THE COPPERBELT UNIVERSITY

SCHOOL OF GRADUATE STUDIES

BUSINESS POSTGRADUATE STUDIES

MASTERS IN HUMAN RESOURCE MANAGEMENT

GBS 650: PERFORMANCE AND REWARD MANAGEMENT

COURSE NOTES

DR. BIEMBA MALITI

COURSE OBJECTIVES

The objectives of this course are to ensure that students will have knowledge and understanding of the following:

  1. Theories and research relevant to individual assessment in organizations.
  2. The role of competencies in assessment, performance and reward.
  3. The ethical and legal issues surrounding assessment, performance and reward.
  4. Good practice in techniques such as job analysis, interviewing and psychometric testing.
  5. Methods used to evaluate the success of techniques designed to manage assessment, performance and reward.
  6. Competency analysis.
  7. Performance management.
  8. Rewarding individuals and/or teams for their effective performance.
  9. Developing the skill of group work.
  10. Participating in group work in so far as to aid the above learning outcomes.

LEARNING OUTCOMES

At the end of this module, students should be able to:

  1. Design and manage reward systems.
  2. Utilize performance management to mobilize and motivate employees in line with the business strategy of the organization.
  3. Apply theory to solve practical problems concerning reward and performance management systems.
  4. Design and utilize systems which comply with legal and ethical requirements.
  5. Optimize the utilization of human resources in the organization.
  6. Ensure compliance with appropriate Zambian labour laws and Acts.

COURSE CONTENT

1Introduction

1.1Assessment, Performance and Reward: Relationships

1.2Designing for Selection

2Competence-based Approaches

2.1 Identification

2.2 Development

2.3 Usage

3Selection Techniques

3.1 Types

3.2 Operation

3.3 Validity

3.4 Reliability

4Recruitment and Selection

4.1 Practical Experience

4.2 Theory Application

5Performance Assessment

5.1The Appraisal Process

5.2Designing the Appraisal Process

6Performance Management

6.1Introduction

6.2Linking Individual Performance to Business Objectives

7Reward Systems

7.1Introduction

7.2Design Considerations

8Performance Pay

8.1Introduction

8.2‘New Pay’ Ideology

8.3Empirical Research

8.4Use of Competencies

9International Comparisons

9.1Selection

9.2Assessment

9.3Performance Management

10Cultural, Diversity and Ethnicity Issues

10.1Cultural Differences

10.2Diversity

10.3Ethnicity

11Public and Private Sectors

11.1Case Studies

11.2Empirical Research

READING LIST

RECOMMENDED TEXTBOOKS

  1. Williams, R.S. (2002): Managing Employee Performance – Design and Implementation in Organizations. 2nd Edition. Thompson, London.
  2. Thorpe, R. & Homan, G. (2000): Strategic Reward Systems. FT Prentice Hall, London.
  3. Cooper, D., Robertson, I.T. & Tinline, G. (2003): Recruitment and Selection – A Framework for Success. Thompson, London.
  4. Henderson, R.I. (2000): Compensation Management in a Knowledge-Based World.

8 th Edition. Prentice Hall, New Jersey.

RELEVANT BOOKS

  1. Aguinis, H. (2006): Performance Management. Pearson, London.
  2. Armstrong, M. (2002): Employee Reward. CIPD, London.
  3. Armstrong, M. & Baron, A. (2004): Managing Performance. CIPD, London.
  4. Cook, M. (2003): Personnel Selection – Adding Value Through People. 4th Ed., Wiley, Chichester.
  5. Fisher, C.D., Schoenfeldt, L.F. & Shaw, J.B. (1999): Human Resource Management. 4th Edition, Houghton Mifflin (Custom Edition), Boston: MA.
  6. Anderson, N. & Shackleton, V. (1993): Successful Selection Interviewing. Blackwell, Oxford.
  7. Searle, R.H. (2003): Selection and Recruitment – A Critical Text. Palgrave.
  8. Marchington, M. & Wilkinson, A. (2002): People Management and Development. 2nd Ed., CIPD, London.
  9. Roberts, G. (2005): Recruitment and Selection. CIPD, London.
  10. Lowenthal, K.M. (2001): An Introduction to Psychological Tests and Scales. 2nd Ed. Taylor & Francis, London.
  11. Lindley, P. (Ed) (2000): Review of Personality Assessment Instruments (Level B). 2nd Ed., British Psychological Society, Leicester.
  12. Arnold, J. (2005): Work Psychology. 4th Ed., Pitman, London.

