CHAPTER 14
Managing and Enhancing Performance: The Big
Picture
Learning Objectives
After studying this chapter, the student should be able to:
1. Describe the relationships among performance measured at different levels within an
organization and discuss how training, development, and job redesign can help improve
performance.
2. Discuss the role of alternate work arrangements in motivating and enhancing performance.
Chapter Outline
Opening Case: Building a Great Place to Work
NetApp, a computer-storage and data-management company headquartered in Sunnyvale,
California, is no stranger to best-places-to-work lists. Since 2005, it has consistently been ranked
among the best multinational work places in the world. NetApp likes to cite employee-survey
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Introduction
The responsible and professional HR manager does all this in an ethical way and does not violate
the law or anyone’s rights, but the ultimate goal of the HR activities and programs is to enhance
I. Enhancing Performance at Different Levels
It is critical that any performance-enhancement intervention must ultimately improve firm-level
performance. This is the level that determines the long-term survival of the firm, generates
profits for potential profit sharing, and determines the company’s stock price.
A. Training and Development
Training and development activities within an organization are a very basic form of
performance-enhancement intervention. The training process begins with some type of needs
B. Job Redesign
A much different approach to enhancing organizational performance is through the redesign
of jobs. Specifically, this technique involves changing—redesigning—jobs so that the work
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Based on the assumption that doing the same basic task over and over is the primary cause of
worker dissatisfaction, job enlargement was developed to increase the total number of tasks
A more comprehensive approach, job enrichment, assumes that increasing the range and
variety of tasks alone is not sufficient to improve employee motivation. Thus, job enrichment
attempts to increase both the number of tasks a worker does and the control the worker has
The job characteristics approach is an alternative to job specialization in that it does take
into account the work system and employee preferences. As illustrated in Figure 14.1, the job
characteristics approach suggests that jobs should be examined and improved along the
following five core dimensions.
• Skill variety is the number of tasks a person does in a job.
The higher a job rates on these five dimensions, the more employees will experience various
psychological states. Experiencing these states, in turn, presumably leads to high motivation,
high-quality performance, and low absenteeism and turnover. Finally, a variable called
Work teams represent a much different way of approaching job design. Under this
arrangement, a group is given responsibility for designing the work system to be used in
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Chapter 14: Managing and Enhancing Performance: The Big Picture
The original impetus for the reliance on work teams comes from a famous series of studies
conducted in England by the Tavistock Institute and dealing with the coal-mining industry.
work teams are not without problems, and they certainly are not the answer in all cases.
II. Alternative Work Arrangements
A. Alternate Work Schedules
The two most common alternatives to the traditional work-week are programs known as
flexible work hours and compressed workweeks. Employees working under flexible work
HR in the 21st Century: Work Is Where You Do It
Once upon a time “going to work” meant getting dressed in appropriate attire at a
predetermined time, driving or using public transportation to get to an office or other work site,
and staying there for a predetermined period of time before returning home. But for some
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Organizations may benefit for several reasons as well: (1) they can reduce absenteeism and
turnover since employees will need to take less “formal” time off, and (2) they can save on
facilities such as parking spaces because fewer people will be at work on any given day.
Compressed workweeks are arrangements in which the employee works the required number
of hours (typically 40) but does so in fewer than 5 days. The employee gains the flexibility of
3 days off a week, presumably making it less likely that he or she will lose work time to deal
with personal business. These schedules are also well suited for employees who work at sites
that are difficult to get to such as offshore drilling rigs. These schedules are not for everyone,
B. Alternate Work Sites
Table 14.1shows the number and distribution of people currently working under an alternative
work arrangement. Home work programs include arrangements that are often referred to as
cottage industries. It is more common, however, to operate in what can be called an electric
cottage. Employees take office work home with them and complete it on home computers.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Alternative work sites present a more serious challenge to the HR manager. In the past, the
AFL-CIO has complained that home work arrangements allow management to impose unfair
working conditions on employees, and it also makes it more difficult for unions to organize
workers. As with alternative work schedules, communication among employees is difficult
under these arrangements, and it is extremely difficult for a new employee to become
socialized.
III. Incentives and Performance-Based Rewards
The most basic form of incentive compensation is merit pay, which generally refers to pay
awarded to employees on the basis of the relative value of their contributions to the organization.
Merit-pay plans, then, are formal compensation plans that base at least some meaningful
portion of compensation on merit.
Another basic approach is based on systems of skill- and knowledge-based pay. Under these
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Chapter 14: Managing and Enhancing Performance: The Big Picture
systems, instead of rewarding employees for increased performance they are rewarded for
acquiring more skills or knowledge. But these skills or this knowledge is related to what the
organization believes it will need in the future.
Incentive compensation systems are among the oldest forms of performance-based rewards.
