HRM no bullshit summary™

On the exam:
-Questions from all chapters
-Recognize and be apply all the concepts but no need to know the definitions by heart
-Multiple-choice questions (no correction for guessing)
-Most questions about basic understanding
-About things we’ve seen/discussed in class, material is based on the recommended textbook and
academic articles on canvas
-No trick-questions
-All very clear questions and 1 slightly more complicated question about a case (e.g. see slide no. 6 of
chapter 8: Performance management & appraisal (IMPORTANT → don’t forget about the job-analysis
part))

Chapter 1: intro
Dave Ulrich’ business model = 1998 HRM business partner model -> 4 Roles of HRM
• Two axis
o Strategy vs Operations
o Processes vs people

4 Roles of HRM:
1. Strategic partner
a. Focus on future, strategy, processes (translate corp. strategy into HR activates)
b. Align HR and business strategy
c. Partner with execs (member of exec team)
d. HR info system (scorecards, dashboards)
2. Administrative expert
a. Day-to-day operations (save cost, rethink how work is done)
i. Seek efficiency gains (in: job analysis, HR planning, career management etc.)
b. Manage HR infrastructure
c. Create HR process for unique business needs
3. Employee champion
a. Focus on day-to-day operations and people (Employee needs, manage employee
contribution)
b. Protect employees (represent them to execs)
c. Job design
d. Morale boosting
4. Change agent
a. Focus on future strategy and people
b. Manage transformation and changes (prepare for change, conflict resolution,
action plans, monitor progress)
c. Understands culture (manage culture)
Strategic partner skills = analytics and quantitative → help profitability
Administrative expert skills = use methods and techniques → perform tasks
Change agent skills = decision making (evaluate options)
Employee champion skills = people skills

History of HRM
I. Pre-industrial revolution:
• Tribes grew → division of labour
• Most people self-employed (artisanal workshops)
• No unions
• Flexible hours (depends on work)

II. Industrial revolution = 18th century Europe

• Workshops → factories
• Repetitive low skilled work – task based
• Machines
• Wage labour
• Autocratic management (no safety, welfare concerns) = controlled with force and fear

III. Post industrial revolution (1800-1880):

• Workers = property, commodity on market)
• Paternalistic leadership = protection in exchange for loyalty
• Limited voice of workers

IV. Personnel management

• Labor problem(s) (1880-1930) = conflict labour → capital
▪ High employee turnover
▪ Poor work effort
▪ Bloody strikes
▪ Child labour
▪ Bad conditions
o Fear of socialism
o Peak: WWI
o → Personnel management was born
• Industrial welfare (1880-1930)
o Improve social and working conditions
o System promotes good manager-employee relations, increase productivity
o Welfare secretary (usually woman)
▪ Oversee: lunchrooms, wash-up rooms, recreation programs, housing (only
for non-union workers)
▪ Later: hiring, training
 • Scientific management (1880-1830) (=Taylorism)
o Making people work as hard as they could is not efficient --» optimize
o Greater productivity bcz rationalized, effective modes of production
o 4 principals:
▪ Vertical task differentiation = managers plan, workers execute
▪ Horizontal task dif. = many simple tasks
▪ Monitor and pay for performance
▪ Hire right, train to max efficiency
o Max Weber → rules → bureaucracy → even more conflict
o Unions grew

V. Human relations movement

- Conflict  poor management and work systems

Hawthorne studies→ experiments on work system effects → bases for HR movement

o Illumination experiments =does better lighting mean higher productivity? -> NO
→ other factors more important
o The relay-assembly test = rest periods vs hours of work
▪ Why production lower in afternoon?
• Operation tyre out?
• Need more rest?
• Impact of changes in equipment?
• Effects of shorter day?
• Role of worker attitudes?
▪ 6 ‘girl’ operators tested
▪ Output rose 30% in first 2,5 yrs  shorter hours, more rest
▪ But the test itself helped attitudes, so skewed (“Hawthorne effect”)
o The Bank wiring test = observe social relationship, structure
▪ Bank wiring → long hours, standing etc
• Workers slowed down production on purpose
• Most admired worker = the one who most slowed down the systems

