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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
1
2
3
Introduction
1.1 Assessment, Performance and Reward: Relationships
1.2 Designing for Selection
Competence-based Approaches
2.1 Identification
2.2 Development
2.3 Usage
Selection Techniques
3.1 Types
3.2 Operation
3.3 Validity
3.4 Reliability
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4
Recruitment and Selection
4.1 Practical Experience
4.2 Theory Application
5 Performance Assessment
5.1 The Appraisal Process
5.2 Designing the Appraisal Process
6 Performance Management
6.1 Introduction
6.2 Linking Individual Performance to Business Objectives
7 Reward Systems
7.1 Introduction
7.2 Design Considerations
8 Performance Pay
8.1 Introduction
8.2 ‘New Pay’ Ideology
8.3 Empirical Research
8.4 Use of Competencies
9 International Comparisons
9.1 Selection
9.2 Assessment
9.3 Performance Management
10 Cultural, Diversity and Ethnicity Issues
10.1
Cultural Differences
10.2
Diversity
10.3
Ethnicity
11 Public and Private Sectors
11.1
Case Studies
11.2
Empirical 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.
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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)
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MODULE 1
PERFORMANCE AND REWARD MANAGEMENT
1.0 Introduction
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 nonmonetary. 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.
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1.3 Designing 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
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shown in the Figure below. Taken together, direct compensation and benefits define total
compensation.
Figure 1: Components of the Compensation System
Compensation System
Direct Compensation- Pay for Work and Performance
Indirect Compensation
Base pay
Salary
Protection
Programs
 Medical
insurance
 Life insurance
 Disability
income
 Pension
 Social
Pay for
Time Not
Worked
 Vacations
 Holidays
 Sick leave
 Jury duty
Merit pay
Wage
Services and
Perquisites
 Recreational
facilities
 Car
 Financial
planning
 Low-cost or
free meals
Security
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Incentive
Pay




Bonus
Commission
Piece rate
Profit
sharing
 Stock option
 Shift
differential
Deferred
Pay
 Savings plan
 Stock
purchase
 Annuity
MODULE 2
COMPETENCE-BASED APPROACHES
2.0 Introduction
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.
2.1 Identification
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.
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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.
2.2 Development
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 teambased 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.
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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
PROBLEM
SOLVING
Communi
cation
Complia
nce
DECISION
MAKING
KNOWLEDGE
Interpret
ation
Educati
on
Experie
nce
Skill
Interpe
rsonal
Assets
Managerial
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I. Knowledge – prerequisites for thinking and action required to perform assignment
necessary to produce acceptable output.
A.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
B. 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.
C. 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.
II. Problem Solving – applying knowledge through interpretation, compliance, and
communication to solve organizational problems in order to achieve desired levels of
performance.
A. 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
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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.
B. 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.
C. Communication – transmitting directions, instructions, and suggestions in
varying degrees of complexity necessary for the utilization and coordination of
resources of the organization.
1. Provide simple and/or oral communications concerning a variety of situations
following a general pattern. Requires moderate grammatical skills.
2. Provide written and/or oral communications concerning changing standards and
procedures for output within constraints set by quality, quantity, and cost.
Requires moderate grammatical skills as well as ability to use basic coded
information necessary in performance of assignment.
3. Provide written and/or oral communications involving multiunit operation or
processes within framework of broad organizational policies. Requires moderate
grammatical skills as well as ability to identify varied components of output
involving both quantitative and qualitative indicators including coded
information.
4. Provide written and/or oral communication concerning basic operations of
organization including processes or systems involved in its output. Requires
comprehensive grammatical skills as well as ability to identify varied
components of output involving both quantitative and qualitative indicators
including advanced skills in coded information.
5. Provide written and/or oral communications concerning general long-range plans
of organization relating organizational objectives, policies, and strategy to both
immediate and future output of the organization. Requires advanced grammatical
skills as well as ability to use wide variety of information.
6. Provide written and/or oral communications concerning abstract and/or complex
concepts relating to organizational philosophy, mission and strategies, financial
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and scientific processes; and external forces. Requires diverse as well as
profound knowledge of grammar and composition.
III.
Decision Making – intensity, scope, and complexity of interactions necessary to
make decisions in order to achieve acceptable levels of performance.
A. Interpersonal – empathetic understanding and effectiveness in interaction
with others in such areas as teaching, counseling, coaching, training, and
development.
1. Frequent interchange of guidance information on nonroutine matters requiring
some involvement in both counselling and instruction of members of work group
or individuals outside the organization who provide direct assistance to the
organization.
2. Frequent interchange of guidance information on nonroutine matters requiring
frequent involvement in interviewing, counselling, and/or instruction with
members of adjoining or linking groups, and individuals or outside groups who
have direct relationships with the organization.
3. Very frequent interchange of nonroutine information requiring interviewing,
counselling, and/or instruction of managers and professionals in adjoining or
linking sections or departments as well as occasional contact with individuals
and groups outside the basic confines of the organization.
4. Extensive interchange of nonroutine information requiring interviewing,
counselling, and/or instruction of managers and professionals within a major
division of the organization as well as occasional involvement with groups
outside the normal operating limits of the organization.
5. Continuous interchange of complex, nonroutine information in a teaching and
counselling capacity with senior officials throughout the organization as well as
frequent involvement with groups outside the normal limits of the organization.
6. Continuous involvement in exchange of complex, nonroutine information in a
teaching and counselling capacity with members at all levels of the organization
as well as individuals and groups outside the organization including suppliers,
clients, special interest groups, and the general public.
B. Managerial – quantity and quality of supervision provided and received.
1. Receives general supervision from superior. May provide moderate direction or
supervision to at least 5 but less than 20 other employees. If involved with selfmanaged work team, number of employees may increase to 100 or more.
2. Receives general supervision from superior; has rather broad latitudes for actions
involving methods, procedures, and controls in achieving objectives. May
provide direction for work group(s) ranging in total size from 5 to 100
employees. If involved with self-managed work team, number of employees may
be greater than 200.
3. Receives nominal supervision from superior; has broad latitude for actions
involving methods, procedures, and control in achieving objectives. Provides
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direction for broad grouping of work units ranging in size relative to function or
output.
4. Receives nominal supervision, functioning rather independently under general
guidelines set by senior executives. Provides direction for all members of broad
grouping of work units ranging in size relative to function or output.
5. Receives minimal supervision. Functions independently under general policies of
organization or broad guidelines set by senior executives. Provides direction for
all members or organizationwide work units ranging in size relative to function
or output.
6. Receives no supervision and functions under general guidance from boards or
public policy. Provides direction and/or supervision for organization – if not
directly, then by normal chain of command.
C. Assets- degree of accountability for human and nonhuman resources in the
planning, operations, and control of the job.
1. Responsible for actions of small group; responsible for and has interaction with
organizational resources of moderate costs.
2. Responsible for actions of small group; responsible for and has interaction with
organizational resources of considerable costs.
3. Responsible for actions of multigroup operations; responsible for and has
interaction with organizational resources of moderate costs.
4. Responsible for actions of small group; responsible for and has interaction with
organizational resources of considerable costs.
5. Responsible for organizationwide activities and resources.
6. Responsible for total resources and operations of the organization.
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MODULE 3
SELECTION TECHNIQUES
3.0 Introduction
The selection process for assessing job applicants follows human resource planning
and recruiting.
The purpose of selection is to identify from a pool of applicants those individuals who will be
hired.
Ideally, the people who are hired will be better employees, on average, than those who are
rejected. If the selection devices or techniques used to assess candidates have been chosen
and validated properly, this goal should be realized. This therefore indicates the importance
of the selection techniques in the employee selection process.
3.1 Types
Organizations vary in the complexity of their selection systems. Some merely skim
application forms and conduct brief, informal interviews, whereas others engage in testing,
repeated interviewing, background checks, and so on. Although the later is more costly per
applicant, many benefits are realized from careful, thorough selection of employees.
For example, in a situation where most of the applicants are deficient in the required skills,
more careful selection clearly will be necessary to procure new recruits able to learn the job.
Organizations need to have members who are both skilled and motivate to perform their
organizational roles. Either such members can be identified by careful selection, or attempts
can be made to develop them after recruitment by extensive training and socialization.
Thus, careless selection may increase training and monitoring costs greatly, whereas
spending more on the selection process will reduce these posthire expenses.
The kwacha savings (utility) of appropriate selection procedures can be very large.
Selecting the right people is also critical to successful strategy implementation. The
organization’s strategy may affect job duties and design, and the job should drive selection.
For instance, if a company plans to compete on the basis of prompt, polite, personalized
service, then service and communication skills should be featured in the job specification,
and selection devices that can identify these skills in front-line applicants should be chosen.
This argument is based on the assumption that the organization’s strategy is clear, well
known, and fairly stable so that people who fit the strategy can be selected. However, in a
rapidly changing, uncertain world, not all organizations are able to stick to a single strategy
long enough for staffing practices to catch up and bear fruit.
Another approach to strategic staffing suggests that human resources come first and
drive strategy rather than the reverse. Companies are beginning to realize that the foundation
of their competitive strategy is the quality of their human capital. Having a top-notch,
flexible, innovative staff may be a competitive advantage that is more sustainable than
technological or marketing advantages. Such people will be able to generate and implement a
wide range of new strategies to respond quickly to a changing environment. This suggests
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hiring the best individuals one can find rather than hiring those who fit a specific job or
strategy that exists today but may be gone tomorrow.
Fig. 3: Typical Order in Which Selection Devices are Used
Application form
Reject some candidates
Screening interview
Reject some candidates
Tests
Reject some candidates
More interviews
Reject some candidates
Reference checks
Reject some candidates
Conditional offer
Offers rejected by some
candidates
Physical examination
Hire
Most organizations use more than one selection technique to gather information about
applicants. Often these techniques are used sequentially, in a multiple hurdle decision-making
scheme: Candidates must do well on an earlier selection device to remain in the running and
be assessed by later devices.
The foregoing Fig. 3 is a fairly typical order in which selection techniques are used.
Often the HR department takes responsibility for the first few hurdles of assessing
application forms, conducting brief screening interviews, and administering ability tests.
Then one or more managers or supervisors interview the survivors of these hurdles. Finally,
pending satisfactory reference checks, offers are made, medical examinations are completed,
and hiring is finalized.
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3.2 Operation
We now look at the use and benefits of a variety of selection techniques as given in Fig. 3.
1. Application Forms and Biodata
The application form and/or the cv represents the first selection hurdle for most jobs.
Application forms typically request information about education, work history, and skills, as
well as the names and addresses of the applicant and several references/referees.
Most of the information requested is factual and can be verified, such as degrees earned or
dates of employment.
Application form or cv fraud is not uncommon. Some studies have found that 20 to 50% of
candidates falsify or slightly inflate some of their credentials. Thus, seeking outside
confirmation of important credentials is a wise practice.
Most organizations use application forms or cvs to screen out candidates who do not meet the
minimum job specifications on education or experience.
Beyond these basics, a manager or HR officer may evaluate the application informally to find
the candidates who look most promising. The criteria used in making this judgement may not
be explicit, job-related or consistent from one screener to the next and thus may pose a legal
problem.
A second way that organizations can use application form (blank) data is to apply a validated
weighting scheme, in which only items known to relate to later job success are scored and
utilized in decision making.
Weighted application blank (WAB) procedures have been shown to produce scores that
predict performance, tenure, and employee theft. Because the weights are valid and are
applied consistently to all applicants, this method of using application form data is more
defensible than the above-mentioned informal evaluation.
To comply with Zambian government employment laws, a firm must not discriminate
in hiring on the basis of age, race, color, sex, religion, or national origin. Interviewers should
avoid questions about any of these subjects unless they are clearly job-related.
Additionally, application forms and interviews should avoid questions that appear neutral but
cause disparate impact if used as selection standards – for example, questions about height
and weight.
Biodata, experience, and accomplishment records can also be used for selection.
Biodata is a term used to refer to any type of personal history, experience, or education
information.
Some organizations use a biographical information questionnaire instead of, or in addition to,
the usual application form. These biodata questionnaires may be much more detailed than
application forms and may be scored with keys based on very sophisticated statistical
analyses.
In most studies that compare the validity of different types of predictors, empirically
scored biodata are among the strongest predictors of subsequent job behaviour.
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An explanation for the success of biodata as a predictor of behaviour on the job suggests that
many biodata items serve as indicators of important personality traits such as “will to
achieve” or “conscientiousness”. These stable traits may both underlie past performance and
contribute to future performance.
Rather than relying on informal methods of evaluating job experience and
accomplishments, some organizations use content-valid job experience questionnaires to
screen candidates for technical and professional jobs.
The usual procedure is to conduct a job analysis by the task inventory method to identify the
most important or time-consuming tasks.
The results of this job analysis are turned into questions about past work experience with
each task or with each type of equipment used.
Usually a content-evaluation panel of job experts verifies the job relatedness of each
question.
A recent survey found that companies filled 62 % of their job openings requiring university
degrees with experienced people rather than new graduates.
Experienced candidates were seen as more skilled, better suited to demanding jobs, and more
likely to perform immediately than new graduates.
When candidates have job-related experience, appropriate measures of that experience can be
valid predictors of subsequent job performance.
When selecting experienced professionals to hire or promote, a firm may find it helpful to use
a structured, content-valid accomplishment record for soliciting information about
candidates’ past achievements.
The procedure for developing the Individual Achievement Record has several steps.
First, a job analysis is performed using the critical incident method. Incidents were sorted into
job dimensions then a number of selected individuals in an organization provided examples
of their accomplishments on each dimension.
Next, a group of job experts applied a complicated sorting and rating procedure to generate
keys and guidelines for scoring applicant accomplishments.
Finally, the system is applied to assess the accomplishments of employees seeking
promotion.
2. Screening Interview
Virtually all organizations use interviews as a selection technique for most jobs.
Most commonly, candidates are interviewed by a panel of at least two people before being
offered a job.
Typically, an HR specialist and the individual who will be the candidate’s immediate
supervisor will be among the people who conduct these interviews.
For managerial and professional jobs, it is common for the candidate to have a third interview
with a higher-level manager, such as a division head.
A new trend in interviewing is to conduct preliminary interviews with distant candidates via
videoconferencing.
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Types of Interviews: Interviews can be classified by their degree of structure or the extent to
which interviewers plan the questions in advance and ask the same questions of all the
candidates for the job.
Three types of interviews, based on three degrees of structure, can be defined – unstructured,
semistructured and structured interviews.
 Unstructured Interviews. Here questions are not planned in advance, and interviews
with different candidates may cover quite different areas of past history, attitudes or
future plans. These interviews have low interrater reliability and overall have the
lowest validity. Thus, unstructured interviews generally should not be used for
evaluating job candidates.
 Semistructured Interviews. These interviews involve some planning on the part of the
interviewer but also allows flexibility in precisely what the interviewer asks candidates.
These interviews are likely to be more valid than unstructured ones but not as valid as
highly structured interviews.
 Structured Interviews. In a structured interview, questions are planned in advance
and are asked of each candidate in the same way. The only difference between
interviews with different candidates might be in the probes, or follow-up questions, if a
given candidate has not answered a question fully. Interviews that feature structured
questions usually also provide structured rating scales on which to evaluate applicants
after the interview. Research shows conclusively that the highest reliability and validity
are realized in the structured interview. There are three types of structured interviews:
(a) The Patterned Interview (the traditional interview where questions tend to focus on
past work activities, education, career goals, etc.). This type of structure does increase
interrater reliability and may prevent the interviewer from talking too much, but it does
not necessarily result in high validity.
The next two approaches are based on the assumption that high predictive validity
depends on eliciting from the candidate relevant information on the skills, abilities, and
attitudes needed for job success.
(b) The Situational Interview attempts to collect and properly evaluate job-relevant
information. This approach begins with a thorough job analysis and the interview
questions are based directly on the job analysis and are double-checked by job experts so
that the interview is content valid.
This interview focuses mainly on future-oriented questions about what the candidate
would do if faced with a hypothetical job situation. Hence it utilizes three types of
interviews: situational or hypothetical questions where the interviewer asks the candidate
what she would do in a particular job situation; job knowledge questions such as defining
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a term, explaining a procedure, or demonstrating a skill – such questions may be written
rather than oral, depending on their number, and; job requirement questions which focus
on the employee’s willingness to comply with job requirements such as different shifts,
travel, or physically demanding work.
In this approach, a panel of three or more interviewers conducts all the interviews. The
interviewers do not attempt to reach a consensus on each candidate but their independent
ratings are averaged to produce an overall score for each candidate.
(c) The Behaviour Description Interview also attempts to collect and properly evaluate
job-relevant information and operates just like the Situational interview. But this
approach focuses on past behaviours – what the candidate actually did do in past
situations similar to those likely to occur on the job. This is based on the assumption that
the best predictor of future performance is past performance in similar circumstances. Job
experts derive behaviour description interview questions from the critical incidents
technique of job analysis.
3. Tests
Def.: A test is a means of obtaining a standardized sample of behaviour.
Tests are standardized in content, scoring, and administration. That is, every time the test is
given, its questions are identical or, in the case of tests with more than one form, equivalent.
The scoring rules are constant; the administration is also the same: All test takers get the
same instructions, have the same length of time to work, and take the test under similar
conditions of lighting, noise, and temperature.
Because tests are standardized, they provide information about job candidates that is
comparable for all applicants.
All tests have to demonstrate the job relatedness (validity).