Under a piece-rate incentive plan, the organization pays an employee certain amount of money
for every unit she or he produces. But such simplistic systems fails to account for factors such as
A. Individual Incentive Pay Plans
Individual incentive plans reward individual performance on a real-time basis. Rather than
increasing a person’s base salary at the end of the year, an individual instead receives some
level of salary increase or financial reward in conjunction with demonstrated outstanding
performance in close proximity to when that performance occurred. Individual incentive
systems are most likely to be used in cases where performance can be objectively assessed in
terms of number of units of output or similar measures rather than on a subjective assessment
of performance by a superior.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
As with merit systems, incentive compensation systems have some shortcomings and
weaknesses. One major shortcoming is that they are practical only when performance can be
measured easily and objectively. Most managerial work does not fit this pattern and, in fact, is
often characterized by ambiguous performance indicators that are difficult to assess. Thus, it
may be much more difficult to provide valid and appropriate incentives for these individuals.
Individual incentives are also likely to focus attention on only a narrow range of behaviors,
perhaps at the expense of other behaviors.
B. Team and Group Incentive Plans
A fairly common type of group incentive system is an approach called gainsharing.
Gainsharing programs are designed to share the cost savings from productivity improvements
with employees. The underlying assumption of gainsharing is that employees and the
employer have the same goals and thus should share in incremental economic gains.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
In addition to gainsharing and Scanlon plans, other systems are also used by some
organizations. Some companies, for example, have begun to use true incentives at the team or
group level. As with individual incentives, team or group incentives tie rewards directly to
performance. The incentives are distributed at the team or group level, however, rather than at
the individual level. Some companies also use nonmonetary rewards at the team or group
level. These rewards come most commonly in the form of prizes and awards.
Various types of stock-based incentives are also ways to tie incentives to the performance of
the firm, although these are more typically used with executive employees rather than hourly
employees. For example, in many companies, executives may be given a certain number of
stock options, which enable them to purchase shares of the company’s stock at a fixed price.
Thus, under a stock-option plan an executive may be given 1,000 options to purchase the
firm’s stock at $5 per share (the current trading price) for as long as 1 year. If the stock price
rises to $6 a share (presumably because of something the executive did), the employee can
exercise his or her option: buy the shares at $5, sell them at $6, and make a $1,000 profit.
IV. Performance Management and Feedback
A. Performance-Management Techniques
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Chapter 14: Managing and Enhancing Performance: The Big Picture
The basic notion underlying this theory is that all behavior is a function of its consequences—
whether actual or anticipated—and so one can shape behavior by arranging for the “right” set
of consequences. Behavior Modification is the systematic and simultaneous application of
positive reinforcement and either punishment or extinction (or both).
Performance feedback plays an important role in both behavior modification and goal setting,
and it is also seen as a useful tool in its own right for performance management. Instead of
providing feedback annually, in tandem with the annual performance-appraisal interview, it
might be more appropriate for managers to provide feedback on an ongoing basis. Feedback
might be provided on a daily or weekly basis, depending on the nature of the job, and it
should focus on various characteristics of performance, including both effective and
ineffective performance.
It is also important during a performance feedback interview to encourage participation and
two-way communication. Participation and two way dialogue, however, allow the individual
to express his or her own feelings and opinions about job performance and to provide other
kinds of feedback as appropriate. It is also important for the manager to try to balance positive
and negative feedback. Many managers tend to focus on the negative.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
feedback interview may focus on topics such as the establishment of a probationary period
(after which employment may be terminated), the development of a training strategy for
improving performance, and so forth.
subsequent performance.
B. ProMES
The productivity measurement and evaluation system (ProMES) incorporates ideas from
goal setting to feedback, and it includes incentives for improvement. More important, it
includes a method for tying performance at the individual and group levels to organizational
productivity.
V. Evaluating Performance-Enhancement Programs
First, any true measures of organizational success must tie back the organization’s strategic
goals. In addition, several more general indexes of firm-level performance could be used to help
evaluate the effectiveness of this intervention.
VI. HR in the Headlines
A. HRM and the Arab Spring
During 2011-2012, an amazing chain of events took place in the Arab world. Tunisia, Egypt,
and Libya all saw an over-throw of deeply entrenched governments, dominated (in the last
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Today, there are more than 1.6 billion Muslims in the world, living in more than 200
countries. The first problem that is encountered when one discusses HRM in Muslim areas is
that cultural differences in various parts of the world affect HRM practices. In general,
though, HR systems in Muslim countries tend to be value-based and draw heavily upon the
Holy Qur’an (or Koran). In addition, HR systems in Muslim countries rely (to a greater or
lesser extent) upon Sharia, which is the entire body of Muslim law.
B. Privacy and Cybersecurity in the 21st Century
Privacy and cybersecurity have become much more complex and critical in today’s
workplace. As a result, HR managers must be more conscientious about protecting the privacy
of both business and employee information. In today’s workplace, every desktop computer,
In addition to these internal and external threats to security and privacy, it is also increasingly
clear that the government itself poses a threat, especially in view of its relationship with many
top social media companies. In 2013, everyone learned about PRISM (Planning Tool for
Resource Integration, Synchronization and Management), a program used by the NSA.
PRISM has been described as a data tool designed to collect and process foreign intelligence
that passes through American servers.
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C. Toward a Two-Class Benefits System?
