Management Chapters 13-17
Terms in this set (36)
List the major provisions of each of the following pieces of EEO legislation
a.The Civil Rights Act of 1964
i. Prohibits employment discrimination on the basis of:
5. national origin
b.The Civil Rights Act of 1991:
ii. One major change is the addition of compensatory and punitive damages in cases of discrimination.
c.The Age Discrimination in Employment Act of 1967: Prohibits employers from discriminating against those 40 years and older in employment decisions because of age.
d.The Americans with Disabilities Act of 1990:
iv. Under ADA, a firm must make "reasonable accommodation" to a physically or mentally disabled individual unless doing so would impose "undue hardship."
Discuss the purpose of the Uniform Guidelines on Employee Selection Procedures, including where the guidelines are applicable and how organizations should use them.
a. Uniform Guidelines: recommends that an employer be able to demonstrate that selection procedures are valid in predicting or measuring performance in a particular job.
b. Employers must be able to prove that the selection instrument bears a direct relationship to job success (that it is valid).
Describe the two main forms of discrimination in employee selection and explain the key differences between them.
a. Disparate Treatment: exists when individuals in similar situations are intentionally treated differently based upon race, color, religion, sex, national origin, age, or disability status.
b. Disparate (Adverse) Impact: occurs when a neutral employment practice disproportionately excludes a protected group from employment opportunities.
i. Four-Fifths Rule
Define the four-fifths rule and explain how organizations can use it to diagnose potential discrimination in employee selection activities (e.g., hiring, firing, promotion decisions)?
a. Four-Fifths Rule: rule of thumb followed by the EEOC in determining adverse impact for use in enforcement proceedings.
b. According to the Uniform Guidelines, a selection program has an adverse impact when the selection rate for any racial, ethnic, or sex class is less than four-fifths (or 80 percent) of the rate of the class with the highest selection rate.
c. The four-fifths rule is not a legal definition of discrimination; rather it is used to monitor severe discrimination practices.
Define the concept of business necessity as a legal defense.
Business Necessity: work-related practice that is necessary to the safe and efficient operation of an organization.
Describe what is meant by a bona fide occupational qualification and how it can be used as a legal defense.
Bona Fide Occupational Qualification: Suitable defense against a discrimination charge only where membership in a protected class is an actual qualification for performing the job.
List the basic steps organizations should take in developing an affirmative action program.
a. Issue a written equal employment opportunity policy and an affirmative action commitment statement.
b. Publicize the policy and the organization's affirmative action commitment.
c. Appoint a top official within the organization to direct and implement the program.
d. Survey minority and female employment by department and job classification.
e. Develop goals and timetables to improve utilization of minorities and women in each area in which underutilization has be identified.
f. Develop and implement specific programs to achieve goals.
g. Establish an internal audit and reporting system to monitor and evaluate progress in each aspect of the program.
h. Develop supportive in-house and community programs.
Define the concept of employment-at-will and explain how is relevant to both employers and employees.
a. Employment-at-will: provisions state that either party in the employment relationship can terminate that relationship at any time, regardless of cause.
i. Can fire anyone at anytime for any reason.
i. Can walk away at anytime for any reason.
ii. Can be fired anytime for any reason.
List the exceptions to employment-at-will legislation.
a. Employment-at-will: provisions state that either party in the employment relationship can terminate that relationship at any time, regardless of cause.
i. Can fire anyone at anytime for any reason.
i. Can walk away at anytime for any reason.
ii. Can be fired anytime for any reason.
Summarize the two general models of employee selection.
a. Person-Job Fit: job analysis identifies required individual competencies (KSAs) for job success.
b. Person-Organization Fit: the degree to which individuals are matched to the culture and values of the organization.
Define the concepts of reliability, validity, utility, generalizability, and legality, in the context of organizational selection devices.
a. Reliability: the degree to which a measure of physical or cognitive abilities or traits is free from random error.
b. Validity: the extent to which a performance measure assesses all and only the relevant aspects of job performance.
c. Generalizability: the degree to which the validity of a selection method established in one context extends to other contexts.
d. Utility: the degree to which information provided by selection methods enhances the effectiveness of selecting personnel.
e. Legality: all selection methods must conform to existing laws and legal precedents.
