Performance Management

After studying this chapter,

you should be able to:
8-1 Understanding performance management.
8-2 Describing methods of performance management.
8-3 Enhancing the effectiveness of performance management.
8-4 Understanding competency assessment.
8-5 Conducting performance appraisal interviews.
Job Performance
 Performance management defined
– The process of setting goals, determining the
methods to achieve those goals, and managing
individuals and teams to ensure the organization's
objectives are met.
– Notes to be given:
• Task goals
• Interpersonal goals
• Strategic goals
• Internalization goals
The Evolution of Performance
Management System
Challenges
– Difficulty in aligning individual goals with company
goals.
– How should performance-based bonuses be
awarded?
– Difficulty in determining employees with low
performance.
– Potential legal issues when terminating low-
performing employees.
– Difficulty in managing feedback on the
performance of individuals.
Content and Sequence of
Performance Appraisal
 Determining evaluative goals
– Smart, measurable, achievable, relevant and time-
bound (SMART).
• Financial performance, e.g., revenue.
• Market performance, e.g., customer satisfaction.
• Internal procedure, e.g., procedural compliance.
• Training and development, e.g., ensuring employee’s
capacity in doing tasks.
• Regulations on behaviors, e.g., comply with work rules
and organizational culture.
 Choosing an appropriate evaluation methods
Content and Sequence of
Performance Appraisal (cont’)
 Identifying evaluators and training on
performance assessment skills.
 Informing employees about contents and
scope of assessment.
 Implementing performance evaluation and
assign new goals to employees.
Performance Appraisal Methods
 Rating
 Pair-comparison
 Scoring
 Recording
 Observing
 Goal-based management
– Determining organization’s, department’s and
individual’s goals
– Developing action plan.
– Implementing, analyzing and adjusting.
– Evaluating.
Key Performance Indicator (KPI)
 KPI defined
– A measurable target that indicates how individuals
or businesses are performing in terms of meeting
their goals.
• Reviewing and evaluating KPIs helps organizations
determine whether or not they are on track for hitting
their desired objectives.
KPI Implementing Process
 Step 1. Identifying key objectives in
performance management
– Job performance
– Disciplines
 Step 2. Classify satisfaction levels for goal
achievement
 Step 3. Weight of each objective group for
employee’s performance outcomes.
 Step 4. Evaluate the overall job performance
of the employee.
 Balanced Scorecard (BSC) and KPI
 BSC defined
– A strategic planning and management system.
• Communicate what they are trying to accomplish.
• Align the day-to-day work that everyone is doing with
strategy.
• Prioritize projects, products, and services
• Measure and monitor progress towards strategic targets.
– Four cornerstones of BSC
• Finance.
• Customer and market.
• Procedure and operating methods.
• HR, learning and development.
Procedure of BSC-KPI Establishment and
Implementation
Problem statement
analysis

Corporate strategy
(Mission, vision, strategy)

Corporate functions and Departmental job Individual job

tasks description description

Strategy map

Corporate KPI Departmental KPI Individual KPI

Building action Monitor Evaluation and

Objective assignment
programs and control report
Objectives and Key Results (OKRs)
 OKR defined
– A framework for businesses to execute and
achieve their desired strategies through simple,
collaborative goal setting.
• Objectives are specific and clearly defined goals that will
have a major impact on the business.
– They should be challenging but attainable, and align with
an organization’s strategic goals.
• Key results are how an objective’s progress is measured
or monitored on the path to achieving the goal.
– Key results serve as outcomes that provide evidence of
whether a goal has been reached or an objective has been
accomplished.
Enhancing the Effectiveness of
Performance Management
 Common errors in performance appraisal
– Lack of clear criteria
– Prejudice error
– Favoritism
– Mediocrity bias
– Bias error
 Role of manager
– Ensure the belief that performance appraisal is fair
and encourage employees proactively participate
in the process.
Enhancing the Effectiveness of
Performance Management (cont’)
 Relation between collective and individual
performance
– Individual performance outcome = A% + MT
collective + B% MT individual.
• MT collective = collective goal outcomes.
• MT individual = individual goal outcomes.
• A%: Weight of collective goal outcomes.
– For head of unit, A% : 30%-40%.
– For workers, A% : 10%
• B% Wight of individual goal outcomes.
• A% + B% = 100%
– E.g., If the Administrative Department achieves 95% of the goal and the
Department Head achieves 100% of the individual goal, then the Department
Head's personal evaluation result is: 0.3 x 95% + 0.7 x 100% = 98.5%.
The classification ratio of collective
performance outcomes

