978-0078029165 Appendix A Part 5

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Appendix A-81

| Appendix A – Critical Thinking Applications

because pay is one of the few characteristics people can know with certainty before taking a

job. Once you’ve had a job for awhile, other factors like the quality of supervision will have a

strong impact.

In his Harvard Business Review article, Kohn states that a “growing collection of evidence

supports an opposing view” regarding pay-for-performance and “numerous studies in

Kohn is right regarding the implications of bad incentive systems. As incentive expert Ed Lawler

has argued, as the perceived connection between effort and performance and then

performance and outcomes becomes less clear, any pay-for-performance system (individual or

Effective PFP systems must support the competitive strategy and values of the organization. If

the strategy emphasizes entrepreneurial activity and independent effort, individual PFP

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the standards and believe in the equity of the rewards. Kohn ignores Lincoln Electric’s much

touted piece-rate system in his writing. But Lincoln’s system would probably not be successful

without the other elements of the Lincoln management, a system based on mutual trust and a

fair distribution of the products of hard work. Organizational culture clearly affects the nature

of incentives selected and, in the end, the effectiveness of the system. Individual PFP plans are

preferable when individuals contribute important ideas, criteria can be clearly measured, and

the process of individual performance measurement and rewards does not seriously undermine

teamwork. Highly interdependent jobs or groups will dictate group or organizational-based PFP

plans.

As one expert on the subject has put it, “Paying for performance will not solve all of the

motivational problems associated with the new workforce and strong national competition.

However, it can be an important part of a total performance management system that is

designed to create a highly motivating work environment.”i Following the measurement

principles we presented in Chapter 7 for defining performance, performance is a critical step in

linking the performance appraisal, performance management and pay for performance system.

guidelines for development and maintenance, PFP systems look like winners.

Key References

Rynes, S, L., Gerhart, B., & Parks, L. (2005). Personnel Psychology: Performance evaluation and

pay for performance. Annual Reviews of Psychology, 56, 571-600.

Rynes, S, L., Gerhart, B., & Minette, K.A. (2004). The importance of pay in employee motivation:

381-394.

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Critical Thinking Application 11-B

The Prediction of Rating Error

Research indicates that the people who commit leniency bias tend to commit the error across

rating situations (e.g., no matter whom they are rating). In essence, some people feel relatively

more discomfort in giving negative feedback than others. The Performance Appraisal

Discomfort Scale (PADS) is an instrument that assesses the level of discomfort in giving

performance feedback and taking performance-related action. Because of the anticipated

discomfort, raters are more likely to take steps to avoid the anticipated discomfort if they can

do so. Thus, as supervisors, they are more likely to rate in a lenient manner in order to avoid

the discomfort that may result from giving a more accurate but more critical review. Two rating

instruments are presented in this exercise, both of which are related to performance appraisal

outcomes. Two forms of the PADS, one a forced-choice instrument, are presented in this

exercise, both of which are related to rating ourtcomes.

Scores should be interpreted as follows:

12–20 Little or no psychological discomfort in evaluating people and giving negative feedback

21–29 Some psychological discomfort in evaluating people and giving negative feedback;

Leniency bias could be a problem

In one study (Bernardin, H.J., Villanova, P. & Cooke, D. (2003). A measure of rater discomfort in

the prediction of rating leniency and rating accuracy. Proceedings of the Southern Management

Association Meetings, Atlanta, GA. Scores on the PADS were correlated (r = .41) with a measure

of rating leniency and .29 with a measure of rating accuracy.

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Key References:

Bernardin, H. J., Villanova, P., Cooke, D. (2000). Conscientiousness and agreeableness as

predictors of rating elevation. Journal of Applied Psychology, 85, 232-236.

Part B. PADS—Forced Choice

The mean score for college students with little experience in conducting performance appraisal

is 3.7. If your score is 6 (or higher), you are likely to feel more confident in conducting

performance appraisals and therefore, are more likely to rate more accurately and with little or

no leniency bias. If your score is 3 (or lower), you feel less confident doing performance

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Discussion Questions

1. What other personality characteristics have been linked to rating tendencies such as

leniency?

