Designing and Using
What is the main purpose of performance management systems?
Improve employee performance and achieve organizational goals.
Why do some managers don’t like performance management systems?
Think of the system as complex and a waste of time.
The performance management system should have nothing to do with the organization's strategic goals. (T/F)
F – It should be closely related.
What are the three types of equity in compensation?
internal equity, external equity, and individual equity
What are the two main forms of direct compensation?
base pay and incentive pay
What are the three types of performance evaluation?
Traits, behaviors, results.
Performance management systems that are not linked to the reward system are still very effective. （T/F）
F – If you do not link to rewards, the system will lose its motivational effect.
Performance data can help identify potential bias issues. (T/F)
T
What theory explains how employees assess fairness in the workplace?
Equity theory.
What are the two main types of pay transparency?
individual pay transparency and process transparency
Performance management systems can only evaluate employee results and cannot evaluate behavior. (T/F)
F – Performance management can evaluate behaviors, traits, and outcomes.
All managers like to be involved in the design of performance management systems. (T/F)
F – Many managers will resist unless they have a sense of engagement and support.
Who within an organization is typically responsible for handling ethical concerns and investigating complaints about employee behavior?
The Human Resources Department.
Why is perceived equity important for employee performance and retention? Name two reasons.
higher job satisfaction and lower turnover
Why do organizations use performance-based pay? Name two benefits.
motivating higher performance and controlling the cost
Absolute evaluation is to compare employees with colleagues to score. (T/F)
F – That is relative assessment, absolute assessment is scored based on criteria.
What are the common reasons for performance management failure?
There is no link to the reward system.
Identify two examples of off-duty employee behaviors that can create ethical or legal dilemmas for employers.
Use of medical marijuana or other substances
Political or religious activities
Criminal records or past arrests
Alcohol or tobacco use
Personal lifestyle choices or social behaviors
List two ways organizations can improve internal equity.
1. Use job evaluation systems.
2. Increase salary process transparency.
What are two advantages of offering indirect compensation to employees?
1. Improves employee satisfaction and loyalty.
2. Helps attract and retain top talent.
What are the three types of ethical problems Human resource managers typically face?
1. The need for discernment or determining the right thing to do in a given situation.
2. Conflict between what the HR manager feels is right and what the employer asks to be done.
3. Conflicts of interest wherein the HR manager's personal beliefs differ from the responsibility of acting as an agent for the employer.
What are the benefits of high-level support for performance management?
Improve system credibility and execution.
Why is incorporating ethics into a performance management system important for modern organizations? Include at least two benefits.
Incorporating ethics into performance management reinforces a culture of accountability and fairness, guiding employees to make ethical decisions. It also improves recruitment, retention, and employee morale by signaling organizational integrity and respect for fair treatment.
What are three challenges in achieving external equity?
1. Fluctuating market wages
2. Regional cost-of-living differences
3. Competitor benefit differences
What are three factors organizations should consider when designing a fair and effective compensation system?
1. Internal equity – ensuring fair pay differences within the organization.
2. External competitiveness – offering pay that is competitive in the market.
3. Legal compliance – following laws such as the Fair Labor Standards Act and Equal Pay Act.