Performance Appraisal and Compensation

Performance Appraisal and Compensation

1Presented by: Mr. Bakary Singhateh

Evaluating Employee Performance - Agenda

• Purpose of performance management system

• Difficulties in performance management system

• Steps of the Appraisal process• Appraisal methods


Performance Evaluation

• The performance management systems need to include:– decisions about who should evaluate

performance– what format should be used– how the results should be utilized


Purposes of a Performance Management System

– Feedback - let employees know how well they have done and allow for employee input.

– Development – identify areas in which employees have deficiencies or weaknesses.


Difficulties in Performance Management Systems

– Focus on the individual: Discussions of performance may elicit strong emotions and may generate conflicts when subordinates and supervisors do not agree.


Difficulties in Performance Management Systems

– Focus on the process: Company policies and procedures may present barriers to a properly functioning appraisal process.

– Additionally, appraisers may be poorly trained.


The Appraisal Process


Step 1 and 2• Establishment of performance

standards – Derived from company’s strategic goals. – Based on job analysis and job description.

• Communication of performance standards to employee.


Step 3 and 4

• Measurement of performance using information from: – personal observation – statistical reports – oral reports – written reports

• Comparison of actual performance with standards.


Step 5 and 6

• Discussion of appraisal with employee.

• Identification of corrective action where necessary. – Basic corrective action deals with causes.


Appraisal Methods

Three approaches:• Absolute standards• Relative standards• Objectives


1. Absolute StandardsEvaluating absolute standards: • An employee’s performance is

measured against established standards.

• Evaluation is independent of any other employee.


1. Absolute Standards

– Essay Appraisal: Appraiser writes narrative describing employee performance & suggestions.

– Critical Incident Appraisal: Based on key behavior incident illustrating effective or ineffective job performance.



– Checklist Appraisal: Appraiser checks off behaviors that apply to the employee.

– Adjective Rating Scale Appraisal: Appraiser rates employee on a number of job-related factors.



– Forced-Choice Appraisal: Appraisers choose from sets of statements which appear to be equally favorable, the statement which best describes the employee.



• Behaviorally Anchored Rating Scales (BARS): Appraiser rates employee on factors which are defined by behavioral descriptions illustrating various dimensions along each rating scale.


2. Relative Method

• Employees are evaluated by comparing their performance to the performance of other employees.


2. Relative Method

• Group Order Ranking: Employees are placed in a classification reflecting their relative performance, such as “top one-fifth.”


2. Relative Method

– Individual Ranking: Employees are ranked from highest to lowest.

– Paired Comparison: • Each individual is compared to

every other.• Final ranking is based on number

of times the individual is preferred member in a pair.


3. Achieved Outcome Method

Management by Objectives (MBO)– includes mutual objective setting and

evaluation based on the attainment of the specific objectives


3. Achieved Outcome Method

– Common elements in an MBO program are:

• goal specificity• participative decision making• an explicit time period• performance feedback

– Effectively increases employee performance and organizational productivity.


Creating More Effective Performance Management Systems


Development of Compensation and Pay systems - Agenda

• Objectives of compensation• Types of rewards• Development of a base pay system


Objectives of compensation

• Efficiency– Quality– Performance– Cost

• Fairness

• Compliance


Types of Reward Plans

Intrinsic versus Extrinsic Rewards • Intrinsic rewards (personal

satisfactions) come from the job itself, such as:– pride in one’s work– feelings of accomplishment– being part of a work team


Types of Reward Plans

Intrinsic versus Extrinsic Rewards• Extrinsic rewards come from a source

outside the job– include rewards offered mainly by

management– Money– Promotions– Benefits


Types of Reward PlansFinancial versus Non-financial Rewards • Financial rewards include:

– wages– bonuses– profit sharing– pension plans– paid leaves– purchase discounts

• Non-financial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.


Introduction


Development of a Base Pay System

Job Analysis

Job Evaluation

Pay Survey

Pay Structure & Grades

Job Structure



Job Evaluation • Use of job analysis

information to determine the relative value of each job in relation to all jobs within the organization. – The ranking of jobs– Labor market conditions– Collective bargaining– Individual skill differences

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Job Evaluation Methods • Ordering method: A

committee places jobs in a simple rank order from highest (worth highest pay) to lowest.



Job Evaluation Methods• Classification method:

– Jobs are placed in classification grades – Compare their descriptions to the

classification description and benchmarked jobs

– Look for a common denominator such as skills, knowledge, or responsibility



Job Evaluation Methods• Point method:

– Jobs are rated and allocated points on several identifiable criteria, using clearly defined rating scales.

– Jobs with similar point totals are placed in similar pay grades.

– Offers the greatest stability.



Establishing the Pay Structure • Compensation surveys

– Used to gather factual data on pay rates for other organizations

– Information is often collected on associated employee benefits as well


Documents

Performance Appraisal and Compensation