ppt

1. performance
Definition
The accomplishment of a given task measured against preset known standards
of accuracy, completeness, cost, and speed. In a contract, performance is deemed to
be the fulfillment of an obligation, in a manner that releases the performer from
all liabilities under the contract.
Read more: http://www.businessdictionary.com/definition/performance.html#ixzz1k3dcU1eO
What is the definition of performance management?
The process of motivating employees through setting goals, measuring progress, giving feedback, coaching for
improved performance, and rewarding achievements.
Performance management is the process of creating a work environment or setting in which people are enabled to perform to the
best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when
an employee leaves your organization.
Many writers and consultants are using the term “performance management” as a substitution for the traditional appraisal system.
I encourage you to think of the term in this broader work system context. A performance management system includes the
following actions.
Develop clear job descriptions.
Select appropriate people with an appropriate selection process.
Negotiate requirements and accomplishment-based performance standards, outcomes, and measures.
Provide effective orientation, education, and training.
Provide on-going coaching and feedback.
Conduct quarterly performance development discussions.
Design effective compensation and recognition systems that reward people for their contributions.
Provide promotional/career development opportunities for staff.
Assist with exit interviews to understand WHY valued employees leave the organization.
Performance Based
Management

2. What does performance based management mean? It simply means the following:
Performance based management is when you manage your direct reports by focusing
on their performance. That’s it.
But think about it though:
You are responsible for your team (made up of your employees and yourself) – you
are your direct reports’ boss – you are accountable for the results your team delivers
– it is your responsibility to make sure your direct reports bring about the expected
results (on time, on budget, and within quality standards) – you get paid so that the
team you are responsible for delivers those expected results.
And no matter what industry you work for, results are always observable, tangible,
measurable, and objective.
But we human beings are subjective by definition – we have feelings, we have
emotions, we interpret the world in different ways, we have different opinions about
the same thing, etc.
The company you work for doesn’t care if the people you are responsible for (your
direct reports) are subjective human beings. You must give results nevertheless.
Period.
So keeping objectivity when it comes to delivering results is critical. At the end of the
day, at the end of the month, or at the end of the quarter, you cannot walk up to
your boss and tell her that you weren’t able to deliver the expected results because
your employees engaged in intense office politics, got angry at each other, and as a
result, they didn’t finish their work on time.
So how do you keep objectivity when it comes to managing your people? In other
words, how do you do performance based management? You do that by focusing on
performance. Why? Because performance is nothing more than behavior plus results.
Because this is an indispensable and key element in performance based
management, I repeat: Performance is a unity composed of two elements: behavior
and results – and both (behavior and results) are tangible, measurable, and
objective.
To do performance based management effectively, keep in mind the following three
guidelines:
1) Be objective
Erase the word “attitude” from your vocabulary – in stead; focus on “behavior.”
Why? Because attitude is subjective, it is the interpretation of a collection of several
behaviors. Attitude is not a fact.
Behavior is objective; it is observable, measurable, and tangible. Behavior is a fact.
For example:
If you ask 10 of your co-workers to tell you about Mary’s attitude who frequently
arrives late at work, you will get 10 different answers: she is lazy, she is
irresponsible, she has problems at home, etc.
These answers are useless if you want to correct Mary’s behavior – if you told Mary
that she is lazy, or irresponsible, etc., you would not keep objectivity in managing
her performance, and she would probably feel that you are blaming her.
Performance based management is not about getting personal with anybody. Mary
and you – her boss – are not inside that company to like or dislike each other; on
the contrary, both of you are inside that company to deliver results. In other words,
attitude is useless in performance based management.
But if you ask those same 10 co-workers to tell you exactly at what time Mary
arrived at the office during the entire the past week, they will all give you exactly the
same answer: on Monday she arrived 12 minutes late, on Tuesday she arrived 9
minutes late, on Wednesday she arrived 17 minutes late, etc.
These answers are observable, measurable, tangible, and objective. If you used
these answers (read facts) to talk to Mary about her behavior, the focus of the
conversation would be on her behavior, not on her as a person, and you would keep
objectivity in managing her performance.