Takeaways from Hawthorne studies:

o Social factors > financial incentives
o “hawthorne effect” = presence of researchers introduces bias
o Reject ‘rational economic man’ assumption of Taylorism and scientific
management
VI. Personnel departments (1930-1980)
- HR movement challenged the idea that people don’t want to work
- Term “personnel management”→ “Human resource management”
- Quality of Work Life era (QWL) = 1960s
- Safeguarding social peace = trade union negotiations

VII. (Strategic) HRM (1980-..)

- Globalization
o Inverted competition (japan)
o Volatile and complex market restructuring/downsizing
o Tech developments
o Diverse workforce

Chapter 2: Strategy-Driven HRM

Resources based view of organizations (theory)
- Personnel are the most important factor
- Employees = source of revenue and competitive advantage

Resources based view assumption = competitive advantage can only occur in situations of firm
resource heterogeneity and firm resource immobility (<->traditional strategy model = resources are
mobile)

Heterogeneity = resources of a firm (e.g., physical capital, human

capital, and organizational capital) and how different these resources
are, across firms

Firm resource immobility = the inability of competing firms to

obtain resources from other firms

Criteria for resource that creates sustained competitive

advantage:
1. Adds positive value
2. Unique or rare
3. Imperfectly imitable
4. Cannot be substituted

VRIO model:
- Is HR Valuable?
- Is HR Rare?
- Is HR Inimitable?
o Path dependency = resources are created overtime
o Linkage ambiguity = causes and effects are unclear
o Social complexity
- Is HR immobile? = usually yes → technical constraints (=transaction costs, moving etc)
- Is HR non-substitutable? = only those can substitute that are themselves VRIO resources
HR mutual gains perspective = thinks that HR benefits both employee and employer
HR conflicting outcomes perspective = HRM has no effect on effect on employee wellbeing

Explaining strategy, mission and goals

Strategy = plan of action to achieve long term or overall goals

Mission = company’s reason for existing

Operative goals = specific measurable outcome (i.e.: performance, marker, productivity etc)

Strategy type:
- Cost leadership = try to lower costs of production (i.e.: Walmart)
o Standardized product for price sensitive buyers
o Large sales, low cost/unit
- Differentiation = create impression of difference in product. Compete on uniqueness
- Focus/niche = Cost leadership or differentiation in a specific market

Organizational structure = the way a company groups its resources to achieve its goals
- Complexity = no. of layers, departments, locations
- Formalization = standardization by procedures
- Centralization

Functional Organization structure = Departmentalization around specialized activities such as

production, marketing and human resources
- Advantages:
o Good for small/single product/service business
o Allows for economies of scale
o Clear career paths
o Like minded professionals can work together
- Disadvantages:
o Department collaboration is hard
o Hard to address more products
o Less visibility into bigger picture
o Slow to respond to changes in the environment
Divisional Organization structure = Departmentalization based on products, customers, or
geographic region
- Advantages:
o Encourages innovation by product line
o Enhance local customer relations
o Ability to change quicker to env
o Employee pride over product line
o Measure profitability of each product line
- Disadvantages:
o Physical distance in resource sharing
o Less likely to abandon bad product line
o Loss of economies of scale across product lines

Matrix Organizational structure = dual reporting. Some employees report to two bosses – a
functional manager and a divisional manager.
- Advantages:
o Multiple areas of focus
o Movement across divisional lines
o Specialization
o Coordination
- Disadvantages:
o Conflict (2 bosses)
o Confused by dual authority
o Costly

Horizontal structure = Cross-functional, often self-managed teams that form and restructure as
the business changes. Roles, titles, jobs, and teams are no longer rigidly built into the structure of
the organization but negotiated and flexible depending on the needs of the organization.
- Advantages:
o Good, fast communication
o More flexible and empowered roles, broader
perspective
o Improve customer responsiveness
- Disadvantages:
o Team work could get in way of functional
specialization
o Traditional departments instigate turf battles
Virtual network structure = A collection of independent, mostly single-function firms that
collaborate on a good or service (i.e.: Airbnb, uber)
- Advantages:
o Organization focuses on core competencies
o Cost effective
o Flexible
- Disadvantages:
o Reduced control
o Reduction of in-house skill

Mechanistic and organic forms:

