CHAPTER

10

REWARD MANAGEMENT

Pay is an important feature in human resource management. After all, it is the main
reason why people work. It is a sensitive and controversial area that if not managed properly,
can affect an organization's ability to attract, retain and motivate talented employees.

Employees may see pay as a return in exchange between their employer and
themselves, as an entitlement for being an employee of the company but more as a reward for a
job well done. It is like an employer telling an individual: "You give me good service and I'll
reward you with pay." Pay is therefore regarded as a reward.

John Stredwick says: "In recent years, the expression 'reward' has start ed to replace
'pay' in the human resource vocabulary. It indicates a much broader approach, including
elements of non cash awards, and presupposes that employees need to achieve something to
receive their wages or salaries, unlike the more mechanistic attachment that pay indicates."
Stredwick expressed surprise that most of the development of rewards come from America and
they still refer to the subject as 'compensation' with its connotation to the belief that work is
unpleasant and should be avoided.53

It is in this context that we prefer to call this chapter Reward Management. Employment
is viewed as a con tract between two parties: employer and employee. Employee performs
services for the employer. In exchange for the services, employer pays employee t reward. The
services, however, must be the value-added, that is, the input (services that the employee gives
to the employer must result in some output that redounds to the benefit of the employer.

The reward people receive for their contribution to an organization includes monetary
and non- monetary components. It has major impact on employee's attitudes and behaviors. As
they say: "You pay them peanuts; you get monkeys." It is also viewed as a sign of status and
success as it provides them the ability to buy what they need and what they want. Employees
attach great importance to pay decisions when they evaluate their relationship with the
organization. Pay also constitutes a significant portion of the company's operating costs.
Therefore, pay decisions must be carefully managed and properly communicated.

Both the level of pay and its seeming fairness compared with others' pay is important.
So, it is important to as sign a rate of pay that is acceptable to the employee in terms of internal
equity, external competitiveness and in terms of the employer's cost. Although each individual
employee is considered as unique and thus, requires some individualized treatment,
standardizing the treatment of similar employees (i.e., those with similar jobs) can help greatly in
making salary administration and decision- making more manageable and equitable. Pay
policies, therefore, are often attached to particular jobs rather than tailored entire ly to
individualemployees.

JOB ANALYSIS

To find out the relative worth of a job in relation to other jobs, one must understand
what's inside the job itself. This is done through Job Analysis. There are many definitions of Job
Analysis and it has many objectives. In the context of reward management, we choose the fol-
lowing definitions:

Job Analysis is a systematic procedure for getting information about the current or
proposed duties and requirements of a position in order to determine the most appropriate
classification. It is a process used to collect information about the duties, responsibilities,
necessary skills, outcomes, and work environment of a particular job. You need as much data
as possible to put together a job description which is the frequent outcome of the job analysis.55
It is the gathering and analyzing of data about a specific job so that a job description and job
specification can bewritten.

Job Analysis focuses on work behaviors, tasks, outcomes. It is not an analysis of

thought processes, attitudes, traits, or aptitudes. It is not a time and motionstudy.

One usual source of data gathering is the employee currently performing the job. The
employee's supervisor or manager is another likely source for accurate information. When using
the current employee as a source of information, the job analyst must exercise caution since the
employee is likely to inflate his responsibilities and somewhat exaggerate the importance of his
tasks.

DATA COLLECTION METHODS

There are various ways of gathering data for job analysis. These include observation,
work sampling, interviews and questionnaires or a combination of one or more of these
methods.

Observation

Observing people while doing their work can provide insight into the vital functions of the
job. Analysts can take notes and may even video tape the actual work and review them later.
Then, they can summarize the list of essential functions in the order of importance.

However, observing is easier on manual jobs. For knowledge workers where analytical
thinking is involved, it is not possible to observe all essential functions. Also, results of
observation may not reflect the actual day to day work as workers are conscious that they are
be ing observed may change the way they would normally perform the job. Observation,
therefore, needs validation with other methods.

Interviews

Focus interviews done one-on-one or in groups provide opportunity for asking relevant
or clarificatory questions. Employees have the tendency to over state their skills. They may
exaggerate the complexity and importance of their jobs especially if they know or suspect that
the study is for the purpose of evaluating jobs with the end result of establishing salary
structure.

Multiple interviews of several incumbents of same job and their supervisor can help
verify the true essential elements of the job. A structured interview is recommended. Unless the
study is made by outside expert consultants, the inter viewers must be properly trained in
conducting structured interview. It is long, tedious and expensive but it assures accuracy in
gatheringdata.

Work Sampling

This is a variation of the interview but done through random work sampling like once a
week or a few hours a day. Work sampling must be representative of the job. Sufficient prior
data must be gathered to determine what is representative of the entire actual job. Otherwise,
observation through work sampling may result in a wrong, insufficient or skeweddata.

Questionnaires
 The most common method is through a questionnaire. A standard form called Job
Analysis Questionnaire (JAQ) is distributed to all employees to accomplish. This is the fastest,
inexpensive way of gathering data. Standard questionnaires are available in the market (See
Appendix B and C for samples). It must be use-friendly and easy to accomplish. It can be
computerized for faster results.

Two problems can be encountered in this method: the lackadaisical attitude of

employees to accomplish the questionnaires and their tendency to exaggerate the importance
of some of their tasks. The first needs prodding by top management by providing a reasonable
deadline to submit; the second can be minimized if not eliminated by review and approval of the
supervisor. In any case, questionnaires should be further validated by other techniques such as
interviewing and/ or observation.

Standardized Instruments

There are a number of standard quantitative methods of job analysis. The two most
common are:

Position Analysis Questionnaire (PAO) requires that each job be analyzed with
regards to 194 specific tasks commonly found in many jobs. It uses six scales to determine the
degree to which these standardized tasks are performed in the job beinganalyzed.

Functional Job Analysis examines the degree to which people, data, and things are
involved in the functions of the job. The critical incident method is a qualitative technique that
focuses on behaviors that are critical for jobsuccess.

In both methods, it is the analyst that completes the instrument.

The Job Analysis process generates two documents: the job description and the job
specification. Both provide a complete picture of the job itself and the qualifications required for
a person to perform the job.

JOB DESCRIPTION

Job description is an abstract of in formation derived from the job analysis report
describing the duties performed the skills training and experience required, the responsibilities
involved, the contribution under which the job is done and the other relations of the job to the
other jobs in the organization.

In short, a job description must contain a list of Tasks, Duties, Responsibilities (TDR)
that the job entails. These TDRs are observable actions. A good job description must also
contain job specifications list - of the knowledge, skills, abilities and other characteristics (KSAs)
required for an individual to perform the job - the details of which we shall discuss later in
thischapter.

Elements of a Good Job Description

A comprehensive job description must:

Describe the basic purpose of the job. (Why it isperformed)

List the various duties in the order of importance. (Describe what the task is, how it is
performed and why it isdone)

Begin each sentence with an actionverb.

Use examples to addmeaning.

 Define jargon orinitials.

Assume the reader knows nothing about thejob.

Answer all the why, how and who questions that the sentencesgenerate.

Provide an organization chart; include names, titles and line numbers. Ensure that the
chart answers the followingquestions::

To whom does this positionreport?

What other positions report to the samesupervisor?

What positions report to thisposition?

Writing a Good Job Description

The first part of the job description serves to identify the job described. It includes an
account number, department, supervisor's name and title and incumbent's name (if applicable).
All descriptions must be signed and dated by the incumbent, supervisor, department head, HR
head, and area or group head or CEO in the case of a small company.

There is also a place to indicate whether the position is new or a reclassification of an

existing position. Additional pages may be attached if needed. A cover memorandum explaining
what has changed that resulted in the need for a new position or for the reclassification of an
existing position would be helpful in understanding theposition.

Position Summary - This section is a brief, specific statement of why the position exists
- what is the major end result. The reason for such a short, concise statement at the outset is so
the evaluator can immediately obtain an impression where the position sits in the organization.
The statement should clearly distinguish this job from all other jobs. In particular, it should
differentiate this job from the supervisor's job, from jobs that report to it, and from other jobs at
the same level. The summary seldom exceedsthreeorfourlines.Forexample,the
positionofanHRDirectormightbesummarizedasfollows:

"This position is accountable for assuring the attraction, development and retention of a
qualified work force by establishing and maintaining appropriate human resource programs and
services."

Principal Duties - This section describes the results for which the position has ongoing
accountability. Accountabilities are statements of the important end results which the job exists
to achieve. Each account ability statement should relate to a single end result which must be
accomplished and which some measurement of performance can beapplied.

The principal duties begin with an action verb that describes the incumbent's role,
followed by a measurable or observable end result and the primary activity or way the end result
is accomplished. For example, a principal duty for an Employment Supervisor might be:

"Provide qualified candidates for job openings by screening applicants."

The action verb reflects the job's freedom to act in producing the end results described.
The end result is enduring in nature: the accountability for the result will not change unless the
design of the job is changed even though the specific actions taken to achieve the result may
vary considerably over time. The major activities that complete the accountability statement
need not be exhaustive but enough to give an idea to a reader what is involved in achieving the
end result.
 The principal duties should be listed in the order of importance. They should answer the
questions: What the task is? How it is performed? and Why it is done?

Education and Experience - Include the minimum level and type of formal education
required of an incumbent in order to perform the job duties. Keep in mind that some positions
can be satisfied with an equivalency of work experience. Cite if the position requires by law a
professional license such as a
PharmacistinapositionofadrugmanufacturingcompanyordrugstoreoraCPA foranauditorposition.

Internal and External Contacts - This section considers what contacts are within and
outside of the company, how often they occur and How important is the contact in relation to
company goals? why?

Confidential or sensitive data - Give examples of sensitive or confidential data (e.g., salary
information, employee performance issues, marketing strategies) which the incumbent of this position
is required to work with or has accessinto.

Organization Chart - An organization chart should be included. The chart answers the
following:

To whom does the position reportto?

What other positions report to the samesupervisor?

What positions report to thisposition?

(For sample of a job description, refer to Appendix D; for a more complex one, refer to
Appendix E)

JOB SPECIFICATION

Derived from job analysis, job specification is a statement of employee characteristics

and qualifications required for satisfactory performance of defined duties and tasks comprising a
specific job or function. This refers mostly to the so called "soft skills" that a jobholder must have
in order to successfully complete the tasks of theposition.

