Human Resource Management

Rosemarie J. Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
LEARNING OUTCOMES:

At the end of the module, you are expected to:

1. Understand the relationship between performance management and employee

movement.
2. Discuss, illustrate, and apply different performance appraisal techniques.
3. Appreciate the importance of conducting performance appraisal in making
decisions regarding employee movement.
4. Identify common errors in appraisal and be able to select appropriate technique
in a particular situation.

MODULE IV: PERFORMANCE MANAGEMENT AND EMPLOYEE MOVEMENT

The performance management system is what Pulakos (2004) calls the Achilles
heel of HRM. Not many companies in recent years have paid much attention to this
particular human resource function. Although they have installed performance
evaluation methods, these were poorly developed and caused difficulties for both
managers and employees. The clamor for an effective performance management
system has become increasingly important due to globalization, stiff competition, and
other social and economic pressures (Williams, 2002).

Performance management is the process by which managers, supervisors, and

executives assess the performance of employees to ensure that it accords with the
company's objectives. Armstrong (2006) defines it as "a systematic process for
improving organizational performance by developing the performance of individuals
and teams" 618). It is the best way of managing and rewarding performance based
on planned goals. Armstrong and Baron (2005) describe it as a "strategic and
integrated approach to delivering sustained success to organizations by improving
the performance orthe people who work in them and by developing the capabilities of
teams and individual contributors" (p. 618).

Performance management is effective if it does the following:

1. Identify excellent performance

2. Use appropriate appraisal techniques
3. Provide feedback to employees regarding their performance
4. Evaluate employees fairly
5. Minimize biases
6. Exercises fairness

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

PERFORMANCE APPRAISAL AND PERFORMANCE MANAGEMENT

Performance appraisal is often synonymous -to performance management.

Performance appraisal is a formal annual assessment of employees by their
immediate superiors. Periodic performances reviews are done routinely by
managers.

In contrast, performance management is a continuous and more comprehensive

process of managing people. It is not exclusive to evaluating employees annually or
periodically. It is about motivating, guiding, and rewarding employees, thus helping
them hone their potential and improve organizational performance.

The performance management cycle below shows managing performance as a

Planning

Performance
Acting Management Monitoring
Cycle

Reviewing

continuous process.

Figure 9: Performance Management Cycle

Adapted from: Performance Management Cycle by Michael Armstrong, Performance
Management: Key Strategies and Practical Guidelines, 2006

1. Planning

This pertains to the setting of performance goals and expectations of groups

(departments or units) and individuals (subordinates and superiors). -that all
efforts work toward the achievement of company objectives. All employees are
involved in the planning process so that they will understand & what the company

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
wants to achieve. It also explains the importance of managing effective
performance and how such management is to be carried out.

Planning covers the following areas which-should be defined clearly and

comprehensively as æ first step for a successful performance management
system:

a. Roles
The manager (immediate superior) and the employee should discuss key
result areas and define their respective roles. Thus discussion ensures that both
possess the necessary behavioural competencies and the core values that each of
them should uphold.

b. Key result areas

The employee at this point should think of the most important tasks has been
assigned with and the kind or performance that is expected from him/her. He/ She
should also find out how others have performed the same tasks before. This
examination should be discussed so that all the tasks (which mav appear multiple or
many) can be summarized or grouped into key result areas.

c. Technical competencies
The employee should possess the essential knowledge and skills (e.g.,
procedural, problem-solving, planning, and communication) to be able to do his/her
tasks well.

d. Behavioural competencies
The manager or the immediate supervisor should discuss the
behaviours/traits expected by the organization. These traits include drive, teamwork,
leadership, planning, communicative skills, etc.

e. Objectives
The employee and-the immediate superior should agree on the performance
objectives (e.g., sales representatives should aim to minimize customer complaints
and always maintain a high level of customer satisfaction). Objectives should be
quantifiable and measurable in terms of sales, income level, output, cost reduction,
etc.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

Importantly, the employee and the immediate superior should agree on and
integrate the performance objectives. Below is an example or an agreed-upon,
integrated set of objectives.

FUNCTIONAL: Define INDIVIDUAL: Ensure

TEAM:Agree on
CORPORATE: Provide a the aspects of customer taht individual
performance standards
quality product that service in terms of standards are in line
set previously and
satisfies customers, value for money, quick with team objectives
ensure that they are
coupled with superior response, superior and make sure that
congruent to corpoarte
customer service and quality product skills and competencies
and functional
support. performance, and required are known
objectives.
customer satisfaction. and used.

Figure 10: Agreed-upon Integrated Objectives

Adapted from: Two-way process of Agreeing on Integrated Objectives by Michael
Armstrong, Performance Mangement: Key Strategies and Practical Guidelines, 2006

f. Core Values of the Organization

The core values of the organization include integrity loyalty, industry, and
honesty.