Percentage (%) of individual performance ranking

depends on collective performance outcomes
Outcomes
Excellent Superior Acceptable Need more Unqualified
efforts
< 75% 1% 4% 15% - -
<85% 5% 10% 30% - -
<100% 8% 20% 50% - -
<110% 10% 30% 50% - -
<125% 20% 50% - - -
<150% 30% 50% - - -
150% 50% - - - -
Employee Competency Assessment in
Vietnam Context
 Management competency
– Problem solving skills; planning skills; work
organizing skills.
 Technical skills
– Entrepreneurial
• Customer care; sales
 General skills
– Work with information, e.g., information collection
and analysis; work with others, e.g.,
communication, coordination and teamwork;
foreign language, and office, computer-related
skills.
360-Degree Feedback
 Defined
– A method of employee review that provides each
employee the opportunity to receive performance
feedback from their supervisor or manager and
four to eight peers, reporting staff members,
coworkers, and, in some cases, customers.
 Roles
– Facing work challenges.
– Managing employees.
– Communicating.
Performance Appraisal Interviews
 Interview goals
– Informing methods of performance appraisals.
 Satisfaction with promotion
– High performance and potential employees.
 Satisfaction without promotion
– Accomplished goal employees but no room for
promotion.
 Dissatisfaction and change
– Unqualified employees.
Interview Procedures
 Step 1. Preparing interviews.
 Step 2. Evaluating work performance.
 Step 3. Establishing new objectives and
action plans for subordinates.
 Step 4. Individual’s career care and
development.
Labor Pay
After studying this chapter,
you should be able to:
9-1 Understanding salary, the goals of the salary system, and
forms of salary.

9-2 Describing stimulating salaries in business.

9-3 Understanding salaries in labor markets.
9-4 Identifying factors affecting compensation and legal
regulations on labor compensation in Vietnam.

9-5 Understanding strategies and policies for labor

compensation.
Salary, Goal of Salary System and Forms
 Salary concept
– The money that employers pay to workers under
an agreement includes job or title-based wages,
salary allowances, and other supplementary
amounts, not lower than the minimum wage,
ensuring equality for jobs of equal value.
– Minimum wage
• The lowest wage paid to workers to ensure a minimum
standard of living, suitable for the socio-economic
development conditions, is established regionally and
specified per month or per hour.
Regulations on Payment (Table 9-1)
– Building a salary scale, salary grid, and job
classification involves creating a framework for
managing human resources within a business.
– Rule of pay, payment, form of pay, time of pay
– Extra-work money
– Dormant salary (stop working)
– Payroll through a contractor
– Salary advance
– Salary deduction
– Salary increase, promotion, allowances, subsidies
– Bonus
Nominal Salary and Actual Salary
 Nominal salary
– The amount of salary specified in an employment
contract or agreement. It's the theoretical or
official salary that is agreed upon between the
employer and the employee.
 Actual salary
– The practical amount of money that an employee
receives, taking into account deductions, taxes,
bonuses, and any other factors that may affect the
final payment.
 The relationship between nominal salary and
actual salary is expressed by

– WR represents actual salary, Wm is nominal

salary, and CPI refers to the Consumer Price
Index, which relates to the price index of goods
and services. To increase workers' income, the
nominal salary index must rise faster than the
Consumer Price Index for goods and services.
Income Structure
 Basic salary
 Salary allowances
 Bonus
 Benefits Basic salary

