Mater Dei College | Tubigon, Bohol | (038)508-8106

College of Accountancy, Business and Management – Business Department

Course Title HUMAN BEHAVIOR IN ORGANIZATION Course APEL 102/
No.
MAPre 101
Instructor MARIA ANTONNETTE B. GULILAT, LPT Schedule 1:00 – 2:30 TF

Week 8

Course Learning Outcome Examine performance appraisal and methods of giving and receiving
feedback.
Student Learning Outcomes a.) identify the purpose and focus of performance appraisal and
discuss ways on improving performance appraisal.
b.) discuss performance appraisal feedback and the elements
needed to ensure its effectiveness.
c.) determine ways of controlling behavior.
d.) illustrate the different types of reinforcement schedules and
guidelines in developing, revamping or currently
implementing an employee rewards program.

Learning Content
PERFORMANCE APPRAISALS, FEEDBACK, AND REWARDS
Introduction

A motivated workforce can be a significant factor in organizational success. When

employees are motivated to work at higher levels of productivity, the organization as a whole
run more efficiently and is more effective at reaching its goals. This is in contrast to an
unmotivated workforce, who can negatively disrupt an organization and distract employees
from their work. For this reason, it is imperative that managers understand the effects of a
regular and fair performance plus the power of reward systems and how they are used to
influence employee behavior.

Lesson Content

PEFORMANCE APPRAISAL
Performance appraisal deals with how organizations evaluate and measures its
employees achievements and behaviors. It is an employee review by his manager where his
work performance is evaluated and strengths and weaknesses are identified that the employee
knows his improvement areas. Performance appraisal is the right time to set new goals and
objectives for the employees.
Periodic appraisal of performance is a key component of employee development. The
performance evaluation is intended to be a fair and balanced assessment of an employee's
performance.
Similarly, managers and employees often see performance reviews as an essential evil.
Workers fear hearing their performance is inadequate, while managers struggle to find the best
way to balance praise and criticism. But regardless of how a manager feels about putting his

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staff under a microscope, regular performance reviews are important and constructive way to
evaluate the contributions an employee is making to the company.

Purposes of Performance Appraisals

Effective performance appraisal systems contain two basic systems operating in

combination: an evaluation system and a feedback system.

The main aim of the evaluation system is to identity the performance gap (if any). This
gap is the shortfall that occurs when performance does not meet the standard set by the
organization as acceptable.

The main aim of the feedback system is to inform the employee about the quality of his
performance. (However, the information flow is not exclusively one way. The appraiser also
receives feedback from the employee about job problems, etc.)

Purposes of performance appraisal include:

1. Judgmental orientation – focus on past performances and provide a basis for making
judgments on which employee should be rewarded and how effective organizational
programs like selection and training have been:

a) Offer a basis for reward allocation like raises, promotion, transfers, layoffs and others
b) Identify high-potential employees
c) Validate the effectiveness of employee selection procedures
d) Evaluate previous training programs

2. Developmental orientation – concern with improving future performance ensuring

expectations are clear and by identifying ways to facilitate employee performance through
training:
a) Stimulate performance improvement
b) Develop ways of overcoming obstacles and performance barriers
c) Identify training and development opportunities
d) Establish supervisor-employee agreement on performance expectations

Focus of Performance Appraisals

Performance appraisal must be focus on job performance not on the performers. When
evaluating employees, it is necessary to ensure that the focus of the appraisal is on the job
performance and that it has proper weighing of relevant behaviors. There are three aspects of
relevance in the context of performance appraisal which must be avoided, they are:
1. Deficiency – It happens when the evaluation does not focus on all aspects of the job. It
certain job responsibilities are not considered; the evaluation is deficient.
2. Contamination – It happens when activities not part of the job responsibilities are included
in the evaluation. This is the exact opposite of deficiency.
3. Distortion – This takes place when an improper emphasis is given to various job elements.

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Types of Performance Appraisals

Performance appraisal system allows the management classify employees into

performers and non-performers. It is primarily done to estimate the employees’ worth. Here are
different variations of performance appraisal systems, they are:

1. Self-Evaluation Method
Self-evaluations are a great way to kick-off reviews. A self-evaluation is when the
employee is asked to judge their own performance against predetermined criteria. The
advantage of this kind of an appraisal is that the employee is allowed to give his input into
his performance appraisal, and the company can use this self-appraisal along with the
standard appraisal to give a more rounded employee review. The disadvantage is that an
employee may not be able to evaluate their own performance objectively, giving himself an
artificially high performance grade and making the self- appraisal less valuable. Employee
self-evaluations help to demystify the appraisal process and can provide interesting insight
into gaps between employee and manager ratings. Self-appraisals also help to ensure that
employees have read and hopefully have analyzed every corner of their performance.

