Human Resource Management (HRM) II

Ass. Prof. Dr. Özgür KÖKALANİstanbul Sabahattin Zaim University

Chapter Objectives

1. Define what HRM2. Classify functions of HRM3. Define how an employee is selected and trained

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HR Performance AppraisalPerformance appraisal can be described as the process

by which organizations evaluate the performances of their employees on their jobs.

Performance appraisal system in the organization intends to identify the employees’ actual past performances and their potentail improvements.

Performance appraisal system gives some benefits for both organization and employees. These are: It improves overall communication and productivity Managers may objectively indentify their subordinates’

performance People at work get positive or negative feedback about

their own tasks

In the organization performance appraisal is mostly done by manager (superior)

Sometimes performance appriasal is done by a group of managers.

There are many performance appraisal method likeSelf – appraisal methods: subordinates

evaluate themselvesPeer appraisal methods: coleagues make the

assessmentAppraisal by subordinates methods:

subordinates assess the manager.

Performance Appraisal MethodsThere are three important approaches in

performance appriasal. These are:Absolute standardsRelative standardsObjectives

How can we decide which program (method) to select for our organization?

The criteria that are used when appropriate performance appraisal method is selected;The jobTime Cost of methodPotential rating errors of methodAcceptibility Usefulness of the methods for promotion,

punishment, rewards etc…

Performance Appriasal Methods Using Absolute StandardsIn this approach subordinates performance is

measured against some pre- established standards.

The performance is not compared with other individual’s performances

Some examples of this method are as follows;Essay method: the rater writes a special

report that describes the subordinatesChecklist method: a list is given to the rater

and he is asked to check items that presents the features of the subordinate.

Critical incident method: the supervisor monitors the subordinate and focuses on key behavior and incidents that make him effective or ineffective in his job.

Forced choice method: opposite spesifications are given to the rater. He is asked to choose one of items that suits subordinate’s work behavior.

Rating scale method: It is the oldest and widely used method. The rater determines the subordinates performance along a scale from low to high

Performance Appraisal Methods Using Relative StandardsIn this approach, an individual’s performance

under assessment is compared against other individual’s performance.

The popular methods using relative standards are as follows:

Individual rating method: The rater ranks subordinates according to their performance from best to poorest without giving any weight.

Point allocation method, manager rates subordinate by allocating fixed number of points for each out of a total 100 points

Paired comparison method, manager compares subordinates performance with each other

Performance Appriasal Method Using Objectives

In this future oriented appraisal method, employees are evaluated by how well they accomplish a specific set of critical objectives in successful completion of their jobs.

HR Compensation ManagementWage represent compensation based on an

hourly pay rate or the amount of output produced.

Salary can be defined as compensation calculated on a weekly, monthly or annual basis.

Incentive is any extra allowance offered by the employer to an employee to encourge him to increase his efforts in performing his taks.

Compensation In Organization

COMPENSATIONS IN

ORGANIZATIONS

WAGE SALARY

INCENTIVE

------------------DIRECT

COMPENSATION

FRINGE BENEFITS

BENEFITS AS LEGAL

OBLIGATION

------------------INDIRECT

COMPENSATION

Direct CompensationThe HR department is responsible for setting

an effective and efficient compensation program in the organizations.

In compensation program, there should be equity among employees. There are two types of equity in compensationExternal equity; job in the organization should

be fairly compensated in comparison with similar jobs in the labor market. Qualified and better employee should take more.

Internal equity: employees who work in similar position in the organization should take same or similar compensation.

Job EvaluationJob evaluation is systematic procedures to

compare jobs in order to determine the worth one job relative to other existing job.

The most widely used job evaluation techniques utilize the points-rating system under which each job is examined in terms of factors such as skills, efforts, accountibility, responsibility, creativity and so on.

The basic factors that jobs have in common, but in different amounts are called the compensable factors. These factors determine the defination of job content.

Steps of Job Evaluation

OBTAIN AND RECORD

INFORMATION ABOUT JOB

DETERMINE THE

SIGNIFICANT COMPENSABLE FACTORS

DEVELOP AND

CHOOSE A PROPER JOB EVALUATION

METHOD

COMPARE AND

EVALUATE THE JOBS

ESTABLISH THE JOB

HIERARCHY

IncentivesIncentive is any extra allowance offered by the

employer to an employee to encourge him to increase his effort in performing in his task. Incentive are based on pay- for- performance.

There are three main types of incentives. These are: Individual incentive plans: provide income above

the base salary Group- based incentive plans: are created to

prevent competition to encourge coorperation and team spirit among the employees.

Company – based incentive plans: cover all working people and groups in the organization to receive an extra payment for overalll performance of organization.

Some examples of the various widely used individual, group- based and company- based incentive plans :Piecework plans; earnings are very much related to

what the worker produces. Time based plans: an employee obtains a bonus if

he accomplishes the standard hour’s work in less than an hour.

Commision plans; it combines base salary and and extra payment that presents a percentage of his sum of sales.

Annual bonus plans: they can be designed that are closely tied to organization’s profitability at the end of fiscal year. The eligibilty and size of bonus differ according to the significance of the managerial position.

Profit sharing plans: this plan gives employes a portion of company profits, determined according to a specially made agreement.

Stock option plans: they gives especially manager the right of purchase of a company’s share at a pre- determined price. This price is usually set below the current market value.

Employee stock ownership plans(ESOP): a corporation voluntarily contributes some shares of its own stock or money to a special trust that is established to buy shares of the organizations’s stock for employees.

Indirect CompensationIndirect compensation includes non cash

items such as benefits and services offered voluntarily by the organization. It is also includes such requirements as security, safety and health, legally mandated by government.

Indirect compensation could be given in financial or non- financial form

Organizations provide non – financial voluntary benefits and services that are called as Fringe Benefits

There are many reasons why an organization use fringe benefits. These are:Increase competition among the companiesHire effective and qualified employeesChanged attitudes of the employeesDemand from employee unionsIncrease loyalty

Types of Fringe BenefitsSome of the fringe benefits utilized in

organizations can be listed as follows:Payment made for time and worked: employees

are provided some free time off – the job while receiving their full wages or salaries. Paid holidays, vacations, sick leave, unemployment insurance…

Protection aganist hazard: an organization provides its employees economical protection when facing hazards such as extended illnesses, permanent or temporary disability.

Retirement benefits: Organization in some circumtances provides employees some compensation on retirement.

Services as fringe benefits: some extra benefits are given by organizations to their employees such as eating facilities, company car for managers, shutte service for employees, educational services, shopping discount tickets, flexible working hour, housing and so on.

Security, Safety, and Health Benefits and Services Legally Mandated By GovernmentOrganization should also be concerned with

health and safety programs for its employees. They have legak responsibilities to ensure these kinds of benefits.