Chapter 4, Part 3

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Chapter 4, Part 3

• Motivating Self and Others

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Responses to the Reward System

• Equity Theory
• Fair Process

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Equity Theory

• Individuals compare their job inputs and outcomes
  with those of others and then respond so as to
  eliminate any inequities.
• Equity theory recognizes that individuals are
  concerned not only with the absolute amount of
  rewards for their efforts, but also with the
  relationship of this amount to what others
  receive.
• Historically, equity theory focused on
• distributive justice or the perceived fairness of
  the amount and allocation of rewards among
  individuals.
• however, equity should also consider procedural
  justice or the perceived fairness of the process
  used to determine the distribution of rewards.

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Exhibit 4-9Equity Theory
Perception due to being underrewarded
O/IA lt O/IB
O/IA O/IB
Equity
Inequity due to being overrewarded
O/IA gt O/IB
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Responses to Inequity

• Change Inputs
• Change Outcomes
• Adjust Perceptions of Self
• Adjust Perceptions of Others
• Choose a Different Referent
• Leave the Field

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Equity Theory Propositions

• Given payment by time, overrewarded employees
  will produce more than will equitably paid
  employees.
• Given payment by quantity of production,
  overrewarded employees will produce fewer, but
  higher-quality, units than will equitably paid
  employees.
• Given payment by time, underrewarded employees
  will produce less or poorer quality of output.
• Given payment by quantity of production,
  underrewarded employees will produce a large
  number of low-quality units in comparison with
  equitably paid employees.

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Fair Process

• Distributive Justice
• Perceived fairness of the amount and allocation
  of rewards among individuals
• Procedural Justice
• Perceived fairness of the process used to
  determine the distribution of rewards
• Interactional Justice
• The quality of the interpersonal treatment
  received from another

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Exhibit 4-10Management Reward Follies
We hope for Teamwork and collaboration Innovative
thinking and risk taking Development of people
skills Employee involvement and empowerment High
achievement Long-term growth Commitment to total
quality Candor
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Cognitive Evaluation Theory

• Allocating extrinsic rewards for behaviour that
  had been previously intrinsically rewarded tends
  to decrease the overall level of motivation.

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Abolishing Rewards

• Alfie Kohn suggests that organizations should
  focus less on rewards, more on creating
  motivating environments
• Abolish incentives
• Re-evaluate evaluation
• Create conditions for authentic motivation
• Collaboration
• Content
• Choice

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What to Evaluate

• Individual task outcomes
• Behaviours
• Traits

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Who Evaluates?

• Immediate supervisor
• Peers
• Self-evaluation
• Immediate subordinates
• Comprehensive approach 360-degree evaluations

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Exhibit 4-11 360-Degree Evaluation
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Methods of Performance Evaluation

• Written essays
• A narrative describing an employees strengths,
  weaknesses, past performance, potential, and
  suggestions for improvement
• Critical incidents
• Evaluating those behaviours that are key in
  making the difference between executing a job
  effectively and executing it ineffectively
• Graphic rating scales
• An evaluation method where the evaluator rates
  performance factors on an incremental scale
• Behaviourally anchored ratings scales (BARS)
• An evaluation where actual job-related behaviours
  are rated along a continuum
• Multiperson comparisons
• group employees placed into particular
  classifications, such as quartiles
• individual rank-order employees from best to
  worst
• paired compare each employee with every other
  employee, and then assign summary ranking

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Potential Problems

• Single criterion errors
• Recency errors
• Leniency/strictness errors
• Halo errors
• Similarity errors
• Low differentiation errors
• Forcing information to match non-performance
  criteria

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Improvements

• Use multiple criteria
• Emphasize behaviours rather than traits
• Document performance behaviours in a diary
• Use multiple evaluators
• Evaluate selectively
• Train evaluators
• Provide employees with due process

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Why Organizations Fail at Performance Appraisal

• Time consuming
• Difficult to establish, communicate expectations
• Don't do it often enough (usually annually)
• Fail to consider the dynamic aspects of the job
• Hard to define levels of performance
• No rewards for being skilled at performance
  appraisal

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Summary

• Need Theories
• Be aware that individuals differ in their levels
  and types of needs
• Goal Setting Theory
• Clear and difficult goals lead to higher levels
  of employee productivity.
• Expectancy Theory
• Offers a relatively powerful explanation of
  employee productivity, absenteeism, and turnover.
  
• Equity Theory
• Strongest when predicting absence and turnover
  behaviours.
• Weakest when predicting differences in employee
  productivity.
• Cognitive Evaluation Theory
• When you give extrinsic rewards for behaviour
  that had been previously intrinsically rewarded
  this can result in a decrease in the overall
  level of motivation.

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Implications

• Recognize Individual Differences
• Employees have different needs.
• Dont treat them all alike.
• Spend the time necessary to understand whats
  important to each employee.
• Use Goals and Feedback
• Allow Employees to Participate in Decisions That
  Affect Them
• Link Rewards to Performance
• Employees must perceive a clear linkage.
• Check the System for Equity

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Exhibit 4-12 Compensation of Canadas Five
Best-Paid CEOs (1998)