Evaluation, Feedback, and Rewards Chapter 7 Evaluation, Feedback, and Rewards

Learning Objectives Describe the purposes of performance evaluation Explain why a 360-degree feedback program is considered more comprehensive Discuss different types of reinforcement schedules Compare intrinsic and extrinsic rewards Describe the relationship between intrinsic rewards and organizational commitment Understand the role rewards play in turnover, absenteeism, performance, and commitment Identify several innovative reward systems

Introduction The manner and timing of distributing rewards is an issue managers address daily Pay, transfers, promotions, praise, recognition, more challenging and satisfying jobs

Introduction Behavior Job performance Rewards impact… Absenteeism Commitment Turnover

Reward distribution strategies Introduction Reward distribution strategies Universal or across-the-board Tenure or seniority Job performance To achieve maximum effectiveness, employee evaluation systems must be linked with reward systems

Evaluation of Performance Purposes of Evaluation (Judgmental) Provide a basis for reward allocation Identify high-potential employees Validate the effectiveness of employee selection procedures Evaluate previous training programs

Evaluation of Performance Purposes of Evaluation (Development) Stimulate performance improvement Develop ways of overcoming obstacles and performance barriers Identify training & development opportunities Establish supervisor-employee agreement on performance expectations

Focus of Evaluation Performance evaluation is a continuous, ongoing process that helps employees understand The responsibilities of the job The work goals associated with them The degree to which goals have been achieved

Weighting of Relevant Behaviors Focus of Evaluation Weighting of Relevant Behaviors Deficiency The evaluation doesn’t cover all aspects of the job Contamination Activities that are not part of the job are included in the evaluation Distortion Improper emphasis is given to various job elements

Improving Evaluations Maximize use and acceptance of evaluations Higher levels of employee participation in the evaluation process Setting specific performance goals Provide manager training in evaluations Evaluate on how effectively the duties were performed Communicate results to employees Actively recognize and reinforce good performance Evaluate performance on a continuous basis

Performance Evaluation Feedback Provide Feedback After Performance Evaluations Explain what went into the evaluation Explain how to improve or sustain performance Avoid generic phrases Managers generally fear giving feedback

Purpose of Evaluation Feedback Instructional Motivational

A Feedback Model

360-Degree Approach to Feedback Up to 90% of Fortune 1000 firms use some form of multi-source feedback program Peers and team members Supervisors and subordinates Creditors The person being evaluated Resulted from calls for fairness, clarity, and credibility

360-Degree Approach to Feedback Best practices… Use primarily for individual development Integrate feedback with other activities Link the feedback process with the overall strategy and direction of the firm Exert administrative control over every aspect of the process Make senior management role models Use highly trained internal coaches Evaluate the effectiveness (ROI) of the process

360-Degree Approach to Feedback Arguments For Arguments Against Constant concern about fairness and credibility in evaluation programs If feedback sources are concerned about use of their ratings, they may inflate them Limited observation of employee behavior by many evaluators

Reinforcement is a Key Principle of Learning Reinforcement Theory Reinforcement is a Key Principle of Learning Positive consequences increase the strength of a behavior and the probability of repetition Negative consequences decrease the strength of a response and the probability of repetition Operants Behaviors that can be controlled by altering the consequences that follow them

Rewards, Reinforcement, and Punishment

Reinforcement Theory A reinforcement is different from a reward A reward is perceived as desirable, and is provided after performance Not all rewards are reinforcers Reinforcers increase the rate of behavior

Can suppress behavior if used effectively, but is controversial Reinforcement Theory Punishment An uncomfortable or unwanted consequence for a particular behavior response Can suppress behavior if used effectively, but is controversial Should be used only after careful and objective consideration of the situation

Reducing unwanted behavior Reinforcement Theory Extinction Reducing unwanted behavior If positive reinforcement for a learned response is withheld, the behavior continues for some time If non-reinforcement continues, the behavior decreases in frequency until it disappears

Reinforcement Schedules Description Organizational Example Continuous Reinforcer follows every response Praise after every new sale and order Fixed interval Response after specific time period is reinforced Weekly, bimonthly, monthly paycheck Variable interval Response after varying period of time (an average) is reinforced Transfers, unexpected bonuses, promotions, recognition Fixed ratio A fixed number of responses must occur before reinforcement Piece rate, commission on units sold Variable ratio A varying number (average) of responses must occur before reinforcement Random checks for quality yield praise for doing good work

Main Objectives of Reward Programs Individual Rewards Main Objectives of Reward Programs Attract qualified people to the organization Keep employees coming to work Motivate high levels of employee performance

The reward process attempts to integrate Individual Rewards The reward process attempts to integrate Satisfaction Motivation Performance Rewards Motivation alone cannot cause good performance Ability, skill, and experience are also required

The Reward Process

Satisfaction with a reward Lawler’s Conclusions Satisfaction with a reward A function of how much is received, and how much one feels should be received Is influenced by Comparisons with what happens to others How satisfied one is with both intrinsic and extrinsic rewards People differ in the rewards they desire, and in how important rewards are to them

Satisfaction & Rewards Any reward package should be… Sufficient to satisfy basic needs Equitable Individually oriented Types of rewards Intrinsic… self-administered Extrinsic… initiated from outside the person

Intrinsic and Extrinsic Rewards Salary and wages Employee benefits Interpersonal rewards Promotions Intrinsic rewards Completion Achievement Autonomy Personal growth

Rewards Interact Do intrinsic and extrinsic rewards have an independent, additive influence on motivation? If one is experiencing a high level of intrinsic rewards, additional extrinsic rewards may decrease motivation or reduce intrinsic rewards No study substantiates that extrinsic rewards have a negative effect on intrinsic motivation

Administering Rewards Positive reinforcement Modeling & social imitation Expectancy theory

Rewards Affect Organizational Concerns Rewards affect employee… Perceptions Attitudes Behavior Organizational commitment Organizational concerns affected Job performance Turnover and absenteeism

Innovative Reward Systems Skill-based pay Broadbanding Concierge services Team-based rewards Part-time benefits Gain sharing Employee stock ownership plans

Line of Sight: The Key Issue Employees must perceive a “real” linkage between performance and rewards Setting a clear line of sight is difficult, and should be considered when designing a job