ASSESSMENT

The course shall be assessed as follows:

  1. Continuous assessment composed of assignments and tests shall constitute 40 % of the final grade.
  2. A written final examination shall contribute 60 % to the final grade.

DISCLAIMER: ALL THE MATERIAL FOLLOWING HAS BEEN REPRODUCED VERBATIM FROM SOME OF THE SOURCES LISTED ABOVE AND IT IS FOR TEACHING PURPOSES ONLY.

(CBU - 2009)

MODULE 1

PERFORMANCE AND REWARD MANAGEMENT

1.0Introduction

Traditionally, the human resources literature has considered as separate and distinct the issues of which types of performance to measure, methods of measuring performance, who should rate performance, and methods of improving performance.

But now performance management has come in to integrate all these issues so that they are handled in a holistic and comprehensive fashion. This approach recognizes the critical/strategic role performance management as a function of human resource management plays in the attainment of organizational objectives. This point is fully captured in the following definition of performance management.

People work for rewards of one type or the other hence individual differences make it impossible to come up with a reward system which would satisfy everyone. Rewards also differ from the individual in a given group to the group level itself. The rewards obtained provide some sort of satisfaction to both an individual and the group to which that individual belongs. Hence the satisfaction obtained will also differ among individuals and groups of individuals.

Members of an organization receive rewards from their employers. These could be monetary rewards paid either directly or indirectly to employees. They could also be non-monetary. These rewards may be paid in the short term or in the long term.

1.1 Assessment, Performance and Reward: Relationships

Def.: Performance management is the integration of performance appraisal systems with

broader human resource systems as a means of aligning employees’ work behaviours

with the organization’s goals.

An organization exists to accomplish specific goals and objectives. To do this, it must attract and hire people who have certain knowledge, skills, aptitudes and attitudes. To attract and retain such people, the organization provides rewards.The individuals hired by the organization as employees have their own needs. One need is for money, which enables them to purchase a wide variety of goods and services available in the marketplace.

Hence there is a basis for an exchange: The employee offers specific behaviours desired by the organization to meet its goals and objectives in return for money, goods and/or services. If rewards are to be useful in stimulating desired behaviours, they must meet the demands of the employees whose behaviours they are intended to influence.

Taken together, the money, goods and/or services the employer provides employees constitute the employer’s compensation system. The system that an organization uses to reward employees can play an important role in the organization’s efforts to gain a competitive advantage and to achieve its major objectives.

1.3Designing for Selection

Compensation systems should do the following:

  • Signal to employees (and others) the major objectives of the organization, such things as quality, customer focus, and other goals, by emphasizing these through compensation.
  • Attract and retain the talent an organization needs.
  • Encourage the employees to develop the skills and abilities they need.
  • Motivate employees to perform effectively.
  • Support the type of culture (e.g. entrepreneurial) the company seeks to engender.

Ideally, a reward system should align individual (personal) objectives with important strategic goals of the organization. An organization designs and implements a reward system to focus worker attention on the specific behaviours the organization considers necessary to achieve its desired objectives and goals. The behaviours range from simply arriving at work at the scheduled time to meeting specified performance standards and providing innovative contributions that lead to improved productivity.

The design and implementation of a compensation system constitute one of the most complex activities for which human resource managers are responsible.

The following are some of the factors that contribute to this complexity:

  • While other aspects of human resource systems (e.g., training, career management, appraisal systems, and quality-of-work-life programs) are important to some employees, compensation is considered crucial by virtually everyone.
  • One goal of a compensation system is to motivate employees, yet there is tremendous variation in the value different individuals attach to a specific reward or package of rewards. Further, an individual’s values also may change over time.
  • The jobs in most organizations involve an almost endless variety of knowledge, skills, and abilities and are performed in situations with a wide range of demands.
  • Compensation systems consist of many elements in addition to pay for time worked; these components must be coordinated to work together.
  • Employee compensation is a major cost of doing business – up to 80 percent for service firms – and can determine the competitiveness of a firm’s products or services.
  • A number of central government and local government regulations affect compensation systems.
  • Employees, either directly or through collective bargaining arrangements, may desire to participate in the determination of compensation.
  • The cost of living varies tremendously in different geographic areas, an important consideration for firms with multiple locations.