A rater with a low “Conscientiousness” score (from the Five– Factor Model discussed in Chapter

2. If a person scores at a high discomfort level on the PADS, does this mean he or she will be a

lenient rater?

Raters can be trained to reduce their levels of discomfort in giving negative information, which

3. What steps that could be taken to alleviate rating leniency in an appraisal system?

4. Some experts recommend the use of a forced distribution rating system to control

leniency. Do you agree with this recommendation?

NO; Microsoft dropped their forced-distribution system in 2008 after numerous complaints by

managers who were “forced” to comply with the rating level distributions. Also, the workers

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One study conducted by Professor Ed Lawler found negative results for forced–distribution

systems. Among his theories for the results was “when employees in a work area compete with

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Critical Thinking Application 11-C

Can We (and Should We) Apply the Lincoln Electric Method?

Does the Lincoln system generalize to many other work situations? Think of one work setting

in which you think the piece-rate method might work. Generate a list of the key

contingencies that may be related to the success of a piece-rate system in that setting.

Also, in addition to the piece-rate method, to what extent are the other characteristics of the

Lincoln compensation and management systems critical for Lincoln’s success? (Even in 2008,

a terrible year for machinery, Lincoln had still maintained its lifetime employment record).

Do you think a CEO’s pay relative to that of the producers of the goods and services is critical

for establishing and maintaining employee trust? Do you think trust is important?

Expectancy theory says nothing about trust. Or does it? Also, is this a work setting for so–

called workaholics only?

Lincoln, the world’s largest maker of arc welders and welding supplies, provides seminars on its

PFP system at its Euclid, Ohio headquarters. Thousands of managers from other companies

have taken advantage of the free seminars.

One of the secrets of Lincoln’s system is that they do use performance appraisals as well as the

measures of quantity to determine employee pay. Appraisals of dependability, quality and

generalize well to most situations.

In addition to the availability of important, countable results, the great trust between workers

and management at Lincoln is another requirement for the system to be effective. That trust

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

renegotiate the results-pay relationship. While people tend to focus on similarly situated co-

workers when assessing their pay, recent evidence supports the notion that pay equity

perceptions by non-executives do include assessments of the pay levels of management.

The key contingencies:

1. Quid pro quo relationships between critical output and desired outcomes;

2. High trust between workers and management.

PFP systems.

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Critical Thinking Application 11-D

Should Teacher Pay be tied to Student Test Scores?

This is a “hot’ topic as President Obama and other prominant polititions support the concept

and teacher unions have been more receptive to group-based PFP systems.

Conduct research on teacher merit pay. What does research say about the subject?

Ballou D (2001). Pay for performance in public and private schools

ECONOMICS OF EDUCATION REVIEW 20 (1): 51-61 FEB 2001

inherent in teaching, but are due to specific circumstances in public education, notably the

opposition of teacher unions

Dee TS & Keys BJ (2004). Does merit pay reward good teachers? Evidence from a randomized

experiment. JOURNAL OF POLICY ANALYSIS AND MANAGEMENT,23 (3): 471-488.

Abstract: A common criticism of merit-pay plans is that they fail to systematically target

in rewarding teachers who increased student achievement. Assignment to career-ladder

teachers increased mathematics scores by roughly 3 percentile, points but generally had

smaller and statistically insignificant effects on reading scores.

De Fraja G & Landeras P (2006). Could do better: The effectiveness of incentives and

competition in schools. JOURNAL OF PUBLIC ECONOMICS 90 (1-2): 189-213 JAN 2006.

effort. In a simple dynamic set-tip, where the reputation of the schools affects recruitment, we

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show that more powerful incentives and increased competition lead to segregation of pupils by

ability, and may also determine lower attainment in some schools

Blumenfeld, Lucinda. Weight In: Does Performance Pay Work? Scholastic Administrator

Magazine. January 2009.