Explain the importance of reliability and validity in choosing and using selection devices.
Both reliability and validity are important in choosing and using selection devices because of the two determining the overall accuracy of the data provided by the performance measurements. Selection methods become essentially useless with an erratic and inconsistent degree of error from testing and even more so if multiple variables are tested at once while only one matters toward performance evaluations.
Describe the different selection devices available to organizations, including the validity of each device, the utility of each device, and when each is/is not appropriate to use
a. Interviews: a dialogue initiated by one or more persons to gather information and evaluate the qualifications of an applicant for employment.
b. References: method for getting background information on applicants before an interview.
c. Biological Data: the evidence on the utility of biographical information collected directly from job applicants is more positive. The low cost of collecting the information increases utility.
d. Application Blanks: Commonly used section included in applications that allow applicants to either enter personal information such as address, education, and employment information or to select from a list of option to answer preference, availability, and related questions.
e. Physical Ability Tests: Tests of physical abilities may be relevant not only to predicting performance by to predicting occupational injuries and disabilities as well. There are seven classes of tests in this area: muscular tension, muscular power, muscular endurance, cardiovascular endurance, flexibility, balance, and coordination.
f. Cognitive Ability Tests: tests that include three dimensions: verbal comprehension, quantitative ability, and reasoning ability.
g. Personality Inventories: research suggests that there are five major dimensions of personality, known as the "Big Five": extroversion, adjustment, agreeableness, conscientiousness, and openness to experience.
h. Work Samples: attempt to stimulate the job in a pre-hiring context to observe how the applicant preforms in the simulated job.
i. Honesty Tests: some tests directly emphasize questions dealing with past theft admissions or associations with people who stole from employees.
j. Drug Tests: tests should be conducted in an environment that is as unintrusive as possible, and results should be held in a strict confidence.
Describe important ethical considerations in using the different selection devices.
a. Ethical considerations such as bias, legality, and possibility of discrimination are important when utilizing the different selection devices.
i. Bias: Giving preference toward a certain trait that does not relate to job performance
ii. Legality: Selection device does not infringe on individuals rights or otherwise unlawful
iii. Discrimination: Devices disregards individuals based on factors like age, sex, and race.
Compare and contrast the different organizational selection devices.
a. Interview: a dialogue initiated by one or more persons to gather information and evaluate the applicant's qualifications for employment.
b. References: Allow verification of information obtained through other sources.
c. References, biographical data, and applications: gather background information on candidates.
d. Physical Ability Tests: are relevant for predicting job performance, occupational injuries and disabilities.
e. Work Sample: require the applicant to perform tasks that are actually part of the work required on the job.
f. Cognitive Ability Test: Abilities involving thinking, perception, memory, reasoning, verbal ability, mathematical ability, and expression of ideas.
g. Bio Data: are typically more subjective than items on applications, and they are usually longer. BioData questionnaires are developed empirically.
h. Honesty Tests: Overt (clear purpose).
i. Based on characteristics of the "typical" employee-thief:
1. More tempted to steal
2. Engages in common rationalizations for theft
3. Would recommend lighter punishment for thieves
4. Often think about theft-related behavior
5. Think others steal more than they actually do
6. Show loyalty to other thieves
7. Vulnerable to peer pressure to steal
Describe the performance management process.
a. Define performance outcomes for company division and department.
b. Develop employee goals, behavior, and actions to achieve outcomes.
c. Provide support and ongoing performance discussions.
d. Evaluate performance.
e. Identify needed improvements.
f. Provide consequences for performance results.
Explain the key purposes of performance appraisal in organizations.
a. Administrative: make employee related decisions-justify a pay raise, promotion or new assignment.
b. Strategic: developing measures and feedback systems that push employees to engage in behaviors and produce results.
c. Developmental: by assisting in identifying your strengths and weakness and highlighting training and development needs " and send strong messages.
