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Model Question Paper

Performance Measurement and Reward Systems (MB3G1H)


Section A : Basic Concepts (30 Marks)
This section consists of questions with serial number 1 - 30. Answer all questions. Each question carries one mark. Maximum time for answering Section A is 30 Minutes.

1. Michael Hammer considers confusion between tasks and processes of an organization as a potential cause of many performance problems. Which of the following statements regarding tasks and processes is/are not true according to Michael Hammer? I. Difference between task and process is the difference between part and whole. II. Problems that afflict modern organizations are not process problems, they are task problems. III. A task is a unit of work, whereas a process is a related group of tasks. (a) (b) (c) (d) (e) Only (I) above Only (II) above Only (III) above Both (I) and (II) above Both (I) and (III) above.

2. In which of the following process, specific objectives are identified in advance of a performance period and at the end of the period results are reviewed against these objectives? (a) (b) (c) (d) (e) Exclusive initiative Review discussion Review meetings Oblique feedback Work planning and review.

3. Hale and Whitlam summarized some important findings of a study, Performance Management an analysis of the issues. Which of the following is not true regarding these findings? (a) (b) (c) (d) (e) Performance management organizations were likely to express performance targets in terms of measurable outputs, accountabilities and training or learning targets The challenge for the personnel function is to facilitate the ownership of performance management by staff management Training and development can be important motivators, particularly if linked to career development Organizations implementing performance management systems should consider extrinsic needs of employees such as reward packages and intrinsic needs in terms of personal growth Organizations that stressed the importance of human resource development activities were more successful than those where the remuneration dimension dominated performance management.

4. Which performance appraisal technique is used to minimize the inevitable rating errors, or use of different standards by various appraisers, especially in situations where appraisals are used to establish relativity among competing colleagues during HR decision-making? (a) (b) (c) (d) (e) Ranking methods Moderation review Graphic-rating scale Role-task rating Essay-type appraisal.

5. Which of the following acts as a sound starting point for determining responsibilities and activities in a performance plan? (a) (b) (c) Role stakeholders Role resources Role description

(d) (e)

Role schedule Role objectives.

6. Which of the following will directly relate to expeditious fulfillment of the job, and are not part of the ongoing day-to-day tasks? (a) (b) (c) (d) (e) Individual occupational activities Professional development activities Peripherality Planning dialogue Systems-oriented projects.

7. Which of the following makes benchmarking an exciting co-optitive give-and-take game, rather than a boring one-way street? (a) (b) (c) (d) (e) Work-standards approach Goal-setting approach Role of causality Performance planning Performance monitoring.

8. Which of the following are incorporated in the individual performance plans? I. Tasks to be completed. II. Performance standards. III. Competencies required for fulfilling the objectives. IV. Indicators of achievement. (a) (b) (c) (d) (e) Both (I) and (II) above Both (III) and (IV) above (I), (II) and (III) above (I), (II) and (IV) above All (I), (II), (III) and (IV) above.

9. Team is at the heart of organizing and represents interpersonal relationships structured to achieve shared goals. Which of the following are the key constituents of a team? I. Leadership. II. Roles. III. Structure. IV. Tasks. (a) (b) (c) (d) (e) (a) (b) (c) (d) (e) Both (I) and (III) above Both (II) and (IV) above (I), (II) and (III) above (I), (II) and (IV) above All (I), (II), (III) and (IV) above. Teamwork must include team maintenance Team building is an event Team building is assisted by external help through design of events A team is not always a group Team members work independently in time and space yet in concert.

10.Which of the following is not true regarding team and team building?

11.Which of the following is a group phenomenon involving extra effort, goals communality and feelings of belonging? (a) Stability (b) Readiness (c) Adaptation (d) Motivation (e) Morale. 12.According to Peter Senge, who among the following are at the heart of the value-generating process, design, produce and sell products, provide services and talk to customers? (a) Seed carriers (b) Internal networks

(c) (d) (e)

Local line leaders Community builders Executive leaders.

13.Oberg suggested several performance appraisal techniques. Each of these techniques suits different situations and purposes. Which of the following is/are false regarding essay-type appraisal? I. Most common form of this technique is annual confidential report. II. This technique follows structured format. III. In this technique, appraisals are hard to compare across a population of appraises. (a) (b) (c) (d) (e) Only (I) above Only (II) above Only (III) above Both (I) and (II) above Both (I) and (III) above.

14.Which of the following set of ratings indicate that the managee will be placed under observation for a period determined by the supervisor and the senior management? (a) (b) (c) (d) (e) Exceeds standards Good performance Standard performance Needs improvement Sub-standard performance.

15.In designing appraisal format, every effort is made to improve database to reduce need for the appraiser to apply his/her judgment on unverified or impressionistic information. Which of the following is not considered while designing appraisal format? (a) (b) (c) (d) (e) Appraiser should focus on the qualities or attributes rather than the behavior of appraisee while assessing performance Rating scale must have limited points Insist on documentation and justification of at least the highest and the lowest ratings Standardize and clearly understand the terms used Avoid factors such as creative, assertive, innovative and dependable.