This differs from the job description in that it focuses on the person performing the job
rather than on the tasks being performed. It specifies the knowledge, skills, abilities and
characteristics required to effectively perform the job. Table 7 is a sample of a job specification.

Table 7. Job Specifications for an Auditor

Quality Essentia Desirabl

l e

Qualifications B.S.C. graduate major in

Accounting;CPA

Experience At least 2 years experience in

auditing in sales company

Specialist training or Assertiveness training; Written

knowledge and verbal communications

Physical Can work extra hours and

travel constantly
Personality Analytical, friendly but
objective, independent and
assertive

JOB EVALUATION

Job Evaluation is defined as the assessment of the relative worth of varied jobs on the
basis of a consistent set of job and personal factors such as qualifications and skills required.
The objective is to determine which jobs should get more pay than others.56 Each job is
evaluated to determine the job content or weight in terms of its contribution to the achievement
of organizational goals. Based on this evaluation, the salary range for each job is determined.

Job Evaluation is a tool used to evaluate the worth of each job in the organization and in
today's labor market. A successful job evaluation system can help to make organization's pay
system equitable, understandable, legally defensible, approachable, and externally competitive.

There are three basic methods of job evaluation: ranking, classification, factor
comparison. A variation of the factor comparison is called factor-point system which can be
considered as a fourth method.

Ranking Method

The simplest method of job evaluation, jobs are arranged from highest to lowest, in order
of their value or merit to the organization. Jobs can also be arranged according to the relative
difficulty in performing them. The jobs are examined as a whole rather than on the basis of
important factors in the job. The job at the top of the list has the highest value and obviously the
job at the bottom will have the lowest value.

Jobs are usually ranked in each department and then the department rankings are
combined to develop an organizational ranking. Following is an illustration of ranking of jobs.

Array of Jobs according to the Ranking Method

Rank Monthly
Salary

1. Accountant P 25,000
2. Accounting clerk 19,000
3. Purchasing Assistant 17,000

4. Secretary 15,000

5. Clerk-typist 12,000

6. Utility ,an 10,000

The method is simple to understand and practice and it is best suited for a small
organization. It is difficult to develop in a large, complex organization. This method is also highly
subjective in nature and employees may disagree with the evaluation. A more scientific way of
job evaluation is called for.

Classification Method

A predetermined number of job groups or job classes are established and jobs are
assigned to these classes. This method places groups of jobs into job classes or job grades.
Separate classes may include office, clerical, managerial, among others. Following is an
example of such classification.

Class 1-Executives: Further classified under this category may be the General Manager,
Asst. General Manager, Plant Manager, Department Supervisor, and the like

Class 2-Skilled workers: Under this category may come the Purchasing Assistant,
Cashier, Secretary, Warehouse clerk, clerk/typist, amongothers

Class 3-Semi-skilled workers: Under this category may come the Steno-typists, Machine
operator, Switchboard operator, amongothers

Class 4-Semi-skilled workers: This category may comprise of Filing clerk, Messenger,
Utility man, and thelike

The weaknesses of this method are:

Even when the requirements of different jobs differ, they may be combined into single
category, depending on the status a jobcarries;

It is difficult to write all-inclusive descriptions of a grade;

The method oversimplifies sharp differences between different jobs and different
grades;and

When individual job descriptions and grade descriptions do not match well, the
evaluators have the tendency to classify the job using their subjectivejudgments.

Factor Comparison Method

A more scientific and systematic method of job evaluation is the factor comparison
method. It may be a complex method, but it is consistent and appreciable. Each job is ranked
according to a series of factors. These factors include mental effort, physical effort, skill needed
supervisory responsibility, working conditions and other relevant factors (e.g., know-how,
problem-solving abilities, and accountability). Pay will be assigned in this method by comparing
weights of the factors required for each job, i.e., the present wages paid for key jobs may be
divided among the factors weighed by the importance (the most important factor, for example,
mental effort, receives the highest weight). The steps involved in this method may be briefly
statedthus:
 Select key jobs or benchmark positions (say 15 to 20 or more depending upon the size of
the company and the total number of jobs), rep resenting wage/salary levels across the
organization. The selected jobs must represent as many departments aspossible.

Find the factors in terms of which jobs are evaluated (such as skill, mental effort,
responsibility, physical effort, working conditions).

Rank the selected jobs under each factor (by each and every member of the job evaluation
committee) in dependently.

Assign money value to each factor and determined the wage rates for each keyjob.

The wage rate for a job is apportioned along the identified factors.

All other jobs are compared with the list of key jobs and wage rates aredetermined.

Advantages of the method:

 Analytical andobjective.
 Reliable and valid as each job is compared with all other jobs in terms of keyfactors.
 Money values are assigned in a fair way based on an agreed rank order fixed by the job
evaluation committee.
 Flexible since there is no upper limitation on the rating of a factor.

Disadvantages:

o Difficult to understand, explain andoperate.

 Its use of the same criteria to assess all jobs is questionable as jobs differ across and within
organizations.
o Time consuming andcostly.
Point Method

This is the most widely used method. Jobs are expressed in terms of key factors. Points
are assigned to each factor after prioritizing each factor in the order of importance. The points
are summed up to determine the wage rate for thejob.

Jobs with similar point totals are placed in similar pay grades. The procedure may be
explained

thus:

Select key jobs. Identify the factors common to all the identified jobs such as skill, effort,
responsibility, amongothers.

Divide each major factor into number of subfactors. Each subfactor is defined and
expressed clearly in the order of importance, preferably along ascale.
The most frequent factors employed in point systems are:

Skill (key factor): Education and training required, Breadth/depth of experience

required, Social skills required, Problem-solving skills, Degree of discretion/use of judgment,
Creativethinking

Responsibility/Accountability: Breadth of responsibility, Specialized responsibility,

Complexity of the work, Degree Of Freedom to act, Number and Nature of subordinate staff,
Extent of accountability for equipment/ plant, Extent of Accountability forproduct/materials

Effort: Mental demands of a job, Physical demands of a Job, Degree of potentialstress

Then, you assign point values (percentage weights and equivalent points to each key
factor and subfactor depending on their importance to a particular job. The result is a job rating
plan upon which you will rate jobs. Table 8 is a sample of a Job Rating Plan.

Advantages of the Method:

It forces raters to look into all key factors and sub-factors of a job; Point values are
assigned to all factors in a systematic way eliminating bias at every stage. It is reliable because
raters using similar criteria would get more or less similar answers. The methodology
contributes to a minimum of rating errors.

Disadvantages:

The point method is complex. Preparing a manual for various jobs, fixing values for key
factors and subfactors, establishing wage rates for different grades, and many others, is a time-
consuming process.

That is why most companies retain the services of outside consultants who I will do the
job with the assistance of a trained internal Job Evaluation Commit- tee who could claim
ownership and de- fend the results of the exercise.

The Hay Job Evaluation System

We could not put a closure to this topic without mentioning in passing the Hay Job
Evaluation Method. Developed by E.N. and Associates in the 1950s, it is the most sophisticated
method of evaluating jobs based on the point factor approach. It was originally designed for
executive positions and therefore is biased toward managerial and executive levels The system,
however, is now applicable to all positions in the organization including the blue collarjobs.

Based on the Hay Guide Chart there is a point score for each "Know" how," "Problem-
Solving," and "Account ability" factor with horizontal and vertical degrees of variation described
in a precise and definitive manner. The system employs the use of market survey of pay to
construct a relationship between Hay Scores of similar jobs in different companies.

The system is copyrighted and can not be used without the permission of the Hay and
Associates. The author had the opportunity to learn and apply the system when he was working in
an American company authorized to use the system.

DEVELOPING A PAY STRUCTURE AND PAY PHILOSOPHY

Assuming that you have now done your job evaluation, the next step is to develop a
salary structure. The structure must be in accordance with the primary purpose of evaluating
jobs: ensure internal equity and maintain external competitiveness.
First, you have to decide how many job classification structures you will have in you company. Many
companies have multiple structures that correspond to different job families (e.g., one for semi
skilled, skilled, and clerical positions; an other for professional/technical positions and another one for
supervisory and managerial positions)

Whether it is single or multiple structure, based on your job evaluation, you have to
decide how many job grades you will have. With the present trend of delayering organizations
and broad banding (which will be explained later), it is advisable to have fewer job grades. This
gives ample opportunity for high per forming employees to receive higher pay based on merit.

A pay structure involves the determination of pay levels for each job class and the
differentials within these classes. For example, if there are six pay grades/ classes, a minimum,
midpoint, and maximum amount is determined along with the range of each class. Overlap is
often designed into the system so the high range of one grade overlaps the low range of the
next grade.

Second, having decided on the number of job grades and whether it is single or multiple
salary structure, you have to compare how your pay structure compare with the rest of the
industry or community. An enterprise must decide if its policy will lead, meet, or lag its
compensation. This means that a company must develop a policy to pay their employees above
the market, at the market rates, or below the market. Some local organizations like, the Ayala
group of companies, have a reputation for paying more than the going rate for the industry or
community because they want to hire the best and the brightest in the labor market. A market
survey is the source of your data. You can conduct your own survey or join salary survey
conducted by leading organizations such as Watson Wyatt Philippines, SGV and ECOP.

Third, you have to decide what will be your pay philosophy based on the market rates.
Some companies adopt a third quartile policy, that is, their aver age pay must be above 75
percent of what the market is giving. Some adopt an above average policy, meaning, their
average pay per key or benchmark position must be at least above the average rate in the
market.

A sample of single pay structure after considering the market survey and pay policy line
may be presented as fol lows in Table 9: (Note: this is presented in terms of annual pay)

Note that in the above example, the range spread (the distance between the minimum
and the maximum) in higher jobs is larger or higher in recognition of the fact that performance
differences are likely to have more impact on the organization at higher joblevels.

BROAD-BANDING

Beginning in the early 80s, formal job evaluation methods has undergone critical
scrutiny. With the downsizing and delayering of organizations, jobs are becoming fewer and
promotions are far and between. A high performer becomes uneasy as the chance of promotion
and higher pay is getting slimmer.

