Managing Employee Performance and Reward Concepts, Practices, Strategies 2nd edition

1. Managing Employee Performance and Reward Concepts, Practices, Strategies 2nd edition

2. Working with psychology • Work behaviours • Work attitudes • The psychological contract • Organisational justice • Motivation in theory and practice: • Content theories • Process theories

3. Work behaviours Work behaviours are physical and/or verbal actions by individuals that are: • Observable • Measurable • Causally linked to desired performance results, either positively or negatively

4. Three key typesof behaviour 1. Membership behaviour When people decide to join and remain with an organisation. Characteristics: • Reduced turnover/longer tenure • Reduced absenteeism

5. Three key types of behaviour 2. Task behaviour When employees perform specific work tasks that have been assigned to them and which form part of the organisation’s technical core. Characteristic: • Increased work effort

6. Three key types of behaviour 3. Organisational citizenship behaviour When employees voluntarily and altruistically undertake special actions that exceed membership and task compliance. Characteristics: • Volunteering to carry out task activities not formally part of the job (i.e. discretionary effort) • Persisting with extra enthusiasm or effort to complete one’s own task activities • Helping and cooperating • Showing initiative/being innovative • Endorsing, supporting and defending organisational objectives

7. Key work attitudes An attitude is a conscious, cognitive predisposition or inclination to act or behave in a certain way.

8. Key work attitudes 1. Work motivation • The strength of the employee’s desire to perform his/her assigned work tasks Three dimensions: • The direction of effort (why people take certain actions rather than others, e.g. emphasising product quantity over quality) • The intensity of effort (why the actions taken involve either a lot of effort, or a little effort) • The persistence of effort (why some actions are more sustained and enduring than others)

9. Key work attitudes 2. Job satisfaction • How happy am I in my job? • The overall positive or negative attitude the employee holds towards the job and the workplace • Covers both intrinsic (job content) factors and extrinsic (job context) factors, including rewards

10. Key work attitudes 3. Organisational commitment • The strength of the employee’s attachment to the organisation; feeling of belongingness • Commitment + effort = ‘engagement’ Three dimensions: • Affective commitment (wish to remain because of perceived emotional benefits) • Normative commitment (felt obligation to remain because of perceived indebtedness to the organisation) • Continuance commitment (felt need to remain because of perceived costs of leaving) But commitment to who or what, exactly?

11. Satisfaction Membership behaviour Organisational citizenship behaviour Commitment Task behaviour Motivation Relationship between work attitudes and work behaviours

12. The psychological contract A contract: an agreement about the mutual responsibilities of parties in an exchange relationship. Involves a promise, a payment/consideration and an acceptance. The psychological contract: perceptions or expectations by each party as to what they and the other party have undertaken to give and receive in the exchange. Why does it exist? Because the employment exchange is typically very open-ended and imprecise, often leading to ‘contract drift’.

13. Inputs State and basis of the psychological contract Attitudinal outcomes Behavioural outcomes • Organisational: • Culture • Climate • Leadership • HR strategy • HR practices • Individual: • Prior experience • Expectations • Needs • Socialised work values and beliefs • Personality • + OR – • Trust-worthiness: • Do/can I trust my employer? • Deal delivery: • Am I getting the deal that I was promised? • Felt-fairness: • Am I treated fairly? • Organisational commitment • Job and reward satisfaction • Task motivation • Organisational citizenship behaviour • Membership behaviour • Task behaviour Psychological contract (employee perspective) Source: Adapted from Guest (1998)

14. ‘Relational’ (espoused traditional deal) ‘Transactional’ (espoused new deal) • Key principle: • ‘A fair day’s work for a fair day’s pay’ over the long term • Key principle: • ‘A flexible, mutually beneficial partnership’ for as long as the partnership is necessary • Basis of the employment exchange: • Social-emotional exchange • Basis of the employment exchange: • Economic-instrumental exchange • If you: • Are loyal • Work hard • Do as you are told • If you: • Develop the competencies we need • Apply them in ways that help us to succeed • Behave consistently with our corporate values • We’ll provide: • A secure job (here) • Internal training opportunities • Steady pay increases • Financial security • We’ll provide: • A challenging work environment • Opportunities for you to develop your knowledge, skills, abilities and marketability • External employability • Reward for your individual contribution • Appropriate work–life balance • And you’ll be a part of: • a dull but safe organisation (for the long haul) • And you’ll be a part of: • an exciting, dynamic organisation (for as long as we need each other) Management-espoused psychological contracts: ‘relational’ vs ‘transactional’ Source: Adapted from Rousseau (1995)

