Chapter 7

Organizational
Behavior, 8e
Schermerhorn, Hunt, and
Osborn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc.

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Organizational Behavior: Chapter 7 2

Chapter 7
Human Resource Management Systems
 Study questions.
– What are the essentials of human resource
strategy and practice?
– What is training and career planning and
development?
– What is performance appraisal?
– What are rewards and reward systems?

What are the essentials of human
resource strategy and practice?
 Human resource (HR) strategic planning.
– The process of providing capable and
motivated people to carry out the
organization’s mission and strategy.
– A key element is the staffing function, which
consists of:
• Recruitment.
• Selection.
• Socialization.

 Job analysis.
– Staffing begins with job analysis.
– The process and procedures used to collect
and classify information about tasks the
organization needs to complete.
– Identifies the worker characteristics needed to
perform the job.
– Forms the basis for a job description and job
specifications.
 Recruitment.
– The process of attracting the best qualified
individuals to apply for a given job.
– Typical recruitment steps.
• Advertisement of a position vacancy.
• Preliminary contact with potential job candidates.
• Preliminary screening to obtain a pool of
candidates.
 Recruitment approaches.
– External recruitment.
– Internal recruitment.
– Realistic job previews.

 Selection.
– A series of steps from initial applicant
screening to final hiring of the new employee.
– Selection process.
• Completing application materials.
• Conducting an interview.
• Completing any necessary tests.
• Doing a background investigation.
• Deciding to hire or not to hire.

 Completing application materials.
– Gathering information regarding an
applicant’s background and experiences.
– Typical application materials.
• Traditional application forms.
• Résumés.
• Sometimes tests may be included with application
materials.

 Conducting an interview.
– Typically used though they are subject to
perceptual distortions.
– Interviews can provide rough ideas concerning
the person’s fit with the job and the
organization.

 Completing any necessary tests.
– Administered before or after the interview.
– Common examples of employment tests.
• Cognitive, clerical, or mechanical aptitudes or
abilities.
• Personality.
• Drug use.
• Performance.
• Assessment centers.

 Doing a background investigation.
– Can be used early or late in selection process.
– Background investigations include:

• Basic level checks.
• Reference checks.

 Deciding to hire or not to hire.
– Draws on information produced in preceding
selection steps.
– A job offer is made.
– A physical examination may be required if it is
relevant to job performance.
– Negotiation of salary and/or benefits for some
jobs.
 Socialization.
– The final step in the staffing process.
– Involves orienting new employees to:
• The firm.
• The work units in which they will be working.
• The firm’s policies and procedures.
• The firm’s organizational culture.

What is training and career
planning and development?
 Training.
– A set of activities that provides the
opportunity to acquire and improve job-related
skills.
– Types of training.
• On-the-job training.
• Apprenticeships.
• Job rotation.
• Off-the-job training.

 Career planning and development.
– Focus is on the long term.
– Individuals work with their managers and/or
HR experts on career issues.

 Framework for formal career planning.
– Personal assessment.
– Analysis of opportunities.
– Selection of career objectives.
– Selection and implementation of plan.
– Evaluation of results and revision of plan as
necessary.

 Career planning and development

implications.
– The nature of work is changing and
continuous learning is required.
– People must take charge of their own careers
and build a portfolio of skills.

 When considering a new job or possible

job change, a person should ask and
answer two questions.
– What are my potential gains and losses?
– What are the potential gains and losses for
significant others?

 Traditional career paths.
– Entry and establishment.
• Involves on-the-job development of relevant skills and
abilities.
– Advancement.
• The individual seeks growth and increased responsibility.
– Maintenance, withdrawal, and retirement.
• Individuals may experience continued growth of
accomplishments or may encounter career stability.
• At some point, individuals consider withdrawal and ultimate
retirement.

What is performance appraisal?
 Performance appraisal.
– A process of systematically evaluating
performance and providing feedback upon
which performance adjustments can be made.
– Performance appraisal should be based on job
analysis, job description, and job
specifications.
 Functions of performance appraisal.

– Define the specific job criteria against which
performance will be measured.
– Measure past job performance accurately.
– Justify rewards, thereby differentiating
between high and low performance.
– Define ratee’s needed development
experiences.
 Purposes of performance appraisal.
– The four functions describe two general

purposes of good performance appraisal.
• Evaluation.
• Feedback and development.

 Evaluative decisions.
– Concerned with issues regarding:
• Promotions
• Transfers.
• Terminations.
• Salary increases.
– When these issues are decided on the basis of
performance, a performance appraisal system
is needed.

 Feedback and development decisions.

– Letting ratees know where they stand in terms
of expectations and performance objectives.
– Feedback should involve a detailed discussion
of the ratee’s strengths and weaknesses.
– Feedback can be used as a basis for coaching
and training by the manager.

 Who does the performance appraisal?

– Ratee’s immediate superior.
– Ratee’s peers.
– Ratee’s subordinates.
– 360-degree evaluation.