Describe the different standards we use to judge performance measures (strategic congruence, validity, reliability, acceptability, specificity).
a. Strategic Congruence: the extent to which a performance management system elicits job performance that is congruent with the organizations strategy. An example is when an organization emphasizes customers service then its performance management system should assess how well it's employees are serving the customers.
b. Validity: producing the desired results-the extent that a performance measure assess all of the relevant aspects of performance.
c. Reliability: a measure of the accuracy of a test or measuring instrument - getting the same results consistently.
d. Acceptability: refers to whether the people who use the performance measurer accept it.
e. Specificity: relevant and appropriate to the job- the extent to which a performance measurer tells employees what is expected of them and how they can meet theses expectations.
Describe and differentiate between the broad methods of employee performance appraisal (comparative, attributes, behavior, results, quality).
a. Comparative: compares performance with others. Helps reduce leniency, central tendency, and strictness.
1. Simple ranking: ranks employees from highest to lowest performer within their department.
2. Alternation ranking: crosses off best and worst employees.
ii. Forced distribution ranks employees in groups certain percentage goes into each category.
iii. Paired comparison: managers compare every employee with every other employee in work group. Every time the employee gets the 1" best employee"
b. Attribute: focuses on the extent to which individuals have certain attributes (characteristics/traits like initiative, leadership, and competiveness) considered desirable to the company.
i. Graphic rating scales
1. List of traits evaluated by 5-point rating scale.
2. Legally questionable.
ii. Mixed-standard scales
1. Define relevant performance dimensions.
2. Develop statements representing good, average, and poor performance along each dimension.
c. Behavior: attempts to define the behaviors an employee must exhibit to be effective in the job.
i. Critical incidents approach requires managers to keep record of specific examples of effective and ineffective performance.
ii. Behaviorally anchored rating scales (BARS)
1. Consists of a series of vertical scales, one for each dimension of job performance; typically developed by a committee that includes both subordinates and managers.
iii. Behavioral observation scales (BOS)
1. A performance appraisal that measures the frequency of observed behavior (critical incidents).
2. Preferred over BARS for maintaining objectivity, distinguishing good performers from poor performers, providing feedback, and identifying training needs.
iv. Organizational behavior modification is a formal system of behavioral feedback and reinforcement.
v. Assessment centers are multiple raters who evaluate employees' performance on a number of exercises.
d. Results: focuses on managing the objective, measurable results of a job or working group.
i. Management by Objectives
1. Top management passes down company's strategic goals to managers to define goals.
ii. Productivity Measurement and Evaluation System (ProMES)
1. Goal is to motivate employees to higher levels of productivity from a team or company level productivity.
iii. Results-Based Methods
1. Productivity Measures
2. Management By Objectives (MBO)
iv. Productivity Measures
1. Appraisals based on quantitative measures
(e.g., sales volume) that directly link what employees accomplish to results beneficial to the organization.
a. Criterion contamination
b. Focus on short-term results
v. Management by Objectives (MBO)
1. A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.
vi. Managers and employees must be willing to establish goals and objectives together.
vii. Objectives should be quantifiable and measurable for the long and short terms.
viii. Expected results must be under the employee's control and free from criterion contamination.
ix. Goals and objectives must be consistent for each employee level (top executive, manager, and employee).
x. Managers and employees must establish specific times when the goals are to be reviewed and evaluated.
e. Quality: customer orientation. Prevention approach to errors, and continuous improvement=improving customer satisfaction is the primary goal.
i. A (PMS) designed with a strong quality orientation can:
1. Assess both person and system factors in the measurement system.
2. Emphasize managers and employees working together to solve performance problems.
3. Involve both internal and external customers in setting standards and measuring performance.
4. Use multiple sources to evaluate person and system factors.
ii. Sustainability is key element of quality approach.