A panel of education leaders give their gut-level reactions

What has happened to teacher merit pay in Massachusetts since Governor Romney left

office?

In 2007, the nonprofit Mass Insight Education and Research Institute secured a $13.2 million

grant funded primarily by ExxonMobil Corp. to recruit, train, and reward teachers for Advanced

Placement classes in math, science, and English. The program provides sensible rewards to

What do teacher unions say about the subject?

According to a 2004 article by Robert Holland in School Reform News, unions almost always

‘resist merit pay for K-12 teachers while insisting on standard pay scales based on seniority and

credits amassed in education courses.”

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Chaired by former IBM chief Louis V. Gerstner, Jr., the Teaching Commission featured

Democrats who were prominent in education policy during the 1990s—among them, President

Bill Clinton’s Secretary of Education, Richard Riley, and former North Carolina Governor James

Hunt, founding chairman of the National Board for Professional Teaching Standards (NBPTS).

“[T]he public school system currently offers virtually no incentives to reward excellence, and a

system that does not reward excellence is unlikely to inspire it,” said Gerstner. While endorsing

improved pay for teachers, the commission report, “Teaching at Risk,” concluded painful

experience demonstrates that “simply raising salaries for all teachers will not, by itself, raise

School administrators are generally opposed to merit pay for different reasons. The main one is

that administrative evaluations will inevitably be scrutinized carefully by teachers who do not

receive merit pay. This is not something administrators look forward to, especially since it’s

always possible to criticize the criteria or the applications of the criteria for merit pay. However,

this issue.

Conservatives often exaggerate the extent to which merit pay is the practice in our labor force.

In dozens of industries, merit pay seldom applies to employees below the supervisory level. In

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It appears also that other countries reputed to have excellent educational systems, such as

Japan, do not have merit pay. It should also be noted that the problems of scale frequently

How have teachers been paid in the past and what has been the role of classroom

performance?

In the past, teachers have been paid relatively low salaries. However, average teacher salaries

have improved rapidly in recent years. US teachers are generally paid on graduated scales, with

income depending on experience. Teachers with more experience and higher education earn

Generate a list of potential problems with teacher merit pay tied to classroom performance

and then possible solutions to those problems.

PROS

CONS

Merit pay raises the bar of professionalism in

teaching. Teachers must be held more

accountable and judged in relation to their

peers. Evaluation is part of being a professional.

Research studies have repeatedly shown that

merit pay doesn’t have a positive effect on

teachers’ classroom work, but instead can have a

divisive and damaging effect on a school or

district’s teaching community.

Principals must have the authority to make

hiring and firing decisions, and a system that

rewards quality is a means to determine who

stays and who goes.

Educational historians David Tyack and Larry

Cuban have said “the history of performance–

based salary plans has been a merry-go-round.

In the main, districts that initially embraced

merit pay dropped it after a brief trial.”

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Rewarding excellence in teaching appears to be

working in North Carolina, Dallas, and Denver

schools.

Teachers unions in Pennsylvania and Cincinnati,

as well as individual teachers around the

country, have opposed merit pay plans, saying

they lack fairness, validity, and practicality.

Changing the ways teachers are paid and raising

the pay levels of the most effective and sought-

after teachers are key parts of responding to the

school-improvement challenge.

Even if teachers would like larger salaries, they

typically aren’t money-driven. A 2000 Public

Agenda survey of 900 new teachers noted that

considerations other than money are

“significantly more important to most teachers

and would-be-teachers.”

Rewarding quality work is a means to change the

paradigm so that the best and the brightest are

eager to teach.

Rewarding teachers based on added

responsibilities, team leadership, mentorship,

and the like is a form of compensation that

recognized teacher effort without the

deleterious effects of merit pay.

Why not just tie student performance to teacher pay directly?

Where is your state on this subject?

