Reward 20 Management - Lecture notes 1-10 PDF

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REWARD MANAGEMENT0841e6a4abc6e5a14b93de18a43652bfREWARD MANAGEMENTINTRODUCTIONThe course is intended to equip the trainees with knowledge, skills and attitudes necessary indesigning, implementing and maintaining pay systems which are geared towards theimprovement of organizational goals by promoting...

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REWARD MANAGEMENT

0841e6a4abc6e5a14b93de18a43652bf.doc

REWARD MANAGEMENT

INTRODUCTION

The course is intended to equip the trainees with knowledge, skills and attitudes necessary in designing, implementing and maintaining pay systems which are geared towards the improvement of organizational goals by promoting motivational goals by promoting motivation commitment of employees. General Objectives At the end of this unit, the trainee will be able to: a) b) c) d)

Appreciate the need for continuous assessment of performance and potential Acquire skills to develop and implement an effective performance management programme Explore and appreciate various factors influencing remuneration Understand the relationship between the remuneration package and the quality of employees

e)

Design a wage and salary structure

f)

Carry out a remuneration survey

Topics to be covered 1. 2. 3. 4. 5. 6. 7. 8.

Performance management Remuneration package Reward policy Establishing competitive market rates Job evaluation Pay structure Performance related pay (PRP) Wage payment systems

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9. 10. 11.

Benefits Salary administration Relevant labour legislation

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READING LIST Armstrong M and Long P., The Reality of Strategic Human Resource Management. (London, Institute of Personnel Management). Armstrong M., Human Resource Management Practice. (London, Kogan Page Ltd) Byars L.L., and Rue L. W: Human Resource Management. (Boston M.A. Irwin McGrawHill) Cascio Wayne: Managing Human Resources. (New Delhi, Tata-McGraw-Hill) Cole G. A. Personnel and Human Resource Management. (London, Continuum,) Flippo Edwin; Personnel Management. (Boston M.A. Irwin McGraw-Hill) Graham, H.T. and Bennett R: Human Resource Management. (London: Pitman Publishing Company). Heneman, Schwab, Fossum, Dyer: Personnel/Human Resource Management. (Boston, Richard D. Irwin Inc) Kandula R. Srinivas: Strategic Human Resource Development. (New Delhi, Prentice – Hall of India) Milkovich G.T. and Boudreau J. W: Human Resource Management. (Boston MA, Irwin). Nzuve S. N. M and Singh K. D., Introduction to Manpower Management. (Nairobi, Veena Exports Ltd,) Saiyadain Mirza S: Human Resources Management. (New Delhi Tata McGraw – Hill Publishing Company). Waweru E. M., Management of Human Resources in Kenya (Nairobi, Kenya Literature Bureau).

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TOPIC 1: PERFORMANCE MANAGEMENT

Specific objectives At the end of this topic the trainee will be able to: i)

Explain the meaning of performance management

ii)

Explain the importance of performance management

iii)

Discuss the basis of performance

iv)

Design and establish performance management system in an organization

Definition This means the integration of employee development with results based assessment. It encompasses performance appraisal, objective setting for individuals and departments, appropriate training programmes and performance related pay. Performance management emphasis development and the initiation of self-managed learning plans as well as the integration of individual and corporate objectives. Performance management is a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors. Performance is a record of outcomes achieved. Performance management is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. It is a process of establishing shared understanding about what is to be achieved, and an approach to managing and developing people in a way that increases the probability that it will be achieved in the short and longer term. Performance management is a broad process that requires managers to define, facilitate and encourage performance by providing timely feedback and constantly focusing everyone’s attention on the ultimate objectives. Principles of performance management i) It translates corporate goals into individual, team, department and divisional goals ii) It helps to clarify corporate goals iii) It is a continuous and evolutionary process in which performances improves over time iv) It relies on consensus and cooperation rather than control or coercion v) It encourages self-management of individual performance vi) It requires management style that is open and honest and encourages two-way communication between superiors and subordinates 0841e6a4abc6e5a14b93de18a43652bf.doc

vii) It requires continuous feedback viii) Feed back loops enable the experience and knowledge gained on the job and individuals to modify corporate objectives ix) It measures and assess all performance against jointly agreed goals x) It should apply to all staff; and it is not primarily concerned with linking performance to financial rewards. Concerns of performance i) Performance management is concerned with performance improvement in order to achieve organizational, team and individual effectiveness ii) Performance management is concerned with employee development. Performance improvement is not achievable unless there are effectiveness process of continuous development iii) Performance management is concerned with satisfying the needs and expectations of all the organizations stakes holders –owners, management, employees, customers, suppliers and the general public iv) Performance management is concerned with communication and involvement. It may contribute to the development of a high-involvement organization by getting teams and individuals to participate in defining their objectives and the means to achieve them.