Sources of performance management info (managers, peers, subordinates, self, customers) - pros & cons.
a. Managers: appraisal done by an employee's manager and reviewed by a manager one level higher.
b. Peers: Appraisal by fellow employees, compiled into a single profile for use in an interview conducted by the employee's manager.
i. Why peer appraisals are not used more often:
1. Peer ratings may be a popularity contest.
2. Managers are reluctant to give up control over the appraisal process.
3. Those receiving low ratings might retaliate against their peers.
4. Peers rely on stereotypes in ratings.
c. Subordinates: appraisal of a superior by an employee, which is more appropriate for developmental than for administrative purposes.
d. Self-Customers: a performance appraisal that, like team appraisal, is based on TQM concepts and seeks evaluation from both external and internal customers.
Identify the following rating errors that can influence performance ratings: similar-to-me effect, strictness, central tendency, leniency, contrast effects, halo effect, horns effect.
a. Similar-to-me: an error in which an appraiser inflates the evaluation of an employee because of a mutual personal connection.
b. Strictness/Leniency: a rating error in which the appraiser tends to give all employees either unusually high or unusually low ratings.
c. Central Tendency: a rating error in which all employees are rated about average.
d. Contrast Effects: a rating error in which an employee's evaluation is biased either upward or downward because of comparison with another employee just previously evaluated.
e. Halo/Horns Effect: a rating error in which an appraiser's evaluation of an employee's performance is biased/skewed because of the appraiser's overall impression of the employee as good (halo error) or bad (horns error).
Summarize the methods raters you can use to improve subjective performance appraisals.
a. Observe other managers making errors.
b. Actively participate in discovering their own errors.
c. Practice job-related tasks to reduce the errors they tend to make.
Outline recommendations for providing effective performance feedback to employees.
a. Give feedback frequently, not once a year.
b. Create right context for discussion.
c. Ask employees to rate performance before the session.
d. Encourage employee to participate.
e. Recognize effective performance through praise.
f. Focus on solving problems.
g. Focus feedback on behavior or results, not on the person.
h. Minimize criticism.
i. Agree to specific goals and set progress review date.
Explain the concepts of internal and external equity with regard to compensation.
a. Internal Factors:
i. Compensation strategy of organization
1. Establishes the internal wage relationship among jobs and skill levels
2. Sets organization compensation policy to lead, lag, or match competitors' pay.
3. Rewards employee performance
4. Guides administrative decisions concerning elements of the pay system such as overtime premiums, payment periods, and short-term or long-term incentives.
ii. Worth of Job
1. Establishing the internal wage relationship among jobs and skill levels
iii. Employee's relative worth
1. Rewarding individual employee performance
iv. Employer's ability to pay
1. Having the resources and profits to pay employees.
b. External Factors:
i. Conditions of labor market
1. Availability and quality of potential employees is affected by economic conditions, government regulations and policies, and the presence of unions.
ii. Area pay rates
1. A firm's formal wage structure of rates is influenced by those being paid by other area employers for comparable jobs.
iii. Cost of living
1. Local housing and environmental conditions can cause wide variations in the cost of living for employees.
2. Inflation can require that compensation rates be adjusted upward periodically to help employees maintain their purchasing power.
3. Consumer Price Index (CPI)
a. A Bureau of Labor Statistics measure of the average change in prices over time in a fixed "market basket" of goods and services
iv. Collective bargaining
1. Escalator clauses in labor agreements provide for quarterly upward cost-of-living (COLA) wage adjustments for inflation to protect employees' purchasing power.
2. Unions bargain for real wage increases that raise the standard of living for their members.
3. Real wages are increases larger than rises in the consumer price index; that is, the real earning power of wages.
v. Legal requirements
Describe the following important components in the process of collecting market wage data: market pay surveys, benchmarking, key/non-key jobs
a. Market Pay Surveys: Benchmarking - procedure by which an organization compares its own practices against the competition.
i. issues to consider before using pay surveys:
1. Which employers should be included in the survey?
2. Which jobs are included in the survey?
3. If multiple surveys are used, how are all rates of pay weighted and combined?
b. Key Jobs: benchmark jobs that have relatively stable content and are common to many organizations so that market-pay survey data can be obtained.
c. Non-Key Jobs: are unique to organizations and cannot be directly valued or compared through the use of market surveys.
