RPM Notes. Week 1 Introduction to fundamentals of performance and rewards

Transcription

1 RPM Notes Week 1 Introduction to fundamentals of performance and rewards Topic 1: Managing Employee Performance and Reward: Concepts, Practices, Strategies Human resource processes and planning: 1. Staffing - Planning - Job analysis and design - Recruitment - Selection 2. Development - Job knowledge and technical skills - Attitudes and abilities 3. Rewards - Intrinsic - Developmental - Base pay - Performance pay 4. Performance management - Evaluation - Feedback - Enhancement Context: - Competitive strategy, organisational structure and management culture - Markets - Regulation/industrial relations

2 Stakeholder Shareholders/own Executives Line managers Employees Customer/clients Suppliers Government Community Environment Main performance criteria What is performance? (cybernetic model) Inputs (Competen cies) Individual performance Personal competencies e.g. knowledge, skills, abilities, Processes (Behaviours ) Personal behaviour e.g. effort, citizenship Outcomes (Results) 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 Organisational behaviour e.g. customer- focus, cooperation, What should a performance management system do? Organisational results e.g. profitability, customer satisfaction, - Communication: desired competencies, behaviours and results to achieve its strategic objectives

3 - Build relationships: between internal stakeholders - Monitor and measure: individual and group performance by valid, reliable and felt fair means. - Provide timely feedback: on recent performance, including strengths, weaknesses and areas for improvement. - Develop: individual and group performance capabilities - Evaluate: individuals for purposes of selection and promotion, and evaluate individuals and groups for reward allocation. 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 enough of 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?) 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

4 What are rewards? - A reward is an organisation that provides its employees either intentionally or unintentionally in exchange for the employee s potential or actual work contribution - It is to which employees as individuals attach a positive valence as a need satisfier. Components of total rewards: Intrinsic rewards: - Job challenge - Responsibility involvement - Autonomy - Task variety Extrinsic rewards: Developmental rewards: - Learning, training & 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 Performance-related reward plans Individual: How (=behaviour) - merit raises/increments - merit bonuses How much? (=results) - piece rates - sales commissions - goal-based bonuses Both: - discretionary bonuses - individual non-cash recognition awards Small group short-term incentives (STIs)

5 How much? (=results) - team incentives - team non-cash recognition awards Large group short-term incentives (LTIs) How much? (=results) - profit sharing - gainsharing - goal-sharing Organisation-wide-long term incentives (LTIs) How much? (=results) - share bonus plans - share purchase plans - share options plan - share appreciation and other rights plans 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 - Retain the best people by recognizing their contribution - Motivate employees to deliver to the best of their capabilities - Develop employees performance capabilities by encouraging and rewarding them for demonstrated improvement in capability 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 costeffective - Be strategically aligned i.e. support the organization s business strategy and structure. Working with psychology - Work behaviours - Work attitudes - The psychological contract - Organisational justice - Motivation in theory and practice

6 - Content theories - Process theories Work behaviours They are physical and/or verbal actions by individuals that are: 1. Observable 2. Measurable 3. Casually linked to desired performance results, either positively or negatively Three key types of behaviour 1. Membership behaviour - When people decide to join and remain with an organisation - Characteristics are: - Reduced turnover/longer tenure - Reduced absenteeism 2. Task behaviour - When employees perform specific work tasks that have been assigned to them and which form part of the organisations technical core. - Characteristics are: - Increased work effort 3. Organizational citizenship behaviour - When employees voluntarily and altruistically undertake special actions that exceed membership and task compliance. - Characteristics are: - Volunteering to carry out task activities not formally part of the job (i.e. discretionary effort) - Persisting with extra enthusiasm or effort to complete one s own task activities - Helping and cooperating - Showing initiative/being innovative - Endorsing, supporting and defending organisational objectives Key work attitudes - An attitude is a conscious, cognitive predisposition or inclination to act or behave a certain way 1. Work motivation - The strength of the employee s desire to perform his/her assigned work tasks Three dimensions: 1. The direction of effort (why people take certain actions rather than others, e.g. emphasising product quantity over quality)

7 2. The intensity of effort (why the actions taken involve either a lot of effort, or a little effort) 3. The persistence of effort (why some actions are more sustained and enduring than others) 2. Job satisfaction - How happy am I in my job? - The overall positive or negative attitude the employee holds towards the job and the workplace - Covers both intrinsic (job content) factors and extrinsic (job context) factors, including rewards 3. Organisational commitment - The strength of the employee s attachment to the organisation; feeling of belongingness - Commitment + effort = engagement - Three dimensions: 1. Affective commitment (wish to remain because of perceived emotional benefits) 2. Normative commitment (felt obligation to remain because of perceived indebtedness to the organisation) 3. Continuance commitment (felt need to remain because of perceived costs of leaving) The psychological contract - A contract: an agreement about the mutual responsibilities of parties in an exchange relationship. Involves a promise, a payment/consideration and an acceptance. - The psychological contract: perceptions or expectations by each party as to what they and the other party have undertaken to give and receive in the exchange. - Why does it exist? Because the employment exchange is typically very open-ended and imprecise, often leading to contract drift. Psychological contract: employee perspective.

