Evaluation , Feedback and Rewards

Evaluation ,Feedback and Rewards

Objectives:
To develop an understanding of:
• Evaluation of Performance
• Performance Evaluation feedback
• Reinforcement theory
• A model of Individual rewards
• Rewards Affect Organizational concerns
• Innovative reward system

Organizations use rewards to attract, retain, and motivate people. But methods for distributing rewards vary from organization to organization, within the same organization across different levels and according to the nature of rewards. Some rewards may be universal or across the board rewards, some rewards may be a function of seniority while others may be related to job performance. To distribute rewards equitably, organizations develop systems for performance evaluation. To maximize effectiveness of the organization, it is necessary to link employee evaluation systems with reward systems.
Evaluation of Performance: Performance of an individual is the function of ability, motivation, resources available to perform the task and direction / target set for the job. Purposes of evaluation may be judgmental or developmental. Judgmental purposes focus on past performance, helping mangers evaluate training programs and decide on how rewards should be distributed. It provides a basis for reward allocation, identifies high-potential employees, validates the effectiveness of employee selection procedures and evaluates previous training programs. Developmental purposes seek to improve future performance by clarifying expectations and identifying training needs. It stimulates performance improvement, develops ways of overcoming obstacles and performance barriers, identifies training and development opportunities and establishes supervisor-employee agreement on performance expectations.
Methods of Performance Evaluation
Rating formats-Evidence indicates that ratings are not strongly related to results.Rating depends heavily on the mental process of the rater and as the processes are complex, there may be errors of judgment in the rating. Results depends heavily on conditions that may be outside the control of the individual employee and most measures of results provide only partial coverage of the overall domain of job performance Behavior – Oriented rating method Relative rating system Absolute rating system Result – Oriented rating system Management by objective Work planning and review Behavior – Oriented rating method
Relative rating system
• Ranking and paired comparison-Good for making comparison across employees, but provides little basis for individual feedback and development
• Forced Distribution-Forces rater to make distinction among employees but may be unfair and inaccurate comparisons across employees if a group of employees, as a group, is very effective or ineffective
• Graphic rating scales( including behavioral anchored rating scales - BARS) are easy to use and very helpful for providing feedback for individual development. It facilitates comparison across employees but does not define dimensions and scale points are not defined clearly
• BARS – Very time consuming to develop, but dimensions and scale points are defined clearly
Absolute rating system
• Narrative essay-Good for individual feedback and development , but difficult to make comparisons across employees
• Behavioral checklist -Are easy to use and provide a direct link between job analysis and performance appraisal. They can be numerically scored and facilitate comparison across employees. However meaning of response categories may be interpreted differently by different raters
• Critical incident-Focus directly on job behavior.Emphases on what employees did that was effective or ineffective, but can be very time consuming to develop
Result – Oriented rating system
Management by objective- Focuses on results.Each individual contribution to the success of the unit or organization. It is short – term oriented in approach. It provides few insights into employee behavior. But it does not facilitate comparison across employees.An example of an objective for a sales manager might be: Increase the gross monthly sales volume
Work planning and Review- It focuses on results. It emphasizes process over outcomes. It requires frequent supervisor– subordinate reviews of work plan. It is time consuming to implement properly and does not facilitate comparison across employees
Effective performance evaluations are continuous, ongoing processes asking two questions:
a. Is the work being done effectively? b. Are employee skills and abilities being fully utilized?
Focus should be on: a. Translating job responsibilities into daily activities. b. Helping employees understand and develop these responsibilities, relate them to goals, and recognize accomplishments. c. Emphasizing job performance, not individuals. d. Weighting relevant behaviors appropriately.

Relevancy in evaluations has three aspects: a. Deficiency-failure to focus on all aspects of the job. b. Contamination-Focusing on activities that are not part of the job. c. Distortion-improper emphasis of various job elements.
Improving evaluations—may be accomplished through: 1.Increasing employee participation in the evaluation process. 2. Setting specific performance goals. 3. Giving evaluators training. 4. Communicating results to employees. 5. Focusing on good performance, as well as performance problems.6.Conducting evaluations informally, throughout the year.
Performance Evaluation Feedback- Purpose of Evaluation Feedback 1.Instructional—when areas needing improvement are clearly identified and needed changes explained. 2. Motivational—when rewards or incentives are provided as part of the evaluation process.
Feedback should be:
• Behavioral: Focus feedback on employee’s behavior
• Specific: Give specific examples of observations; avoid exaggerations, e.g. “always” “never”
• Job-related: feedback must be about behaviors exhibited on the job
• Timely: feedback should be given as soon as possible; time lapse allows inappropriate behavior to be repeated
• Balanced: the “sandwich” method; deliver positive feedback, followed by constructive feedback, then positive again
• Respectful: feedback is more easily accepted if the employee’s dignity and self-worth are kept intact
Effective Feedback is descriptive and not evaluative. It focuses on the behaviour of the person and not on the person himself. It is data based and specific and not impressionistic. Effective feedback reinforces positive new behaviour . It is continuous, suggestive and not prescriptive, need based and solicited. It is intended to help the person to whom feedback is given, focuses on modifiable behaviour and satisfies needs of both the feedback given and one who receive feedback
Approaches to increase the effectiveness of feedback in improving performance-
a. Feedback should be given frequently.
b. Permit the person being evaluated to participate in the feedback session.
c. Focus on both ineffective and effective behaviors.
d. Focus on results and goals.
e. Gain and maintain respect throughout the entire process.