Allowances
Materialism
Bonus

Benefits
Payment system
structure

Promotion
Non-materialism
Work interests

Figure 9-2, page 335 Working conditions

Purpose of Salary System in Business
 Talent attraction
 High-performance employee retention
 Employee motivation
 Cost efficiency
 Laws and regulation compliance
Forms of Salary
 Time-based pay
 Employee-based pay
 Performance-based pay
Stimulating Salary in Business
 Defined
– Benefits related to salary designed to stimulate
enthusiasm and effort in employees' work.
 Three levels of stimulating salary
– Individual
– Group
– Overall organizational performance
Individual Stimulation
 Piece-rate pay form
– A compensation method based on the quantity or
quality of the work produced by an employee.
• Directly paying individuals based on the product.
• Paying based on the product with bonuses or
progressive product-based pay.
• Indirect product-based pay.
• Paying for product when the labor standard increases.
Formula:
– Unit price * (Old labor standard + New labor standard) / 2
* New labor standard
Individual Stimulation (Cont’)
 Standard hourly wage
 Commission
 Multi-level marketing (MLM)
Group Stimulation
 Defined
– Commonly applied to tasks that are
comprehensive in nature and involve various
interconnected stages. The entire workload is
assigned to a group or team of employees. The
salary is then paid to the group or team based on
the final outcome achieved by the entire group or
team.
• This method stimulates all employees to be concerned
about the final product outcomes of the group.
Overall Organizational Performance
Stimulation
 Defined
– Pay based on business performance outcomes.
 Types of pay
– Productivity bonus
– Efficiency bonuses
• E.g., time savings, material savings, cost reduction, and
profit sharing (to tightly connect employee compensation
with the company's profits).
Salary in Labor Markets
 Labor market for workers and office staff
– Required skills, educated knowledge, working
conditions, and relation between workers and
office staff.
 Labor market for professional and technical
officers
– Education, experience, previous work performance
outcomes, and self-credits.
 Labor market for managers
– Monthly or annual pay and bonuses, and other
role-related compensations.
 Labor market for athletes and entertainment
industries
Impactful Factors and Legal Regulations
in Labor Remuneration in Vietnam
 Impactful factors on salary (detailed in Table
9-8, page 358)
– Externalities
– Intra-organizational issues
– Work characteristics
– Worker attributes.
Legal Regulations in Labor Remuneration
in Vietnam
 Regulations on minimum wages and working
hours
– The minimum wage is determined based on the
cost of living, ensuring that workers performing
the simplest tasks under normal working
conditions receive compensation that compensates
for basic labor and partly reflects the accumulated
productivity of expanded and diversified labor.
(see details in Table 9-9, page 359)
Days off with Full Payment
 Holiday
– New Year, the Tet days, Commemoration of Hùng
kings, April 30th Day, International Workers' Day,
and National Day.
 Leave (after working for 12 months):
– Normal vs.. hazardous conditions
 Personal leave
– E.g., wedding
Detailed in Table 9-10, page 360.
Regulations on Child and Women Labor
 Prohibiting the use of labor under 13 years
old.
 Prohibiting employers to terminate or
unilaterally terminate labor contracts with
female employees due to:
– Marriage, pregnancy, maternity leave, or caring for
children under 12 months old, except in cases
where the business ceases its operations.
– In the case of childbirth, women are entitled to a
6-month maternity leave with corresponding
maternity benefits.
 Regulations on social-welfare benefits such
as social insurance, sickness benefits,
maternity benefits, and occupational
accidents.
– Required pay of insurance in total (%), see Table
9-11 on page 361.
• Employers: 21.5%
• Employees: 10.5%
Strategy and Policies for Labor
Remuneration in the Enterprise
 Three main contents of the strategy and
policy for labor remuneration
– Competing with the external labor market.
– Fairness and efficiency within the internal
organization.
– Organizing and managing the labor remuneration
system.
Salary and Business Strategies
 Innovation
 Cost leadership
 Customer orientation
Enterprise Salary Scale and System
After studying this chapter,
you should be able to:
10-1 Understanding the salary scale and system within the
enterprise.

