Transcript Chapter 11 Attracting, Selecting, and Developing Employees

Chapter 11
Attracting, Selecting, and
Developing Employees
Staffing
• Staffing involves bringing new people into the
organization and then moving them through, and perhaps
out of, the firm.
• Staffing consists of three stages:
– recruiting
– selection and hiring
– placement
• These staffing activities are coupled with the training and
development function to match the abilities of the job
candidate with the needs of the firm.
Staffing or Training?
• Should a firm hire people who are ready to step into
their jobs, or should it “groom” them through training
programs?
• With selection and placement, new employees have
proven skills and can begin work immediately.
• With training and development, people can be hired
at lower rates of pay if they come to the firm
untrained, and training and development can be
tailored exactly to the company’s needs.
The Staffing/Training Balancing Act
(Figure 11-1)
Recruitment,
Selection,
and
Placement
Training
and
Development
Fitting New
Employee and
Job Together
Making Sure
That Employees
Grow with Their Jobs
Recruiting
• Recruiting is the first of staffing’s three stages.
• Recruiting refers to all activities involved in
finding interested and qualified applicants for a
job opening.
• The greater the number of applicants and the
better their qualifications, the more likely it is
that the firm will build a solid personnel base.
The Gillette International Graduate
Trainee Program
• The program grooms local talent in the countries where the
firm has business operations.
• Training includes an 18-month term at the company’s
Boston headquarters, followed by an entry-level position in
the home country.
• At headquarters, an executive mentor is responsible for
overseeing the trainee’s training and education in Gillette’s
operations.
• About half the trainees have moved into executive positions,
and many have returned to the U.S. or moved to other
countries to pursue international careers.
Global Staffing at Colgate-Palmolive
• Almost 70% of Colgate-Palmolive’s $7 billion in sales come
from overseas. 60% of its employees operating outside their
home countries come from places other than the U.S.
• Two of the last four CEOs were from outside the U.S.
• All top executives must speak at least two languages, and
important meetings take place all over the globe.
• In 1991 a global team of Colgate human resource leaders and
senior-level managers began a year-long quest to develop global
HR policies that would mesh with business goals.
• These efforts culminated in a Global Human Resources
conference, with more than 200 HR leaders from more than 35
countries in attendance.
Sources of Applicants (Figure 11-3)
Source
Benefits and Costs
Walk-ins to the
company
Newspaper and
magazine ads
Referrals from
current and past
employees
Private
employment
agencies
Public
employment
agencies
Company must assign someone to greet
walk-ins and deal with applications
Bring in many applicants, but don’t
screen out unqualified applicants.
Referring employees understand the
firm’s needs and may know good
people in the industry.
These are in the business of matching job
seekers with suitable jobs. They
charge a fee.
Most cities have an office of the state
employment agency. It finds jobs for the
unemployed and may offer training.
Sources of Applicants (Figure 11-3)
(Continued)
Source
Benefits and Costs
Educational Good sources of applicants. Companies may
institutions
send recruiters to campus.
Labor unions Good sources for blue-collar and some
professional jobs. Some have hiring halls.
Social
These provide training and assistance for the
service
homeless, including help with job seeking.
agencies
Coops and
In a coop arrangement, the student attends
internships
school and works full time on an alternating
basis. In an internship, the student works for
the employer for a specified period of time.
Temporary
Contingent workers are employed by a firm on
help
a temporary basis. They are used when
agencies
work is of short duration and many give the
company flexibility.
Internet Recruiting
• The Internet is the hottest tool for recruiting.
• Search engines such as Yahoo! and Excite as
well as bulletin boards and news groups
provide job information.
• Job Banks include America’s Job Bank, the
Monster Board, and others.
America’s
• Cisco Systems gets 500,000 hits a month on Job Bank
its Internet job pages. It hires 1,200 people
every three months, making 66% of its hires
from the Net.