Basic Management Skills
Basic management skills to help you manage the performance of your direct reports.
But don’t be fooled by the word “basic” – whether you are an entry-level supervisor,
a seasoned executive, or the CEO, these skills will help you lead your employees to
peak performance.
In my experience working with hundreds of managers, the great majority of them
didn’t know about most of these so-called basic skills.

3. I grouped these skills into four sections:
First Section: Building Blocks
Second Section: General Skills
Third Section: Communication Skills
Fourth Section: Specific Skills
Because each skill is a stand-alone technique or tool, you may look at each section,
and decide which skill you want to learn about.
However, in order to maximize the effectiveness of this performance management
model, I suggest you go through the first three sections in a sequential order.
–––~~~••• O •••~~~–––
Definition of
Performance Management
You must have a clear and practical definition of performance management if you want to
purposefully manage the performance of your direct reports in order to lead them to peak
performance.
We do not define anything here in terms of theory – we define everything here according to
the practical needs of the manager who must deliver results through her direct reports.
Before we ask ourselves what is performance management, let’s define the meaning of
“performance.”
Performance is the sum of behavior plus results:
Performance = Behavior + Results
When you are looking at performance, it is necessary to focus on both, on behavior and on
results:
If you only focus on behaviors, you won’t notice if you don’t get desired results
And if you only focus on results, you won’t notice if your employees don’t behave ethically
Remember this simple formula – it’s very easy to recall it and it is extremely useful.
The definition of performance management then, is the systematic and periodic assessment
of your direct report’s behaviors and results.
Now, despite the fact that this definition of performance management is accurate and
objective, it is useless.
This definition by itself won’t help you get very far in managing the performance of your
employees.
Together with this definition of performance management, you also need to know what
performance management is for.
Performance Management Goals
What is performance management for? In other words, what are the goals of performance
management?
Performance management has two goals:
The first goal is to create competency in your people – competency refers to the adequate
skills your direct reports need in order to achieve desired performance.

4. The second goal is to create growth in your employees – growth refers to the development
of skills of your direct reports in order to exceed desired performance and be able to move
to increasingly difficult assignments.
Translation number one: Performance management means that your job as the boss is
two-fold:
First, it is to help your direct reports be able to do current tasks; and second, it is to help
them grow professionally.
The more you do this well, your team will become gradually stronger, and your team will
deliver better results.
Translation number two: As the manager that you are, doing performance management
well will help you grow as a leader tremendously (to lead – among other tasks – is to grow
people).
Since you get paid to deliver results, from your own perspective and from the organization
you work for perspective, performance management is not an option.
Translation number three: Performance management is an ongoing process.
Performance management is not a once in a while one-time event – like performance
appraisal for example – if it were, it would be impossible to achieve your two performance
management goals.
By keeping these two elements (definition of performance and the two performance
management goals) in your definition of performance management, you will maintain
objectivity and effectiveness in your performance management endeavors, and
consequently, you will be able to boost the performance of your direct reports.
To keep on learning about performance management, go back to the previous page (
or click here ), and continue reading in a sequential order.
If you would like to learn about our definition of performance managementthrough our
speaking or consulting services for your organization, please click on this link.
What Is the Performance Management Process?
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Process Flow Diagram
Performance Management

5. Process
Performance Metrics
K 3 Process
Performance Metrics
Performance Management System
Business Performance Management Software
Performance Management Process
Managing Performance
Performance Management Software
Employee Performance Management
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Change Management Process
Management Goals
Employee Performance
Business Performance
Appraisal Performance
Business Process Analysis
Article Details
Written By: Jessica Bosari
Edited By: Bronwyn Harris
Copyright Protected:
2003-2012 Conjecture Corporation
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The performance management process is a method of management design to ensure the
organization and all of its components are working together to optimize the organizations goals.
Organization components include departments, employees, processes, teams, and other aspects of

6. an organization. To achieve this design, performance management processmust address the overall
organization performance in conjunction with the components.