2. Behaviorally Anchored Rating Scales (BARS)

Behaviorally Anchored Rating Scales has a list of criteria that an employee should
workup to be a diligent worker. The behaviors differ according to the type of job been
assessed. This method is considered favorable as the evaluation is done on the basis of
individual employee performance without comparisons.
It is a combination of the rating scale and critical incident techniques of employee
performance evaluation. The critical incidents serve as anchor statements on a scale and the
rating form usually contains six to eight specifically defined performance.
The following chart represents an example of a sales trainee’s competence and a
behaviorally anchored rating scale.
Performance Points Behavior
Extremely 7 Can expect trainee to make valuable suggestions for increased
good sales and to have positive relationships with customers all over the
country.
Good 6 Can expect to initiate creative ideas for improved sales.
Above 5 Can expect to keep in touch with the customers throughout the
average year.
Average 4 Can manage, with difficulty, to deliver the goods in time.
Below 3 Can expect to unload the trucks when asked by the supervisor.
average
Poor 2 Can expect to inform only a part of the customers.
Extremely 1 Can expect to take extended coffee breaks and roam around
poor purposelessly.

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3. The 360 Degree Approach

The 360-degree appraisal involves feedback of the manager, supervisor, team

members and any direct reports. It is a powerful developmental method and quite different
to traditional manager-subordinate appraisals. As such a 360-degree process does not
replace the traditional one-to-one process. It augments it, and can be used as a stand-alone
development method.
The 360 degree appraisals involve the appraisee receiving feedback from people
(named or anonymous) whose views are considered helpful and relevant. The feedback is
typically provided on a form showing job skills/abilities/attitudinal/behavior criteria and some
sort of scoring or value judgment system. The appraisee should also assess themselves
using the same feedback instrument or form.
The 360 degree respondents can be the appraisee's peers, up-line
managers/execs, subordinate staff, team members, other staff, customers, suppliers –
anyone who comes into contact with the appraisee and has opinions/views/reactions of and
to the appraisee.

What a 360 Feedback Survey Measures:

1) 360 feedback measures behaviors and competencies

2) 360 assessments provide feedback on how others perceive an employee
3) 360 feedback addresses skills such as listening, planning, and goal-setting
4) A 360 evaluation focuses on subjective areas such as teamwork, character,
and leadership effectiveness

What 360 Feedback Surveys do not assess:

1) 360 feedback is not a way to measure employee performance objectives (MBOs)

2) 360 feedback is not a way to determine whether an employee is meeting basic job
requirements
3) 360 feedback is not focused on basic technical or job-specific skills
4) 360 feedback should not be used to measure strictly objective things such as
attendance, sales quotas, etc.

Management by Objective (MBO)

Management by objective is a type of evaluation which falls under modern approach of

performance appraisal. This method, often called MBO, is designed to include employees in the
goal-setting process and define "success" by measuring accomplishments against a clearly
established set of objectives. In MBO method of performance appraisal, manager and the
employee agree upon specific and obtainable goals with a set of deadline. If managers and
employees begin the ear by working together to list these objectives, the end-of-year appraisal
can simply compare each gal with its final outcome. With this method, the appraiser can define
success and failure easily.

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Forced Distribution

Forced distribution is a form of comparative evaluation in which an evaluator rates

subordinates according to a specified distribution. Unlike ranking methods, forced distribution is
frequently applied to several rather than only one component of job performance.
Use of the forced distribution method is demonstrated by a manager who is told that he
or she must rate subordinates according to the following distribution: 10 percent low; 20 percent
below average; 40 percent average; 20 percent above average; and 10 percent high. In a group
of 20 employees, two would have to be placed in the low category, four in the below average
category, eight in the average, four above average, and two would be placed in the highest
category. The proportions of forced distribution can vary. For example, a supervisor could be
required to place employees into top, middle, and bottom thirds of a distribution.

Forced distribution is primarily used to eliminate rating errors such as leniency and central
tendency, but the method itself can cause rating errors because it forces disseminations
between employees even where job performance is quite similar.

Graphic Ratings Scale

Rating scale is probably the most common performance appraisal method. The rating
scale methodology requires an employer to develop an in-depth grading system, similar to the
way students in school are assessed. This graphic rating scale is then used to evaluate an
employee in terms of success within a variety of areas, such as technical skill set, teamwork and
communication skills. There is typically a minimum required grade an employee must receive in
order for the performance appraisal to be considered a success. Those that do not make the
grade are often put on a performance improvement plan.