Organization Culture = are values, beliefs, assumptions about appropriate behaviour that
members of an organization share
- Clan teams structure
- Adaptability horizontal structure
- Bureaucratic functional structure
- Mission divisional structure
Selecting strategy and design

Michigan Matching model

- People = resources (like raw material)
- Human resource cycle – 4 generic
processes:
1. Recruitment and selection
2. Performance appraisal
3. Compensation
4. Training and development
Measuring HRM

HRM relies on hard data and metrics (ROI=return on investment)

HR Scorecard = visual representation of measure of HR achievements, productivity etc

HR Performance drivers = Core people related capabilities or assets (i.e.: employee productivity
/satisfaction)

HR Enablers = reinforcers of performance drivers (i.e.: reward change for preemptive maintenance)

HR Deliverables = outcomes of the HR architecture that serve to execute the firm's strategy

HR Doables = Focus on HR efficiency and activity counts

 Chapter 3: Job and Work analysis
Job analysis = identify work done and conditions. Does not evaluate person

Traditional job analysis = observable tasks and qualifications

Cognitive task analysis = mental processes and decisions
Competency management = strategic competencies
Strategic job modelling = future jobs

Information sources: SMEs (each is biased in a different way)

- Current job holders
- Supervisor/manager
- Customers (internal/external)
- HR specialists and technical experts

According to research:
- High agreement between experts
- Low agreement between jobholder and supervisor

Job analysis methods:

- Observation = shadowing worker and logging tasks (long enough so worker ignores)
o Advantages:
▪ Analyst gains acceptance and credibility (he is in the field)
▪ Not subject to reporting bias
o But time consuming
- Individual interviews
- Group interviews
- Questionnaires
- Diaries = worker logging activities
- Computers = employee monitoring software
o Recording device, camera, tracking device etc
- Available company records
- Databases

O.net = encompasses the broadest scope of work information ranging from labor market data and
wages to important knowledge, skills, and required tasks. A preliminary version of O*NET was
released in December 1997. A refined version became available to the general public in December
1998.

Traditional Approach:
Types of information (= via databases: D.O.T., O.net)

Job description = what needs to be done (tasks, duties, standards, position)

Job specification = what is needed to do it. more worker-oriented. It will evaluate the
suitability of applicants for the job.
Units of analysis = frames what is being analyzed, or is the entity being studied
- Motions = Lowest level. Any action requiring motion ex.: bring hand to phone
- Elements = Often considered smallest division of work ex.: dial someone
- Activities = ex.: answer calls related to landlord-tenant disputes
- Tasks = ex.: talk to parties to settle disputes
- Responsibilities = ex.: apprehending drug users and sellers
- Job = ex.: police officer

Importance of job analysis = plays role in recruitment, evaluation job design. Effects future
decisions
- Human resource planning = helps design jobs better to get results we need
- Job evaluation for compensation = if we know what the job contains, we can better
decide its worth
- Staffing = We know what to tell them about tasks and pay
- Training
- Performance management
- Maintain safe work environment = analysis helps identify hazards

Criticisms of traditional approach:

- Time consuming
- Static

Other approaches:

New ways of working:

- Flexible work design (time, place, medium) – Results only Environment (ROWE)
- Proactive work behaviours
o Job crafting = employees make changes on own initiative
o Career self-development
o Extra-role behaviours

Job (re-)designing: job characteristics model

o Job enlargement division of labour (horizontal restructure)
o Job enrichment = make work more interesting (mainly more responsibility)
o Job rotation

Cognitive task analysis = tap into the mental processes that underlie observable behaviour, and
reveal the cognitive skills and strategies needed to effectively tackle challenging situations.
- How they do the job
- Complements traditional approach
- Methods: Comparison, thinking out loud
Core competence = combination of multiple resources and skills that distinguish a
firm in the marketplace
- Identified by meeting w execs

Individual competence = Measurable characteristics of a person which lead to superior job

performance
- Identified by critical event and related methods

Iceberg model of competencies = explains the concept of competency (some visible some not)

Competency management = integration of HR planning with business planning by allowing

organizations to assess the current HR capacity based on their competencies against the capacity
needed to achieve the goals.