16.Several tools available for the purpose of stocktaking potential can facilitate the process of potential identification and enhancement. Which of the following is not a tool for stocktaking potential? (a) (b) (c) (d) (e) Managee career development window Assessment center Self-fulfilling prophecy Forced-choice rating scale 360 degree appraisal system.

17.Which of the following is not a criterion stipulated by the Task Force on Assessment Center Standards for an assessment center? (a) (b) (c) (d) It must contain an explicit definition of the determinants of managerial effectiveness It must attempt to generate higher-level motivational forces in the managee Multiple measurement techniques, including simulation are used Integration of information occurs after all the measurement techniques are completed at an assessment evaluation session Performance of behavior is observed and evaluated by a selected trained team of managers.

(e) 18.360 degree feedback is relatively a new practice used only by few organizations. Which of the following is/are assumption(s) of 360 degree appraisal system according to Turnow? I. Awareness of discrepancies between how one see themselves and how others see us increases ones selfawareness. II. Enhanced self-awareness is a key to high performance as a leader. III. It is a powerful intervention to increase awareness of the importance of aligning leader behavior, work unit results and customer expectations. (a) (b) (c) Only (I) above Only (III) above Both (I) and (II) above

(d) (e)

Both (I) and (III) above All (I), (II) and (III) above.

19.In which of the following roles, managers see the outcomes from the managees perspective, understand problems and difficulties faced by him/her to achieve the outcomes and manager also engage himself proactively with the managee to identify ways of obviating similar problems and difficulties in future? (a) (b) (c) (d) (e) Authentic Supportive Open Positive and empathetic Honest-to-purpose.

20.Which of the following means comparison inter-se of performance across individuals, workgroups, departments, functions etc., and rank ordering their value addition to requisite goals? (a) (b) (c) (d) (e) Appraising contribution Quantifying contribution Rewarding contribution Stocktaking performance Stocktaking potential.

21.Two personal characteristics motives and self-image of the counselor and the counselee are particularly important to the process and outcome of counseling. Which of the following motive will determine the concern for accomplishing the task of developing counselee competencies? (a) (b) (c) (d) (e) Security Self-actualization Power Affiliation Achievement.

22.Coaching process involves three stages viz., setting tasks, monitoring progress and learning by doing. Which of the following takes place in learning by doing stage? (a) (b) (c) (d) The manager set the tasks that are consistent with the managees ability to learn The manager and managee carry out a thorough examination of what worked well, what did not and why Discuss progress on the learning agenda The manager provides answers to the managees problem when the managee has exhausted his/her own resources The manager constantly helps the managee in the process of exploration by asking relevant questions.

(e) 23.Coaching is not necessarily about correcting performance deficiencies. Which of the following are forms of coaching? I. Telling. II. Selling. III. Non-directive questioning and analyzing. IV. Middle-of-the-road consulting. (a) (b) (c) (d) (e) Both (I) and (II) above Both (III) and (IV) above (I), (II) and (III) above (I), (III) and (IV) above (II), (III) and (IV) above.

24.In which of the following, the managers supervisor talks with the managers direct reports about his/her strengths and areas for improvement? (a) (b) (c) (d) (e) (a) 360 degree feedback Skip-level meetings Upward appraisal Reflective level Factual level. Pygmalion effect

25.Which of the following demonstrates that high expectations produce high performance from managees?

(b) (c) (d) (e)

Placebo effect Perceptual bias Horn effect Halo effect.

26.Which of the following is not true regarding the skills needed to effectively use Tell and Listen discussion type (a) (b) (c) (d) (e) Active listening Patience Using power and influence The ability to stay open Empathy.

27.In SMART goals, which of the following indicate that goals being challenging, remain within the reach of the managee who effectively uses his/her competencies for achieving the goal? (a) (b) (c) (d) (e) Specific Measurable and mutual Adjustable and achievable Relevant and realistic Trackable and Timely.

28.Which of the following acts as ready reckoner for the plan and also shows the numerous and varied planned activities in relationship to each other? (a) (b) (c) (d) (e) Resources Standards Periodic review Timeline Power motive.

29.Participatory process being a team building event helps to develop a sense of openness and equity in the group. Which of the following statements are true with regard to participatory process? It provides for standards that are easier to verify, since there are more perspectives available to develop standards and also measure performance during reviews. II. In an independent work group, this process can ensure more connected and coordinated performance standards among all team members, which can be monitored laterally by colleagues as they impact their performance. III. The relevance of performance standards is understood by everyone more clearly and holistically. IV. It simultaneously helps set team standards, which in reality are part of the performance standards for the manager. (a) (b) (c) (d) (e) (I), (II) and (III) above (I), (II) and (IV) above (I), (III) and (IV) above (II), (III) and (IV) above All (I), (II), (III) and (IV) above. I.

30.Which of the following locates the role in the organizational context, by defining its vertical, horizontal, or diagonal etc., relationships with other roles? (a) (b) (c) (d) (e) Role purpose Performance indicators Position in the organogram Work context Decision-making functions. END OF SECTION A

Performance Measurement and Reward Systems (MB3G1H)


Section B : Caselets (50 Marks)
This section consists of questions with serial number 1 7. Answer all questions. Marks are indicated against each question.

Detailed explanations should form part of your answer. Do not spend more than 110 - 120 minutes on Section B.