This method gains points for simplicity and functionality, but it only works well to both
managers and employees share the same understanding of each point on the scale (tor
example, on a scale of one to ten, is an "average" performance given a mid-range rating or the
lowest rating) or it the rating categories focus on "traits rather than "behavior

Critical Incident Method

Like the essay method above, the critical incident method allows supervisors to describe
an employee's excellent or poor response to situations arising during the year in question. This
method keeps answers open-ended, flexible, multi-dimensional, and respectful of context. But it
also resists standardization and comparison, and if the incidents aren’t recorded and discussed
as they occur, a subjective assessment made weeks or months later may have limited value.

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Paired Comparison Analysis

Paired comparison analysis relies on a grid that presents numerical values for each
employee based on an established set of criteria. After the values are collected, they can be
reviewed against other values presented in the same format and affected by the same factors.
This method can be complex and labor intensive if done manually, but it allows the kinds of
apple-and-orange comparisons that often present philosophical challenges to HR managers who
need to standardize evaluation methods across groups of employees facing very different tasks.

Ranking

Ranking methods compare one employee to another, resulting in an ordering of

employees in relation to one another. Rankings often result in overall assessments of
employees, rather than in specific judgments about a number of job components. Straight
ranking requires an evaluator to order a group of employees from best to worst overall or from
most effective to least effective in terms of a certain criterion.

Alternative ranking makes the same demand, but the ranking process must be done in a
specified manner (for example, by first selecting the best employee in a group, then the worst,
then the second-best, then the second-worst, etc.). Comparative evaluation systems such as
ranking are rarely popular. No matter how close a group of employees is in the level of their
performance, and no matter how well they perform on the job, some will rank high and some will
end up at the bottom. Evaluators are often reluctant to make such discriminations. Also, rankings
are unable to compare employees across different groups.

Essay Method

The essay method involves an evaluator’s written report appraising an employee's

performance, usually in terms of job behaviors and/or results. The subject of an essay appraisal
is often justification of pay, promotion, or termination decisions, but essays can be used for
developmental purposes as well.
Since essay appraisals are to a large extent unstructured and open-ended, lack of
standardization is a major problem. The open-ended, unstructured nature of the essay appraisal
makes it highly susceptible to evaluator bias, which may in some cases be discriminatory. By
not having to report on all job-related behaviors or results, an evaluator may simply comment on
those that reflect favorably or unfavorably on an employee. This does not usually represent a
true picture of the employee or the job, and content validity of the method suffers.

Improving Performance Appraisals

Not every manager has the opportunity to impact or improve the overall performance
appraisal system within which they must work. But, every manager has the opportunity to take

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the system they have been dealt and turn the performance appraisal process into a positive,
rewarding, beneficial process for both themselves and the employees who report to them.
Here are more meaningful and effective ways of improving performance appraisals:

1) Make sure managers and subordinates understand the appraisal system – The appraisal
system should be explicitly described specific to the purpose of the appraisal. Organizations
that clearly state the purpose for the appraisal reduce the confusion and ambiguity of the
process. The goal should be that everyone knows why the organization is conducting
appraisals. Think of it as purpose and procedure training.

2) Assess the effectiveness of the organization's current system – Managers and subordinates
agreed that the system uphold some functions while falling short in other functions.
Additionally, managers and subordinates have different needs. Identify them, and construct
a questionnaire to assess the degree to which org members perceive the process to be
effective. Only then is the organization in position to develop a strategy to address
shortcomings.

3) Appraisal skills training for managers is a must – It can reasonably be concluded that the
ability of the supervisor to skillfully appraise his subordinate is critical to an effective
appraisal. Training must focus on helping managers develop specific appraisal skills and
confidence in their ability to effectively evaluate others. Skills should include:
a) Goal setting
b) Communicating performance standards
c) Observing subordinate performance
d) Coaching and providing feedback
e) Completing the rating form
f) Conducting the appraisal review

4) Increase managers’ willingness to conduct effective appraisals – Primary causes appraisal

ineffectiveness fall squarely on the manager's shoulder. It's the harsh truth, but
organizations should take more steps to facilitate. Offer refresher trainings, or training on
the skills mentioned in the previous bullet. In short, arm or prepare managers to best carry
out effective appraisals.

5) Start with effective performance planning – Planning is required to set the stage for effective
appraisals. The majority of subordinates cited unclear performance standards as a cause
of ineffective appraisals. Meaningful and accurate evaluation and feedback requires clear
goals be established beforehand. Therefore, a large part of the process should be devoted
to determine what actions need to be taken in the future. It is harder to correct the results
of poor planning than it is to plan correctly at the beginning.