In most organizations, the compensation system involves a multifaceted package, not just pay for work and performance. The components of the compensation system can be roughly divided into direct (wages) and indirect (benefits) forms of compensation as shown in the Figure below. Taken together, direct compensation and benefits define total compensation.

Figure 1:Components of the Compensation System

MODULE 2

COMPETENCE-BASED APPROACHES

2.0Introduction

Definition: Competency is a combination of knowledge, skill, behaviours, and attitudes

demonstrated by an employee in the performance of job assignments.

Some compensation professionals even include results achieved as part of employee competency.

Knowledge, skills, and abilities (KSAs) may be defined as follows:

Knowledge: Prerequisites for thinking and action required to perform assignments necessary to produce acceptable output.

Skill: Demonstrated level of proficiency of an ability.

Ability: A natural talent or acquired proficiency required in the performance of work assignments.

Although KSA information is typically collected for establishing minimum job qualifications and developing minimum hiring requirements, this kind of information can be developed to identify requirements normally expected of a fully proficient employee.

Not only are work requirements becoming more demanding, but the relationship between employee performance and organizational productivity is also increasing in complexity.

Computer-assisted machines are replacing humans where there is an emphasis on repetitive physical labor and repetitive intellectual demands.

Software that directs these machines accommodates a certain amount of flexibility in assignments and can quickly react to changes in input data. Human labor, however, is required to operate and repair these sophisticated machines.

Many positions in contemporary organizations require the incumbent to act as an interface between different groups of computer-driven machines.

In this high-technology world, the workforce is called on to perform less physical work, but the speed and number of interactions and the accuracy demanded in every phase of operations require workers to have significantly higher levels of knowledge and skills and a broader understanding of the reasons or causes of the interactions that influence their assignments.

Thus, workers have less time to make decisions, must consider more alternatives in the decision-making process, and frequently have less control over what they do than workers did prior to the computer revolution.

This has resulted in emotional and intellectual stress, which is replacing physical stress at the workplace.

2.1Identification

The level of complexity of responsibility and duty statements varies with the level of the job in the organization.

The responsibility and duty statements for an office messenger, a cleaner, or a data entry operator will be formulated in very precise terms.

On the other hand, responsibilities and duties of jobs higher in the organization hierarchy will be defined in more general terms.

Because of the change in the level of the responsibility and duty statements, the same approximate number of statements can be used to describe the job of the CEO or the job of an entry-level filling clerk.

A review of these two job definitions reveals that:

(1)The higher the level of the job, the more complex the job requirements and associated incumbent activities.

(2)The more complex the requirements and activities, the more difficult it is to describe them in clear, unambiguous terms.

(3)The more complex the activities, the more difficult it is to identify relevant activities that are observable and measurable in quantitative terms, although qualitative measurements are certainly possible and applicable.

(4)The higher the level of the job, the greater the likelihood that the way identified job activities are performed will vary significantly among incumbents.

(5)As jobs increase in importance, the cognitive (intellectual pursuits characterized by thinking, reasoning, and understanding skills) and affective (feelings and emotional pursuits characterized by interests, attitudes, openness to change, and appreciation of differences) domains become more important, and the psychomotor (physical pursuits characterized by motor skills involving synchronised and coordinated movement of hands, arms, legs, torso, head and eyes) domains become less important.

2.2Development

The complexity issue also affects the development of skill-based pay, knowledge-based pay, and competency-based pay as being promoted for establishing pay systems within team-based organizations.

Competency-based pay is one of the terms used to promote new and more appropriate methods for measuring job worth and determining rates of pay.

But the term competency has not had one commonly accepted definition.To develop a useful definition of the competency approach, it is helpful to start with an acceptable definition of competence:

Def.: Competence is a combination of knowledge and skills required to successfully perform

an assignment.

Its attainment is evidenced by the ability of an individual to gather data, process it into useful information, assess it, and arrive at an appropriate and usable decision in order to initiate the actions necessary to accomplish that assignment in an acceptable manner.