2. Monitoring

Monitoring provides the mechanisms by which performance will be measured. It also

entails giving constant feedback to employees regarding their progress in achieving
the goals of the organization. Undoubtedly, planning is very -important in the
performance management cycle. More importantly, the articulation of performance
objectives sets the stage for a successful performance management system.
However, these objectives can only be achieved if there are agreed upon and
reliable performance measurements which can spell the difference between
performance standards and actual performance.

Performance measures can be established in terms of output and outcome. What is

quantifiable is an output whereas what can be visible but cannot be measured in
quantifiable terms is called an outcome (Armstrong, 2006).

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
Output metrics include costs, income, sales, speed of recovery or response, delivery
time, etc. Outcome measures include completion of work, changes in behaviour,
judgment of customers, attainment of a standard level of service, etc.

In monitoring performance, performance plan using the agreements made during

the planning stage is provided. A personal development plan is also accomplished
so that the immediate superior can support the employee's improvement of
knowledge and skills. This may include coaching, mentoring, job enlargement, or job
enrichment activities.
This also includes the process details which show how and when a certain kind of
performance will be reviewed.

3. Reviewing

Performance is reviewed from time to time and compared with the performance
standards, goals, and expectations which were agreed upon during the planning
stage. The act of reviewing performance should be a continuous process. Managers
should always allot time to dialogue with their subordinates. During such sessions,
the agreed upon objectives and development plans should be reviewed to give room
for revisions if any are needed.

Reviewing has the following objectives (Armstrong, 2006):

a. Planning
This is the opportunity to find out if there is a need to revise the performance
agreement between the employee and the immediate superior.
b. Motivation
This encourages the employee to grow or take control of his/her performance.
c. Learning and development
This is an opportunity to further develop the employee's knowledge and skills and to
provide him/her with learning activities that maximize his/her potential.
d. Communication
This promotes two-way communication between the superior and the subordinate.
Roles and performance expectations are clarified and a relationship between them is
built on mutual trust is developed.

4. Acting

This includes activities based on the performance review. It means giving an

employee feedback on his/her accomplishment of organizational goals. Feedback is
based on evidence which should be fair to the employee. It should describe what
actually happened and should not be based on the mere judgment of the superior.
Thus, it is not at all subjective. The manager should focus on the aspects of
employee performance that can still be improved. If there is a need for training—
enhancing employee skills or acquiring new tasks and responsibilities—specific
programs should be devised. Outstanding performances, on the other hand, are
rewarded and recognized.

The three R's of performance, management and employee movement are rewards,
retention, and remuneration.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

REWARDS

Rewards are tangible manifestations of a job well done or a good deed. They are
included scope of performance management because conducting performance
appraisal involves, acknowledging the employees' contribution in the attainment of
the firm's objectives.

The outstanding performance- of employees benefit the organization. Employees

who perform outstandingly, as indicated in the performance appraisal, are rewarded
by the organization in different ways.

Under the performance management system, there are periodic performance

assessments conducted using various tools and techniques, either individually or by
group.

Performance appraisal determines whether employees perform effectively and are

on a par with the company's expectations. It concretizes and measures performance
as an aspect of the performance management system. Formal evaluation as
opposed to the informal one is highly preferred and recommended.

An informal evaluation is done by mere observation. Over the years appraisal has
expanded its role from simply determining salary increase promotions to making of
other employee-related decisions which dramatically affect long-term organizational
performance (www.ihabsarieddine.com).

The following are the purposes of performance appraisal:

a. Needs assessment
The results of performance evaluation provide relevant • about the specific
training needs of employees. Information
b. Employee movement
The appraisal helps management decide who will be promoted aided by concrete
evidence of meritorious performance.
c. Basis for merit increase
In addition, it also justifies merit increases.
d. Legal concerns
If there are issues triggered by certain actions like termination of employment,
the appraisal document serves as basis of such decision. Other questions about
performance issues include rewards provision layoff, and transfer.
e. Development
A series or performance appraisals monitors the growth of employees. These
periodic records can assist the career pathing and development of personnel.
f. Channel of communication
This is d good source enhancing discussions on performance issues between the
employee and the immediate supervisor. It becomes an avenue for ironing out
differences and articulating certain career concerns or questions on performance
ratings.
g. Source of motivation

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
Performance evaluation is one of the best ways to keep employees motivated.
Every performance appraisal period generates excitement on the part of the
employees. It is one way of boosting their morale and encouraging them to make
good impressions and give outstanding work performance.

The following are the different performance appraisal techniques:

1. Individual Evaluation Methods

a. Graphic Rating Scale

This is the most popular technique. Employees are rated set of traits or,
characteristics such as punctuality, quality of work, flexibility, cooperation, and the
like. The table below is an example.