6) Make informal appraisals ongoing activity – Annual appraisals are only as effective as what
happens during the rest of the work year. Managers can increase the effectiveness by
scheduling periodic, informal appraisals with subordinates on a regular basis. Mini-
appraisals encourage honest communication, give the manager an opportunity to monitor
employee progress, provide employee with an ongoing source of feedback, and address
minor problems before they build or snowball. This can be difficult to maintain throughout

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the year as workloads pile up. However, when systems and structures are put in place, they
can help ensure commitment to ongoing activity.

7) Provide resources necessary to link pay to performance – Linking rewards to performance

appraisal results has been found to be one of the most unclear and controversial issues.
However, this value proposition or selling point is frequently made for the appraisal. Few
managers and subordinates believe the system effectively linked pay to performance. When
the following happens, the system will be viewed as a sham.
a) Changes in pay drive ratings instead ratings driving pay
b) Does not allow for differentiation among various levels of contribution to the
organization
When this happens, appraisal process loses its ability to have a positive effect on
employee motivation instead creates a lack of trust in the appraisal process, which can
undermine the potential for the system to effectively fulfill other functions. In short, define
performance and contribution and reward them.

8) Use Anniversary dates to stagger appraisals – Conducting appraisals can be burdensome.

Not only do managers have project or client work to do but also the administrative and
internal work. To provide managers time to conduct more effective appraisals, encourage
the staggering of appraisals throughout the year. This reduces the difficulty of managers
having to conduct numerous appraisals in condensed period, which is a serious threat to
the effectiveness of process.

PERFORMANCE APPRAISAL FEEDBACK

Probably the most challenging part of the performance appraisal meeting is giving
feedback to employees on their performance. But, of course, feedback must be given if
managers want the performance appraisal meeting to be motivational for an employee to result
in improve performance.
Performance appraisal feedback is always easier to give (and receive) if managers have
followed a structured process of:
1. agreeing performance objectives or standards
2. monitored employee performance and
3. given employees ongoing performance feedback (not just at performance appraisal
time)

Effectiveness of Performance Appraisals Feedback

Effective and timely feedback is a critical component of a successful performance

management program and should be used in union with setting performance goals. If effective
feedback is given to employees on their progress towards their goals, employee performance
will improve. People need to know in a timely manner how they are doing, what is working, and
what is not.

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Feedback can come from many different sources like managers and supervisors,
measurement systems, peers, and customers. However certain elements are needed to ensure
its effectiveness, which are:

1.) Specificity – Feedback works best when it relates to a specific goal. Establishing
employee performance expectations and goals before work begins is the key to providing
tangible, objective, and powerful feedback. Telling employees that they are doing well
because they exceeded their goal by 10% is more effective than simply saying "you're
doing a good job."

2.) Timeliness – Employees should receive information about how they're doing as timely
as possible. If improvement needs to be made in their performance, the sooner they find
out about it the sooner they can correct the problem. If employees have reached or
exceeded a goal, the sooner they receive positive feedback, the more rewarding it is to
them.

3.) Manner – Feedback should be given in a manner that will best help improve performance.
Since people respond better to information presented in positive way, feedback should
be expressed in a positive manner. This is not to say that information should be sugar
coated. It must be accurate, factual and complete. When presented, however, feedback
is more effective when reinforces what the employee did right and then identifies what
needs to done in the future. Constant criticism eventually will fall upon deaf ears.

lf effective feedback is designed into a performance management program, individual and

team performance will improve, which will make your organization more effective. With effective
feedback processes, employees won't be working blind and, hopefully, will reach their
destinations successfully.

REINFORCEMENT THEORY
Reinforcement theory of motivation was proposed by BF Skinner and his associates. It
states that individual's behavior is a function of its consequences. It is based on "law of effect".
Individual's behavior with positive consequences tends to be repeated, but individual's behavior
with negative consequences tends not to be repeated.
Reinforcement theory explains in detail how an individual learns behavior. Managers who
are making attempt to motivate the employees must ensure that they do not reward all
employees simultaneously. They must tell the employees what they are not doing correct. They
must tell the employees how they can achieve positive reinforcement.
This theory focuses totally on what happens to an individual when he takes some action.
Thus, according to Skinner, the external environment of the organization must be designed
effectively and positively so as to motivate the employee. This theory is a strong tool for
analyzing controlling mechanism for individual's behavior. However, it does not focus on the
causes of individual's behavior.