The Monster Board
Merits of Internal and External
Recruiting Sources
Merits of internal methods
• Employees are familiar
with the organization.
• Recruiting and training
costs are relatively low.
• Enhance employee
morale and motivation
since they send a signal
that the organization
offers opportunities for
advancement.
Merits of external methods
• Introduce new ideas and
approaches.
• Provide knowledge and
skills that are not currently
available in the
organization.
• Permit new hires to start
with clean slates.
• Reduce political infighting
for promotions.
The Outsourcing Alternative
• In the face of increasing demand, evolving needs, or
cost considerations firms may use outside parties to
perform tasks that would otherwise be performed in
house.
• This is a popular, rapidly-growing option.
• In 1996, American firms spent over $100 billion in
outsourced business activities.
• By outsourcing some activities, firms can concentrate
their resources on their core competencies, the things
that they do particularly well.
The Realistic Job Preview (RJP)
• Most companies present a rosy picture of themselves
and their job openings in order to attract job applicants.
• As a result, many new employees experience “entry
shock” and are dissatisfied when they learn the “truth”
about the company.
• The aim of realistic job preview (RJP) is to give the
recruit an accurate picture of what the company and the
job are like.
• RJPs lead to higher levels of employee satisfaction and
lower levels of turnover. They don’t appear to reduce
job acceptance rates.
Bottom Line: The Recruiting Process
Identify a
Job Opening
Determine Job
Requirements
and Employee
Qualifications
Needed
Identify
Appropriate
Recruiting
Sources and
Methods
Evaluate
Recruiting
Process
Generate
Applicant
Pool
Implement
Recruiting
Strategy
Selection
• The role of selection is to evaluate each candidate’s
qualifications and pick the one whose skills and interests
best match requirements of the job and company.
• Some firms use informal selection procedures, such as
reviewing application blanks and resumes. Others use
formal procedures, such as tests and assessment centers.
• Careful selection procedures can be time consuming and
costly. They are worthwhile if:
– the costs of a wrong decision are high
– there are many applicants and few openings
– selection tools are accurate
Focus on Management: Selection at
Toyota
• When Toyota Motor Corp. wanted to fill positions
at its new Kentucky auto assembly plant, it
received 90,000 applications from 120 countries
for its 2,700 production jobs and thousands more
for the 300 office jobs.
• The company wanted to select workers who
would conform to its emphasis on teamwork,
loyalty, and versatility.
• In addition to physical exams and drug tests,
applicants had to spend as much as 25 hours
completing written tests, workplace simulations,
and interviews.
• Only 1 of 20 applicants made it to the interview.
Application Forms
• The application form is the first source of information
about a potential employee.
• It provides the hiring firm with information about
educational background, work experience, and outside
interests.
• Much of this information is especially useful for
screening purposes.
Problems with Application Forms
• The information provided by the applicant may
not be relevant to job performance.
• Job applicants may provide incorrect or
misleading information.
• The law places many restrictions on what can and
cannot be asked on a job application.
Some Unfair Pre-Employment Inquiries
(Excerpted from Figure 11-4)
• Any inquiry that implies a preference for people under 40
years of age
• Whether applicant is a citizen; any inquiry into citizenship
than tends to divulge applicant’s lineage, ancestry, national
origin, descent, or birthplace
• All inquiries relating to arrests
• Request that applicant submit a photograph
• Gender
• Any inquiry concerning race or color of skin, hair, eyes, etc.
• Any inquiry concerning religious denomination, affiliations,
holidays observed, etc.
Lighten Up: Rotten Resumes
• I am extremely loyal to my present firm, so please don’t let them
know of my immediate availability.
• Note: Please don’t misconstrue my 14 jobs as ‘job hopping.’ I have
never quit a job.
• Marital status: Often. Children: Various.
• Wholly responsible for two (2) failed institutions.
• Terminated after saying, “It would be a blessing to be fired.”
• I am writing to you, as I have written to all Fortune 1000 companies
every year for the past three years, to solicit employment.
