Kreitner/Kinicki/Cole

Fundamentals of Organizational Behaviour: Key Concepts, Skills and Best Practices

Chapter 4

Performance Management

Chapter Learning Objectives

· Specify the two basic functions of feedback and three sources of feedback.

· Define upward feedback and 360-degree feedback, and summarize the general tips for giving good feedback.

· Briefly explain the four different organizational reward norms.

· Summarize the reasons rewards often fail to motivate employees.

· Explain the difference between positive reinforcement, negative reinforcement, punishment, and extinction.

· Discuss the concept of behaviour shaping.

Opening Case

Creating the Right Environment

Rewards at Zenon Environmental are successful in motivating employees because of the “appreciation effect” expressed in attention to the workplace location and design, and egalitarian policies regarding company travel, parking, and employee participation through the Zenon Parliament. The reward of a natural-setting work location is based on the criteria of organizational performance, and all employees receive this reward based on the overall success of the company. The extrinsic reward of a comfortable workplace in a beautiful natural setting is a form of recognition from the organization, and it feeds into self-esteem, self-satisfaction, and sense of accomplishment, as evidenced by the closing comments of Jim Imrie.

The pleasant, natural-setting work environment is experienced by employees every day, thus providing continuous reinforcement. CEO Andrew Benedek believes that this work environment has helped the company achieve high levels of organizational performance. The organizational reward norm of equality is also shown by the egalitarian practices of the ‘Zenon Parliament’ where employees can participate in company decision making, economy class flights for all employees, and no reserved parking space.

Chapter Summary

Providing Effective Feedback

The chapter begins with information on productivity and total quality, making the point that we need to work smarter, not harder. Today’s employees (why not 70 years ago?) need instructive and supportive feedback and desired rewards if they are to translate their knowledge into improved productivity and superior quality.

Feedback is what employees seem to want. They need it in order to achieve work goals. Feedback is defined as objective information about performance. How can observational feedback be objective? It deals with human beings who bring a lot of things that come from the outside and are not germane to the job but surely impact the organization, the person and her or his work. Objective feedback is best used on quantifiable things such as hard data of units sold, days absent, dollars saved.

The Two Functions of Feedback. The two functions of feedback are for those who receive it; one is instructional and the other is motivational. Feedback instructs when it clarifies roles or teaches new behaviour. Can your students think of examples from classes or work?

Three Sources of Feedback. The three sources of feedback are others, task and self. Others are peers, supervisors, lower-level employees and outsiders. The task itself is a source of feedback as to how well or not one does something. With yourself there is often a self-serving bias that is used more by those with high esteem for themselves than low.

The Recipient’s Perspective of Feedback. The need for feedback is variable. The personal awareness and growth exercise at the end of the chapter focuses on this variation. This is a good exercise for your students to complete before class and then to discuss in small groups or as a class. We are coming into a world where performance evaluations are more key than ever and many organizations will live and die by them, as will their employees. Think Enron.

Feedback can be either positive or negative and people tend to process positive feedback much better than negative. You might refer your students to The One Minute Manager where feedback is handled in a very fair and even matter with much autonomy for the worker. Fairness of feedback is very important as are the reasonableness of the standards to be met.

Behavioural Outcomes of Feedback. Resistance is one outcome of feedback and one that needs to be managed. If the employee sees the efforts as manipulative, it will led to resistance as well other negative actions.

Nontraditional Upward Feedback and 360-Degree Feedback. Tradition has been top down feedback, especially in a hierarchical structure. Newer organizational structures are trying new approaches such as upward feedback and what is termed 360-degree feedback, meaning that a person can be evaluated from the top, the side, outside the organization, from those below in position, etc. There at least six (6) reasons why there is growing popularity for new approaches:

· Traditional performance appraisal systems have created widespread dissatisfaction.

· Team-based organization structures are replacing traditional hierarchies.

· Multiple-rater systems are said to make feedback more valid than single source feedback. Is this just common sense?

· Advanced computer network technology (the Internet and company Intranets) greatly facilitates multi-rater systems. Why did organizations wait until this technology to do multi-rating?

