MANAJEMEN

SUMBERDAYA MANUSIA
(Human Resources Management)

Prof. Dr. H. Pahlawansjah Harahap, ME

Bohlander and Snell (Managing Human Resources, 2005)

MAGISTER MANAJEMEN – UNIVERSITAS SEMARANG

2008
Chapter 1
The Challenge of
Human Resources Management
Overall Framework for
Human Resource Management
COMPETITIVE
COMPETITIVE HUMAN
HUMAN EMPLOYEE
EMPLOYEE
CHALLENGES
CHALLENGES RESOURCES
RESOURCES CONCERNS
CONCERNS
••Globalization
Globalization ••Planning
Planning ••Background
Backgrounddiversity
diversity
••Technology
Technology ••Recruitment
Recruitment ••Age
Agedistribution
distribution
••Managing
Managingchange
change ••Staffing
Staffing ••Gender
Genderissues
issues
••Human
Humancapital
capital ••Job
Jobdesign
design ••Educational
Educationallevels
levels
••Responsiveness
Responsiveness •Training/development
•Training/development ••Employee
Employeerights
rights
••Cost
Costcontainment
containment ••Appraisal
Appraisal ••Privacy
Privacyissues
issues
••Communications
Communications ••Work
Workattitudes
attitudes
••Compensation
Compensation ••Family
Familyconcerns
concerns
••Benefits
Benefits
••Labor
Laborrelations
relations
Going Global
Globalization
– The trend toward opening up foreign
markets to international trade and
investment.
Impact of Globalization
– Partnerships with foreign firms
– “Anything, anywhere, anytime”
markets
– Lower trade and tariff barriers
NAFTA, EU, APEC trade agreements
WTO and GATT
Going Global (cont’d)
Impact on HRM
– Different geographies, cultures, laws,
and business practices
– Issues:
Identifying capable expatriate
managers.
Developing foreign culture and work
practice training programs.
Adjusting compensation plans for
overseas work.
Embracing New Technology
Knowledge Workers
– Workers whose responsibilities extend
beyond the physical execution of work
to include planning, decision making,
and problem solving.
The Spread of E-commerce
The Rise of Virtual Workers
Influence of Technology in HRM
Human Resources Information System
(HRIS)
– Computerized system that provides current
and accurate data for purposes of control and
decision making.
– Benefits:
Store and retrieve of large quantities of data.
Combine and reconfigure data to create new
information.
Institutionalization of organizational knowledge.
Easier communications.
Lower administrative costs, increase
productivity and response times.
 Impact of IT on HRM
Operational
Operational Relational
Relational
Impact
Impact Impact
Impact

HRM
HRM

Transformational
Transformational
Impact
Impact
 Productivity Enhancements

Perf
Perf== ff (A,M,E)
(A,M,E)
MOTIVATION
MOTIVATION ABILITY
ABILITY
••Job
Jobenrichment
enrichment ••Recruitment
Recruitment
ENVIRONMENT
ENVIRONMENT
••Promotions
Promotions ••Selection
Selection
••Empowerment
Empowerment
••Coaching
Coaching ••Training
Training
••Teams
Teams
••Feedback
Feedback ••Development
Development
••Leader
Leadersupport
support
••Rewards
Rewards ••Culture
Culture
Human Resource
Competency Model
Business
Business
Mastery
Mastery
• Business acumen
• Business
• Customer acumen
orientation
•• External
Customer orientation
Relations
• External Relations

Personal
Credibility
HRHR • Trust Change
• Personal Change
Mastery
Mastery Mastery
Mastery
• Staffing relationships • Interpersonal
• Staffing • skills
• Lived values Interpersonal skills
• Performance appraisal
• Performance appraisal • Courage and influence
and influence
• Rewards system • Problem-solving skills
• Rewards system • Problem-solving skills
• Communication • Rewards system
• Communication • Rewards system
• Organization design • Innovation and creativity
• Organization design • Innovation and creativity