10-2 Understanding the determination of job value.

10-3 Understanding market salary surveys.
10-4 Knowing how to determine salary levels and salary grades
in the salary scale.

10-5 Knowing how to determine individual salaries.

Salary Scale and System
 Salary structure and pay scale
– Payroll: A table that determines the salary range
for each job title. The payroll includes one or more
salary grades
– Two forms of payroll:
• A salary table that specifies the quantity and value of
specific salary grades for each job title (Table 10-1, p.
381).
• A salary table that does not specify the quantity and
value of salary grades (Table 10-2, p. 381).
Salary Scale
 A table that determines the proportional
relationship of wages based on the skill level
of workers in the same profession or similar
group of professions.
– The target for applying the salary scale is
technical workers in professions that have clear
and distinguishable technical grade standards,
reflecting the differences in the complexity of the
job requirements and the skill level of the
performers across different grades (Table 10-4, p.
383).
Concepts Used in Salary Scale and
System
 Salary scale:
– A hierarchical system of salary grades based on employees' qualifications,
experience, and positions within the company.

 Salary table:
– A chart that shows specific amounts paid for each grade in the salary scale.

 Salary grade
– A part of the salary scale, representing a specific level with a corresponding
salary.

 Salary step
– A specific salary level assigned to each salary grade within the salary scale.

 Technical grade
– A segment of the salary scale often used for individuals performing various
levels of technical work.
Determining Job Value
 Defined
– The process of research involves systematically
determining the relative value of a job in relation
to other jobs within the enterprise.
 Roles
– The process of determining job value is
fundamental in promoting transparency, employee
satisfaction, and overall organizational success.
 Methods
– Ranking, pairing, classifying, score grading,
computer-based evaluation.
Market Salary Survey
 Market salary survey results
– Provides information about the salary levels and
benefits in the market for common positions,
indicating low, average, and high compensation
levels based on job titles, geographical regions,
industry sectors, and even the ownership structure
of the business.
• Factors such as the number of years of experience
and/or educational qualifications of the individuals
surveyed are also taken into account.
Determining Salary Levels and Salary
Ranges in the Salary Scale