· Bottom-up feedback meshes nicely with the trend toward participative management and employee empowerment. How many organizations are actually adopting these?

· Co-workers and lower-level employees are said to know more about a manager’s strengths and limitations than the boss. As award-winning author of Science Fiction and other novels, Ursula Le Guinn, notes, “The slave knows the master better than the master knows the slave.”

Upward feedback stands the traditional approach on its head by having lower-level employees provide feedback on a manager’s style and performance. It is generally anonymous. Many managers resist because they believe it erodes their authority. Doesn’t it? What about grudges people may hold? If it is anonymous you can say about anything you want without backing it up. Is there danger in upward feedback as well as safety?

360-degree feedback is defined as “letting individuals compare their own perceived performance with behaviorally specific and usually anonymous performance information from their managers, subordinates, and peers”. You might ask your students if they would like this applied in class or at work. Peer appraisals are seen as better than self-appraisals given the chance of self-serving bias. These approaches fly in the face of tradition and are quite often resisted with vigor.

Practical recommendations recommend anonymity and discourage using it for pay and promotion decisions. They say use it for managerial development and training.

Why Feedback Often Fails. These are the six (6) reasons:

· Feedback is used to punish, embarrass, or put down employees.

· Those receiving the feedback see it as irrelevant to their work.

· Feedback information is provided too late to do any good.

· People receiving feedback believe it relates to matters beyond their control.

· Employees complain about wasting too much time collecting and recording feedback data.

· Feedback recipients complain about feedback being too complex or difficult to understand.

What do your students think of this list? Can they think of ways to overcome this type of attitude and resistance?

Organizational Reward Systems

Rewards are an ever-present and always controversial feature of organizational life. Why? Not everyone works for the same reasons. The reasons can range from money only to social recognition to pride. Despite the fact that reward systems vary widely, it is possible to identify and interrelate some common components as seen in Figure 4-1. The four components are:

(1) types of rewards;

(2) reward norms;

(3) distribution criteria; and

(4) desired outcomes.

Types of Rewards. They can be extrinsic rewards (financial/material or social) or intrinsic rewards (self-granted).

Organizational Reward Norms. These include profit maximization, the reward equity norm, that is, rewards should be tied to contributions (think pay for performance), the reward equality norm where everyone should get the same reward (think unions), and reward need norm in which distribution of rewards is based according to employees’ needs, rather than their contribution (think across the board pay cuts when the lower paid employees get a 10% cut and the top management gets a 20% cut). There are many ethical and conflict debates about these issues. You might want to have your students debate each of these reward norms and then design a system for each.

The International OB box provides information about different approaches to incentive rewards in Asia. You can discuss these examples in relation to organizational reward norms and to distribution criteria.

Distribution Criteria. There are three general criteria for the distribution of rewards according to one expert: they are performance: results such as tangible outcomes; performance: actions and behaviors such as teamwork and creativity; and nonperformance considerations that include customary or contractual where the type of job is, nature of the work, equity, tenure, level in hierarchy, etc. are rewarded. What do your students think of these types of rewards? You might ask them what they think of the tenure system and if they would change it and how in terms of rewards.

Desired Outcomes. A good reward system should attract talented people and motivate and satisfy them once they have joined the organization and it should also foster growth and development. Each year, the Report on Business magazine’s ‘50 Best Companies to Work for in Canada’ showcases companies where there is low turnover, a strong supportive culture, and excellent employee-management working relationships. You might want them to go to the homepages of some of these companies and do some research on what rewards they offer.

The Focus on Diversity box provides an example of Rogers, a company using mentoring and Goodwill training to demonstrate its commitment to rewards based on need, which help increase the desired outcomes of a diverse and loyal workforce.

Why Rewards Often Fail to Motivate. A management consultant lists eight reasons:

· Too much emphasis on monetary rewards

· Rewards lack an ‘appreciation’ effect. The opening case illustrates how effective these first two points can be if done right.

· Extensive benefits become entitlements.

· Counterproductive behavior is rewarded.