Valuing People

Paying people

Performance management

Developing people

Involving people

Integration of performance management Performance management has integration in the following four senses: a) Vertical integration b) Functional integration c) HR integration d) Integration of individual needs Performance management should be integrated into the way the performance of the business is managed and it should link with other key processes such as business strategy, employee development and total quality management. Vertical integration TM/RM HANDOUT 1

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This is achieved vertically with the business strategy and business plans and goals. Team and individual objectives that support the achievement of corporate goals and agreed. Objective setting can be a cascading process so that objectives flow down form the top or a bottom-up process, where individuals and teams are given an opportunity to formulate their own goals within the framework provided by the overall purpose and values of the organization. Horizontal integration This means aligning performance management strategies with other HR strategies concerned with valuing, paying, involving and developing people. It can act as a powerful force in integrating these activities At a general level, the broad process of performance management requires managers to do three things well: 1. 2. 3.

Define performance Facilitate performance Encourage performance.

Define Performance: Ensure that individual employees or teams know what is expected of them, and that they stay focused on effective performance. The manager does this by staying focused to goals, measures and assessment (performance appraisal). Facilitate performance Managers must facilitate performance – eliminate roadblocks to successful performance, provide adequate resources to get a job done right and on time, and pay careful attention to selecting employees. Obstacles that can inhibit performance include; poorly-maintained equipment, delays in receiving supplies, inefficient design of work spaces and ineffective work methods Encourage Performance. To encourage, especially repeated good performance, it is important to do the following well; a) provide a sufficient amount of rewards that employees really value, b) in a timely and c) fair manner. PERFORMANCE MANAGEMENT PROCESS Performance management is concerned with improving individual and team performance. Performance management is a continuous self-renewing cycle. Its main activities are:1.

Role definition – in which the key result areas and competence requirements are agreed

2.

The performance agreement / contract – this defines expectations (what is to be achieved, how will performance be measured, the competencies needed to deliver the required results. This is the performance planning stage

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3.

Personal development plan – sets out the actions people intend to take to develop themselves and improve their performance. This is the performance development stage

4.

Managing performance throughout the year – here action is taken to implement the performance agreement and personal development plan

5.

Performance review – is the formal evaluation stage, when a review of performance over a period takes place, covering achievements, progress and problems.

ACTIVITIES OF THE PERFORMANCE MANAGEMENT PROCESS Role definition Plan

Performan ce

Performance review Review Personal dev.

Performan ce

Act

The performance management cycle.

Monito ROLE DEFINITION r The role definition provides the framework for P.M. It sets out: -

The purpose of the role, which summarizes its overall aim-what the role holder, is expected to do.

-

The key result areas or principal accountabilities – which define the main output areas of the role.

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The key competencies, which indicate what the role holder has to be able to do and the behaviour, required performing the role effectively. They provide the basis for drawing up personal development plans.

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Performance agreements, also known as performance contracts, define expectations i.e. the results to be achieved and the competences required to attain these results. Agreements cover the following points.

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Objectives and standards of performance – results to be achieved defined as targets and standards

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Performance measures and indicators to assess the extent to which objectives and standards of performance have been achieved.

-

Competency assessment Core value or operational requirements – refers to the core values of the organizations for quality, customer service, team working employee development etc. certain general operational requirements may also be specified – health and safety, budgetary control, cost reduction, security.

Performance Agreements must have objectives – describing something that has to be accomplished. Objectives are targets or tasks/projects. Performance Agreements also define the performance standards. This is a statement of the conditions that exist when a job is being performed effectively. They are used when it s not possible to set time based targets. Performance measures are agreed when setting objectives. They provide evidence of whether or not the intended result has been achieved. Guidelines that define performance measures: a) b) c) d) e)

Measures should relate to results, not efforts Results must be within the job holder’s control Measures should be objective, observable and achievable. Data must be available for measurement Existing measures should be used to adapted wherever possible

Measures can be classified under the following headings: Finance – income, economic value added, shareholder value, rates of return, costs -

Output – units produced or processed Impact – attainment of a standard (Quality, level of service), changes in behaviour (internal and external customers), completion of work, innovation

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Reaction – judgment by others, colleagues, internal and external customers

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Time – speed of response, amount of backlog, time to market, delivery times.

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MANAGING PERFORMANCE THROUGHOUT THE YEAR Performance Management is a continuous process, which reflects normal good management practices of setting, directing, monitoring and measuring performance and taking action accordingly. PM is an integral part of the continuing process of management. This is based on a philosophy that emphasis. -

Achievement of sustained improvements in performance Continuous development of skills and overall competence That the organization is a learning organization

The issues that may arise in the course of managing performance throughout the year are: 1. Updating objectives and work plans Performance agreements and plans are working documents. New demands, situations arise that make demands for updating the objectives and work plans. The following is important at this level. -

Discussing with the jobholder on what has been done and achieved.

