PERFORMANCE APPRAISAL & JOB EVALUATION

MEANING OF PERFORMANCE APPRAISAL

Performance Appraisal may be understood as the assessment of an individuals performance in a systematic way, the performance being measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility, health etc.

DEFINITION OF PERFORMANCE APPRAISAL

Performance Appraisal is a method of evaluating the behaviour of employees in the work spot, normally including both the quantitative and qualitative aspects of job performance. It is a systematic and objective way of evaluating both work related behaviour and potentiality of employees.

IMPORTANCE OF PERFORMANCE APPRAISAL

Compensation

Decisions Promotion Decisions Training and Development Programmes Feedback Personal Development

PROCESS OF PERFOMANCE APPRAISAL

Establish

performance standards Communicate the standards Measure actual performance Compare actual performance with standards and discuss the appraisal Taking corrective action, if necessary

METHODS OF PERFORMANCE APPRAISAL

Appraisal Methods

Individual evaluation methods

Confidential report Essay evaluation Critical incidents Checklists Graphic rating scale

Multiple person evaluation methods

Ranking Paired Comperison Forced Distribution

Other methods Group appraisal HRA Assessment centre Field review

Behaviourally anchored rating scale

Forced choice methods MBO Most utilized appraisal methods by corporate 360-Degree Feedback System

PROBLEMS ON PERFORMANCE APPRAISAL SYSTEM

i.
ii. iii. iv. v. vi. vii.

Judgment errors
First impressions Halo error Horn effect Leniency Central tendency Stereotyping Recency effect

Poor appraisal forms Lack of rater preparedness Ineffective organizational policies and practices

MANAGERIAL APPRAISAL
Harold koontz has developed a concept of managerial appraisal. According to his concept, the managers attain the organizational objectives by performing the basic managerial functions, viz, planning, organizing, leading, motivating, staffing and controlling.

JOB EVALUATION
Job Evaluation is the process of analysis and
assessment of jobs to ascertain reliably their relative worth using the assessment as a basis for a balanced wage structure - British Institute of Management

OBJECTIVES OF JOB EVALUATION

Secure and maintain complete, accurate and impersonal descriptions of each distinct job or occupation in the entire plant. Provide a standard procedure for determining the relative worth or value of each job within the plant. Determine a rate of pay for each job which is fair and equitable with relations to other jobs in the plant community and industry. Ensure that like wages are paid to all qualified employees on like work. Promote fair and accurate consideration of all employers for advancement and transfer. Provide information for the work, organization employees selection, training and numerous other important purposes.

PRINCIPLES OF JOB EVALUATION

Rate the job but not the employee Rate the elements on the basis of job demands. The elements selected for rating should be easily understood The elements should be defined clearly and properly selected Employees concerned and the superiors should be educated Do not establish too many occupational wages.

METHODS OF JOB EVALUATION

ANALYTICAL METHODS

Point Ranking Method Factor Comparison Method

NON- ANALYTICAL METHODS

Job Evaluation

Ranking Method Job-grading Method

MODULE 2
INTRODUCTION OF COMPENSATION MANAGEMENT

MEANING OF COMPENSATION MANAGEMENT

Compensation refers to the set of rewards that organizations provide to individuals in return for their willingness to perform various jobs and tasks within the organization. Compensation could be monetary and non monetary in nature.

DEFINITION OF COMPENSATION MANAGEMENT

Compensation Management is a system of compensating individuals for the work they perform in such a way that the organization is able to attract, retain, and motivate them to perform well keeping in view organizational and market factors. - Tapomoy Deb

OBJECTIVES OF COMPENSATION MANAGEMENT

To attract highly capable and efficient employees so that their efforts produces higher organizational performance. To retain talented employees in an organization. To increase the motivation and morale of employees for achieving higher employee commitment towards goals and objectives of the organization. To maintain market competitiveness in order to reduce or control employee attrition which can affect organizational functioning . To help employee meet his economic, personal, social, and psychological needs and aspirations. To encourage employees to develop their skills and competencies by attaching higher value to compensation for increased job performance.

