Employee Performance Appraisal
Discussion One:
- Discuss the benefits, challenges, and tradeoffs of pay-for-performance, or merit pay. Benefits
Pay-for-performance is a system that is designed by companies where they pay the employee as per their hard work. It works based on the more you work and accomplish the companies’ targets, the more money you earn. Pay-for-performance system has a positive effect on employee participation in organization activities and increases the performance of small and middle-sized enterprises (Wang, Thornhill, & Zhao, 2018). Employees will realize that their full participation in duties improves the performance of the business. Therefore with a pay-for-performance compensation plan, the interests of employees are brought to closer to the company’s interest hence increasing their involvement with organization actions.
Besides increasing employees’ performance, pay for performance also align employee’s actions with the interests of the company. A pay-for-performance system has proven to be the best way to focus employee’s actions in the areas that need much attention. For instance, if the point of focus for the organization is customer satisfaction. Through a merit pay that evaluates employee’s customer satisfaction percentage, the organization will stand a chance on improving its overall customer satisfaction significantly since employees’ actions will be focused on customer satisfaction.
Challenges
The process of implementing a pay-for-performance may be very trickier and challenging for most organizations. According to Michael Beer, a professor at Harvard Business School stated that the process of implementing and initiating a pay-for-performance for employees might be complicated to some organizations (Lagace, 2020). The pay-for-performance compensation may sound so sweet for an organization to implement, but it can cause more harm than expected. This system may mount pressure to employees and demoralize them from working hard because some factors that may be out of their control may affect their performance hence low payment. Another challenging aspect of pay-for-performance is that senior employees may refuse to admit that people who work under them and of below their level of expertise earn more than them hence leading to disparities among the employees. In addition, the inability to maintain a consistent lifestyle of high payment may employees get angry when they see they can’t achieve their targets consistently.
Tradeoffs
Pay-for performance can cause the organization to not pay employees according to their merit. This may demoralize employees who fail to achieve higher targets set by the management. For such a challenging issue, merit pay will be a good tradeoff for the employee since the employee will continue working towards the goal. If they fail to meet the goal, they are still subjected to salary according to their levels of expertise. Besides, organizations can adopt other methods of motivating employees to improve their performance. motivating employees through incentive is another effective tradeoffs for pay-for-performance.
How would a pay-for-performance policy support the organization’s strategic goals?
Pay-for-performance supports the organization’s strategic goals in various ways. Organizations have many strategic goals, and this includes customer satisfaction, job satisfaction, employee motivation, improve performance, improve business productivity, and employee participation. Pay-for-performance supports these strategies by paying employees according to their performance. Once employees realize they are paid according to their performance at work, their involvement at work increases, they focus their action in achieving the goals set by the management, such as ensuring customers are satisfied. Pay-for-performance also increases employee interaction since their through combined efforts, the performance of the organization will increase and more payment to them.
What factors should be considered in evaluating the effectiveness of this practice?
There are various ways in which the effectiveness of pay-for-performance compensation plan. This can be through measuring the employee turnover rate (Brown & Reilly, 2009). High employee turnover shows that the practice is effective, while low employee turnover will show the practice is not effective for some employees. Another effective approach is evaluating an employee’s job satisfaction and customer satisfaction level. An increase in satisfaction shows a positive correlation between pay-for-performance with job and customer satisfaction. Another way to evaluate that the organization has implemented an effective practice is by evaluating the time take to fill vacancies, the decline rate of jobs offered to employees, staff commitment, employee productivity, and engagement.
- Select three methods for conducting an evaluation of an employee’s performance and discuss the advantages and disadvantages of each method. Discuss what level of employee (management, administrative, clerical, laborer, etc.) you would use each method to evaluate.
Methods of Evaluating Employee’s Performance
- Competency on scale
This is one of the most commonly used employee performance evaluation techniques. In this method, the employee’s performance is evaluated in various job duties, and the performance is graded on a scale. The employee is graded according to productivity, customer service, teamwork, and quality of work. This method of employee performance can be best used in evaluating a customer care assistant where the candidate will be evaluated according to customer relationship, quality of services, interaction skills, and execution of the job duties.
Advantages
It shows individual achievements in different aspects such as customer satisfaction, quality of goods, and achievement of goals set.
It also measures employee performance basing on a range of aspects and not based on the achievement of targets set by the management.
Disadvantage
The data used is extensive, and it may take longer to analyze all the details of the employee and interpret it.
The analysis of data is prone to errors and bias in the rating of individual employees.