Source: Arthur Yeung, Wayne Brockbank, and Dave Ulrich, “Lower Cost, Higher Value: Human Resource Function in
Transformation.” Reprinted with permission from Human Resource Planning, Vol. 17, No. 3 (1994). Copyright 1994 by The Human
Resource Planning Society, 317 Madison Avenue, Suite 1509, New York, NY 10017, Phone: (212) 490-6387, Fax: (212) 682-6851.
Chapter 2
Job Analysis, Employee
Involvement, and Flexible
Work Schedules
 What is a Job?
Job
– A group of related
activities and duties Job
Job
Position
– The different duties and
responsibilities performed
by only one employee Job
Job Job
Job Job
Job
Job Family
– A group of individual jobs
with similar
characteristics
 Job Requirements
Job Specification
– Statement of the needed knowledge, skills,
and abilities (KSAs) of the person who is to
perform the job
– Since Griggs v Duke Power and the Civil
Rights Act of 1991, job specifications used in
selection must relate specifically to the
duties of the job.
Job Description
– Statement of the tasks, duties, and
responsibilities (TDRs) of a job to be
performed
Relationship of Job Requirements
to Other HRM Functions
Job
JobRequirements
Requirements

Recruitment Determine
Determinerecruitment
recruitmentqualifications
qualifications
Recruitment

Provide
Providejob
jobduties
dutiesand
andjob
job
Selection
Selection specifications
specificationsfor
forselection
selectionprocess
process

Performance Provide
Provideperformance
performancecriteria
criteriafor
for
Performance
Appraisal evaluating employees
evaluating employees
Appraisal

Training Determine
Determinetraining
trainingneeds
needsand
anddevelop
Trainingand
and develop
Development instructional programs
instructional programs
Development

Compensation Provide
Providebasis
basisfor
fordetermining
determining
Compensation
Management employee’s
employee’s rateof
rate ofpay
pay
Management
 Job Analysis
Job Analysis
– The process of obtaining information
about jobs by determining what the
duties, tasks, or activities of jobs are.
HR managers use the data to develop job
descriptions and job specifications that are
the basis for employee performance appraisal
and development.
The Process
of Job
Analysis
Determining Job Requirements
Nature of: Basis for:
Job Analysis
•• What
Whatemployee
employeedoes
does
•• Why
Whyemployee
employeedoes
doesitit •• Determining
Determiningjob
jobrequirements
requirements
•• How
Howemployee
employeedoes
doesitit

Job Description
•• Summary •• Employee
Employeeorientation
Summarystatement
statementofofthe
thejob
job orientation
•• List •• Employee
Employeeinstruction
Listof
ofessential
essentialfunctions
functionsofofthe
the instruction
job
job •• Disciplinary
Disciplinaryaction
action

Job Specification
•• Personal •• Recruitment
Personalqualifications
qualificationsrequired
required Recruitment
in
interms
termsof
ofskills,
skills,education
educationand
and •• Selection
Selection
experience
experience •• Development
Development
Job Analysis and Essential Job
Functions
Essential Functions
– Statements in the job description of job duties
and responsibilities that are critical for success
on the job.
The purpose of essential functions is to match and
accommodate human capabilities to job requirements.
A job function is essential if:
– The position exists to perform the function.
– A limited number of employees are available to
perform the function.
– The function is specialized, requiring needed
expertise or abilities to complete the job.
 Performing Job Analysis
1. Select jobs to study
2. Determine information to collect: Tasks,
responsibilities, skill requirements
3. Identify sources of data: Employees,
supervisors/managers
4. Methods of data collection: Interviews,
questionnaires, observation, diaries and
records
5. Evaluate and verify data collection: Other
employees, supervisors/managers
6. Write job analysis report
Chapter 3
Human Resources
Planning and Recruitment
 Human Resources Planning
Human Resources Planning (HRP)
– Process of anticipating and making provision
for the movement (flow) of people into,
within, and out of an organization.
– HRP’s purpose is the the effective
deployment of human resources through:
Anticipating organizational labor supply and
demand.
Providing expanded employment opportunities
for women, minorities, and the disabled.
Guiding the development and training the
workforce.
 HRP and Strategic Planning
Strategic Analysis
– What human resources are needed and
what are available?
Strategic Formulation
– What is required and necessary in support
of human resources?
Strategic Implementation
– How will the human resources be allocated?