 Dimensions and standards of performance

appraisal.
– Output measures.
• Quantity of work output.
• Quality of work output.
– Activity measures.
• Behavioral measures that are typically obtained
from the evaluator’s observation and rating.

 Performance appraisal methods.

– Comparative methods.
• Seek to identify a person’s relative standing among
those people being rated.
– Absolute methods.
• Specify precise measurement standards.
– Collectivist-oriented cultures are less likely to
use comparative methods and more likely to
use absolute methods.

 Comparative methods of performance

appraisal.
– Ranking.
– Paired comparison.
– Forced distribution.

 Ranking.
– Consists of rank ordering individuals from
best to worst on each performance dimension.
– Relatively simple to use.
– Can be burdensome when evaluating a large
number of people.

 Paired comparison.
– Each person is directly compared with every
other person being rated.
– Final performance ranking reflects the
frequency of endorsement across all pairs.
– Can be very tedious when many people must
be compared.

 Forced distribution.
– Uses a small number of performance
categories, and rater assigns a specific
proportion of employees to each category.
– Forces rater to use all categories.
– Can be problematic if most of the employees
perform similarly.

 Absolute methods of performance

appraisal.
– Graphic rating scales.
– Critical incident diary.
– Behaviorally anchored rating scales.
– Management by objectives.

 Graphic rating scales.

– List of dimensions related to high
performance, and the rater assigns an
individual score on each dimension.
– Easy and efficient to use.
– Conundrum of job relevance and generality
across jobs.
 Critical incident diary.

– Record of incidents of each subordinate’s
behavior that led to unusual success or failure
in a give performance aspect.
– Excellent for development and feedback due
to qualitative emphasis.
– Difficult to use for evaluation due to lack of
quantitative emphasis.

 Behaviorally anchored rating scales

(BARS).
– Developed through the careful collection of
observable job behaviors that describe both
superior and inferior performance.
– A rating scale is developed that anchors
specific critical behaviors, each of which
reflects a different degree of performance
effectiveness.

 Behaviorally anchored rating scales

(BARS) — cont.
– Provides specific behaviors that are useful for
counseling and feedback.
– May not be as superior as once thought.
– The Behavioral Observation Scale (BOS) is a
simpler variation of BARS.

 Management by objectives (MBO).

– Subordinates work with their supervisor to
establish specific task-related objectives.
– MBO is the most individualized appraisal
method .
– MBO works well with counseling, provided
the goals focus on important activities.
– MBO is not highly subjective to rating errors.

 To be meaningful, an appraisal system must be:

– Reliable — provide consistent results across time.
– Valid — actually measure people on relevant job

content.
 Measurement errors can threaten the reliability or

validity of performance appraisals.

 Measurement errors in performance

appraisal.
– Halo errors.
• The rater evaluates the ratee on several different
dimensions and gives a similar rating for each
dimension.
– Leniency errors.
• Raters tend to give everyone relatively high
ratings.

appraisal — cont.
– Strictness errors.
• Raters tend to give everyone relatively low ratings.
– Central tendency errors.

• Raters lump everyone together around the average
or middle.


appraisal — cont.
– Low differentiation errors.
• Raters restrict themselves to a small part of the
rating scale.
• Examples include leniency, strictness, and central
tendency errors.
– Recency errors.
• Raters allow recent events to exercise undue
influence on ratings.

appraisal — cont.
– Personal bias errors.
• Raters let personal biases, such as stereotypes,
unduly influence the ratings.

 Rating errors can be reduced and performance

appraisals improved by:
– Training raters to understand the evaluation process
and recognize errors.
– Ensuring that raters observe ratees on an ongoing
basis.
– Not having the rater evaluate too many ratees.
– Ensuring the clarity and adequacy of performance
dimensions and standards.
– Avoiding terms that have different meanings for
different rates.
 Guidelines for ensuring the legality of

performance appraisal systems.
– Base appraisal on job requirements as
reflected in performance standards.
– Ensure that employees clearly understand the
performance standards.
– Use clearly defined dimensions.
– Use behaviorally-based dimensions supported
by observable evidence.
 Guidelines for ensuring the legality of

performance appraisal systems — cont.
– Avoid abstract trait names.
– Ensure that scale anchors are brief and
logically consistent.
– Ensure that the system is valid and
psychometrically sound.
– Provide an appeal mechanism to handle
appraisal disagreements.
 Group evaluation.
– Group or team performance appraisal is
consistent with:
• Self-managed teams.
• High performance organizations.
– Frequently accompanied by a group-based

compensation system.

What are rewards and reward systems?
 Types of rewards.
– Extrinsic rewards.
• Positively valued work outcomes given by some
person or source in the work setting.
– Intrinsic rewards.
• Positively valued work outcomes received directly
from task performance.

 Pay as an extrinsic reward.