Multisource Feedback: A 360-Degree Approach uses information about the employee from various locations within, and sometimes outside of, the organization. An employee is rated on a range of competencies by people with whom he or she has a work or business relationship-self, boss, peer, subordinates, customers, and even family members.It is a common belief that such programs are effective when used for developmental purposes but not for administrative (e.g. promotion) purposes. A 360-degree feedback process usually consists of multiple steps –(1)Planning (2)buy-in (3)evaluation instrument design or selection (4) report generation (5)feedback delivery (6) setting development plan (7) follow-up.
Feedback can enhance self-awareness about own strengths and weaknesses.Based on Cognitive Dissonance Theory (Festinger, 1957), a significant gap between self-ratings and ratings from others can cause psychological dissonance. When this happens, people are motivated to reduce this gap and feel assonant again.According to Control Theory (Carter & Schneier, 1981,1982), when people detect discrepancies between their goals and their behavior, they are likely to take actions to reduce the discrepancies.
360-Degree Feedback is considered to be more fair and credible as it provides multiple points of view; thus, allowing comparisons. Also, it is considered more thorough.

However, feedback providers may be reluctant to provide honest and direct information for fear of retaliation that the information could negatively affect the recipient’s salary and/or career aspirations; results might be inflated; concern that the peer or subordinate evaluator does not have enough information upon which to make the evaluation.
There is a plenty of room between feedback and actual individual development /change
Feedback: How was a person perceived by various raters?
Judgment: what does the feedback mean to the person?
Intention: What does the person plan to do?
Action: What does the person really do?
Results: What does the person finally achieve?
To close the gap between feedback and actual individual development/change steps should be taken at both organizational and individual level.
What should be done at the Organizational Level
When designing a 360-degree feedback program, it is important to make it clear that actual individual development /change is the major goal. It is better to model the individual learning process instead of simply using “follow-up”. During implementing the program , it is important to align the whole effort with the goal of individual development e.g., train people how to give constructive feedback in real work situations. After giving feedback, it is important to(1) ensure to keep focus on the major goal—individual development(2)set realistic expectations(3)allocate sufficient resources(4) provide supportive conditions(5)create a learning culture
What should be done at the Individual Level
Firstly, it is necessary for the individual to understand why he or she needs to learn or develop. Finding a good coach or mentor is the second important thing. The individual should have a focus-One of the keys is to identify one or two areas for improvement. Three ways to make a development focus: (a) focusing on strengths (from good to great) (b) focusing on weaknesses when they really create problems (c) leveraging strengths and compensating for weaknesses and learning how to mix them to have a better outcome. Being patient, persistent, resilient and creative is very much necessary. It is important to reflect. Seeking external emotional, strategic and technical support whenever needed
Benefits of this Integration
It ensures the main objective, individual development is always at focus. Both organizations and individuals are responsible for making actual learning happen-they work as a joint force aligning personal development goals and organizational goals and objectives. Organizations can provide sufficient resources and create supportive conditions and culture to facilitate individual learning. Ideally, organizations can finally create a feedback culture which is characterized as (1) People often receive constructive feedback from various sources on a regular basis(2)People also often actively seek feedback for improvement .In a feedback culture, individuals can get feedback on a regular basis so that feedback is given in a timely manner and more likely to focus on behavior instead of trait because of vivid memory.
Reward Programs of Organizations