Multiskilling is an emerging trend. Employees are no longer fixed in one particular job.
The hierarchical grading structure resulting from a job evaluation puts a rigid approach to the
job. As a con sequence, an employee can now say with justification "My job has been described
and graded at this level. I am not going to do extra or beyond what I am paid for my classified
job." A reclassification to meet an employee's complaint can be contentious and can sometimes
lead to a "grade drift" which skews the salary structure and cause further head aches to the
company.

These criticisms led to the concept of broad banding. It comprises a fewer and wider
band than a traditional graded structure. With having six or less bands each with a span of 70-
100% above the pay range minimum, the focus is on lateral movements and continuous
development rather than progressing upwards through a hierarchy of job grades .

Broad-banding therefore, involves collapsing of several grades into a few er broad

"bands." That's how it got its name - broad-band. Each band may have a minimum and
maximum pay but usually does not have a traditional mid point. It may not be feasible to see a
traditional pay range of midpoint for control and analysis because the pay range is so broad and
encompasses a wide level of skills. Bands are established at major breaks or differences in
work skills/competency requirements. It provides more flexible approach to compensation. The
focus is on job responsibilities and the development of new skills/competencies instead of the
pay grade for thejob.

The system has the following salutary effects as it:

 Addresses severe recruitment and retention difficulties as it gives management wider
latitude in offering attractive entry pay or meritincreases.

Moves employees to multi-functional teams where the scope of broadbanding will be

more extensive and the structure morecomplex.

Links salary progressions to a competency-based structure where employees are

rewarded for the acquisition of newskills/competencies.

THE IMPORTANCE OF PARTICIPATION AND COMMUNICATION

Salary management has always been a delicate and emotive issue. You may have the
best job evaluation method used and fair and equitable pay structure but some employees may
still be unhappy about it. One way of minimizing if not, preventing complaints is allowing
employee participation in the job evaluation process.

Selective employees representing the rank and file may serve in the task force in
tandem with management representatives charged in formulation of the Job Rating Plan and the
actual evaluation of jobs leading to the establishment of the Job Classification Framework. The
idea of giving "ownership" to the plan re moves the aura of mystery of the plan and the
perception that it is purely a management decision.

While management has the loftiest motivation in pricing relative worth of jobs, it also
matters how such decisions are made and how they are communicated. It is absolutely critical
therefore that management must communicate to explain what Job Evaluation is all about, why
it is being done, and what would the ultimate result. The idea is to avoid unfounded speculations
and rising expectations.

Employees who participated in the task force can help and communicate the rationale of
the program and how it was done and finally implemented. Managers play the most crucial role
because of their day-to-day interaction with their employees. They must be prepared to explain
how the jobs were classified, why and how the pay structure was designed. When a job needs
to be reclassified be cause of substantial changes in its job content, it is also the managers who
take the cudgel for the incumbents affected by that change.

SUMMARY

Pricing jobs in relation to its importance and impact to the company operations is a
complex task. It starts with a job analysis, data gathering through observation, interviewing and
other validation techniques, that will generate job description and job specification. The ultimate
result is the development of a job and pay structure through job evaluation. The broad-band
concept offers a new alternative in reward management.

Developing a salary structure is necessary in order to maintain internal equity. Moreover,

since no company operates in a vacuum or isolation, the external environment must be
considered to ensure external competitiveness. This can only be done by doing a survey of its
own or joining a survey conducted by reputable organizations.

The success of the whole process hinges on the active participation of the employees
and proper communication and implementation. Participation of employees through their own
representatives provides a sense of "ownership" of the project. They can also help in the proper
communication to the rest of the employees for their acceptance of how the jobs were evaluated
and assigned salary ranges. Reward management can attract, retain and motivate good talent
in yourorganization.
 CHAPTER
11

MANAGING PEOPLE MOTIVATION

Human resources are the heart and soul of the organization. In order for the business to
succeed, it is important that you should manage them effectively. In today's globally competitive
business, success depends on the people to optimize the full utilization of their talents. It is not
enough to attract and retain talented people; you should motivate them to use their talents.
Keeping an employee working at full potential is the ultimate goal of employee motivation.

The employment contract carries with it a contract of mutual expectations. Employers

expect employees to work hard, committed to the values of the organization, loyal and
dependable, keep the work standards set by management, observe the rules and regulations,
and provide output in terms of products or services that are of good quality.

Employees, on the other hand, expect that they should be rewarded well and equitably, treated fairly
and humanely, provided with opportunities for career development and promotion, given work that
suits their abilities, and have a happy and safe working environment. There is a failure in motivation if
these expectations are not met.

The employment contract provides a symbiotic relationship between em ployers and

employees. Business is the means by which people make the money to acquire their needs,
and managers today are the leaders who rise to make decisions and ensure the survival of the
business. The success of the business is largely dependent upon the ability of managers to
motivate workers to achieve the highest results. Managing people motivation therefore is a
must.

DEFINITION OF MOTIVATION

Motivation is the internal condition that activates behavior and gives it direc tion; energizes and directs goal-
oriented behavior,57 Author Twyla Dell writes of motivating employees, "The heart of mo tivation is to give
people what they really want most from work. The more you are able to provide what they want, the more you
should expect what you really want, namely: productivity, quality, and service. 58

Motivation helps explain why peo ple do the things they do. Understand ing motivation is a major concern of all
people managers. It can help shape the behavior of people in the organization. Motivating people is now more
complex in light of Generation Y that dominates the workplace. They are more demand ing, ambitious, assertive
and career-ori ented. It is more complex as each worker has different set of values and personal goals.
Generally, motivated employees will work harder to accomplish organiza tional objectives.

HISTORY OF MOTIVATION

It has been said that before the word motivation entered a manager's dictionary,
thousands of years ago, people realized the importance of influencing workers to accomplish
tasks for an organization. The oldest technique used to motivate others is known today as the
Carrot and Stick method. The name evolved from the stubbornness of don keys that could only
be moved by taunting them with a carrot. Early managers regularly offered economic "carrots"
 to entice people to work harder. This technique was passed on from generation to generation
and was a deeply rooted part of society for hundreds of years.

This theory created a misconception that money always motivated per sons to work
harder. Managers were beginning to realize that methods of the past were not effective. The
awakening field of psychology was looking for new ways to motivate people, and in a short time,
managers would begin looking for psychologists for new methods of management.

It was not until 1923 when Elton Mayo made clear the inadequacy of the pure carrot-
and-stick motivation that psychological theory began to trickle down into management.
Performing an experiment in a Philadelphia textile mill, Mayo concluded that the reason for the
low productivity was that spinners had few opportunities to communicate with one another.
Financial incentives failed to in crease productivity. Mayo felt that the solution to this productivity
problem was to change the atmosphere of the workplace. The introduction of two (2) ten-minute
breaks for the spinners produced immediate results. Morale improved and out put increased
tremendously. The spinner experiment confirmed Mayo's belief that it was important for
managers to take into account the psychology and well-being of the worker. A new era of
partnership between the managers and psychology began.

THE ERA OF INDUSTRIAL PSYCHOLOGY

Douglas McGregor was one of the few Americans in the 1950s who believed that
workers actually cared about doing good work. He felt workers would be much more productive
if management is smart enough to align jobs with worker needs. Building tradition with roots in
the early work of pioneers such as Elton Mayo, McGregor questioned a deeply held assumption
that guided manage rial efforts for centuries: workers had no rights beyond the paycheck; their
duty was to work hard and follow orders. McGregor and the other few psychologists held the
view that it was unfair and was bad psychology. They argued that people's skills, attitudes,
energy and commitment are resources that can make or unmake an enterprise.

This new era of industrial psychology led to a sensitive understanding of people and
their symbiotic relationship with organizations. The human resource framework is built on core
assumptionsthat highlight this linkage:

Organizations exist to serve human needs rather than thereverse.

People and organizations need each other. Organization needs ideas, energy and talent;
people need careers, salaries andopportunities.

When the fit between individual and system is poor, one or both suffer. Individuals are exploited or
exploit the organization - or both becomevictims.

A good fit benefits both. Individuals find meaningful and satisfying work and
organizations get the talent and energy they need tosucceed.

People want to know, "How will this place fulfill my needs?" Organization usually asks,
"How do we find and retain people with skills and attitudes needed to the work?" 60

MOTIVATION THEORIES

Needs became the central element in everyday psychology. Just as parents worry about
the needs of their children, politicians pride themselves in responding to the needs of their
constituents, managers try to understand the needs of workers. This gave rise to the
development of Motivation Theories. These theories help provide insight into why people
behave the way they do and what energizes them. Each of these theories made up the building
blocks upon which motivational tools were based and applied in dealing withemployees.
 Maslow's Hierarchy of Needs

Abraham Maslow's hierarchy of needs theory is one of the most widely discussed
theories of motivation. It has provided insight into the differences among employees as well as
the changes of motivational drives across time for one individual. Maslow's hierarchy of needs is
predetermined in order of importance. It is often depicted as a pyramid consisting of the
following five levels, listed from the basic (lowest, earliest) to most complex (highest, latest):

Self-actualization Esteem

Love/Belonging

Safety

Physiological

Physiological

Safety

Belongingness

Esteem

Self-actualization

morality, creativity, spontanelty,

problem solving, lack of prejudice,
acceptance of facts

Self-esteem, confidence, achievement, respect of others,

respect by others

Friendship, family, sexual intimacy

Security of body, of employment, of resources, of morality, of the family, of the

health, of property
 Breathing, food, water, sex, sleep, homeostasis, excretion

Figure 5

Figure 5 below depicts this pyramid.

The theory can be summarized as follows:

Human beings have wants and desires which influences their behavior. Only unsatisfied
needs influence behavior, satisfied needs donot.

Since needs are many, they are arranged in order of importance, from the basic to
thecomplex.

The person advances to the next level of needs only after the lower level need is at least
minimally satisfied.

The further the progress up the hierarchy, the more individuality, humaneness and
psychological health a person willshow.