· Too long a delay between performance and reward.

· Too many one-size-fits-all rewards.

· Use of one-shot rewards with a short-lived motivational impact.

· Continued use of demotivating practices such as layoffs, across-the-board raises and cuts, and excessive executive compensation. Think AT&T, Northern Telecom.

Positive Reinforcement

A behaviour modification technique called positive reinforcement helps managers achieve needed discipline and effect when providing feedback and granting rewards. Are employees costs or assets? Objects or people? Positive reinforcement is one aspect of a field known as behaviourism, which deals with operant behaviour, where learned consequences shape behaviour.

Contingent consequences control behaviour in four ways: positive reinforcement, negative reinforcement, punishment and extinction, as shown in Figure 4-2.

Positive reinforcement strengthens behaviour by contingently presenting something pleasing.

Negative reinforcement also strengthens behaviour by contingently withdrawing something negative.

Punishment weakens behaviour by presenting something negative or taking away something positive. The Ethics at Work box asks students their opinion about ‘response-cost’ punishment where cashiers are required to pay back any cash register shortage. A class discussion may uncover opinions on both sides of the issues of whether to take into account the character of the violator and the level of damage from the violation.

Extinction also weakens behaviour by ignoring it or making sure that it is not reinforced. What do your students think of behaviourism? What would behaviourism say about equity theory or expectancy theory? What about 360-degree appraisals?

Schedules of Reinforcement. The timing of behavioural consequences can be very important.

Continuous reinforcement occurs when every instance of a target behaviour is reinforced when a continuous schedule is in effect.

Intermittent reinforcement involves reinforcement of some but not all instances of a target behaviour. Variations include fixed ratio, variable ratio, fixed interval and variable interval.

Proper scheduling is important because the schedule of reinforcement can more powerfully influence behaviour than the magnitude to the reinforcement. See Table 4-1 for a complete description of schedules of reinforcement.

Work organizations typically rely on the weakest schedule particularly with monetary rewards like pay. Why?

Shaping Behaviour with Positive Reinforcement. Shaping is defined as the process of reinforcing closer and closer approximations to a target behaviour. This can be used quite effectively in training and quality programs involving continuous improvement. Ten guidelines for effectively shaping behaviour are:

· Accommodate the process of behavioural change.

· Define new behaviour patterns specifically

· Give individuals feedback on their performance

· Reinforce behaviour as quickly as possible

· Use powerful reinforcement

· Use a continuous reinforcement schedule for new behaviours

· Use a variable reinforcement schedule for maintenance

· Reward teamwork, not competition

· Make all rewards contingent on performance

· Never take good performance for granted.

Internet Exercises

1. 360-Degree Feedback

This exercise is designed to further explore 360-degree feedback. The students are instructed to go to the Panoramic Feedback Website (w w w.panoramicfeedback.com), and select ‘Sample Questionnaires’ from the main menu. The questions asked are:

1. How would you rate the eight performance dimensions in this brief sample? Relevant? Important? Good basis of constructive feedback? Personal opinion.

2. If you were to expand this evaluation, what other performance scales would you add? Personal opinion.

3. Is this a fair evaluation as far as it goes? Explain. Personal opinion.

4. How comfortable would you be evaluating the following people with this type of anonymous 360-degree instrument: Boss? Peers? Self? People reporting directly to you? Personal opinion.

5. Would you like to be the focal person in a 360-degree review? Under what circumstances? Explain. Personal opinion.

6. Results of anonymous 360-degree reviews should be used for which of following purposes: Promotions? Pay raises? Job assignments? Feedback for personal growth and development? Explain. Concerns about bias should be the main focus here.

2. Manager-Employee Relationships

This Internet exercise is to explore the concept of extrinsic social rewards, specifically the relationship between a manager and an employee. A quiz regarding the manager-employee relationship is provided on a consultant’s Website (www.joanlloyd.com). The questions asked are:

1. If you manage others as part of your job responsibilities, take the quiz. If you don’t, then ask someone you know who is a manager to take the quiz. How did you (he or she) score? Personal opinion.