Human
HumanResources
Resources Strategic
Strategic
Planning
Planning Planning
Planning
 Linking the Processes of HRP and
Strategic Planning
Strategic
Strategic Strategy
Strategy Strategy
Strategy
Analysis
Analysis Formulation
Formulation Implementation
Implementation
Establish
Establishthe
thecontext:
context: Clarify
Clarifyperformance
performance Implement
Implementprocesses
processesto to
expectations
expectationsand
andfuture
future achieve desired results:
achieve desired results:
• •Business
Businessgoals
goals management method:
management method: • •Business
Businessgoals
goals
• •Company
Company • •Values,
Values,guiding
guiding
strengths/weaknesses
strengths/weaknesses • •Company
Company
principles
principles strengths/weaknesses
strengths/weaknesses
• •External
External • •Business
Businessmission
mission
opportunities/threats
opportunities/threats • •External
External
• •Objectives
Objectivesand
and opportunities/threats
opportunities/threats
• •Source
Sourceof
ofcompetitive
competitive priorities
priorities
advantage
advantage • •Source
Sourceof
ofcompetitive
competitive
• •Resource
Resourceallocations
allocations advantage
advantage

Identify people-related Define HR strategies, Implement HR processes,

Identify people-related Define HR strategies, Implement HR processes,
business issues objectives, and action plans policies, and practices
business issues objectives, and action plans policies, and practices

Source: Adapted from James W. Walker, “Integrating the Human Resource Function with the
Business,” Human Resource Planning 14, no. 2 (1996): 59–77. Reprinted with permission.
Human Resource Planning Model
FORECASTING
FORECASTINGDEMAND
DEMAND
Considerations
Considerations Techniques
Techniques BALANCING
BALANCING
• •Product/service • •Trend SUPPLY
SUPPLYAND
Product/servicedemand
demand Trendanalysis
analysis DEMAND
AND
• •Technology • •Managerial DEMAND
Technology Managerialestimates
estimates
• •Financial
Financialresources
resources • •Delphi technique
Delphi technique
• •Absenteeism/turnover
Absenteeism/turnover (Shortage)
(Shortage)
• •Organizational
Organizationalgrowth Recruitment
growth Recruitment
• •Management philosophy
Management philosophy • •Full-time
Full-time
• •Part-time
Part-time
• •Recalls
Recalls
Techniques
Techniques External
ExternalConsiderations
Considerations
• •Staffing • •Demographic (Surplus)
Staffingtables
tables Demographicchanges
changes (Surplus)
• •Markov • •Education Reductions
Markovanalysis
analysis Educationof
ofthe
theworkforce
workforce Reductions
• •Skills inventories • •Labor Mobility • •Layoffs
Layoffs
Skills inventories Labor Mobility
• •Management • •Government • •Terminations
Managementinventories
inventories Governmentpolicies
policies Terminations
• •Replacement charts • •Unemployment • •Demotions
Replacement charts Unemploymentraterate Demotions
• •Succession • •Retirements
SuccessionPlanning
Planning Retirements

FORECASTING
FORECASTINGSUPPLY
SUPPLY
Forecasting Demand for
Employees

Quantitative
QuantitativeMethods
Methods

Forecasting
Forecasting Demand
Demand

Qualitative
QualitativeMethods
Methods
Quantitative Approach: Trend Analysis
Forecasting labor demand based on an
organizational index such as sales:
– Select a business factor that best predicts
human resources needs.
– Plot the business factor in relation to the
number of employees to determine the labor
productivity ratio.
– Compute the productivity ratio for the past five
years.
– Calculate human resources demand by
multiplying the business factor by the
productivity ratio.
– Project human resources demand out to the
target year(s).
Example of Trend Analysis of HR
Demand
BUSINESS  LABOR = HUMAN RESOURCES
FACTOR PRODUCTIVITY DEMAND
YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

1997 $2,351 14.33 164

1998 $2,613 11.12 235
1999 $2,935 8.34 352
2000 $3,306 10.02 330
2001 $3,613 11.12 325
2002 $3,748 11.12 337
2003 $3,880 12.52 310
2004* $4,095 12.52 327
2005* $4,283 12.52 342
2006* $4,446 12.52 355
*Projected figures
 Qualitative Approaches to
Demand Forecasting
Management Forecasts
– The opinions (judgments) of supervisors,
department managers, experts, or others
knowledgeable about the organization’s
future employment needs.
Delphi Technique
– An attempt to decrease the subjectivity of
forecasts by soliciting and summarizing the
judgments of a preselected group of
individuals.
– The final forecast represents a composite
group judgment.
Forecasting Supply of Employees:
Internal Labor Supply

Staffing Tables
Markov Analysis
Skill Inventories
Replacement Charts
Succession Planning
Forecasting Internal Labor Supply