The performance management process requires several ongoing activities. This include identifying
and prioritizing goals, defining what constitutes progress towards goals, setting standards for
measuring results, and tracking progress toward goals. Other activities include exchanging feedback
among organizational components, regularly reviewing progress, reinforcing effective goal-oriented
activities, and intervening to create improvements when needed. Business performance
management software is a performance management tool that is often used to
organize performance management processes.
While the activities in the performance management process are similar to
other managementmethods such as strategic planning and management by objectives,
the performancemanagement process focuses on overall results. Great importance is place d on
measuring results, maintaining ongoing feedback about results, and developing plans to improve
results. While other management processes often focus on the results themselves,
this processplaces greater importance on the methods used to achieve results.
The steps in the performance management process can vary from one organization to another. Most
programs include certain core activities working from the highest level of the organization down to
the smaller components. The first step is to review the overall organizational goals and prioritize by
quantity, quality, cost or timeliness.
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The next step is to specify which goals apply to which parts of the organization's components. Once
the goals are identified by component, the goals must be evaluated to ensure they contribute to the
success of the entire organization. Managers must then prioritize the goals of the organization's
components.
Once goals of the whole organization and goals of its components are identified and priorities,
managers will identify measures to be taken towards the desired goals. They will then set standards
to identify the quality of the activities’ results. Managers must determine if goal-oriented activities are
below expectations, meet expectations or exceed expectations. Once the goals are understood and
the measures toward progress are identified, managers will create and document
a performance plan. This plan will outline the goals, measures and the standards by which success
will be evaluated.
With a complete plan in place, managers will conduct ongoing observation,
measureperformance and track the results. The information will be exchanges with organizational
components to secure ongoing feedback about performance.
A performance appraisal orperformance review will be conducted to identify and document the
quality of results. Finally, managers will reward performance that meets or exceed expectations or
intervene and alter measures that have not produced the expected results. The process of
evaluating the plan, altering measures and rewarding success will continue until all objectives in the
plan have been met.
]
Performance Management Process
Cornell is striving to standardize administrative processes and tools across campus to create
efficiencies and to increase effectiveness. Consistent performance management processes,
assessment tools, ratings, and development plans help increase the effectiveness of supervisors
and employees within and across units.
An Effective Performance Management Process (PMP):
Maximizes staff engagement, development, and performance
Is consistent across units to enhance full development and utilization
of talent
Remains flexible, efficient, measurable, fair, transparent
Provides better alignment of staff roles and goals with the university’s mission
Promotes on-going and proactive succession management
Cornell’s Performance Management Philosophy:
Addresses the relationship of employees to the institution, from the time they are recruited, through their
growth and development, to the time they depart
Engages and develops employees throughout the year
Establishes goals and measures performance to those goals
Depends on the supervisor giving clear, developmental feedback

7. Includes a review of past performance and goals and focuses on future development opportunities that
are aligned to individual, unit, and university goals
Performance Appraisal Feedback
Appraisals Home » Performance Appraisal Feedback
Performance appraisal process is incomplete without
the feedback given to the employee about his
appraisal and his performance. But the way of
giving as well as receiving the feedback differs from
person to person and their way of handling and
their outlook towards the issue.
According to a popular saying:
"A SUCCESSFUL MAN IS ONE WHO CAN LAY A FIRM
FOUNDATION WITH THE BRICKS OTHERS HAVE
THROWN AT HIM."
Therefore, On the part of the person receiving the feedback, the following points are important
to be taken care of:
o The employee should have a positive attitude towards the feedback process
o He should listen to the suggestions of the appraiser calmly and try to incorporate them
in his plans.
o He should not hesitate to ask for the help of his superiors.
o Should have a co-operative attitude during the feedback meeting.
o Don’t judge the appraiser as a person.
o Should take the feedback objectively.
o Should not judge the appraiser as a person on the basis of the feedback.