Table 6: Graphic Rating Scale

Traits Outstanding Good Satisfactory Fair Unsatisfactory

Attitude
towards work
Teamwork
Creativity
Flexibility
Honesty
Punctuality

This technique clearly defines the core traits needed for the job. It is very popular
because it is very easy to use and makes comparisons between employees
possible. The traits it identifies, however, are too general and raters may tend to
underrate or overrate an employee. As a result, it may not accurately describe an
employee.

b. Forced Choice Technique

This is a technique that branched out from the graphic rating scale. The HR
develops a set of descriptive statements and the supervisors rate their subordinates
based on how they behave on the job. The HR prepares the following statements
and a rater ranks an employee, for example, using number 1 for the statement that
best describes the employee and number 6 for the statement that least characterizes
the latter. There will be no ties when it comes to the scores.

Here are some examples of descriptive statements:

_____ mingles well with co-employees

_____ understands directions quickly
_____ manages time well
_____ resourceful
_____ innovative
_____ controls his or her emotions

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
The HR department gathers and adds the points in each category an effectiveness
index to further categorize the employees.

This method is inexpensive and fairly easy to use. However, just like the graphic
rating scale, the rater is forced to choose from a number of statements that may or
may not describe an employee. In this case, the rater can become subjective.

c. Critical Incident Technique

In this particular technique, the rater or the supervisor keeps track of all the
critical or relevant behaviours of the subordinates. A logbook is used to record these
whether good or bad. For example, a technician has to be of immediately detecting a
possible mechanical failure arise before it costs more than a million pesos' worth of
in production output. The failure may be detected a day before machine's actual
breakdown.

This technique is useful because it provides an actual picture of performance

through the handling of a critical incident thereby giving a clear, fair, concrete, and
accurate evaluation However, this particular technique becomes tedious for the
supervisor because continuous observation should be done for each of his/her
subordinates. Otherwise, it would be very unfair on the part of the subordinates who
may have displayed ideal work behaviour that has gone unnoticed and unrecorded.

Supervisors should accurately track positive and negative work behaviours using the
critical incident technique. Otherwise, such acts become meaningless since they are
out rightly ignored or forgotten.

d. Checklists and Weighted Checklists

The HR provides a list of descriptive statements with corresponding weights.
The rater checks the statements which would likely describe the employee.
Otherwise, he/she leaves it blank. He/ She can check as long as they apply to the
traits of the employee concerned.
Descriptive Statements Weights
_____ tactful in dealing with concerns of fellow workers 8.0
_____ systematic in doing the job 7.5
_____ submits reports on time 4.9
_____ shows leadership in group activities 5.9
_____ speaks clearly 5.7
_____ shows initiative in meaningful projects 6.3

The items above show the weighted checklists. The supervisor adds the
weights of the items checked.
The checklists are simpler than the weighted checklists because there are no
weights. The supervisor just checks the statements that likely describe the
employee. There are corresponding scores based on the number of checks.
This technique is not time-consuming and, therefore, ideal for large
organizations. However, a checklist may not provide all the possible tasks of an
employee. There is also a tendency for the supervisor to merely check the
statements without mulling over all the relevant factors involved. In such cases, the
evaluation becomes perfunctory.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

e. Behaviorally Anchored Rating Scale (BARS)

Patricia C. Smith and Lorne M. Kendall developed the BARS (Smith and
Kendall 1963 cited in John M. Ivancevich [2009]). There are about nine performance
dimensions with anchor statements of critical incidents in a scale. The ability of a
sales representative to provide accurate information to customers is an example of a
performance dimension.
This method is advantageous because it describes a particular aspect of a job
in great detail. It provides more objectivity than the previous techniques mentioned.
The construction of BARS, however, is too complicated. Thus, it is not a very
popular evaluation technique because it is time consuming.
Very high

Could be expected to make actual purchase 9

from a customer who was provided with
accuarate product information
8
Could be expected to be assured by the
customer for the purchase of the product in 7
the next few days because of accuarate
product information
6
Could be expected to ask the help of his
immediate supervisor to provide more
5
accurate product information
4
Could not warrant actual purchase because of
inaccurate product information provided to
3
customers
2

1
Very low
0
Figure 11: Behaviorally Anchored Rating Scale

f. Essay Evaluation
In this technique, the rater discusses in narrative form all the levels of
performance manifested by his/her subordinates. Advantageously, the rater can
discuss what he/she feels is relevant to an employee's performance without the use
of statements to describe them. However, it is not advisable if the rater has many
direct reports. It is time-consuming and helpful only to managers who have a flair for
writing. One disadvantage of this technique is that there is no consistent and specific
criterion by which to gauge performance.

