning , which implored reinforcements . ``Skinner 's theory simply

states those employees ' behaviors that lead to positive outcomes will be

repeated and behaviors that lead to negative outcomes will not be

repeated (Linder , 1998 ' In this sense , we can view increased

productivity , efficiency and motivation to be the end...