8 Inputs State and basis of psychological contract Attitudinal outcomes Behavioural outcomes Organisational: - Culture - Climate - Leadership - HR strategy - HR policy - Trustworthiness Do/ can I trust my employer? - Deal-delivery: Am I getting the deal that I was promised? - - Organisational commitment Job and reward satisfaction - - Organisational citizenship behaviour Membership behaviour Individual: - Prior experience - Expectations - Needs - Socialised work values & beliefs - personality - Felt fairness Am I treated fairly? - Task motivation - Task behaviour Management-espoused psychological contracts: relational vs transactional Relational (espoused traditional Key principle: A fair day s work for a fair day s pay over the long term Basis of the employment exchange: Social-emotional exchange If you: Are loyal Work hard Do as you are told We ll provide: A secure job (here) Internal training opportunities Steady pay increases Financial security And you ll be a part of: a dull but safe organisation (for the long haul) Transactional (espoused new Key principle: A flexible, mutually beneficial partnership for as Basis of the employment exchange: Economic-instrumental If you: Develop the competencies we need Apply them in ways that help We ll provide: A challenging work environment Opportunities for you to develop your knowledge, skills, abilities and And you ll be a part of: an exciting, dynamic organisation (for as long as we

9 Breach of psychological contract: some causes Reneging on promise (= failure to deliver on the deal): - Pay cut or lower increases - Withdrawal of overtime - Longer hours Incongruence of expectations (= misalignment of expectations): - Poor initial communication - Misunderstanding Contract drift: - Organisational change (restructure, merger, acquisition) - Downsizing and loss of job security - Increasing workloads - Substitution of temporaries for permanents - Growing pay inequality Perceived unfairness (= Organisational injustice) Organisational justice (or felt-fairness) perceptions Procedural justice: Perceived fairness of employment decision-making processes (e.g. job evaluation; performance appraisal) How am I treated by the decision-makers? Basic requirements for procedural justice: Same standards consistently applied Judgement based on evidence Fair hearing/voice (including right to refute and appeal) Interactional justice: Perceived fairness of interpersonal/emotional relationships: Am I treated with dignity and respect in my daily work relationships? Distributive justice: Perceived fairness of employment outcomes (including rewards/pay received) Am I adequately rewarded for what I contribute?

10 Distributive justice: equity theory (J.S. Adams) Focal person/self (A) Reference person (B) A s assessment/ attitude Outcomes A Inputs A < Outcomes B Inputs B Feeling of under-reward inequity Outcomes A Inputs A = Outcomes B Inputs B Feeling of reward equity Outcomes A Inputs A > Outcomes B Inputs B Feeling of over-reward inequity Perceived outcomes: Pay, benefits, recognition, status, achievement, satisfaction, security, etc. Perceived inputs: Knowledge, skills, ability, qualifications, experience, age, seniority, loyalty, effort, time, performance, responsibility, etc. Possible behavioural responses: - Leave for a more rewarding position elsewhere - Change outcomes within organisation - Change inputs Possible cognitive responses: - Rationalise away the felt inequity by altering perception of the self s own inputs and outcomes - Psychologically distort inputs and outcomes of the comparison other to eliminate felt inequity - Change comparison other /referent But: - Which response? - Which referents?

11 Content or needs theories of motivation Hierarchy of Needs Two-Factor Theory (Maslow) (Herzberg) Higher Order Needs: Selfactualisation Ego/esteem Lower Order Needs: Social Safety Physiological Motivators: Achievement Growth Recognition Responsibility Hygienes: Work relationships Supervision Work conditions Pay Job Characteristics Model (Hackman & Oldham) Intrinsic Factors: Skill variety Task variety Task significance Autonomy Feedback Extrinsic Factors: Relationships Job context Work conditions Pay Process of cognitive theories of motivation Perceived pathways and outcomes motivate. - Seek to explain (and exploit) the cognitive processes by which individuals decide to pursue particular pathways to reward attainment and need satisfaction rather than others. Main process theories: - Expectancy theory - Goal-setting theory - Reinforcement theory Motivation: from theory to HR practice Some key implications for effective performance management: - Identify the essential performance capabilities (knowledge, skills and abilities) for the position and ensure that employee capacities match these requirements (expectancy theory expectancy) - Encourage task self-efficacy (expectancy theory, goal-setting theory) - Set tasks that are specific and challenging, but attainable (goal-setting theory) - Encourage employee ownership of performance criteria (goal-setting theory)

12 - Ensure that performance achievement is accurately measured (expectancy theory instrumentality) - Provide timely and positive feedback (goal-setting theory) - Do not overlook the importance of intrinsic motivation (two-factor theory) Some key implications for effective reward management: - Understand individual employee needs and how these differ between employee groups (content theories) - Offer individuals valued rewards, i.e. rewards that address high salience needs (Maslow s hierarchy of needs; expectancy theory valence) - Link rewards clearly and directly to performance in a timely way (expectancy theory instrumentality) - Deliver on the rewards promised (expectancy theory instrumentality) - Strike an appropriate balance between financial and other rewards (two-factor theory) - Do not overlook the potential of intrinsic rewards (two-factor theory) - Manage perceptions of work inputs, reward outcomes and comparisons (equity theory)