Caselet 1
Read the caselet carefully and answer the following questions: 1. The reward system in an organization plays an important role in retaining and motivating employees. Explain the role played by the Nucors reward system in the companys success. ( 8 marks) 2. Edward Lawler suggests the organizations to design the reward system which is more flexible and diversified. Discuss the various factors that are to be considered while designing reward systems. ( 7 marks) It makes an unusual cover for an annual report instead of attractive photographs on the cover page, the company puts the names of all its employees on the front and back cover pages. The company is Nucor Corp (Nucor) the largest producer of steel in North America. According to company sources, Nucors recruitment process, reward system and work culture are responsible for the companys success over the years. Nucors employees were paid according to their productivity. Employees were given certain production goals, and their pay depended on realizing these goals. Though the hourly wages at Nucor were only $9 per hour compared to the industry average of $18 per hour, yet, Nucor employees earned more than their counterparts in the industry due to the companys reward system which linked pay with productivity. Commenting on the employees pay at Nucor, Jim Coblin, Vice President HR said, The only reason to work here is to try to get rich. Money is important to our people. According to analysts, Nucors incentive plans not only encouraged the employees to perform well at individual level but also encouraged them to excel at the team level as the incentive plans took the performance of the teams into consideration. Nucors incentive plans also resulted in healthy competition among the companys different plants. For instance, workers at Nucors Hickman plant worked hard to break the production records of Nucor-Yamato plant. The internal competition among Nucor plants was one of the main reasons for Nucors high productivity. Commenting on the competition among the mills, DiMicco said, We encourage positive competition that isnt destructive. Everybody wants to have leadership in the company. It goes down to the employee level. In addition, Nucor implemented a profit sharing plan with a deferred trust instead of a retirement plan for line employees (this excluded middle and top management). Under this plan, 10% of pre-tax earnings were allotted to profit sharing every year. Of the total amount allotted to profit sharing, 20% was paid by the company in cash in March of the following year. This was to make sure that in the short run employees did not take for granted the 10% of profits shared each year. The remaining 80% of the amount was held to fund the worker retirement program. The arrangement had the effect of making the retirement income of Nucor employees depend on the companys success. Nucor also provided a scholarship of $1,000 for every child of a full time employee of Nucor (excluding the middle and top level employees) to attend four years of college or vocational schools. Nucor also provided scholarships to employees who wanted to pursue higher education or acquire additional skills. Every Nucor employee was covered under a compensation plan according to management layer he/she belonged to. Weekly bonuses were paid based on the production levels of the work group. Nucor calculated bonuses according to pre-decided production goals and formulas. According to company sources, this incentive plan motivated employees to achieve production goals. The production incentive bonus was around 80-150% of base pay. Bonus was also linked to attendance. If an employee was late by 10-15 minutes, he was not paid bonus for that week. This ensured that employees reported to work on time. Employees were also not entitled to bonus if equipment broke down. This made employees take care of equipment and instilled a sense of ownership in them, which in turn led to high productivity. Said Coblin, We ask our people to treat this like its their own business. Its like, Heres your McDonalds franchise, now go to it.

Nucor paid its production managers incentive bonus based on total annual plant performance. The bonus was calculated on the basis of return on assets of the plant. A return of 25% or more on assets employed by plant was the standard set for all Nucor plants for calculating incentive bonus. According to company sources, generally production department managers earned around 82% of base salary as incentive bonus. Nucor provided only one compensation plan for all its senior level employees. Unlike other companies, senior level executives at Nucor did not receive hefty pay cheques and their basic pay was the lowest in the organization. The bonus plan for the senior level employees was based on return on shareholders equity, subject to certain minimum earnings. They received bonus in both cash and stock and the breakup was around 60% stock and 40% cash. In addition to these incentive plans, when the company performed extremely well, Nucor provided for extraordinary bonus to all its employees. However, senior level officers were not entitled to extraordinary bonus. Nucor strictly adhered to its egalitarian philosophy. Unlike other Fortune 500 companies which owned corporate jets for the senior management, Nucor did not own any corporate jets, nor did it provide chauffeur driven cars to its top employees. The senior executives were not provided with executive dinning rooms or executive parking places. All employees irrespective of cadre were entitled to the same holidays, leave system and insurance program. According to company sources, this increased the team spirit among the employees. END OF CASELET 1

