HUMAN RESOURCE MANAGEMENT

“ Measurements are the key.
If you cannot measure it, you cannot control it.
If you cannot control it, you cannot manage it.
If you cannot manage it, you cannot improve it.”
J. Harrington

Out of all the assets owned by a company, the intellectual capital is the most complex and unpredictable one
! Organizations cannot afford to support people who are not obviously contributing to the strategic goals of the enterprise.
therefore they act in the spirit of recruiting the persons whose abilities and skills satisfy the best their needs,
they apply the best policies of motivation for stimulating the employees to achieve outstanding results and
they take the opportunity to measure the performance achieved in comparison with the standards expected.

If there is any error in the performance management process,
how high is the price a company can afford to pay for promoting the wrong person or for terminating a potential gold medal employee?

We have to get it right!
An effective tool of assessing competence:
must have a clear definition
- must have well-defined levels of performance at each
point along a rating scale

1. identify
2. analyze
3. measure
4. evaluate
5. improve/ encourage
6. reward PERFORMANCE
Performance management system

! Administrative vs development approach
- administrative approach → granting a salary raise
promotion
downsizing
termination
- development approach → data about the strengths
capabilities
weaknesses
improvement areas

Stages in performing an appraisal
! Defining the reason for evaluation & setting objectives
why? what?
! Nominate the person who will do the evaluation
who?
- Employees’ rating by the supervisor
- Manager’s rating by the employees - upward feedback
- Peer Rating
- Self Rating
- Outside raters
Multisource rating (360° appraisal)
! Perform the evaluation + Follow-up

Positive not negative
...you obtained only 80 points out of 100, which is not the best score...
...you did well in ...and out of 100 points you have obtained 80....
Future oriented not past oriented
...why didn’t you do more for achieving a better score?
...we could work together in order to find a way for improving it...
Constructive not destructive
...I think that you are a little bit lazy, you can do more, I am sure...
...maybe we have to change something in your schedule or to analyze your general approach...
An appraisal should be

During the appraisal… feedback!
Feedback system = a FRPS response
F- fast
R- relevant
P- positive
S- specific

Rynes, Gerhard & Parks suggest a separation of
Performance evaluation
Pay for performance
“Split roles” notion: counselor of development versus judge of salary
However, no empirical results suggest that the combination is detrimental to satisfaction, motivation, or performance

The last step in the performance management system?
Rewarding employees

Individual Human Needs (McClelland)
The need for achievement
The need for affiliation
The need for power
Within a need satisfaction framework, what do people
find rewarding?

The effects of rewards (Lindenberg, 2001)
How rewards are likely to be interpreted
Via attribution action: to oneself (i) or external cause (e)
Via interpretation of control: controlling (e) or informational (i) of one’s competence
(e) – external
(i) – internal

Why would a person work for someone else?

GAIN
People are highly sensitive to opportunities for and
threats to the improvement of their resources

Functions of pay
To increase wanted type of behavior
In Economics: incentives - costs and rewards following behavior
In Sociology: value/ goal rational behavior
In Psychology: from behaviorism (“rewards increase behavior”) to intrinsic motivation (“rewards decrease behavior”)
Motivation theories deny the importance of pay

2 Effects of pay
Incentive effect: impact on performance (focus on outcome), same person improves
Sorting effect: impact on workforce (attracting and retaining certain employees), improvement by changes of employees, e.g. more productive replace less productive – selection effects

To determine pay
How much emphasis is put on performance measures?
How strong should incentives be, how will risk aversion influence effectiveness?
How much emphasis on individual vs. collective contributions?

Individual incentives/ merit pay
Gain sharing
Profit sharing
Stock plans
Pay for performance:
Generally positive
Other motivators available
If wrong, consequences are seriously wrong, unintended negative effects
Individual vs Collective

Effectiveness of group pay
Drawbacks according to Rynes et al.
Most employees prefer individual
Best performers prefer this least, sorting effect
Weakened incentives: lower expectancy, specifically of rational self-interested individuals
But: Positive incentive effects if promoting cooperation and avoiding overly narrow individual goals.

Comparison group pay over four articles

Hakonen et al. - Meaning of pay
Motivational properties: what you can do with money to achieve other rewards (instrumentality of pay)
Relative position: provides information on how you do compared to others, and to own previous performance
Control: feelings of meaning something to organization, self-determination and competence
Spending: specific type of instrumentality, ownership/ satisfaction

GREED
Definitional difficulty:
“excessive desire”
“more than is needed”
Negative in all cultures (or do you know an exception?) because at cost of others, yet “upward surge of mankind”, hypocritical?
When to be greedy and when not?
When does self-interest become greed?

CONCLUSIONS
Each and every’s employee performance has to be managed
Appraisals are critical for determining rewards
Pay can have many effects: incentive, sorting, goal framing effects
Sometimes we see a separation of evaluation and pay in research and practice