Paper-and-Pencil Tests of Ability
 Choosing Tests
The procedure for empirical validation begins with job analysis, followed by selection of
potential predictors, development of criteria, and collection and analysis of validity data.
Because so many published tests are available, a firm must collect information and consider it
carefully before selecting several tests for a validation effort.
The choice process should involve reading test reviews written by knowledgeable people and
carefully reading the test manual, which details test content, purpose, administration, scoring,
and developmental procedures.
Among the several characteristics to look for in a published test are the following:
o Specific ability assessed. The test should measure aptitudes or abilities that
make sense for the job in question.
o Reliability. The test should have high internal consistency reliability and
reliability over time.
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o Proper test development procedures. Developing a test entails much more
than writing questions on a piece of paper. These procedures include item and
factor analysis, trying out successive versions of the test on large samples of
people, developing evidence for the construct validity of the test, and
compiling normative data on large samples of people.
o Administrative ease. This is how easy it is to administer the test to individuals
or groups, time and expense to administer, score, and interpret the test; and
cost of test materials.
o Past success. The success of past empirical validation studies on similar jobs,
extent of test usage in industry, and any record of the test in legal cases.
 Computerized Testing
Some standard written tests are now administered and scored by computer rather than on
paper. This can speed up testing and scoring and reduce the need for a trained test
administrator.
A more sophisticated application is to have the computer create a customized test for each
candidate by selecting items on the basis of the correctness of past answers. For instance, if a
moderately difficult item is answered correctly, the computer will next present a more
difficult item. If the test taker fails this item, the computer will next choose an item between
the first and second in difficulty.
Called adaptive testing, this method quickly zeroes in on the person’s true ability level by
selecting the most diagnostic items for the person being tested.
This method can provide an accurate test score in about half the number of items needed to
produce an equally accurate score via paper-and-pencil methods.
 Work Sample Tests
These ask applicants to do a portion of the job to demonstrate that they have the skill to
perform or learn the job. They are used when the applicant is expected to possess one or more
crucial job skills – skills that the organization does not intend to teach to new hires.
After conducting a thorough job analysis to verify the level and need for these kinds of skills,
the HR specialist can construct a carefully standardized work sample test.
The tester should give all candidates the same copy, equipment, instructions, and length of
time to complete the test. Scoring standards that have been developed in advance should be
applied consistently for all applicants.
Work sample tests also may be paper-and-pencil tests of job knowledge.
There are two other important points to remember:
First, the work sample test does not need to represent the entire job. Some skills may be
better assessed by an interview or an ability test, and certain aspects of the job that can be
readily taught to new hires should not be included.
Second, the skills that are tested should be important skills, whether or not they take up a
large portion of time on the job.
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Work sample and trainability tests are the most popular type of testing presently being
conducted for employment purposes.
 Trainability Tests
These also ask applicants to do a portion of the job to demonstrate that they have the skill to
perform or learn the job. They are used for semiskilled jobs in which the candidate is not
expected to know the skill when applying for the job.
The first part of the process consists of a carefully standardized period of instruction during
which the trainer introduces a task, explains and demonstrates each step, and has the
candidate perform the task once or twice while being coached.
The second portion is the test, during which the candidate performs the task several times
without coaching. The trainer observes and uses a checklist to record errors. At the
conclusion of the performance period, the instructor rates the overall trainability of the
candidate.
 Personality Tests
Unlike the tests already described, personality tests do not have correct answers.
The intent of these tests is to elicit self-descriptive answers.
Personality inventories are sets of objectively scored questions or statements to which the test
taker responds yes if the item is self-descriptive and no if it is not.
Some personality inventories are long and some ask extremely personal questions, and other
non-work-related issues that an interviewer would never even consider asking.
Applicants may justifiably feel that their privacy has been invaded when asked to take some
personality tests.
Nevertheless, well-developed personality tests sum up a large number of questions to produce
reliable scores on well-defined dimensions of personality like dominance, tolerance,
extroversion, aggression, self-esteem, authoritarianism, neuroticism, and independence.
But the proper interpretation of these inventories may require special training.
A number of studies have recently shown that appropriately chosen personality measures
(with a logical connection to job demands) often do help predict interpersonal, noncognitive
aspects of job success, although cognitive ability measures remain the best predictors of job
performance.
Tests that specifically diagnose mental illnesses rather than relative standing on normal
personality traits may be illegal in preemployment screening.
 Integrity Tests
Many employers today are interested in screening out job candidates who may be likely to
steal from them.
Traditionally, two methods have been used to identify potentially dishonest employees:
polygraph examinations and paper-and-pencil tests.
The polygraph, or lie detector, measures and graphs respiration, blood pressure, and
perspiration while the person being tested answers questions.
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Doubts about the validity of the polygraph and horror stories of honest individuals who were
discharged or denied employment because of erroneous polygraph results have led to legal
restrictions on the use of polygraphs.
But companies that provide security services or manufacture and distribute controlled drugs
may continue to use polygraphs; polygraph tests also may be used for investigating specific
crimes against the employer, such as theft or embezzlement.
In no case, however, may a company discharge or discipline an employee solely on the basis
of polygraph results.
As a result of the restriction on polygraph testing, paper-and-pencil honesty tests have
increased in popularity.
There are two types of written honesty tests: overt integrity tests that assess attitudes toward
theft and ask about past dishonest behaviour, and personality-oriented tests that focus on
broader traits such as dependability, rule-following, impulse control, and conscientiousness.
Most available tests have satisfactory reliability and reasonable validity in identifying
individuals who have been caught stealing in the past or who will be caught stealing in the
future.
Personality-oriented tests predict not only theft but also composite measures of other types of
counterproductive behaviour, such as abuse of sick leave, excessive grievance filing, drug use
at work, and rule breaking.
4. Reference checks
Most organizations check candidates’ references in varying degrees of detail as part of the
selection process.
The goal in reference checking may be to verify information that the candidate has already
given the organization, such as academic degrees, dates of employment, job responsibilities,
and salary.
Reference and background checks are also used to discover new information on the history or
past performance of the candidate, such as relevant criminal convictions or reasons for
leaving a previous job.
These investigations may be performed by the organization or by an investigative services
firm hired by the employer.
Reference information is usually collected from a candidate’s former employers or teachers
or from other knowledgeable persons the candidate lists.
Ideally, an organization should seek additional reference information from people other than
those the candidate gives.
The most informative references are former or current superiors who know the candidate’s
work well and who have observed the candidate perform in a similar job.
Information from references may be solicited in writing, in a phone interview, or in a face-toface interview.
Generally, letters are the least useful because writers have time to carefully censor what they
say, and their letters are nearly always positive and relatively unrevealing.
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There are several potential legal problems associated with references.
The first involves the new employer: If an employer hires someone who subsequently causes
injury to another – and the employer should have known, through reference and background
checks, about the employee’s propensity for committing injurious acts – then the employer is
liable for negligent hiring.
There also may be legal problems for employers who give references.
One involves possible lawsuits for defamation when an employer or former employer gives a
negative reference. Thus many companies are discouraging candidates’ superiors from giving
any reference information at all.
Instead, these firms are handling all requests for reference information centrally, from the
personnel office, and they are limiting the information to facts such as dates of employment
and job title. But this complicates the task of the potential future employer who would like a
frank assessment of a candidate.
A second legal problem is that by remaining silent about a problem employee, the former
employer may be liable for negligent referral, or for violating a duty to warn, if the candidate
is hired and subsequently causes harm to others.
5. Physical examination
One of the final steps in the selection process may be a physical examination or test.
The physical examination traditionally has been part of the selection process in many
organizations.
The examination is required by law for some jobs, such as pilot, truck driver, and any
position that involves handling of food.
Information gained from physical examinations can serve several purposes:
 To revoke conditional employment offers to persons who are found to be physically
unable to perform the essential functions of the job.
 To place individuals in jobs that they are fit enough to handle.
 To prevent the spread of contagious diseases to current employees or customers.
 To document pre-existing injuries and illnesses to prevent fraudulent group
insurance or workers’ compensation claims.
As with all selection techniques, reliability, validity and utility are relevant in the evaluation
of physical examinations.
Reliability may not be extremely high: Doctors who are not knowledgeable about job
demands may not be able to agree on whether a candidate is fit enough or can perform
essential job functions.
The validity of the physical examination is also questionable: When jobs require unusual
strength or stamina, actual physical tests are likely to be more valid than a doctor’s opinion.
In terms of utility, physical examinations are expensive because they must be administered
individually by a costly tester.
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Physical examinations may also be challenged legally as being discriminatory against the
handicapped and others.
Regarding strength and fitness testing – for physically demanding, employers may be wise to
directly measure applicant strength or fitness as part of the selection process.
In terms of drug testing, more and more employers have adopted drug and alcohol screening
programs for both applicants and current employees.
There may be good reasons for avoiding hiring substance abusers. Some studies suggest that
drug and alcohol abusers have higher rates of absenteeism and accidents.
Furthermore, employers may be liable for negligent hiring if a drug-using employee causes
an accident that harms others.
Drug tests appear to be reasonably reliable, but usually a second, more sophisticated
confirmatory test is performed when a sample gives an initial positive reading.
In order to be fair to candidates, it is important to choose a properly certified laboratory to
conduct drug tests.
Overall, drug testing is a relatively expensive and invasive procedure.
Whether or not it has utility (cost-effectiveness) in a given setting depends on the extent to
which drug users are represented in the applicant pool and on the extent to which drug use
actually compromises job performance, attendance or safety on the job in question.
Criteria For Choosing Selection Techniques
Some of the criteria that may be used are as follows.
 Validity
 Utility
 Legality
 Acceptability to Managers
 Applicant reactions
 Societal impact
3.3 Validity
The validity of the interview is how well it measures that which should be measured. This is
the predictive ability of the interview with regards to job performance.
Historically, the predictive validity of the interview has been thought to be quite low.
It seems that interviewers often commit judgemental and perceptual errors that can
compromise the validity of their assessments.
 Similarity Error
 Contrast Error
 Overweighting of negative Information
 Race, Sex and Appearance Bias
 First Impression Error
 Traits Rated and Halo Error
 Nonverbal Factors
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

Faulty Listening and Memory
Differences Between Interviewers
However, recent research has suggested that some interview procedures can be quite valid.
Interviews also tend to capture somewhat different aspects of a person than do cognitive
ability tests, and it has been shown that a properly conducted interview can add to the
prediction of job performance over and above tests.
The predictive power of work sample tests has been found to be quite high.
Trainability tests have shown moderate validities with job success, indicating that eventually
even less trainable employees are able to learn the job.
Work sample and trainability tests can be developed and used even for very small samples,
unlike tests requiring empirical validation.
They also possess excellent face validity; thus applicants who do poorly can readily
understand why they are being rejected and probably will not file complaints of unfair
treatment.
Since work sample and trainability tests embody important aspects of the job, they can serve
as realistic job previews so that candidates who do not enjoy the work sample may choose to
turn down a job offer.
Historically, predictive validities have tended to be substantially lower for personality
measures than for other types of tests.
Studies of the validity of reference information agree that predictive validity tends to be low
but is sometimes significant.
3.4 Reliability
In the interview context, reliability is consensus, or agreement, between two interviewers on
their assessments of the same candidates. This is called interater reliability.
Research shows that it is usually weak.
Interviewers might agree fairly well on the overall assessment of a candidate and on factual
issues but they seem unable to agree on more subjective or future-oriented characteristics.
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MODULE 4
RECRUITMENT AND SELECTION
4.0
Introduction
Def.: Recruiting is the process by which organizations locate and attract individuals to fill job
vacancies.
Most organizations have a continuing need to recruit new employees to replace those who
leave or are promoted, to acquire new skills, and to permit organizational growth.
Recruiting an employee from the external labor market can be quite expensive. The
recruitment cost includes the cost of advertising, agency fees, employee referral bonuses,
applicant and staff travel. Relocation costs, and recruiter salaries.
Def.: Selection is the process by which organizations evaluate the suitability of candidates for
various jobs.
Recruitment follows HR planning and goes hand in hand with the selection process.
Without accurate planning, organizations may recruit the wrong number or types of
employees.
Without successful recruiting to create a sizable pool of candidates, even the most accurate
selection system is of little use.
4.1
Practical Experience
This is the age of Human Capital which requires open-system thinking. It is a “big picture”
approach to managing people and staying competitive.
This is because we are living in a time when a new economic paradigm – characterized by
speed, innovation, short cycle times, quality, and customer satisfaction – is highlighting the
importance of intangible assets, such as brand recognition, knowledge, innovation, and
particularly human capital.
Def.: Human capital encompasses all present and future workforce participants (employees)
and emphasizes the need to develop their fullest potential for the benefit of everyone.
Central to this perspective is the assumption that every employee is a valuable asset, not
merely an expense item.
This broad concern for possible future employees is a marked departure from traditional
“employees-only” perspectives.
People-Centred Organizations Enjoy a Competitive Advantage: In an era of non-stop layoffs,
the often-heard slogan “Employees are our most valuable asset” rings hollow.
But such cynicism can be countered by looking at how leading companies build a bridge
from progressive human resource practices to market success.
Recent research has reported a strong connection between people-centred practices and
higher profits and lower employee turnover.
Pfeffer has identified the following seven people-centred practices:
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






Protection of job security (including a no-layoff policy)
Rigorous hiring process
Employee empowerment through decentralization and self-managed teams
Compensation linked to performance
Comprehensive training
Reduction of status differences
Sharing of key information
These are seen as an integrated package and should not be implemented piecemeal.
Unfortunately only about 12 percent of today’s organizations qualify as being systematically
people-centred.
Thus, we have a clear developmental agenda for human resource management.
4.2 Theory Application
The following is an overview of the recruitment process from the perspectives of the
organization and the candidate. This flow chart displays the process as it unfolds over time.
When a vacancy occurs and the recruiter receives authorization to fill it, the next step is a
careful examination of the job and an enumeration of the skills, abilities and experience
needed to perform the job successfully.
Existing job analysis documents can be very helpful in this regard.
In addition, the recruitment planner must consider other aspects of the job environment – e.g.
the supervisor’s management style, the opportunities for advancement, pay and geographic
location – in deciding what type of candidate to search for and what search methods to use.
After carefully planning the recruiting effort, the recruiter uses one or more methods to
produce a pool of potentially qualified candidates.
A firm can generate candidates internally, from among its present employees who desire
promotion or transfer, or externally, from the labor market.
The organization then screens the candidates, evaluates some of them more thoroughly, and
offers the best the position.
Throughout the recruitment process, the organization attempts to “sell” itself to the more
promising candidates – that is, to convince them that the organization is a good place to work
and that it offers what they want in the way of both tangible and intangible rewards
Candidates searching for an employer also go through a parallel set of activities.
In the recruitment and selection process, the organization’s and the individual’s objectives
may conflict.
The organization is trying to evaluate the candidate’s strengths and weaknesses, but the
candidate is trying to present only strengths.
Conversely, although the candidate is trying to ferret out both the good and bad aspects of the
prospective job and employer, the organization may prefer to reveal only positive aspects.
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In addition, each party’s own objectives may conflict.
The organization wants to treat the candidate well to increase the probability of job-offer
acceptance, yet the need to evaluate the candidate may dictate the use of methods that may
alienate the prospect, such as background investigations or stress interviews.
Analogously, the applicant wants to appear polite and enthusiastic about the organization to
improve the probability of receiving an offer, but he/she also may want to ask penetrating
questions about compensation, advancement, and the company’s financial health and future.
The use of experience in recruitment has already been covered in Module 4 above.
Fig. 4.0: The Recruitment Process
ORGANIZATION
APPLICANT
Receive education and choose
occupation
Vacant or new position occurs
Acquire employment
experience
Perform job analysis and plan
recruiting effort
Search for job openings
Generate applicant pool via
internal or external
recruitment methods
Apply for jobs
Evaluate applicants via
selection process
Impress company during
selection process
Impress applicants
Evaluate jobs and companies
Make job offer
Accept or reject job offers
Recruiting for Diversity:
The ultimate goal of recruiting is to generate a pool of qualified applicants for new and
existing jobs. Everyday recruiting tactics include internal job postings, referrals by present
and past employees, campus recruiters, newspaper ads, Web sites, public and private
employment agencies, head-hunters, job fairs, temporary-help agencies, and union halls.
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But today’s recruiting is extremely challenging since applicant pools need to be
demographically representative of the population at large if diversity is to be achieved.
The Selection Process:
Equal employment opportunity (EEO) legislation in the United States and elsewhere attempts
to ensure a fair and unprejudiced race for all job applicants. The first two hurdles are résumé
screening and reference checking; both are very important because an estimated 40% of job
applications include false information.
Background checks for criminal records and citizenship/immigration status are more essential
than ever in an age of workplace violence and international terrorism.
Other hurdles may include psychological tests, physical examinations, interviews, worksampling tests, and drug tests.
A respected author and trainer summarizes the overall employee selection process with the
acronym PROCEED, with each letter representing one of the seven steps involved. This
model encourages managers to take a systems perspective, all the way from preparation to the
final hiring decision.
Step 1 is where job analysis and job descriptions come into play.
Def.: Job analysis is the process of identifying basic task and skill requirements for specific
jobs by studying superior performers.
Def.: A job description is a concise document outlining the role expectations and skill
requirements for a specific job.
Up-to-date job descriptions foster discipline in selection and performance appraisal by
offering a formal measuring stick.
Table 4.0: The Employee Selection Process- The PROCEED Model
Step 1: PREPARE
o Identify existing superior performers
o Create a job description for the position
o Identify the competencies or skills needed to do the job
o Draft interview questions
Step 2: REVIEW
o Review questions for legality and fairness
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Step 3: ORGANIZE
o Select your interview team and your method of interviewing
o Assign roles to your team and divide the questions
Step 4: CONDUCT
o Gather data from the job candidate
Step 5: EVALUATE
o Determine the match between the candidate and the job
Step 6: EXCHANGE
o Share data in a discussion meeting
Step 7: DECIDE
o Make the final decision
Strategic Issues In Recruiting
The nature of a firm’s recruiting activities should be matched to its strategy and values as
well as to other important features such as the state of the external labor market and the
firm’s ability to pay or otherwise induce new employees to join.
Recruitment Goals: A good recruiting program needs to serve many and sometimes
conflicting goals.
A commonly mentioned goal is to attract a large pool of applicants, but applicant pools can
be too large and thus very costly to process.
Recruiting also must attract a high proportion of well-qualified candidates who are seriously
interested in accepting a job offer.
Balancing these varied goals against one another should be done with reference to the
organization’s overall strategy and values.
Recruitment Philosophy: One of the key issues in recruitment philosophy is whether to
promote largely from within the organization or to hire from the outside for vacancies at all
levels.
A second aspect of recruitment philosophy concerns where the emphasis is: on merely filling
vacancies or on hiring for long-term careers.
A third aspect concerns depth of commitment to seeking and hiring a diverse range of
employees- a mere compliance with the law or valuing diversity as a central principle of
organizational life and actively encouraging participation by all types of people.
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A fourth aspect is whether applicants are viewed as commodities to be purchased or as
customers to be wooed (the marketing orientation).
A fifth aspect has ethical overtones, in terms of fairness and honesty in the recruitment
process.
Internal or External Sources: Deciding whether the position is to be filled internally or
externally is often an early task in recruitment planning for a specific vacancy.
Usually, entry-level jobs must be filled externally, and for other positions, the company’s
policy or union contract may require that internal sources be used first.
Most organizations use a mixture of internal and external sources – promoting from within
when qualified employees are available and recruiting from external sources when new skills
are needed or growth is rapid.
Countercyclical Hiring: One strategic issue relevant to external recruiting is when to recruit.
Most firms recruit each year to meet that year’s needs. They attempt to hire many people in a
boom year and hire very few during years when the industry, economy or company is on a
down cycle.
Research suggests that the firms most likely to engage in countercyclical hiring emphasize
human resource planning to avoid shortages, maintaining a regular age distribution of
managers, and training and development; these are also firms that can afford to hire in
downturns, since they are among the stronger financial performers.
Alternatives to Traditional Recruiting
Traditional recruiting is not always the answer to a firm’s human resource needs.
A traditional approach is to intensify essentially similar recruiting efforts – to run yet another
advertisement, extend a contract with an employment agency, or recruit in a larger
geographic region.
But additionally, firms can attempt to attract applicants by improving or changing the nature
of inducements, perhaps increasing wages or benefits or providing flexible work
arrangements.
Another strategy is to change the focus of recruiting to labor pools that are relatively more
plentiful and underutilized; for example, to recruit from retirees, people with disabilities,
disadvantaged urban residents, mothers with young children, and so on.
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Inducements as well as recruiting methods and messages will have to be tailored to the needs
and desires of these groups.
One of the distinct alternatives to traditional recruiting include not recruiting at all. Instead,
such firms have adopted the staffing strategy of keeping a small cadre of permanent
employees along with a buffer of temporary or contract workers.
Another alternative is to use temporary workers obtained from a temporary help agency.
Temporaries are especially helpful for covering peak demand periods, especially in an
uncertain economic climate when demand could drop sharply.
Employee leasing is a way to obtain the services of individuals over a longer period than
would normally be the case with temporaries.
An employee leasing firm recruits, hires, trains, and compensates employees, and the
organization that leases them provides their work facilities, direct daily supervision, and
duties.
Subcontracting is another alternative whereby an organization hires an outside firm to
perform the entire function, either on or off the organization’s premises.
External Recruiting Methods
These are often grouped into two classes: informal and formal.
Informal Methods:
These tap a narrower labor market than formal methods.
Informal methods include rehiring former employees or former cooperative education
students, hiring people referred by present employees, and hiring from among those who
have applied without being unsolicited ( “walk-ins” or “gate hires”).
Employee referral, also known as word-of-mouth advertising, is quick, effective, and usually
inexpensive.
Formal Methods:
These entail searching the labor market for candidates who have no previous connection to
the firm.
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These methods traditionally have included newspaper advertising, use of employment
agencies and executive search firms, campus recruiting, employee referrals, networking, and
internet.
Equal Employment Opportunity (EEO):
EEO law now provides a broad umbrella of employment protection for certain categories of
disadvantaged individuals. The result of this legislation has been that in virtually all aspects
of employment, it is unlawful to discriminate on the basis of race, colour, sex, religion, age,
national origin, etc. This means managers cannot lay off or discharge, refuse to hire, promote,
train, or transfer employees simply on the basis of the characteristics listed above. Selection
and all other personnel decisions must be made solely on the basis of objective criteria such
as ability to perform or seniority.
Lawsuits and fines by agencies such as the EEO Commission are powerful incentives to
comply with EEO laws.
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MODULE 5
PERFORMANCE ASSESSMENT
5.0
Introduction
A critical factor related to an organization’s long-term success is its ability to measure how
well employees perform and then use that information to ensure that performance meets
present standards and improves over time.
This process is referred to as performance appraisal or performance evaluation.
It is a complex task that is difficult to do, and it is not done well by most organizations.
Annual performance appraisals are such a common part of modern organizational life that
they qualify as a ritual.
But both appraisers and subjects tend to express general dissatisfaction with performance
appraisals.
For many organizations and their employees, the mechanism used to measure and rate
performance is the performance appraisal system.
5.1 The Performance Appraisal Process
Def.: Performance appraisal is the process of evaluating individual job performance as a basis
for making objective personnel decisions.
Performance appraisal is the formal process, normally conducted by means of completing an
instrument that identifies and documents a jobholder’s contributions and workplace
behaviours.
It is the process by which an employee’s contribution to the organization during a specified
period of time is assessed.
Performance feedback lets employees know how well they have performed in comparison
with the standards of the organization.
A primary reason for appraising performance is to encourage employees to put forth their
best effort so that the organization can reach its mission and goals.
Through the appraisal process, the organization identifies and recognizes effort and
contributions.
Rewarding employees for effort and contributions reinforces their behaviours in a manner
that increases the likelihood that they will achieve their own goals.
Formally documented appraisals are needed both to ensure equitable distribution of
opportunities and rewards and to avoid prejudicial treatment of protected minorities.
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Two important aspects of performance appraisal are legal defensibility and alternative
techniques.
Appraisal and feedback can occur informally, as when a supervisor notices and comments on
a good or poor performance incident.
A more formal method is the structured annual performance review, in which a supervisor
assesses each employee’s performance using some official appraisal procedure.
Functions of Performance Appraisal
The uses of performance appraisal can be divided into 4 major categories:

Developmental Uses of appraisal focus on improving employees’ future performance
and career advancement.

Administrative Uses include decision making about merit increases and promotions.

Appraisal information is also used to contribute to organizational wellbeing (e.g. to
anticipate HR needs) and for documentation (e.g. to provide criteria for validation
research).

Organizational maintenance/objectives
Table 5.0: Multiple Organizational Uses for performance Appraisal Information
General Applications
Specific Uses
Developmental Uses
Identification of individual training needs.
Performance feedback
Determining transfers and job assignments
Identification of individual strengths and
developmental needs
Administrative Uses/ Decisions
Salary; Promotion; Retention or termination;
Recognition of individual performance;
Layoffs; Identification of poor performers.
Organizational Maintenance/ Objectives
Human resource planning
Determining organization training needs
Evaluation of organizational goal
achievement
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Information for goal identification
Evaluation of human resource systems
Reinforcement of organizational
development needs
Documentation
Criteria for validation research
Documentation of human resource decisions
Helping to meet legal requirements
5.2
Designing the Appraisal Process
Criteria for a Good Appraisal System
The fundamental decisions about what type of performance to assess and how to measure that
performance should be shaped by four desirable criteria:
 Validity
A good measure of performance should measure important job characteristics (relevancy)
and be free from extraneous or contaminating influences.
It also should encompass the whole job (not be deficient).
A measure is content valid if it measures important parts of a job and does so in a
representative way.
A performance appraisal system must be valid.
It is essential that a good job analysis be conducted before developing the performance
measure so that all relevant aspects of performance are covered and irrelevant factors do
not contaminate the appraisal measure.
 Reliability
Interrater reliability is the most relevant type of reliability for performance appraisal.
It is high when two or more raters agree on the performance of an employee and low
when they do not.
Interrater reliability is usually quite good when performance raters come from the same
level of the organization.
Internal consistency reliability and reliability over time are not especially important in
performance appraisal because performance itself may not be internally consistent or
stable over time.
Thus, when evaluating the reliability of performance appraisals, it is very important to
know exactly what type of measure is used and, in the case of subjective ratings of
performance, who is making the ratings.
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 Freedom from Bias
This has two components: legal issues of fairness to employees and the subjectivity of
one person’s judgements about the performance of others (rating errors).
An appraisal is free from bias if it is fair to all employees regardless of their race, sex,
national origin, disability status, and so on.
Ratings may also be biased either intentionally or unintentionally when an appraisal
system requires individuals to make subjective judgements about the performance of
others.
Common rating errors include leniency errors (more positive performance ratings than
employees deserve); severity errors (more unfavourable ratings than performance
warrants); central tendency errors (rating all employees near the midpoint of a
performance scale); halo errors (rating an individual on several aspects of performance,
then an employee receives nearly identical performance ratings on all performance areas,
and the resulting correlation among the ratings is very high).
 Practicality
It takes time, effort, and money to develop, implement, and use a performance appraisal
system.
The benefits to the organization of using the system must outweigh its costs.
The appraisal system also should be relatively easy to use and should have a high degree
of employee and managerial acceptance.
The development and use of an appraisal system can be an expensive undertaking.
Since kwacha costs are high, an important practical criterion against which to judge an
appraisal system is the savings it might bring to the organization.
The process of measuring kwacha return to an organization is called utility analysis.
Deciding What Types of Performance to Measure
There are three basic categories of performance information.
A trait-based appraisal system assesses the abilities or other personal characteristics of an
employee.
A behaviour-based appraisal system measures the extent to which an employee engages in
specific, relatively well-defined behaviours while on the job.
A results-based appraisal system measures the “bottom line” associated with an employee’s
work: Did the job get done, and was a profit made?
 Trait-Based Appraisals
These are used to assess the personality or personal characteristics of employees, such as
their ability to make decisions, loyalty to the company, communication skills, or level of
initiative.
This type of appraisal asks a lot about what a person is but relatively little about what he
actually does.
While trait-based appraisals are easy to construct, the disadvantages of focusing on traits are
significant.
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Trait-based approaches have questionable validity.
Traits assessed in this type of appraisal often do not relate well to how employees really
behave on the job because job behaviour is strongly influenced by situational and
environmental factors.
Since the link between personal traits and actual job behaviour is weak, trait-based systems
are potentially more susceptible to charges of unfairness by minorities, women, and other
protected groups.
Trait-based systems are not likely to be accepted by courts of law.
A further problem is that the interrater reliability of trait-based ratings is often low.
The traits are difficult to define accurately, and the different frames of reference used by
different raters make agreement among raters unlikely.
A final disadvantage is that trait-based appraisals are not helpful for providing feedback to
employees.
The basic personality traits of individuals are relatively well fixed by the time they are hired
by an organization and are very difficult to alter.
 Behaviour-Based Appraisals
Appraisals can consider the behaviour of employees rather than their personal traits.
Behaviour measures are appropriate when the process used to accomplish the job is very
important, and thus behaviour measures are used to emphasize how a job is done.
In behaviour-based appraisals, employees are assessed on what they do on the job.
Such assessments are more acceptable to the courts than trait-based appraisals.
Behaviour measures can be very useful for feedback purposes because they indicate exactly
what an employee should do differently.
Deficiency may be a problem with some behaviour-based appraisals because they often will
not include all behaviours that could lead to job effectiveness.
For some jobs, effective performance can be achieved using a variety of different behaviours.
Research has produced 8 generic work behaviours organized into 5 minimum performance
behaviours and 3 organizational citizenship behaviours.
Table 5.1: The Generic Work Behaviours
Generic Work Behaviour
Example
Industriousness (Work ethic)
Takes the initiative to find another task when
finished with regular work.
Notices items out of place and returns them
to the proper areas.
Works flexible hours by accepting schedule
changes when necessary.
Stays away from work without notifying
anyone.
Thoroughness (Work ethic)
Schedule flexibility
Attendance
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Off-task behaviour
Unruliness (Employee deviance)
Theft (Employee deviance)
Drug misuse (Employee deviance)
Uses company phones to make unauthorized
personal calls.
Refuses to take routine orders from
supervisors
Advises friends how to steal company
property.
Comes to work under the influence of drugs
or alcohol.
 Results-Based Appraisals
To avoid the problems inherent in a behaviour-based approach, appraisals may measure the
results of work behaviour (the output of an employee).
When it is not important how results are achieved, or when there are many different ways to
succeed, a results-based appraisal would be appropriate.
Despite their intuitive appeal, results-based appraisals pose questions of practicality,
contamination, and deficiency.
Results-based measures may be difficult to obtain for some jobs.
Furthermore, results are not always under the control of an individual employee.
Equipment breakdowns, a change in the economy, bad luck, inadequate budgetary or staff
support, or other factors not directly controlled by an employee may greatly affect the job
results.
Results measures are therefore contaminated by these external factors.
Another problem is that results-based appraisals may foster a “results at all cost” mentality
among employees.
Teamwork among employees may suffer if individuals are preoccupied with their own
personal results and will not take the time to help coworkers.
A final disadvantage is that results-based appraisals are less helpful for employee
development.
They do not always provide clear information on how to improve work performance.
Methods of Appraising Performance
Performance can be measured in many different ways.
Most of the performance measures currently in use can be characterized as either objective or
subjective.
Objective measures are typically results-based measures of physical output, whereas
subjective measures can be used to assess traits, behaviours or results.
 Objective Measures
These assess performance in terms of numbers, such as the amount of a product an employee
produces or sells, the number of defective products produced, the number of times an
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employee is absent or late to work, or some other direct numerical index of how well or
quickly an employee can perform certain tasks.
There are five major types of objective measures: production measures, kwacha sales,
personnel data, performance tests, and business unit performance measures.
Objective measures have the advantages of being free from the types of errors and biases that
plague subjective measures.
However, objective measures seldom capture the individual’s total contribution to the
organization.
Measures of quantity, quality, attendance, and even profit may represent important
dimensions of performance but ignore dimensions such as cooperation or willingness to
contribute in ways that go beyond the job description.
 Subjective Measures
Because they rely on human judgement, subjective measures are prone to the rating errors
mentioned above.
Most performance appraisal systems place heavy emphasis on subjective ratings of
performance.
Unlike objective measures, subjective judgements can be used even when the employee does
not produce a measurable physical product.
The major problem with subjective measures of performance is that the raters have to observe
and evaluate job-related behaviour.
Raters may not have the chance to observe relevant behaviour, and even if they do, their
ratings may be biased.
Several different types of subjective measures can be used and generally, they can be
classified as either comparative procedures (ranking) or assessments against absolute
standards (rating).
Comparative Procedures: Subjective comparison of the overall work performance of
individual employees can yield a rank ordering of employees from best to worst.
Three kinds of comparative procedures are used in performance appraisal – ranking
(employees compared directly against one another), paired comparisons (all possible pairs of
employees are formed and the better performer is chosen from each pair) and forced
distributions (placing a percentage of employees into each of several performance
categories).
Ranking – When ranking is used, employees are compared directly against one.
Ranking is faster, less expensive, easy to understand and use than the other evaluation
techniques.
The simplest ranking procedure is straight ranking whereby the evaluator arranges
employees in order from best to worst on the basis of their overall performance.
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Alternate ranking is a variation whereby the evaluator first ranks the best employee, next
the worst employee, then the second best, then the second worst, and so on until all
employees are ranked.
Absolute Standards: Instead of comparing an employee’s performance with that of fellow
employees, an appraisal system can be based on absolute performance standards for the job.
Each employee is evaluated against the standards.
Absolute standards facilitate comparison of employees from different departments and
performance is measured on a number of specific dimensions so that employees can be given
more helpful feedback than is generated by comparative measures.
Variations of the absolute standards technique include graphic rating scales, weighted
checklists, the critical incidents technique, behaviourally anchored rating scales (BARS) and
behavioural observation scales.
Graphic Rating Scales – are the most widely used evaluation technique where the
rater evaluates an employee on each of several performance dimensions using a continuum
made up of clearly defined scale points.
The scale points can be assigned scores and a total score for an employee can be computed by
summing the ratings across all dimensions rated.
If some characteristics are more important than others, the rating on these dimensions can be
multiplied by an appropriate weight before the total is calculated.
Weighted Checklists - In this approach, a rater is given a list of job-related
characteristics or behaviours and is asked to tick the items that are typical of a particular
employee.
When such a weighted checklist is developed, job experts indicate how good or poor
behaviour is. These goodness weights are then used in summing ratings to determine the
overall performance of an employee.
A variant of this technique is the forced-choice system, a procedure developed specifically to
reduce leniency error.
Critical-Incident Technique - When performance appraisal is to be based on critical
incidents, the evaluator keeps a log for each employee, recording behaviours and
performance incidents that are particularly effective or ineffective.
Incidents are recorded for each employee as soon as possible after they occur.
At the end of the evaluation period, this log is used to evaluate the performance of an
employee.
This technique is time-consuming for the evaluators, and it may be hard to quantify or
structure the incidents into a final narrative evaluation.
Behaviorally Anchored Rating Scales (BARS) - Some appraisal systems use
graphic rating scales on which anchor points are defined in considerable detail, using
examples of behaviour that represent particular levels of performance.
Such a BARS is developed for each of several important performance dimensions.
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Raters are asked to mark the scale point that best represents the performance of an employee.
Development - The development of a BARS is a time-consuming and costly process that
involves the efforts of many people. The development steps are as follows:
1. A group of knowledgeable employees (perhaps including both workers and
supervisors) identifies the important dimensions that make up effective performance.
This group writes a clear definition for each dimension.
2. A second group comes up with as many critical incidents as it can to illustrate
effective, average, and ineffective performance for each dimension.
3. A third group is given the list of dimensions and a stack of cards, each containing one
of the critical incidents. The task of each member of this group is to assign each
critical incident to the dimension it seems to characterise. This is called
“retranslation”. Critical incidents that are not placed in the same dimension by a
majority of the retranslation group are discarded as unclear.
4. A fourth group rates the level of performance each remaining incident represents, i.e.
outstanding, above-average, average, or below-average performance. The mean and
standard deviation of these ratings are computed for each critical incident. Items are
discarded if group members are unable to agree on the performance level represented.
From the remaining items, incidents are chosen to anchor each point along the BARS.
Each anchor is worded “Could be expected to .......”.
5. The final step is to pilot test the rating scale in the organization.
The BARS can also be developed with only two groups rather than four, each group carrying
out two of the steps listed above.
The following Figure 5.0 illustrates a BARS developed for the performance dimension
“problem solving/ decision making” for the job of middle manager.
Raters of Employee Performance
In most organizations, supervisors provide subjective ratings of employee performance.
However, there are several other potential sources for performance ratings, including
employees themselves, peers, subordinates, and customers, both internal (e.g. the customers
of HRM) or external to the organization.
Self-Evaluation:
Employees are sometimes asked to evaluate themselves.
It seems logical that individuals would be the best judges of their own performance,
particularly if supervisors cannot observe them on a regular basis.
If employees are asked to evaluate themselves, they may respond by becoming more
motivated and involved in the process.
Self-evaluations have become popular as a part of the management by objectives (MBO)
process, when the supervisor and the subordinate jointly evaluate goal attainment.
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Self-evaluation may also serve as an important input into a supervisory appraisal as an
employee’s self-appraisal may provide important information of which the supervisor was
not aware.
Fig. 5.0: Example of Behaviourally Anchored Rating Scale for the Performance
Dimension of Problem Solving/Decision Making
Could be expected to
conduct detailed talks with
workers to solve technical
problems
7
6
Could be expected to
solve problems as they
arise
5
4
Could be expected to
make decisions without
considering reactions from
subordinates
Could be expected to
take problem to a higher
level when problem is
beyond his/her ability to
handle
Could be expected to
provide temporary
solutions to problems
that keep appearing
3
Could be expected to
refuse to make decisions
when needed
2
Could be expected to
give personal feelings
priority when making
decisions
1
Peer Evaluation:
Compared with supervisory ratings, peer or co-worker evaluations are more stable over time,
can tap more dimensions of performance, are better able to distinguish effort from
performance, and can focus more on task-relevant abilities.
Peer evaluations can be particularly useful when supervisors do not have the opportunity to
observe an individual’s performance, but fellow employees do.
When teamwork, participation, and cohesiveness are part of the organization’s culture, peer
evaluations can work well.
Subordinate Evaluation:
Evaluation by subordinates may provide valuable information and is becoming a popular
mechanism in many organizations.
Subordinates know how well a supervisor performs with respect to leading, organizing,
delegating, and communicating.
Complete anonymity is essential if this technique is to provide valid ratings due to fear of
victimization by the supervisor.
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Customer Evaluation:
Appraisal information from customers or clients is popular in the context of service delivery,
where there is a high degree of client involvement and when the service employee is
relatively removed from other employees or supervisors.
Customers can be internal or external to the organization. The customer set for human
resource professionals includes the employees of the organization.
Customer feedback can also be through “shoppers”, individuals appearing to be regular
customers but who are actually carefully observing and rating the service.
360-Degree Appraisals:
A new approach to performance appraisal is that of simultaneously using many or all of the
sources of feedback mentioned above.
This is a contemporary innovation described below.
Contemporary Appraisal Practices
Self-Managed Teams as a Performance Appraisal Challenge:
More and more companies are looking to self-managed teams as the productivity and qualityof-work-life breakthrough of the 21st century.
Self-managed teams create special challenges for performance appraisal.
When teams perform highly interdependent activities, evaluating them using an appraisal
system that focuses only on individual results may be inaccurate as well as discouraging to
necessary teamwork.
In addition, when teams are working effectively, they manage themselves.
There is no supervisor, yet historically it is the supervisor who has made performance
appraisal judgements about employees.
Consequently, teams are responsible either for developing a performance appraisal system for
their members or for applying an existing system to suit the purposes of the team.
360-Degree Appraisals as an Innovation in Performance Appraisal:
More and more companies are implementing 360-degree appraisals, where performance
ratings are collected simultaneously from subordinates, peers, supervisors, and employees
themselves.
The 360-degree method provides a complete portrait of behaviour on the job – one that looks
at people from every angle and every perspective.
Typically, 360-degree appraisals are used for development and feedback purposes.
The focus is on evaluation of skills that are relevant for job performance in useful
behavioural terms.
Information can be collected through rating forms, open-ended comments, or some
combination of both.
This approach works best when results are filtered through a coach and combined with selfevaluation.
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It is most successful in organizations that offer open and participative climates, along with
active career development systems.
Supervisors, peers, subordinates, and employees themselves typically differ in their ability to
appraise various dimensions of performance.
These raters observe different behaviours and may interpret them with divergent standards.
Thus each source has access to unique information about performance and the best approach
is to use as many different sources as possible to maximize the breadth of information and
cancel out biases unique to a particular source.
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MODULE 6
PERFORMANCE MANAGEMENT
6.0 Introduction
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.
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.
The purpose of performance management is to make sure that employee goals, employee
behaviours used to achieve those goals, and feedback of information about performance are
all linked to the corporate strategy.
There is no one way to manage performance. Whatever system is adopted needs to be
congruent with the culture and principles that pervade the organization.
However, most systems of performance management have several parts:
6. Defining performance. It is desirable to carefully define performance so that it supports
the organization’s strategic goals.
7. Empowering employees. It is important to empower workers to deal with performance
contingencies, i.e. situations which are important for an employee to achieve goals
successfully.
8. Measuring performance. Measuring performance can bring together multiple types of
performance measured in various ways. The key is to measure often and use the
information for midcourse corrections.
9. Feedback and Coaching. In order to improve performance, employees need information
(feedback) about their performance, along with guidance in reaching the next level of
results. Without frequent feedback, employees are unlikely to know that behaviour is
out of synchronization with relevant goals or what to do about it.
6.1 Linking Individual Performance to Business Objectives
A primary purpose of job evaluation is to establish the relative worth of jobs in an
organization.
Performance appraisal has already been discussed above as an important tool in the
management of employee performance.
The compensation strategy of an organization should facilitate the design of jobs that:
 Support a desired organizational structure that in turn ensures organizational
effectiveness;
 Are compatible with organizational culture and philosophy; and
 Permit each jobholder to recognize the relationship between job activities and the
common purpose (objectives) of the organization.
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One of the most important outputs of job analysis is the job description.
The job description comes in a wide variety of forms but essentially it attempts to provide
statements of facts that describe the job.
In most organizations, job analysis data are reviewed, edited, and then formatted into the job
description.
A Job Contract
An organization that provides the employee with an accurate and current job description is in
reality giving the employee a deed to the job.
Like a true deed, the job description acts as a contract – it conveys employee rights to the job,
and also establishes obligations to maintain those rights.
A quality job description provides a sound base for determining the comparable worth of jobs
and for establishing employment and performance standards for each job.
The deed/job description works in two ways:
 It protects the employee by letting him know what is expected.
 It protects the employer by letting the employee know what must be done.
Like a deed, to be a valid and useful contractual instrument, it must be accurate and complete,
hence it must describe the job as it is.
A job description differs from a normal contract in that jobs change, and their descriptions
must change too.
Recognizing what must be done and coming to an agreement with the immediate supervisor
regarding job activities go a long way toward enhancing job security and trust, which in turn
promote the commitment and involvement of each employee.
PLANNING, OPERATIONS AND CONTROL
The job description is one of the few tools available to managers in performing the three
basic functions of management – planning, operations and control.
The job description is basic to operational planning (the planning of day-to-day activities),
and it also serves as a direct link to the area of strategic or long-range planning.
From an operations point of view, the most important single part of a job description is that
which describes the activities and requirements of the job as it exists today.
When used as one of the basic elements for setting performance standards (expected results),
the job description becomes a valuable tool of control – an instrument with immense
feedback value.
Planning
The job description can be valuable in a number of planning activities which include
organization design, staffing levels, career ladders and career pathing, job design and pay
system design.
48
Organization Design: The job description supplements other descriptive instruments such as
organization charts, work unit function statements, and input-output charts by providing more
complete information regarding organizational relationships and outputs.
It becomes useful when decisions must be made about centralization/decentralization, about
some form of functional, geographic or product dispersion, or about reengineering,
downsizing or restructuring.
Staffing Levels: The review of the job definition section (responsibilities and duties) assists
in pinpointing potentially unneeded positions and missing activities. A comparison of job
description data with workload requirements can be useful for determining staffing levels.
Career Ladders and Career Pathing: The identification of responsibilities and duties requiring
a common body of knowledge, skills and other requirements can be used in establishing
classes, class-series, and families of jobs for designing career development programs.
By recognizing job-specific knowledge and skills, it is possible to develop career ladder
programs and to identify bridging jobs for career pathing opportunities to other career
ladders.
Job Design: The development of teams and the rotation of individuals among a number of
jobs or workstations makes it essential that there be clear and understood explanations of
what must be done at each job/workstation.
It also helps in reallocating activities among various employees, ensuring that activities are
performed and making jobs more interesting and vital to incumbents.
Pay System Design: The job description is a basic tool in determining or documenting
internal job worth decisions. It provides job data for comparison with jobs in other
organizations when capturing market data.
The combination of internally equitable and externally competitive data then becomes the
basic inputs for designing a pay structure.
Operations
The job description is a useful document for individuals who have various responsibilities in
the day-to-day operation of the organization. These activities include (1) recruiting and
screening, (2) test design, (3) hiring and placement, (4) orientation, (5) developing
procedures, and (6) training and development.
Recruiting and Screening: The job description provides individuals responsible for recruiting
and screening with a clear picture of the job, its requirements, and the demands it places on
an employee. It also provides a preview for the job applicant.
Test Design: Those involved in designing tests that will be used for identifying the most
suitable candidates for the job must be certain that they can relate test items to job
requirements.
49
Being able to relate knowledge, skill, and ability requirements to job description duties assists
in designing tests and significantly enhances their probable validity, legality, and
acceptability to job applicants.
Hiring and Placement: Final selection and placement are normally the joint responsibilities of
HR specialists and the job candidate’s immediate supervisor.
When the Hr specialist has total responsibility, however, the knowledge, responsibilities and
duties, and physical working requirements spelled out in the job description are usually relied
on heavily in matching the candidate’s qualifications with the job requirements.
Orientation: Possibly the most important predictor of job success is the new employee’s first
impression of the job.
Using the job description as an introduction to the job assists in setting forth its requirements
and helps the new jobholder to understand more fully what the organization expects and how
the job fits into the overall structure of the organization.
Developing Procedures: For many jobs, it is necessary to develop specific procedures that
describe the step-by-step actions an employee must take in performing job assignments.
The duties within the job description provide a starting point for the development of
procedures.
Training and Development: It is seldom for an organization to fill a vacancy without
providing some degree of training to new jobholders. Also the fact that as the job and its
description change, training and development must keep pace.
Control
Recognition of individual contributions is increasing in importance.
Over 70 percent of all workers are now employed in service industry jobs, which, like their
manufacturing counterparts of a hundred years ago, are now being scrutinized to identify
possible ways of measuring performance objectively.
Control systems must be implemented to ensure compliance with legal requirements and,
when necessary, to meet union demands.
Performance Standards: Almost all employees want to know how well they are doing.
To be effective, a performance measurement must be able to identify demonstrated
behaviours and compare actual with expected or desired results.
Well-written duty statements provide the basis for setting performance standards.
These standards inform an employee of the minimal acceptable level of performance and can
also identify levels of performance ranging up to excellent or superior.
Legal Requirements: Changes in legislation, as well as changing emphasis in enforcement
patterns, have placed new stress on the importance of the job description.
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Collective Bargaining: A key labour principle is “equal pay for equal work.”
Many union demands focus on the elimination of varied pay rates for similar work or the
distortion or imbalance of the pay structure among comparable organizations.
The job description provides a starting point for standardization.
Although unions want uniform rates, organizations must defend themselves by recognizing
and identifying which jobs are similar and protecting those pay levels that truly discriminate
among jobs that require different levels of knowledge and responsibilities and among
employees who provide different contributions.
APPLICATION OF MOTIVATION THEORIES
Over the years, many scholars and researchers have made contributions to understanding why
people behave the way they do.
Those involved in designing reward systems or pay-for-performance programs also want to
understand more about human behaviour.
Their goal is to design programs that direct employee behaviour in a manner that benefits
both the employee and the organization.
Content Theories of Motivation
The content theories of motivation focus on the needs individuals attempt to satisfy through
various kinds of actions or behaviours. They describe what motivation is.
Hence motivation here is defined as activities undertaken to satisfy a need. Motivation then is
a process.
Another meaning of motivation is the inducement or incentive to action - this is the reward.
But every part of the management and human resources system must interact in a positive
and dynamic nature, or the reward system will have only minimal influence on employee
behaviour.
Thus there is need for employers to hire the right person for each job (properly match
employee knowledge, skills and abilities with job requirements) and the right person to match
the organization’s culture (select individuals with values that are similar and reinforce
organizational values), for the reward system to operate much more effectively.
Process Theories of Motivation
These expand on the content theories by describing how the motivation process works.
One process theory is the expectancy theory.
These theories have an implicit recognition of motivation as a process with identifiable and
potentially observable parts. This is why reward system designers have found them to be
more helpful and useful than content theories.
Expectancy represents ideas or thoughts an individual develops about the consequences that
may result from a certain action.
Expectancy theory models provide these three guidelines for designing incentives:
1. The need to define or identify explicitly certain desired actions (activities)
2. The need to relate specific outcomes and consequences to the demonstration of certain
actions.
3. The need to provide within some established schedule.
51
Reinforcement theories tell pay-for-performance designers that a reward (consequence or
reinforce) will have more motivational influence when the employee recognizes a direct
relationship between activities performed, results achieved, and rewards gained.
Motivational value also increases when the timing of the delivery of the rewards closely
approximates the demonstration of a behaviour, the completion of an assignment, or the
achievement of a result.
These elements of motivational theory support the concept that the most powerful short-term
incentive is one that relates to individual performance, and the weakest is one that relates the
individual to the overall performance of the organization.
STRATEGIC IMPORTANCE OF PERFORMANCE APPRAISAL: PERFORMANCE
– OBJECTIVES LINKING
Strategically, it is hard to imagine a more important HR system than performance appraisal.
Organizations strive to do the following at all levels:

Design jobs and work systems to accomplish organizational goals.

Hire individuals with the abilities and desire to perform effectively.

Train, motivate, and reward employees for performance and productivity.
It is this sequence that allows organizations to disperse their strategic goals throughout the
organization.
Within this context, the evaluation of performance is the control mechanism that provides not
only feedback to individuals but also an organizational assessment of how things are
progressing.
Without performance information, managers of an organization can only guess as to whether
employees are working toward the right goals, in the correct way, and to the desired standard.
Consistency Between Organizational Strategy and Job Behaviour (Performance)
Performance appraisal plays another important role in organizational strategy, that of
ensuring consistency between organizational strategy and job behaviour (strategy-consistent
behaviour).
A truism of organization life is that people engage in the behaviours that they perceive will be
rewarded.
Employees want to be rewarded and will try to do those things that the organization is
emphasizing.
So if the focus is on rewarding productivity, employees will strive for productivity.
If the focus is on service, employees will behave in that gain the rewards associated with
service delivery.
52
If the focus is on cost control, employees will seek ways to control cost and thus be
recognized and rewarded.
Performance appraisal becomes a means of knowing if employee behaviour is consistent with
the overall strategic focus and a way for bringing to the front any negative consequences of
the strategy-behaviour link.
For example, a single-minded productivity focus may include potential negative
consequences, such as decreased quality and cooperation.
Performance appraisal is an important organizational mechanism to elicit feedback as to the
consistency of the strategy-behaviour link.
Consistency Between Organizational Values and Job Behaviour (Performance)
Performance appraisal is also a mechanism to reinforce the values and culture of the
organization, i.e. ensuring consistency between organizational values and job behaviour.
For example, how is an organization that articulates the value of developing its people to
know if managers throughout the organization share this value? If managers are held
accountable for developing their people by being judged on this task in their own
performance appraisal, they will be likely to spend more time developing subordinates.
A further element in the strategic importance of performance appraisal is in the alignment of
the appraisal with the organizational culture.
For instance, in a team-oriented system, the traditional appraisal that rates one employee in
comparison with others may be counterproductive.
Such a system will engender competition rather than teamwork among employees.
Thus, an appraisal system that emphasizes coaching and development, and involves feedback
from co-workers, may be more appropriate than the traditional supervisor-based rating.
53
MODULE 7
REWARD SYSTEMS
7.0
Introduction
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.
Meanwhile, as the individual and the group coordinate their needs and efforts, a third set of
satisfactions develops. These satisfactions are those gained by the leaders or employers of the
group – those who both receive and offer some form of reward for the services provided by
the individual and the group.
Members of an organization receive rewards from their employers. These could be monetary
rewards paid either directly (base pay or cash incentives) or indirectly (employee benefits
paid for by an employer) to employees. They could also be non-monetary (promotions,
recommendations, facilities, arrangements, etc.). These rewards may be paid in the short term
(within one year) or in the long term (beyond one year).
Employers use their reward systems to attract and retain those who not only have the desired
knowledge and skills, but also have the interest and are willing to put forth the effort needed
to link their knowledge and skills to the accomplishment of organizational goals and
objectives.
But the value an individual attaches to a specific reward or reward package may vary
significantly over time, and the time span need not be too long.
Furthermore, the worth of a reward is greatly affected by any factor that influences the
lifestyle of an individual.
Because of the almost endless variety of human qualities, workplace requirements, and
situational demands, the task of designing and managing a reward system so that it will
benefit the organization is a difficult and complex undertaking.
7.1
Design Considerations
The reward system of an organization includes anything that an employee may value and
desire and that the employer is able or willing to offer in exchange for employee
contributions.
A rather broad classification scheme that facilitates the identification of the various kinds and
qualities of rewards provided by employers is to separate the compensation components
from the non compensation components.
54
That is to say, all rewards that can be classified as monetary payments and in-kind payments
constitute the compensation system of an organization.
Monetary payments can be in the form of coins or paper money, or in the less tangible form
of cheques or credit cards.
They have value in use and they simplify exchange transactions.
In-kind payments are goods or services that are used in lieu of money and that provide an
equivalent value for what has been offered or received.
All other rewards constitute the noncompensation system.
7.1.1 Employee Satisfaction and Motivation Issues in Compensation Design
People have no basic or instinctive need for money, a commodity that is important only if it
can satisfy other needs.
Organizations frequently overestimate the value workers place on monetary reward.
For example, if money were the primary motivation for working, why would hourly
employees object to overtime, given the premium rate of pay associated with it?
Many supervisors become frustrated and disillusioned when pay increases do not produce a
corresponding rise in productivity.
Still more troublesome is the fact that the rewards that effectively motivate some workers do
not succeed with others.
The equity and expectancy theories can help explain employees’ reactions to compensation
systems.
Equity Theory: Employees want to be treated fairly. Thus equity theory suggests that
individuals determine whether they are being treated fairly by comparing their own
input/outcome ratio with that of someone else.
A sense of inequity arises when the comparison process uncovers an imbalance between
inputs and outcomes of the employee compared with others. And thus individuals will make
some attempt to relieve the tension created by any perceived inequity.
The desire to achieve equity even extends to the point of employee theft as a reaction to
underpayment.
Satisfaction with Pay: Survey data regularly show compensation to be one of the areas of
employment with which employees are least satisfied.
It is not unusual to find that individuals, otherwise satisfied with their career and the
organization for which they work, believe that their compensation leaves something to be
desired.
One reason for the reduced degree of satisfaction with compensation has to do with the
number of possible comparisons.
55
Individuals seem to seek comparison information from a wide variety of sources, both
internal and external to the organization, and then hold to the least favourable comparison.
If there are not unfavourable comparisons with those in their line of work, individuals may
compare themselves to those in a related line of work.
A successful compensation system needs to incorporate the equity concerns of all participants
in the employment relationship.
This is achieved by establishing a system that includes both external and internal
comparisons in setting pay levels.
In addition, it is more important to focus on the specific employees who are dissatisfied with
compensation than on the overall level of satisfaction. If poor performers are dissatisfied, this
may be as desired.
7.1.2 Designing Equitable Compensation Systems
Compensation Components
Three elements of equity can be distinguished: internal, external and individual.
Internal equity refers to the relationship among jobs within a single organization.
Employees expect the CEO of a company to earn more than a director, who in turn earns
more than the plant manager, and so on.
Among other things, compensation is presumed to be correlated with the level of knowledge,
skill and experience required to do the job successfully.
Internal equity exists when the pay differentials between different jobs within the
organization are perceived as fair – neither too large nor too small.
External equity refers to comparisons of similar jobs in different organizations.
Hence the CEO of a bigger firm might earn more than a counterpart in a small firm.
Presumably a doubling of company size requires more knowledge, skill and experience on
the part of its leader.
Locality matters as well (local comparisons rather than nationwide) as industry and company
size.
Individual equity refers to comparisons among individuals in the same job with the same
organization.
In many ways this is the most critical aspect and if it is not addressed satisfactorily, attention
to internal and external equity will have been wasted.
Employees must ensure that issues related to this aspect are handled fairly in order for
individual equity to exist.
56
COMPONENTS OF THE COMPENSATION PACKAGE
The major parts that can be included within a compensation package are base wages and
salaries, wage and salary add-ons, incentive payments, both short and long term, and
employee benefits and services.
Pay for Work and Performance
Pay for work and performance includes money that is provided in the short term (weekly,
monthly, and annual bonuses/awards) and that permits employees to pay for and contract for
the payment of desired goods and services.
The amount of money payments provided to employees normally depends on specified job
requirements; outputs that meet or exceed quantity, quality or timeliness standards;
innovations that may lead to improved productivity; dependability; loyalty; and some
combinations of these items.
Typical components within this dimension are base pay, premiums and differentials, shortterm bonuses, merit pay and certain allowances.
Incentive pay is payment for a specified output.
Pay for Time Not Worked
Over the years, there has been a decrease in hours worked per week and the number of days
worked per year. Instead workers have enjoyed more days off with pay for holidays, longer
paid vacations, and paid time off for a wide variety of personal reasons.
These components of pay for time not worked significantly increase labor costs and also
enhance quality-of-work-life (QWL) opportunities for most employees.
Loss-of-Job Income Continuation (Protection Programs)
Job security is and always has been the primary consideration for most workers.
They want assurance that their jobs and the income derived from working will continue until
they are ready to retire.
Workers also know that few jobs are guaranteed to continue to retirement.
Not only may accident and sickness problems occur, but personal performance or
interpersonal dynamics problems may cause temporary layoff or termination of employment.
A variety of components such as unemployment insurance, supplemental unemployment
benefits (SUBs), and severance pay help unemployed workers to subsist until new
employment opportunities arise.
Disability Income Continuation (Protection Programs)
The possibility always exists that a worker may incur health or accident disability.
Because of these disabilities, employees are frequently unable to perform their normal
assignments.
57
Even so, individual and family living expenses continue; and medical, hospital, and surgical
bills create additional burdens.
Social security, workers’ compensation, sick leave, and short- and long-term disability plans
are examples of components that provide funds for employees who are unable to work for
health-related reasons.
Deferred Income
Most employees depend on some kind of employer-provided program for income
continuation after retirement.
There are two basic reasons for these programs.
Firstly, most employees do not have sufficient savings at retirement to continue the lifestyles
they provided while working.
Various kinds of programs, such as Social Security, employer-provided pension plans,
savings and thrift plans, annuities, and supplemental income plans provide income after
retirement.
Secondly, tax laws and regulations make deferred income plans more appealing to many
employees.
Because of tax regulations, employers can often take immediate deductions and employees
can defer tax obligations until income tax rates are possibly more favourable.
In addition, funds invested in many of these deferred plans draw tax-free interest,
significantly increasing the amount of money available upon retirement.
Stock purchase, options, and grant plans are components commonly used to achieve tax
deduction, estate building, and deferred goals.
Spouse (Family) Income Continuation
Most employees with family obligations are concerned with what may happen if they are no
longer able to provide money that will allow their families to maintain a particular standard
of living.
Certain plans are designed to provide dependents with income when an employee dies or is
unable to work because of total and permanent disability.
Specific features within life insurance plans, pension plans, Social Security, workers’
compensation, and other related plans provide income for the families of employees when
these conditions arise.
Health, Accident and Liability Protection
When a health problem occurs, employees must be concerned not only with income
continuation, but also with payment for the goods and services required in overcoming the
illness or disability.
Organizations provide a wide variety of insurance plans to assist in paying for these goods
and services.
In recent years, the cost of medical-related goods and services has increased at a greater rate
than almost any other good or service desired or required by employees.
58
Medical, hospital, and surgical insurance plans and major medical, dental, and vision
insurance are only a few of the numerous compensation components designed to provide
such protection for workers.
Because of savings available through group purchasing, organizations are now providing
various kinds of liability-related insurance plans for their employees.
These plans include group legal, group automobile, group umbrella liability, employee
liability, and other insurance plans.
Income Equivalent Payments
Many of these compensation components are frequently called perquisites or “perks”.
Employees usually find them highly desirable, and both employers and employees find
certain tax benefits in them.
Some perks are tax free to employees and tax deductible to employers.
Some of the more desirable perks are the use of a company car or company credit card,
payment for expenses to professional meetings, subsidized housing and food services,
housekeeping expenses (maid, gardener, etc.) and child care services.
The NonCompensation System
The other major part of the reward system consists of noncompensation rewards.
These rewards are much more difficult to classify and their components far more complex
than is the case for compensation rewards and components.
Def.: Noncompensation rewards are all the situation-related rewards not included in the
compensation package.
These rewards have an almost infinite number of components that relate to the work situation
and to the physical and psychological well-being of each worker.
In fact, any activity that has an impact on the intellectual, emotional, and physical well-being
of the employee and is not specifically covered by the compensation system is part of the
noncompensation reward system.
The noncompensation system contains many of the reward components that behavioural
scientists have been describing for the past 50 years as critical for improving workplace
performance. The figure below shows this system.
Enhance Dignity and Satisfaction from Work Performed
Possibly the least costly and one of the most powerful rewards an organization can offer to an
employee is to recognize the person as a useful and valuable contributor.
This kind of recognition leads to employee feelings of self-worth and pride in making a
contribution.
Few people want to be simply given something but would prefer to know that through their
own efforts they have earned and deserved rewards.
59
Enhance Physiological Health, Intellectual Growth, and Emotional Maturity
Considering the number of hours a person spends on the job, on travel to and from the work
site, and off the job in attempting to resolve job-related problems, work obviously has a great
effect on the health of employees.
Modern health practices recognize the direct relationship between the physiological health
and intellectual and emotional well-being of each individual.
A safe working environment in terms of provision of safe equipment; a work environment
that is as risk free as possible; minimization of noxious fumes; avoidance of extreme heat,
cold and humidity conditions; and elimination of contact with radiation, carcinogens, and
other disease-related materials and substances is expected by all employees.
Figure 7.0: Dimensions of a Noncompensation System
Noncompensation
System
Enhance Dignity
and Satisfaction
from Work
Performed
Promote
Constructive Social
Relationships with
Coworkers
Enhance Physiological
Health, Intellectual
Growth and Emotional
Maturity
Allocate Sufficient
Resources to
Perform Work
Assignments
Design Jobs That
Require Adequate
Attention and Effort
Offer Supportive
Leadership and
Management
Grant Sufficient
Control Over the
Job to Meet
Personal Demands
More and more attention is now being focused on the emotional strains that result from the
extreme specialization of work assignments and the complex interactions caused by this
specialization.
Additional psychological and emotional stress is caused by technological advancements that
require rapid changes in the knowledge and skills of workers, and the demands for a greater
share of the limited resources of both organizations and society as a whole.
Management recognition of these universal problems and letting employees know what the
organization can provide to help them maintain a secure and stable lifestyle will help
minimize job-induced stress.
60
Training employees to perform current jobs in an acceptable manner and offering
developmental opportunities that will help employees attain their potential are