• It’s best for employers that I not work with people.
• Excellent memory; strong math aptitude; excellent memory; effective
management skills; and very good at math.
Interviews
• In an interview, a representative of the hiring firm asks
the candidate a series of questions.
• The goal of the interview is to determine how well the
candidate’s skills and interests match the job requirements.
• In a structured interview, all candidates are asked the
same list of questions in the same order. This gives each
applicant the same chance as others, makes it easier to
compare candidates, and makes it less likely the firm will
be sued for discrimination in hiring.
• In an unstructured interview, there is a looser exchange
between the interviewer and job candidate. This may
result in a more complete picture.
Advantages of Interviews
• It is easier to ask a series of questions than to develop a test.
• Interviewing makes the selection process more personal and gives
the interviewer an overall idea as to whether the applicant is right
for the job.
• The interview may be used to give the applicant information
about the job and company.
• Interviews may be used to “sell” the company to the applicant.
• Interviews may be be used to complete the information about job
candidates.
• Good candidates may be unwilling to consider a job seriously
unless they had the change to ask questions and gather
information.
Problems with Interviews
• Interviewers:
– show many biases
– disagree with one another
– ignore much of the information available
• The success of an interview in identifying the best
candidate for the job depends on the skill and good
judgment of the individual interviewer.
• There are severe legal restrictions on what can be asked
in interviews.
Guidelines for Improving Interviews
• Interviewers should prepare for interviews by making a list
of specific topics to be covered and/or specific questions to
be asked.
• Interviewers should be trained in preparing questions that
relate to job requirements, probing for details, listening
carefully, and avoiding discriminatory questions.
• Interviewers should use behavioral and situational
questions.
• Written records of the interview should be kept.
• Whenever possible, multiple interviewers should be used.
• Interviews should be used along with other selection tools.
The Bottom Line: The Job Interviewing
Process
Determine Job
Requirements
and Employee
Qualifications
Needed
Develop
Behavioral and
Situational
Interview
Questions
Complete
Interview
Rating Form
Immediately
After the
Interview
Develop an
Interview
Rating Form
Probe
Interviewee
Responses
and
Explore
Related Issues
Start Each
Interview by
Putting the
Interviewee
at Ease
Ask the Same
Questions of
Each
Interviewee -Do Not Make
Snap
Judgments
Testing
• A test is a systematic and standardized procedure for
obtaining information about individuals.
• Testing is a relatively objective way to determine how
well a person may do on the job.
• Many human resource experts and human resource
managers believe testing is the single best selection tool.
• Tests yield more information about a person than does a
completed application form, and they are generally less
biased than interviews.
Types of Tests
• Ability tests measure whether the applicant has certain
skills needed to perform the job tasks.
• Personality tests measure the strength or weakness of
personality characteristics that are considered important
for good performance on the job.
• Interest tests measure a person’s likes or dislikes for
various activities.
• Work sample tests measure how well applicants
perform selected job tasks.
Types of Tests (Continued)
• Integrity tests measure an applicant’s honesty.
• Drug and impairment tests measure abuse of alcohol
or other drugs.
• Genetic testing applies the science of genetics to the
testing of workers.
Forms of Ability Tests
Mental Ability
Tests
Psychomotor
Ability Tests
Ability
Tests
Mechanical
Ability Tests
Integrity Tests
• A polygraph (“lie detector”) test is an electronic device
used to detect lying. Due to concerns about validity and
invasion of privacy, a 1988 federal law outlawed most
private uses of pre-employment polygraph tests aimed at
assessing employee honesty.
• Written “honesty” or “integrity” tests contain items
concerning one’s attitudes toward theft and other forms of
dishonesty. These may be less valid than the polygraph
tests they replace, and may cause resentment.
• Many firms use credit checks to judge applicant integrity.
There are legal restrictions regarding credit checks.
Drug and Impairment Tests
• Drug and impairment tests measure abuse of alcohol and other
drugs.