Competency profile = look at 3 different levels:

- custer/domain,
- the competency
- the indicators of the competency

Chapter 4: Recruitment

I. Relevance and definitions

Michigan matching model (very important) = A model that states the importance of linking HR
strategies with the overall strategies of the organization; it deals with external and internal
alignment. Under this model a cycle can be identified that consists of processes performed in the
organization: Recruitment and selection, performance appraisal, training and development, and
compensation.

Linking HR strategies = vertical or external alignment, it represents the degree to which

HR practices specifically focus on identified strategic organizational objectives
 Horizontal alignment = the degree to which the practices work together in a mutually
supportive and reinforcing way. Horizontally aligned HR practices potentially create an HR
system with a strategic impact that is greater than the sum of the individual HR practice
impacts

The Labour Market = The external pool of candidates from which we draw our recruits.
Factors in the labour marker which effect availability:
o Labour market tightness = Supply and Demand of labour and unemployment
rate
o Generational factor = each gen works differently
o Competitors = study of the competitors toughness

Talent:
Exclusive-Stable = exceptional and properly stable →”Gifted”
Exclusive-Changing = Expectational, but can only be developed thru practice→ “Nature”

Inclusive-Stable = universal and stable thru practice→ “Universal”

Inclusive-Changing = universal, anyone can have it only thru practice. → “Universal”

Recruitment = process of creating a reasonable pool of qualified candidates for a job opening.
- The recruitment and selection process overlap

Applicant population = Potential applicants. Identify and motivate them to apply.

Applicant pool = People who actually apply. We should motivate them to stay in the pool
Hires = Selected candidates. We should motivate them to accept the job offer.
 Recruitment Framework (applicant needs to):
o See the message
o Pay attention
o Understand
o Be convinced
o Change their attitude
o Act accordingly

Internal recruiting = Filling jobs openings with current employees or with people the
employees know.
o Promotions or employee referrals
o Advantages:
▪ Faster
▪ Cheaper
▪ Familiarity
o Disadvantages:
▪ Smaller pool
▪ Might miss more qualified
▪ Etc
▪ Peter principle = success in one job doesn’t mean success in other

External recruiting = Process of engaging individuals from the labor market.

o Advantages:
▪ Innovation
▪ Avoids resistance to change
▪ Increase diversity
o Disadvantages:
▪ Risky
▪ Longer
▪ Costlier

Targeted recruitment = Recruitment actions that are designed to generate a particular type
of job applicant.
- Made by work analysis
- Name what type of people they want
- After -> choose recruitment method
- Signaling theory = applicant has limited info, so they rely on website, recruiter behavior etc to
make decision
Recruitment methods:

Informal recruitment methods = better applicants, but lead to homogenous org.

- Referrals
- Walk-ins
- Reserve list
- Re-hires
- Word of moth

Realism hypothesis = informally recruited understand the job more -» informed decision

Individual difference hypothesis = dif methods lead to different people (i.e.: referred ppl are
best fits, walk-ins are more motivated)

Formal recruitment methods = they generate more and more diverse Applicants
- Job fairs
- adverts
- Website
- Exec search
- Agencies

Elaboration likelihood model = Central path vs Peripheral path

Central path is the most rational approach and best way of making decisions. However, this
is not how people make decisions. The peripheral path is making decisions based on fear, or
desire, it is more emotional.

Recruitment message: should have precise, specific and unique info to have qualified and
many applicants

II. Recruitment today

Employer Branding = The promotion of an identifiable, attractive and unique image (value
proposition)

External employer branding = Image to outsiders

Internal employer branding = what people inside the co. think (more stable)

Attributes of employers:
o Instrumental/functional = i.e.: location, pay
o Symbolic attributes = subjective i.e.: innovativeness, personality
Non-traditional applicants = recruitment today looks for heterogeneity (more diverse pool)

Technology –> is used today in recruitment (i.e.: E-recruitment, AI)

Measuring effectiveness, metrics:

1. Pre-hire = no. of applicants, yield ratio
2. Post-hire = cost/hire, time/hire, new hire turnover, performance
3. “New metrics” = no. of visitors on website, time spent on website, traffic sources, web
traffic

Alternative to recruitment:
- Not filling vacancy
- Training
- Changing job attributes

Chapter 5: Selection I

Task performance = what is in the job description.