- 360- degree feedback
This method allows employees to receive feedback and ratings from employees in the organization, inclusive of those working under their division and the customers. This method offers an opportunity for all employees and customers to evaluate an employee by submitting their views on their job performance. This method is based suit for a management level of employees.
Advantage
This method gives a full view of the employee’s performance in terms of their strength and weaknesses as it brings reviews from different people in and outside the organization.
360- Degree feedback is also easier to spot development opportunities in teams since team members will give on different reviews on what the person should improve and focus on to increase their performance.
Disadvantage
This method of evaluation is prone to dishonesty since the employee will be less confident in giving truthful views of their manager for fear of job loss or other harm.
It sometime may not be effective since some employers don’t know much about their managers hence making the reviews submitted to be misleading.
- Self-evaluation
This method of employee performance evaluation is one that an individual creates his performance appraisal and ensures it is effective, efficient, and highlights key areas. This method allows an employee to monitor their activities and correct themselves in areas that they have missed. Its best suited for laborers. A self-evaluation on laborers will allow the organization to understand how the laborer performs its duties and what development needs are needed.
Advantage
Self-evaluation motivates employees to evaluate themselves and explain to the management of their performance and prevent them from being evaluated by other people who don’t understand the flow of work.
The method improves employee engagement with management and improves communication. Self-evaluation leads to full engagement of laborers with management through discussions. This also improves communication between the two parties that will lead to an understanding of the employee’s performance.
Disadvantage
The risk of filling misleading information is high.
The possibility of a conflicting rating between the supervisor and the employee are also high.
Discussion Two: Application
- Discuss the different alternatives that you recommend as the most effective for measuring the performance of software developers working in teams. Share at least three alternatives with the pros and cons of each alternative you suggest.
- Competency Scale
This method measures the employee’s performance against various aspects that define the duties assigned to them. This is the quality of services, employee compliance to guideline and policies and many other aspects
Pros
This method gauges the employee on various aspects that are related to the responsibilities assigned to him, and the result will be the employee’s performance rating on a scale.
It motivates employees to work harder to increase their ratings.
Cons
The collecting o data take a lot of time and money in computing the data, analyzing, and interpreting the information.
In the rating process, the chance of bias for some employees is high.
- Management by Objective
Management by objective performance evaluation method will allow the software team manager together with the employees to identify, plan, organize, and communicate goals. After setting the goals, the full team discusses the progress of the project.
Pros
The employee is guided through the whole project as they progress.
The plans and organization of the projects to be accomplished by the software team will be easier to implement and also gives the team a clear role of what they are expected to do
Cons
Its procedure of consultation with the manager of the team may limit members’ freedom in contributing to the objectives or set their objectives.
This method only works effectively on short term projects and cannot be integrated effectively on long term projects due to inflexibility to changes in the environment.
- Self-evaluation.
In this method, the team will evaluate themselves and communicate to the team leader on how they achieved the objectives and discuss their performances as well.
Pros
This method will allow the employees to document their duties in the whole project and record down what they managed to achieve.
Self-evaluation method also highlights the specific roles and performance of the employee that the organization should focus on in discussing his or her performance.
Cons
The self-evaluation performance rating may conflict with the supervisor’s employee performance ratings.
Employees can provide inaccurate information on the process of the activities they undertake and their significant achievement in the projects hence affecting the performance results negatively.
- Answer/discuss the following:
- What information will need to be gathered to develop the new appraisal system;
Individual work quality
Individual significant achievements and objectives
Job satisfaction and compliance with guidelines and organization policies
Employee engagement and approach to duties
- How you will make the performance appraisal job-related and valid;
One of the best and effective way of making the performance appraisal related to the job and be valid is by integrating the appraisal with the duties assigned to the individual. For the appraisal to be valid, it should measure all the relevant details that are related to the job only and exclude any relevant information. For instance, for the software team, the performance appraisal to be of job related and valid should measure the competency of the individuals, the quality of the work, and their engagement and communication skills with the team.
- How you will mitigate the risk of rate errors when evaluating performance.
One of the effective ways of ensuring that the performance rate is free from errors is by collecting only valid and relevant performance information that is related to the job.
Mitigating the risk of performance rate errors can also be done by ensuring the measurement criteria are explicit and specific to the goal of the organization.
References
Brown, D., & Reilly, P. (2009). Measuring the effectiveness of pay and reward practices.
Lagace, M. (2020). Pay-for-performance doesn’t always pay off. Harvard Business School.
Wang, T., Thornhill, S., & Zhao, B. (2018). Pay‐for‐performance, employee participation, and SME performance. Journal of Small Business Management, 56(3), 412-434.