• Drug tests may involve examination of body fluids, such as urine
and blood, or hair, or of reaction of the pupil to light.
• In response to concerns about violation of rights of privacy and
errors in the testing process, many firms instead use impairment
testing. This involves use of activities similar to a video game to
measure an employee’s ability to work.
• Impairment tests detect impairment due to things such as illness,
sleep deprivation, and emotional preoccupation that would be
missed by drug tests.
Genetic Testing
• Genetic testing takes two forms:
– genetic monitoring involves periodically testing groups of
employees to see whether they are showing any alarming
chromosomal abnormalities that might have been caused by their
environment.
– genetic screening is a one-time analysis of DNA taken from
blood or other bodily fluids. It is aimed at finding genetic
“markers” that indicate that a person may be especially
susceptible to harm from a particular substance.
• Genetic monitoring has the approval of most observers
since it provides an early warning of dangers from the
work environment, but genetic screening is controversial.
Focus on Management: Too Smart for
the New London Police Department
• The city of New London, Connecticut refused to grant
Robert Jordan a job interview because he scored too
high on a pre-employment test.
• The city’s rationale was that employees who are too
smart are likely to be bored in patrol jobs and thus to
leave the force.
• Jordan sued the department, but a federal judge ruled
that the practice of excluding too-bright applicants was
constitutional.
Test Validity
• Validity is the degree to which predictions from the
selection device are supported by evidence.
• Valid tests are expensive to develop.
• Some jobs, such as those of top management, are hard to
describe, and the abilities and interests required may be
all but impossible to predict on the basis of test results.
• In general, ability tests and work sample tests are more
valid than other selection tools.
Graphology
• Graphology, or handwriting analysis, is sometimes used to predict
performance.
• The theory behind graphology is that handwriting reflects personality.
• Graphology is very popular in western Europe; most French
companies require applicants to submit handwritten letters.
• While graphology is difficult to fake, there is no solid evidence that it
predicts job performance.
Test Fairness
• Everyone agrees that a test should be fair, but few agree
on a definition of fairness.
• To some people, a test is unfair if it includes questions
about things that might be unfamiliar to some people
because of their race or ethnic origin.
• To other people, a test is unfair if it measures things that
aren’t needed on the job but that block some people from
being hired.
• In the eyes of the law, a fair test is one that does not
overpredict or underpredict performance of one group of
employees relative to another.
Assessment Centers
• An assessment center is a collection of systematic procedures to
approach the selection process systematically.
• The centers employ psychologists and other experts on human
behavior as well as providing tests, interviews, group discussions, and
other approaches for evaluating job candidates.
• Assessment centers may use role playing and in-baskets.
• Assessment centers have additional uses, including early detection of
management talent and skill development for assessors.
• While expensive, assessment centers are quite valid and are seen by
employees as offering a fair chance to show abilities.
Selecting for Teams
• As organizations rely more heavily on teams, they must
carefully screen team candidates for their ability to work
with other team members.
• In putting together a self-directed team, Delta Dental Plan:
– spent more than 6 months recruiting and selecting team members.
– used a personality test to find members with complementary
personality types.
– selected some bilingual team members.
– selected members from both inside and outside the company.
– assessed candidates’ interpersonal skills with interviews by
members of the HR department and others.
The Bottom Line: The Selection Process
Identify Selection
Methods Based on
Job Requirements
and Desired
Employee
Qualifications
Administer Selection
Methods to
Applicant Pool
Generated by the
Recruiting Process
Evaluate the
Process
Extend Job Offers and
Negotiate Terms
with Candidate(s)
Assess
Person-Job
Fit
Assess
PersonOrganization
Fit
Reduce
Applicant Pool
to “Short List”
of Top 3-5
Placement
• Placement means fitting people and jobs together after
the people have become employees of the firm.
• It includes everything from helping new employees feel
at home in the firm to promoting them to positions of
greater responsibility or demoting them to less
demanding position when necessary.