Caselet 2
Read the caselet carefully and answer the following questions: 3. Most of the managers in many companies cite performance appraisal as the task they dislike the most. Explain the various problems and complaints that appraisals often invoke. ( 7 marks) 4. Nokia uses an online appraisal system in order to eliminate the drawbacks such as lot of paperwork and excessive control of the appraisal process. Discuss the advantages and disadvantages of such appraisal system to Nokia. ( 7 marks) 5. Rating errors are not necessarily deliberate because they usually occur outside a persons awareness. Yet, these errors have significant consequences for employees when managers base their people-related decisions on such potentiality invalid decisions. Discuss the various rating errors that affect the performance appraisals. ( 6 marks) In most organizations, the annual appraisal system usually does not work as effectively as expected. As a result, employees become dissatisfied as their performance remains unrecognized and consequently the company performance suffers as a whole. The HR can attribute the reasons why companies neglect having an annual process of appraisal process to involvement of plenty of paperwork, excessive control of the appraisal process and various rating errors that creep in while appraising an employee. Thus, delay that it results in makes many line managers lose interest in the management function of appraisal, keeping these drawbacks in consideration; companies such as Nokia have begun to use Information Technology (IT) to make the process of performance appraisal more userfriendly. Nokia uses an online appraisal system which helps it to cover all its 53,000 employees. Each employee posts a series of objectives on the corporate intranet. These objectives are then discussed and agreed upon by managers and other superiors who are involved in the appraisal process. These objectives are then put on the corporate intranet and serve as a draft plan for the employee for these next six months. This plan serves as a basis for evaluating the performance of the employee at the end of six months and reaching a conclusion regarding his performance. If the performance requires improvement, the HR department assists the individual in analyzing the reasons for his poor performance and provides him with the necessary training to improve his skills. The Nokias style of appraisal has empowered the individual to set his own objectives. His training and development needs are identified as a part of subsequent discussions with the manager.

Although a manager plays an important role in assessing the employees performance, the HR department conducts the annual review of the performance of all the employees to assess their training development needs. The appraisal process at Nokia increases the confidence level of the employees as it begins with the employee posting the result of his self-assessment on the corporate intranet. The self-assessment report of the employee is then sent to the manager who adds his evaluation to the report. In order to present an unbiased opinion, evaluations by 5 or 6 managers are obtained and added to it. Although IT cannot prove to be a perfect tool for appraising the performance of employees, if it is coupled with vital support from the management, it can certainly help an organization to come up with effective results in the long-term. Tauo Jokinen, a product development manager with Nokia, conjectured that performance appraisal systems actually erode performance over time as a result of people endeavoring to set goals that are achievable, thus ensuring themselves a decent appraisal. This might be viewed as a form of structural deflation regarding performance, and it is quite reminiscent of the late Kenneth Berriens view that management might control the lower limits of productivity but employees are clearly in control of the upper limits. The source of the fear cited above owes to the fact that the carrot-and-stick nature of appraisal systems is mostly stick. Performance appraisals become a permanent part of the employees personnel folders. Many people have access to these folders including prospective employers elsewhere within the company, the human resources department and other executives and senior managers. Past appraisals exert a significant influence over status and standing, future assignments, and promotions. Thus, although performance appraisal systems do not distribute much in the way of rewards, they can inflict great damage. Control of appraisals is largely in the hands of the employees supervisor. Savvy employees know that success hinges in large part on psyching out the boss. They also know that when senior executives call for change, the marching orders, if any, will come from their supervisors. In short, for political, structural, and systemic reasons, performance appraisal systems cannot function as intended. Worse, they seem to have an almost exclusively negative impact on the very employees they are meant to help. This view of performance appraisals squarely contradicts the mythology of performance appraisal systems. Further, the reasons that performance appraisal systems fail to provide the benefits claimed for them seem firmly rooted in the nature of organizations and the behavior of people. Trying to change these factors so that performance appraisal systems will work the way they are intended is truly a modern-day challenge. All things considered, one would hope that performance appraisal systems are relatively inexpensive. END OF CASELET 2

Caselet 3
Read the caselet carefully and answer the following questions: 6. Discuss the various leadership styles of situational leadership model proposed by Blanchard. Analyze the leadership style followed by Mr. Ashish Gupta according to Blanchard. ( 8 marks) 7. Explain the various steps to be followed to develop the managees competence and commitment as suggested by the One Minute Manager. ( 7 marks) Rahul Mehra (Mehra) and Rajesh Mithra (Mithra) were annoyed that the week had begun badly. It was Monday morning and it was time for them to provide their manager, Ashish Gupta (Gupta), with a detailed report on achievement of their weekly targets. Unfortunately, the preceding week too, had been a dull one with not even fifty percent of the targets being met. Mehra and Mithra worked as sales representatives for the personal loans division of a leading private bank. Mehra gained a lot of experience in handling the customers as he was working from the past 1 year in the bank. He always met weekly targets as a result earns the special sales incentives, only lucrative monetary benefit offered by the company. Mehra has a high level of competence and commitment towards his job. While Mithra has joined the bank recently and moreover has low ability and commitment towards his job. The bank