noncompensation components that can influence this health-related dimension in a positive
manner.
Promote Constructive Social Relationships with Coworkers
One of the most valued rewards gained from working is the opportunity to interact in a
socially constructive manner with other people – to enjoy the comradeship of workplace
associates.
The chance to communicate and interact with others is another inexpensive but valuable
reward.
A workplace environment where trust, fellowship, loyalty, and love emanate from the top
level of management to the lowest levels of the organization promotes the kinds of social
interaction most people need in order to thrive.
All parts of the reward system can enhance the establishment of a trusting workplace
environment; or they can provide barriers where suspicion, jealousy, and intrigue can destroy
any opportunity to productivity-promoting social relationships.
The move toward team-based operations is an example of what organizations are doing to
improve social interactions among employees.
Design Jobs that Require Adequate Attention and Effort
The problems arising from boredom related to work has been extensively discussed over
many years now.
Specific attention has been focused on “scientific management” efforts to specialize work
assignments that were developed hundreds of years ago.
Jobs were designed so that workers could quickly be taught how to perform a few highly
repetitive tasks. Workers were then required to perform these few tasks for as long as they
remained on the job.
What first appeared to be an efficient way of melding human resources with machine
technology proved to have serious drawbacks- boredom, dissatisfaction, work-related
anxieties and frustration all produced employee behaviour that led to declining performance.
Employee turnover, absenteeism, lateness, minimal concern for quality or productivity, waste
of physical resources, and even theft and malicious damage were behaviours attributed to
unacceptable workplace and job design.
Recognizing these problems, behavioural scientists and managers at all levels have been
searching for and implementing new approaches to improve the quality-of-work-life.
On both an individual and team or group basis, employees are being given more opportunity
to have a voice in how their jobs should be performed.
Restructuring of job tasks and job responsibilities is receiving top attention.
61
Flexibility in job requirements is being provided by rotating work assignments and by giving
employees more opportunity to schedule workdays and workweeks.
Managers are being taught to recognize when to provide needed support, when to tell
employees what they are doing right, and when to assist them in correcting their errors.
Allocate Sufficient Resources to Perform Work Assignments
Requiring employees to perform assignments for which they have neither the knowledge nor
the skills opens the door for problems.
Not only is the organization likely to suffer because of outcome failures, but employee jobrelated interest and satisfaction are likely to break down because of the likelihood or
inevitability of failure.
Most employees seek a sense of accomplishment from their work, they want some degree of
challenge, but they also want to feel reasonably sure that they can succeed.
In addition, when employees are told they must produce certain kinds and quantities of output
within a specified time, they want to know that resources are available to help them meet
these demands.
To make work a satisfying and exhilarating experience, employees must not be placed in a
no-win situation.
This means that with the proper interested effort, success is likely. The organization,
therefore, must do everything possible to assist the employee in completing missions
successfully.
Grant Sufficient Control Over the Job to Meet Personal Demands
Behavioral scientists have for many years been discussing the need to grant employees
greater opportunity to participate in organizational decision-making processes.
One problem with this participation concept is that organizations are composed of all kinds of
people with all kinds of decision-making desires.
Some people simply want to be told what to do, to be shown what is an acceptable level of
performance, and then to be left alone to do their jobs.
A few people in every organization want to tell top management how to run the organization.
Between these two extremes is a wide variety of demands for a greater voice in determining
how to perform assignments.
One of the most important decisions being made by more and more workers is that of
scheduling work activities and, in some cases, of choosing the location of assignments. This
involves flexible work schedules that can range from compressed workweeks to the flextime
programs.
Another advancement allows two part-time employees to share one full-time job.
Another change to make life easier is the casual dress day.
62
Offer Supportive Leadership and Management
Practically all people look to certain individuals for guidance and support.
They have a need to recognize and respect those who can help them achieve goals.
They look to managers who have influence and can bring about desired changes.
Followers must have faith in and abide by the actions taken by their leaders, and the leaders
must heed the requests of their followers.
Employee faith and trust in management assist in establishing a workplace environment
where job security becomes accepted, where social interaction thrives, and where work
satisfaction is possible.
Supportive leadership is demonstrated in many ways: skill and interest in coaching and
counselling; praise for a job well done; and constructive feedback leading to improvement of
job performance.
Leaders must be sufficiently flexible with policies, rules, and regulations so that an employee
can meet both job and nonjob responsibilities without infringing on the rights and the
opportunities of other employees.
The selection, training, and promotion of individuals who will later become effective leaders
and managers are the cost components of this dimension.
But the benefits far outweigh the costs.
JOB EVALUATION
The major purpose of job evaluation is to determine the relative worth of the jobs within an
organization with regard to the fulfilment of the company’s objectives.
Since there is no direct way to measure the value of jobs in relation to organizational
objectives, rewards are usually based on important components generally agreed to make one
job worth more than another is.
These aspects, called compensable factors, may include such things as skills, effort, and
education required; amount of responsibility involved; and working conditions.
Approximately 75 percent of all companies employ some form of job evaluation.
To be most effective, the process needs to involve the employees whose jobs are affected.
The five most frequently used job evaluation methods are job ranking, job grading or
classification, the point method, the Hay plan and factor comparison.
63
Fig. 7.1: Job Evaluation Procedures
Nonquantitative Comparison
Quantitative Comparison
Involving Job as a Whole
Involving Job Components
Job versus Job Comparison
Job Ranking
Factor Comparison
Job versus Scale Comparison
Job Grading or Classification
Point Method
Basis for Job Hierarchy
Hay Plan
Job Ranking:
The simplest way to evaluate jobs, is used primarily in small organizations.
Normally, a committee of managers reviews all the job descriptions and ranks them in order
of their relative worth or importance to the organization.
The ranking method is simple, inexpensive, fast, and easy to understand.
However, it is nonquantitative and rather subjective, for although jobs are compared with
each other, there is no explicit set of compensable factors used in this comparison.
Table 7.0: Paired Comparison Ranking Table
M
Messenger (M)
-
Data Processing
X
DPM
DEO
ES
CO
SA CC
P FC AD
Total
0
-
X
X
X
X
X
X X
X
9
Manager (DPM)
X
-
X
X
Computer Operator (CO) X
X
Systems Analyst (SA)
X
X
Control Clerk (CC)
X
X
Programmer (P)
X
X
File Clerk (FC)
X
Assistant Director (AD)
X
Data Entry Operator
X
2
(DEO)
Executive Secretary (ES)
X
64
-
X
X
X
X X
6
-
X
X
4
X
X X
7
X
3
X
5
-
1
X
-
X
X
X
X
X
X
-
X X
-
8
Additionally, simple ranking gives no information about the distances between jobs, making
it difficult to assign salary levels.
Also, except in a very small organization, there may be no one who is knowledgeable about
every single job in the organization, as would be necessary for meaningful ranking.
A special method of ranking is the paired-comparison technique used in performance
appraisal for comparing employees with each other on the basis of overall performance.
In the job evaluation context, the content and importance of different jobs, not the
performance of incumbents, is the object of comparison.
In this approach, each job is compared directly against every other job, using a matrix like the
one depicted above (Table 7.0).
Reading across each row, an X is marked each time the job is ranked more highly than the
job in that column.
The totals column records the number of comparisons in which the job is ranked higher and
this total determines the job’s overall rank.
Some evidence suggests this approach is more reliable than simple ranking.
Job Grading or Classification:
The job grading or job classification method is a nonquantitative job evaluation technique
that compares the whole job with a predetermined standard.
In this approach, jobs are assigned to predefined grades or classes.
Job grading is common in the public sector and the U.S. federal government’s General
Schedule (GS) has eighteen (18) grades.
In the private sector, job classification is commonly used in managerial and scientific or
engineering jobs.
It is usually fairly easy for organizations to group jobs and for employees to accept the
classifications.
Flexibility is another advantage of the job classification method as it can be applied to a large
number and wide variety of jobs.
As the number of jobs in the organization grows, these new jobs can easily be assigned to the
grades that already exist.
65
But when a job seems to fall between two grades, this method is not good since subjective
judgements are used to place jobs into the grades.
Another disadvantage is that of relying heavily on the use of job titles rather than on a more
detailed examination of job content.
The Point Method:
Unlike job ranking or classification, the point method breaks the job into components and
evaluates each of these job elements against specially constructed scales.
A quantitative approach, the point method is rather complex to design but relatively simple to
understand and administer once it is in place.
It is the most widely used method of job evaluation as well over half the organizations that
use job evaluation use the point method, especially Lott’s method.
Four steps are followed in applying the point method:

Selection of compensable factors. Organizations select 3 to 25 compensable factors,
with the typical point method using about 10 factors. One firm uses 11 factors that are
grouped into the following 4 dimensions: (1) skill (education, experience,
knowledge), (2) effort (physical demand, mental or visual demand), (3) responsibility
(equipment or process, material or product, safety of others, work of others), and (4)
job conditions (working conditions, hazards).

Establishment of factor scales. Once the compensable factors have been chosen,
scales reflecting different degrees (levels) within each factor are constructed.

Assignment of points to degrees. The next step is to assign points to degrees. First,
however, the job evaluation committee decides on the relative importance of the
different factors. The most important factor is then awarded the largest number of
points and the lower degrees are assigned proportionately lesser point values in accord
with factor importance. The determination of factors and the assignment of points to
these factors become an important mechanism for communicating to employees what
is valued in the organization.
The typical plan illustrated below tells employees that experience, education, and
knowledge are equal to all the other factors taken together.

Application to organizational jobs. Once the compensable factors have been
identified, defined, and assigned points, jobs can be evaluated and “scored”. In this
process, the committee will thoroughly review job analysis data and perhaps observe
66
the job or speak with incumbents. Then it will determine which degree of each factor
best describes that job. The points associated with these degrees are summed for each
job. Often jobs with similar point totals are later grouped together to form a single pay
grade for administrative convenience.
In principle, the point method could be used to develop a single set of factors and
weights for all jobs in the organization.
In practice, however, organizations tend to use several different point plans, e.g. one
plan for office and clerical employees, another for production workers, and a third for
managerial staff. Rarely do the same compensable factors apply to jobs at widely
different levels.
Table 7.1: A Typical Point Plan
Factors
Points
1st
2nd
3rd
4th
5th
1. Education
14
28
42
56
70
2. Experience
22
44
66
88
110
3. Knowledge
14
28
42
56
70
4. Physical demand
10
20
30
40
50
5. Mental demand
5
10
15
20
25
6. Equipment/process
5
10
15
20
25
7. Material/product
5
10
15
20
25
8. Safety of others
5
10
15
20
25
9. Work of others
5
10
15
20
25
10. Work conditions
10
20
30
40
50
11. Hazards
5
10
15
20
25
Degrees
Skill
Effort
Responsibility
Job Conditions
67
The Hay Plan:
The Hay plan is a well-known version of the point method.
It is used for evaluating managerial and executive positions by a large number of
organizations worldwide.
The universal factors used by the hay plan are know-how, problem solving, and
accountability.
Know-how is the total of all the knowledge and skills required to do the job; it includes the
subfactors of technical knowledge, management responsibility, and responsibility for
motivating others.
Problem solving is the amount of original thinking required by the job for arriving at
decisions; it includes the subfactors of degree of freedom and type of mental activity.
Accountability is defined as being answerable for actions taken on the job; its three
subfactors are freedom to act, money magnitude, and impact.
The Hay guide chart allows the evaluator to assign a point value for each factor and the total
of the points across all factors is the value of the job.
Factor Comparison:
The factor comparison method is a method of quantifying the job versus job comparison.
It is the least commonly used method of job evaluation.
The first step is to select key jobs to help anchor the system
Key jobs are those that are found in many organizations and have relatively stable job
content; they also have to be jobs for which the prevailing wage rates are known.
The second step is to rank the key jobs on a few compensable factors, such as skill, effort,
responsibility, and job conditions.
The third step is to determine for each key job the amount of the present pay rate that is
attributable to each of the factors.
The factor comparison method can be applied to other jobs by comparing their standings on
each factor with that of the key jobs and summing the associated kwacha values to arrive at
an hourly rate.
The procedure is rather cumbersome and requires constant updating, hence the relative
infrequency of its use.
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DETERMINING RATES OF PAY
How are decisions made that determine what each employee in the organization should be
paid?
The critical or basic reasons underlying the differences in pay and compensation packages for
different employees relate to the following correlates or determinants.
 Kinds and levels of required knowledge and skills
The most important factor influencing the rate of pay of an employee is the kind of
job the person performs. The highly paid people in all fields all have a common skillthe ability to influence others.

Kind of business
For some jobs (especially higher-level jobs), private-sector businesses provide higher
rates of pay than those in the public sector.

Union-nonunion status
Since the blossoming of unions, those businesses with the highest rate of unionization
have also included some of the highest-paid members of the workforce.

Capital- versus labor-intensive
Quite often, businesses that have low labor costs relative to revenues pay employees
higher rates of pay. Probably no one cost of business is more controllable and has a
greater influence on profits than labor costs.

Size of business
Large businesses quite often provide higher wage rates than smaller businesses.
Profitability and unionization are frequently related to company size. Firms normally
increase in size because their products are in demand – economies of scale and
opportunities to increase profit.

Philosophy of management
Some owners and top executives have a philosophical bias toward paying their
employees as much as possible. Other owners and managers may have a completely
opposite bias.

Total compensation package
Today, employees have sufficient interest in and knowledge of their compensation
packages to recognize the value or worth of its major components.

Geographic location
Employment and unemployment do not affect all sections of the nation equally.
Not only do employment opportunities dampen or improve job wage rates, but certain
regions have historically paid higher wages than others.
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
Supply and demand of labor
Even in times of high unemployment, individuals with certain sets of skills or abilities
are in demand. Sometimes the demands are in specific locations; at other times, they
are national in scope. Jobs high in demand are frequently called “exotic” jobs, and
those who have the necessary skills can demand and will receive premium wages.

Profitability of the firm
Employees working for highly profitable businesses have a greater chance of
receiving higher wages than those working for less profitable firms.
Historically, high-paying firms felt they had an edge in hiring and retaining the best
workers by paying above the going rate in their markets.

Employment stability
Practically all workers want the psychological security of knowing that their jobs will
be there as long as they want them so that they can be able to maintain their current
lifestyles and pay the many incurred debts and existing living costs.
Thus, an employee who feels that her job is permanent is often willing to take lower
pay, knowing that the pay will be there as long as the assignments are performed in an
acceptable manner.

Gender difference
Historically, women have earned approximately 60 percent of what men have earned
although this gap is steadily being closed with the passage of time.