Contextual performance = things that go beyond the job description (i.e.: proactivity)
Counterproductive performance = negative behaviour

Can assess performance with:

▪ Subjective measure (appraisals)
▪ Objective measures (i.e.: salary growth, no. of errors etc.)
▪ Sources of error

Criterion measure (important)

Criterion deficiency = Degree to which actual criteria falls to overlap conceptual criteria.
Criterion relevance = Degree to which actual criteria and conceptual criteria coincide.
Criterion contamination = Unrelated to the conceptual criteria

Deficient measures = incomplete appraisal of an individual’s performance when important aspects

are not measured (or just vaguely related) (i.e.: how friendly a nurse is)

Contaminated measures = A criterion measure being influenced by something other than the
performance related to the construct. (i.e.: no. of patients a nurse had/day)
Predictor construct = Concept/requirements for good performance. What we look for.

Criterion Domain = what we want to predict (performance)

Predictor instrument = What we use to measure the predictor construct.

Measuring the predictor construct of personality:

1. Openness to experiences
2. Conscientiousness = how impulsive, reliable, organised
3. Extraversion
4. Agreeableness = how good natured, trusting etc.
5. Neuroticism = how composed, secure, calm they are

General mental ability (intelligence) = greatest indicator of job performance (traditional g factor)

Carroll’s three-stratum model divides intelligence in 3 sections

- General
- Broad
- Narrow

General (g) = general mental ability

o broad abilities are flavours of g:
▪ Fluid intelligence (Gf)
▪ Crystallized intelligence (Gc)
▪ General memory and learning (Gy)
▪ Broad visual perception (Gv)
▪ Broad auditory perception (Gu)
▪ Broad retrieval ability (Gr)
▪ Broad cognitive speediness (Gs)
▪ Processing speed (Gt)

A good way to know about task performance in the future is by using conscientiousness +
intelligence (g factor) as predictor constructs.
Triarchic theory of intelligence (1985) by Robert Sternberg
- Intelligence is not the same as book smart
- 3 dimensions:
o Analytic giftedness
o Practical giftedness = create fit between person and environment
o Synthetic giftedness = create new ideas and solve new problems

Theory of multiple intelligences (1983) by Howard Gardner

- No evidence to support theory (untestable = theories that cannot be tested r useless)
- 9 types of intelligences:
1. Linguistic
2. Musical
3. Logic-mathematical
4. Spatial
5. Bodily kinaesthetic
6. Interpersonal
7. Intrapersonal
8. Naturalist
9. Existential

Vocational interest = traits that reflect preferences for certain types of work activities and
environments.
- 6 different types (RIASEC)
1. Realistic = doers
2. Investigative = thinkers
3. Artistic = creators
4. Social = helpers
5. Enterprising =persuaders
6. Conventional = organisers

Physical abilities = strength and physical proficiency

Psychomotor abilities = speed, control and precision of movement

Construct validity = degree to which a test measures what it claims, or purports, to be measuring
 Chapter 6: Selection II

Reliable test = gives consistent scores when a person takes two alternate forms of the test or when
they take the same test more times

Valid test = for measurement, the test adequately measures what it claims to measure (construct
validity)

In order to measure predictor constructs in a reliable and valid way you can
use the following:

1. Biodata, CV = Information about an individual’s background and life history

Biographical data, or biodata = info about an individual’s background and life history (e.g., civil
status, education) ranging from objectively determined to subjective preferences.
- Biodata inventories typically include verifiable and non-verifiable items.
- Biodata questions are scored. Scoring takes place based on how strongly the item
empirically or theoretically relates with criterion.
- “Past performance is the best indicator of future performance”
- is reliable when it can be verified.

2. References/recommendation letters
- Types:
o Applicant nominated referee (letter from past employers)
o Prospective employer reaches out to past employers
o Referee gets a link to a reference form
- Subjective and difficult to verify

Trends: Structured references and multisource references. Examples of questions that

should be answered in this method are the candidates’ past responsibilities, candidates’
weakest/strongest attributes, and the ranking they’d give the candidate.
3. Personality Inventories = self-assessment tool where there are no right or wrong answers.
Scoring can be normative or ipsative

Normative = Score is compared against patterns of normality, like other test-takers scores.
Ipsative = There’s a forced choice where test takers have to select the option that they consider is
the most or least true about themselves. (Not recommended for selection purposes)

This is a good predictor of task performance. However, it might lead the candidate to fake social
desirability by answering as they think is best.

