PAYING FOR PERFORMANCE: THE USE AND ABUSE OF REWARDS

OLIVIA NIELSENMGMT 5210

DEFINITIONS

• WHAT IS PAY-FOR-PERFORMANCE?• PERFORMANCE IS SPECIFICALLY TARGETED AND REWARDED

• WHY IT MATTERS?

THEORIES OF MOTIVATION

• EXPECTANCY THEORY• BEHAVIORS ASSOCIATED WITH OUTCOMES

• EQUITY THEORY• MOTIVATION TO PERFORM IS AFFECTED BY THE PERFORMANCE OF OTHERS

BEHAVIORAL THEORIES

• REINFORCEMENT THEORY• BEHAVIOR IS A FUNCTION OF ENVIRONMENTAL CONSEQUENCES• IF A CONSEQUENCE IS CONTINGENT ON A BEHAVIOR AN RESULTS IN A FUTURE

INCREASE IN THAT BEHAVIOR, THEN THE CONSEQUENCE IS SAID TO BE A REINFORCER

MEASUREMENT CRITERIA• 5 REQUIRED CRITERIA OF PERFORMANCE MEASURES• ACCEPTABILITY• VALIDITY• STRATEGIC CONGRUENCE• SPECIFICITY• RELIABILITY

METHODS OF EVALUATION• PERFORMANCE APPRAISAL SYSTEMS• MANAGEMENT REVIEW OF PERFORMANCE AND APPLICATION OF FEEDBACK

• BEHAVIORALLY ANCHORED RATING SCALES (BARS)• RATES PERFORMANCE BASED ON EXAMPLES AND NON-EXAMPLES

• BALANCED SCORECARD• TRANSLATES BUSINESS STRATEGY INTO EMPLOYEE STRATEGY

PROS OF PERFORMANCE-BASED PAY• AMERICAN COMPENSATION ASSOCIATION STUDY• 134% NET RETURN

• EFFECTIVE DEFICIENCY PINPOINTING• IMPROVED TRAINING SYSTEMS AND COMPANY POLICIES

• EMPLOYEE SELF-MANAGEMENT• INCREASED MOTIVATION

• POSITIVE BUSINESS ENVIRONMENT

CONS OF PERFORMANCE-BASED PAY• LACK OF EXPERIMENTAL EVIDENCE• MISUSE OF REWARDS• REWARDS ARE GIVEN TO BEHAVIORS BEING DISCOURAGED• EXAMPLE: AN EMPLOYEE IS TO BE REWARDED FOR BEING AT HIS DESK FOR 6

HOURS EACH DAY. THE GOAL OF SUCH A POLICY IS TO ENSURE THAT EMPLOYEES ARE SPENDING ENOUGH TIME AT THEIR DESKS TO COMPLETE ALL OF THEIR ASSIGNED DUTIES. HOWEVER, THE EMPLOYEE INSTEAD SPENDS MORE TIME SURFING THE INTERNET AND BEING INEFFICIENT.

SOLUTIONS

• SYSTEMATIC IMPLEMENTATION• INVEST IN EXPERIMENTAL DEMONSTRATION OF SUCCESS

• EVALUATION OF REWARD DISTRIBUTION• ARE THE REWARDS BEING GIVEN FOR THE CORRECT BEHAVIORS?

IMPLEMENTING PERFORMANCE PAY• CHOOSING APPROPRIATE REWARDS• EFFECTIVE PAY APPRAISAL SYSTEMS• DETERMINE OBJECTIVES• TRAIN AND USE MULTIPLE RATERS• HAVE FREQUENT APPRAISALS• MAINTAIN ACCURATE RECORDS• HAVE EFFECTIVE MEASUREMENT SYSTEMS

• TIME TO PAY ADJUSTMENT

FUTURE DIRECTIONS

• MORE TRAINING FOR RATERS IN PERFORMANCE APPRAISAL• CONSIDERATION AND PLANNING FOR OTHER PERFORMANCE OUTCOMES• EFFECTS ON BUSINESS CULTURE, CAREER ADVANCEMENT, ETC.

• USE OF PERFORMANCE SYSTEMS AS ASSESSMENTS OF COMPANY HEALTH

REFERENCES• BOICE, D. F., & KLEINER, B. H. (1997). DESIGNING EFFECTIVE PERFORMANCE APPRAISAL SYSTEMS. WORK STUDY, 46(6),

197-201.• DIPBOYE, R. L., & DE PONTBRIAND, R. (1981). CORRELATES OF EMPLOYEE REACTIONS TO PERFORMANCE APPRAISALS

AND APPRAISAL SYSTEMS. JOURNAL OF APPLIED PSYCHOLOGY, 66(2), 248.• KERR, S. (1995). ON THE FOLLY OF REWARDING A, WHILE HOPING FOR B. ACADEMY OF MANAGEMENT JOURNAL, 18(4),

769-783.• LUTHANS, F., & STAJKOVIC, A. D. (1999). REINFORCE FOR PERFORMANCE: THE NEED TO GO BEYOND PAY AND EVEN

REWARDS. THE ACADEMY OF MANAGEMENT EXECUTIVE,13(2), 49-57.• RAMLALL, S. (2004). A REVIEW OF EMPLOYEE MOTIVATION THEORIES AND THEIR IMPLICATIONS FOR EMPLOYEE

RETENTION WITHIN ORGANIZATIONS. THE JOURNAL OF AMERICAN ACADEMY OF BUSINESS, 9, 21-26.• WRIGHT, PATRICK; GERHART, BARRY; NOE, RAYMOND; HOLLENBECK, JOHN (2012-07-01). HUMAN RESOURCE

MANAGEMENT, 8TH EDITION (PAGE 342). MCGRAW-HILL HIGHER EDUCATION -A. KINDLE EDITION.