Physiological Needs
 For the most part, physiological needs are obvious - they are the literal requirements for
human survival. If these requirements are not met (with the exception of clothing and sex), the
human body simply cannot continue to function.
Physiological needs include:

Breathing
Homeostasis (a relatively stable state ofequilibrium)
Water

Sleep

Safety Needs

With their physical needs relatively satisfied, the individual's safety needs take over and
dominate their behavior. These needs have to do with people's yearning for a predictable,
orderly world in which injustice and inconsistency are under control, the familiar frequent and
the unfamiliar rare. In the world of work, this safety needs manifest themselves in such things as
a preference for job security, grievance procedures for protecting the individual from unilateral
authority, savings accounts, insurance policies, and thelike.

Safety and Security needs include:

Personalsecurity
Financialsecurity
Health andwell-being

Safety net against accidents/illness and their adverseimpacts

Social Needs

After physiological and safety needs are fulfilled, the third layer of human needs is
social. This psychological aspect of Maslow's hierarchy involves emotionally-based relationships
in general, such as friendship and intimacy.

Having a supportive and communicative family, humans need to feel a sense of

belonging and acceptance, whether it comes from a large social group, such as clubs, office
culture, religious groups, professional organizations, sports teams, gangs ("safety in numbers"),
or small social connections (family members, intimate partners, men tors, close colleagues,
confidants) and unions. They need to love and be loved (sexually and non-sexually) byothers.

Esteem

All humans have a need to be respected, to have self-esteem and self respect. Also
known as the belonging need, esteem presents the normal human desire to be accepted and
valued by others. People need to engage them selves to gain recognition and have an activity
or activities that give the person a sense of contribution, to feel accepted and self-valued, be it
in a profession or hobby.

Self-actualization

The motivation to realize one's own maximum potential and possibilities is considered to
be the master motive or the only real motive, all other motives being in its various forms. In
Maslow's hierarchy of needs, the need for self-actualization is the final need that manifests
when lower level needs have beensatisfied.61
 A good example of the application of these needs is the case of a jobless person. He
approaches the owner of the firm and pleads for a job even as a casual employee. He is happy
with the job for it enables him to buy all the necessities like food, clothing, medicines, and pro
vide shelter for his family. After one year, he is concerned about his safety - his job insecurity as
a casual employee. So, he approaches the owner and pleads that he be regularized in status.
His request is granted.

Having satisfied his safety needs, the next higher need that is uppermost in his mind is
social - love, belongingness. So, he joins the union. He feels happy to be part of the labor union
to redress for their grievances. Having met this need, he hankers for the next higher need-es
teem, to be respected by others. So, he runs for membership of the board of directors of the
union. If you think he is happy as a board member, you have another think coming. He wants to
be the problem-solver of the union, to be creative in negotiating with the management. So, he
runs for president of the union and gets elected. He gets the highest need - self actualization. In
the meantime, the owner of the company who is not aware of the hierarchy of needs is going
into fits of anger against the person he plucks from the gutter as an ingrate. Now, the owner is
facing this person across the negotiating table as an equal social partner.

Maslow's work helps us understand the importance of individualizing motivational tools.

Each person has a different need from others and at different times. The firm must determine
how to meet
thesedifferingneedstomotivatetheworkforcetohigherperformancelevels.Thekeyistoknowwhich

level of need is motivating each employee and to monitor it constantly to be aware of any change that
could make the former motivating tools ineffective.

Herzberg's Motivation-Hygiene Theory

Frederick Herzberg's two-factor theory, also known as intrinsic/extrinsic motivation,

was based on interviews with 200 engineers and accountants He concludes that certain factors
in the workplace result in job satisfaction, but t absent, lead to dissatisfaction. His major premise
was that satisfaction and dissatisfaction are not really opposite ends of one continuum. Rather,
the opposite of satisfaction is no satisfaction and the opposite of dissatisfaction is no
dissatisfaction.
Herzberg distinguished between:

Motivators (e.g., challenging work, recognition, responsibility) which give positive

satisfaction; and

Hygiene factors (e.g., status, job security, salary and fringe benefits) that do not
motivate if present, but if absent, result in demotivation. It is referred to as hygiene
because like hygiene, the presence will not make you healthier, but absence can
cause healthdeterioration.

To move an employee from dissatisfaction to no dissatisfaction, a set of factors, referred

to as hygienes is used. These factors are extrinsic to the work, itself. They are the dissatisfiers
which include working conditions, company policy, supervision, security, relationship with
subordinates and pay. Herzberg considers these as hygienes. In other words, they hardly by
themselves motivate employees to work harder but can make them work less hard if they are
not satisfied.

The real job satisfiers which motivate employees are recognition, achievement,
advancement, responsibility, and personal growth. These factors are intrinsic to the job itself.
 However, some researches are questioning Herzberg's conclusion that pay is not a
motivating factor. Although this is in line somewhat with Maslow's hierarchy of needs theory in
that money is at the lowest level of the hierarchy and could last only for a short period, the
practical role of pay in the motivation of the workforce is still being debated until today. Some
researches have concluded that pay is a motivator, not a hygiene. 62

Douglas McGregor's Theory X and Y

McGregor in his book, "The Human Side of the Enterprise" published in 1960 has
examined theories on behavior of individuals at work, and has formulated two models which he
calls Theory X and Theory Y.

In Theory X, management assumes employees are inherently lazy and will avoid work if
they can. They inherently dislike work. Because of this, workers need to be closely supervised
and comprehensive systems of controls developed.

In Theory Y, management assumes that employees maybe ambitious and self-

motivated and exercise self-control. It is believed that employees enjoy their mental and
physical work duties. Work to them is as natural as play. They possess ability to create problem-
solving but their talents are underused in most organizations. Given the proper conditions,
Theory Y managers believe that employees will learn to seek out and accept responsibility and
exercise self-control and self direction in accomplishing objectives to which they are committed.

For McGregor, Theory X and Y are not different ends of the same continuum. Thus, a
manager needs to apply Theory Y principles but does not preclude him from being a part of
Theory X and Y.

There are criticisms to this just as there are in Maslow's Hierarchy of Needs and
Herzberg's Motivation-Hygiene Theory. It is believed that most employees fall somewhat in
between these poles. Recent studies questioned the rigidity of the model. Nevertheless, Theory
X and Y are still important terms in the field of management and motivation. It remains a guiding
principle of positive approaches to management, to organization development, and to improving
organizationalculture.

McClelland's Learned Needs Theory

David McClelland developed a theory of motivation called learned needs theory. He

proposed that an individual's specific needs are acquired over time and are shaped by one's life
experiences. Sometimesreferredtoasthree needstheory,
mostoftheseneedsareclassifiedaseitherofthefollowing:

Achievement. People with a high need of achievement seek to excel and thus tend to
avoid both low-risk and high-risk situations. They avoid low-risk situations because the
easily attained success is not a genuine achievement. In high-risk projects, achievers see
the outcome as one of chance rather than one's own effort. They therefore prefer work
that has a moderate probability of success, ideally a 50% chance. They need regular
feedback to monitor progress of their achievements and prefer either to work alone or
with other highachievers.

Affiliation. Those with high need for affiliation want harmonious relation ships with other people and
need to feel accepted by other people.. They tend to conform to the norms of their work group and
prefer work that provides significant personal interaction. They performed well in customer service
and client interactionsituations.
 Power. A person's need for power can be one of two types - personal and institutional.
Those who need personal power want to direct others, and this need often is perceived
as undesirable. Persons who need institutional power (also known as social power) want
to organize the efforts of others to further the goals of the organization. Managers with a
high need for institutional power tend to be more effective than those with a high need for
personalpower.

What are the implications of learned needs theory for management? People with
different needs are motivated differently. High achievers should be given challenging projects
with reachable goals. They should be provided with frequent feedback. While money may not be
an important motivator, it is an effective form of feedback. Those with high affiliation needs
perform best in a cooperative environment. Management should provide power seekers the
opportunity to manage others.

McClelland's theory allows for the shaping of a person's needs; training programs can be
used to modify one's need profile.64
Equity Theory

This theory was developed by John Stacey Adams in 1962, a workplace and behavioral
psychologist. Most people use equity theory on a regular basis. They may not recognize it but
use it just the same. The theory attempts to explain relational satisfaction in terms of
perceptions of fair/unfair distributions of resources within interpersonal relationships. It is
considered as one of the justice theories.

The structure of equity in the work place is based on the ratio of inputs to outcomes.
Inputs are the contributions made by the employee for the organization which include the work
done by the employee, his behavior as well as the skills and other useful experiences he may
contribute for the good of the company. Equity is measured by comparing the ratios of
contributions and benefits of each person within therelationship.

An individual will consider that he is treated fairly if he perceives the ratio of his inputs to
his outcomes to be equivalent to those around him. If an employee notices that another person
is getting more recognition and rewards for their contributions, even when both have done the
same amount and quality of work, it would persuade the employee to be dissatisfied. This
dissatisfaction would result in the employee feeling underappreciated. This is in direct contrast
with the idea of equity theory, the idea is to have the rewards (outcomes) be directly related with
the quality and quantity of the employees' contributions (inputs). If two or more employees of the
same input were rewarded the same, it would help the workforce realize that the organization is
fair, observant, and appreciative.
There are three primary assumptions applied to most business applications of this theory:

Employees expect a fair return for what they contribute to their jobs, a concept
referred to as the "equitynorm."

Employees determine what their equitable return should be after com paring their
inputs and outcomes with those of their co-workers. This concept is referred to as "social
comparison."

Employees who perceive themselves as being in an inequitable situation will

seek to reduce the inequity either by distorting inputs and/or outcomes in their own
minds. (cognitive distortion), by directly altering inputs and/or outputs, or by leaving
theorganization.
 People managers can help create perceptions of equity by ensuring that re wards are
fair and employees are treated equitably. There are criticisms from some scholars that the
theory is simplistic and does not consider a number of demographic and psychological variables
which affect people's perceptions of fairness and interaction with others. Be that as it may, the
theory has wide-reaching implications for employee morale, efficiency, productivity,
andturnover.65
Expectancy Theory

This theory was developed by Vic tor Vroom, a psychologist and professor of
organization and management at Yale University. It predicts that employees in an organization
will be motivated when they believe that:
putting in more effort will yield better jobperformance; better job performance will lead to an
organizational rewards, such as an increase in salary or benefits;and
these predicted organizational rewards are valued by the employees inquestion.