2. Multiple -Person Evaluation Methods

a. Forced Distribution

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
The forced distribution technique allows a supervisor to group his/her
subordinates at his/her own discretion. For example, out of 20 personnel; 20% or 4
personnel will receive outstanding ratings, 40% or 8 personnel will get above
average, and so on. A problem occurs if more than 20% of his/her subordinates get
outstanding ratings and he/she will stick to just 4. If none outstanding ratings, he/she
will just stick to 4 as outstanding although they should only be above average.
This technique is very easy to use, so it is widely popular However, it is
controversial because employees may not fit into the groups identified by the
manager. There may be a thin line between, say, 20% and 40%.
b. Ranking
In this method, the supervisor rates all the employees from first to last. A
manager can easily make decisions such as who becomes employee of the month
or who gets laid' off. It also motivates- employees to work better since they will know
where they stand in comparison with the others.
If the supervisor has 16 employees, it may be difficult for him/her to rate them
as to who is first, second, third, and so on and so forth. This procedure is quite
tedious since it involves placing employees in a particular rank or position.
c. Paired Comparison Technique
The supervisor rates employees by pair. Suppose four employees will be
evaluated: Employees A, B, C, and D. The raters will be given six cards with the
names of the employees in pair.

EMPLOYEE A EMPLOYEE A EMPLOYEE A

EMPLOYEE B EMPLOYEE C EMPLOYEE D

EMPLOYEE C EMPLOYEE D EMPLOYEE C

EMPLOYEE B EMPLOYEE B EMPLOYEE D

Figure 12: Paired Comparison Technique

The supervisor determines the most preferred employee based on his/her

appearance in the pairings. Final rankings reveal the most preferred to the least
preferred employee. To cite: (1) Employee A; (2) Employee B; (3) Employee C; and
(4) Employee D.

The advantage of this method is that managers rank employees by pair so

assessing them becomes simpler because it is done two at a time. The employee
who has a mediocre performance when paired to an outstanding performer,
nevertheless, may cause the outstanding employee to obtain a lower rating as
opposed to when the latter is evaluated individually.

d. Management by Objective (MBO)

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
This technique allows an employee to set his/her own goals or objectives by
himself/ herself. For example, one objective is to increase the sales of AM Food's
vinegar to 500,000 bottles before the next evaluation period. On the next evaluation
period, his/her immediate superior (e.g, the sales director) has to find out if the
objective is met. If the target is not reached, the product manager should study likely
reasons for the failure. During the evaluation period, the director should meet the
manager and discuss the ratings based on the achieved objectives. The director or
department head should emphasize that the objectives should be realistic,
challenging, and achievable under normal circumstances.

This technique is ideal because it develops the work commitment of ratees as

members of the team and, thus, motivate them to further excel in performance.
Moreover, it focuses on results that are relevant.
However, it is too individual-focused and mainly based on the goals that have
been achieved. The performance of an individual is not compared with the
performance of other employees. Also, a goal is only set on a short-term basis.

e. 360-degree Feedback
As the term implies, immediate supervisors are not the only raters. Other
people also evaluate the employees. For example, a purchasing manager is rated by
the following other department managers or peers, suppliers, subordinates and
himself/herself. In the academe, college faculty members are evaluated by the
following: the chairperson, peers or co-faculty within the department, students, and
the faculty member himself/herself. This technique is said to be comprehensive and
gives a full-blown evaluation of the employee or an assessment done in a circular
fashion.

The advantage of this technique is that employees are provided with a clear
picture on how others see them as performers. Thus, it gives a more accurate view
of their performance. It also increases their awareness of their competencies, skills,
and knowledge because of the more valid and objective feedback they receive.
However, one obvious disadvantage is that not all employees give honest feedback.
There may be politics involved as people become subjective and provide feedback
based on their personal biases against the people being evaluated.

RETENTION

Retention is the act of maintaining the employees in the organization. It entails

earning their loyalty. One of the best ways to do this is to evaluate them fairly and
objectively.

There are certain errors committed by raters who are usually the employees'
immediate supervisors.

1. Halo Effect
This usually happens when a rater uses one particular aspect of the
employee's good traits. For example, the employee is always punctual and never
absent. He/ She is never late and reports at least one hour earlier than his/her official
time. Based on this one factor, he/she also gets high ratings on the quality of his/her

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
work, initiative, flexibility, and relationship with peers, even though he/she does really
display a type of performance that merits high ratings in these areas.

2. Ambiguous Evaluation Standards

Ambiguity occurs if one rater's standard for outstanding performance
contradicts that of another rater from a different department. The former may be hard
to please and, therefore, may only give an above average rating as compared to the
latter who may give an outstanding rating. Supervisors should be very careful in
rating employees and must know the difference between an outstanding or above
average performance because performance evaluation ratings are one of the bases
for merit increase. The difference between a basic salary increase of +5% for above
average rating and a +10% for an outstanding performance evaluation means a lot to
employees.

3. Stereotyping Effect
Stereotypes may influence the rater's decision as to who will garner a high
ranking and who will earn a low one. For example, raters may not like employees
who belong to a certain religious denomination or those who come from a particular
region or province.

4. Recency Effect
If recent events prior to the actual evaluation period are easily remembered
and given more weight than the accumulation of performance behaviors for the
whole evaluation period, the raters commit the recency effect. Biases occur when
these recent employee performances, whether positive or negative, are given more
weight affecting the general rating even if the overall work performance is not really
that favorable.