On the part of the appraiser or the manager / person giving the feedback, the following points
are to be taken care of:
o The appraiser should make the receiver feel comfortable during the feedback meeting.
o The appraiser should make it a two – way conversation i.e. let the employee speak.
o Listen to the employee and note his points, suggestions, problems etc.
o The appraiser should not adopt a confrontational approach towards the meeting. The
goal is not to criticize the employee.

8. o Provide a constructive feedback to the employee i.e. in a way which will motivate
him to perform better.
o Have a positive attitude towards the process
o Try to understand the reasons of his failure.
o Be fair and objective
o Prepare yourself for what to say and how to say.
o Make the appraisal feedback meeting useful and productive for the organization and
the employee.
People Management
Reward Management
Reward management involves the analysis and effective control of employee remuneration and covers
salary and all benefits. It assesses the nature and extent of rewards and the way they are delivered as
well as considering their effect on both the organisation and staff.
Cornwell consultants take a holistic approach to reward management, treating every element of reward
as an investment. We help assist organisations to review each part of reward to determine:
Its purpose
An organisation’s ‘return’ on investment
The most appropriate areas for investment
Working closely with IDS our consultants have access to one of the largest private and public sector
salary databases in the country. This association and our involvement with strategic remuneration bodies
helps our consultants identify and advise on emerging trends and practices in addition to establishing
appropriate levels of pay at national and regional levels. We also conduct bespoke salary surveys
focussing on specific sectors or roles.
Job Evaluation, Grading and Equal Pay
Our consultants are highly experienced in using most proprietary job evaluation systems and are skilled in
designing and constructing tailored point factor systems that meet both the specific needs of individual
organisations and the exacting requirements of equal pay legislation.
We have considerable expertise in helping clients ensure that grading systems reflect organisational
structure and that they have the flexibility to accommodate the subtleties of all jobs across the
organisation.
In addition, our consultants also conduct equal pay reviews to establish whether grading and
remuneration systems comply with legislation.
Reward Management
Based on Chapter 19 of Human Resource Management in a Business Context by Alan Price - published by Cengage
Learning

9. Objectives
The purpose of this chapter is to:
Investigate the relationship between the human resource function and payroll administration
Outline the rationale behind different compensation packages
Evaluate the link between pay and performance
Pay and compensation
Pay is an important feature of human resource management - after all, it is the main reason why people work. It is a
sensitive and controversial area that has been extensively debated at both practical and theoretical levels. In the US
the term 'compensation' is used to encompass everything received by an employed individual in return for work. For
example, Milcovich et al (2001: 6) state that:
"Employees may see compensation as a return in exchange between their employer and themselves, as
an entitlement for being an employee of the company, or as a rewardfor a job well done" (original emphases).
The reward or compensation people receive for their contribution to an organisation includes monetary and non-
monetary components. Remuneration does not simply compensate employees for their efforts - it also has an impact
on the recruitment and retention of talented people.
The term 'reward management' covers both the strategy and the practice of pay systems. Traditionally, human
resource or personnel sections have been concerned with levels and schemes of payment whereas the process of
paying employees - the payroll function - has been the responsibility of finance departments. There is a trend towards
integrating the two, driven by new computerised packages offering a range of facilities. These are described later in
this chapter.
There are two basic types of pay schemes, although many organisations have systems which include elements of
both:
Fixed levels of pay. Wages or salaries which do not vary from one period to the next except by defined pay
increases, generally on annual basis. There may be scales of payments determined by age, responsibility or
seniority. Most 'white-collar' jobs were paid in this way until recently.
Reward linked to performance. The link may be daily, weekly, monthly or annualised. Payment for any
one period varies from that for any other period, depending on quantity or quality of work. Sales functions
are commonly paid on the basis of turnover; manual and production workers may be paid according to work
completed or items produced. Catering staff typically rely on direct payment from satisfied customers in the
form of service charges or tips (gratuities).