For decades, sociologists have often characterized U.S. society as having three “classes”
D. HR in Faith-Based Businesses
Managing so-called faith-based businesses provides some interesting perspectives on how to
Closing Case: Creating Humane Work Schedules
Case Summary
Sixty-hour workweeks used to be the norm in the United States; now 80-hours is not uncommon.
But working longer hours does not always increase productivity. One recent study showed that
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Case Questions
1. Do you think working hours will get longer or shorter in the future? Why?
Students’ answers might vary for this question. Working hours might get longer or shorter
2. Would you be willing to trade off scheduling flexibility and balance for slightly reduced
compensation? What factors would be important to you in such an arrangement?
Students’ answers might vary for this question. Some individuals may be willing to trade
The following items appear on the in-text Instructor Prep Cards. These notes and
suggested talking points should help instructors conduct these exercises with the students.
Discussion Questions
1. Discuss how individual level performance might or might not influence firm level
performance.
Individual level performance can impact the effectiveness of the overall firm performance.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
2. Identify and summarize the five basic approaches to job redesign.
The five basic approaches to job redesign are as follows:
• Job rotation occurs when employees are systematically moved from one job to
another. Thus an employee might spend one day filing records, the second day
organizing and tidying the workspace, the third day making copies of records, the
• Job enrichment increases the tasks but also increases the autonomy of the worker
about how the work is accomplished. For example, the job of the workers doing
filing mentioned in the job rotation situation above could be enriched by allowing the
workers to decide how to manage the work. If the clerical workers were in the
medical industry, for example, perhaps the workers would choose to do all the tasks
related to one set of patients. Another aspect of job enrichment would be to
3. Among the various alternate work scheduling options, which would you prefer to follow?
Students’ answers will vary. For example, individuals will have different situations that
will make flexible work schedules or compressed work schedules more attractive. For
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Chapter 14: Managing and Enhancing Performance: The Big Picture
4. How strong is your interest in having an alternate work site, such as working from home?
Why?
5. Identify the most common forms of individual incentive pay plans.
Merit pay is awarded to employees on the basis of the relative value of their contributions
to the organization. Merit-pay plans base at least some meaningful portion of compensation
on merit. The most general form of merit pay is annual salary increases to individuals
based on their relative performance or contributions to the organization. The organization
6. Identify the most common forms of team and group incentive plans.
Team- or group-based incentives are designed to reward groups or teams of employees for
particular performance outcomes. For example, gainsharing plans are designed to share
with employees the cost savings from productivity improvements. The Scanlon plan is one
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Chapter 14: Managing and Enhancing Performance: The Big Picture
7. Many managers do a poor job of providing performance feedback to their employees. Why
do you think this is true?
Managers might not provide feedback on a regular basis. They might also not encourage
employees to appraise their own performance in advance of an appraisal interview.
8. Summarize ProMES.
The Productivity Measurement and Evaluation System (ProMES) includes elements from
9. Describe as precisely as you can the kind of performance enhancement system that would
be most likely to motivate you.
10. Discuss how current events, such as the “Arab Spring” and events in the high tech sector
affect the way we manage and think about human resources.
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Ethical Dilemmas in HR Management
Scenario Summary
The student is to assume that he or she is a manager for a manufacturing company. The firm’s
specialized jobs increase efficiency but leave workers bored. Through a tour of another firm, the
manager discovers that jobs within his or her company could be changed to become more
challenging and stimulating, with a relatively small loss of efficiency or risk of increasing
salaries. Should the company keep the standardized jobs or should the jobs be improved?
Questions
1. What are the ethical issues in this situation?
This situation asks the students to examine the tradeoffs that must be made by a firm as it
2. What are the basic arguments for each course of action?
On the one hand, the current system is very cost-efficient, with easy-to-replace workers
3. What do you think most managers would do? What would you do?
Students’ answers to this opinion question will vary, but here is one example. “I think most
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Chapter 14: Managing and Enhancing Performance: The Big Picture
Assignment
This exercise gives students the opportunity to think about the process of job redesign. The
exercise may be assigned in class, or may be assigned as a homework exercise. The exercise can
be conducted individually or in groups. If this is an in-class activity, the exercise should take
approximately 30 to 60 minutes.
Step 1 (5 minutes): The individual students or student teams choose a familiar job with low
enrichment, one with moderate enrichment, and one with high enrichment.
Step 4 (10 minutes): Meet with students and compare results.
Step 5 (10 minutes): Cover the following questions individually or as a class. If the exercise is
1. What job qualities make some jobs easier to enrich than others?
Students’ answers will vary. However, students who have previous job experience will
to enrich than less structured, more complex jobs.
2. Can all jobs be enriched?
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Chapter 14: Managing and Enhancing Performance: The Big Picture
3. Even if a particular job can be enriched, does that always mean that it should be enriched?
Not all jobs should be enriched. One would have to evaluate the person working on the job
4. Under what circumstances might an individual prefer to have a routine and unenriched
job?
Students’ answers will vary. An individual might not want an enriched job if he or she has