15. Breach of psychological contract: some causes Reneging on promise (= failure to deliver on the deal): • Pay cut or lower increases • Withdrawal of overtime • Longer hours Incongruence of expectations (= misalignment of expectations): • Poor initial communication • Misunderstanding

16. Breach of psychological contract:some causes Contract drift: • Organisational change (restructure, merger, acquisition) • Downsizing and loss of job security • Increasing workloads • Substitution of temporaries for permanents • Growing pay inequality Perceived unfairness (= Organisational injustice)

17. Procedural justice: • Perceived fairness of employment decision-making processes (e.g. job evaluation; • performance appraisal) • How am I treated by the decision-makers? • Basic requirements for procedural justice: • Same standards consistently applied • Judgement based on evidence • Fair hearing/voice (including right to refute and appeal) • Adequate notice (of underperformance; opportunity to improve) • Interactional justice: • Perceived fairness of interpersonal/emotional relationships: • Am I treated with dignity and respect in my daily work relationships? • Distributive justice: • Perceived fairness of employment outcomes (including rewards/pay received) • Am I adequately rewarded for what I contribute? • How do I compare with those I like to compare myself with? ‘Organisational justice’(or felt-fairness) perceptions

18. Focal person/self (A) Reference person (B) A’s assessment/ attitude Outcomes A Inputs A < Outcomes B Inputs B Feeling of under-reward inequity Outcomes A Inputs A = Outcomes B Inputs B Feeling of reward equity Outcomes A Inputs A > Outcomes B Inputs B Feeling of over-reward inequity Distributive justice: equity theory (J.S. Adams)

19. Distributive justice: equity theory (J.S. Adams) Perceived outcomes: Pay, benefits, recognition, status, achievement, satisfaction, security, etc. Perceived inputs: Knowledge, skills, ability, qualifications, experience, age, seniority, loyalty, effort, time, performance, responsibility, etc. Possible behavioural responses: • Leave for a more rewarding position elsewhere • Change outcomes within organisation • Change inputs

20. Distributive justice: equity theory (J.S. Adams) Possible cognitive responses: • Rationalise away the felt inequity by altering perception of the ‘self’s’ own inputs and outcomes • Psychologically distort inputs and outcomes of the ‘comparison other’ to eliminate felt inequity • Change ‘comparison other’/referent But: • Which response? • Which referents?

21. ‘Unmet needs motivate.’ Content (or needs) theories of motivation

22. Process (of cognitive) theories of motivation ‘Perceived pathways and outcomes motivate.’ Seek to explain (and exploit) the cognitive processes by which individuals decide to pursue particular pathways to reward attainment and need satisfaction rather than others. Main process theories: • Expectancy theory • Goal-setting theory • Reinforcement theory

23. Motivation Reward Valence (V) Is it worth it? Instrumentality (I) Will they deliver? Expectancy (E) Can I do it? Effort/task behaviour Expectancy theory (Vroom)

24. Agreedgoals Feedback Goal-setting theory (Locke & Latham) Goal-setting theory (Locke & Latham) Self-efficacy Goal commitment M Goal- Directed effort Goal achievement

25. Motivation: from theory to HR practice Some key implications for effective performance management: • Identify the essential performance capabilities (knowledge, skills and abilities) for the position and ensure that employee capacities match these requirements (expectancy theory – expectancy) • Encourage task self-efficacy (expectancy theory, goal-setting theory) • Set tasks that are specific and challenging, but attainable (goal-setting theory) • Encourage employee ownership of performance criteria (goal-setting theory) • Ensure that performance achievement is accurately measured (expectancy theory – instrumentality) • Provide timely and positive feedback (goal-setting theory) • Do not overlook the importance of intrinsic motivation (two-factor theory)

26. Motivation: from theory to HR practice Some key implications for effective reward management: • Understand individual employee needs and how these differ between employee groups (content theories) • Offer individuals valued rewards, i.e. rewards that address high salience needs (Maslow’s hierarchy of needs; expectancy theory – valence) • Link rewards clearly and directly to performance in a timely way (expectancy theory – instrumentality) • Deliver on the rewards promised (expectancy theory – instrumentality) • Strike an appropriate balance between financial and other rewards (two-factor theory) • Do not overlook the potential of intrinsic rewards (two-factor theory) • Manage perceptions of work inputs, reward outcomes and comparisons (equity theory)