Both methods work smoothly, provided that scales are easy to understand and the methods of measuring completed
work are overt, accurate and fair. However, there has been considerable dissatisfaction with the management of pay
on both sides of the employment relationship. In recent years, attempts have been made to remedy the situation
through new systems and a greater reliance on performance-related pay.
HR and payroll administration
Human Resources/ reward system
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Effective Reward Systems. Reward systems should focus on positive reinforcement. Positive
reinforcement is the most effective tool for encouraging desired behavior because it stimulates people
to take actions because they want to because they get something of value (internally or externally) for
doing it. An effectively designed and managed reward program can drive an organization's change
process by positively reinforcing desired behaviors.
The SMART criteria.
These criteria should be used when designing and evaluating programs. Programs should be:
Specific. A line of sight should be maintained between rewards and actions.
Meaningful. The achievements rewarded should provide an important return on investment to both the
performer and the organization.
Achievable. The employee's or group's goals should be within the reach of the performers.
Reliable. The program should operate according to its principles and purpose.
Timely. The recognition/rewards should be provided frequently enough to make performers feel valued
for their efforts
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Performance Management. Organizations should get away from thinking of the annual performance
appraisal process as performance management.
"I would recommend that the organization refocus the performance appraisal process away from all
the varied attempts to justify its existence and concentrate instead on the process of managing
performance."
The process of performance management reflects how the work gets done and creates the
environment in which people feel valued for their achievements. The performance management
process includes four critical components:
Focus on what is important to change or be improved.
Measures to determine whether and how much progress is being achieved.
Feedback so that performers will know whether and how much progress is being achieved.
Reinforcement so that everyone celebrates achievements as they are unfolding.
Indicators of successful performance management include the following:
All measures are understood by the employees, who can describe the importance of their activities to
the agency. Measures address results and behaviors/processes.
A tracking system is used to monitor performance in the areas identified.
The performance measures and progress are displayed in a public area.
Data on the performance charts is current.
The team leaders/managers are actively engaged in coaching staff members and providing assistance
to improve performance.
Periodic celebrations mark achievements as they are realized. These celebrations are regarded
positively by employees.
Data indicate performance is improving.
Recommend that organizations:
focus on variables critical to success;
create timely, chart-oriented feedback;
create celebrations that mean something to the performers;
use performance reviews as an opportunity to reflect "how we won" and "how we lost" make them as
often as necessary to cement the learning;
anchor the memory of achievements achievement-oriented firms measure a lot, accomplish
milestones frequently, and do much celebrating;
don't rely on annual performance appraisals as the sole source of feedback;
when designing programs, avoid copying programs used by other organizations; and
don't make the design process into the "let's make a form" game.
The Do's and Don'ts of Effective Reward Programs. The Do's and Don'ts of Effective Reward Programs.
The fundamental principles for designing reward programs that work:
Do it now! Putting off change only makes the situation worse.
Keep your eye on the needs of the customer. The customer should be at the center of all measures,
goals, and objectives.
Take action, be proactive. Well-designed programs require management, which should focus on
providing people with meaningful measures, realtime feedback, and ongoing reinforcement.
Personalize rewards to their recipients. Rewards should be valued by the performer. The performer
needs to see that the reward opportunities are directly linked to the effort and results taken and that
there is an appropriate benefit to the organization. By personalizing the reward, you can anchor the
meaning of the achievement more deeply than if you simply treat the reward as a mechanical
administrative task.
Make sure everyone can win. Reward programs built on the principles of competition or compliance
are counterproductive, if not downright destructive.
Make sure that rewards are contingent. Reward programs become entitlement programs when they
lose their contingency on performance. Each reward should be fully earned and people should
understand exactly what they have done to achieve it.
Don't expect success all at once. The process of developing an effective program is one of change and
continual improvement.
Remember that you are in competition with other consequences. Reward programs simultaneously
compete with negative reinforcements that occur throughout the organization. So rewards must be

11. meaningful to the performer to have an impact.
Do it from the heart. Rewards that are intended to be manipulative are not accepted by employees.
The fundamental purpose of reward programs is to build a powerful partnership between the individual
and the organization. Collaboration is an essential theme of success.