5. Primacy Effect
Raters may have first impressions of the employees that linger and influence
the ratings they give during an evaluation. For these raters, first impressions last and
become a dominant assessment criterion.

6. Central Tendency
In statistics, there are measures of central tendency such as mean, median,
and mode. The central tendency deals mostly with the mean or average. The rater
avoids putting high and low ratings (e.g., a scale of 1 to 5, where 5 is the highest and
1 is the lowest, and the rater remains neutral and puts 3 instead). This error
diminishes the opportunity for subordinates to get the ratings they deserve.

7. Hard/Easy to Please Tendencies

There are raters who are hard to please and feel that employees do not meet
their expectations in terms of performance. They set their own high standards that
are not only difficult to meet but are also beyond the standards set by the firm.
On the other hand, many employees get outstanding ratings because some
raters lower their standards for outstanding performance. Again, these raters fail to
comply with the standards set by the firm.

8. Mirror Effect

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
This error happens when a raters get affected or influenced by his/ her,
immediately preceding performance assessment of an employee. For example, a
rater gives an outstanding performance grade to an employee. Then, the next
employee who seems to have an average performance, may be rated as poor
instead because what is reflected in the rater's "mirror" is still the outstanding
performance of the employee they previously evaluated.
To eliminate this error, it is suggested that companies provide extensive
training programs for raters. Performance evaluators should practice fair and
effective ways of rating. They should always remember that whatever ratings they
provide will affect the employee's morale and chances for merit increase, promotion,
career development, and training.
There is a need for all managers and supervisors who conduct performance
appraisal to be trained in the following aspects (www. appraisals.naukrihub.com/pa-
training.html):
a. methods, techniques, and guidelines for setting goals and objectives
b. ways of evaluating the performance of the employees
c. documentation of performance standards
d. filling out a performance appraisal form
e. prevention of performance evaluation errors
f. questions on appraisal techniques
g. how to answer employee questions and queries
h. improvement of rapport and communication
i. uplifting employee morale and motivation
j. how to observe employee performance
k. how to deal with employee resistance to performance evaluation
l. tracking results
m. providing constructive feedback
n. post-review actions

Training can be done through special workshops conducted by professional HR

consultants or other experts in the field of HRM. Sessions can be held in seminar
halls, training rooms, conference halls, boardrooms, or some other venues far away
from the workplace.

REMUNERATION

Remuneration refers to payments equivalent to the value of the tasks Performed. In

performance evaluation, remuneration is equated with employee movement or how
performance evaluation transforms an employee's status— higher, lower, or at same
level by either promoting or demoting him/her or keeping him/her at the same level. It
may also mean quitting or resigning from the organization.
There are four main types of employee movement, namely:

1. Promotion refers to an employee's movement to a higher position. Promotion

decisions can be made either on higher the level seniority or through merit based on
performance. Seniority refers of one's length of service in an organization. Merit is
one's value in terms of performance. Under a straight seniority system, the only
factor considered in promotion is seniority. In the straight seniority system all
employees have the chance to get promoted if they have worked with the

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
organization long enough. There is no conflict or competition among the employees
because the basis for promotion is very clear to them. Employees are not pressured
at work since what they are building is loyalty to the organization. The disadvantage
is that not all employees want this kind of system to be the basis of moving up the
career ladder. Some employees like to be challenged on the job and the more
ambitious employees are not willing to wait for their turn to get promoted. This is one
reason for the high turnover of highly skilled personnel. Employees are not motivated
to work harder because they are not challenged to perform better on the job.

Promotion by merit uses qualifications- and performance as the basis for

promotion. This is ideal because good performance is rewarded. Employees are also
encouraged and motivated to perform well because of promotion opportunities.
Performance management is fostered because employees work their way up the
career ladder and the organization promotes managing performance through the use
of the set performance standards. However, it is quite difficult to gauge merit on the
basis of qualifications and performance. There is too much politics as well as
conflicts associated with it. Employees tend to figure in conflicts, and personal issues
arise due to promotion. There are questions about how people are selected for
promotion.

Promotion on the basis of a combine seniority and merit produces mixed

reactions because of the relative ways or variations in applying this system. There
are promotions where seniority has a higher percentage than merit, (e.g., 60%
seniority and 40% merit) or vice versa.

2. Demotion refers to an employee's movement to a lower level or position. There are

instances when an employee is demoted because of inefficiency or poor
performance. Instead of being terminated, an employee is still given the chance to
work in the firm, but in a lower position.