Employee tenure and performance
In most cases, an employee’s rate of pay increases with years of service since through
their experience, they become more effective problem solvers, dependable and
predictable. It is thus not unusual to find very senior employees being paid double the
amount received by new employees for comparable jobs.
Individual performance can also make a significant difference in the pay received by
incumbents in similar jobs.
Pay Level Policy
Once an organization has completed an internal job evaluation and obtained wage survey
data, it needs to translate this information into pay rates for each class of job.
This process involves interpretation of survey results, the merging of the job evaluation with
the survey data, and consideration of the organization’s pay level policy.
The first step in merging the internal and external data is a strategic decision on the
organization’s positioning in terms of the competition.
The three fundamental options are to match, lead or lag behind the market.
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By setting its pay levels at the market rate, or matching the competition, an organization tries
to keep its labor costs comparable with those of competitors.
Such an approach tends to neutralize pay as a factor in attracting, retaining, and motivating
employees while ensuring that labor costs are competitive.
In adopting a lead policy – that is, paying a higher wage rate than its competitors – a firm
hopes to attract and retain higher-quality employees while maximizing satisfaction of its
current employees.
Firms with a lead policy want to be the preferred employer so that they can select the best
applicants while making it costly for competitors to persuade current employees to leave.
Some organizations follow a lag approach, setting their pay rates below those of their
competitors.
On the surface, it might seem that such a policy inevitably would lead to difficulties in
attracting, motivating and retaining qualified employees.
But some companies have other ways to attract applicants, such as employment security (as
with government jobs), superior benefits (e.g. holidays, vacation time, tuition
reimbursement), or an enjoyable environment
Some organizations, because of the nature of the business, social or business philosophy, or
excellent reputation, will attract well-qualified applicants even at below-market wages.
Still other organizations may adopt this approach because they simply cannot afford to pay
competitive salaries.
Finally, an organization need not have one policy for all jobs.
DESIGNING PAY RANGES
Jobs evaluated as having nearly the same value are usually combined into a single wage
grade.
Thus wage grades are established, and all jobs within the grade are paid identically.
More commonly, however, a range of pay rates is set for each grade.
When a range is set, the issue of individual equity becomes important, and the organization
must have a system for determining where in the range the compensation of each employee
should be.
The range associated with a pay grade sets the upper and lower bounds of possible
compensation for individuals whose jobs fall in the grade.
There is no optimal number of pay grades for a wage structure, although most organizations
define 10 to 16 pay grades.
Establishing Pay Ranges
The first step is to define the pay policy line linking pay to job evaluation points.
The policy line is based on salary survey data, appropriately adjusted and taking into
consideration the firm’s policy (lead, match, or lag).
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The points on the line will represent the midpoints of the wage ranges, which are calculated
next.
Each grade has a minimum, maximum and midpoint and the spread around the midpoint may
vary.
The percentage spread is frequently greater for higher-level positions, on the assumption that
there is more leeway to make an outstanding or very poor contribution in these more
important jobs.
It is important that adjacent grades overlap, since an experienced employee in a lower grade
may make a greater contribution than a relatively new employee in the next higher grade.
At some point, the top-performing employees eventually will reach the maximum within a
range.
They should then be considered for promotion to a higher grade.
Broadbanding
This makes job evaluation to be more compatible with the downsizing and delayering that
characterize many restructured organizations.
An increasing number of companies are using broadbands or are considering applying this
concept as a way to remove the artificial barriers created by job grades.
An advantage of broadbanding is in the flexibility it provides and the signals it sends to
employees.
For example, an employee may be interested in a job but will be reluctant to explore moving
into it if is not at a higher grade.
With broadbanding, the position may be in the same band, so the employee can focus on the
content of the job, its challenges, and its developmental opportunities rather than on its grade
level.
In this way the employee can learn new skills and better contribute to the team without the
possible stigma of a demotion or reduction in pay.
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MODULE 8
PERFORMANCE PAY
8.0
Introduction
Global competition has posed a difficult challenge for organizations in general and
human resource specialists in particular.
HR managers must try to develop human resource programs that improve productivity
and enhance organizational effectiveness.
Attaining these goals will help ensure that Zambian businesses will be competitive in
national and world arenas.
One popular approach to enhancing productivity has been the linking of rewards to
performance through various forms of incentive pay.
In fact, the idea of incentive pay is so widely accepted that most organizations say that
they pay for performance.
Most managers and many workers believe that performance should be the most
important factor in determining salary increases.
Besides, studies indicate that linking pay to performance can lead to better employee
performance.
The goal of performance-based reward systems is to reward participants in direct
relation to their individual performance and contribution to organizational success.
8.1
‘New Pay’ Ideology
In the past, compensation practice was dominated by traditional (fixed) pay plans, in
which pay increases were given across the board or based on the cost of living or
seniority.
Lawler gave the name new pay to reward programs that seek to align compensation
with organizational goals, values, and culture, as well as with the challenges of the
global economy.
This indicates the strategic importance of variable pay.
New pay goes beyond individual or group incentive pay and seeks to provide a
mechanism for an organization to use all elements of compensation, direct (cash
compensation) and indirect (benefits), to help forge a partnership between the
organization and its employees.
The aim is to have employees who:
 Understand the goals of the organization
 Know their role in accomplishing these goals
 Become appropriately involved in decisions of the organization
 Accept that their rewards are related to their contribution to the goal
attainment of the organization.
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Having determined their goals, objectives, and values, how do organizations signal
these elements to their employees?
Assuming that an organization has selected the right individuals, has trained these
individuals, and has established appropriate work systems, it is still a challenge to
have these employees understand what needs to be done.
A major mechanism for indicating the organizational goals and objectives is the
compensation system.
This can best be understood from examples of misalignment:
 What is being signalled to co-workers when well-intentioned but ineffective
employees are given above-average merit increases?
 What is being signalled to employees when executives are given large bonuses
after the organization has had a below-average year, and only small increases
are given to other workers?
 What is being signalled if high commissions and other incentives are paid to
field sales representatives, but there is no monitoring of sales practices?
 What is being signalled if an organization has an established bonus system,
does not attain the profits necessary to trigger the bonuses in a given year, but
decides to pay them anyway “because it was a tough year?”
Basic to the effective functioning of any organization is the way it uses its system of
total compensation to communicate to employees both what needs to be done and
their role in accomplishing those objectives.
The above examples frequently are well-intentioned actions on the part of managers
but obviously are not consistent with the desired alignment between rewards and
organizational objectives.
8.2
Empirical Research
8.2.1. Linking Pay to Performance
Employers believe that reward systems in general and incentive systems in particular
influence performance positively.
In addition, many workers prefer that pay be linked to performance, reinforcing the
motivation to use such reward systems.
There are numerous ways of linking pay to performance.
One consideration is the level of aggregation of the incentive pay: Will the incentive
be based on the performance of the individual employee, the work group, the division,
or the entire organization?
Another consideration is the degree of objectivity involved in measuring performance
(subjective supervisory rating of performance or purely objective measures such as
sales, production or profit).
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Reasons to Link Pay to Performance
 Motivation: Several studies, including research based on free agency and
final-offer arbitration in sports (major league baseball), have indicated that
when pay is contingent on performance, individual and group performance are
consistently higher than when this contingency is not present.
Vroom’s expectancy theory suggests that a pay-performance link is essential
for motivating performance.
Among approaches to understanding work motivation, the expectancy theory
is widely accepted and has fairly strong empirical support in applied and
theoretical settings.
To produce maximum motivation, all the three components of the expectancy
model (expectancy, instrumentality, valence) must be high. Incentive
compensation systems are designed to raise two of the three components.
Instrumentality beliefs should be strengthened by making rewards contingent
on good performance, and valence should be high because more money is a
reward that most people find highly attractive.

Retention: Linking pay to performance is likely to help improve work force
composition.
High performers will tend to gain a larger share of compensation resources
and thus be motivated to stay with the organization.
Below-average performers will become discouraged and will tend to leave the
organization.
Reward systems that are not linked to performance tend to have the opposite
effect and thus result in the worst of both possibilities.
Some organizations link rewards to performance by using commissions as the
primary or exclusive basis for compensation.
To performers in real estate, insurance agencies, and stock brokerage houses,
for example, may earn ten times more than poor performers.

Productivity: When performance is linked to rewards, those capable of doing
what will lead to top productivity are motivated to do so.
In the organizations mentioned above, nobody becomes productive by waiting
for business to come along. The top performers make the extra effort that will
result in productivity when they know they will share in the rewards of their
productivity.
In the financial services business, the “extras” that result in productivity
frequently involve working evenings, entertaining clients, soliciting business,
and volunteering in community activities, etc.

Cost Savings: An obvious benefit of pay for performance is the capability to
link compensation costs with productivity results.
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
By basing pay on performance, employers can ensure that compensation costs,
typically a major cost of doing business, will be tied to organizational results.
When the results are poor and the organization is less able to pay,
compensation costs are lower.
With a salaried and/or hourly work force, compensation costs are not related
to business results and, even worse, continue to grow each year as cost-ofliving and merit increases are added.
Organizational Objectives: It is always a challenge to make sure that all
employees understand organizational objectives.
Because of their important influence on motivation and satisfaction, reward
systems have the ability to communicate organizational objectives.
By linking pay to organizationally defined performance, it is also possible to
ensure that individual objectives are in line with organizational objectives.
Employees whose efforts are not synchronized with organizational objectives
will not enjoy an equal share of the rewards.
Reasons Not to Link Pay to Performance
Linking pay to performance is not always possible or successful.
For example, pay-for-performance systems can be misguided by focusing too much
on output at the expense of quality or service.
Pay-for-performance systems also take more time to administer successfully than do
traditional reward systems, i.e. continuous fine-tuning of the system to make sure that
rewards are aligned with desired performance.
A union’s position on this type of reward system also may influence the feasibility of
instituting the system in a particular organization. Historically, unions have opposed
performance-based pay systems.
Table 8.0: Classification of Pay Incentive Plans
Type
Salary Reward
Individual Plan
Group Plan
Organizational Plan
Basis for Reward
Productivity
Cost-effectiveness
Superiors’ rating
Productivity
Cost-effectiveness
Superiors’ rating
Productivity
Cost-effectiveness
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Type
Bonus
Individual Plan
Group Plan
Organizational
Plan
Basis for Reward
Productivity
Cost-effectiveness
Superiors’ rating
Productivity
Cost-effectiveness
Superiors’ rating
Productivity
Cost-effectiveness
Profit
INDIVIDUAL INCENTIVES
When individual productivity is measurable, individual incentives are most successful
in boosting performance through a fairly direct link between performance and
rewards.
Popular individual incentive plans include piece-rate incentive, commissions,
bonuses, skill-based pay and merit pay.
Piece-Rate Incentive
This is the most common form of individual enticement for production workers.
Employees are paid a fixed rate for each unit of output produced. The incentive is
paid for all units in the excess of the standard.
The major shortcoming of the typical piece-rate incentive is in the signal it sends.
Instead of suggesting a partnership between the goals of the individual and those of
the organization, it implies that the organization actually distrusts the individual.
As a result, a piece-rate system is likely to encourage behaviours opposite to those
sought.
Commissions
Commission reward systems, which are usually found in sales jobs, allow the
salesperson to receive a percentage of his gross receipts.
About two-thirds of all salespeople are paid on commission basis – either straight
commission or a base salary plus commission.
Commission payments offer a very clear link between pay and worker performance
and therefore are an effective financial incentive.
Commission plans are easy to administer and justify because there is no subjective
element, and rewards are purely a function of performance.
Bonuses
One of the most popular trends in compensation is the use of bonuses: one-time lumpsum payments given for meeting a performance goal.
Bonuses can be based on objective goal attainment or a subjective rating.
In some organizations all employees share in the bonus awards if organizational goals
are met, whereas in others the size of the bonus is tied to each individual’s
performance.
Bonuses not only help the employer control costs but appear to improve employee
satisfaction.
Skill-Based Pay
Skill-based pay (or pay for knowledge) is a reward system that pays employees on the
basis of the work-related skills they possess rather than associating rewards with
performance levels or seniority.
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Under a typical skill-based pay plan, an employee is hired and receives initial training
on one job.
She then joins a work group at the entry-level rate of pay and has the opportunity to
learn new job-related skills through on-the-job experience and further training.
As the employee demonstrates mastery of different jobs performed by other group
members, her pay is increased.
Part of the reason for the popularity of skill-based pay lies in what it indicates to
employees.
For example, skill-based pay is:
 Associated with work teams or self-managed work groups
 Prevalent in organizations committed to egalitarian principles – highinvolvement or all-salaried work forces
 Embraced by reorganized organizations that have adopted a broadened
conceptualization of the job.
Merit Pay
Merit pay is an annual increment tied to the employee’s performance during the
preceding year.
Because it is the standard procedure for attempting to tie pay increases to individual
performance, merit pay is a major motivational device for employees at all levels.
In practice, the size of merit raises usually depends on both performance and the
employee’s current position in the salary range established for that job.
There are several important difficulties in using merit increases to link pay to
performance.
First, merit raises represent a permanent commitment to an increased salary (pay is
virtually never reduced if performance falls), thereby creating an annuity that can be
an expensive fixed cost to an organization during economic downturns.
Second, merit increases are almost always based on the supervisor’s subjective
evaluation, so employees may perceive a weak link between performance and pay.
Many employees like the idea of a merit system but feel that the system in their
organization is not implemented in a completely fair, unbiased manner.
Third, merit increases are usually awarded annually, so they do not immediately
follow the specific instances of good performance that the organization wishes to
reinforce.
Fourth, variations in the size of merit raises are generally not large enough to be
highly motivating.
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Fifth, the size of the total merit budget may vary substantially from year to year so
that the same performance level does not always earn the same reward.
GROUP INCENTIVES
Group incentives, just like individual incentives, are designed to link rewards to
performance.
The difference is that performance is measured on the level of an organizational unit
and is viewed as resulting from the combined efforts of a group rather than from
individual efforts.
Individual and group incentives are not mutually exclusive but can be combined to
emphasize the desired mix of individual and group linkage of rewards to performance.
Profit Sharing
This is an incentive system in which designated employees share the business profits.
Profit-sharing plans:
 Are often implemented corporation-wide, whereas gain sharing is often at the
unit level.
 Use a formula based on profit rather than on productivity improvement.
The usual profit-sharing program establishes a base-level profit target.
After this target is achieved, a percentage of additional profits is set aside in a bonus
pool to be distributed to participants.
Sometimes the bonus pool is distributed in equal money shares to all employees while
at other times the distribution is made according to organizational level or
salary/wages.
There are three broad types of profit-sharing plans:
1. Current distribution plans (or cash plans), which pay a share of the company’s
profits in cash or in company shares.
2. Deferred payout plans, in which an employee’s share of the company’s profits is
placed in a trust fund to be distributed at a later date, usually on retirement,
disability, death or termination.
3. Combination plans of the two above.
Some features of profit-sharing plans are very attractive.
First, when there are no profits, the company bears no costs for this type of reward system.
Second, these plans also make employees more aware of the organization’s competitive
position in its industry and facilitate a cooperative atmosphere.
Third, the deferment plan allows employees tom postpone taxation and therefore increase
rewards.
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Gain-Sharing Plans