Have fun while you are doing it. If a job is worth doing, it is worth measuring progress and celebrating
achievements.
REGARDS
Rewarding and recognizing employees is a ticklish business. It can motivate people to explore more
effective ways to do their jobs - or it can utterly discourage such efforts.
Here are a few tips and traps:
Establish a clear link between what people are rewarded for and the organization's priorities. Does
everyone see and understand the relationship between their improvements and financial rewards? Too
many profit-sharing plans, for example, are disconnected from daily work. The effect of cost control or
customer satisfaction efforts on the bottom line is so fuzzy that it's meaningless.
Be careful when offering money or recognition for employee suggestions. This can lead to conflict
rather than cooperation. Individuals and groups often end up jealously protecting their ideas or
arguing about the source of ideas. Suggestion systems also separate idea generation from
implementation. Effectiveness is a function of how strongly ideas or strategies are accepted and then
implemented by the people who can make them work.
Suggestion systems work best in traditional "command and control" or paternalistic organizations.
Workers come up with ideas and managers decide which ones get implemented. In a highly involved
organization, teams generate and test ideas as part of a bigger focus on improving their own key
processes.
Involve team members, individuals or managers in developing their own incentive and reward
systems.
Involvement can be achieved through opinion surveys, focus groups, teams that study and
recommend, or teams that design and implement the rewards. The best organizations always use
combinations of these approaches.
Despite mountains of evidence to the contrary, many managers believe money is more rewarding than
recognition and appreciation. You should balance your incentive plans and reward systems with
generous amounts of "thanks pay." And make sure managers have the skills to show recognition when
people are doing good work. They often find it awkward to express appreciation.
Reward systems and recognition practices speak volumes about your organization's values. Are they
designed and delivered to employees - or with them? Do they reflect a management view of "we know
what's best for you?" Are they partial and piecemeal or part of a larger system and philosophy?
You should ask if financial incentives seek to penalize people and have them "share the pain," or look
for ways to make people feel like winners. Are people given paternalistic pats on the head or treated
as equal adults?
Like customer service and quality, reward and recognition are highly subjective. Just as they monitor
the changing needs of customers, effective leaders constantly try to understand the shifting
perceptions and values of everyone in their organization.
===============================================================
===========
Employees are motivated by both intrinsic and extrinsic rewards. To be effective, the reward system
must recognize both sources of motivation. All reward systems are based on the assumptions of
attracting, retaining and motivating people. Financial rewards are an important component of the
reward system, but there are other factors that motivate employees and influence the level of
performance.
Today's emphasis on quality-improvement teams and commitment-building programs is creating a
renaissance for financial incentive of pay-for-performance plans.
To ensure the reward system is effective and motivates the desired behaviors, it is essential to
consider carefully the rewards and strategies utilized and ensure the rewards are linked to or based on
performance. To be effective, any performance measurement system must be tied to compensation or
some sort of reward. Rewarding performance should be an ongoing managerial activity, not just an
annual pay-linked ritual.
Strategies for rewarding employees’ performance and contributions include both non-financial and
financial mechanisms.Some of the primary ones are discussed below. The list is not exhaustive, and
individual units/departments may identify additional mechanisms that are appropriate for and support
their culture and goals.
Praise/recognition from supervisors - Praise and recognition from supervisors is consistently found to
be among the most important motivators. Employees want to be recognized and feel their
contributions are noticed and valued. It is important that supervisors recognize the value and
importance of sincerely thanking employees verbally and/or in writing for their specific contributions.
Professional growth and development opportunities- Supervisors may provide employees opportunities
to participate in educational programs or other activities that will expand their skills/knowledge .
Employees benefit by developing new skills, and the institution benefits from the additional expertise
individuals bring to the job. A recent survey found that 87% of responding workers viewed special

12. training as a positive incentive, and it appeared most meaningful to employees with postgraduate
education.
Paid Leave - Supervisors may award employees up to 32 hours of paid leave annually in recognition of
meritorious performance .