PRINCIPLES OF COMPENSATION MANAGEMENT

Ability to Pay Non - Discriminatory Legal Compliance

Equity Considerations

Principles of Compensation Management

Simple & Flexible

Performance Orientation

Employee Development

DEFINITION OF REWARD SYSTEM

According to Armstrong, Reward System is concerned with the formulation and implementation of strategies and policies, the purpose of which are to reward people fairly, equitably and consistently in accordance with their value to the organization and thus help the organization to achieve its strategic goals.

TYPES OF REWARDS
REWARDS Intrinsic Participation Growth Chances Responsibility Freedom Financial Performance Based Incentive Plans Bonuses Commission Merit Pay Membership Based Dearness Allowance Seniority Based Running Scale Profit Sharing Benefits Services Personal Secretary Phone, Car & Others facilities Extrinsic Non - Financial Furnished Office or House Business Cards Executive Class Travel & Stay

ROLE OF REWRD SYSTEM

Motivating the employees for their jobs. Developing the living status of the employees. Making the employees more responsible towards the organization. Increasing the morality of an employee. Improving the skills and knowledge of the employees. Helping the employees to be more growth oriented. Helping the employees to enjoy the task or job.

EMPLOYEE REMUNARATION
Remuneration is the compensation an employee receives in return for his or her contribution to the organization. Remuneration of an employee comprises wages and salary, incentives, fringe benefits, perquisites and non monetary benefits.

FACTORS INFLUANCING EMPLOYEE REMUNARATION

o

External Factors:1. Labour Market 2. Cost of Living 3. Labour Unions 4. Labour Laws 5. Society 6. The Economy Internal Factors:1. Business Strategy 2. Job Evaluation and Performance Appraisal 3. Potentiality of an employee

MANAGERIAL COMPENSATION
Section 198 of the companies Act 1956, says that the total managerial remuneration payable by a public limited company to its directors, secretaries, treasures and managers shall not exceed 11% of the net profit s of the company. Section 198(4) of the companies act provides that in the a inadequacy of profits, a maximum of Rs50,000 may be paid to managing directors and all directors. As per Government guidelines in November 1978, the overall salary was restricted to Rs 72000 per annum and perks were restricted to Rs 60,000 per annum.

FACTORS EFFECTING WAGES,SALARY LEVEL AND ITS ADMINISTRATION

Remuneration in comparable industries. Firms ability to pay Relating to price index Productivity Union pressure and strategies Government legislation

THE MECHNISM OF SALARY/WAGE ADMINISTRATION

Wages Survey Wages Legislation Job Description Wages Level Job Evaluation Wage Structure Work / Job Standard Wage Fixation Incentive Payment Merit Rating (Evaluation) Wages Incentive Plan Job Specification

Wage Payment

MODULE 3
THEORIES OF WAGES & WAGE LEGISLATION

JUST WAGE THEORY

This was the first theory on wages. The essence of this theory is that the worker should be paid on the level of maintaining himself and his family.

SUBSISTENCE THEORY
This is proposed by David Ricardo(1772-1823). It says The labourers are paid to enable them to subsist and perpetuate the race without increase or diminution. This theory pre-supposes low wages lead to decrease of labour force due to death, malnutrition, whereas higher wages increase their number due to better health, long life. This theory is also known as Iron Law of Wages. Here payment is limited to subsistence level.

