This Document Contains Chapters 9 to 11 Chapter 9 Training and Development A. OVERVIEW This chapter addresses the benefits and difficulties of employee training and development (T&D) programs. T&D are unavoidable strategic issues due to rapid shifts in technology that result in premature obsolescence; the trend of job redesign which redefines work in broader responsibilities and often involves self-managed teams; increased merger and acquisition activity that demands fluidity of integration; and the globalization which requires a sensitivity to cultural and linguistic issues. T&D are both long-term strategies; involve long term investments and short term costs, which may not have immediate visible results; and involve viewing the employee as a resource to be cultivated and nurtured. Employees who have had training or learning experiences that emphasize a more holistic understanding of operations are more flexible, leading to greater organizational flexibility and fewer management layers. Planning and strategizing training can be broken into four steps: needs assessment; establishing objectives; training delivery; and evaluation. Reinforcement of positive employee activity should follow, which may be difficult if the training unit is not an integrated part of the larger HR strategy. B. LECTURE OUTLINE I. OPENING CASE – Using training to Rebrand Sofitel Hotels looks at how the increased competition in the luxury hotel industry resulted in Sofitel’s decision to differentiate itself by creating a unique customer experience. To achieve this more than 25,000 Sofitel employees across 40 countries received extensive training on how to “create a sense of luxury” for guests. Guest satisfaction and employee retention have been significantly positively affected. II. INTRODUCTION T&D represents the ongoing investment in employees as assets with initiatives designed to increase that value through employees acquiring knowledge and skills (employee training), as well as through learning with a more long term approach to employee careers and the organizational strategy (employee development). Organizations now largely favor the term “learning” over training, because learning implies continual growth and development, emphasizing results rather than process. The threat of obsolescence as technology shifts rapidly; the design shift of jobs toward broader skill requirements and responsibilities; the fluid integration required for successful merger and acquisition; and the globalization of business all require an eye to T&D for a successful business. See New Employee Training at Black and Decker and Boot Camp at MicroStrategy examples. An increasing number of job applicants are evaluating employers based on the kinds of training and development opportunities offered. I. BENEFITS OF TRAINING AND DEVELOPMENT A. Employees with a more 'holistic' understanding of the company are more flexible, and can take on a greater range of responsibilities. B. Reducing management layers and making employees themselves more accountable for results. C. Benefits are long term as opposed to short term, and may not be immediately visible. II. PLANNING AND STRATEGIZING TRAINING A. Training needs to be planned and strategized. A model for the planning of training is presented in Exhibit 9.1. B. Needs Assessment involves determining why the training is required. See summary in Exhibit 9.2: LEVELS OF NEEDS ASSESSMENT. 1. Organizational - Training considered within the context of the politics, culture, structure, and strategy of the whole. 2. Task - Training considered in relation to specific duties and responsibilities for jobs. 3. Individual - Considers the people to be trained. C. Objectives are set based on assessed needs and should be described in specific measurable terms considering desirable employee behavior as well as the results expected to follow. Vague objectives are difficult to measure and progress cannot be determined. Objectives can be augmented by a close study of performance management and performance deficiencies for a given company. D. Design and Delivery runs into interference and transfer issues. 1.Interference results when previously learned behaviors block the learning process. Stress also causes individuals to revert into conditioned behaviors. The broad organizational context must be considered: politically, culturally, and structurally. Blocking is not merely a problem on an individual level and training must occur in a supportive organizational environment to be effective. 2.Transfer becomes a problem when it is inhibited by workers being trained in an environment that is vastly different from the one they are to work in. To combat transfer problems, training programs should simulate actual working conditions as closely as possible. On-the-job training is also very effective. See Computer-Based Training at Qualcomm and E-Learning at EMC Corporation examples. E. Evaluation provides feedback on training effectiveness and allows determination of future training strategies, including: modifying; retaining the status quo; or removing a training program entirely. The four level hierarchy popular for training evaluation can be seen in Exhibit 9.3: FOUR LEVELS OF TRAINING EVALUATION. 1. Reaction measures whether employees liked the training, trainers and facilities, and is usually conducted through questionnaire. Positive results here do not necessarily indicate positive results elsewhere. 2. Learning measures employee knowledge after training against knowledge previous to training. If there is no change here, performance cannot be expected to have been enhanced. 3. Behavior is a measure of what employees do on the job after training. If there is no observable change, performance cannot be expected to have been enhanced. 