Staffing Tables
– Graphic representations of all organizational
jobs, along with the numbers of employees
currently occupying those jobs and future
(monthly or yearly) employment
requirements.
Markov Analysis
– A method for tracking the pattern of
employee movements through various jobs.
Hypothetical Markov Analysis for a
Retail Company

Figure 4.5
An Executive
Replacement
Chart
Recruiting within the Organization
Benefits of a promotion-from-within
policy:
– Capitalizes on past investments
(recruiting, selecting, training, and
developing) in current employees.
– Rewards past performance and
encourages continued commitment to the
organization.
– Signals to employees that similar efforts
by them will lead to promotion.
– Fosters advancement of members of
protected classes within an organization.
Recruiting within the Organization
Limitations of a promotion-from-within
policy:
– Current employees may lack the knowledge,
experience or skills needed for placement in
the vacant/new position.
– The hazards of inbreeding of ideas and
attitudes (“employee cloning”) increase
when no outsiders are considered for hiring.
– The organization has exhausted its supply
of viable internal candidates and must seek
additional employees in the external job
market.
 Internal Methods of Locating
Qualified Job Candidates
Human Resources Information Systems
(HRIS)
– Database systems containing the records and
qualifications of each employee that can be
accessed to identify and screen candidates
for an internal job opening.
Job Posting and Bidding
– Posting vacancy notices and maintaining lists
of employees looking for upgraded positions.
Recruiting Outside the Organization
Labor Market
– Area from which applicants are to be
recruited.
Tight market: high employment, few available
workers
Loose market: low employment, many
available workers
Factors determining the relevant labor market:
– Skills and knowledge required for a job
– Level of compensation offered for a job
– Reluctance of job seekers to relocate
– Ease of commuting to workplace
– Location of job (urban or nonurban)
 Outside Sources of Recruitment
Advertisements Labor unions
Unsolicited Public employment
applications and agencies
resumes Private employment
Internet recruiting agencies
Employee referrals Temporary help
Executive search agencies
firms Employee leasing
Educational
institutions
Professional
organizations
 Effectiveness of Recruitment
Sources

Source: David E. Terpstra, “The Search for Effective Methods.” Reprinted from HRFocus, May 1996.
© 1996 American Management Association International. Reprinted by permission of American
Management Association International, New York, NY. All rights reserved. http://www.amanet.org/.
Increasing the Effectiveness of
Employee Referrals
Up the ante.
Pay for performance.
Tailor the program.
Increase visibility.
Keep the data.
Rethink your taboos.
Widen the program.
Measure the results.
Chapter 4
Selection
 Matching People and Jobs
Selection
– The process of choosing individuals who have
relevant qualifications to fill existing or projected
job openings.
Selection Considerations
– Person-job fit: job analysis identifies required
individual competencies (KSAOs) for job success.
– Person-organization fit: the degree to which
individuals are matched to the culture and values
of the organization.
Steps in the Hiring
Hiringdecision
decision
Selection
Process
Medical
Medicalexam/drug
exam/drugtest
test

Supervisor/team
Supervisor/teaminterview
interview

Preliminary
Preliminaryselection
selectioninin
HR
HRdepartment
department

Background
Backgroundinvestigation
investigation

Employment
Employmenttesting
testing
(aptitude, achievement)
(aptitude, achievement)

Initial
Initialinterview
interviewinin
HR
HRdepartment
department Note: Steps may vary. An
applicant may be rejected
Completion after any step in the process.
Completionof
ofapplication
application
 The Selection Process
Obtaining Reliable and Valid
Information
– Reliability
The degree to which interviews, tests, and
other selection procedures yield comparable
data over time and alternative measures.
– Validity
Degree to which a test or selection procedure
measures a person’s attributes.
Chapter 5
Training and Development
 Use of the Types of Training