3. Define the concept of job evaluation.
a. Job Evaluation: administrative procedure used to measure internal job worth.
Describe the point system of job evaluation, and demonstrate how an organization would conduct a job evaluation using the point method.
a. Job Evaluation: a process is composed of compensable factors, which are characteristics of jobs that an organization values and chooses to pay.
b. Job evaluators often apply a weighting scheme to account for differing importance of compensable factors to the organization.
c. Point System
i. A quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it.
ii. Permits jobs to be evaluated quantitatively on the basis of factors or elements—compensable factors—that constitute the job.
d. The Point Manual
i. A handbook that contains a description of the compensable factors and the degrees to which
these factors may exist within the jobs.
Explain how an organization combines job evaluation and market pay survey data to produce a pay structure. Include the concepts of pay policy-line and pay grades in your discussion
a. Pay-setting Approaches:
i. Market Survey Approach - emphasizes external comparisons. It bases pay on market surveys that cover as many key jobs as possible.
ii. Pay Policy Line - mathematical expression that describes the relationship between a job's pay and its job evaluation points.
iii. Pay Grades - Grouping jobs of similar worth or content together for pay administration purposes.
1. Range spread - distance between minimum & maximum amounts in a pay grade.
List and describe the major components of executive compensation packages (salary/bonus, stock options, stock grants)
b. Stock Options
i. Right to buy company stock at discounted price (not obligatory)
ii. CEO pay varies with performance of stock market
c. Stock Grants
i. Stock given to employee as compensation/part of compensation
Explain how stock options work as a component of executive compensation.
Stock options are considered a form of executive compensation due to the opportunity to receive a price advantage on a companies offering that would otherwise be unavailable to individuals outside the company or non-vested employees. Considered a perk/benefit for time spent working with organization.
Outline the major provisions of the Equal Pay Act of 1963 and the Fair Labor Standards Act of 1938
a. Comparable Worth (Equal Pay Act of 1963): Comparable worth (or pay equity) is a public policy that advocates remedies for any undervaluation of women's jobs.
i. Based on the idea that individuals should obtain equal pay, not just for jobs of equal content, but for jobs of equal value or worth.
ii. Courts have consistently ruled that using the going market rates of pay is acceptable defense in comparable worth litigation suits.
b. Fair Labor Standards Act of 1938: established a minimum wage and overtime pay rate.
i. Hourly Work: paid on an hourly basis.
ii. Salary Work: compensation is computed on the basis of weekly, biweekly, or monthly pay periods.
iii. Minimum wage is $7.25 an hour. It is the lowest hourly amount that employers are legally allowed to pay.
iv. Exempt - those employees (executive, professional, administrative and outside sales) not covered by the FLSA and not eligible for overtime pay.
Describe the relationship between pay and individual employee behavior from the following three perspectives: reinforcement theory, expectancy theory, and agency theory.
a. Reinforcement Theory: a response followed by a reward is more likely to recur in the future.
i. In pay-for-performance:
1. When high employee performance is followed by a reward (monetary in the form of bonuses etc. or nonmonetary, such an award), then the behaviors that resulted in the high performance are more likely to recur in the future.
ii. Important element of this theory is the actual experience of the reward as an outcome of high performance
b. Expectancy Theory: Motivation= Expectancy (E)
i. Expectancy: the subjective perception that by exerting effort one can reach a performance goal.
ii. Instrumentality: the belief that an award will be received if a specific goal is met.
iii. Valence: the value that the individual places on the award that he/she will receive if the specific goal is met.
iv. Expectancy Theory: Extrinsic vs Intrinsic Motivation
1. Extrinsic motivation: depends on rewards controlled by the employer (pay and benefits)
2. Intrinsic motivation: depends on rewards stemming from work itself (e.g., having an interesting job)
3. Monetary rewards can reduce to some extent the intrinsic motivation.
4. Both extrinsic and intrinsic motivations are important for performance.
c. Agency Theory:
i. Principals: employers/owners.