The theory suggests three variables within the expectancy theory:

Expectancy probability - based on the perceived effort-performance

relationship. It is the expectancy that one's effort will lead to the desired performance
and is based on past experience, self-confidence, and the perceived difficulty of the
performance goal. Example: If I work harder than everyone else in the plant will I
produce more?

Instrumentality probability - based on the perceived performance-reward

relationship. The instrumentality is the belief that if one does meet performance
expectations, he or she will receive greater reward. Example: If I produce more than
anyone else in the plant, will I get a bigger raise or a fasterpromotion?

Valence - refers to the value the individual personally places on the rewards.
This is a function of his needs, goals, and values. Example: Do I want a bigger raise? Is
it worth the extra effort? Do I want a promotion?

This theory emphasizes the need for organizations to relate rewards directly to
performance and to ensure that the rewards provided are those rewards deserved and wanted
by the recipients. Be cause the motivational force is the product of the three perceptions, if any
one of their values is zero, the whole equation becomes zero. Expectancy theory generally is
supported by empirical evidence and is one of the more widely accepted theories
ofmotivation.66
Reinforcement Theory

Reinforcement theory is the process of shaping behavior by controlling the

consequences of the behavior. A combi nation of rewards and/or punishments is used to
reinforce desired behavior or extinguish unwanted behavior. Any behavior that elicits a
consequence is called operantbehavior, because the individual operates on his environment.

Generally, there are two types of reinforcement: positive and negative. Positive
reinforcement results when the Occurrence of a valued behavioral con sequence has the effect
of strengthening the probability of being repeated. For example, if you stay late to complete a
report for your boss which you are being given a reward for doing so, you are more likely to stay
late again.

Negative reinforcement results when an undesirable behavioral consequence is

withheld, with the effect of strengthening the probability of the behavior being repeated.
Negative reinforcement is of ten confused with punishment, but they are not the same.
Punishment attempts to decrease the probability of specific behaviors; negative reinforcement
attempts to increase desired behavior. An example of negative reinforcement might be a
salesperson who exerts effort to increase sales in his territory (behavior) which is followed by a
decision not to reassign him to an undesirable sales route (negative reinforcer). This negative
reinforcer should make it more likely that the sales person will continue to exert necessary effort
in the future. An example of punishment is demoting an employee who does not meet
performance goals or suspending an employee without pay for violating workrules.

Thus, both positive and negative reinforcements have the effect of increasing the
probability that a particular behavior will be learned and repeated. The best known application of
the principles of reinforcement theory is called behavioral modification, or behavioral
contingency management. A behavioral modification program consists of foursteps:
Specifying the desired behavior as objectively aspossible.

Measuring the current incidence of desiredbehavior.

Providing behavioral consequences that reinforce desiredbehavior.

Determining the effectiveness of the program by systematically assessing

behavioralchange.

The theory of behavioral modification through reinforcement is often applied in

organizational settings. Although the assumptions, like the other motivation theories, are
criticized, its principles continue to offer important insights into individual learning and
motivation.87
INCENTIVE PLANS

Providing incentives to employees is one tool that management can use. Incentives are
rewards given to employees for exceeding performance targets. It can be monetary or non-
monetary re wards like gift certificates, plaques of appreciation, overseas trip, or other forms of
incentives. As the word itself indicates incentives must be linked to employee performance.

How effective is your incentive plan? Does it encourage higher levels of performance by
your employees? Do you know what it is that your employees really want? In one company
where we worked
before, an Achiever's Award was given to every extraordinary achieve once a year. The
recognition was given by means of a plaque of achievement handed by the Chairman and CEO.
Over the years, it became a ritual that lost its meaning and significance. We stopped it when we
heard cynical remarks from some awardees, "Lapida na naman!" (comparing the plaque to the
marble marker at thegraveyard).

We revamped the system after consulting with the employees to get a sens of what
incentive they really wanted and considering the goals and objectives the company wished to
achieve. The first step therefore in designing an incentive plan is to understand what the ideal
end results would be. For example, the company may want to lower customer attrition, increase
sales or increaseproductivity.

The critical steps for each of these goals need to be mapped out. If the company wants
to increase sales, then streamlining the workflow, training and better communication between
the service and sales staff might be some of the critical steps. The next step is to assess the
behaviors, tasks and decision-making actions that staff involved can control and management
wants to encourage or discourage.

Effective incentive plans must also be creative. Since different needs motivate different
people, the incentives must cater to a variety of needs. Following are key fundamentals in any
successful incentive plan:

Keep it simple and easy to measure. Employees need to know what they can do to
earn the incentive and what the incentive will be. The macro results are clear. Did sales
go up? Is productivity increasing? Did it improve customer or client retention? Did it
decrease cost of operation?

Reward only for surpassing business goals. Incentive plans should be given only for
superior performance. This means that the company needs to have clear goals and
expectations. A target goal might. be increasing sales revenues by 20 percent of the
previousyear.

Reward great individual effort. While team effort should be given recognition and
reward, identify the individual superstars and bestow upon them rewards and
recognition. They serve as models for others to follow andemulate.

Encourage team results. Track down outstanding performance on unit, section or

departmental results. It encourages and recognizes teameffort.

Extraordinary rewards. Beyond the ordinary plaques, the reward even if non-monetary
must be something unusual that awardees would love to cherish and keep. If it is
monetary reward, the incentive must be significantly meaningful like 20 percent or more
over basepay.

FUN IN THE WORKPLACE

A white or blue-collar worker spends about a third of his day five or six days a week at
the workplace. He wracks off his brain or toil by the sweat of his brow to earn a living. He
returns home tired and weary sometimes bringing with him the problems at work only to be met
by some domestic problems. Some delayed bills to pay, a sick child to be brought to the doctor
and a slew of other problems con fronting a person everyday. Is there no fun at all in his life?

Should there not be humor in the workplace to break the monotony of one's humdrum
existence? How serious can we be in the workplace? The old refrain, "Planting rice is never fun,
bent from morn till the set of sun," cannot be equated in the workplace. How humorous can we
be about the seriousness we often find in there? Is it a taboo to laugh in the workplace?
 According to a Robert Haft International 1985 survey in the U.S.,68 only 15% of workers
are fired because of incompetence. The remaining 85% are let go because of their inability to
get along with fellow employees. When asked about the qualities of an effective employee,
senior administrators and human relations personnel check humor as one of the choice
attributes of a desired employee.

Humor, facilitates communication, refreshes the spirit, builds relationships, reduces

stress, provides perspective, and promotes attendance. In a tense situation, humor can reduce
stress and defuse anger. Humor provides a non-threatening medium which a worker can
communicate with others without intensifying the emotional temperature of the relationship. This
author recalls an incident at the DOLE when both parties - labor and management - were in
shouting match, hurling insults and invectives at each other. The superb mediator/conciliator
would suspend the session, pulls out from his drawer old Playboy magazines and gives them to
the protagonists. The chuckles of the boys ogling at those girlie pictures was enough to cool the
rising temper of theparties.

The use of humor builds strong ties of friendship and camaraderie, a sense of team
effort and staff cohesion. It makes work more interesting and enjoyable. Can you imagine a
company newsletter, a common medium of communication used by management to inform and
to persuade without somehumor in it? Nobody reads it with gusto. Office jokes taking the
seriousness of work lightly provide workers with the opportunity to become more connected with
others.

Humor is also valuable in training. Humorous examples will increase the learner's
attention and retention of a concept. A person's sense of humor is also related to creativity. The
more you put humor into a problem-solving process the more likely creative you will be and
arrive at more innovative solutions to problems. There also seems to have a direct correlation
between humor and advancement. Our experience indicates that persons serious in work but
with an innate sense of humor are given more opportunities for promotion than those who are
smug and humorless.

Humor is a great stress reliever. Work is often associated with stress and it is one of the
major causes of illness, absenteeism, burn-out and other employee problems. A person who
laughs at jokes can relieve depression, anger and anxiety. "Laughter is the best medicine," may
be a hackneyed expression but its truth is supported by empiricalevidence.

Quoting author Steven Sultanoff, 69 "Humor and its partner, laughter also reduce stress
by activating the physiological systems including the muscular respiratory, cardiovascular, and
skeletal. In fact, we may even lose muscle control, as many of us have, when we laugh so hard
that we fall down or wet our pants. Laughter has been labeled a jogging and juggling of the
internal organs. When we laugh we feel physically better, and alter laughter we feel lighter and
more relaxed.”

So, let's have humor at work. A few moments of humor at the workplace can lead to
increased productivity as the newly energized employee returns to his desk or task. There is,
however, an unwritten limit on humor. Toilet humor is negative and has no place in a decent
workplace. Co-workers with physical impairments should not be the subject of a joke. It is cruel
and discriminatory. And do not joke about your boss. Jokes travel so fast that it can easily reach
him fast. It is safer to read Delbert cartoon and laugh at the follies ofbosses.
SUMMARY

People managers must brush up with all theories of motivation and understand what
motivates people. No one theory explains all human behavior. The most appropriate theory
depends on the person and the situation. A complete understanding of a wide range of
motivation theories increases the probability of understanding what motivates people. Managers
 must create the environment in which employees will be motivated to perform their tasks to the
maximum.

Humor in the workplace removes stress. Everyone appreciates a good laugh and a funny
incident. Seriousness and fun in the workplace are not mutually exclusive. Humor and levity can
help re move tension in workplace relationship.

Poor performance cannot always be ascribed to lack of motivation. There may be other
attributable causes to poor performance such as the ability and competence of an employee.
Physical environment or faulty equipment can be another cause. Motivation is only one of them.
But motivation should absolutely be a major concern of management. It is a function of both line
and human resource department but the latter should influence management in creating an
environment that motivates people to work harder to accomplish the organization's objectives.

CHAPTER 12

PERFORMANCE MANAGEMENT

This chapter will expound on the critical nature of performance management, its
meaning and purposes and how it differs from performance appraisal.

PERFORMANCE MANAGEMENT

Organizations that seek to main tain and improve its competitive advan tage must be able to manage the
behav ior of its employees to optimize results. Companies may fall or succeed due to extraneous factors such
as the prevailing economic crisis today which results in low market demand. But it is the ability of the people
to perform that can mitigate their losses or take the challenge and convert the crisis into an opportunity for
success. Managing people's performance, there- fore, is extremely important.

