1. Motivating Employee Performance Through Rewards
Chapter 6
Motivating Employee Performance Through Rewards

2. Chapter Learning Objectives
After studying this chapter you should be able to:
Describe goal setting and relate it to motivation.
Discuss performance management in organizations.
Identify the key elements in understanding individual rewards in organizations.
Describe the issues and processes involved in managing reward systems.
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3. Goal Setting and Motivation
Purposes of Setting Goals in Organizations
To provide a useful framework for managing motivation to enhance employee performance
To serve management as a control device for monitoring of how well the organization is performing
Goal
A desirable objective
Self-Efficacy
The extent to which we believe we can accomplish our goals even if we failed to do so in the past
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4. Goal Setting and Motivation (cont’d)
Goal Setting Theory (Locke)
Assumes that behavior is a result of conscious goals and intentions, therefore goals influence behavior (performance)
Goal Characteristics
Goal difficulty
The extent to which a goal is challenging, requires effort, and is attainable
Goal specificity
The clarity and precision of a goal
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5. Expanded Goal Setting Theory (Lock and Latham)
The Goal-Setting Process
Goal-directed effort is a function of goal attributes:
Goal difficulty
Goal specificity
Goal acceptance: the extent to which a person accepts a goal as his/her own
Goal commitment: the extent to which a person is interested in reaching a goal
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6. 6.1 The Goal-Setting Theory of Motivation
Source: Reprinted from ORGANIZATIONAL DYNAMICS, Autumn 1979, Gary P. Latham et al., "The Goal-Setting Theory of Motivation", Copyright 1979, with permission from Elsevier.
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7. Broader Perspectives on Goal Setting
Management by Objectives (MBO)
A collaborative goal-setting process through which organizational goals cascade down throughout the organization
Requires customizing to each organization
Can be effective for managing reward systems where the manager has individual interactions with each employee
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8. Goal Setting: Evaluation and Implications
Research has shown that:
Goal difficulty and specificity are closely associated with performance.
Goal-setting theory may focus too much on short-run considerations.
MBO has the potential to motivate because it helps implement goal-setting theory on a systematic basis throughout the organization.
MBO has a tendency to overemphasize quantitative goals to enhance verifiability.
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9. Performance Management in Organizations
The Nature of Performance Management
Performance measurement (or appraisal) process:
Evaluating an employee’s work behaviors by measurement and comparison with previously established standards
Documenting the results
Communicating the results to the employee
Performance Management System
Comprises the processes and activities involved in performance appraisals
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10. 6.2 The Performance Management System
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11. 6.3 Purposes of Performance Measurement
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12. Performance Management Basics
Who is to do the appraisals?
How often are the appraisals to be done?
How is performance to be measured?
Issues in Performance Measurement
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13. Performance Management: The Process
The Appraiser: Alternatives
The direct supervisor
Multiple-rater systems (including self-evaluation)
360-degree feedback
A system in which people receive performance feedback from those on all sides of them in the organization (boss, colleagues, peers, subordinates)
Frequency of Appraisals
Determined by convenience for administrative purposes, cultural appropriateness, and relevance
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14. Performance Management: The Process (cont’d)
Measuring Performance
Considerations
Desired decisions to be made based on outcome
Instruments must be valid, reliable, and free of bias
Choices of measurement methods
Graphic rating scales, checklists, essays/diaries, behaviorally anchored rating scales, forced-choice systems
Comparative methods such as ranking, forced distribution, paired comparisons, multiple raters
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15. Individual Rewards in Organizations
Reward System
Consists of all organizational components involved in allocating compensation and benefits to employees in exchange for their contribution to the organization including:
People
Processes
Rules
Procedures
Decision-making activities
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16. Rewards’ Purposes, Roles, and Meanings
To attract, retain, and motivate qualified employees
Roles of compensation structures
To be equitable and consistent
To be a fair reward for the individual’s contribution
To be competitive in the external labor market
Meanings of rewards
Surface value: objective meaning or worth of reward
Symbolic value: subjective and personal meaning or worth of reward
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17. Types of Individual Rewards
Compensation Package
The total array of money (wages, salary, commission), incentives, benefits, perquisites, and awards provided by the organization
Base Pay
Symbolizes an employee’s worth
Can improve motivation and performance if part of an effectively planned and managed pay system
Is a major cost of doing business
Can reduce turnover and increase morale when well-designed
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18. Types of Individual Rewards (cont’d)
Incentive Pay Systems
Plans in which employees can earn additional compensation in return for certain types of performance
Piecework programs
Gain-sharing programs
Bonus systems
Long-term compensation
Merit pay plans
Profit-sharing plans
Employee stock option plans
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19. Individual Rewards (cont’d)
Indirect Compensation (Employee Benefits)
Payment for time not worked
Social Security contributions
Unemployment compensation
Disability and workers’ compensation benefits
Life and health insurance programs
Pensions or retirement plans
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20. Individual Rewards (cont’d)
Perquisites
Special privileges awarded to selected members of an organization, usually top managers
Add to the status of their recipients and thus may increase job satisfaction and reduce turnover
Other Awards
Rewards for seniority, perfect attendance, zero defects (quality work), cost reduction suggestions
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21. 6.1 Issues to Consider in Developing Reward Systems
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22. Managing Reward Systems
Linking Performance and Rewards
Employee perception of link between pay and performance results in symbolic value of pay
Flexible Reward Systems
Allows employees to choose the combination of benefits that best suits their needs
Increases both employee satisfaction with benefits and administrative costs for the employer
Participative Pay Systems
Employees are involved in the design and/or administration of their compensation system
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23. Managing Reward Systems (cont’d)
Pay Secrecy
Employer makes no information available to employees regarding other employees’ salaries, percentage raises, salary ranges and requires employees to not reveal their compensation
Expatriate Compensation
Compensation packages of employees on overseas assignments must be adjusted to account for differences in costs of living and working conditions in working aboard versus their home base
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24. 6.4 The Expatriate Compensation Balance Sheet
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25. Organizational Behavior in Action
After reading the chapter:
How would you motivate employees when their original goal is now impossible to achieve?
On which aspects of the MBO process would it be beneficial for college course advisors to be trained?
Are both surface and symbolic values associated with course grades?
On a scale of 1 (weak) to 10 (strongly), how strongly linked are course grades to the actual performance capabilities of most students?
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