set the targets for each sales representative in terms of the number of new customers and the total value of sales to be achieved. Gupta was a manager who liked to be in total control of any situation. His micromanaging tendency made him exercise total control over his subordinates in all organizational aspects. (A micromanager is one who does not trust his subordinates and who closely monitors them on the job.) He thought of himself as being very knowledgeable and did not feel he had to seek suggestions from his team members. He believed in issuing instructions to his subordinates and expected them to follow the instructions without questioning. He kept an eye on the performance of his 12-member team of sales representatives throughout the twelve-odd hours they spent in office. He expected his team members to keep him informed about their progress on any target on an hourly basis even when they were on the field. The team was responsible for obtaining leads (prospective customers) and eventually converting them into customers. The targets, in terms of the volumes and value of loans, were so high that achieving them seemed a difficult task. Mehra went into Guptas room only to be given a strong warning that if the achievement of targets for the week ahead was also below expectations, it would cost him his job. Most of Mehras colleagues too had a similar experience to narrate after they had submitted their weekly report. To make matters worse, Gupta called for an emergency meeting of sales representatives, and announced that all teams must follow a systematic procedure to gather data, make cold calls to potential customers from the leads obtained and then close the deal No one was permitted to deviate from this style of working. The team was thus forced to follow a traditional way of marketing, which included calling up prospective customers and following up until the deal was finalized. They were not allowed to try out new and innovative ways of marketing their services. The team members were expected to report to Gupta about their performance on a daily basis, unlike the weekly reporting that was followed previously. The week that followed, was one in which team members struggled under tremendous pressure. Ultimately, they were unable to meet even the weekly targets. This made Gupta even more frustrated and he again called for a meeting. But what took place at the meeting left him in a state of shock, helplessness and despair. Mehra, along with three others, among the best performers in the organization, quit the organization. END OF CASELET 3 END OF SECTION B

Section C : Applied Theory (20 Marks)


8. This section consists of questions with serial number 8 9. Answer all questions. Marks are indicated against each question. Do not spend more than 25 - 30 minutes on Section C.

A goal means which has to be accomplished or aimed at, and describes what a managee is expected to achieve over a specified period of time. Goals must cover all the important aspects of a managees role and all are not equal as regards their contribution to role responsibilities some are more critical than others to the managees role performance. Explain the various attributes that goals must respond in order to be effective. ( 10 marks) Pareek has suggested various dimensions that influence a managees role efficacy. The more each of these dimensions is present in the role, the higher the efficacy of that role is likely to be. Explain these dimensions. ( 10 marks)

9.

END OF SECTION C END OF QUESTION PAPER

Suggested Answers
Performance Measurement and Reward Systems (MB3G1H)
Section A : Basic Concepts
1. 2. Answer Reason B Problems that afflict modern organizations are not task problems, they are process problems. E In work planning and review process, specific objectives are identified in advance of a performance period and at the end of the period, results are reviewed against these objectives. B Option (b) is not true regarding the findings summarized by Hale and Whitlam because the challenge for the personnel function is to facilitate the ownership of performance management by line management. All other options (a), (c), (d) and (e) are true regarding the findings. B Moderation reviews are used to minimize the inevitable rating errors, or use of different standards by various appraisers, especially in situations where appraisals are used to establish relativity among competing colleagues during HR decision-making. C Role description acts as a sound starting point for determining responsibilities and activities in a performance plan. E Systems-oriented projects, which directly relate to expeditious fulfillment of the job, and are not part of the ongoing day-to-day tasks. D Performance planning makes benchmarking an exciting co-optitive give-and-take game, rather than a boring one-way street. D Individual performance plans incorporates the tasks to be completed, performance standards and the indicators of achievement. It does not incorporate competencies required for fulfilling the objectives. D Leadership, roles and task are the key constituents of a team but not the structure. B All options (a), (c), (d) and (e) are true regarding team and team building except option (b) as team building is a process, not an event. E Morale is a group phenomenon involving extra effort, goals communality and feelings of belonging. C Local line leaders are people at the heart of the value-generating process, design, produce and sell products, provide services and talk to customers. B Statement (II) - This technique follows structured format is false as essay-type appraisal follows unstructured or a semi-structured format. The following statements are true regarding essay-type appraisal: Most common form of this technique is annual confidential report. In this technique, appraisals are hard to compare across a population of appraises. Sub-standard performance indicates that the managee will be placed under observation for a period determined by the supervisor and the senior management. While designing the appraisal format, special attention may be given to the following: Rating scale must have limited points. Insist on documentation and justification of at least the highest and the lowest ratings. Standardize and clearly understand the terms used. Avoid factors such as creative, assertive, innovative and dependable. All options (a), (b), (d) and (e) are tools for stocktaking potential except option (c) self fulfilling prophecy as it is a rating error while appraising the managee. Option (b) - It must attempt to generate higher-level motivational forces in the managee is not a criteria for an assessment center but it is a shift in the evaluative and developmental process. The following are criteria for assessment centers:

3.

4.

5. 6. 7. 8.

9. 10. 11. 12. 13.

14. 15.

E A

16. 17.

C B

18.

It must contain an explicit definition of the determinants of managerial effectiveness. Multiple measurement techniques, including simulation are used. Integration of information occurs after all the measurement techniques are completed at an assessment evaluation session. Performance of behavior is observed and evaluated by a selected trained team of managers. The following are assumptions of 360 degree appraisal system according to Turnow: Awareness of discrepancies between how one see themselves and how others see us increases ones self-awareness. Enhanced self-awareness is a key to high performance as a leader. Statement (III) It is a powerful intervention to increase awareness of the importance of aligning leader behavior, work unit results and customer expectations is increased is not an assumption suggested by Turnow. In positive and empathetic, managers see the outcomes from the managees perspective, understand problems and difficulties faced by him/her to achieve the outcomes and manager also engage himself proactively with the managee to identify ways of obviating similar problems and difficulties in future. Appraising contribution means comparison inter-se of performance across individuals, workgroups, departments, functions etc., and rank ordering their value addition to requisite goals. Achievement motive will determine the concern for accomplishing the task of developing counselee competencies. In learning by doing The manager and managee carry out a thorough examination of what worked well, what did not and why In monitoring progress Discuss progress on the learning agenda. The manager provides answers to the managees problem when the managee has exhausted his/her own resources. The manager constantly helps the managee in the process of exploration by asking relevant questions. In setting tasks

19.