Performance management is part of the major systems of organizational con trol. Organizations must control
and di rect the efforts of their people towards the achievement of its goals and objectives. Performance
management establishes the link between a company's vision, mission and strategic objectives and the
required employee performance. People are the key ingredients for success and growth of a company. Hence,
their per formance is the central focus of control. "The enablers for learning and growth come primarily from
three sources: em ployees, systems, and organizational align ment. x x x Consequently, objectives and
measures for these enablers of superior performance in the future should be a integral part of any anced
Scorecard."70 organization's Bal

manage. This chapter will expound on the ment, its meaning and purposes and how it differs from
performance appraisal.

Planning

Monitoring

Developing
Rating

Rewarding

DEFINITION

Performance management is the systematic process by which an organization involves its

employees, as individuals and members of a group, in improving organizational effectiveness in the
accomplishment of the organization's mission and goals. It is also defined "as the process through
which managers ensure that employees activities and outputs are congruent with the organization's
goals."71

In other words, performance management is a strategic tool used to promote an

effective organization. It ensures that individual employee's efforts are focused on the programs
and strategies set out in the corporate and departmental business plans. It directs efforts
towards effectiveness and results. It ensures that goals are consistently being met in and
effective and efficient manner.
Figure 6 below is the schematic diagram of performance planning process.

Performance appraisal which will be discussed later in this chapter is only part of Performance
Management System(PMS).PMS has five parts: planning, monitoring, developing, rating,and
rewarding.

Planning means setting performance expectations and goals for individuals or group of
individuals to channel their efforts toward achieving organizational objectives. Getting
employees involved in the planning process will help them understand the goals of the
organization, what needs to be done, why it needs to be done, and how well it should
bedone.

Planning includes establishing elements and standards of their performance

appraisal plans. Performance elements and standards should be measurable,
understand able, challenging, verifiable, and achievable. Employees are to be held
accountable for these agreed plans. Plans should be flexible to respond to some
changes in the work environment. These plans are working documents that are to be dis
cussed often rather than just being considered a paper work filed in a drawer and
retrieved only when the performance appraisalcomes.

Monitoring means consistently measuring performance and providing ongoing feedback

to employees on their progress toward reaching their goals. It includes progress reviews
with employees where their performance is compared against plan and standards.
Ongoing monitoring provides the advantage of checking how well employees are meet
ing predetermined standards and to make changes if there are supervening events
beyond their control that may impede in their meeting thestandards.

By continually monitoring, unacceptable performance can be identified on time

and assistance provided rather than wait for the regular performance appraisal time.

Developing provides an excellent opportunity to identify training and developmental

needs. Through the PMS, employee developmental needs are evaluated and ad
dressed. Skills, abilities, competencies, and behaviors are the drivers of performance. In
the interim, there could be some changes in the technology infrastructure, direction and
objectives, or supervisory problems that affect employee behavior. Providing training
and developmental opportunities encourage good performance, strengthen job related
skills and competencies and help employees keep up with changes in theworkplace.

Rating summarizes employee performance over a certain period. Rating means

evaluating employees against standards in their performance plan and assigning a
summary
ratingofrecord.Asindicatedearlier,thiswillbediscussedmoreextensivelylaterinthischapter.

Rewarding recognizes employees for their performance and acknowledges their

contributions to the organization's strategic objectives. It can come in many forms like
award of distinction, achiever's award and usually, a merit increase in pay and other
forms of monetary incentives.

The five component processes, working together and supporting each other
achieve natural, effective performance management.
PURPOSES OF PERFORMANCE MANAGEMENT SYSTEM(PMS)

PMS has three major purposes:

 Strategic - There should be a link between the employees' activities to the
organization's goals. That's why when a Manager and his subordinate sit down to work
on the performance plan, the first question that should be asked is: what are the
strategic goals of the company and how can the employee support these goals? The
source material references are the job description and job analysis. They can look at the
key elements of the job and the critical success factors that can support the strategic
goals of thecompany.

To be fair, the system must be flexible enough to adjust to some changes when
some company goals and strategies change.

Administrative - While strategic is seldom used as a purpose, organizations use

performance management system particularly the performance appraisal as the basis for
administrative actions such as: salary increases, recognition of high achievers,
promotion, demotion, lay-offs, discipline, and termination. That is why performance
review is universally disliked and avoided. After all, how many people in your
organization want to hear that they did not meet the standards? How many managers
want to face arguments, diminished morale, and sometimes hostility from their
subordinates resulting from the performance appraisalprocess?

Thus, if they are not watched close ly, managers tend to rate subordinates high
or practically at the same level as mostly everyone to avoid creating enmity from them.

Developmental - This is another common purpose of performance management

- to develop people with potential or overcome their shortcomings. Managers often feel
uneasy confronting employees with their shortcomings or weaknesses. Maybe, it is more
politically correct to call it short comings rather than weaknesses. The latter word seems
to be harsh. Con fronting one's shortcomings although necessary to improve his
performance, sometimes, if not done properly, could strain such subordinate-supervisor
relationship. That is why it must be handled properly with the focus on performance
improvement rather on the person himself.

As a feedback mechanism, performance appraisal would indicate the shortcomings of

employees which could be addressed through training and development. For instance, with the
delayering of organizations to improve productivity, multi-skilling is introduced whereby
employees are given additional responsibilities but do not have the necessary skills and
competencies. These could be the cause of the deficiency in their performance. Retraining is
therefore organized to meet these new required skills. Or, a high potential employee is groomed
for promotion to a supervisory job. This particular employee is scheduled for training on Basic
Supervision to be able to handle well his future subordinates.

PERFORMANCE APPRAISAL

The tool that documents an individual employee's performance is the performance

appraisal. It is defined as a method by which the job performance of an employee is evaluated
generally in terms of quality, quantity, cost and time.72 It is the key human resource function
that is closely integrated with compensation, training and development and other administrative
actions.

Performance appraisal is the "rating" part of the performance management system. It

provides an opportunity for a structured formal interaction between a subordinate and
supervisor, that usually takes the form of a periodic interview (annual, semi-annual or quarterly,
depending upon company policy and practice), in which the work performance of the
subordinate is examined and discussed, with a view to identifying the weaknesses and
strengths as well as ways for improvement and skillsdevelopment.
 Performance appraisal has two fold purposes: evaluation and feedback. When used for
evaluation, it provides the basis for personnel actions such as promotion, demotion, transfer,
termination, and salary increases. As a feedback mechanism, the document focuses on the
development of the employee including the identification of coaching and training needs.

Appraisal results therefore are used to identify the better performing employees who
should get available merit pay increases, bonuses, and promotions. By the same token,
appraisal results are used to identify the poorer performers who may require some form of
counsel ing, or in extreme cases, demotion, or even discharge.
CONTROVERSY SURROUNDING PERFORMANCEAPPRAISAL

Few issues in management stir up more controversy than performance appraisal. Many
appraisers feel uncomfortable with the combined role of judge and executioner. Such feeling is
understand able. Appraisers often know the appraises well, and are in daily contact with them in
a direct superior-subordinate relation ship. They work together on working days and may
possibly socially interact
afterofficehours.Suggestinghowasubordinateneedstobrushupwithoncertainworkskills and
abilities is one thing; giving an appraisal that has direct effect on his not getting a merit increase
or a promotion is another. The result can be resentment, enmity leading to workplace disruption,
soured relationships and possible productivity decline.

Though performance appraisal may be considered by some supervisors and managers

as a periodic "nightmare," it should be done nevertheless. After all, no management system is
perfect. Whatever its practical flaws might be, performance appraisal is the only process
available to help achieve fair, decent evaluation of an employees performance as a basis for
giving rewards and suggesting training and development to improve performance. This is where
the human resource function comes in to en sure that the appraisal process is not a sham and a
waste of time. It starts with a goodplan.

BASIC REQUISITES OF A GOOD PERFORMANCE APPRAISAL

A good performance appraisal system is a product of preparation and planning.

Managers feel that the process itself is time consuming but once the foundation is in place, time
to administer it decreases. Each step of the process must be taken with the participation and
cooperation of the employee for best results. The process involves the followingsteps:

Clarify purpose of the job, job duties, and responsibilities.The job description or
process description, whatever you may call it, and job analysis are the best sources
of documents to start with. Discuss with your subordinate the key result areas of the
job that could be focused on in his daily work activities to getresults.

Define performance goals with measurable outcomes.Performance goals must be

aligned with the organization's goals and strategies. Setting performance goals must
pass the SMART test: specific and stretching, measurable either quantitatively or
qualitatively, achievable, realistic and relevant, time-bound in that it is clear at what
point they should be achieved.

Define the priority of each job responsibility and goal. Prioritize each key job
responsibility and goal set ac cording to its importance and impact to the company's
goals andstrategies.

Define performance standards for each goal set.While performance elements tell
employees what to do, the standards tell how well they have to do it. A performance
standard is a management-approved expression of the performance thresholds,
requirements, expectations that must be met to be appraised at a particular level of
performance. Here is an example of a standard set for a customer service employee
in an insurancecompany:
 A word of caution: not all jobs have easy measurable objectives. In human. resources
function, for example, objectives can be set on the rates of absenteeism, tardiness, number of
grievances, prevention of strikes, recruitment time,number of training programs, turn-over rates,
among others. But there are some performance indicators like employee attitudes, employee
relations, competencies that are not easy to measure and to ascribe to human resource
functionalone.
APPROACHES TO MEASURINGPERFORMANCE

There are various approaches in measuring performance. The most common are the
following: The Comparative Approach -It consists of techniques that require the rater to
compare the performance of one individual employee against those of others. The techniques
are categorized into three: ranking, forced distribution, and paired comparison.

Ranking. It simply requires a manager to rank employees in his department from

the highest to the lowest or from the best to theworst.

Forced Distribution. Employees' performance is ranked in groups. This

followsthenormalcurveinstatisticswherethemajorityofemployeesareinthemiddlewhilethefe
wernumberareineithersideofthe extremes.Thisis
usuallydonebycompaniesattheinitialstageoftheirperformanceappraisalsystemtoavoidwildfl
uctuationsofratingsespeciallyonthehighside.