Orientation
• Orientation involves introducing new employees to their
jobs and to the company.
• Orientation:
– reduces uncertainties, makes company policies and expectations
clear, and provides a good idea of what the firm, plant, and
coworkers are like.
– sends a signal that the new employee has an important role to
play in the organization.
– offers a bonding opportunity, ensuring that new hires don’t feel
alienated and helping to instill in them a sense of pride and
opportunity.
Lateral Move
• A lateral move is sideways rather than up or down.
• One type of lateral move, job rotation, may be used
to build worker skills and provide a more solid base
for later promotions.
• Employees may welcome the change of pace and
duties of job rotation, and may develop a greater
sense of pride and self-worth as they learn new
skills.
• Lateral moves are sometimes dictated by
organizational changes, such as reorganizations.
Lateral Moves at W. R. Grace
• W. R. Grace & Company, a chemical and consumer
products company, has been using lateral moves for
years.
• Purposes include:
– assignment to special projects for the company’s future
– to fill slots at locations far from their current posts
– to newly created jobs in other countries
• The company’s VP for corporate administration reports
that, “They get new challenges, and we get broadened
managers -- something a global, decentralized company
must have.”
Promotion
• A promotion is a move up, generally to a new title, more
responsibility, and greater financial rewards.
• Promotions are valued by employees, and move competent
employees to positions with greater impact on the firm’s success.
• Promotions also demonstrate to other employees that good
performance and potential are rewarded, thus serving as a
motivating device.
• Promotions must be handled carefully since jobs at different
levels may require different skills. If not, the Peter Principle
may occur.
• Some firms have instituted fallback positions for employees who
are unhappy with their promotions.
Demotion
• A move down in the organizational hierarchy to a lower
title, less responsibility, and lower salary is called a
demotion.
• Demotions are stressful to employees and may be resisted
by unions.
• Demotions may be necessary. A firm may, for instance,
demote rather than fire a poorly-performing employee.
Also, especially during economic downturns, employees
may prefer demotions to unemployment.
• Some firms have experimented with demoting employees
temporarily so they can relate better to their subordinates.
Termination
• Sometimes firings are necessary because employees have
continued to perform poorly or because they have been
unmotivated or uncooperative.
• Firings are traumatic for the terminated individual and
costly for the firm. For instance, the firm will have to
bear the costs of recruiting and training a replacement.
• Employees who are performing below standards should
be counseled and given written performance goals and
plans for meeting them.
• Those employees should have a probationary period and
should receive regular feedback over that period.
Termination (Continued)
• Firing should only be used if corrective efforts
fail, as a last resort.
• In recent years, many employees have been fired
as a result of things having little to do with their
motivation or performance, such as technological
changes, restructuring, mergers, changes in
strategy, and foreign competition.
• In some cases, firms hire outplacement companies
to assist those who are affected.
• There are increasing legal restrictions on firing.
Guidelines for Effective Termination
• Give as much warning as possible for mass layoffs.
• Be sure the employee hears of the termination from a
manager, not from a colleague.
• Sit down one-on-one in a private office with the
individual to be terminated.
• Tell the individual in the first sentence that he or she
is terminated; leave no room for confusion.
• Express appreciation for the employee’s past
accomplishments if appropriate.
Guidelines for Effective Termination
(Continued)
• Complete the firing session within 15 minutes. Make
the session brief and to the point, not an opportunity
for debate.
• Keep the conversation professional, avoiding personal
comments.
• Briefly explain how much severance pay will be
provided and for how long; provide written
explanations of severance benefits.
• Unless security is an issue, don’t rush the employee off
site.
Training and Development
• Training and development helps the firm meet its
immediate human resource needs.
• Over the long run, training and development
ensures that the firm’s employees are ready to
meet future challenges.
• Training and development takes many forms.
• Firms in the U.S. spend an estimated $30 billion
annually to train employees.
