Compensation Study Guide
Quiz III Study Guide- HRM 438
Pay for Performance (PFP) Theory
Job Performance
• Performance represented by behaviors of employees—behavioral focus o When we talk about job performance, what we are really talking about are specific behaviors of employees– focus on behaviors, not outcomes o Performance = Ability * Motivation
• You need both ability and motivation in order to perform successfully
• Performance is determined by both ability and motivation (multiplicative relationship) your textbook states this as: Behavior = f (Motivation, Ability, Environment)
1. Attraction– helps attract people with necessary abilities
2. Retention– helps retain the talent with those abilities
3. Development– motivates employees to further develop abilities
4. Direction– directs both effort & behavior by rewarding desired behaviors
Goal of PFP: Ultimately to increase organizational performace
• motivate effort from employees—includes persistence of effort
a. To motivate employees by rewarding desired employee behaviors (i.e. performance) in order to ultimately achieve organizational success
i. Tie compensation to performance (to some degree) in order to motivate ii. Do this by having portion of compensation be variable– based on performance
• direct behavior in appropriate direction
To motivate employees by rewarding desired employee behaviors (i.e. performance) in order to ultimately achieve organizational success
Basics of Motivation (3 things)
1. Exchange between two parties
2. Employees get something they value from employer
3. Employer gets desired behaviors from employees
a. value to the Individual Employee
i. Involves satisfying employee needs & desires ii. Valued “thing” can be both monetary and non-monetary (extrinsic & intrinsic)
b. Exchange of Value (between employee & employer)
i. Exchange must be seen as fair– rules created and followed
c. Desired Behaviors
i. Desired behaviors must be clearly identified, specific, & measurable
Pay for Performance (PFP) Theory
Job Performance
• Performance represented by behaviors of employees—behavioral focus o When we talk about job performance, what we are really talking about are specific behaviors of employees– focus on behaviors, not outcomes o Performance = Ability * Motivation
• You need both ability and motivation in order to perform successfully
• Performance is determined by both ability and motivation (multiplicative relationship) your textbook states this as: Behavior = f (Motivation, Ability, Environment)
1. Attraction– helps attract people with necessary abilities
2. Retention– helps retain the talent with those abilities
3. Development– motivates employees to further develop abilities
4. Direction– directs both effort & behavior by rewarding desired behaviors
Goal of PFP: Ultimately to increase organizational performace
• motivate effort from employees—includes persistence of effort
a. To motivate employees by rewarding desired employee behaviors (i.e. performance) in order to ultimately achieve organizational success
i. Tie compensation to performance (to some degree) in order to motivate ii. Do this by having portion of compensation be variable– based on performance
• direct behavior in appropriate direction
To motivate employees by rewarding desired employee behaviors (i.e. performance) in order to ultimately achieve organizational success
Basics of Motivation (3 things)
1. Exchange between two parties
2. Employees get something they value from employer
3. Employer gets desired behaviors from employees
a. value to the Individual Employee
i. Involves satisfying employee needs & desires ii. Valued “thing” can be both monetary and non-monetary (extrinsic & intrinsic)
b. Exchange of Value (between employee & employer)
i. Exchange must be seen as fair– rules created and followed
c. Desired Behaviors
i. Desired behaviors must be clearly identified, specific, & measurable