For example, in a rating scale of five, management may forcibly distribute ratings
in the following manner:

This precludes a where the company-wide rating, if situation drawn in a

graph where the right is the highest, is skewed to the right which is statistically
improbable. Based on our experience, we usu ally recommend Forced
Distribution at the few years inception of a performance appraisal system until
the raters are already accustomed to the disciplines of the system.

4. Paired Comparison. Otherwise known as pairwise comparison, it generally

refers to the process of comparing entities in pairs to judge which of each pair is
preferred, or has a
greateramountofsomequantitativeproperty.73Inperformancerating,itrequiresmanagerto
 compare every employee with every other employee in the work group, giving an
employee a score of 1 every time he is considered the highest performer. Once all the
pairs have been com pared, the manager computes the number of times each employee
received the favorable score (counts up the number of points), and this becomes the
employee's performance score.

The method is criticized to be too cumbersome and eats a lot of time for
managers especially if his span of control is wider and bigger in terms of number
of employees reporting to him.

Criticisms of the Comparative approach are: while the system provides an

effective tool to differentiate employee performance and virtually eliminates
problems of leniency, central tendency and strictness in rating, it fails to link it to
the strategic goals of the firm. Moreover, the subjectivity of the ratings, put their
re liability and validity in doubt. Finally, employees are less inclined to accept
evaluation based on comparative approaches. Instead of being compared to
employees in a group, team or department, they would rather be rated
individually on ab solute standards of excellent, good, fair, or poor performance.

The Attribute Approach -It starts on the premise that employees have certain traits or
attributes believed to be desirable for the organization's success. It identifies and defines such
traits as leadership, initiative, maturity, competitiveness, interpersonal skills, creativity, problem
solving, communication and evaluates employees onthem.

Graphic Rating Scale. A list of traits is evaluated by a five-point (or some other
number of points) scale. The manager considers one employee at a time, circling the
number that signifies how much of that trait the individual has. Graphic rating scales can
provide the rater with a number of different points or with a continuum along which a
rater simply places a checkmark.

Mixed Standard Scale. It was developed to get around some of the problems
with graphic rating scale. It defines relevant performance standards dimensions, and
then develops statements representing good, average, and poor performance along
each dimension. These statements are then mixed with the statements from other
dimensions on the actual rating instrument. In a scale of 5 (Poor, Adequate, Commend
able, Excellent, Distinguished) or of 3 (High, Medium, Low), employees are rated against
theseattributes.

The downside of this method is, in developing and defining these traits,
they usually have little congruence between the technique and the company's
strategy. Besides, these methods have vague standards that are subject to
different interpretations by raters. Ratings by different raters are extremely wide
and different. It puts a doubt therefore on its reliability and validity. A poor rating
on a certain attribute like creativity where the definition is unclear could provoke
arguments between the rater and ratee.

The Behavioral Approach -It tries to identify and define behaviors of employees that
employees may exhibit to be effective on the job. There are five techniques that managers are
required to assess their employees on their effectiveness and their behaviors.

Critical Incidents. It requires managers to log specific incidents as specific

examples of what is effective and ineffective performance of employees. Here's an
example of an incident described in the performance appraisal of a "new account clerk"
in abank:

A customer comes in to deposit money with the bank. The teller was out
to the bathroom. Instead of allowing him to wait, the new account clerk greeted
 the customer, "May help you?" and rushed to the teller booth and accepted the
deposit. After the transaction, the new account clerk offered him a new service
which would yield a higher interest for a time deposit. The customer agreed to
shell out another amount for time deposit.

The incident can be tied to the corporate strategy of proactive customer service
but managers may balk at the idea of making daily or weekly record of instances of
employees' behavior. It is also difficult to compare one incident from another since each
incident is specific to a particular employee.

Behaviorally-Anchored Rating Scales (BARS). It is an appraisal method that

aims to combine the benefits of narratives, critical incidents, a qualified ratings by
anchoring qualified scale with specific narrative examples of good or poor performance.
BARS scale is a method that combines elements of the traditional rating scales and
critical incidents method. In order to construct BARS, steps are followed as mentioned
below:

The advantage of the method is it in creases intra-rater reliability by providing a precise definition of
the performance dimension. Its disadvantage is, behavior that closely approximates the anchor is
more easily recalled than other behavior.74

Behavioral Observation Scales (BOS). It is a variation of the BARS. It differs in

two ways. First, instead of discarding large numbers of behaviors that exemplify effective
or ineffective performance, it uses many of them to more specifically define all the
behaviors that are necessary for effective performance. Second rather than assessing
which behavior best reflects an individual's performance, it requires managers to rate the
frequency with which the employee has exhibited each behavior during the rating period
These ratings are then averaged to compute an overall performance rating.

The major disadvantage is may require more information than managers can
remember. It may consist of 80 or more behaviors managers must remember how
frequently a certain employee exhibited each of these behaviors over quarter, semester
or annual rating period. This is tedious enough for managers to follow andrecord.75

Organizational Behavior Modification (OBM). This term appears to have been

first used by Edward Thorndike in 1911. It has since come to refer mainly to techniques
for increasing adaptive behavior through reinforcement and decreasing maladaptive
behavior through punishment (with emphasis on the former).76 It is a formal system of
behavioral feedback and reinforcement. It is premised on the behaviorist's view that
future behavior is determined by past behavior that have been positively reinforced. This
is in accordance with the law of effect behaviors that are followed - by positive
reinforcement are likely to be repeated; behaviors that are followed by negative
consequences are less likely to berepeated.

Managers who work along this system take the following steps:

In summary, the behavioral approach can be effective in that it can link corporate
strategy to the specific types of behavior needed to implement that strategy. It provides
specific feedback to employees about their expected performance. Also, since those
using the system are involved in developing the measures, acceptability is high. With
some training of the raters, the results are reliable.

There has been criticism on the concept of punishment. When misused, extreme
punishment can lead to affective (emotional) disorders, the target of the punishment
eventually focusing only on avoiding punishment (i.e., "not getting caught") rather than
improving behavior." The other downside is the behaviors and measures must be
constantly monitored and revised to ensure that there is still a connection to the strategy.
That consumes a lot of time of managers.
 The Results Approach -It is premised on the assumption that subjective rating can be
eliminated from the measurement process and that results are the closest indicator of one's
contribution to organizational effectiveness. There are two systems in the Results Approach.

Management by Objectives (MBO) is a process of agreeing upon objec tives

within an organization so that management and employees agree to the objectives and
understand what they are in theorganization.79

The term "MBO" was first popularized by Peter Drucker in his book "The
Practice of Management." The essence of MBO is participative goal setting,
choosing courses of actions and decision making. An important part of MBO is
the measurement and comparison of the employee's actual performance with the
standards set. Ideally, when employees themselves have been involved with the
goal setting and the choosing of the course of action to be followed by them, they
are more likely to fulfill their responsibilities.

The principle of MBO process is to create empowered employees who

have the clarity of the roles and responsibilities expected from. them, understand
their objectives to be achieved and thus help in the achievement of
organizational as well as personal goals.
Some of the important features and advantages of MBO are:

The goals that are set are clear, motivating and there is a linkage between organizational goals
and performance targets of the employees. The focus is on the future rather than on the
past. Goals and standards are set for performance for the future with periodic reviews
andfeedback.
Critics cite some limitations of the MBO such as:

It overemphasizes the setting of goals over the working of a plan as driver ofoutcomes.

It underemphasizes the importance of the environment or context in which the goals are set. The
context includes everything from the avail ability and quality of resources, to relative buy-in by
leadership and stake-holders.

Companies evaluated their employees by comparing them with "ideal" employee. Trait appraisal
only looks at what employee should be, not at what they shoulddo.

It did not address the importance of successfully responding to obstacles and constraints as
essential to reaching a goal. The model didn't adequately cope with obstaclesof

When the approach is not properly set, agreed and managed by organizations in
self- centered thinking employ er, it may trigger an unethical behavior of distorting the
system or results and financial figures to falsely achieve targets that were set in short
terms, bottom-line fashion. The use of MBO needs to be carefully aligned with the
culture of the organization. While it was still not fashionable as it was be fore the
'empowerment' fad, it still has its place in managementtoday.

Productivity Measurement and Evaluation System (PROMES). Its main goal

is to motivate employees to higher levels of productivity.80 Productivity measurement is
a required management tool in evaluating and monitoring performance of a business
organization. Improving productivity is one of the most important people-management
issues of today. That's why PROMES, though rarely used, is considered as one of the
alternatives in the results approach.

PROMES consists of four steps:

 First, people in an organization identify the products, or set of activities or objectives, the
organization expects to accomplish. Its productivity depends on how well it produces its
products.

Second, the staff defines indicators of the products. Indicators are measures of how well
the products are being generated by the organization.

Third, the staff establishes the contingencies between the amount of the indicators and
level of evaluation associated with the amount.

Fourth, a feedback system is developed that provides employees and work groups with
information about their specific level of performance on each of the indicators. An over all
productivity can be computed by summing the effectiveness scores across the various
indicators.

The results approach minimizes subjectivity as it relies on objective, quantifiable

indicators of performance. Also, it links employee's results with the company's strategies
and goals. Its dis advantage is employees may focus only on aspects of their
performance that are measured neglecting those that are not. For example, if a
production employee targets a certain number of units to be produced, it might tend to
neglect quality of the products produced which is equally important. Another flaw is,
though results measures provide objective feedback, it may not help employees learn
how to change their behavior to increase theirperformance.

The Quality Approach -It is anchored on customer satisfaction through an effective quality
assurance system. Its aim is to ensure quality standards are maintained. There has been so
much focus on quantity as a measure of performance without taking into account quality.
Employees are held accountable for good or bad results to which they contribute but do not
completely control.

Advocates of quality approach believe that the major focus of performance evaluation
should be to provide employees with feedback on areas which they can improve. One is
subjective feedback from managers and other stakeholders about the personal qualities of
employees. The other is objective feedback based on the work process itself using statistical
quality-controlmethods.

Statistical process control techniques are important in the quality approach. Rather than
rating negatively employees on outcomes that are beyond their control (e. g. non achievement
of production units due to defects in raw materials or machine), these techniques provide
employees with an objective tool to identify causes of problem. The techniques include process
flow analysis, cause and effect diagrams, Pareto charts, histograms, and scattergrams.

