HBO Finals
Appraising and Rewarding Performance

Chapter Objective: To understand: Total Reward System, Money as Economic and Social Medium of Exchange, The Role of Money in Motivational Models, Behavioral Considerations in Performance Appraisal

Introduction- In the 19th and 20th centuries employees were presumed to want primarily money; therefore, money was believed to produced direct motivation. The more money offered, the more motivation.
Roethlisberger and his followers successfully buried this idea by showing that economic rewards operated through the attitudes of the workers in the social system to produce an indirect incentive.
In this chapter we discuss the Complex Relationship between economic reward systems and organizational behavior. This chapter focuses on how incentives are combined with other parts of wage administration to build a complete reward system that encourage motivation.

Economic Reward System: 1. Base Pay- Motivate employees to progress jobs of higher skill and responsibility. 2. Performance Rewards- Is an incentive to improve performance on the job. 3. Profit Sharing- Motivates workers toward teamwork to improve an organization’s performance.

Other Payments- Primarily non-incentive in nature, are added to the incentive foundation.
Seniority Pay – Adjustments are made up to reward workers for extended service and to encourage them to remain with their employer.

Money as means of Rewarding Employees- Money is important to employees for a number of reasons. Certainly, money is valuable because of goods and services that it will purchase. This aspects its economic value as medium of exchange for allocation of economic resources. Money is a social medium of exchange.

Application of Motivational Models: Drives, Needs, Expectancy 1. Drives- Achievement-oriented employees maintain a symbolic scorecard in their minds by monitoring their total pay and comparing it with that others. 2. Needs- In the Herzberg model, pay is viewed as a hygiene factor, although it may have at least short-term motivational value as well.

3. Expectancy- (Valence X Expectancy X Instrumentality = Motivation.) This means that if money is to act a strong motivator, an employee must want more of it (valence), must believe that effort will be successful in producing desired performance (expectancy), and must trust that the monetary reward will follow better performance (instrumentality).

Behavior Motivation- Two desired conditions for applying contingent rewards under behavior modification principles are shown in figure 6.2 as situations 1-4. In each case employees can see that there is a direct connection between performance and reward. The undesirable states are situation 2-3, where rewards are withheld from high performance or given to low performers.

Desirable and Undesirable Instrumentality Conditions

Equity- There is no simple answer for employers in their attempts to create workable systems of economic rewards for increase productivity, but they must at least to understand the employee’s perspective. The employee’s approach to this complex problem is to make rough type of Cost-Reward Comparison, similar to break-even analysis that is used in financial assessments.

Cost of Performance in Relation to Reward for an Employee

Additional Consideration in the Use of Money
Extrinsic and Intrinsic Rewards- Money is essentially an extrinsic reward rather than an intrinsic one, so it is administered in behavior modification programs.

Compliance with the Law- Labor Code of the Philippines PD. 442- A decree instituting a labor code thereby revising and Consolidating labor and social laws to afford protection To labor, promote employment and human resources Development and insure industrial peace based on social Justice.

Organizational Behavior and Performance Appraisal- Organization require consistent levels of high performance from their employees in order to survive in a highly competitive global environment.

Management by Objectives (MBO)- is cyclical process the often consist of four steps as a way to attain desired performance: Objective Setting, Action Planning, Periodic Reviews, Annual Evaluation 1. Objective Setting- Joint determination by manager and employee appropriate levels of future performance of employee, within the context of overall unit goals and resources. 2. Action Planning- Participate or even independent planning by the employee as to how to reach those objectives. 3. Periodic Reviews- Joint assessment of progress toward objectives by manager and employee, performed informally and sometimes spontaneously. 4. Annual Evaluation- More formal assessment of success in achieving the employee’s annual objective, coupled with a renewal of the planning cycle.

Performance Appraisal- Plays a key role in reward system. It is the process of evaluating the performance of the employee, sharing that information with them, and searching for ways to improve their performance.
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