Progression through the salary range - Employees may receive salary increases to recognize the
attainment of new and/or the enhancement of existing skills/competencies or for assuming increased
responsibilities within the scope of the current position. The salary increase represents a progression
through the salary range approved for the position .
Merit increases - policy should allow supervisors to give employees an annual merit increase to
recognize consistently meritorious performance or successful completion of a project that had a
significant impact on a department or the university. The reward may be in any amount up to 5% of
the employee's current base salary, subject to the availability of funds. Budgetary information
regarding fiscal year merit increases are issued annually as part of the budget process as soon as the
institution's fiscal position can be determined. To be eligible for a merit increase, employees must
have been employed for at least six continuous months and at least six months must have elapsed
since the employee's last salary increase, promotion, salary increase due to progression in the salary
range, demotion or transfer from another department.
Promotions and lateral moves - Promotions and lateral moves may be long term rewards that
recognize employees’ professional growth, expertise, and capacity to contribute to the institution in
new roles. Promotions are typically associated with an increase in salary, and the increase may be any
amount up to 10% of an employee’s current salary. For employees with base salaries under $25,000,
the increase may be any amount up to $2,500. The new salary also must be within the salary range
approved for the position, and employees are subject to a 90-day probationary period following a
promotion/lateral move to a new department .
Administrative salary supplements - Employees who assume new/additional responsibilities on an
interim basis may receive administrative salary supplements that are paid in addition to the base
salary. The supplement is discontinued when the employee is no longer responsible for the additional
responsibilities.
Informal rewards - When warranted, supervisors may choose to give employees informal rewards for
specific accomplishments/contributions. State law and institutional policy allow expenditures of up to
$50 of state funds and $100 of non-state funds per employee for informal non-cash rewards that
demonstrate the supervisor’s/institution’s appreciation. Supervisors can be creative in identifying
informal rewards that will be appreciated by the particular individual being recognized, but, in
selecting and purchasing rewards, supervisors must be sensitive to the institution’s responsibility to be
good stewards of public funds.
===============================================================
==============
Keys to Selecting the Right Reward
The first key to selecting an effective reward is knowing what your employees will find rewarding.
When an employee’s performance, morale or motivation has not been influenced by a reward, it is
likely because it was the wrong reward for that employee. When rewards don’t fit, they don’t work.
However, it is sometimes difficult to identify a reward that your employee will find valuable.
There are three easy ways to find out what your employees would find rewarding:
Watch what they do - Pay attention to how they spend their free time or what they might have as
hobbies.
Listen to them - By listening, you can learn about their interests or work place concerns. (i.e. the
desire for advanced training)
*Ask them - If you’re unsure, ask them!
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The basic components of employee compensation and benefits
Employee compensation and benefits are basically divided into four categories:
1. Guaranteed pay – monetary (cash) reward paid by an employer to an employee based on
employee/employer relations. The most common form of guaranteed pay is the basic salary.
2. Variable pay – monetary (cash) reward paid by an employer to an employee that is contingent on
discretion, performance or results achieved. The most common forms are bonuses and sales incentives.
3. Benefits – programs an employer uses to supplement employees’ compensation, such as paid time-
off, medical insurance, company car, and more.
4. Equity-based compensation – a plan using the employer’s share as compensation. The most
common examples are stock options.

13. Guaranteed pay Guaranteed pay is a monetary (cash) reward.
The basic element of the guaranteed pay is the base salary, paid based on an hourly, daily, weekly, bi-
weekly or a monthly rate. The base salary is typically used by employees for ongoing consumption. Many
countries dictate the minimum base salary defining a minimum wage. Individual skills and level of
experience of employees leave room for differentiation of income-levels within the job-based pay
structure.
In addition to base salary, there are other pay elements which are paid based solely on
employee/employer relations, such salary and seniority allowance.
[edit]Variable pay
Variable pay is a monetary (cash) reward that is contingent on discretion, performance or results
achieved. There are different types of variable pay plans, such as bonus schemes, sales incentives
(commission), overtime pay, and more.