WAGE FUND THEORY

This theory was propounded by Adam Smith (1723- 90). As per this theory wage level is a function of surplus fund available with the employer. Higher this fund, higher the pay, lower the same, low the level of wages which may even touch the subsistence level. Here focus is on employer and his capacity to pay. (Wage = Amount of fund allocated for wage payment / Number of workers)

STANDARD OF LIVING THEORY

According to Karl Marx, Wage of labour is determined by a traditional standard of living, which, in turn, is determined by the mode of production of the country concerned

RESIDUAL CLAIMANT THEORY

Francis. A. Walker(1840-97) proposed this theory. According to this theory, four factors add value to the product which is manufactured. These are land, capital, labour and entrepreneurship. The revenue earned by selling product was first distributed among the three factors viz. land, capital and entrepreneurship as compensation against their contribution. Whatever remained was paid to labour as wages against their value addition. Thus labour is considered as a residual claimant.

MARGINAL PRODUCTIVITY THEORY

This theory was developed by Phillips Henry Wicksteed (UK) and John Bates Clark (USA). Here wages are determined by supply and demand of labour in the labour market. Accordingly workers are paid what they are economically worth as assessed by the employer. Marginal concept says that employer continue to employ labour as long as value addition by the marginal worker is more than his cost; otherwise discontinue hiring and resort to changes in technology or product mix. This results better return to employer and lesser wages to employees.

BARGAINING THEORY
This theory was proposed by John Davidson. Here wages levels are determined by bargaining power of employees and their unions Vs employers and their Associations. Relative strengths of these forces determine all aspects of wages viz. wage level, wage structure, individual fixation, wage differentials.

BEHAVIOURAL THEORY
According to Behavioral Scientists, wage are determined on the basis of several factors like the size, nature, prestige of the organization, strength of the union, social norms, traditions, customs, prestige of certain jobs in terms of authority, responsibility and status, level of job satisfaction, morale, desired lines of employee behaviour and level of performance.

EXPECTANCY THEORIES
Vrooms expectancy theory focuses on the link between rewards and behaviour. According to the theory, individual motivation depends on following three factors:1. Perception that his effort will lead to good performance (Expectancy) 2. Perception that good performance will lead to rewards (Instrumentality) 3. Perception that the rewards are worth getting (Valence)

EQUITIES THEORIES
According to Adams Equity theory, an employee who perceives inequity in his or her rewards seeks to restore equity. The theory emphasizes equity in pay structure of employees remuneration. Employees perceptions of how they are being treated by their firm is of prime importance to them. The dictum (formal announcement / saying) a fair day work for fair day pay denotes a sense of equity felt by employees. When employees perceive inequity, it can result in lower productivity, higher absenteeism or increase in turnover.

PAYMENT OF WAGES ACT, 1936

This Act provides protection of employees from the careless employers. The exploitation takes in many forms such as payment in kind instead of cash, delayed payment, unauthorized deduction of wages and irregular payments etc. This Act cover employees whose payment are less than Rs. 1600 per month. This Act protect employees from non-payment, irregular payment, or payment in kind instead of cash. As per this Act, all the employees are to be paid on or before 7th working day of the month for organizations having strength less than 1000. For other organizations, this day is 10th working day.

MINIMUM WAGES ACT, 1948

This is an Act of Central Government. State Governments also follow these provisions. Central legislation covers originally 40 employments. As on date, 260 employments are now covered by this Act for central and state governments. It takes into account cash value of items, or goods supplied. This Act is now being amended to link the same to cost of living in order to take care of inflation.

PAYMENT OF BONUS ACT, 1965

The benefits of bonus Act goes to organized labour. An interesting controversy has arisen as to the definition of the term bonus; whether it is a profit sharing or deferred wages. Initially bonus was 4 % which is increased to 8.33% during emergency period (1975-76). It covered all employees below wages level of Rs.2500. Of late efforts are made to amend this Act also to include all employees drawing salaries, wages less than Rs. 3500 p.m. Due to pressure from Indian Labour Unions, government has agreed and considered bonus as a deferred wage. Because of this reason, even loss making organizations have to pay the minimum bonus of 8.33%. Wherever union is strong they can obtain bonus higher than the minimum level by collective bargaining. At present employees of service sectors, education institutions and other employees like casual workers and those of unorganized sectors are not covered by this Act. This task is given to government labour officers.