Training and Development
Needs Assessment
• In general, training and development should follow a
systematic needs assessment.
• The needs assessment should consider three sets of
factors:
– The organization. What is the environment for training in
terms of the organization’s goals, resources, and climate for
training?
– The task. What is the work to be performed and what are the
conditions under which it will be performed?
– The person. What personal capabilities are needed to do the
job, and what are the people like who will do the job?
On-the-Job Training
• On-the-job training is conducted while employees perform jobrelated tasks. Employees are not taken out of the workplace or
put in a classroom.
• Employees learn the job by doing it, with coaching and feedback
from a supervisor or more experienced employees.
• On-the-job training is the most direct approach to training and
development and offers quick returns in terms of improved
performance.
• Job rotation, regular coaching by a supervisor, committee
assignments to involve individuals in decision-making activities,
and staff meetings to broader employee understanding of
company activities outside their immediate areas are examples.
Off-the-Job Training
• It is often necessary to train employees away from
the workplace.
• Such off-the-job training may take place
elsewhere within the firm or outside the company.
• There are many popular off-the-job training
techniques.
Forms of Off-the-Job Training
Behavior
Modeling
Sensitivity
Training
Classroom
Training
Off-the-Job
Training
Management
Games
Programmed
Instruction
Training in Japan
• Workers in the U.S. often receive far
less training than their Japanese
counterparts.
• New production workers in Japan
receive 380 hours of training, and new
workers in Japanese-owned plants in
the U.S. receive 370 hours.
• In contrast, new workers in U.S.owned plants in North America
receive only 47 hours of training, or
one-eighth as much.
Corporate Universities
Motorola University’s
Galvin Center
• Corporate universities are educational
organizations established and run by a corporation to
educate employees, customers, and suppliers.
• There were an estimated 1,600 corporate universities
in 1999, up from 400 in 1998.
• Dow Chemical -- which has training expenditures of
more than $90 million annually -- is developing
online learning over its company’s intranet.
• In the first nine months, Dow developed 31 classes,
and over one-quarter of its employees completed one
or more courses.
Virtual Reality
• Virtual reality immerses the trainee
in a simulated setting through the use
of computer peripherals and
stereographic imaging.
• Although virtual reality techniques are
expensive, they typically cost much
less than training on real equipment.
• Using a specialized display system
called a haptic interface, virtual
reality can now simulate touch.
Haptic
Glove
Sensing
Vest
Virtual Reality
Goggles
Sensing
Chair
Web Wise: The Virtual Environment
Technology Laboratory (VETL)
• The Virtual Environment Technology
Laboratory is a joint enterprise of the
University of Houston and
NASA/Johnson Space Center.
• It performs research and development
focused on virtual environments for
training, education, and
scientific/engineering data
visualization.
• www.vetl.uh.edu/
Training for Tolerance
• In addition to techniques such as sensitivity training which may
be used to enhance tolerance toward minority group members,
firms are adopting many other approaches.
• At Hoechst Celanese the top 26 officers are each required to join
two organizations in which they are a minority.
• IBM’s Systems Storage Division in San Jose, California (a city
where 33 languages are spoken) launched an annual diversity day
in 1993.
• Firms are providing training to integrate sexual orientation into
their ongoing diversity efforts.
• Many firms are “gender training” to promote tolerance between
the sexes.
The Bottom Line: The Training Process
Conduct a
Training Needs
Analysis
Develop
Training
Objectives
Evaluate Training
Program
Effectiveness in
Relation to
Original Training
Objectives
Develop Training
Content and
Methods That Are
Based on Training
Objectives and
Sensitive to
Participant
Characteristics
Present
the
Training
Performance Appraisal
Performance appraisal is the process of
measuring employee performance against
established goals and expectations.
Why Appraise Performance?
To Check on the
Impact of New
Policies and Programs
As input to Promotion,
Salary, and
Termination Decisions
Performance
Appraisal
To Motivate
Employees to Meet
Performance Goals
To Give Employees
Developmental
Feedback
Guidelines for Improving Performance
Appraisals
• Ensure that the performance appraisal measure is
reliable and valid.