An example where this type of compensation plan is prevalent is the real estate industry and real estate
agents. A common variable pay plan might be the sales person receives 50% of every dollar they bring in
up to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward.
Typically, this type of plan is based on an annual period of time requiring a "resetting" each year back to
the starting point of 50%. Sometimes this type of plan is administered so that the sales person never
resets and never falls down to a lower level.
[edit]Benefits
There is a wide variety of employee benefits, such as paid time-off, insurances (life
insurance, medical/dental insurance, and work disability insurance), pension plan, company car, and
more.
A benefit plan is designed to address a specific need and is often provided not in the form of cash.
Many countries dictate different minimum benefits, such as minimum paid time-off, employer’s pension
contribution, sick pay, and more.
[edit]Equity-based compensation
Equity based compensation is an employer compensation plan using the employer’s shares as employee
compensation. The most common form is stock options, yet employers use additional vehicles such as
restricted stock, restricted stock units (RSU), employee stock purchase plan (ESPP), and stock
appreciation rights (SAR).
The classic objectives of equity based compensation plans are retention, attraction of new hires and
aligning employees’ and shareholders’ interests.
[edit]Organizational place
In most companies, compensation & benefits (C&B) is a sub-function of the human-resources function.
HR organizations in big companies are typically divided into three: HR business partners (HRBPs), HR
centers of excellence, and HR shared services. C&B is an HR center of excellence, like staffing and
organizational development (OD).
[edit]Main influencers
Employee compensation and benefits main influencers can be divided into two: internal (company) and
external influencers.

14. The most important internal influencers are the business objectives, labor unions, internal equity (the
idea of compensating employees in similar jobs and similar performance in a similar way), organizational
culture and organizational structure.
The most important external influencers are the state of the economy, inflation, unemployment rate, the
relevant labor market, labor law, tax law, and the relevant industry habits and trends.
[edit]Bonus plans
Bonus plans are variable pay plans. They have three classic objectives:
1. Adjust labor cost to financial results – the basic idea is to create a bonus plan where the company
is paying more bonuses in ‘good times’ and less (or no) bonuses in ‘bad times’. By having bonus plan
budget adjusted according to financial results, the company’s labor cost is automatically reduced when
the company isn’t doing so well, while good company performance drives higher bonuses to employees.
2. Drive employee performance – the basic idea is that if an employee knows that his/her bonus
depend on the occurrence of a specific event (or paid according to performance, or if a certain goal is
achieved), then the employee will do whatever he/she can to secure this event (or improve their
performance, or achieve the desired goal). In other words, the bonus is creating an incentive to improve
business performance (as defined through the bonus plan).
3. Employee retention – retention is not a primary objective of bonus plans, yet bonuses are thought to
bring value with employee retention as well, for three reasons: a) a well designed bonus plan is paying
more money to better performers; a competitor offering a competing job-offer to these top performers is
likely to face a higher hurdle, given that these employees are already paid higher due to the bonus
plan. b)if the bonus is paid annually, employee is less inclined to leave the company before bonus payout;
often the reason for leaving (e.g. dispute with the manager, competing job offer) 'goes away' by the time
the bonus is paid. the bonus plan 'buy' more time for the company to retain the employee. c) employees
paid more are more satisfied with their job (all other things being equal) thus less inclined to leave their
employer.
The concept saying bonus plans can improve employee performance is based on the work of Frederic
Skinner, perhaps the most influential psychologist of the 20th century. Using the concept of Operant
Conditioning, Skinner claimed that an organism (animal, human being) is shaping his/her voluntary
behavior based on its extrinsic environmental consequences – i.e. reinforcement or punishment.
This concept captured the heart of many, and indeed most bonus plans nowadays are designed
according to it, yet since the late 1940s a growing body of empirical evidence suggested that these if-
then rewards do not work in a variety of settings common to the modern workplace. Research even
suggested that these type of bonus plans have the potential of damaging employee performance.