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 Refers to all aspects of pay and reward including

promotion, bonuses and recognition.

 Compensation is always a STICKY ISSUE.

 Objective of good compensation is to attract , retain

and not to demotivate employees.

 Most companies use traditional financial measures such

as financial growth, profitability.
 Method of utilizing market pay data to evaluate
organization’s pay level.

 Develop hierarchy.

a.) Ranking Method – ranking of employees from best

to worst

b.) Classification Method

c.) Point Method (skills, responsibilities, efforts,

working conditions)
Nucor Corporation is the largest steel producer in
the United States, is well-known for having succeeded
in quality, productivity, participation and compensation.

Nucor’s compensation at all levels is based on pay

for performance. In the mills, it means that pay is tied
to the number of tons of steel produced each day. The
company has found out that this results in above
industry average wages for employees. By pushing
decision-making to the lowest levels of organization,
employees empowered to do such things as to stop
operation when they see problem.
Employee relations to Nucor are based on four clear-cut
 Management is obligated to manage Nucor in such a way
that the employees will have the opportunity to earn
according to their productivity.

 Employees should feel confident that if they do their jobs

properly, they will have a job tomorrow.

 Employees have the right to be treated fairly and must

believe that they will be.

 Employees must have an avenue of appeal when they

believe they are treated unfairly.
To emphasize the importance of employees as a vital part
of the corporate culture and its ongoing success, to
cover the company’s Annual Report contains the
individual names of a segment of its employees, in
alphabetical order. In past years, Nucor featured the
names of each of its 20,500 employees spread over the
first 14 cover pages of the report.
 Recognition and rewards can be powerful motivators.
They can be monetary, non monetary, formal or
informal, individual or group.

 Whatever the recognition, it should be a symbolic value

that the employees inspire.

 Recognition has important benefits to both employees

and organizations.

 Not everyone values the same type of recognition and

Conference Board found out that a combination of cash
and noncash works better.

Certain key principle lead to effective recognition and

 Give both individual and team awards.
 Tie rewards to measurable performance.
 Involve everyone
 Drive behaviors that supports organizational values
and high performance.
 Publicizing extensively.
 Making recognition fun.
 Performance appraisal is a process of subjectively
evaluating the quality of employee’s work.

 Exceedingly difficult.

 Provide feedback to employee.

 Recognize their strength and weaknesses.

 Determine trainings needed.

 Refers to setting of objectives for a certain period of
time. Objectives might focus on the development of
knowledge or skills.

 Objective setting is followed by a supervisory review

of accomplishments.
Numerous research studies have pointed out the
problems and pitfalls of performance appraisals. Many
legitimate objections can be made:

 They tend to foster mediocrity and discouraging risk

 Focus on short term and measurable results.
 Focus on the individual and therefore destroy
teamwork between departments.
 They are often unfair, as managers frequently do not
possess observational accuracy.
 A group of individuals who interact with the employees or

 This team might include suppliers, clients, peers, internal

customers, managers and subordinates.

 The final performance appraisal consists of discussing an

aggregation of the comments and ratings with the

 Performance appraisal are the most effective when they are

based on the objectives.
 An effective performance appraisal should focus on the
feedback and improvement.

Step 1: Establish Expectation

Step 2: Manage Performance

Step 3: Measure Reward and Performance

Step 4: Improve Performance