20.

21. 22.

E B

23.

The manager set the tasks that are consistent with the managees ability to learn. Coaching takes three forms: Telling or directing. Non-directive questioning and analyzing. Middle-of-the-road consulting. During skip-level meetings the managers supervisor talks with the managers direct reports about his/her strengths and areas for improvement. Pygmalion effect demonstrates that high expectations produce high performance from managees. Using influence and power comes under the Tell and Sell discussion type. Adjustable and achievable: The goals while being challenging, it remains within the reach of the managee effectively using her competencies and demonstrating high commitment and is thus achievable in the normal course. A timeline acts as ready reckoner for the plan also shows the numerous and varied planned activities in relationship to each other. The following are true regarding participatory process: It provides for standards that are easier to verify, since there are more perspectives available to develop standards and also measure performance during reviews. The relevance of performance standards is understood by everyone more clearly and holistically.

24. 25. 26. 27.

B A C C

28. 29.

D C

30.

It simultaneously helps set team standards, which in reality are part of the performance standards for the manager. Statement (II) is false - In an interdependent work group, this process can ensure more connected and coordinated performance standards among all team members, which can be monitored laterally by colleagues as they impact their performance. Position in the organogram locates the role in the organizational context, by defining its vertical, horizontal, or diagonal etc., relationship with other roles.

Performance Measurement and Reward Systems (MB3G1H)


Section B : Caselets
1. Nucors employees were paid according to their productivity. Employees were given certain production goals, and their pay depended on realizing these goals. Nucors incentive plans not only encouraged the employees to perform well at individual level but also encouraged them to excel at the team level as the incentive plans took the performance of the teams into consideration. Nucors incentive plans also resulted in healthy competition among the companys different plants. For instance, workers at Nucors Hickman plant worked hard to break the production records of Nucor-Yamato plant. The internal competition among Nucor plants was one of the main reasons for Nucors high productivity. Weekly bonuses were paid based on the production levels of the work group. Nucor calculated bonuses according to pre-decided production goals and formulas. Incentive plan motivated employees to achieve production goals. Bonus was also linked to attendance. If an employee was late by 10-15 minutes, he was not paid bonus for that week. This ensured that employees reported to work on time. Employees were also not entitled to bonus if equipment broke down. This made employees take care of equipment and instilled a sense of ownership in them, which in turn led to high productivity. All employees irrespective of cadre were entitled to the same holidays, leave system and insurance program which increased the team spirit among the employees. Factors to be considered while designing reward system An effective reward system must not violate the equity principle, or create ethical dilemmas for the recipient managees, but promote a high psychosocial quality of work life. It must encourage organizational effectiveness by rewarding high performance and be sustainable by offering rewards that are consistent with the organizations style and structure. An effective reward system must link with measurable performance. Managees who produce more, better quality outputs must be distinguished through rewards perceived higher than those awarded to less productive performers. The criteria for earning rewards must be clearly known to the managees; who must completely understand what behaviours or outcomes will be rewarded, and what will not be. It bears repetition that, at all times, organizations must ensure that all managees perceive the rewards awarded as equitable. Besides internal comparisons, external comparisons with similar organizations help to ensure that organizational rewards compare favourably with rewards in other comparable organizations. This is important in order to attract and retain the requisite quality of high performing managees. Crucial to rewarding is the assurance that the managee rewarded by the organization is in fact feeling rewarded. Common Problems and Complaints There are commonalities between what Heathfield and Moulton separately observe. Managers themselves are not strangers to the problems, complaints and protests that appraisals often invoke. Some of the ones most frequently voiced are: Appraisal events take away too much of the appraiser managers productive time. Appraising managee performance and potential is not seen as part of the normal managerial or supervisory function. It is seen more as an imposition from the personnel or human resource functionaries meant to inform their specialist function, rather than day-to-day management or supervisory function of concerned managers. While it is true that managee performance or potential become manifest only on-the-job, techniques that will make appraisal procedures acceptable to managers are only those that facilitate their day-to-day supervision, control, and motivation roles. Appraisals are poor instruments for managee comparison, thereby making an organizations human resource decisions and actions inconsistentand inequitable. Values and biases held personally by the appraising managers tend to function as organizational standards: to a lesser extent if explicit organizational standards exist and are widely known in the organization, but almost totally if such standards are either not in

