Lyceum of the Philippines University (Manila)

College of International Tourism and Hospitality

Management
Human Behavior in Organization (DHBN01H)

CHAPTER 6:
REWARDING INDIVIDUAL
PERFORMANCE

by: Jon Jovi R. Barreras (H-353)

CHAPTER LEARNING OBJECTIVES
 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.
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
GOAL SETTING AND MOTIVATION
 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
 EXPANDED GOAL SETTING THEORY
(LOCK AND LATHAM)
The Goal-Setting Process
 Goal-directed effort is a function of goal
attributes:
1. Goal difficulty
2. Goal specificity
3. Goal acceptance: the extent to which a
person accepts a goal as his/her own
4. Goal commitment: the extent to which a
person is interested in reaching a goal
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
 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.
 PERFORMANCE MANAGEMENT IN
ORGANIZATIONS
The Nature of Performance Management
 Performance measurement (or appraisal)
process:
1. Evaluating an employee’s work behaviors by
measurement and comparison with previously
established standards
2. Documenting the results
3. Communicating the results to the employee

Performance Management System

 Comprises the processes and activities involved
in performance appraisals
 PERFORMANCE MANAGEMENT BASICS

Issues in Performance
Measurement

How often are How is

Who is to do
the appraisals performance to
the appraisals?
to be done? be measured?
 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
 PERFORMANCE MANAGEMENT:
THE PROCESS
 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

 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
 REWARDS’ PURPOSES, ROLES, AND
MEANINGS
 Purposes
 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
 TYPES OF INDIVIDUAL REWARDS
 Compensation Package
 The total array of money
(wages, salary, commission), incentives, benefits, perqui
sites, 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
TYPES OF INDIVIDUAL REWARDS
 Incentive Pay Systems
 Plans in which employees can earn additional
compensation in return for certain types of performance
1. Piecework programs
2. Gain-sharing programs

3. Bonus systems

4. Long-term compensation

5. Merit pay plans

6. Profit-sharing plans

7. Employee stock option plans

INDIVIDUAL REWARDS
 Indirect Compensation (Employee Benefits)
1. Payment for time not worked
2. Social Security contributions
3. Unemployment compensation
4. Disability and workers’ compensation benefits
5. Life and health insurance programs
6. Pensions or retirement plans
 INDIVIDUAL REWARDS
 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
 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
 MANAGING REWARD SYSTEMS
 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
THE EXPATRIATE COMPENSATION BALANCE
SHEET
THE END!
Thank you 