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CHAPTER 12 – CRITICAL THINKING APPLICATIONS

Critical Thinking Application 12-A

Employment-at-Will

* Contributed by Jennifer R.D. Robin

A study was discussed in which individuals were asked their perceptions of employment–at-will.

Specifically, they were asked to define the concept and they were presented with a scenario in

which they were to determine if a termination was lawful. Do a similar “study” by asking 10

people the following questions.

1. Define employment-at-will.

2. Can an employer legally fire someone who was performing satisfactorily merely to

replace her with someone at a lower wage?

3. Can an employer legally fire someone who refuses to participate in illegal billing

practices?

4. Can an employer legally fire someone who has been accused of stealing, even if the

employee can prove that he or she is not the culprit?

Description: This exercise raises an interesting question as to how well individuals understand

their protections from termination under Employment-at-Will doctrine. Most likely, the

students themselves have not considered these issues, so exploring and understanding them

will be a new experience. Moreover, the issue can be a springboard for debate over the current

laws. Should workers be afforded more protection against termination than what already

exists? In other words, are they as “free” to determine the path of their careers, as

organizations are “free” to determine the best way to achieve productivity, as at-will doctrine

seems to suggest? On the other hand, would increased regulations be a greater strain on

organizations than is necessary? Between employment law, union agreements, and state

regulations, organizations are already forced to adopt many, many practices that require

administration and oversight.

Part A:

This section involves gathering data on four key questions dealing with employment–at-will.

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Part B:

Compile the results from the entire class and compare to Kim’s (1997) results.

Questions 5 & 6 ask that the students critically think about their results as compared to the

Part C:

Students are asked to research employment at will in their state. Possible resources for this

are as follows:

Part D:

Students may be divided into groups based upon their agreement with this statement. Those

that agree likely believe that workers need to be better informed, and may cite reduced

litigation and perceptions of unfairness as reasons that organizations should take responsibility

for educating workers. Those that disagree may cite the increased administrative costs

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Critical Thinking Application 12-B

Developing Organizational Policy and a Code of Ethics

* Contributed by Joyce E.A. Russell and Lillian T. Eby

Do research to identify a company you are familiar with where you can borrow the firm’s

policies and procedures handbook or retrieve it through the internet.

• Write a brief description of the company you have chosen.

• Identify the code of ethics for employee behavior and what (if any) policy exists

regarding ethics and employee behavior.

Here is a sampling of some companies that have excellent ethics policies.

Baxter International Inc.

http://www.baxter.com/about_baxter/doing_business_with_baxter/global_business_pr

actice_standards/ethics_and_compliance.html

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Pitney Bowes:

http://www.pb.com/cgi-bin/pb.dll/jsp/GenericEditorial.do?catOID=–

18365&editorial_id=corp_gov_code&lang=en&country=US

Raytheon Company:

http://www.raytheon.com/ourcompany/stellent/groups/public/documents/legacy_site

/cms01_023524.pdf

Since the Enron debacle additional sections on company stock ownership programs, insider

trading, accounting disclosures, accounting ethics, and relationships with outside customers,

A recent study found that 90% of people employed expect their companies to “what is right,

ethical bosses.6 The surveyor was The Ethics Resource Center (ERC).

ERC suggest the following outline for an Employee Code of Conduct:

B. Leadership Letter

1. Commitment of senior management to the code.

2. Why a code? Why now?

5 Ethics Resource Center. (2000). Ethics Survey Provides Hop and Concern for Association Executives.

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6. What kind of example this sets for others?

C. Table of Contents

D. Introduction – Prologue

1. Why is this code important? Will it be enforced? Is it mandatory? For

everyone?

2. To what purpose will this code be put?

i. Clear objectives

ii. Purpose of the code (inspirational or aspirational)

E. Statement of Values – Core Values

F. Code Provisions (Substantive Part of Code)

1. Employment Practices

i. Workplace Harassment

2. Equal Opportunity