How Often the Types of

Training Are Offered

Source: Tammy Galvin, “The Methods,” Training 38, no. 10 (October 2001): 48–56. Figure 6.1
 Systems Model of Training
Phase
Phase4:4:
Evaluation
Evaluation
________________
________________
Phase •
Phase3:3: Reactions
• Reactions
Implementation • Learning
Implementation • • Learning
________________ Behavior transfer
________________ • Behavior transfer
Phase • •On-the-job • •Results
Phase2: 2: On-the-job Results
Design methods
methods
Design • Off-the-job
________________
________________ •methods
Off-the-job
Phase • •Instructional methods
Phase1: 1: Instructional
objectives • Management
Needs objectives • Management
Needs • •Trainee development
development
Assessment Trainee
Assessment readiness
________________ readiness
________________ • Learning
• •Organization • Learning
Organization principles
analysis principles
analysis
• •Task
Taskanalysis
analysis
• •Person
Personanalysis
analysis
Needs Assessment for Training
Competency assessment
– Analysis of the sets of skills and knowledge
needed for decision-oriented and knowledge-
intensive jobs.
• •ORGANIZATIONAL
ORGANIZATIONAL
……of
ofenvironment,
environment,strategies,
strategies,and
andresources
resources
ANALYSIS
ANALYSIS to
todetermine
determinewhere
whereto
toemphasize
emphasizetraining
training

TASK ……of
ofthe
theactivities
activitiesto
tobe
beperformed
performedin
inorder
orderto
TASKANALYSIS
ANALYSIS to
determine the KSAs needed.
determine the KSAs needed.

……of
ofperformance,
performance,knowledge,
knowledge,and
andskills
skillsin
in
• •PERSON
PERSONANALYSIS
ANALYSIS order
orderto
todetermine
determinewho
whoneeds
needstraining.
training.
 Phase 1: Conducting the Needs
Assessment
Organization Analysis
– An examination of the environment, strategies,
and resources of the organization to determine
where training emphasis should be placed.
Task Analysis
– The process of determining what the content of
a training program should be on the basis of a
study of the tasks and duties involved in the job.
Person Analysis
– A determination of the specific individuals who
need training.
 Phase 2: Designing Training
Programs
Issues
Issues in
in training
training design
design
Instructional
Instructionalobjectives
objectives

Trainee
Traineereadiness
readinessand
andmotivation
motivation

Principles
Principlesof
oflearning
learning

Characteristics
Characteristicsof
ofsuccessful
successful trainers
trainers
Designing The Training Program
Instructional Objectives
– Represent the desired outcomes of a
training program
Performance-centered objectives
– Provide a basis for choosing methods
and materials and for selecting
the means for assessing
whether the instruction
will be successful.
Trainee Readiness and Motivation
Strategies for Creating a Motivated
Training Environment:
– Use positive reinforcement.
– Eliminate threats and punishment.
– Be flexible.
– Have participants set personal goals.
– Design interesting instruction.
– Break down physical and psychological
obstacles to learning.
Principles of
Learning
Modeling
Modeling Goal
Goalsetting
setting

Meaning-
Meaning- Individual
Individual
fulness
fulnessof
of differences
differences
presentation
presentation
PRINCIPLES
PRINCIPLES
OF
OFLEARNING
LEARNING
Active
Activepractice
practice
Feedback
Feedbackand
and and repetition
and repetition
reinforcement
reinforcement

Massed-versus-
Massed-versus- Whole-versus-
Whole-versus-
distributed
distributed part
partlearning
learning
learning
learning
Chapter 6
Career Development
HR’s Role in THE
THEGOAL:
GOAL:MATCH
INDIVIDUAL
MATCH IDENTIFY
IDENTIFYCAREER CAREER
INDIVIDUALAND AND OPPORTUNITIES
OPPORTUNITIESAND AND
Career ORGANIZATION
ORGANIZATION NEEDS NEEDS
---------------------------------
---------------------------------
REQUIREMENTS
REQUIREMENTS
---------------------------------
---------------------------------
Development The
TheGoal:
Goal:Matching
Matching
• Encourage employee ownership
• Encourage employee ownership
Opportunities
Opportunities&&Requirements
Requirements
• Identify future competency
• Identify future competency
of career. needs.
of career. needs.
• Create a supportive context. • Establish job
• Create a supportive context. • Establish job
• Communicate direction of progressions/career paths.
• Communicate direction of progressions/career paths.
company. • Balance promotions, transfers,
company. • Balance promotions, transfers,
• •Establish mutual goal setting exits, etc.
Establish mutual goal setting exits, etc.
and planning • •Establish dual career paths.
and planning Establish dual career paths.
1 2