This is a type of group incentive in which a portion of the gains the organization realizes
from group effort is shared with the group.
The concept also implies an organizational philosophy that engenders the kind of
cooperativeness and trust needed to facilitate group efforts.
Many organizations are seeking productivity and quality improvement through gain-sharing
plans.
Other important reasons for adopting gain-sharing plans have to do with employee relations,
labor costs, and a desire to link pay to performance.
Employee Stock Ownership Plans (ESOPs)
In many companies, employees at all levels own stock in the organization for which they
work.
ESOPs are now a common vehicle for profit sharing and the funding of pension plans.
They also have been used by employees to buy out firms that might otherwise have been sold
or closed.
There is some evidence that employee ownership may increase employee commitment,
loyalty, and motivation.
8.3
Use of Competencies
Already covered under Module 2.
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MODULE 9
INTERNATIONAL COMPARISONS
9.0
Introduction
Compensation managers of many organizations are now facing an entirely new set of
issues – designing and managing the compensation of employees who work for the
company in a foreign nation.
The unique compensation issues are in these areas:
1. Incentives provided to stimulate movement or expatriation to a foreign location or
host country.
2. Allowances for repatriation to home country.
3. Additional tax burdens placed on employees working in a foreign location.
4. Labor regulations in both host country and home country.
5. Cost-of-living allowances in the host country.
6. Home country and host country currency fluctuation.
7. Formal and informal compensation practices unique to the host country.
8. Determining home country for setting base pay of third-country nationals.
There are a number of reasons for sending employees to a foreign work site.
Among the most common and critical are:
1. Existing or potential employees who already live at the foreign work site do not
have the necessary knowledge and skills and related work experience.
2. Existing or potential employees who already live at the foreign location do not
have the knowledge of the business, its operations, plans, policies, and strategies.
3. The organization desired to develop a global perspective among employees and
make it part of a career development program.
9.1
Selection
An organization operating in one or more foreign nations may draw employees from
three different places of residence: (1) the specific nation or host country where the
operation is located; (2) the home nation of the parent operation; and (3) foreign
countries other than the site of the operation.
The title given to those employees whose basic residence or home is the host nation is
nationals or locals.
Those who come from the home country of the operation are expatriates and those
whose nation of residence is neither the host country nor the home country are thirdcountry nationals (TCNs).
The compensation provided to locals, expatriates and TCNs can vary considerably.
Normally, the total compensation package provided to locals is the least costly
whereas that provided to expatriates is most costly.
From strictly a cost point of view, the more locals employed at the work site, the less
the labor cost and the greater the return on invested capital.
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The expenses involved in stimulating an employee to move to a foreign site, the
payment of relocation costs (both ways), and, finally the additional tax burden
incurred by having expatriates and, at times, TCNs in foreign operations are
substantial.
These expenses often result in an excessive drain on the profitability of the foreign
operation.
Attracting Individuals to a Foreign Work Site
Recruiting new employees with the requisite knowledge and skills, or influencing
current employees to move to a foreign site, requires a wide array of compensationrelated incentives.
The kind of compensation components offered and the amount or quality of
components available vary according to the desirability of the location.
Site Desirability: Each site has its unique strengths and weaknesses, and these vary
according to the way each individual perceives them.
Some of these strengths or weaknesses relate to geographical location and climate.
Others relate to social and political conditions.
Transfer Incentives: Usually, the first compensation issue that confronts the
compensation manager is the amount of additional pay required to induce an
employee to move from the present job site to the new one in the foreign country.
In some cases, the site may be so desirable that almost any job candidate would find it
sufficient if the organization guaranteed that the individual would be as financially
well-off in the host country as at home.
In most cases, however, the person asked to move to a foreign site will demand some
premium over that earned in the present assignment.
The next set of compensation issues revolves around present housing.
In many cases, the employee owns a house and looks to the employer to cover some
or all of the expenses involved in selling it.
Hence organizations now provide home rental assistance and absentee ownership
management services for the homeowner who rents rather than sells while on foreign
assignment.
In most cases, the organization again takes care of all moving expenses to the new
site.
During the selection phase, the usual interview should be supplemented with an
orientation session for the candidate’s family.
This session gives everyone an opportunity to “select themselves out” before a great
deal of time and money has been invested.
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9.2
Assessment
Expatriates can be difficult to manage because of the problems associated with
adapting to and working in unfamiliar environments, concerns about their
development and careers, difficulties encountered when they re-enter their parent
company after an overseas assignment, and how they should be remunerated.
Special policies for them are required, covering:
 Resourcing Policies
The challenge is that of resourcing international operations with people of the right
calibre.
Policies are required on the employment of local nationals and the use of expatriates
for long periods or shorter assignments.
The advantages of employing local nationals are that they:
1. Are familiar with the local markets, the local communities, the cultural setting and
the local economy;
2. Speak the local language and are culturally assimilated;
3. Can take a long-term view and contribute for a long period (as distinct from
expatriates who are likely to take a short-term perspective);
4. Do not take the patronizing (neo-colonial) attitude that expatriates sometimes
adopt.
Expatriates may be required to provide the experience and expertise that local
nationals lack, at least for the time being.
But there is much to be said for a long-term resourcing policy that states that the aim
is to fill all or the great majority of posts with local people.
Parent companies that staff their overseas subsidiaries with local nationals always
have the scope to ‘parachute in’ specialist staff to deal with particular issues such as
the start-up of a new product or service.
 Recruitment and Selection
Policies for recruitment and selection should deal with specifying requirements,
providing realistic previews and preparation for overseas assignments.
Role Specifications:
Role specifications should take note of the behaviours required for those who work
internationally. They should be able to:
1. Recognize the diversity of overseas countries;
2. Accept differences between countries as a fact and adjust to these differences
effectively;
3. Tolerate and adjust to local conditions;
4. Cope in the long term with a large variety of foreign contexts;
5. Manage local operations and personnel abroad effectively;
6. Gain acceptance as a representative of one’s company abroad;
7. Obtain and interpret information about foreign national contexts (institutions,
legislations, practices, market specifics, etc.);
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8. Inform and communicate effectively with a foreign environment about the home
company’s policies;
9. Take into account the foreign environment when negotiating contracts and
partnerships;
10. Identify and accept adjustments to basic product specifications in order to meet
the needs of the foreign market;
11. Develop elements of a common framework for company strategies, policies and
operations;
12. Accept that the practices that will operate best in an overseas environment will not
necessarily be the same as the company’s ‘home’ practices.
 Realistic Previews
At interviews for candidates from outside the organization, and when talking to
internal staff about the possibility of an overseas assignment, it is advisable to have a
policy of providing a realistic preview of the job.
The preview should provide information on the overseas operation, any special
features of the work, what will need to be done to adjust to local conditions, career
progression overseas, re-entry policy on completion of the assignment, pay, and
special benefits such as home leave and children’s education.
 Preparation Policy
The preparation policy for overseas assignments should include the provision of
cultural familiarization for the country/ies in which the expatriate will work
(‘acculturization’), the preferred approach to leading and working in international
teams, and the business and HR policies that will apply.
 Assimilation and Review
Assimilation policies will provide for the adaptation of expatriates to overseas posts
and their progress in them to be monitored and reviewed.
This may take the form of conventional performance management processes but
additional information may be provided on potential and the ability of individuals to
cope with overseas conditions.
Where a number of expatriates are employed it is customary for someone at
headquarters to have the responsibility of looking after them.
 Training Policy
The following steps should be taken to design a training programme for expatriates:
1. Identify the type of global assignment, e.g. technical, functional, tactical,
developmental or strategic/executive.
2. Conduct a cross-cultural training needs analysis covering organizational analysis
and requirements, assignment analysis of key tasks and individual analysis of
skills.
3. Establish training goals and measures – cognitive and affective.
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4. Develop the programme – the content should cover both general and specific
cultural orientation; a variety of methods should be used.
5. Evaluate the training given.
 Career Management Policy
Special attention has to be paid to managing the careers of expatriates as part of their
experience overseas, or on return permanently or for a period to their home country.
 Re-entry Policies
Re-entry policies should be designed to minimize the problems that can arise when
expatriates return to their parent company after an overseas posting.
They want to be assured that they will be given positions appropriate to their
qualifications, and they will be concerned about their careers, suspecting that their
overseas experience will not be taken into account.
Policies should allow time for expatriates to adjust. The provision of mentors or
counsellors is desirable.
 Pay and Allowances Policies (Home-based or Host-based pay)
The factors that are likely to impact on the design of reward systems are the corporate
culture of multinational enterprise, expatriate and local labor markets, local cultural
sensitivities and legal and institutional factors.
They refer to the choice that has to be made between seeking internal consistency by
developing common reward policies to facilitate the movement of employees across
borders and preserve internal equity, and responding to pressures to conform to local
practices.
Studies of cultural differences suggest that reward system design and management
need to be tailored to local values to enhance the performance of overseas operations.
9.3
Performance Management
The management of expatriates is a major factor determining success or failure in an
international business.
Expatriates are expensive; they can cost three or four times as much as the
employment of the same individual at home.
They can be difficult to manage because of the problems associated with adapting to
and working in unfamiliar environments, concerns about their development and
careers, difficulties encountered when they re-enter their parent company after an
overseas assignment, and how they should be remunerated.
Establishing a compensation plan for a job in a foreign location begins with the
determination of base pay.
The market or going rate of pay for a comparable job in the home country at the time
of expatriation is normally used for setting this rate.
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After setting the base pay comes the determination of a Foreign Service Premium
(FSP), which is an incentive bonus for performing the assignment in the host country.
The FSP is usually expressed as percentage of base pay and is part of the total pay
received by the employee each pay period.
Some organizations are now granting expatriates lump-sum bonuses in lieu of FSPs.
These lump-sum payments are made at the time of expatriation and repatriation.
To maintain the employees’ present standard of living in the foreign location,
organizations provide a number of allowances to keep them “whole”.
A major one provides money for additional living costs.
In host areas where conditions (climatic, political, social) are undesirable, a
“hardship” or “location” allowance is added to base pay.
Most pay plans include a cost-equalization allowance that includes cost-of-living
(COLA) and housing allowances.
Many organizations also provide a tax equalization allowance for the tax liabilities
incurred by the employee.
To minimize problems related to exchange of currency and to protect the employee,
many organizations now “split” an expatriate’s compensation between home country
and host country compensation packages (a split-pay plan).
Many payments and services in addition to the compensation items above are also
provided to employees willing to accept a foreign assignment.
(See also Case 5, Module 11)
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MODULE 10
CULTURAL, DIVERSITY AND ETHNICITY ISSUES
10.0 Introduction
A critical challenge for organizations from both the public and private sectors in the
21st century is the need to operate across national boundaries.
International human resource management is the process of managing people across
international boundaries by multinational companies.
It involves the worldwide management of people, including expatriates.
10.1 Cultural Differences
In managing globally, cultural differences must be taken into account.
The following HR areas may be affected by national culture:
 Decisions of what makes an effective manager;
 Giving face-to-face feedback;
 Readiness to accept international assignments;
 Pay systems and different concepts of social justice;
 Approaches to organizational structuring and strategic dynamics.
Culture has been defined as the collective mental programming of people in an
environment.
Another definition is that culture is the pattern of taken-for-granted assumptions about
how a given collection of people should think, act, and feel as they go about their
daily affairs.
Since cultural lessons are imparted from birth to death via role models, formal
education, religious teachings, and peer pressure, cultural undercurrents make
international dealings immensely challenging.
Cultural roots run deep, have profound effects on behaviour, and are not readily
altered.
Cultural values are broad tendencies to prefer certain states of affairs over others.
The cultural values within a nation are substantially more similar than the values of
individuals from different nations.
Culture varies more between organizations than countries.
Culture has a powerful impact on people’s behaviour.
National culture differences can be critical and insensitivity to national culture
differences can and does result in business failure (as well as failure and career
consequences for individual managers).
Cross-cultural business negotiators who ignore or defy cultural traditions do so at
their own risk.
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The means the risk of not making the sale or of losing a contract or failing to
negotiate a favourable deal.
Four national cultural dimensions have been identified: uncertainty avoidance,
masculinity/femininity, power distance and individualism/collectivism.
10.2 Diversity
Dealing effectively with both co-workers and customers in today’s diverse
workplaces requires a good deal of cultural intelligence.
This involves cultural accommodation which is possible with a knowledge of the
following important sources of cultural diversity.
 High-Context and Low-Context Cultures
People from European-based cultures typically assess people from Asian cultures
such as China and Japan as quiet and hard to figure out.
Conversely, Asians tend to view Westerners as aggressive, insensitive, and even rude.
True, language differences are a significant barrier to mutual understanding but
something more fundamental is involved, something cultural.
The difference between high-context and low-context cultures centres on how much
meaning one takes from what is actually said or written versus who the other person
is.
In high-context cultures, people rely heavily on nonverbal and subtle situational
messages when communicating with others.
The other person’s official status, place in society, and reputation say a great deal
about the person’s rights, obligations and trustworthiness.
In high-context cultures, people do not expect to talk about such “obvious” things.
Conversation simply provides general background information about the other person.
Thus, in high-context Japan, the ritual of exchanging business cards is a social
necessity, and failing to read a card you have been given is a grave insult.
The other person’s company and position determine what is said and how.
African, Arab, Chinese, Latin/Romance languages and Korean cultures also are highcontext.
People from low-context cultures convey essential messages and meaning primarily
with words.
Low-context cultures in Germany, Switzerland, Scandinavia, North America and
Britain expect people to communicate their precise intended meaning.
Low-context people do read so-called body language, but its messages are secondary
to spoken and written words.
Legal contracts with precisely worded expectations are important in low-context
countries such as the USA.
However, in high-context cultures the process of forging a business relationship is as
important as, if not more important than, the written details of the actual deal.
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This explains why Americans tend to be frustrated with the apparently slow pace of
business dealings in Japan.
For the Japanese, the many rounds of meetings and social gatherings are necessary to
collect valuable contextual information as a basis for judging the other party’s
character.
For the schedule-driven American, anything short of actually signing the contract is
considered a pointless waste of time.
Thus, patience is a prime virtue for low-context managers doing business in highcontext cultures.
 The Nine Dimensions of Culture
These are key cultural dimensions which provide practical guidelines for international
management. These are shown in the table below.
Table 10.0: Nine Cultural Dimensions from the GLOBE Project
DIMENSION
DESCRIPTION
PREDOMINANT CULTURE
Power Distance
Should leaders have high or
low power over others?
How much should social
norms and rules be used to
reduce future uncertainties?
To what extent should
society and institutions
reward loyalty?
To what extent do
individuals value loyalty to
their family or organization?
How aggressive and
confrontational should one
be with others?
How nearly equal are men
and women?
How much should one work
and save for the future, rather
than just live for the present?
How much should people be
rewarded for excellence and
improvement?
How much should people be
encouraged to be generous,
kind, and fair to others?
High-Context
Uncertainty
avoidance
Institutional
collectivism
In-group
collectivism
Assertiveness
Gender equality
Future orientation
Performance
orientation
Humane
orientation
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Low-Context
High-Context
High-Context
Low-Context
Low-Context
Low-Context
Low-Context
High-Context