– Positive aspects of pay.
• Helps firms attract and retain capable workers.
• Helps satisfy and motivate workers.
– Negative aspects of pay.
• Dissatisfaction with pay can lead to strikes,
grievances, absenteeism, turnover, and poor
physical and mental health.

 Pay as a source of motivation.

– High job performance must be viewed as the
path for achieving high pay.
– Merit pay is a method for connecting
performance and pay.
– Merit pay makes pay contingent on job
performance.

 To be effective, merit pay should:

– Use realistic and accurate performance
measures.
– Create a strong linkage between high
performance and high pay.
– Discriminate between high and low
performers in amount of pay.
– Not be confused with cost-of-living
adjustments.
 Creative pay practices.

– Merit pay plans do not recognize employee
interdependence, and are thus inconsistent
with the demands of HPOs.
– Pay practices should be consistent with:
• The demands of HPOs.
• The HR and overall organizational strategies.

 Types of creative pay practices.

– Skill-based pay.
– Gain-sharing plans.
– Profit-sharing plans.
– Employee stock ownership plans (ESOPs).
– Lump-sum pay increases.
– Flexible benefit plans.

 Skill-based pay.
– Rewards people for acquiring and developing
job-relevant skills.
– Advantages.
• Employee cross-training.
• Fewer supervisors needed.
– Disadvantages.
• Higher pay and training costs.
• Establishing appropriate monetary values for
skills.
 Gain-sharing plans.
– Workers share in enhanced earnings resulting
from productivity gains.
– Advantages.
• Increased worker motivation.
• Greater sense of personal responsibility.
• Encourages participation and teamwork.

 Profit-sharing plans.
– Reward employees based on entire
organization’s performance.
– Not connected to productivity gains.
– Often fund employee retirement plans.
• Considered to be a benefit rather than an incentive.

 Employee stock ownership plans (ESOPs).

– Based on total organization’s performance.
– ESOP options.
• Stock may be given to employees.
• Employees may purchase stock at a below-market price.
– Advantage.
• Nontaxable to organization until redeemed by employees.
– Disadvantage.
• Risk of stock investments.

 Lump-sum pay increases.

– Individuals elect to receive a pay increase in
one or more lump-sum distributions that
increase the base salary.
– Lump-sum payments — which differ from
lump-sum increases — are one-time bonus
payments that do not increase the base salary.

 Flexible benefit plans.

– Fringe benefits are indirect incentives.
– Plans accommodate individual differences to
capitalize on motivational value of benefits.
– Plans allow workers to select benefits
according to their needs.

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Organizational

John Wiley & Sons, Inc.

Organizational Behavior: Chapter 7 2

Organizational Behavior: Chapter 7 3

Organizational Behavior: Chapter 7 4

– Realistic job previews.

Organizational Behavior: Chapter 7 7

Organizational Behavior: Chapter 7 8

Organizational Behavior: Chapter 7 9

Organizational Behavior: Chapter 7 10

Organizational Behavior: Chapter 7 11

 Doing a background investigation.

– Can be used early or late in selection process.

– Background investigations include:

Organizational Behavior: Chapter 7 12

Organizational Behavior: Chapter 7 14

Organizational Behavior: Chapter 7 15

 Career planning and development.

– Focus is on the long term.

– Individuals work with their managers and/or

HR experts on career issues.

Organizational Behavior: Chapter 7 16

Organizational Behavior: Chapter 7 17

 Career planning and development

Organizational Behavior: Chapter 7 18

 When considering a new job or possible

Organizational Behavior: Chapter 7 19

Organizational Behavior: Chapter 7 20

 Functions of performance appraisal.

 Purposes of performance appraisal.

– The four functions describe two general

• Feedback and development.

Organizational Behavior: Chapter 7 23

Organizational Behavior: Chapter 7 24

 Feedback and development decisions.

Organizational Behavior: Chapter 7 25

 Who does the performance appraisal?

Organizational Behavior: Chapter 7 26

 Dimensions and standards of performance

Organizational Behavior: Chapter 7 27

 Performance appraisal methods.

Organizational Behavior: Chapter 7 28

 Comparative methods of performance

Organizational Behavior: Chapter 7 29

Organizational Behavior: Chapter 7 30

Organizational Behavior: Chapter 7 31

Organizational Behavior: Chapter 7 32

 Absolute methods of performance

Organizational Behavior: Chapter 7 33

 Graphic rating scales.

 Critical incident diary.

Organizational Behavior: Chapter 7 35

 Behaviorally anchored rating scales

Organizational Behavior: Chapter 7 36

 Behaviorally anchored rating scales

Organizational Behavior: Chapter 7 37

 Management by objectives (MBO).

Organizational Behavior: Chapter 7 38

 To be meaningful, an appraisal system must be:

– Valid — actually measure people on relevant job

 Measurement errors can threaten the reliability or

Organizational Behavior: Chapter 7 39

 Measurement errors in performance

 Measurement errors in performance