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existence, or not widely shared. Managees dont know what constitutes performance, or what precisely is expected of them. Often, there is an actual (not merely perceived) communication gap between the managees and their appraising managers as to the standards used to appraise performance. Managers are not authentic in providing performance feedback. Ambiguity around what constitutes performance also affects the managers appraiser role, especially in regard to low performers. In the absence of concrete data with respect to a shortfall in performance, a natural problem arises for the manager in her task of providing feedback in respect of lowperforming managees. As a result, some of them take the easy way out and either avoid giving low appraisals that may be hard to defend, or withhold authentic feedback. Advantages of online appraisal system for Nokia are: Empowerment of employees: Nokias style of appraisal is that the individual is empowered to set his own objectives. His training and development needs are identified as a part of subsequent discussions with the manager. Increases the confidence level: The appraisal process at Nokia increases the confidence level of the employees as it begins with the employee posting the result of his self-assessment on the corporate intranet. Unbiased appraisal: The self-assessment report of the employee is then sent to the manager who adds his evaluation to the report. In order to present an unbiased opinion, evaluations by 5 or 6 managers are obtained and added to it. Thus, a 360-degree performance appraisal can work efficiently if information technology is harnessed. Effective in the long-term: Although IT cannot prove to be a perfect tool for appraising the performance of employees, if it is coupled with vital support from the management, it can certainly help an organization to come up with effective results in the long-term. Disadvantages of online appraisal system for Nokia are: Structural deflation: Tauo Jokinen, a product development manager with Nokia, conjectured that performance appraisal systems actually erode performance over time because of people endeavoring to set goals that are achievable, thus ensuring themselves a decent appraisal. This might be viewed as a form of structural deflation regarding performance, and it is quite reminiscent of the late Kenneth Berriens view that management might control the lower limits of productivity but employees are clearly in control of the upper limits. Access to multiple sources: The source of the fear cited above owes to the fact that the carrot-andstick nature of appraisal systems is mostly stick. Performance appraisals become a permanent part of the employees personnel folders. There, many people have access to them including prospective employers elsewhere within the company, the human resources department (HR), and other executives and senior managers. Past appraisals exert a significant influence over status and standing, future assignments, and promotions. Thus, although performance appraisal systems do not distribute much in the way of rewards, they can inflict great damage. Various rating errors that affect performance appraisal Halo and Horn Errors: These occur when a manager bases her perception or evaluation of a managee on only partly apparent attributes, behaviours or actions, to the exclusion of totality. Leniency and Severity Error: Some appraisers are very generous or lenient with their ratings. This tendency may arise from several sources plain good-nature with scant concern for the organization, very high affiliation motive or concern for good relations with appraisees, political or populist tendencies giving rise to a need to push ones people ahead. Severity error is the obverse of leniency error. There is evidence to suggest that the tendency to rate severely or leniently may be significantly influenced by the way one herself is rated. Projection: In projection, a person ascribes her own attitudes, prejudices or feelings on to another. Whether or not these attitudes, prejudices or feelings are true for the other person, they reflect the projectors own frame of mind. Range Restriction Errors: This can be seen as the abdication of managerial responsibility to sift poor performance from the good, or a play-safe approach so that no motives can be attributed for differentiation and, also, no attacks can be mounted by those rated low. Recency Error: Good performance towards the end of an appraisal period dominating the appraisal of a managee ignoring indifferent performance during the earlier part of the appraisal period (or vice-versa) is a frequent occurrence. Self-fulfilling Prophecy: Sometimes, people expect certain behaviours from others so strongly

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that they perceive those behaviours as occurring. These will be distortions if these behaviours were perceived without their actually taling place. Stereotyping: It means attributing almost instantly, instinctively and without conscious control performance behaviour, attitudes or outcomes to a managee on the basis of preconceived notions about a group or a category to which she belongs. Various leadership styles suggested by Blanchard In their book Leadership and the One-Minute Manager, Blanchard, Zigarmi and Zigarmi elaborate a model of Situational Leadership. According to them, A whole manager is flexible and is able to use four different leadership styles: Directing: The leader provides specific instructions and closely supervises task-performance. Coaching: The leader continues to direct and closely supervise task accomplishment, but also explains decisions, solicits suggestions and supports progress. Supporting: The leader facilitates and supports subordinates efforts towards task accomplishment and shares responsibility for decision-making with them. Delegating: The leader turns over responsibility for specific task-accomplishment, including decision-making and problem solving, to subordinates. Ashish Gupta adopts directing style of leadership. His style can be briefed as below Gupta liked to be in total control of any situation and exercised total control over his subordinates in all organizational aspects. He believed in issuing instructions to his subordinates and expected them to follow the instructions without questioning. He kept an eye on the performance of his 12-member team of sales representatives throughout the twelve-odd hours they spent in office. He expected his team members to keep him informed about their progress on any target on an hourly basis even when they were on the field. He announced that all teams must follow a systematic procedure to gather data, make cold calls to potential customers from the leads obtained and then close the deal. No one was permitted to deviate from this style of working. The team was forced to follow a traditional way of marketing. They were not allowed to try out new and innovative ways of marketing their services. The One Minute Manager also suggests five steps to develop the managees competence and commitment: Step 1. Tell the managee what to do. Step 2. Show the managee what to do. Once the managee knows what to do, she will need to know what the performance standards are, and what good performance looks like. Let the managee try. The manager better not hand out too much responsibility too soon. Step 3. Let the risk be reasonable both for the managee as well as the manager. Step 4. Observe managee performance, rather than closely supervise or monitor it. Many managers hire people, tell them what to do, and then leave them alone and assume good performance will follow: they abdicate, they do not delegate. Managers cannot blame managees if the managees had assumed that being left alone meant the manager felt things were fine. Step 5. Praise managee progress. Praise or recognition is the key to helping managees move from low commitment and competence to high commitment and competence.