Other Sources of Cultural Diversity
Managers headed for a foreign country need to do their homework on the
following cultural variables to avoid awkwardness and problems.
There are no rights or wrongs here, only cross-cultural differences.
o Individualism versus Collectivism
This distinction between “me” and “we” cultures deserves closer attention
because it encompasses two of the nine GLOBE cultural dimensions.
People in individualistic cultures focus primarily on individual rights, roles,
and achievements.
The USA and Canada are highly individualistic cultures.
People in collectivist cultures – such as Zambia, Egypt, Mexico, India and
Japan – rank duty and loyalty to family, friends, organization, and country
above self-interests.
Group goals and shared achievements are paramount to collectivists; personal
goals and desires are suppressed.
o Time
Time is a salient language of culture and we can distinguish between
monochromic and polychromic time.
Monochronic time is based on the perception that time is a unidimensional
straight line divided into standard units, such as seconds, minutes, hours, and
days.
In monochromic cultures, including North America and Northern Europe,
everyone is assumed to be on the same clock and time is treated as money.
The general rule is to use time efficiently, to be on time, and not to waste
time.
In contrast, polychromic time involves the perception of time as flexible,
elastic, and multidimensional.
African, Latin American, Mediterranean and Arab cultures are polychromic.
Managers in polychromic cultures tend to view schedules and deadlines in
relative rather than absolute terms.
Different perceptions of time have caused many cultural collisions.
It is important to reset your mental clocks (and expectations) when living and
working in a culture with a different time orientation or when working
globally on a virtual team.
o Interpersonal Space
People in a number of cultures prefer to stand close when conversing.
Many Africans, Asians and Arabs fall into this group.
But this is disturbing to a Northern European or Northern American who is
accustomed to conversing at arm’s length – a proper social distance.
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o Language
Foreign language skills are the gateway to true cultural understanding.
Translations are not an accurate substitute for conversational ability in the
local language.
o Religion
Awareness of a business colleague’s religious traditions is essential for
building a lasting relationship.
Those traditions may dictate dietary restrictions, religious holidays, and
Sabbath schedules, which are important to the devout and represent cultural
minefields for the uninformed.
Of course, it is important to be aware of and follow applicable laws regarding
religion in the workplace.
10.3
Ethnicity
Three managerial attitudes toward international operations have been identified and
have been labelled ethnocentric, polycentric and geocentric.
 Ethnocentric Attitude
Managers with an ethnocentric attitude are home-country-oriented.
Home-country personnel, ideas, and practices are viewed as inherently superior to
those from abroad.
Foreign nationals are not trusted with key decisions or technology.
Home-country procedures and evaluation criteria are applied worldwide without
variation.
Proponents of ethnocentrism say that it makes for a simpler and more tightly
controlled organization.
Critics believe this attitude makes for poor planning and ineffective operations
because of inadequate feedback, high turnover of subsidiary managers, reduced
innovation, inflexibility, and social and political backlash.
 Polycentric Attitude
This host-country orientation is based on the assumption that because cultures are so
different, local managers know what is best for their operations.
A polycentric attitude leads to a loose confederation of comparatively independent
subsidiaries rather than to a highly integrated structure.
Because foreign operations are measured in terms of ends (instead of means),
methods, incentives, and training procedures vary widely from location to location.
On the negative side, wasteful duplication of effort occurs at the various units within
the confederation precisely because they are independent.
Such duplication can erode the efficiency of polycentric organizations.
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Moreover, global objectives can be undermined by excessive concern for local
traditions and success.
The main advantages are an intensive exploitation of local markets, better sales since
local management is often better informed, more local initiative for new products,
more host-government support, and good local managers with high morale.
 Geocentric Attitude
Managers with a geocentric attitude are world-oriented.
Thinking globally to them means taking the best other cultures have to offer and
blending that into a third culture.
Skill, not nationality, determines who gets promoted or transferred to key positions
around the globe.
In geocentric companies, local and worldwide objectives are balanced in all aspects of
operation.
Collaboration between headquarters and subsidiaries is high, but an effort is made to
maintain a balance between global standards and local discretion.
Of these three contrasting attitudes, only a geocentric attitude can help management
take a long step toward success in today’s vigorously competitive global marketplace.
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MODULE 11
PUBLIC AND PRIVATE SECTORS
11.0 Introduction
The Public Sector in Zambia
Public companies comprise this sector. These are large companies whose stocks are owned
by a large number of investors, most of whom are not active in management. Such companies
are called publicly owned corporations, and their stock is called publicly held stock.
Characteristics and Challenges:
This sector has few large enterprises that enjoy the following advantages:
a) Economies of scale.
b) High credit-worthiness.
c) High access to capital resources.
d) High access to technology and latest developments.
e) Wide customer base.
f) High variety of products.
g) Some are branches of multinational corporations.
h) High access to skilled human resources and new knowledge bases.
i) Strong market leadership.
j) Strong lobbying capabilities.
But this sector is one which has a low growth rate due to high barriers to entry.
Thus, the levels of innovation tend to be moderate. On average, the economic factors
mentioned above create serious challenges for the management of this sector.
The Private Sector in Zambia
Some companies are so small that their common stocks are not actively traded; they are
owned only by a few people, usually the companies’ managers. Such firms are said to be
privately owned, or closely held, corporations.
Characteristics and Challenges:
This sector has the majority of the companies in Zambia and most of them belong to the
informal sector. This is the sector which has seen the largest increase in growth over the last
decade or so. Most of the companies here have a lot of constraints in terms of the following:
a) Small production capacity.
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b) Limited access to capital resources.
c) Limited access to sources of financial resources like commercial banks.
d) Poor creditworthiness.
e) Limited access to technology and technological developments.
f) Narrow information pertaining to markets and market trends.
g) Excessive dependency on local and domestic markets.
h) Limited number of products and product offerings.
i) Shortages of critical skills and knowledge in human resources.
j) High rate of business failures.
k) Low barriers to entry.
l) Highly competitive environment.
This is a sector which exhibits high levels of innovativeness. These and the other factors
already mentioned above make the management of this sector very hard.
Thus, management needs to be multi-skilled in terms of managing the enterprise almost
single-handedly.
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11.1 CASE STUDIES
CASE 1: The Validity of Educational Level for Selection: Some Different Perspectives
In Griggs v. Duke Power Company (1971), the Supreme Court ruled that requiring a high
school certificate in selection was illegal because the company could provide no evidence
that a high school education was a valid predictor of job performance.
Elsewhere, however, the use of educational level as an important or even sole factor in
selection is widespread. Japan, Taiwan, Korea and Singapore see selection based on
education level as a means of achieving broader organizational and national goals and show
much less concern about whether education level is a valid predictor of performance on
specific jobs.
In Japan, the “best” organizations recruit only students who have graduated from the top
universities. Singapore provides another example in which the concern for job-specific
validity often takes a back seat to the concern for broader (in this case, national) issues.
In a study conducted by Morgan Guaranty Trust Company of New York, the economic
success of Singapore, Korea, Taiwan and Hong Kong was attributed partly to their success in
increasing the education level of their populations.
In line with government policy, organizations in Singapore place very high importance on
educational level in their selection decisions. The importance of education continues beyond
the selection stage; both the earnings and promotions of Singaporeans are substantially
dependent on their education levels. Thus substantial incentives exist for obtaining and then
furthering educational credentials.
For both Japan and Singapore, the use of education level as a primary selection tool has
resulted in considerable national benefits. However, because the link between education and
performance on specific jobs is often weak, there are dangers associated with this practice.
These dangers lie primarily in the underutilization of available human resources. Individuals
who, for whatever reason, do not achieve high levels of education may, through experience
and/or natural ability, have skills of great value to organizations. In Japan and Singapore,
these individuals often find it impossible to gain access to positions commensurate with their
true abilities. Thus both the individuals and organizations lose.
K.F. Taylor (1987) cites other dangers of “credentialism”.
 Performance appraisal, promotions, and compensation may be used on continued
educational attainment rather than on actual contributions to the organization.
 When less educated employees see that their opportunities for advancement and
increased pay are restricted, they may exhibit lower motivation and productivity.
Tony Buon and Bob Compton (1990) point out that credentialism also tends to perpetuate
social inequality if access to more prestigious education is based partly on social class.
(Source: Fisher et al., 1999.)
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CASE 2: Ethics in Recruiting and Job Search
A number of ethical challenges can arise in the recruiting process. Both parties to recruiting
may be motivated to present their best sides while concealing their weaknesses, and this may
lead to a temptation to lie or mislead by omission or commission.
Applicants may engage in resume fraud, though most organizations have a policy of firing
employees if significant resume fraud is later detected. Firms sometimes emphasize the most
positive aspects of jobs while failing to mention less pleasant aspects, and in extreme cases,
firms have been sued for fraudulent recruiting. In one case, a firm enticed an individual to
relocate with promises of a bright future. However, the firm knew that its financial condition
was very shaky and that there was a good probability that the new employee would soon be
laid off. A jury later awarded the employee damages of $250,000.
Honesty is a central value in most ethical systems, so blatant lying probably would be
regarded by both employers and applicants as unacceptable. However, the morality of other
recruiting behaviours is not so clear-cut and may be defined situationally by common practice
in the industry. Theft of property would be by most people, but what about theft of employees
and their organization-specific knowledge? When one organization raids a competitor by
hiring away its best talent, has an unethical act been committed by the raider? What if the
new hire passes on critical insider knowledge of the strategies, customers, or technology of
the former employer? “Noncompete” agreements signed on hiring are efforts to prevent
employees, if they later quit, from using their organization-specific knowledge to the
disadvantage of their former employer, but such agreements are not always legally
enforceable.
In some industries, raiding is commonplace and accepted. Any company that hires an
executive search firm is essentially hiring a raider, since nearly all candidates referred will be
employed already.
But do some firms go too far? Microsoft’s recruiters go out of their way to make friends with
technical talent employed by their competitors. They learn as much as possible about these
individuals’ lifestyle and personal needs, job preferences, and career aspirations so that they
can make a customized recruiting offer. But so do other firms in the same industry!
More clearly problematic behaviour sometimes occurs when an employment agency acts as
an intermediary in the recruiting process. The organization wants to find a well-qualified
candidate, and the candidate wants to find a suitable job. The agency wants to make a
placement so that it can collect a fee. In the long run, making a suitable placement should pay
off for all parties, with the agency gaining a good reputation and repeat business from the
employer.
However, making a good match may take substantial time and effort. Some agencies and
consultants may be motivated to make quick, unsuitable placements so that they can collect
their fee. Stories are told of applicants’ self-esteem being intentionally undermined by
personnel consultants so that the applicants can be intimidated into accepting the first job
offered even if it is below their abilities and aspirations.
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Other alleged violations include fee-splitting between agency and employer when the
candidate pays the fee, charging excessive fees, advertising without identifying the agency as
fee-charging, and misrepresenting the job. Some states license and regulate employment
agencies and/or their personnel consultants to try to reduce the incidence of these abuses.
(Source: Fisher et al., 1999.)
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CASE 3: Employee Selection in Korea
The basic idea underlying many HR practices in the West is that “people are different” –
different in skills, aptitudes, and job performance. Hr practices are based on measuring and
responding to these differences throughout the employee’s career via selection testing,
differential assignment to training programs, individual performance appraisal, and
performance-based pay. Implicit in these processes is the need to evaluate and judge others.
A Korean HR scholar points out that the basic assumption in many Asian countries is that
people are the same, and it is in bad taste for one individual to notice or judge differences in
others. This cultural tendency is called “collectivism”, as opposed to the “individualism” that
is prevalent in the West.
Collectivism also means that group membership and group identities are very important to
people. Korean organizations see themselves as family groups, with employees being given
lifetime employment. Loyalty from employees (family members) is a prime expectation, even
more than competence. As in a biological family, each family member remains such
regardless of how good or bad their behaviour or performance might be, and other members
do not judge them on their contribution to the family. A manifestation of this in Korean
organizations is that performance-based pay is very seldom used.
Korean companies usually recruit generalists at the entry level, who they develop in-house
through job rotation. This contrasts with the Western approach of hiring people with specific
skills for specific jobs. Nearly all promotions in Korean companies are from within, because
only family members who have proven their loyalty over time are trusted to take important
roles in the company. Because the family relationship of employment is lasting, it is very
important to adopt the right people into the family. At blue-collar level, much of recruiting is
via the “back door”. This refers to selecting people who are recommended by or related to a
present employee and thus already have an indirect relationship with the organization. Who
you know is more important than what you know in getting a job. Coming from the same
geographic region as other company members is also desirable, because it makes one already
part of the extended family. When recruiting university graduates, connections also matter.
References from professors and other high status people are very important in the “who you
know” lottery. Which school a candidate attended is also critical. Competition to get into the
top schools is fierce, so having attended a highly ranked university is considered to guarantee
a desirable level of mental ability and motivation. It is also an indicator of social status, and
this is very important because someone of lower status probably will not be able to credibly
manage subordinates of higher status. Other indicators of status depend on the region in
which one was born, the prestige of the district in which one presently resides, and the
occupations and affluence of one’s parents and grandparents.
Most companies follow the approach of screening based on university and social status,
followed by company-sponsored examinations in English and in one’s major subject. A new
economic graduate, for instance, would be asked to take an economics examination as part of
the selection process. A graduate of a technical or vocational institute would need to present a
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certificate from the national Skill Testing Agency to document his knowledge. Testing is
followed by extensive interviews, often with top executives or even the company CEO.
Throughout this process, prior work experience is considered much less important than being
of “good character”. (Source: Fisher et al., 1999.)
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CASE 4: Developing a Procedurally Just Performance Appraisal Process
When organizations make decisions about people, such as whom to hire or promote, what
appraisal ratings or merit raise to give, or how to discipline a particular misbehaviour, it is
very important that the decisions are seen as fair and just. Research has shown that at least
two aspects of justice influence employees’ job satisfaction and organizational commitment,
and both must be considered in organizational decisions.
The first type is “distributive justice”, or the perceived fairness of particular outcomes. It has
to do with the distribution of rewards and punishments across people. Distributive justice
would exist if employees agreed that the best person had been chosen for a promotion, that
the punishment fit the crime in a discipline case, or that the size of merit raises accurately
reflected true differences in performance across the people involved.
Distributive justice is specific to a particular decision – we might agree that one promotion
decision was fair, but that is no guarantee that we will think the next one is fair. This is
because distributive justice doesn’t include evaluation of the fairness of the method or
process by which the decision was made. The latter is called “procedural justice”.
Presumably, a just policy or procedure should help assure equitable outcomes every time,
whereas a single instance of distributive justice could occur by chance, favouritism, or some
other unfair process.
What makes an allocation procedure just? Following are six rules for procedural justice
(Folger and Greenberg 1985, p.146):
 Consistency Rule: Allocation procedures should be consistent across persons and over
time.
 Bias Suppression Rule: Personal self-interest in the allocation process should be
prevented.
 Accuracy Rule: Decisions must be based on accurate information.
 Correctability Rule: Opportunities must exist to enable decisions to be modified.
 Representativeness Rule: The allocation process must represent the concerns of all
recipients.
 Ethicality Rule: Allocations must be based on prevailing moral and ethical standards.
Performance appraisal represents a situation in which decisions are made about individuals
(allocation of ratings or rankings and associated rewards) and the potential for
misunderstandings and feelings of injustice are great. This means that a very fair and clear
process should be adopted.
Research has shown that appraisals are seen as more fair when consistent standards are
applied to all ratees, there is a system by which the rate can appeal or refute the evaluation,
and when raters are familiar with ratee’s work, solicit employee input before assigning
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ratings, provide prompt feedback, and allow two-way communication in the appraisal
interview. In addition, procedures should be more likely to be perceived as fair if employees
understand the rating dimensions and superior’s expectations well before the rating takes
place. Ideally, rates would also have input into determining the rating criteria.
These appraisal procedures meet most of the six rules given above, and should help to assure
that the emotionally laden process of performance appraisal is seen as fair, insofar as is
humanly possible.
(Source: Fisher et al., 1999.)
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CASE 5: International Compensation Comparisons
Substantial variation in compensations rates can be seen around the world; costs tend to be
lower in the developing economies compared with those that are more developed. Many
European countries pay more than the USA.
The U.S. Bureau of Labor Statistics has developed comparative measures of manufacturing
compensation costs, allowing for international comparisons. These statistics provide a general
indication of the relative total compensation cost in each country.
Total compensation cost is made up of payment for time worked, holiday pay, and the cost of
providing required benefits such as health insurance, pensions, workers’ compensation, and
unemployment insurance.
In order to make a direct comparison, the USA is used as the benchmark country with defined
costs at 100. The rest of the countries are reported relative to this standard. The Table below
illustrates how other countries compare with the USA in terms of manufacturing
compensation for the years 1990 and 1994.
In 1994, U.S. manufacturing costs were $17.10 per hour. Germany had the highest
compensation costs, totalling 160 percent of the United States level. Second was Switzerland
with costs at 145 percent of the U.S. level and then Belgium at 134 percent. Overall costs in
non-European countries except for Japan were below the levels of the U.S.
There are differences in compensation structures among the countries, such as variations in
levels of paid leave and health insurance provisions. For example, holiday pay and bonuses
accounted for approximately 30 percent of total compensation costs in Japan, compared with
some European countries, where it accounts for 15 to 20 percent of costs, and the United
States, where it accounts for 6 percent. In Japan, an annual bonus of three months’ pay is
typical, whereas in Europe, an annual bonus of one to two months’ pay plus four to six weeks
of paid holidays are common.
Mexico is often seen as a low-wage country, and since the passage of the North American
Free Trade Agreement, many companies have tried to take advantage of this by opening
facilities in Mexico. Some of them have found that actual wage costs are greater than
anticipated. While the official minimum wage is low, very few people actually work for the
minimum wage. In addition, there are legally required cash allowances: fifteen days’ pay for
a Christmas bonus (though most employers pay a full month), a vacation premium of 25
percent beyond regular pay, and required sharing of 10 percent of pretax profits. Overtime
must be paid at twice the normal rate. A number of additional bonuses, such as fifteen to
twenty days’ pay as a reward for perfect attendance over one year, are not mandatory but are
widely used and hence necessary to attract and keep good employees.
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Table 11.0: Hourly Compensation Costs for Production Workers in the Manufacturing
Sector
Country
1990
1994
Australia
88
80
Austria
119
127
Belgium
129
134
Canada
106
92
Denmark
120
120
Finland
141
110
France
102
100
Germany
147
160
Hong Kong
21
28
Italy
119
95
Japan
86
125
Korea
25
37
Mexico
11
15
Norway
144
122
Portugal
25
27
Singapore
25
37
Spain
76
67
Sweden
140
110
Switzerland
140
145
Taiwan
26
32
United Kingdom
85
80
United States
100
100
(Source: Fisher et al., 1999.)
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11.2 EMPIRICAL RESEARCH
1. EXTERNAL RECRUITING
A study by Armacost and Jauernig (1991) indicates a sophisticated example of recruitment
planning in a large city. The manucipality authorized a single position, that of pension
financial manager, in early November and requested that it be filled by the first or second
week of January. This was a high-level position that involved managing a $14 billion pension
fund. The city’s civil service rules specified a complex set of recruiting and selection steps.
The recruiter assigned to the project first estimated the time required to complete each step,
determined which steps could occur concurrently, and identified steps that were critical in
that they could slow down the entire project. The recruiter applied the critical Path Method
(CPM) and the Program Evaluation Review Technique (PERT) to identify the quickest way
to move through the set of activities to the final step of producing a ranked eligibility list of
candidates.
The recruiter also identified activities that could be speeded up over their expected duration
by overtime work (“crashed”). Ultimately, the recruiter forwarded the eligibility list to
decision makers just 41 days after the project began.
The table below shows the activities involved, the estimated and actual time in days to
complete each one, and the activities that were “crashed” through overtime to keep the
recruitment plan on schedule when other activities took longer than expected.
Table 11.1: Finding a Pension Financial Manager: Time in Days for Recruitment and
Selection Activities
Activities
Expected
Time
2.33
1.00
1.00
20.17
2.33
1.92
1.25
1.08
4.83
7.17
1.92
2.00
2.00
Job analysis and announcement sheet
Education and experience questionnaires
Advertisement/Legal notice
Recruitment/accepting applications
Application review
Oral board list development
Lining up raters
Questionnaire rating form
Oral examination and rating form
Ranking questionnaires
Scheduling oral examinations
Oral examination
Eligibility list development
(Source: Fisher et al., 1999.)
104
Actual
Time
2.00
0.50
3.50
23.00
Crash
Time
Crash
Cost
1.00
$124
0.50
$69
1.00
$263
$155
$132
1.00
$94
3.00
0.50
6.00
0.50
2.00
2. FORMAL RECRUITING METHODS
A 1996 survey of 201 HR executives shows the rated effectiveness of various recruiting
methods for producing high-performing employees. On a scale from 1 (not effective) to 5
(extremely effective), it is clear that 3 methods were considered superior: employee referrals,
university recruiting and executive search firms. The most commonly used method,
newspaper advertising, was rated only average in effectiveness. These findings are shown in
the table below.
Table 11.2: Mean Rated Effectiveness of recruiting Sources
Source
Employee referrals
College recruiting
Executive search firms
Professional associations
Newspaper advertisements
Direct (unsolicited) applications
Private employment agencies
Public employment agencies
Unions
Scale: 1 = Not good
2 = Average
3 = Extremely good
Effectiveness
3.84
3.81
3.71
3.08
3.05
2.86
2.78
1.92
1.64
(Source: Fisher et al., 1999.)
105
3. JOB CHOICE
A study involving 1000 American employees ranked the importance of 10 job factors in 1994
and their rankings are given below:
Table 11.3: Average Ranks of the Importance of 10 Job Characteristics to American
Employees
All
Job Characteristic
Age Ages Ages Age
Earnings Earnings
Employees < 30 31-40 41-50 > 50
<$25000 $40000$50000
Interesting work
1
4
2
3
1
5
1
Full appreciation of
2
5
3
2
2
4
3
work done – others
show appreciation of my
work
A feeling of being “in on 3
6
4
1
3
6
2
things”, being well
informed and involved
High job security
4
2
1
4
7
2
4
Good wages
5
1
5
5
8
1
6
Promotion and growth in 6
3
6
8
9
3
5
my skills within the
organization
Good working
7
7
7
7
4
8
7
conditions
Personal loyalty to
8
9
9
6
5
7
8
employees from
superiors and the
organization
Tactful discipline from
9
8
10
9
10
10
9
superiors
Sympathetic help with
10
10
8
10
6
9
10
personal problems from
superiors
Male and female employees had very similar preferences.
However, there were pronounced differences in the ranks given to various job characteristics
by employees of different age groups and income levels.
Note that pay was ranked only 5th. Other studies also have found that pay comes in at about
5th when individuals rank their own preferences but is almost always ranked 1st in importance
to “other people” or to “subordinates”.
(Source: Fisher et al., 1999.)
106
4. SELECTION DEVICES
One survey determined the percentage of companies that use each of a number of selection
devices to hire employees in 5 different job groups from production workers to managers.
The findings are given in the table below.
Another survey assessed who made hiring decisions and found that the immediate supervisor
made the actual decision to hire in 52 percent of the companies, the department/division head
made the decision in 32 percent of the firms, and the personnel officer either made or
influenced the final decision in 19 percent of the firms.
Table 11.4: Popularity of Selection Devices for Different Job Classes
Percent of Companies
Any Job
Categorya
(# of Firms)
(245)
Skill performance 63
Office/
Clerical
(245)
55
Production
/ Service
(221)
19
Professional
/ Technical
(237)
10
Commissioned
Sales
(96)
4
Managers/
Supervisors
(243)
3
test/ or work
sample
Medical
57
43
57
47
46
45
examination
Mental ability 31
23
10
8
9
9
test
Job knowledge 27
14
14
14
3
5
test
Drug test
26
21
26
22
23
21
Personality
17
1
2
6
23
13
test
Assessment
12
b
1
3
4
10
centre test
Physical
11
1
12
2
1
1
abilities test
Written
7
4
6
2
4
3
honesty test
Polygraph test 5
2
4
2
5
2
Genetic
3
2
2
2
1
screening
AIDS test
1
b
b
1
b
Other
2
b
1
1
1
1
Note: Percentages for each job category group are based on the number of organizations that provided data for
that category, as shown by the numbers in parentheses.
a
Percentages in this column show the proportion of all responding organizations that administer a
preemployment test to applicants in any job category.
b
Less than 0.50%
(Source:
Fisher et al., 1999.)
107
5. PREFERENCES FOR JOB CHARACTERISTICS AND REWARDS IN
SEVERAL COUNTRIES
In recruiting new employees as well as managing present employees, it is important to know
what their preferences are for the various rewards and inducements organizations can offer in
exchange for becoming and remaining productive organizational members.
Preferences vary around the world. Multinational companies and expatriate managers need to
be aware of these preferences so that they can target their recruiting messages, reward
systems, and management styles accordingly.
The table below shows importance ranks for 10 job characteristics in 1992 by employees in 4
nations. Interesting work is ranked 1st in the USA but 7th in China. Being in on things is 3rd in
the USA and last in China.
These differences suggest that job enrichment, empowerment, and participative management
may be better received by U.S. than Chinese employees. Employees in China and Taiwan
should be very attracted by good wages, whereas this seems to be much less important to
Russian employees (at least it was at the time these data were collected).
An additional item that was rated separately as most important by employees in the people’s
Republic of China was employer-subsidized housing, yet this is something that few Western
managers would think of as a reasonable benefit for rank and file employees.
Table 11.5: Ranked Preferences for Job Characteristics
Job Characteristic
Interesting work
Full appreciation of work done – others
show appreciation of my work
A feeling of “being in on things”, being well
informed and involved
High job security
Good wages
Promotion and growth in my skills within
the organization
Good working conditions
Personal loyalty to employees from
superiors and the organization
Tactful discipline from superiors
Sympathetic help with personal problems
from superiors
USA
1
2
CHINA
7
5
TAIWAN RUSSIA
5
3
4
7
3
10
8
2
4
5
6
6
1
4
1
2
3
6
10
1
7
8
2
3
7
9
9
4
9
10
9
8
10
6
5
8
(Source: Fisher et al., 1999.)
108
6. INCENTIVE PLANS
Lawler (1981) carried out a study of incentive pans with regard to the factors affecting the
design of incentive systems. His analysis is shown below:
Table 11.6: Ratings of pay incentive Plans
Basis for Reward
Tie Pay to
Produce
Encourage
Performance Negative
Cooperation
Side Effects
Salary
reward
Individual
plan
Productivity
4
Cost-effectiveness 3
Superiors’ rating
3
Group plan
Productivity
3
Cost-effectiveness 3
Superiors’ rating
2
Organizational Productivity
2
plan
Cost-effectiveness 2
Bonus
Individual
Productivity
5
plan
Cost-effectiveness 4
Superiors’ rating
4
Group plan
Productivity
4
Cost-effectiveness 3
Superiors’ rating
3
Organizational Productivity
3
plan
Cost-effectiveness 3
Profit
2
On a scale of 1 to 5: 1 = low and 5 = high
(Source: Fisher et al., 1999.)
Employee
Acceptance
1
1
1
1
1
1
1
1
1
1
1
2
2
2
3
2
4
4
3
4
4
3
4
4
3
2
2
1
1
1
1
1
1
1
1
1
3
3
3
3
3
3
2
2
2
3
3
3
4
4
3
Objective measures of performance (productivity and cost savings) tend to have greater
employee acceptance and credibility.
Individual incentive programs are often reported to yield higher productivity than group
incentives.
One explanation is that linking individuals’ pay to the group’s performance diffuses the
connection between pay and each person’s effort.
But group systems often result in more cooperation and coordination.
They are better suited for organizations in which performance is difficult to measure at the
individual level and success depends on effective teamwork.
109