Here are the steps on how to demote an employee without triggering conflicts and
issues of unfair treatment:

a. Identify the reasons for demoting an employee

The decision to demote an employee is really difficult to make. It is important
for a manager to provide the main reasons for doing so. In essence, it should really
be due to the employee's inability to meet -the performance standards set by the
company.

b. Communicate the decision to the employee

It is imperative to discuss the reasons for the demotion in a meeting. There
should be documents that support the decision. The manager should exercise tact in
disclosing the decision. He/ She should discuss it in a professional manner.

c. Make a follow-up after demotion

The manager must observe the employee's reaction after a demotion caused
by a job performance evaluation. He/ She should also observe how other employees
react to the changes.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
d. Have a contingency plan
A demoted employee may feel demoralized and opt to leave the company
instead. The manager should be prepared when this happens.

3. Transfer is an employee's movement to another position but within the same rank
or responsibility. It is a part of job rotation. For example, an administrative assistant
may be transferred to the same post, but this time in the purchasing department.
Transfer may also mean relocation to another branch if the company has many
branches nationwide. Banks usually move their employees (e.g., tellers and
managers) from one branch to another.

There are four types of employee transfers

(www.corehr.wordpress.com/2012/05/03/employee-transfer-2/):

a. Production transfer
This occurs when there is a shortage of employees in one department and a
surplus in another. Employees who are found to be excesses in the latter department
will have to be transferred to the department where there is a shortage.

b. Replacement transfer
This is replacing or relieving an old employee from a heavy workload.

c. Remedial transfer
This is to rectify a faulty selection is recruitment or placement.

d. Versatility transfer
This provides the opportunity for an employee to increase his/her skills by
transferring him/her from one department to another through job rotation. In most
instances, this practice prepares the individual for promotion.

4. Separation is an employee's movement or leave-taking (departure) from the

organization. It has four sub-types: (a) termination with just cause, (b) termination
with authorized cause or layoff, (c) resignation, and (d) retirement.

a. Termination with just cause is due to the employee's fault. It is the company’s
decision to terminate the employee because of a just or valid cause such as
malversation of funds, theft, and a fraud. In another instance, termination with
just cause is a result of an employee’s failure to undergo the probationary
successfully. Unsatisfactory performance means not meeting the standards of
the company. Therefore, the services of an employee under probation are
terminated, or he/she is not "regularized”.
b. Termination with authorized cause is often called layoff. It is the company's
decision to lay off employees on any of the following grounds. First, a new
technology has been introduced and there are positions which have been
evaluated as redundant. These jobs only duplicate the functions of the newly-
installed technology. Second, a department or division will be closed
permanently as a labor-saving measure. The tasks of the office will be taken
over by another department. Third, the company will merge with another
company. Mergers usually result in two similar jobs or position. If there are

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
two accountants, one has to be retained and the other has to be laid off.
Layoffs usually entail fair separation packages so that the employees affected
may start anew in whatever way possible. A severance package helps an
employee prepare for temporary or permanent unemployment. It varies from
company to company and from one employee to another. A severance
package may include the following:

 The employee's remaining regular pay

 Additional salary based on- remaining months of service
 Payment for unused sick leave
 Insurance
 Retirement benefits

A company, on the other hand, may consider the following to determine how
much to offer as severance pay:

 Current salary of the employee

 Length of service Current position
 Performance (for most recent years)

c. Resignation is an employee's voluntary decision to leave the company. The

reasons for resignation are varied. Some employees transfer to other
companies to obtain higher salaries and benefits. Others consider resignation
a career move and a chance to look for more challenging jobs and positions
that maximize their skills and potential. A few opt to start and manage their
own business while a number leave the country to work abroad.

One of the pressing problems of companies is employee retention. It is the

process by which management encourages employees to remain with the
company. One particular issue under employee retention is how an
organization can prevent employees from leaving.

Employees usually resign to look for better opportunities. Today, because

mobility has been made easy, many highly skilled personnel are able to hop
from one company to another. It is relatively uncomplicated for many highly
skilled personnel to transfer from one company to another. They know their
value as employees and, therefore, are easily dissatisfied when companies do
not treat them fairly. They are also aware that other companies would accept
them immediately once they decide to apply.

The company should address certain issues that lead to an employee's

resignation:

 Compensation. Employees who have high self-worth and know their

bankability always have high expectations regarding the total
compensation package. Compensation issues should be discussed
before an employee is offered a particular job. Employees who initially