• Provide training for raters.
• Involve employees in the process.
• Make sure the performance ratings are discussed.
• Develop an action plan based on the discussion.
• Attempt to link merit increases to performance ratings.
• Integrate performance evaluation into the broader
process of day-to-day performance management.
Types of Performance Measures
• With trait approaches, employees are rated on such
traits as friendliness, efficiency, and punctuality. The
assumption is that these traits are related to
performance. Trait approaches suffer from a variety of
problems, and should never be used alone.
• With behavioral approaches, such as the critical
incidents method and behaviorally anchored rating
scales, employees are rated on specific actions.
• With outcome approaches, employees are rated on
what they are supposed to accomplish on the job.
Performance Reviews at Northern States
Power
• Northern States Power Company is
committed to achieving the benefits of
workplace diversity.
• Its annual performance reviews now
include an assessment of how well an
individual creates an environment that
cultivates workforce diversity.
• The reviews also measure each
person’s active participation in
meeting departmental diversity goals.
360o Feedback
• Many firms are now using 360-degree feedback.
• With 360-degree feedback, the employee receives
feedback from four sources: the supervisor,
subordinates, peers or coworkers, and self-ratings.
The Bottom Line: The Performance
Appraisal Process
Communicate
Performance
Expectations
to
Employees
Document
Observations
of Employee
Performance
During the
Appraisal
Period
Work with the
Employee to Develop
and Implement an
Action Plan for
Improving His or Her
Job Performance
Use
Documented
Observations
of Employee
Performance
to Complete
Ratings
Present the
Completed Rating
Form to the
Employee and
Explain the Basis for
the Ratings
Ask Employee
to Submit a
SelfEvaluation of
His or Her
Performance
Start the Performance
Appraisal Session by
Establishing Rapport
with the Employee
and by Explaining the
Process to Him/Her
Job Analysis, Job Specification, Job
Description, and Performance Standards
• Job Analysis is the systematic study of a job to
determine its characteristics.
• A job specification is a summary of the qualifications
needed in a worker for a specific job.
• A job description is a short summary of the basic tasks
making up a job.
• Performance standards define the goals to be
achieved by a worker over a specified period of time.
Pay Systems
• Seniority: Pay is linked to years of service. The idea is
that seniority reflects loyalty to the company as well as
valuable experience.
• Individual performance: Individual employees are paid
on the basis of how well they do on the job. With a piecerate system, total wages are tied directly to output. These
have strong motivational effects.
• Group performance: How much each person makes is
based on how well the group as a whole does. Such
systems encourage cooperation, and may give group
members an incentive to push slow workers to do better.
Guidelines for Basing Pay on Individual
or Group Performance
• Appropriately link pay to performance.
• Use pay-for-performance as part of a broader
human resources management system.
• Build employee trust and promote the belief that
performance makes a difference.
• Use multiple layers of rewards.
• Increase employee involvement.
• Include nonfinancial incentives.
Pay Systems (Continued)
• Plantwide or company productivity: Employee pay rates are
based in part on the productivity of the entire plant or
organization. One form is the Scanlon Plan, in which groups of
employees suggest to management how productivity might be
improved and are given bonuses if the suggestions help.
• Organization-based: These include plans such as profitsharing plans, under which employees get a bonus if company
profits are high, and employee stock option plans (ESOPS),
which reward employees with company stock. Organizationbased plans give companies flexibility to make payments when
they can be afforded and may result in positive employee
attitudes toward the company, but have little impact on individual
performance.
The Wage Determination Process
(Figure 11-6)
Market
Conditions
Local
Wages
Wage
Surveys
Job
Analysis
Job Description
and Evaluation
Job
Evaluation
Local Wage
Level
Performance
Standards
Performance
Appraisal
Payments to
Employee
Pay
System