A model of Individual Rewards-A reward program's main objectives are to attract qualified individuals to join the organization, to keep employees coming to work, to motivate employees to perform well. According to the model of the reward process: 1. An individual is motivated to perform.2.Performance is affected by abilities, skills, and experiences.3.Evaluating performance determines intrinsic and extrinsic rewards.4.These rewards are evaluated by the employee and result in some degree of satisfaction, which influences motivation. According to Lawler, the degree to which rewards satisfy an individual depends on:1. The amount given and how much the individual feels should be given. 2. The individual's comparison of the rewards received with those received by others.3.The individual's satisfaction with intrinsic and extrinsic rewards.4.The importance of different rewards to the individual.5.The extent to which some extrinsic rewards satisfy because they lead to other rewards. Managers should develop a rewards system that: 1. Satisfies basic needs.2.Employees consider fair.3.Responds to individuals.
Rewards can be Extrinsic and Intrinsic in nature.
Extrinsic rewards are initiated from outside the person. Some primary ones are:
1. Salary and wages—money is a major extrinsic rewards. It's a powerful motivator if employees perceive a link between performance and pay.
2. Fringe benefits—usually financial benefits (the major financial fringe benefit is a pension), and usually based on seniority or attendance.
3. Interpersonal rewards—e.g., status and recognition.
4. Promotions—performance and seniority are usually the criteria used in making promotion decisions.
Intrinsic rewards are self administered by the person. It provides a sense of satisfaction or gratification and often a feeling of pride for a job well done. Some major ones are: 1. Completion—the ability to start and finish a project or job. 2. Achievement—a self-administered reward received when a challenging goal is reached.
3. Autonomy—the right and privilege of working and making decisions without close supervision. 4. Personal growth—expanding capabilities via the job.
Organizations generally assume that motivation is determined by the sum of the effects of intrinsic and extrinsic rewards, but this assumption is questionable. The addition of extrinsic rewards tends to reduce the extent to which the individual experiences self-administered intrinsic rewards.
Administering rewards—three approaches are:
1.Reinforcement theory- It is based on the learning theory of Operant conditioning which attempts to influence behavior by using rewards and punishments as consequences. Operants are behaviors that can be controlled via manipulating consequences. Reinforcement 1. Positive reinforcer—a stimulus that when added to the situation strengthens the probability of a desired behavioral response. 2. Negative reinforcer—when removed immediately after a response increases the frequency of that response. 3.Punishment— presenting an uncomfortable or undesired consequence for a particular behavioral response (e.g., a demotion, suspension, criticism, termination). Punishment is increasingly used, but still controversial managerial strategy. It should be used with caution because it can have unintended consequences. 4.Extinction—Reduces unwanted behavior by withholding positive reinforcement from a learned response.
Reinforcement schedules—the timing of rewards or punishments 1. Continuous reinforcement—reinforcing a behavior each time it occurs.
2. Intermittent reinforcement—reinforcing after some expressions of behavior, but not every one. a. Fixed interval—reinforcing a desired behavior after a certain period of time. b. Variable interval—reinforcing at some variable time interval. c. Fixed ratio—reinforcing after a fixed number of desired behaviors (e.g., a bonus for every ten houses sold). d. Variable ratio—reinforcing after a number of desired responses with the number varying around an average. According to research ratio schedules produce higher response rates than do interval schedules. Rewards in Organizations are generally based on Positive reinforcement—reinforcing desired behavior that leads to performance rather than performance alone.
2. Modeling and social imitation—employees acquire desired behaviors by observational learning or imitating.
a. Imitation depends on whether the modeled person was rewarded or punished for a behavior.
b. For imitation to occur, the individual must view the model receiving a valued reward for the behavior.
c. To use modeling to administer rewards, management must consider who responds to the approach, the appropriate model, and the modeling context.
3.Expectancy theory—requires that managers: a. Identify desired rewards. b. Make them available (if possible) for desired behaviors, or; c. Increase the desirability of other rewards. Often, a combination of these approaches is used in a rewards system.
Rewarding Employees: Four Aspects are (1)What to Pay (Internal vs. external equity) (2)How to Pay (e.g., Piece rate, merit based, bonuses, profit sharing, gain sharing, ESOPs, skill-based pay) (3)What Benefits to Offer (e.g., Flexible benefits) (4)How to Recognize Employees
Types of Rewards in the Workplace are based on (1)Membership and seniority (2)Job status (3)Competencies (4)Performance.
Membership/Seniority Based Rewards-Fixed wages, increases with seniority .Advantages are (1)Guaranteed wages may attract job applicants (2)Seniority-based rewards reduce turnover. Disadvantages are (1)Doesn’t motivate job performance(2)Discourages poor performers from leaving(3)May act as golden handcuffs (tie people to the job)
Job Status-Based Rewards-Includes job evaluation and status perks. Advantages are (1)Job evaluation tries to maintain pay equity(2)Motivates competition for promotions. Disadvantages are (1)Employees exaggerate duties, hoard resources (2)Reinforces status, hierarchy(3)Inconsistent with workplace flexibility
Competency-Based Rewards-Pay increases with competencies acquired and demonstrated. Skill-based pay-Pay increases with skill modules learned. Advantages are more flexible work force, better quality, consistent with employability. Disadvantages are that it is potentially subjective and involves higher training costs
Performance-Based Rewards (exhibit taken from Organizational behavior and management by Ivancevich, Konopaske and Matteson -7th edition, Tata McGrawHill)
Rewarding Employees:
Variable Pay Programs-A portion of an employee’s pay is based on some individual and/or organization measure of performance. Piece rate pay plans -Workers are paid a fixed sum for each unit of production completed
Profit sharing plans-Organization-wide programs that distribute compensation based on some established formula designed around a company’s profitability
Flexible Benefits- Employees tailor their benefit program to meet their personal need by picking and choosing from a menu of benefit options. (a)Core-Plus Plans-A core of essential benefits and a menu-like selection of other benefit options (b) Modular Plans -Predesigned benefits packages for specific groups of employees (c) Flexible Spending Plans- Allow employees to use their tax-free benefit dollars to purchase benefits and pay service premiums
Employee Recognition Programs- It is an intrinsic reward which stimulates intrinsic motivation. Here personal attention is given to an employee, approval and appreciation is given for a job well done. Growing in popularity and usage. Benefits of Recognition Programs are (1)fulfill employees’ desire for recognition (2)inexpensive to implement (3)encourages repetition of desired behaviors. Drawbacks of Programs are that they are susceptible to manipulation by management
Innovative Reward Systems
Skill-based Pay Plans-Pay levels are based on how many skills employees have or how many jobs they can do. Clear demonstration of skill acquisition results in pay increase. It approximates how professionals are compensated. It relies on surveys of what other firms pay professionals to establish pay grades and maturity curves. Benefits of Skill-based Pay Plans are (1)Provides staffing flexibility to assign workers to different jobs (2) Requires fewer job classifications.(3) Requires fewer employees.(4)Facilitates communication across the organization (5)Lessens “protection of territory” behaviors (6)Meets the needs of employees for advancement (without promotion) (7)Leads to performance improvements.(8) May reduce turnover and absenteeism. Drawbacks of Skill-based Pay Plans are: (1)Lack of additional learning opportunities that will increase employee pay (2)Continuing to pay employees for skills that have become obsolete (3)Paying for skills that are of no immediate use to the organization (4)Paying for a skill, not for the level of employee performance for the particular skill