INSTITUTE GAUGE
INSTITUTECAREER CAREER GAUGE
DEVELOPMENT EMPLOYEE
EMPLOYEE
DEVELOPMENT
INITIATIVES POTENTIAL
POTENTIAL
INITIATIVES
------------------------------------ ---------------------------------
---------------------------------
------------------------------------ Gauge
Career Development Initiatives GaugeEmployee
EmployeePotential
Potential
Career Development Initiatives • Measure competencies
• Provide workbooks and • Measure competencies
• Provide workbooks and (appraisals).
workshops.
workshops. (appraisals).
• Provide career counseling. • Establish talent inventories.
• Provide career counseling. • Establish talent inventories.
• Establish succession plans.
• Provide career self-management • Establish succession plans.
• Provide career self-management • Use assessment centers.
training. • Use assessment centers.
training.
• Give developmental feedback.
• Give developmental feedback.
• Provide mentoring.
• Provide mentoring. 4 3
Balancing Individual and
Organizational Needs

Figure 7.2
Identifying Career Opportunities
and Requirements
Competency Analysis
– Measures three basic competencies for each job:
know-how, problem solving, and accountability.
Job Progressions
– The hierarchy of jobs a new employee might
experience, ranging from a starting job to jobs
that require more knowledge and/or skill.
Career Paths
– Lines of advancement in an occupational field
within an organization.
 Career Changes
Promotion
– A change of assignment to a job at a
higher level in the organization.
– Principal criteria for determining
promotions are merit, seniority, and
potential.
Transfer
– The placement of an individual in another
job for which the duties, responsibilities,
status, and remuneration are
approximately equal to those of the
previous job.
Career Change Organizational
Assistance
Relocation services
– Services provided to an employee who is
transferred to a new location:
Help in moving, in selling a home, in
orienting to a new culture, and/or in learning
a new language.
Outplacement services
– Services provided by organizations to
help terminated employees find a new
job.
Alternative Career Moves
Chapter 7
Appraising and
Improving Performance
 Performance Appraisal

Appraisal
Appraisal Programs
Programs

Administrative
Administrative Developmental
Developmental

Compensation
Compensation Ind.
Ind.Evaluation
Evaluation

Job
JobEvaluation
Evaluation Training
Training

EEO/AA
EEO/AASupport
Support Career
CareerPlanning
Planning
Purposes for Performance
Appraisal
Reasons Appraisal Programs Fail
Lack of top-management
information and support
Unclear performance
standards
Rater bias
Too many forms to
complete
Use of the appraisal
program for conflicting
purposes.
Common Appraisal Problems
Inadequate Inconsistency in
preparation on the ratings among
part of the manager. supervisors or other
Employee is not given raters.
clear objectives at the Performance standards
beginning of may not be clear.
performance period. Rating personality
Manager may not be rather than
able to observe performance.
performance or have The halo effect,
all the information. contrast effect, or
some other perceptual
bias.
 Common Appraisal Problems
(cont’d)
Inappropriate time Organizational politics
span (either too short or personal
or too long). relationships cloud
Overemphasis on judgements.
uncharacteristic No thorough discussion
performance. of causes of
Inflated ratings because performance problems.
managers do not want Manager may not be
to deal with “bad trained at evaluation or
news.” giving feedback.
Subjective or vague No follow-up and
language in written coaching after the
appraisals. evaluation.
 Why Appraisal Systems Are
Ineffective
Inadequate preparation on the part of the
manager.
Employee is not given clear objectives at the
beginning of performance period.
Manager may not be able to observe
performance or have all the information.
Performance standards may not be clear.
Inconsistency in ratings among supervisors or
other raters.
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.
 Why Appraisal Systems Are
Ineffective (cont’d)
Rating personality rather than performance.
The halo effect, contrast effect, or some other
perceptual bias.
Inappropriate time span (too short or too long).
Overemphasis on uncharacteristic performance.
Inflated ratings because managers do not want
to deal with “bad news.”
Subjective or vague language in written
appraisals.

Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.
 Why Appraisal Systems Are
Ineffective (cont’d)
Organizational politics or personal
relationships cloud judgments.
No thorough discussion of causes of
performance problems.
Manager may not be trained at evaluation or
giving feedback.
No follow-up and coaching after the
evaluation.

Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.
 Behavioral Methods
Critical
CriticalIncident
Incident

Behavioral
BehavioralChecklist
Checklist
Behavioral
Behavioral
Methods
Methods
Behaviorally
BehaviorallyAnchored
Anchored
Rating
RatingScale
Scale(BARS)
(BARS)

Behavior
BehaviorObservation
Observation
Scale
Scale(BOS)
(BOS)
 Behavioral Methods
Critical Incident
– An unusual event denoting superior or inferior
employee performance in some part of the
job.
Behaviorally Anchored Rating Scale (BARS)
– A performance appraisal that consists of a
series of vertical scales, one for each
dimension of job performance.
Behavior Observation Scale (BOS)
– A performance appraisal that measures the
frequency of observed behavior.
Chapter 8
Managing Compensation
 Compensation
Pay is a statement of an employee’s
worth by an employer.
Pay is a perception of worth by an
employee.
 Total
Total Compensation
Compensation

Direct
Direct Indirect
Indirect

Wages Time
TimeNot
NotWorked
Worked
Wages//Salaries
Salaries ••Vacations
Vacations
••Breaks
Breaks
••Holidays
Holidays
Commissions
Commissions
Insurance
InsurancePlans
Plans
Bonuses ••Medical
Medical
Bonuses ••Dental
Dental
••Life
Life
Gainsharing
Gainsharing Security
SecurityPlans
Plans
••Pensions
Pensions

Employee
EmployeeServices
Services
••Educational
Educationalassistance
assistance
••Recreational programs
Recreational programs
Compensation Management and

Other HRM Functions

Supply
Supplyofofapplicants
applicants
Aid
Aidor
orimpair
impairrecruitment
recruitment Recruitment
Recruitment affects
affects wagerates
wage rates

Selection
Selectionstandards
standardsaffect
affect
Pay
Payrates
ratesaffect
affectselectivity
selectivity Selection
Selection level of pay required
level of pay required

Training
Trainingand
and Increased
Increasedknowledge
knowledgeleads
leads
Pay
Paycan
canmotivate
motivatetraining
training Development to higher pay
to higher pay
Development

Training
Trainingand
anddevelopment may Compensation
developmentmay Compensation AAbasis
basisfor
fordetermining
determining
lead
leadto
tohigher
higherpay
pay Management employee’s
employee’srate
rateof
ofpay
pay
Management
Management

Low
Lowpay
payencourages
encourages Pay
Payrates
ratesdetermined
determined
unionization
Labor
LaborRelations
Relations through negotiation
unionization through negotiation
The Pay-for-Performance Standard
Pay-for-Performance Standard
– The standard by which managers tie
compensation to employee effort and
performance.
– Refers to a wide range of compensation
options, including merit-based pay,
bonuses, salary commissions, job and
pay banding, team/ group incentives,
and various gainsharing programs.
Designing a Pay-for-Performance
System
How will performance be measured?
How will monies to be allocated for
compensation increases.
Which employees will be eligible?
How will payouts be made?
How often will payouts occur?
How large will the payouts be?
Will employees perceive the rewards as
valued?
 The Bases for Compensation
Hourly Work
– Work paid on an hourly basis.
Piecework
– Work paid according to the number of
units produced.
Salary Workers
– Employees whose compensation is
computed on the basis of weekly,
biweekly, or monthly pay periods.
The Bases for Compensation
(cont’d)
Nonexempt Employees
– Employees covered by the overtime
provisions of the Fair Labor Standards
Act.
They must be paid time and one-half their
regular pay for all work performed after forty
regular hours of work.
The Bases for Compensation
(cont’d)
Exempt employees
– Employees who not covered in the
overtime provisions of the Fair Labor
Standards Act.
Managers, supervisors, and white-collar
professional employees are exempted on the
basis of their exercise of independent
judgment and other criteria.
 Components of the Wage Mix
Labor Market Compensation Strategy
Conditions of the Organization