 This process involves setting specific salary

levels and salary ranges within the salary
scale.
– The salary scale encompasses various salary
grades and classifications, each associated with
specific job roles or levels within the organization.
• The determination of salary levels and ranges takes into
consideration factors such as job responsibilities,
required skills, experience, and qualifications.
Determining Individual Salary Factors
 After establishing the salary levels for each
rank within the salary structure, it is crucial to
determine the salary coefficient or amount for
each individual employee.
– Business leaders may still be uncertain about
whether the salary levels within these rank
structures align with the company's financial
capacity.
Steps in Determining Individual
Salary Factors
 Step 1: Identify the essential competencies for job
positions
 Step 2: Determine the complexity Level of each
competency requirement
 Step 3: Assign weights (importance) to competency
requirements for each position
 Step 4: Evaluate (score) individual competencies of
each employee in each position
 Step 5: Relationship between salary level and
competency response
 Step 6: Apply and adjust
Labor Relations
After studying this chapter,
you should be able to:
11-1 Understanding the role of labor relations.
11-2 Describing collective labor agreements.
11-3 Capturing internal regulations and labor disputes.
11-4 Understanding international labor relations and job
satisfaction.
What Is Labor Relations?
 Concept of Labor Relations
– The interaction between management
(representing the interests of the employer) and
labor organizations (unions representing the
workers), collaborating in the process of
establishing, negotiating, implementing, and
enforcing workplace rules and conditions.
• Employees: Working, from 15 years old
• Employers: Employment offering
Three Stages of Labor Relations Process
 Recognition of rights and responsibilities:
– Acknowledging the rights and responsibilities of
both management (employer) and labor
organizations (unions).
 Negotiating labor agreements
– Engaging in negotiations to reach labor
agreements using appropriate strategies, tactics,
and conflict resolution techniques.
 Managing the enforced labor agreement
– Administering the negotiated labor agreement,
interpreting its provisions, and applying the terms
of the daily labor contract.
Factors of Labor Relations Process
Negotiating and
managing labor rules
• Pay and compensations:
Salary, extra-working time,
holidays, leave, etc.
• Rights and obligations of
employers and employees
• Characteristics of labor
rules
- General or unique
- Ambiguous or specific
- Changes in times
Figure 11-1, page 425
Constraints and
Key participants
Influences
• Management personnel • Economic status
- Enterprise leaders • Labor market
- Legal representatives • Product market
• Union Officers • Financial market
- Specialized officials, • Technology
- Authorized • International forces
representatives • Media
• Employees • Pandemic
• Government officials
• Third party
- Mediator
- Arbitrator
Role of Union (Table 11-1, 427)
 International union context
– International Trade Union Confederation
• 207 million members in 163 countries and territories.
– Mission
• Promote and protect the rights of workers through
international cooperation among trade union
organizations.
– Forms of international union (Detailed in Table 11-1)
• International Federation of Building and Wood Workers;
Education International; Global Industrial Union;
International Federation of Journalists; International
Transport Workers' Federation; International Union of
Food, Agricultural, Hotel, Restaurant, Catering, Tobacco,
and Allied Workers' Associations; UNI Global Union;
World Federation of Trade Unions
Four Future Challenges
 Risk of marginalization
 Trend of polarization
 Risk of substitution
 Recovery capability
Union Involvement
 Ensure that the enterprise management
applies effective regulations regarding the
rights and benefits of the workforce;
 Demand or propose solutions for unstable
situations.
 Econometric evidence
– Increase labor productivity;
– Promote employees' professional management
skills and ensure appropriate human resource
management policies;
– Counterbalance with opportunism in operational
management.
Vietnam Union
 A voluntary-based establishment
– Socio-political organization of the working class
and laborers, within the political system of
Vietnamese society, under the leadership of the
Communist Party of Vietnam
• Care for and protect the legitimate and just rights and
interests of laborers
• Participate in state management, socio-economic affairs,
inspection, and supervises the activities of agencies,
organizations, and enterprises.
Vietnam Union (cont’)
 Union members’ responsibility
– Rights of union members
– Corporate responsibility
– Union base establishment (see Figure 11-2, page
431)
Collective Labor Agreement
 Regulations and contents
– A document signed through collective bargaining,
including the enterprise-level collective labor
agreement, industry-level collective labor
agreement, and other collective labor agreements,
must not violate legal regulations.
• Salary, compensations, welfare, promotion, working time,
safety, and etc.
• Process
– Parties propose requirements and bargaining contents.
– Implementation of bargaining.
– Drafting of collective bargaining agreement.
– Completion.
Labor Rules and Disputes
 Labor rules
– Principles, procedure of labor discipline
– Forms of discipline
– Compensations
 Labor disputes
– Principles of resolving
– Rights and obligations
– Procedure
 Guides for managers (Table 11-4, page 440)
– Should and should not do
International Labor Relations and Job
Satisfaction Global workforce participation
Income Gap
Growth of GDP per capita, 2010–23,
world and country income groups (%)
Working Conditions and Policies
 Collective bargain
 Job security
 Salary
 Working time
 Life-work balance
Job Satisfaction
 Defined
– The level of contentment, fulfillment, or happiness
that an individual experiences in their job or
workplace.
– High job satisfaction
• Positive outcomes for both employees and employers.
Satisfied employees tend to be more productive,
engaged, and committed to their work. They may also
experience lower levels of stress and have better overall
well-being.
Interventions
 Leadership
 Organizational structure
 Employee expectation
 Perceived support
 Job autonomy
 Social networking mechanism