Broadbanding—involves reducing numerous pay grades to a relatively few broadband grades.

Concierge Services—a variety of benefits from tracking down tickets to an event to massages and other lavish services. Only a small number of companies have these services for employees.
Team-Based Rewards—paying all members of a team equally based on the outcome performance of the entire team’s work. Team members must be rewarded differently than when individuals simply worked independently. To continue to reward employees, who are now functioning in teams, as independently organizational members increases competition among these members at the very time that collaboration is essential for both team and therefore, organizational success.
Part-time Benefits—with the shortage of talent more employers are relying on part-time employees and may are now providing benefits that only full time employees used to receive such as sick leave and paid vacations.
Gainsharing—provides employees with a share of the financial benefits the organization accrues from improved operating efficiencies and effectiveness. It is an incentive plan in which improvements in group productivity determine the total amount of money that is allocated. It may take many forms, including cash rewards and bonuses.To succeed, Gainsharing requires strong managerial and employee commitment to operating efficiencies.
Employee Stock Ownership Plans—companies contribute stock or cash to purchase stock to employees. Employee Stock Ownership Plans (ESOPs) is a company-established benefit plans in which employees acquire stock as part of their benefits. It is typically allocation is based on seniority. Benefit for the organization comes from improved performance by employees who have a direct financial stake in the business. Effectiveness of these plans is questionable, and seems to depend on how well management introduces and implements the plan.
Rewards Affect Organizational Concerns
Turnover—the focus should be on frequency and who leaves (turnover of low performers is desirable).A reward system should retain the best employees and cause poor ones to go. A merit reward system should encourage the better employees to stay if the system clearly discriminates between high and low performance in rewards.
Absenteeism is a costly and disruptive problem. Managers exert some influence over attendance behavior via use of rewards and punishments.
Job Performance-To motivate individuals, rewards must be valued by the employee (high valence)and related to the performance level that is to be motivated (high performance-outcome expectancy).
Organizational commitment -Organizational Commitment involves:1. A sense of identification with organizational goals. 2. A feeling of involvement in organizational duties. 3.A feeling of loyalty to the organization. A committed employee: 1. Is less likely to leave.2.Requires less supervision 3.Perceives the value and importance of integrating individual and organizational goals, viewing his/her goals and organizational goals in personal terms. Intrinsic rewards facilitate the development of organizational commitment.
Key issue
Promotions, increased pay, recognition for a job well done or the opportunity to own a part of an organization can be motivators if there is a clear line of sight between what the employee is doing and the reward. Line of sight is that the employee perceives that there is a “real” linkage between his or her performance and the rewards received. In case of extrinsic rewards, organizations need to have systems that clearly tie rewards to desired performance. Intrinsic rewards are personal and come from the employees. However, organizations can influence intrinsic rewards and employees perception of them by providing jobs that are challenging and by providing clear feedback on job performance.