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The managers use the following methods for controlling the behavior of the
employees:
1) Positive Reinforcement – This implies giving a positive response when an individual
shows positive and required behavior. For instance, immediately praising an employee for
coming early tor job. This will increase probability of outstanding behavior occurring again.
Reward is a positive reinforce, but not necessarily. If and only it the employees behavior
improves, reward can be said to be a positive reinforcer. Positive reinforcement stimulates
occurrence of behavior. It must be noted that more spontaneous is the giving of reward, the
greater reinforcement value it has.
2) Negative Reinforcement – This implies rewarding an employee by removing negative/
undesirable consequences. Both positive and negative reinforcement can be used for
increasing desirable / required behavior.
3) Punishment – It implies removing positive consequences so as to lower the probability of
repeating undesirable behavior in future. In other words, punishment means applying
undesirable consequence for showing undesirable behavior. For instance – Suspending an
employee for breaking the organizational rules. Punishment can be equalized by positive
reinforcement from alternative source.
4) Extinction – It implies absence of reinforcements. In other Words, extinction implies
lowering the probability of undesired behavior by removing reward for that kind of behavior.
For instance, if an employee no longer receives praise and admiration for his good work,
he may feel that his behavior is generating no fruitful consequence. Extinction May
unintentionally lower desirable behavior.

Reinforcement Schedules
In operant conditioning, schedules of reinforcement are an important component of the
learning process. When and how often we reinforce a behavior can have a dramatic impact on
the strength and rate of the response.
A schedule of reinforcement is basically a rule stating which instances of a behavior will
be reinforced. In some case, a behavior might be reinforced every time it occurs. Sometimes, a
behavior might not be reinforced at all.
Either positive reinforcement or negative reinforcement might be used, depending
on the situation. In both cases, the goal of reinforcement is always to strengthen the behavior
and increase the likelihood that it will occur again in the future.
In real-world settings, behaviors are probably not going to be reinforced each and every
time they occur. For situations where you are purposely trying to train and reinforce an action,
such as in the classroom, in sports, or in animal training you might opt to follow a specific
reinforcement schedule.

Certain schedules of reinforcement may be more effective in specific situations. There

are two types of reinforcement schedules:
1.) Continuous Reinforcement – In continuous reinforcement, the desired behavior is
reinforced every single time it occurs. This schedule is best used during the initial
stages of learning in order to create a strong association between the behavior and

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the response. Once the response it firmly attached, reinforcement is usually switched
to a partial reinforcement schedule.

2.) In partial reinforcement – the response is reinforced only part of the time. Learned
behaviors are acquired more slowly with partial reinforcement, but the response is
more resistant to extinction. there are four schedules of partial reinforcement:
a.) Fixed-ratio schedules are those where a response is reinforced only after a
specified number of responses. This schedule produces a high, steady rate of
responding with only a brief pause after the delivery of the reinforcer.
b.) Variable-ratio schedules occur when a response is reinforced after
unpredictable number of responses. This schedule creates a high steady rate
of responding. Gambling and lottery games are good examples a reward
based on a variable ratio schedule.
c.) Fixed-interval schedules are those where the first response is rewarded only
after a specified amount of time has elapsed. This schedule causes high
amounts of responding near the end of the interval, but much slower
responding immediately after the delivery of the reinforcer.
d.) Variable-interval schedules occur when a response is rewarded after an
unpredictable amount of time has passed. This schedule produces a slow,
steady rate of response.

EMPLOYEE REWARDS PROGRAMS

Seeking to increase employee motivation using rewards can sometimes be a daunting
task for managers. But it should not be when armed with the right information and the proper
techniques, managers can be experts at enhancing motivation using rewards in no time.
Managers who are developing, revamping or currently implementing an employee
rewards program should consider these tips:
1) Involve all employees in the development, implementation and revision of rewards
programs – Involving all employees (or representatives from different positions) will
encourage communication between employees and management about the rewards
process. It Will also ensure that both employees and upper management are onboard
with the reward system.
2) Ensure that employees view the rewards as worth the effort – Including employees in
the reward program development process is critical to ensuring that they value the
rewards and see them as worth the effort. Managers should value employee input and
select rewards accordingly. Employees who see the rewards as worth the effort will
be more motivated to work hard to obtain them.
3) Make sure that employees understand how to earn the rewards – Managers should
clearly delineate how employees can earn rewards. When employees have a
comprehensive understanding of what is expected of them, they will be more capable
of achieving performance standards.

