© Prentice-Hall, Inc., 1998 Chapter Four Traditional Bases for Pay: Seniority and Merit

© Prentice-Hall, Inc., 1998 Seniority/Longevity Pay l Historical overview l Who participates l Effectiveness of seniority pay systems l Design of seniority pay and longevity pay plans l Advantages of seniority pay l Fitting seniority pay with competitive strategies

© Prentice-Hall, Inc., 1998 Exhibit 4-2 A Sample Seniority Policy for Junior and Advanced Clerk Jobs $8.60/hr 24 months $7.95/hr 9 months $7.50/hr 6 months Advanced Clerk $7.25/hr 15 months $6.85/hr 9 months $6.50/hr 3 months Junior Clerk

© Prentice-Hall, Inc., 1998 Merit Pay l Who participates? l Elements of merit pay

© Prentice-Hall, Inc., 1998 Performance Appraisal l Basis of Merit Pay l Types of performance appraisal plans l The performance appraisal process

© Prentice-Hall, Inc., 1998 Exhibit 4-5 A Trait-Oriented Performance Appraisal Rating Form Employee’s Name: Supervisor’s Name: Employee’s Position: Review Period: INSTRUCTIONS: For each trait below, circle the phrase that best represents the employee. 1. Diligence a. outstanding b. above average c. average d. below average e. poor 2. Cooperation with others a. outstanding b. above average c. average d. below average e. poor 3. Communication skills a. outstanding b. above average c. average d. below average e. poor 4. Leadership a. outstanding b. above average c. average d. below average e. poor 5. Decisiveness a. outstanding b. above average c. average d. below average e. poor

© Prentice-Hall, Inc., 1998 Exhibit 4-7 A Paired Comparison Performance Appraisal Rating Form INSTRUCTIONS: Please indicate by placing a X which employee of each pair has performed most effective during the past year. Refer to the duties listed in the job description for animal keeper as a basis for judging performance. _____ Bob Brown _____ Mary Green _____ Bob Brown _____ Jim Smith _____ Bob Brown _____ Allen Jones _____ Mary Green _____ Jim Smith _____ Mary Green _____ Allen Jones _____ Jim Smith _____ Allen Jones X X XX X X

© Prentice-Hall, Inc., 1998 Exhibit 4-8 A Critical Incidents Performance Appraisal Rating Form INSTRUCTIONS: For each description of work behavior below, circle the number that best describes how frequently the employee engages in that behavior. 1. The incumbent removes manure the unconsumed food from the animal enclosures. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 2. The incumbent haphazardly measures the feed items when placing them in the animal enclosures. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 3. The incumbent leaves refuse dropped by visitors on and around the public walkways. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often 4. The incumbent skillfully identifies instances of abnormal behavior among the animals, which represent signs of illness. 1. Never 2. Almost Never 3. Sometimes 4. Fairly Often 5. Very Often

© Prentice-Hall, Inc., 1998 Exhibit 4-9 A Behaviorally Anchored Rating Scale for the Cleaning Dimension of the Animal Keeper Job INSTRUCTIONS: On the scale below, from 7 to 1, circle the number that best describes how frequently the employee engages in that behavior. The incumbent could be expected to thoroughly clean the animal enclosures and remove refuse from the public walkways as often as needed. The incumbent could be expected to thoroughly clean the animal enclosures and remove refuse from the walkways twice daily. The incumbent could be expected to clean the animal enclosures and remove refuse from the public walkways in a sketchy fashion twice daily. The incumbent could be expected to rarely clean the animal enclosures or remove refuse from the public walkways. 7|6|5|4|3|2|17|6|5|4|3|2|1

© Prentice-Hall, Inc., 1998 Exhibit 4-12 The Impact of Equal Pay Raise Percentage Amounts for Distinct Salaries ANNE BROWN $52,500 $55,125 $57,881 $60,775 $63,814 $36,750 $38,587 $40,516 $42,542 $44,669 JOHN WILLIAMS At the end of 1995, Anne Brown earned $50,000 per year as a systems analyst, and John Williams earned $35,000 per year as an administrative assistant. Each received a 5 percent pay increase every year until the year 2000.

© Prentice-Hall, Inc., 1998 Strengthening the Pay-for- Performance Link l Link PA plans to business goals l Analyze jobs l Communicate l Establish effective appraisals l Empower employees l Differentiate among performers

© Prentice-Hall, Inc., 1998 Limitations of Merit Pay Plans l Failure to differentiate among performers l Poor performance measures l Supervisors’ biased ratings l Lack of open communication between management and employees l Undesirable social structures l Factors other than merit l Undesirable competition l Little motivational value

© Prentice-Hall, Inc., 1998 Linking Merit Pay with Competitive Strategy l Lowest-cost competitive strategy l Differentiation competitive strategy