SHRD -Chapter 6.ppt

Performance Measurement and
Compensation
MGT 460
Chapter 6

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Mission
"Al Buraimi University College
strives to be a strategic contributor
and partner in achieving the
comprehensive development
through offering distinct services in
the field of higher education,
scientific research and community
service".
Complexo
Portuário
Sul
–
CPBS
/
RJ
Márcio
Dantas
Valença
/
Agência
Vale
Vision
oEstablishing and developing the spirit of loyalty to the
country and its leadership.
oProviding the local and regional society institutions with
skillful and knowledgeable human resources that can do
their jobs competently and effectively.
oEncouraging applied scientific research to serve the
productive and service sectors.
oOffering various consulting and training services
competently, effectively and transparently according to
international standards and practices.
The Vision and Mission of the Al-Buraimi University College

The mission of the Department of Business and Accounting is to offer high quality academic
programs which successfully prepare individuals for entry-level managerial position in public
and private sectors.
The goals that come out from this mission are:
1)To prepare graduates for various positions in business and industry.
2)To recruit, retain and develop quality faculty.
3)To provide quality instruction and curriculum to meet the demands of students for their
chosen careers.
The Mission of the Department of Business and Accounting

Learning
Objectives
 Understand the expectancy theory and its effect on employee behavior .
 Discuss the theories of Incentives and Behavior
Chapter : 6
Performance Measurement and Compensation
 Understand Managers and Staff roles in Performance Management process
 Understand he Performance Appraisal Process
 Understand the meaning and importance of Performance Management.
 Discuss the three general purposes of Performance Management.
 Understand the Agency theory and its effect on employee behavior .

What is performance management?
Performance management is ‘a process which contributes to the effective
management of individuals and teams in order to achieve high levels of
organizational performance. As such, it establishes shared understanding about
what is to be achieved and an approach to leading and developing people which
will ensure that it is achieved.
* Source : ARMSTRONG, M. and BARON, A. (2004) Managing performance: performance management in action. London: Chartered
Institute of Personnel and Development.
There’s no single best approach to performance management, as what is helpful
will depend on context: for example, the job in hand, organizational culture and
business strategy.
“One Size Fit All ”
* Performance Management should be:
• Strategic – it aligns with broad issues and long-term goals.
• Integrated – it should link various aspects of the business and how people are managed.

Fundamentals of Human Resource Management, Chapter 10, slide 8
Why evaluate?
Who benefits from the evaluation?
What format should be used?
What problems might arise?
 Employees see performance evaluations as
having a direct effect on their work lives.
 Questions regarding the performance
management process:
 Performance Measurement

Fundamentals of Human Resource Management, Chapter 10, slide 9
Performance management systems have
three main purposes:
1. Two-way feedback – performance measures mutually set
between employee and employer
2. Development – identify areas in which employees have
deficiencies or weaknesses
3. Documentation - to meet legal requirements

Fundamentals of Human Resource Management, Chapter 10, slide
Performance management systems aren’t perfect.
– Focus on the individual: discussions of performance may elicit
strong emotions and may generate conflicts when
subordinates and supervisors do not agree.
– focus on the process: company policies and procedures may
present barriers to a properly functioning appraisal process
– appraisers may be poorly trained

Fundamentals of Human Resource Management, Chapter 10, slide
Establish performance standards with employees
Compare actual performance with standards
Discuss the appraisal with the employee
if necessary, initiate corrective action
Measure actual performance
Communicate expectations and set goals
1
2
3
4
5
6
 The Performance Appraisal Process

12
Managers
• Plan and manage staff performance
• Communicate division and department
goals to staff. Guide staff expectations to
align with broader organizational goals
• Foster a work environment that
encourages active staff participation
• Provide regular, clear, constructive
feedback
• Monitor performance throughout the
year to support the formal evaluation
• Devote the time and effort needed to
plan and evaluate performance, and
support staff
Employees
• Understand how their performance
expectations align with division and
department goals, and participate actively in
setting expectations
• Be open to feedback and take it to heart to
improve performance and/or remain on track
• Monitor their own performance compared to
expectations. Seek advice and guidance as
needed from their supervisor
• Complete a Self Assessment and participate
actively in the performance evaluation
• Be open and honest about professional
growth and development plans and interests
 Managers and Staff have roles
in the process

Monitoring and Assessment
Setting of Performance Standards
Individual Competencies
Departmental / Team
Objectives
Organizational
Objectives
Development
How does a Performance Management
system look ?
Development Reward Career Planning

14
Organizational Mission
and Priorities
Division and
Department
Goals
Annual
Staff Goals
14
 Annual Goals for Staff Are Derived from
the Organization’s Mission and Priorities

Performance Measurement:
Theories of Incentives and Behavior
 Pay Plan is typically used to energize , direct , sustain or control the behavior of
current employee.
 Three Theories help explain compensation’s effect on employee behavior :
o Reinforcement Theory
o Expectancy Theory
o Agency Theory

How dose Pay influence individual
employees?
o Reinforcement Theory :
 Response followed by a reward is more likely to recur in the future. The implication
for compensation management is that high employee performance followed by a
monetary reward will make future high performance more likely . By the same token
, high performance not followed by a reward will make it less likely in future.
 The theory emphasizing the importance of a
person’s actual experience of a reward.
 It is based on “law of effect”, i.e, individual’s behavior
with positive consequences tends to be repeated, but
individual’s behavior with negative consequences tends
not to be repeated.

employees?
o Expectancy Theory :
 states that employee’s motivation is an outcome
of how much an individual wants a reward
(Valence), the assessment that the likelihood that
the effort will lead to expected performance
(Expectancy) and the belief that the performance
will lead to reward (Instrumentality).
 In Simple words , it proposes that an individual
will behave or act in a certain way because they
are motivated to select a specific behavior over
other behaviors due to what they expect the
result of that selected behavior will be.

employees?
o Agency Theory :
 It focus on the divergent interest and goals of the organization’s stakeholders and
the ways that employee compensation can be used to align these interests and
goals .
Principle
Shareholders are owners
of the company and elect
the directors Board
Intermediary
Directors Board watches
over Management Team
Agent
Management Board runs the
company
Has extensive information abut the
company no direct influence through
shareholders.
Principal hires Agent
Agent performs
Elect Chose

This is the last lecture ! ()
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19 Full Induction

SHRD -Chapter 6.ppt

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