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4) Set reasonable and transparent performance standards for rewards – Employees
must see the rewards as attainable in order for them to engage in the necessary effort
to obtain them. Check in with employees to ensure that they believe the rewards are
within their reach. Also, providing the employees with a dashboard where they can
view their performance in real time will allow them to accurately assess their own
performance and have realistic expectations for rewards.
5) Base reward determinations on objective performance data – When rewards are
distributed based on objective data, employees are more likely to view the process as
fair and are also more likely to have a concrete understanding of what is expected of
them. This will increase their motivation to achieve the desired performance results.
6) Make sure employees view the reward system as fair – When employees view the
reward system as fair, they will be more engaged in trying to obtain the reward.
Rewards should be distributed consistently according to pre-determined policies.
Never engage in favoritism or cut corners as this will have a detrimental impact on
employee performance.
7) Always link rewards to performance – In order for rewards to have the most impact on
influencing employee performance, they must be directly linked to the desired
behavior. Tie praise, recognition, cash rewards and non-cash rewards to specific
results. When employees understand the connection between their reward and their
performance, they will be motivated to perform optimally in the future.
8) Recognize small and large accomplishments – Employees should be rewarded when
they meet large goals as well as smaller milestones. This will ensure that they receive
recognition for their progress and that their behavior is consistent with company
expectations.
9) Reward teamwork and Cooperation – Team-based incentives were found to more
effective at increasing performance than individual incentives. If team-based rewards
are not already included in the company strategy, they should be. Additionally, the
resources devoted to team-based rewards should substantial. This could have a
significant impact on cooperation, employee cohesiveness and the company's bottom
Iine.

10) Never take a good performance for granted – It can be easy to stop rewarding top
performers, but this could be a fatal flaw. In order to keep top talent on the team,
ensure that your company continues to acknowledge and reward an excellent
performance.
11) Provide rewards immediately after the employee achieves the desired behavior –
There is a temporal component to the effect of the reward. The longer the delay in
providing the reward after the employee's achievement, the less of an impact it has
shaping subsequent behavior. Reward behavior that meets performance standards
immediately.

12) Match the reward to the employee – Allow each employee to select their own
reward or decide what rewards employees should receive under predefined
Circumstances. This will enhance their commitment to achieving the rewarded by

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engaging in the required behavior. Understanding the needs of employees is central
to this process.
13) Offer financial rewards, non-monetary rewards and recognition – Reward systems
that include a combination of cash and non-monetary rewards as well as social
awards (e-g. recognition and praise) have the greatest impact on employee
performance. Pay cash bonuses in a lump sum to maximize their effect as money only
motivates when it is a significant amount.
14) When employees learn an unfamiliar task, distribute rewards based on a continuous
reinforcement schedule – The most effective way to encourage learning a new task
is by reinforcing employee behavior on a continuous schedule. This can require
considerable effort when executed by a manager, however, using an employee reward
software program is a more feasible and cost effective solution.
15) Once the behavior becomes a habit, distribute rewards based on a variable ratio or
variable interval schedule – Variable ratio and variable interval schedules of
reinforcement result in the most significant behavior change once the behavior
becomes a habit. This change in behavior is also more resistant to weakening.
Therefore, one of these reinforcement schedules should dictate the reward distribution
process after the behavior has become a habit.
16) Do not disclose the cash value of non-monetary tangible rewards – Employees who
are unaware of the exact cash value of non-monetary rewards are more motivated
by them. Do not disclose the amount unless necessary.
17) Use long-term rewards programs-Long-term rewards programs have the
greatest effect on employee performance and the resulting gains last longer.

18) Balance competitive reward programs with non-competitive programs – Competitive

incentive programs are just as effective as non-competitive reward programs
in increasing performance. An effective rewards strategy should include both.
19) Make rewards an integral part of the company’s strategy – Rewards are invaluable in
aligning employee behavior win the organization’s business strategy. Ensure
that rewarded behavior is in line with company standards, objectives and
strategy.

20) Change the rewards frequently – When the reward is changed frequently, employees
will be more surprised and the process will be more exciting. When employees are
excited about rewards, they will work harder to achieve them.

Intrinsic Rewards

Intrinsic motivation is internal to the person in that it is something that has to be offered
to oneself and is driven by personal interest or enjoyment in the work itself. Because intrinsic
motivation exists within the individual, achieving it does not depend on others. Some people
believe that the most powerful rewards come from inside a person.

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Intrinsic motivation provides that personal pat on the back or natural high that
reflects a person's ability, competency, growth, knowledge and self-control over their endeavors.
Employees who are intrinsically motivated tend to work at higher levels of productivity and strive
to develop professionally. Intrinsic rewards include things such as: personal achievement,
professional growth, sense of pleasure and accomplishment.
In knowledge economy where the greatest asset an employee can offer an organization
is their intelligence, experience, problem solving ability and change savvy persona, intrinsic
rewards are especially important to workers. In fact, Frederick Herzberg, who is one of the
leading theorists of workplace motivation, found intrinsic rewards to be much stronger than
financial rewards in increasing employee motivation. This is not to say that employees will not
seek financial rewards in addition to intrinsic rewards, rather it just means that money is not
enough to maximize motivation in most employees. People want to feel like their contributions
matter.