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Section C: Applied Theory


8. Goals must respond to certain attributes to be effective. For example: Managee goals must flow from organizational goals, and also link with goals of other related segments of the organization. Goals cascade. Goals superordinate an individuals contribution. They are best developed in a context with which the goal-setter can identify. They must contribute fully to what the organization is striving for as a whole. Ideally, every goal in an organization must connect with every other goal. At the very least, the managees goals must feed into her managers goals. Goals are the ultimate outcomes or impacts of performance, not its activities. As such, goals must describe these outcomes or impacts. There will be intermediate goals, which must be successfully met in order to fulfill the ultimate goal(s). Solving problems, closing deals for

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sale or purchase, ensuring economy through effective inventory control are examples of intermediate goals; whereas attending meetings or training programs, negotiating, carrying out administrative chores are examples of activities. A useful goal always aims at improving some key result(s). Organizations define these results in terms of quantity of output, quality of goods and services, cost, sales figures or development of new products, etc. An additional dimension is the time taken, e.g., the number of telesales calls made in a day, or the number of pieces produced per hour. In order to be meaningful, outcomes or impacts should be measurable. These enhance the essential control dimension in an organizations functioning. It helps the performer get a concrete sense of the task, as well as its achievement. It also makes goals comparable with those of other managees and enables the organization to make its appraisals and rewards more commensurate and equitable. Measurability of goals is linked to the way that organizations define their goals or results. The most worthwhile of goals are quantifiable and measurable: some may need more effort and creativity. Goals become exciting if they challenge and stretch the capacities of the performer. Yet, if they are not achievable in the estimation of the performer, they tend to discourage, even frustrate the performer and she may give up. Ease and difficulty of achievement is relative to the performers ability to accept challenge and perform. The same task may be an easy one for a particular managee and difficult or challenging for another. Easy-to-achieve goals do not motivate a person while impossible goals frustrate her. Neither of these is a favourable condition for high performance. Moderately hard-to-achieve goals create the right doze of challenge and stretch and charge a managee to use her best potential; thereby optimizing results. Where goals are set in a dyad, between the manager and the managee, these must be mutually agreed upon. The acceptance of goals is a basic condition for high commitment to accomplish them. Goals handed down by the managers are the managers agenda. There is no reason for the managee to be excited about it. Goals developed by the managee in isolation may not evoke the manager interest or support.Mutual agreement helps make goals the common ground between the manager and the managee, for which both of them will enthusiastically work. Mutually-agreed-upon goals, thus, have far greater chances of success. Goals are powerless, if these are not uniformly understood. Written goals enhance shared understanding and are more sustainable. They dont wear out easily with time. Goals must carry an optimum commitment of all concerned in the goal-setting process. Yet, changes made elsewhere in the organization, in its environment or in the work unit itself, may call for changes in goals as time passes. This is likely in a longer-term goal more than it is in a relatively shorter-term goal. Participants in goal-setting and goal achievement processes must understand that goals can be revised in appropriate situations. For this to happen, goals must be subject to periodic review. Dimensions of Role Efficacy:Pareek suggests that 10 dimensions influence a managees role efficacy: Centrality, Integration, Proactivity, Creativity, Linkage, Helping, Superordination, Influence, Growth, and Confrontation). The more each of these dimensions is present in a role, the higher the efficacy of that role is likely to be. He describes the 10 dimensions as follows: Centrality vs. Peripherality: The dimension of centrality measures the role occupants perception of the significance of her role. The more central that a managee feels her role is in the organization, the higher will be her role efficacy. Integration vs. Distance: Integration between the self and the role contributes to role efficacy and self-role distance diminishes efficacy. Proactivity vs. Reactivity: When a role occupant takes some initiative and does something independently, that person is exhibiting proactive behavior. On the other hand, if she merely responds to what others expect, the behavior is reactive. Creativity vs. Routinism: When role occupants perceive that they do something new or unique in their roles, their efficacy is high. The perception that they do only routine tasks lowers role efficacy. Linkage vs. Isolation: Inter-role linkage contributes to role efficacy. If role occupants perceive interdependence with others, their efficacy will be high. Isolation of roles reduces efficacy. Helping vs. Hostility: One important aspect of efficacy is the individuals perception of how she gives or receives help. A perception of hostility decreases efficacy. Superordination vs. Deprivation: One dimension of role efficacy is the perception that the

role occupant contributes to some larger entity. Influence vs. Powerlessness: The role occupants feeling that they are able to exercise influence in their roles increases their efficacy. The influence may be in terms of decision making, implementation, advice or problem solving. Growth vs. Stagnation: When a role occupant has opportunities and perceives them as such to develop in her role through learning new things, role efficacy is likely to be high. Similarly, if the individual perceives her role as lacking in opportunities for growth, the role efficacy will be low. Confrontation vs. Avoidance: When problems arise, they can either be confronted to find solutions for them, or they can be avoided. Confronting problems to find solutions contributes to efficacy and avoidance reduces efficacy.

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