Business Finance
Discussion HR4

Question Description

Review the video “The Performance Review Process”. This video presented by Wayne Cascio focuses on the performance review process, particularly compensation strategy, legal consideration, benefits, insurance, and global perspectives. Noting that 90% of organizations use a pay for performance model, Cascio addresses the camera on this topic from an office setting, then intersperses slides with voiceover that mirror the audio. Then answer the following two questions using the question and answer (Q&A) format; in other words, include the original question along with your response.

Within your post, support your responses with information from at least one peer-reviewed/scholarly source (not older than 3-5 years) from CSU-Global online library or the Internet, and provide the full citation at the end. Use APA guidelines to format your references.

  1. What are the principal components of an effective performance appraisal system?
  2. How can a performance appraisal system effectively address employee-related challenges in the workplace such as performance problems, unsatisfactory conduct, and/or violations of policies?

Unformatted Attachment Preview

The Performance Review Process Video Transcript - How much do you make? That sounds like a simple question, doesn't it? Most people think immediately of their annual salary or their hourly rate of pay. Neither answer is correct. Both answers underestimate how much a person actually makes. It's important that you understand how much you're really being paid for the work you do. I'd like to walk you through the components of total compensation. Compensation refers to anything that an employer is willing to offer in return for an individual's contributions of time, knowledge, skills, abilities, and commitment to an organization or to a project. Total compensation refers to monetary compensation as well as your benefits. Monetary compensation includes base pay, which is the monetary compensation that an employer pays for the work that is performed. Merit increases are in addition to base pay and are based on past performance. Whereas a merit bonus is also based on past performance but paid as a onetime lump sum. Short-term incentives are one-time payments that do not increase the base wage and that have to be re-earned each period. Bonuses and commissions are examples of short-term incentives. Long-term incentives focus on multiyear results such as stock grants or options to buy stock at a fixed price. Both of these lead to monetary gain if the stock price goes up over time. Let us say you have had a great year at work and in your performance review your boss says, "Kelly, based on your past performance, you've earned a merit increase of 6% on top of your base pay. In addition, you'll receive a bonus of 15% of your base pay and a stock grant equal to 10% of your annual salary.” Your boss has generously included each element of monetary compensation in this year's raise. Of course, your total compensation also includes a variety of benefits. Income protection is made up of benefits that are legally required such as Social Security, Workers' compensation, and Unemployment insurance. Those that an employer offers voluntarily like Medical insurance, Retirement programs, Life insurance and Savings plans. Work, Life Fit programs help employees integrate their work and life responsibilities. They may include time away from work, access to services to meet specific needs, like childcare, counseling for substance abuse, or financial planning. They might also include flexible work arrangements like telecommuting and non-traditional work schedules or non-paid time off. Allowances may include transportation or housing while miscellaneous benefits might include employee discounts on goods and services purchased from one's employer, employee meals, or education expenses. Think of your total compensation as the sum of three forms of pay. The challenge is to design total compensation so that it helps an organization to succeed. By the way, all those benefits we listed, average almost 40 cents for every dollar you make at U.S. companies. So the next time someone asks how much do you make, be sure to tack on that extra 40% on top of your monetary compensation. It provides a more accurate picture of the total financial rewards that you get from work. - Would a great coach ever go into a game or match without a strategy to win? Would a great General ever engage the enemy without a battle plan? Of course not. And just as you need strategies to win at sports and in battle, you also need them to succeed in business. In a business setting, strategy refers to the decisions, processes and choices firms make to position themselves for long-term success. It answers questions such as why should customers buy from you? What do you do better than anyone else? What do you offer that's valuable, rare, difficult to imitate? If you're going to be part of your company's long-term success, it's important that you understand the connection between an organization's competitive strategy and its compensation strategy. Competitive strategy is about being distinctive by providing a superior product or service in the eyes of the customer. And it might include developing products or services that no other competitor can match such as a patent protected miracle drug. Offering the cheapest products and services or the highest quality. Or maybe you offer the fastest order fulfillment process or superior customer service. The challenge is to align the entire organization to execute that strategy effectively. The company's compensation strategy must compliment and align closely with competitive strategy. To do that well, the company maps a total compensation strategy by answering some key questions. What objectives do you want your compensation strategy to achieve? Does your company want to be viewed as a fun place to work to provide special benefits to employees? Does your company demand a lot from its employees but pay much higher than its competitors? How should the different levels of skills and work be paid within your organization? Do you want to establish differences in pay based on the relative worth of the jobs that people do or on the skills and competencies that they have to demonstrate to do their work? How should we position our total compensation compared to competitors? For example, do we want to lead, lag or match going rates of pay across the various jobs in our organization? How should pay increases be determined? Should they be based on individual or team performance on experience or on improved skills? Or should increases be based on each business units performance or on changes in the cost of living? Who should be involved in designing and managing the system to ensure that it complies with legal requirements? And what information will you communicate to various groups in your organization? For example to executives, supervisors and employees? How open and transparent should paid decisions be to employees? Let's say you manage a fast food restaurant that is staffed primarily by teenagers. To appeal to new employees, you focus on three themes. Fun, family and flexibility. So you offer a fun working environment where crews welcome new hires to their family that are extremely flexible with work hours. In addition, you choose to match the competition on payand to offer all legally required benefits. You also offer opportunities for training. And as employees increase their skills, their pay rises accordingly. In this example, you can see how compensation strategy aligns with and reinforces the restaurant's approach to competing for business in the marketplace. Taken together, decisions about these issues form a pattern that becomes your organization's compensation strategy. ...
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