2.3 Usage

Competency-based pay systems have been designed and used principally for employees in management and professional positions.

The driving force underlying the development of a competency-based pay system is that the results expected of these management/professional jobs are difficult to define in precise terms.

To simplify and clarify both descriptions of what the work consists of and results expected, broadly defined competencies are established for these jobs. These competencies are a combination of knowledge and skills required and results expected in the performance of work assignments.

In moving upward to the highest level of managerial and professional positions, the work performed becomes more and more influenced by the mission, policies, and strategies of the organization.

The time dimension related to work assignments moves from the short term here and now to the much more indefinite future.

In moving from tactical, day-to-day operations to long-term strategic operations, the work of those whose jobs influence and, in turn, are influenced directly by organizational strategies can only be defined in general or generic terms.

Competencies become useful for establishing base pay for employees in these kinds of work settings.

In moving from the generic factors to organization-specific competencies, an in-depth analysis of the work performed by managers and professionals at various levels in different functional areas of the organization are required.Through an in-depth analysis of organizational work required, knowledge, problem-solving, and decision-making factors and their subfactors can be converted into pay determination competencies.The following can be used as a starting point for designing a competency-based pay plan:

Fig. 2:Components of Competency

  1. Knowledge – prerequisites for thinking and action required to perform assignment necessary to produce acceptable output.
  1. Eductaion – formal learning necessary for the development of sufficient mental capabilities to perform assignments.
  1. High school certificate
  2. Two-year college certificate (paraprofessional licensing)
  3. Four-year university degree (professional licensing)
  4. Education beyond undergraduate degree and/or professional licensing)
  5. Master’s degree and/or advanced professional licensing
  6. Doctorate and/or senior professional licensing
  1. Experience – amount and complexity of direct participation in interaction with and training in use of equipment, materials, technology, processes, and systems necessary to perform assignment as measured by time.

- from one month to over 10 years required.

  1. Skill – dexterity, accuracy, alertness required relative to the flow of work or to levels of complexity in the use of and interaction with both human and nonhuman resources in performing assignments.

- skills requiring accuracy or alertness from moderate to extreme levels where

output is of such importance that mistakes may jeopardize existence of operation

if not the organization as a whole.

  1. Problem Solving – applying knowledge through interpretation, compliance, and

communication to solve organizational problems in order to achieve desired levels of

performance.

  1. Interpretation – analyzing and evaluating action-oriented instructional

information.

  1. Requires moderate amount of interpretation. Complies with general policies, practices, and/or procedures within differing situations relative to a job or grouping of jobs to determine action.
  2. Requires moderate amount of interpretation. Complies with broad policies, practices, and/or procedures relative to a variety of situations involving work group, team, or a number of work groups or teams operating as a well-identified unit to determine action.
  3. Requires broad amount of interpretation as actions in changing situations involve a variety of problems determined by broad policies, practices, and procedures relative to the operation of a basic cost or profit centre that combines the efforts of diverse functional groups.
  4. Requires broad amount of interpretation in actions of constantly changing situations involving a variety of problems determined by broadest limits of organizational policies and procedures relative to the operation of an independent division.
  5. Requires extensive amount of interpretation in actions of nonrecurring, unique situations involving widest variety of situations determined by broadest limits of organizational policy and procedures relative to the operation of the entire organization.
  6. Requires extensive amount of interpretation in actions in nonrecurring, unique situations involving wide variety of problems limited only by basic organizational philosophy and the impact of external forces on the operation of the organization.
  1. Compliance – requirements for following instructions or orders of varying degrees

of complexity necessary for implementation and coordination of resources of the

organization within limits of existing policies and precedents.

  1. Written, oral, or visual directives involving use of quantitative information from specifications, graphs, pictures, blueprints, dials, gauges, and so on.
  2. Basic directives relating to technological processes or flow of work in some stage of operation.
  3. Complex directives relating to technological processes or flow of work in some stage of operation.
  4. Basic, complex and extremely complex directives relating external forces with technological processes of the organization.
  1. Communication – transmitting directions, instructions, and suggestions in

varying degrees of complexity necessary for the utilization and coordination of