4. Integrity tests

Overt = (clear purpose) The test asks directly about integrity-related attitudes and past dishonest
behaviours.

Personality based = (disguised purpose) measure of broad range of constructs that are precursors
of dishonesty

5. Cognitive ability tests = They test general mental ability and specific cognitive abilities.
- Examples
o Stanford-Binet Intelligence test
o Wechsel Adult Intelligence Scale.
- Biased test = when test design systematically disadvantages certain groups

6. Emotional intelligence test = Ability vs trait measure

7. Job interview
- Types:
o Two-person interaction
o Serial interview
o Tandem interview
o Panel interview
o Group interview
o Telephone or conference call
- Structure
o Unstructured
o Structured = Content is based on job analysis, same questions
- Situational interview:
o Applicant is confronted with an everyday situation to provide solution
- Behavioural interview:
o Ask about past behaviour
- Strange interview questions = they predict nothing
o Useless, unrelated Qs
8. Medical and physical examination = to screen out unfit applicants

9. Work samples = test in which tasks similar to job tasks are performed
- High fidelity = high level of realism

10. Assessment Center Method = Standardized evaluation of behaviour based on multiple

evaluations including job related simulations, interviews, and/or psychological tests.
- Used in more than 25% of all big companies

11. Situational judgment test = measurements that present applicants with job-related situations
(low-fidelity)
- Reliable
- High face validity

Chapter 7: Training and development

I. Terminology

Development = training as well as formal education, job experience relationship and assessment of
personality skills and abilities that help employees prepare for future jobs and positions

II. Ideal theory

Procedure of training:
1. Conduct needs analysis
a. Support from top
b. Take into account: organisational strategy
2. Formulate objectives
a. Goals based on SMART (Specific, measurable, attainable, realistic, timely)
3. Training design and methods
a. Learning objectives
b. Training methods
i. Presentation techniques = lectures reading list etc
ii. Simulation methods
1. Case method = put into dif real cases
2. Incident method = incidents prepared, make decision
3. Role-playing
4. Experiential exercises = learn by doing
5. In-basket exercises = situation for new people that they might
face
c. Synthetic learning environment
i. Mix elements of learning w technology
ii. Physical fidelity = how much conditions, tools mirror real life
iii. Psychological fidelity = how seriously they take test compared to real
d. Team building methods
i. Cross-training = introduce member to roles of their teammates
ii. Team-coordination training = focus on teamwork skills
iii. Outward bound training = outdoor challenges
iv. City games = activities in city
v. Action leaning
4. Optimize transfer
a. Transfer = how much of learned thing is applied
4.1 Training design

4.2 Trainee characteristics

b. Honey and Mumford learning styles
 4.3 Work environment
c. Pre-training = before doing job
d. Post training = supervisor and peer support
5. Evaluate The training effectiveness
a. Criteria Kirkpatrick:

Characteristics Examples
Reaction - How individuals - Online assessment
react - Interviews
- Questions - Participants
thoughts
Learning - What level have trainees - may use control group
reached - exams, interviews
Behaviour change - Are they using - Observation,
what they interview
learned?
results Determine overall success

b. Most companies don’t conduct systematic evaluation:

- No support
- Costly

III. Informal learning = unstructured, experiential and non-institutional learning, driven by

choice
- Learner directed, self-guided
- Intent for development
- Involves action
- Is not formal
Four components:
- Intent to learn, improve
- Experience and action
- Feedback
- Reflection
 Context of informal learning:
- Contextual factors:
o Organisational climates
o Opportunities
o Time
o Support
- Individual factors:
o Motivation
o Personality characteristics
o Self-awareness

Chapter 8: Performance and management and appraisal

Performance management = process of managing performance of human resources

Performance appraisal = ongoing process of evaluation

Assumptions about performance management:

- Everyone has stable level of true performance that reflects their
effectiveness (not always true, it fluctuates)
- Raters are able to rate accurately
- Raters are motivated to rate accurately

Building blocks of performance management:

1. Content = what to evaluate
a. Management object (MBO)
b. Strategy has to be longitudal
c. Goals are SMART
2. Instruments = how to evaluate
a. Critical incident method = record of + and – performance
b. Ranking
c. Forced distribution = evaluate based on premeditated categories (disliked by
managers)
d. Essays = comments by managers
e. Graphic rating scales = manager rates on scale
f. Behaviour observation on scales = evaluate the behaviour
g. Behaviourally anchored rating scale = Performance appraisal, description of
each assessment on a scale
 MBO method = managers and employees jointly set objectives. Periodically evaluate
performance and give reward.
- Pros: factual, fair
- Cons: time consuming, have to be quantifiable goal

Evaluative decision = incl. compensation, promotion or pay raise

Development decision = incl. training and development

3. Who would assess performance?

- Immediate supervisor
- Peers
- Subordinates
- Self
- Customer
- 360-degree evaluation

Who to choose:
- For evaluation: supervisor
- For development: everyone

Performance appraisal biases:

o Leniency bias = managers give favourable rating that aren’t accurate

o Severity bias = managers wrongfully downrate

o Centrality bias = give everyone middle rating
o Halo effect bias = one good trait overshadows
o Recency = focus on most recent
o Primacy = focus on first impressions
o Similar-to-me bias
o Idiosyncratic rater bias = rate based on who is better at things than me
o Confirmation bias
o Gender bias
o Law of small numbers bias = “lower performer in my team might be really good
out of the population”

4. The performance appraisal interview

4 types:
1. “Tell-and-Sell” approach = rater uses persuasion to change behaviour
2. “tell-and-Listen” approach = relate + and – aspects, employee can respond
 3. Problem solving approach = “how can I help ypu?” rater helps employee
4. Guidance approach = combination of all above

Reality of performance management

Problems with Performance management in most companies:

- 95% of managers dissatisfied w/ PM system
- 59% employees don’t think PM is worth the time
- 59% say they don’t receive feedback
- 90% HR heads report, PM system does not yield accurate info

Reasons for these problems:

- Paperwork
- Implicit political motives
o Jusstify decisions
o Keep morale
- Resistance
- No impact
- Combination of evaluation and development

Possible solutions:
- Upgrade system and measurements
- Reengineer process
- Separate objectives of evaluation and development
- Informal and continuous feedback

Chapter 9: Compensation
Compensation = total pay and benefits

Pay for Performance (PFP) = when it works it seems to yield good results

Types of compensations:
- Base pay = flat rate
o Wage = paid hourly, usually blue collar
o Salary = periodic pay, usually white collar
- Wage and salary add-ons = i.e.: overtime, premium
- Incentive pay = PFP
- Benefits = insurance, gas money
Total reward system = all tools available to employer to attract, motivate and retain employees

PFP is considered fair but 70% of people only receive fixed salary

Variable pay:

Merit pay = program to reward top performers with increases in their annual wage that carry over
from year to year
- Merit pool = % of annual payroll
- Potential problems:
o Usually very low %
o Everyone may be “good performer”
o Good performers max out quicky

Bonus = lump sum, typically at end of time period

- Potential problems:
o Usually based on company performance
o Not based on individual performance goal
o Can become usual occurance
- Best practice = bonus immediately after reaching goal

Commission = usually to salesperson for selling

- Straight commission = only get paid commission
- Salary + commission
- Potential problems:
o Pressure
o Team conflicts
o Unethical behaviour
- Best practice = account for customer satisfaction
Piecework and standard workplans
- Straight piece rate = payed for every piece completed
- Differential piece rate = set goal, if do more, get more
- Standard hour = each task has set standard time

Group incentives:
- Profit sharing plans
o Share of profit to workers
o Problem: company may manipulate accounting profits
- Gain-sharing plans
o Based on revenue changes per unit costs (harder to manipulate)
- Stock ownership, stock options and stock purchasing plans

Pros:
- Better teamwork
- Broadens outlook
- Less supervision

Cons:
- Social loafing
- Individual output discounted
- Best performers slack