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
have high hopes may end up leaving the company if the latter does not
keep its promise of better salaries and benefits.
 Work Relationships. Aside from compensation, some employees
resign because of broken or uneasy relationships either with his/her
immediate superior or with co-workers in-the same- area or
department. Good relationships affect employee motivation.
Employees are more enthusiastic to work in a positive, conducive
environment. Some employees are greatly affected by how their co-
workers support or relate with them. Some workers are also
uncomfortable with superiors whom they perceive to be
unapproachable or unsupportive.
 Major Changes in the Organization. Tenure has become
unpredictable in some industries. Mergers, acquisitions, and closures
have adversely affected employees. Those who were left after massive
layoffs think of leaving as well because they felt insecure and anxious
of getting laid off in the future. People who remain after a mass layoff
face uncertainties.
 Organizational Culture. Employees leave upon discovering that the
company culture does not jibe with their personal values. Another
aspect of organizational culture is the way it shows appreciation for a
job well done. In other instances, there are employees who are
dismayed at the top management because it is not supportive of highly
effective and worthy, but quite costly, projects.
 Career Development Program. There are companies that do not
pursue career development programs for their employees. People
without foresight and incapable of imagining the possible top positions
they may assume later on in their careers may opt to resign early.
Highly skilled. employees do not want to remain in the same position or
level during their entire tenure in a company. If there are no career
opportunities in their own company, they may seek them somewhere
else.

d. Retirement. It is the end of an employee's career in a company. This happens to

people between the ages of 60 and 65 years. It signals a new beginning for retirees
and the opportunity for them to do other things. An employee retires from an
organization either satisfied or dissatisfied depending on how he/she looks at his/her
entire work experience.
 Early retirement. It is availed of by employees who have health-
related issues. Due to poor healthy a company may decide to terminate
an employee even before his/her actual retirement age. If it is deemed
necessary for the employee to leave the company permanently to rest
and recover from an ailment, then this is also considered a retirement,

Other issues related to retirement are also discussed in the chapter on

career management.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

CASE STUDY: HRM INCIDENT IN PERFORMANCE EVALUATION AND

EMPLOYEE MOTIVATION

ITech and Performance Appraisal

(This case is for a classroom discussion only and it is not intended to show correct or
incorrect management of a case. It is based on an actual situation of the company under
study. Some personal details and information of the characters involved are altered and the
structures and procedures of the organization are purely hypothetical to fit the situation
depicted in the case. The company is disguised to protect the identity of the owners.)

ITechnology has been selling computer hardware, software, other computer gadgets
and accessories for the last 12 years. Sales are steady with total figures second only
to MegaCD, the number one retailer of computer parts and accessories. ITechnology
has 10 branches nationwide and the majority have sales personnel who man the
stores.

ITechnology is owned by Rolando Velasquez and his family. Because of his age, Mr.
Vasquez handed the management to his daughter, Corazon, who recently graduated
with a degree in HRM. She is planning to pursue her MBA next year.

Within a week of staying at ITech's office in Makati and visiting its store in nearby
Glorietta, Cora found out that the sales personnel are happy and satisfied. Pay
increases are given every year. Spot bonuses are given by her father in every
branch based on observed outstanding performance every month.

However, Cora found out that the company did not practice performance evaluation.
All bonuses are based on "observed" evaluation. Cora did not want to take all this
sitting down. She believes performance evaluation is important as it would serve as
the basis for many major decisions in the future.

She went around the store and wondered. She felt that the sales personnel are
happy with their work. She thinks that something must be done to maintain their
satisfaction. They deserve to be appraised fairly. Their performance should have
been equally rewarded based on fair measures of performance.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
Instructions: Answer the following questions comprehensively.

1. Is there really an urgency to install a performance appraisal system in

ITechnology? Why or why not?
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2. Why do you think Cora felt the need to install a performance appraisal
system?

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Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

3. How can the installation of a performance appraisal system help in

maintaining the employees’ high morale?

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4. How did ITech survive for the last 12 years without a performance appraisal
system?

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Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4

TRENDING IN HR

PERFORMANCE MANAGEMENT

Nowadays, the performance of employees is managed well according to a

company's corporate culture. The current trend is to build a high-performance
culture where employees strive to align their performance with the company's
mission and vision.

Because of globalization, companies should encourage employees to do their

jobs excellently, use their skills, and maintain a high-performance level at all
times. The younger workers expect companies to support and reward
excellent performance. On the other hand, retirees expect to leave the
workplace with a sense of fulfillment after spending many fruitful years with
the organization.

The key factor is performance management—well-installed and implemented

with expertise, inclusive of excellent rewards coupled with innovation,
flexibility, and fairness. A high-performance culture is created by an
organization that can survive the rapid changes occasioned by the forces and
constraints in the environment.

HR FOREFRONT

THE ROLE OF THE HR DEPARTMENT IN MAINTAINING A FIRM'S

COMPETITIVE ADVANTAGE

(Adopted from Understanding the Relationship of HR Competencies and Rotes of

Malaysian Human Resource Professionals by Choi Sang Long and Wan Kairuzzaman
Ismail, 2008 from the European Journal of Social Sciences)

As an emerging concept, human resources is well-positioned to exercise

strategic leadership and contribute significantly to a firm's competitive
advantage. This paradigm shift creates opportunities for the HR function to

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
develop a more strategic role in the firm's operations. There is a need for
companies to make human resources play an active role in choosing the right
people, investing in them, and supporting their growth to achieve the
organization's strategic objectives.