The following are descriptions of intrinsic rewards and how workers view them:

1) Sense of meaningfulness – This reward involves the meaningfulness or importance of

the purpose a person is trying to fulfill. A person must feel that he has an opportunity to
accomplish something of real value, something that matters in the larger scheme of things.
He feels that he is on a path that is worth his time and energy, 8iving him a strong sense
of purpose or direction.

2) Sense of choice – A person will feel free to choose how to accomplish his work, to use
his best judgment to select those work activities that make the most sense to him and to
perform them in ways that seem appropriate. He feels ownership his work, believe in the
approach he is taking and feel responsible for making it work.
3) Sense of competence – A person feels that he is handling his work activities we that
performance of these activities meets or exceeds his personal standard and that he is
doing good, high-quality work. A person feels a sense satisfaction, pride, or even artistry
in how well he handles these activities.

4) Sense of progress – A person is encouraged that his efforts are really accomplishing
something. He feels that his work is on track and moving in the right direction. He sees
convincing signs that things are working out, giving him confidence in the choices he has
made and confidence in the future.

Extrinsic Rewards
Extrinsic motivation is based on tangible rewards. Unlike intrinsic motivation that is self-
administered, extrinsic motivation is external to the individual and is typically offered by a
supervisor or manager who holds all the power in relation to when extrinsic rewards are offered
and in what amount. Extrinsic rewards are usually financial in nature, such as a raise in salary,
a bonus for reaching Some quota or paid time off. However, extrinsic rewards can also be as
simple as getting the better office, verbal praise, public recognition or awards, promotions and
additional responsibility.

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These material rewards can be motivating to employees because pay, time off,
advancement and recognition are important to most workers. An extrinsically motivated person
will work on a task that they do not particularly care for simply because of the anticipated
satisfaction that will come from some extrinsic reward.

Innovative Rewards System

There are seven different approaches to rewards that are not yet widely tested but are
being considered by managers: They are the following:

1) Skill-based pay – Skill-based pay refers to a pay system in which pay increases are
linked to the number or depth of skills an employee acquires and applies and it is a means
of developing broader and deeper skills among the workforce. Such increases are in
addition to, and not in lieu oft, general pay increases employees may receive. Thee pay
increases are usually tied to three types of skills:
a) horizontal skills, which involve a broadening of skills in terms of the range of tasks
b) vertical skills, which involve acquiring skills of a higher level
c) depth skills, which involve a high level of skills in specialized areas relating to the
same job

2) Broad banding – Abroad broad banding pay structure uses a small number of large
salary pay ranges, instead of many different pay grades within an organization. The main
objective of a broadband is to reduce salary ranges within a certain level but introduce
broader pay ranges within a job level or family. Broad banding systems are implemented
to allow greater flexibility in compensation. It is this flexibility that often flattens the
hierarchy of an organization and is sometimes appealing to large organizations.
Flattening of a hierarchy can be interpreted as collapsing salary grades into a few wide
bands containing many different jobs and salaries.

3) Concierge services – It is an employee benefit award which consists of making

restaurant reservations, finding estimates for a home or automotive repair person,
providing pet care vendors, doing personal shopping before the holiday or picking up dry
cleaning to name a few. These services are available 24 hours a day and 7 days a week
in order to free the employee from wide range of "must d0 activities and just concentrate
on performance.

4) Team-based rewards – It is a monetary compensation that rewards individuals for

teamwork and/or rewards teams for collective results. Team-based incentive programs
can be extremely effective in increasing individual and team performance. They can also
be very effective in shaping employee performance to be more in line with company
values and goals. Here are the several types of team-based rewards:
a) Profit Sharing – Profit sharing is a team-based incentive plan in which management
pay their employees a percentage of their company's overall profits. Profit sharing
builds a sense of ownership among employees and encourages greater team

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performance levels. Staffers know that the better their performance, the better the
business's financial picture, and the higher their own potential cash rewards.
b) Goal-Based incentives – Goal-based team incentives reward employees for
reaching specific goals. For example, topping a certain peso amount in sales
landing a specific number of contracts or hitting a membership recruitment
figure. The approach encourages teamwork and gives employees a firm target to
aim for. This incentive plan is good for businesses that promotes team work and
collective effort, and management only issue the reward if the goal is met.

c) Merit-Based Incentive – A more subjective approach to incentive programs is the

merit-based incentive approach. Following this model, management reward
employee teams for effort, regardless of outcome. For example, if marketing
employees stay late every night to finish a major advertising campaign that doesn’t
perform as anticipated, their dedication and effort are still recognized. Because of
the discretionary element of this type of incentive, it can be a challenge for
employees to know what they aiming for or how they will know when their efforts or
actions are viewed as "good enough” to merit reward.