Area Wage
Rates Worth of
the Job
Cost of WAGE
Living
MIX Employee’s
Relative
Worth
Collective
Bargaining
Employer’s
Legal Ability
Requirements to Pay
Chapter 9
Pay-for-Performance :
Incentive Rewards
Strategic Reasons for Incentive
Plans
Variable Pay
– Tying pay to some measure of individual, group,
or organizational performance.
Incentive Pay Programs
– Establish a performance “threshold” to qualify
for incentive payments.
– Emphasize a shared focus on organizational
objectives.
– Create shared commitment in that every
individual contributes to organizational
performance and success.
 Advantages of Incentive Pay
Programs
Incentives are most useful when:
– Focused on key performance targets that
produce employee and organizational gains.
– Variable costs of payouts are linked to the
achievement of competitively important results.
– Directly relating payouts to achieving operating
performance objectives (quantity and/or
quality).
– Teamwork and unit cohesiveness are fostered by
basing payments to individuals on team results.
– Used to distribute success among those
responsible for producing that success.
 Employee Opposition to
Incentive Plans
Production standards are set unfairly.
Incentive plans are really “work speedup.”
Incentive plans create competition among
workers.
Increased earnings result in tougher
standards.
Payout formulas are complex and difficult to
understand.
Incentive plans cause friction between
employees and management.
 Types of Incentive Plans
INDIVIDUAL GROUP ENTERPRISE
Piecework Team compensation Profit sharing
Standard hour plan Scanlon Plan Stock options
Bonuses Rucker Plan Employee stock
Merit pay Improshare ownership plans
Lump-sum merit pay Earnings-at-risk plans (ESOPs)
Sales incentives
Incentives for
professional employees
Executive compensation
 Successful Incentive Plans
Employees have a desire for an incentive plan.
Employees are encouraged to participate.
Employees see a clear connection between the
incentive payments they receive and their job
performance.
Employees are committed to meeting the
standards.
Standards are challenging but achievable.
Payout formulas are simple and understandable.
Payouts are a separate, distinct part of
compensation.
 Individual Incentive Plans
Straight Piecework
– An incentive plan under which employees
receive a certain rate for each unit
produced.
Differential Piece Rate
– A compensation rate under which employees
whose production exceeds the standard
amount of output receive a higher rate for
all of their work than the rate paid to those
who do not exceed the standard amount.
Computing The Piece Rate

60 minutes (per hour)

= 5 units per hour
12 minutes(standard time per unit)

$7.50 (hourly rate)

= $1.50 per unit
5 units (per hour)
 Piecework drawbacks
Problems with piecework systems:
– Piecework standards can be difficult to develop.
– Individual contributions can be difficult measure.
– Not easily applied to work that is highly mechanized
with little employee control over output.
– Piecework may conflict with organizational culture
(teamwork) and/or group norms (“rate busting”).
– When quality is more important than quantity.
– When technology changes are frequent.
– When cross-training is required for scheduling
flexibility.
 Individual Incentive Plans:
Standard hour plan
– An incentive plan that sets pay rates based
on the completion of a job in a
predetermined “standard time.”
If employees finish the work in less than
the expected time, their pay is still based
on the standard time for the job multiplied
by their hourly rate.
 Bonuses
Bonus
– Incentive payment that is
supplemental to the base wage for
cost reduction, quality improvement,
or other performance criteria.
Spot bonus
– Unplanned bonus given for employee
effort unrelated to an established
performance measure.
 Merit Pay
Merit Pay Program (merit raise)
– Links an increase in base pay to how
successfully an employee achieved some
objective performance standard.
Merit Guidelines
– Guidelines for awarding merit raises that
are tied to performance objectives.
Merit Pay Guidelines Chart
MERIT PAY GUIDE CHART

QUINTILE (POSITION IN RANGE),%

PERFORMANCE LEVEL 1 2 3 4 5

Outstanding (5) 9 9 8 7 6
Superior (4) 7 7 6 5 4
Competent (3) 5 5 4 3 3
Needs improvement (2) 0 0 0 0 0
Unsatisfactory (1) 0 0 0 0 0
 Problems with Merit Raises
Inadequate funding for merit increases.
Vagueness in how to define and measure performance.
Employees not believing that merit compensation is
tied to effort and performance
Allowing organizational politics to influence merit pay
decisions.
Failing to differentiate between merit pay and other
types of pay increases.
Mistrust between management and employees.
An “overall” merit pay plan that does not motivate.
 Group Incentive Plans
Gainsharing Plans
– Programs under which both employees
and the organization share the financial
gains according to a predetermined
formula that reflects improved
productivity and profitability.
The Pros of Team Incentive Plans
Team incentives are effective when:
– They support group planning and problem
solving, thereby building a team culture.
– The contributions of individual employees
depend on group cooperation.
– They broaden the scope of the contribution that
employees are motivated to make.
– They reduce employee jealousies and
complaints over “tight” or “loose” individual
standards.
– They encourage cross-training and the acquiring
of new interpersonal competencies.
The Cons of Team Incentive Plans
Team incentives are ineffective when:
– Individual team members perceive that “their”
efforts contribute little to team success or to
the attainment of the incentive bonus.
– Intergroup social problems—pressure to limit
performance and the “free-ride” effect— arise.
– Complex payout formulas are difficult for team
members to understand.
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