The quality approach relies heavily on system-oriented focus while the traditional
performance appraisal systems focus more on individual employee performance. The problem
is a lot of companies may be unwilling to abandon the traditional performance appraisal system
as it is a basis for personnel actions such as training and pay increase decisions and
selectionvalidation.

In any event, an organization may opt to use a combination of two or more approaches
of appraising performance. (For sample of Performance Plan, see AppendixF)

360-DEGREE APPRAISAL -Perhaps no performance appraisal system has stirred a lot of

controversy than the 360 degree appraisal. The system also known as "multi-rater feed back,"
"multisource feedback," or "multisource assessment," is feedback that comes from all around an
employee. 360 refers to the 360 degrees in a circle, with an individual figuratively in the center of the
circle. Feedback is provided by sub ordinates, peers, and supervisors. It also includes a self-
assessment and, in some cases, feedback from external sources such as customers and suppliers or
other interested stakeholders.81
 We have no data how many companies use 360 degree performance appraisal in our
country. One leading media company uses it but for some reasons, discarded it not long
afterwards. Studies in the

U.S. suggest that over one-third of U.S. companies use some type of multiscore feedback.

The strength of multirater feedback is that it allows people (e.g., peers) who work most
closely with the ratee are far better judges than manager or supervisor alone, since they see his
actual performance and behavior on a daily basis. Manager or supervisor has less opportunity
to observe the employee up close and personal. Then, there is the possible bias of a superior.
Favoritism is a fact of organizational life but it is one that must be minimized as much as
possible in the performance appraisal process. One way to do it by way of check and balance is
not to rely on only a superior's evaluation.

The system, however, has been criticized by some quarters as to its accuracy and
effectiveness. One problem with subordinate evaluations, for instance, is they give subordinates
power over managers, thus putting the manager in a difficult situation. This can lead to
managers emphasizing employee satisfaction over productivity. Customer feedback is more
accurate but the weakness is the cost. Printing, postage, phone, and labor can add up to a
significant amount for the evaluation of one employee and cost thousands if not millions of
pesos if a plied to all employees of thecompany.

Self-ratings by the employees themselves are not often used as the only source of
performance evaluation although it should be encouraged. The advantage is they have the
opportunity to observe their own behavior and they usually have access to information on the
results of the job. The problem, how. ever, is that there is the tendency toward inflated
assessments. This is especially true if ratings are going to be used for administrative purposes
like pay raises or promotion. Self-rating is advisable as a prelude to the performance feedback
session to get employees thinking about their performance and could be a starting point in
discussing areas ofdisagree

The disadvantage of peer rating is the potential for friendship to bias ratings Closeness
and camaraderie could result in an unholy quid pro quo alliance. ("You scratch my back, I'll
scratch yours.") Peers don't feel comfortable rating an other peer especially if it is used for
administrative decisions like terminating the services of a ratee for poor performance.

Some respectable critics say "The theory is very promising. The reality on the other
hand, can be problematic. When not handled well, 360-degree re view can actually decrease
shareholder value. It can interfere substantially with teamwork, and it can take up so much time
that it negatively affects productivity Companies interested in the enhanced performance that
360-degree review could (cou1d) provide must approach this practice withcare."82

RATER ERRORS IN
PERFORMANCEAPPRAIS
AL

Human judgment is far from perfect and their weakness is an important factor behind the
controversies associated with performance appraisals. It is essential that raters must be trained
to be aware of some rating errors. The most common errors are thefollowing:

Contrast Effects. The tendency for a rater to evaluate a person relative to other
individuals rather than on the extent to which the individual is ful filling the requirements of
thejob.

First Impression. The tendency of a rater to make an initial favorable or unfavorable

judgment about an employee that is not justified by the employee's subsequentbehavior.
 Halo Effect. Inappropriate generalization from one aspect of a per son's preference to
all aspects of the person's jobperformance.

Similar to Me. A tendency for people to be judged more favorably who are similar,
rather than dissimilar to the rater in attitudes and background, even if the latter are notjob-
related.

Distributional. Rater's tendency to use only one part of the rating scale. Leniency
occurs when a rater as signs high (lenient) rating to all employees. Strictness occurs when a
manager gives low ratings to all employees - that is, when a manager holds all employees to
unreasonably high standards. Central occurs when a manager rates all employees in the middle
of thescale.

Negative and Positive Tendency. Consistently rating people at the low or high end
ofthe

Recency. The tendency to rate people based upon the most recent performance, instead ofon
the entire rating period. This usually occurs because the supervisor has no documented
history of performance of the employee.
THE PERFORMANCE FEEDBACK PROCESS

Developing a performance plan, setting the standards with the subordinates is

one thing. The hardest part is the performance feedback. This is where the rubber hits
the road, so to speak. Judgment day is viewed with anxiety and trepidation by some
managers and employees. Only few feel comfortable sitting as judge and telling
subordinates their deficiencies. In truth, nobody wants to be a bad guy.

But providing feedback no matter how distasteful it is to some can not be

avoided. It is part of a manager's function. For the process to work success fully, it must
be collaborative. If it is, both parties in session have the capability to agree upon the
problem, identify possible solutions, and agree on a plan for improvement. The final step
will be mutual commitment to the agreed upon change. Properly implemented by a
trained rater, the process leaves no bad feelings on either side of thediscussion.

A fair and fact-based collaborative model for feedback session is the best way to
lower the pain and improve the gain from a challenging but important part of a manager's
role. The following process increases the potential of a successful, collaborative
performance feed back session.

Frequent feedback is better than yearly feedback. An assessment

should be ongoing. Progress must be discussed against expectation, to clarify
and modify goals and expectations, if justified, and to correct unacceptable
performance before it is toolate.

Establish a comfortable, private setting and rapport. A neutral

location like a conference room is preferable for a feedback session. It should be
free from noise and eavesdropping of some to maintain privacy and
confidentiality of the discussion. The manager should set the friendly tone of the
meeting to establish rap port and encourage the employee to speak up. In short,
it should be an open dialogue, not amonologue.

Ask the employee to rate his performance before the session. It

requires employees to think about the performance for the past period covered
and think about their shortcomings and weaknesses. Though in some cases,
employees may tend to in flate their performance, it could be a good starting
point of discussion on some of their sticky points of dis- agreement.

Encourage the employee to be open and participate in the

discussion. The good listening skills of the manager is put to the test here. He
may tell the employee how he is rated but the manager must be prepared to
listen to the employee's reactions. It is through the free exchange of opinions that
a solution could be arrived at and a plan of action could be agreed upon to
improve performance. There may not be a complete agreement on the rating but
the active participation of the employee removes the rough edges of a
negativerating.

Focus on solving problems. Never browbeat an employee with poor

performance to accept your rating. Allow him to explain. Be alert to differentiate
an alibi from a plausible reason. A salesperson may not have been able to meet
 his target quota because he lacked mobility since his company car was removed
by his formerboss.

Give praise where it is due. Performance feedback is not talking only

about target shortfalls. It is the avenue to recognize high performance. Doing so
reinforces a high achiever to do more.

Avoid personalities, focus on behavior. When providing negative

feedback, never insult an employee by telling him he's hopeless and lousy.
Focus on his behavior, not the person and offer some help on how to correctit.

Agree on action plans and set a date to review progress.

Performance feed back should not be open-ended. It should end with goal
setting, and agreed date for progress review. It motivates employees to improve
performance. Setting a specific date for progress review prods the employee to
take the goal seriously as it demonstrates the manager's interest in helping him
to improve hisperformance.

MANAGING A PROBLEMATIC EMPLOYEE - Whether the purpose of PMS is strategic,

administrative or developmental, we all know at some stage that there are few
employees who are problematic despite your efforts to sit down with them, coach, guide,
counsel and mentor them. Their behavior and
performancestilldonotchange.Thesearethe"deadwoods"thatarebetterdiscardedthanretain
ed.

These are the marginal performers who are performing at a bare minimum level due to lack of
ability and/or motivation to perform well.

Efforts must be exerted to save them. For those who lack ability, managers
should provide training opportunities so they could be productive members of the team.
For the others who lack motivation, the causes must be looked into. Does he fit into the
job? Or is it case of bad supervision? Is it an interpersonal problem? Look at the cause
and effect of lack of motivation and consider remedial solutions. If despite remedial
efforts being taken to help a marginal performer, the problem persists, termination may
be the best solution.

Extreme care must, however, be observed that termination must be in

accordance with the law and jurisprudence. A marginal employee can be terminated
under the law due to "gross and habitual negligence.," as discussed in Chapter 2. This
means that poor performance must be so poor for several rating periods to prove that it
was habitual. Building up a case takes time. Documenting them through performance
appraisals for a period of time is necessary.

It is interesting to note that about 75 to 85% of cases filed with the National Labor
Relations Commission are Illegal Dismissal Cases. A labor case, if possible, should be
avoided because of the enormous cost that it may entail. If the company loses in the
arbiter's stage, on appeal, the management cannot sus pend the reinstatement order.
Either rein state the employee back to work or apply the "payroll" reinstatement (i.e., pay
him without working pending final resolution of the case on appeal). After a long,
arduous, costly legal battle, the company may win in the highest court of the land but the
victory might be pyrrhic unless the management chose to fight it out as a matter of
principle and to establish a good precedent in favor of management.
 SUMMARY

Performance measurement is one of the cornerstones of business excellence. It

is one of the keys to gaining competitive advantage. Performance management systems
(PMS) serves strategic, administrative and developmental purposes. PMS involves
planning, monitoring, developing, rating and rewarding. Rating is the centerpiece of
performance appraisal. There are different approach es of rating that are available.
Managers may use one or a combination of one or moreapproaches.

Performance appraisal is a critical component of reinforcing appropriate

behaviors in the workplace and of helping employees understand how to avoid in
appropriate behaviors and their negative consequences. The appraisal process enables
the organization to provide feed back to employees regarding their work and identify
areas that are in need of improvement.

Training is important for raters to be aware of the pitfalls and errors in rating and
to effectively carry out the performance feedback process. While there are many
advantages of 360 performance appraisal, extreme caution must be exercised to ensure
that the results are reliable and valid and that the process itself would not disrupt
teamwork and interpersonal relationship in the workplace. Finally, terminating the
services of a non performing employee must be exercised with prudence and must be in
accordance with law.