5) Part-time benefits – Employers generally choose whether their part-time employees will
receive most benefits. These benefits include vacation time holiday pay, sick leave,
medical insurance, retirement benefits and disability insurance. All are considered
voluntary benefits, since providing the benefits is at the employer's discretion.

6) Gain-sharing – Similar to a profit-sharing plan, gain sharing is a team incentive

in which management reward employee groups for measurable, non-financial
achievements in pre-established areas. For example, teams may enjoy a bonus if
customer satisfaction levels rise a certain percentage above figures from the previous
year. The focus of this type of incentive is for employees to recognize
the role they play in continually moving the business forward in key areas.

7) Employee stock ownership – An employee stock ownership plan (ESOP) is

an employee-owner program that provides a company's workforce with an ownership
interest in the company. In an ESOP, companies provide their
employees with stock ownership, often at no up-front cost to the employees.
ESOP Shares, however, are part of employees remuneration for work
performed. Shares are allocated to employees and may be held in an ESOP
trust until the employee retires or leaves the company. The shares are then sold.

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Assessment

Mini – Case Study: Read this mini – case study and answer the case questions below.

No More Dawdling Over Dishes

(Adapted from: Organizational Behavior 6th ed. 2009 by Griffin & Moorhead)

Andy Davis was proud of his restaurant, The Golden Bow. Its location was perfect, its
decor tasteful, its clientele generous and distinguished. When he first took over the business a
year ago, Davis had worried that the local labor shortage might make it difficult to hire good
workers. But he had made some contacts at a local college and hired a group of servers who
worked well with customers and with one another. The only problem he still had not solved was
the dishwasher.

At first Davis felt lucky when he found Eddie Munz, a local high school dropout who had
some experience washing dishes. Davis could not afford to pay a dishwasher more than $4 an
hour, but Eddie did not seem to mind that. Moreover, Eddie seemed to get the dishes clean. But
he was so slow! Davis originally thought Eddie just was not quick about anything, but he changed
his mind as he observed his behavior in the kitchen. Eddie loved to talk to the cooks, often
turning his back on the dishes for minutes at a time to chitchat. He also nibbled desserts off of
dirty plates and sprayed the servers with water whenever they got near him. The kitchen was
always a mess, and so many dishes piled up that often two hours after closing time, when
everything else was ready for the next clay, Eddie would still be scraping and squirting and
talking. Davis began to wonder if there was a method to Eddie's madness: He was getting paid
by the hour, so why should he work faster? But Davis did not like having a constantly sloppy
kitchen, so he determined to have a talk with Eddie.

Davis figured out that Eddie had been making Php28 on his reasonably efficient nights
and then met with Eddie and made him a proposal. First he asked Eddie how soon he thought
he could finish after the last customer left. Eddie said an hour and a quarter. When Davis asked
if he would be interested in getting off forty-five minutes earlier than he had been, Eddie seemed
excited. And when he offered to pay Eddie the Php28 for a complete job every night, regardless
of when he finished, Eddie could hardly contain himself. It turned out he did not like to work until
2:00 a.m., but he needed every dollar he could get.

The next week, a new chalkboard appeared next to the kitchen door leading out to the
dining room. On top it read, "Eddie's Goal for a Record Time." By the end of the first week, Davis
had printed on the bottom "1." Davis began inspecting the dishes more often than usual, but he
found no decrease in the quality of Eddie's work. So on Sunday, he said to Eddie, "Let's try for
an hour."

A month later, the board read "42 minutes." The situation in the kitchen had changed
radically. The former "Eddie the Slob" had become "Eddie the Perfectionist."

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His area was spotless, he was often waiting when someone came from the dining room with a
stack of dirty plates, and he took it as a personal affront if anyone found a spot on a plate he had
washed. Instead of complaining about Eddie squirting them, the servers kidded him about what
a worker he had become, and they stacked the plates and separated the silver to help him break
his record. And the first time Eddie got done at 12:42, they all went out for an hour on these
together.

Case Questions

1. What did Andy Davis do to change Eddie's behavior?

2. Which elements of total quality management and performance management did Andy
Davis use?

3. Could Davis have use a different system of rewards to get the same results m Eddie
Munz?

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