Performance Management and Compensation Systems Overview

Performance Management

The continuous process of identifying, measuring, and developing performance in organizations.

Performance Reviews

Formal assessments used to evaluate job performance, including terms like feedback, evaluation, and development.

Developmental Purposes

Coaching, training, and career planning.

Administrative Purposes

Compensation, promotions, discipline.

360-Degree Evaluations

Pros: Broader feedback, comprehensive view. Cons: Time-consuming, conflicting opinions.

Rating Errors and Biases

Common types: leniency, central tendency, halo, horns effect.

Review Methods

Trait Methods: Graphic Rating Scales; Behavior Methods: BARS (Behaviorally Anchored Rating Scales), BOS (Behavioral Observation Scales); Results Methods: MBO (Management by Objectives), Balanced Scorecard.

Compensation

All forms of pay going to employees.

Types of Compensation

Direct: Wages, salaries; Indirect: Benefits.

Pay-for-Performance

Incentives tied to individual or organizational performance.

Pay Equity & Equity Theory

Perceptions of fairness impact motivation.

FLSA

Establishes minimum wage, overtime, and youth employment rules.

Exempt vs. Nonexempt

Exempt: Not entitled to overtime (e.g., salaried managers); Nonexempt: Entitled to overtime (e.g., hourly employees).

Compensation Strategy

Alignment with business goals and market standards.

CPI, Escalator Clauses, COLAs, Real Wages

Tools to maintain purchasing power.

Job Evaluation

Determines internal value of jobs for fair pay.

Wage and Salary Surveys

Gather market data to set competitive pay.

Variable Pay

Pay linked to performance or results.

Expectancy Theory

Motivation depends on expectancy, instrumentality, and valence.

Individual Incentives

Bonuses: One-time, performance-based; Merit Pay: Raises based on performance; problems include subjectivity; Awards and Recognition: Intangible motivation.

Team Incentives

Encourage collaboration, shared accountability.

Gainsharing

Group-based performance rewards.

Scanlon Plan

Employee involvement in cost-saving.

Executive Compensation

High-level pay packages with bonuses, equity, perks.

Cost of Benefits

~30%+ of compensation expenses.

Purpose of Benefits

Attraction, retention, and support of employees.

Tax Advantages

Many benefits are tax-free or tax-deferred.

Flexible Benefit Plans (Cafeteria Plans)

Employees choose benefits that suit their needs.

Legally Required Benefits

Includes Social Security, Unemployment Insurance, Workers' Comp.

Affordable Care Act

Requires employers to offer health insurance, limits costs.

HDHPs, HSAs, FSAs

High Deductible Health Plans paired with savings options.

COBRA

Continued health coverage after employment ends.

FMLA

Up to 12 weeks unpaid leave for family/medical reasons.

Life Insurance

Employer-provided, often group-term coverage.

Pension Plans

Retirement savings (defined benefit vs. defined contribution).

OSH Act & OSHA

Regulates workplace safety, enforces standards.

Coverage

Most private sector employees.

Standards

Industry-specific safety rules.

Enforcement

Conducts inspections, issues citations, imposes penalties.

Inspections

Based on complaints, injuries, or random audits.

Rights & Responsibilities

Employees may refuse dangerous work; employers must provide safe environments.

General Duty Clause

Employers must provide a workplace free from recognized hazards.

Fatigue

Risk factor for accidents; mitigated by scheduling and rest.

Workplace Violence

Prevention includes training, reporting systems.

Stress, Burnout, Depression

Addressed via mental health support.

Substance Abuse

Employers may test and offer EAPs.

Employee Rights

Limited in private sector (e.g., no free speech guarantee).

Negligent Hiring

Failure to vet candidates can result in liability.

Employment-at-Will Relationship

Either party may terminate employment at any time.

Wrongful Discharge

Violates law or contract (e.g., discrimination, retaliation).

Implied Contracts

Statements or policies suggesting continued employment.

Explicit Contracts

Formal employment agreements.

Constructive Discharge

Employee quits due to intolerable work conditions.

Retaliatory Discharge

Illegal firing for whistleblowing or complaints.

Privacy Rights

Drug/substance testing, electronic monitoring.

Off-Duty Conduct

May affect job status if it harms employer's image.

Body Art, Grooming, Attire

Appearance policies must be applied fairly.

Discipline

Rules must be clearly communicated.

Documentation

Essential for legal protection.

Progressive Discipline

Increasing severity (e.g., warning → suspension → termination).

Termination

Must follow due process and policy.

National Labor Relations Act

Protects collective bargaining rights.

NLRB

Enforces labor law.

Why Unions?

Fair treatment, better wages/benefits.

Union Steward

Employee rep for union.

Organizing Process

Soliciting support, authorization cards, election.

Aggressive Tactics

Some may be illegal or unethical.

Unfair Labor Practices

Actions that interfere with union rights.

Bargaining Units

Groups eligible for union representation.

Representation Elections

Majority vote needed for union formation.

Unionization Impact on Managers

Limits on unilateral decisions.

Collective Bargaining

Process of negotiating agreements.

Good-Faith Bargaining

Required by law; must actively negotiate.

When Talks Fail

Strikes, lockouts, mediation/arbitration.

Labor Agreement

Covers wages, hours, working conditions.

Grievance Procedures

Step-by-step resolution process.

Grievance Arbitration

Final step in dispute resolution.

Union Decline

Attributed to legislation, employer resistance.