-

Identifying any shortfalls in achieving objectives or meeting standards

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Establishing the reasons for the shortfall – changes in the work environment, new pressures and demands.

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Agreeing any changes required to the objectives and work plans

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Agreeing any actions required by the employee or manager to improve performance.

2. Continuous learning Individuals must be able to learn from the problems, challenges and successes inherent in people’s day-to-day activities. Any occasion when managers give instructions, agree on what is to be achieved and review how well a task has been accomplished provides a learning opportunity. 3. Dealing with performance problems The five basic steps required to handle performance problems are: i)

Identify and agree the problem – get and analyze feedback and agreement from the individual on what the short fall has been.

ii)

Establish the reason(s) for the short fall – identify any causes that are external to the job and outside the control of the manger and individual. Consider the factors that are within the control of the manager and individual. Determine the extent to which the reason for the problem is because the individual: a. b. c. d. e.

Did not receive adequate support or guidance from his manager Did not fully understand what he was expected to do Could not do it –ability Did not know how to do it – skill Would not do it – attitude

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iii)

Decide and agree on the action required. Such action will be undertaken by the individual, the manager or both parties. This include: a. b. c. d.

Changing behaviour Changing attitudes Clarifying expectations – job requirements, objectives and standards Jointly developing abilities and skills

iv)

Resource the action – providing the coaching, training, guidance, experience or facilities required to enable agreed actions to happen

v)

Monitor and provide feed back – monitor performance, ensure feedback is provided/obtained, analyzed and agree on any further actions that may be necessary.

PERFORMANCE REVIEWS Performance and development reviews provide those involved with the opportunity to reflect on past performance as a basis for making development and improvement plans. The performance review discussion provides the means through which 5 key elements of performance management can be achieved. These are: 1. Measurement- assessing results against agreed targets and standards 2. Feedback – Giving people information on how they are performing. 3. Positive reinforcement – Recognizing what has been done well so that it will be done even better in the future. It also entails positive criticism, those that point the way to improvement. 4. Exchange of views – Performance review discussions need to be full, free and frank in the exchange of views, about what has been achieved, what needs to be done to achieve more, what people think to their work and the manner in which they are guided and managed and their aspirations. The review process should be a dialogue, not atop-down interview. 5. Agreement on action plans – to be implemented by individuals alone or by individuals with the support of their managers.

PERFORMANCE REVIEW & DEVELOPMENT MEETINGS 1.

Preparation. Both parties should prepare for the meeting so that they consider the points for discussion. Assess the achievement of objectives; understand the factors that affected performance and actions necessary to improve performance.

2.

Self-Assessment. The employee should consider achievements and progress, prepare to explain the shortfalls, training and development needs.

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Constructive Review Meetings Such a meeting is likely to take place if reviewers: Encourage reviewees to do most of the talking 

Listen actively to what they say



Allow scope for reflection and analysis



Analyse performance, not personality



Keep the whole period under review, not isolated incidents



Adopt a ‘no surprises’ approach – performance problems should have been identified and dealt with at the time they occurred



Recognize achievements and reinforce strengths



End the meeting positively with agreed action plans and an understanding of how progress in implementing them will be reviewed.

Task.



What are some of the mechanisms that organisations put into place to deal with performance problems that occur during the year?

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PERFORMANCE APPRAISAL Performance appraisal is concerned with determining how well employees are doing their jobs, communicating that information to the employees and establishing a plan for performance improvement. Appraisal is the judgment of an employee’s performance in a job, based on consideration other than productivity atone. What is being assessed in appraisal is the employee’s performance in carrying out the general duties of his/her role, together with any specific targets that have been set. Performance appraisal is the process of determining and communicating to an employee how he is performing on the job and establishing a plan of improvement. They tell an employee how well he is performing and the future level of effort and took direction. Reasons for Performance Appraisal 1. For making administrative decisions relating to promotions, firings, layoffs and merit pay increases. It helps a manager decide what increases of pay shall be given on grounds of merit. 2. For determining the future use of an employee. 3. Appraisal can provide needed input for determining both individual and organizational training and development needs, through identifying strengths and weaknesses. 4. Appraisal encourages performance improvement. They may motivate the employee to do better in his current job due to knowledge of results, recognition of merit and the opportunity to discuss work with his manager. 5. Appraisals help to identify can individual’s current level of performance. 6. Information generated by appraisal can be used as an input to the validation of selection procedures. 7. Appraisal information is an important input to human resource planning ...