Strategic Compensation, 8e, Global Edition (Martocchio)

Chapter 3 Traditional Bases for Pay: Seniority and Merit

41) How can empowering employees help strengthen the pay-for-performance link?
Answer: Because formal performance appraisals are conducted periodically–maybe only once
per year–supervisors must empower their employees to make performance self-appraisals
between formal sessions. Moreover, supervisors need to take on a coach's role to empower their
workers. As coaches, supervisors must ensure that employees have access to the resources
necessary to perform their jobs. Supervisors-as-coaches should also help employees interpret and
respond to work problems as they develop. Empowering employees in this fashion should lead to
more self-corrective actions rather than reactive courses of action to supervisory feedback and
only to the criticisms addressed in performance appraisal meetings.
Difficulty: Difficult
AACSB: Analytic Thinking
Learning Obj.: Explain at least three ways compensation professionals can strengthen the pay-
for-performance link and summarize each one. (4)

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42) Summarize the four activities that can help minimize discriminatory performance
appraisal practices.
Answer: First, conduct job analyses to ascertain characteristics necessary for successful job
performance. Companies must first establish definitions of the jobs and then discover what
employee behaviors are necessary to perform the jobs. Job analysis is essential for the
development of content-valid performance appraisal systems. Content validity displays
connections between the measurable factors upon which the employee is being appraised and the
job itself. For example, customer service associates' performance might be judged on the basis of
courtesy and knowledge of the company's products or services, and these measures would be
content-valid dimensions. Both measures are representative of and relative to the job. On the
other hand, knowledge of the company's financial accounting practices would not be a content-
valid criterion of customer service associates' performance. Human resource and compensation
experts must review performance appraisal tools regularly to ensure that the tools adequately
reflect the key behaviors necessary for effective job performance. Jobholders, supervisors, and
clients can often give the most relevant input to determine whether a performance appraisal
system contains dimensions that relate to a particular job.

Second, incorporate these characteristics into a rating instrument. Although the professional
literature recommends rating instruments that are tied to specific job behaviors (e.g.,
behaviorally anchored rating scales), the courts routinely accept such less-sophisticated
approaches as simple graphic rating scales and trait ranges. Regardless of the method, HR
departments should provide all supervisors and raters with written definitive standards.

Third, train supervisors to use the rating instrument properly. Raters need to know how to apply
performance appraisal standards when they make judgments. The uniform application of
standards is extremely important. In addition, evaluators should be aware of common rater
errors.
Fourth, several cases demonstrate that formal appeal mechanisms and review of ratings by
upper-level personnel help make performance appraisal processes more accurate and effective.
Allowing employees to voice their concerns over ratings they believe to be inaccurate or unjust
opens a dialogue between employees and their supervisors that may shed light on the
performance appraisal outcomes. Employees may be able to point out instances of their
performances that may have been overlooked in the appraisal process or explain particular
extreme instances as the result of extraordinary circumstances. For example, an ill parent in need
of regular attention is the reason for an employee's absence rather than an employee's deliberate
breach of work responsibilities because the employee chose to relax at the beach.
Difficulty: Moderate
AACSB: Analytic Thinking
Learning Obj.: Give examples and definitions of performance appraisal methods. (3)

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43) List and discuss four possible limitations of merit pay programs. How can a company
overcome these limitations?
Answer: An answer should contain any of the following elements:
1) The failure to differentiate among performers: When there is no clear difference in actual job
performance, companies may provide alternative rewards such as higher discounts on the
company's product or service to complement merit pay increase.
2) Poor performance measures: Job analysis can be used to create objective performance
measures.
3) Supervisors' biased ratings of employee job performance: Major types of rater errors include
bias errors, contrast errors, errors of central tendency, and errors of leniency or strictness. HR
departments can help raters to minimize errors by choosing better rating systems and recognizing
common errors. For instance, to avoid errors of central tendency, HR professionals should
require justification for rating at every level of the scale and not just the extremes.
4) Lack of open communication between management and employees: An employee develops
reasonable expectations when there is open communication between management and
employees. A clear performance planning worksheet can help to establish performance
expectations.
5) Undesirable social structures
6) Factors other than merit
7) Undesirable competition among employees
8) Little motivational value
Difficulty: Moderate
AACSB: Analytic Thinking
Learning Obj.: Discuss three possible limitations of merit pay programs. (5)

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