1. Their goal is to influence others into engaging in specific behaviors
ii. Agents: employees
1. They might have different interests/goals than those of principals
d. The problem: The employer wants his/her employees to exert effort but employees want to work as little as possible.
Explain the differences between the following incentive rewards: bonus and raise.
i. Paid frequently
ii. Based on output, productivity, sales, safety, etc.
iii. Doesn't influence the base salary
iv. Is effective when work is a) designed for individuals, b) simple and repetitive, and c) stable
v. Problems include a) creating a competitive environment, b) being costly to maintain, and c) hurting organizational culture
i. Given annually
ii. Based on supervisor performance rating
iii. Changes the base salary
iv. Most widely used approach to pay-for-performance
v. There are problems if a) there are poor performance measures, b) there is little communication, and c) there is little range in pay raises
Describe how a merit pay plan works and explain merit pay using the merit increase grid.
a. Merit Pay Plan: Merit pay programs link performance-appraisal ratings to annual pay increases or merit bonuses.
b. How merit pay works?
i. A merit increase grid combines an employee's performance rating with employee's position in a pay range (compa-ratio) to determine the size and frequency of his/her pay increases.
c. Characteristics of merit pay:
i. They identify individual differences in performance, which are assumed to reflect differences in ability or motivation.
ii. The information on individual performance is collected from the immediate supervisor.
iii. Usually pay increases are linked to performance appraisal results
iv. The feedback tends to occur infrequently (formal performance review session).
v. The flow of feedback tends to be unidirectional (from supervisor to subordinate).
Discuss the criticisms of merit pay plans.
a. Criticism of merit pay:
i. Focus on merit pay discourages teamwork.
ii. Measurement of performance is unfair and inaccurate.
iii. Too much emphasis on individual performance.
iv. Merit pay does not really exist - high performers are paid more than marginal and poor performers.
v. Money available for merit increases may be inadequate to satisfactorily raise all employees' base pay.
vi. Managers may have no guidance in how to define and measure performance - vague merit award criteria.
vii. Employees may not believe that their compensation is tied to effort and performance.
viii. The performance appraisal objectives of employees and their managers are often at odds.
ix. There may be a lack of honesty and cooperation between management and employees.
Describe individual incentive plans and discuss their pros and cons.
a. Individual Incentive Plans: reward individual performance but payments are not rolled into base pay.
i. Performance is measured as physical output rather than by subjective ratings.
b. Individual incentives - Advantages:
i. Focus employee efforts on specific performance targets (provide real motivation).
ii. Are variable costs linked to the achievement of results.
iii. Directly related to operating performance (don't have to pay incentives when objectives are not achieved).
iv. A way to distribute success among those responsible for producing that success.
v. A means to reward or attract top performers when salary budgets are low.
c. Individual incentives are rare because - Disadvantages:
i. Most jobs have no physical output measure.
ii. Many potential administrative problems.
iii. Employees may only do what they get paid for.
iv. Do not fit in with team approach.
v. May be inconsistent with organizational goals.
vi. Some incentive plans reward output over quality or service.
Discuss the basic premises of gain-sharing as a group incentive plan.
i. Management commitment.
ii. Need to change or commitment to continuous improvement.
iii. Management's acceptance and encouragement of employee input.
iv. High cooperation and interaction.
v. Employment security.
vi. Information sharing on productivity and costs.
vii. Goal setting.
viii. Commitment of all involved to the process.
ix. Agreement on a performance standard and calculation that is understandable, fair, and related to managerial objectives.
b. Group Incentive Plan
i. Group incentives measure performance in physical output.
ii. Team award plans may use a broader range of performance measures
iii. Individual competition may be replaced by competition between groups or teams.
iv. Risks not recognizing differences in individual performance.