Exam # 2 Study Guide Chapters: 10 - 14 Chapter 10 (March 3) – Performance Reviews HRM has four basic functions:(1) Staffing – HR planning, recruiting, and selection(2) Training and Development – training (3) Motivation – Performance review, reward system, and benefits(4) Maintenance – Health & safety In other words, hiring people, preparing them, stimulating them, and keeping themPurpose of Performance Reviews1. Improving future performance (by providing feedback)2. Making HR decisions: compensation/benefits/career development/training/termination 3. Documentation: for legal requirements4. Guiding desired behaviors Appraisal Process(1) Establish performance standards with employees(2) Communicate expectations and set goals(3) Measure actual performance(4) Compare actual performance with standards(5) Discuss the appraisal with the employee(6) If necessary, initiate corrective actionPerformance Review Process1. Establish performance standards– Derived from company’s strategic goals – Based on job analysis and job description2. Communicate expectations– Goals must be articulated from supervisor to – Employee and from employee to supervisor3. Measure actual performance using– Personal observation– Statistical reports– Oral reports – Written reports4. Compare performance with standards– Explain different levels of performance and – How acceptable they are compared to the standard5. Discuss appraisal with the employee– Feedback has a strong impact on employee self-esteem and future performance– Feedback can be positive or negative6. Initiate corrective action if necessary– Immediate action deals with symptoms of the problem– Basic corrective action deals with the source of the problemMGI 301 Human Resource ManagementExam # 2 Study Guide Chapters: 10 - 14 Appraisal Methods*No single approach is best – each has its strengths and weaknesses (1) Absolute Standards - Employee’s performance is measured against established standards– Critical incident appraisal– Checklist > Forced choice– Graphic rating scale > Behaviorally anchored (BARS)(2) Relative Standards – Employee’s performance is measured against other employee’s performance– Group order ranking (Stack ranking)– Individual ranking– Paired comparison(3) Achieved outcome - Management by Objectives (MBO): evaluation based on the attainment of specific objects – Goal Specific– Participative decision making– Specific time period– Performance feedbackEffectively increases employee performance and organizational productivity, especially when goals are difficult enough to require stretching Factors that Distort Appraisals(1) Leniency error– Each evaluator has his/her own value system; Some evaluate high (positive leniency) and others, low (negative leniency) (2) Halo error– Evaluator lets an assessment of an individual on one trait influence evaluation on all traits (3) Similarity error– Evaluator rates others in the same way that the evaluator perceives him or herself(4) Low appraiser motivation– Evaluator may be reluctant to give an accurate appraisal if it means the employee may not attain expected rewards as a result(4) Central tendency– The reluctance to use the extremes of a rating scale resulting in all employees being rated close to average(5) Inflationary pressure– Rater feels pressures for equality or fear of retribution from unhappy employees– Rater ranks employees better than they deserve to avoid conflict(7) Inappropriate substitutes for performance– Effort, enthusiasm, appearance, etc., are less relevant for some jobs than others (8) Attribution theory– Evaluations are affected based on whether someone’s performance is due to:• Internal factors they can control• External factors they cannot control MGI 301 Human Resource ManagementMGI 301 Human Resource ManagementExam # 2 Study Guide Chapters: 10 - 14 AttributionWhen observing others or our behavior, we “attribute” certain causes to that behaviorWe attribute behavior to either:– Internal causes within a person’s control (e.g., ability, values, effort, etc.)– External causes outside of a person’s control (e.g., task difficulty, luck, situation, etc.)Attributional Bias(1) Fundamental attribution error: Tendency to make internal attributions when observing others’ behavior (especially forBAD behaviors)(2) Self-serving bias: Tendency to make internal attributions for our successes, yet external attributions for our failuresPositive Outcomes Negative OutcomesOthers External Attribution (luck) Internal Attribution (lack of competence)Self Internal Attribution (personal ability) External Attribution (lack of luck)Creating Effective Performance management Systems(1) Use behavior-based measures– They’re more job-related and elicit more inter-rater agreement than traits such as “loyalty” or “friendliness” (2) Combine absolute and relative standards– Absolute standards tend to be positively lenient– Relative standards suffer when there is little variability(3) Provide ongoing feedback– Expectations and disappointments should be shared with employees on a frequent basis (4) Use multiple raters– The more used, the more reliable and valid the results– Peer evaluations, Upward evaluations and 360-degree appraisals(5) Rate selectively– Appraisers should evaluate only in areas about which they have sufficient knowledge, they should beorganizationally close the individual being evaluated, and should be an effective rater (6) Train appraisers– Poor appraisals can demoralize employees and increase legal liabilitiesChapter 11 (March 29) – Compensation MGI 301 Human Resource ManagementExam # 2 Study Guide Chapters: 10 - 14 Intrinsic vs. Extrinsic Rewards(1) Intrinsic Rewards: Come from the job itself, such as– Pride in one’s work– Feelings of accomplishment – Being part of a work team(2) Extrinsic Rewards: Come from a source outside the job, mainly by management– Money– Promotions– BenefitsCompensation AdministrationCompanies derive their compensation programs from job evaluation, which defines the appropriate worth of each job.*An effective, fair compensation program attracts, motivates and retains competent employeesThe Fair Labor Standards Act (FSLA) requires:– Minimum wage 2– Overtime pay– Child labor provisionsExempt employees – Include professional and managerial employees not covered under FSLA