The crucial roles of HRM called the Ulrich Human Resource Management Four-
Role Model was presented by Conner and Ulrich in 1996 and later by Ulrich in
1997. The conceptual framework for the four-role model consists of two
dimensions. The first dimension is in the form of a continuum which highlights
operational and strategic focus while the second one shows the conflicting
demands of people and processes.

Human resources can enhance organizational performance by becoming a

partner in managing the firm and by contributing expertise in the efficient and
effective performance of work. Another contribution is for human resources to
present the concerns of the employees to senior management and work side by
side with employees to ensure their commitment and contribution to
organizational performance.

Question:

Picture the role of the HR in increasing a firm's competitive advantage. How can
the HR help in the achievement of corporate objectives?

LESSONS IN HRM

THE IMPACT OF HUMAN RESOURCE MANAGEMENT ON DESIRED

ORGANIZATIONAL OUTCOMES

HRM is vital because people have qualities which prove to be valuable.

Today, any organization can succeed if it has a sustainable Competitive
advantage. Human resources can greatly help in keeping this advantage for a
certain period of time. Employees should be highly competent, skilled, and
knowledgeable so that other organizations may find it hard to duplicate and
match such employees. These employees can form the foundation of a high-
performance work system.

What is a high-performance work organizational system? According to it is an

organization where people, processes all work together to give the company a
competitive advantage. To have a high-performing work system, all human
resource functions must work together in recruiting people with new skills and
Course Code: Mgt 102
Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
competencies, establishing a competitive compensation and benefits
package, and developing excellent training programs to further hone the skills
of the workforce.

Mayer (2008) identifies these HRM practices in high-performance

organizations:

1. Engaging in selective hiring. Hiring the best person for the job does not
mean that the company has already done selective hiring. The true test is
whether the person's qualities, competencies, knowledge, and skills can
contribute to the company's competitive edge.
2. Fostering employment security. Companies should understand that highly
skilled employees want to feel secure in their jobs amidst the economic
uncertainty. They also want to know how they are doing with regard to
their job performance so their superiors should provide them with regular
performance feedback.
3. Building and empowering teams. Teams are present in high-performing
organizations. They are empowered to decide and innovate. They
contribute greatly to the achievement of corporate goals.
4. Providing extensive development and training. High-performing'
organizations see to it that they provide opportunities to hone employee
potentials by offering excellent training and development programs all year
round. They value training as a contributor to the company's bottomline
and do not consider it as an unnecessary cost.
5. Disclosing essential information. These organizations are transparent in
disclosing key information to their employees. In short, all issues are
discussed, thus there is no room for the "I heard it through the grapevine"
or sentiments of employees brought about by unconfirmed reports and
speculations.
6. Creating supportive cultures. High-performing organizations see to it that
work practices, social norms, and beliefs are monitored to ensure that they
always facilitate good organizational performance.
7. Reducing status differences. Organizations see to it that differences in
status and positions do not interfere with individual and team performance.
The overall contribution of each employee to organizational performance is
what matters.
8. Linking compensation directly to performance. Desirable performance is
fairly rewarded. Incentives also form part of the total compensation
package. Compensation issues are also promptly and fairly addressed.
9. Promoting health and safety. The health and safety of employees in high-
performing organizations are not set aside.
10. Integrating human resource management (HRM) strategy. These
organizations recognize the contribution of HRM to achieve strategic
company goals.

Thus, the integration of HR functions provides the impetus for higher forming
organizations to gain a strong foothold in the industry where it belongs and
maintain a competitive advantage for a long period of time.

Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
ACTIVITY IV

CRITICAL THINKING/EXPERIENTIAL EXERCISES

1. “People earn promotions usually on the basis of past performance. Past

performance is a good indicator of job success.” Comment and justify your
answer.
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2. Some psychological appraisals not based on past performance are now used
to assess an employee’s potential for future performance. Usually, they
include in-depth interviews, psychological tests, and discussions with
immediate supervisors. They can also focus on personal characteristics. Can
psychological appraisal predict future performance and be used as a basis of
promotion?

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3. “The advantages of the 360-degree feedback method outweigh its

disadvantages in an organization’s performance management system.”
Comment and justify your answer.

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Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua
ILOCOS SUR POLYTECHNIC STATE COLLEGE

Tagudin Campus

MODULE 4
4. You are the manager and you are proposing a performance management
system. Employees show some form of resistance. They quip: “We thought
we already had a performance appraisal system so what’s the big deal? Why
is performance management better?” Justify.

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5. Rewrite the following comments in a more appropriate and tactful manner.

The revisions should make the subordinates understand how they are doing
without offending their sensibilities or demotivating them:

a. You are not doing your best.

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b. You’re a pleasure to supervise but you seem to be stiff in your working
relationships with your co-workers.
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c. Your skills are below our standards.
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d. You should improve your productivity.
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Course Code: Mgt 102

Descriptive Title: Human Resource Management Instructor: Rosemarie Jimeno Pascua