4. Results measures overall outcomes of training on productivity, efficiency, quality, customer service, etc. Results are rarely immediate, and while results-based measures are economically significant, undue reliance on them may cause preemptive termination of training programs that do not produce immediate measurable results. III. ORGANIZATIONAL DEVELOPMENT Training programs focus on individual skill acquisition and development to improve productivity as well as assist in obtaining strategic objectives. In a rapidly changing global environment, organizations much be able to change in response by undertaking larger-scale changes. Such activities constitute organizational development which focuses on the entire organization rather than individual employees. OD initiatives usually focus on organizational processes and/or culture and might include culture change, facilitating mergers and acquisitions, organizational learning, knowledge management, process improvement, and organization design and structure. They look at the organization from the macro perspective, utilizing a systems approach to appreciate the interrelatedness of functions and processes. This is frequently accomplished through the establishment of an in-house corporate university. See Leadership Development at Virgin Atlantic Airlines and Liverpool Virtual University examples. IV. INTEGRATING TRAINING WITH PERFORMANCE MANAGEMENT SYSTEMS Reinforcement of training is key when employees achieve or accomplish desired results after training is completed. In large organizations where the training unit is autonomous and unconnected to the greater HR plan, reinforcement is often difficult or ineffective. Integration of HR strategies throughout the organization is key to successful implementation of training programs. See Strategizing Training and Performance Management at Anheuser-Busch example. V. CONCLUSION Training and development is a key strategic issue for organizations. T&D activities help to ensure that employees have the skills and experiences they need to perform at high levels as well as to facilitate the organization’s adaptation to change in its environment READINGS Reading 9.1 – Confronting the Bias Against On-Line Learning in Management Education Many higher education leaders and faculty have adopted attitudes which marginalize online learning, rating online courses and programs inferior to face-to-face offerings despite having no personal first-hand experience with online learning. One survey found 80% of public university faculty with no online teaching experience believe that online learning outcomes are inferior that those achieved face-to-face, Externally, standards for accreditation, membership in business school organizations and media rankings continue to measure and emphasize the amount of face-to-face instructional time and other criteria that favor traditional classroom delivery. AACSB, through its emphasis on learning outcomes, has acknowledged the validity of online learning. Academics who are critical of online delivery often view it as a means for administrators to reduce costs and to increase managerial control over the education process. In addition concerns have been raised relative to faculty rights, skills, and resources; pressures to expand enrollments and reduce costs; and the lack of technical, administrative, and financial support required to deliver quality online learning. Lack of awareness about on-line research and practice reinforces the bias against on-line teaching and learning. A recent article in the Harvard Business Review serves to illustrate the way that on-line education continues to be viewed as an inferior mode of delivery. A substantial body of research evidence indicates that there is no significant difference in learning outcomes for students who learn online compared to those who learn in a traditional classroom. Most comparative studies involving business courses support the argument that students learn just as effectively online as they do in the classroom and, in some cases, more effectively, given individual student learning styles and preferences. Three recommendations are provided help overcome biased perceptions about on-line education; 1) leverage the research; 2) incent and enable faculty; and 3) remove systemic barriers. Reading 9.2 – Becoming a Leader: Early Career Challenges Faced by MBA Graduates The authors surveyed MBA graduates and found that the encountered three types of career transitions as well as four common challenges as the struggled with these transitions. The three transitions, role, business and personal and highlighted in Table 1 and the four challenges, managing and motivating subordinates, management relationships with peers and bosses, development a leadership mindset, and coping with setbacks and disappointments, are outlined in Table 2. Chapter 10 Performance Management and Feedback A. OVERVIEW This chapter briefly reviews various aspects of performance management and feedback. A model is provided that is useful in linking performance management systems with organizational strategic objectives and goals. It is important to consider carefully who will do evaluations; specifically what they will evaluate; how the evaluation will de administered; and appropriate measures of evaluation. Critical guidelines to effective performance systems suggest specific, immediate feedback based on clear, measurable goals delivered by a credible, trustworthy person are desirable. B. LECTURE OUTLINE I. OPENING CASE - MICROSOFT Microsoft recently designed its performance management system to allow better integration with its compensation program. As the company grew and its strategy evolved the plan of compensating employees heavily via stock options did not reward sustained performance or retention. To remedy this Microsoft shifted to restricted stock units and revamped its performance management system to both simply this latter process and directly integrate it with the new compensation plan. II. INTRODUCTION Effective performance management systems require cooperation between employees and supervisors to set performance expectations; review results; assess organizational and individual needs, and plan for the future. Today’s streamlined organizations have fewer employees with broader job assignments and increased responsibility and accountability. More than ever, organizations need broader measures of employee performance to ensure that performance deficiencies are quickly addressed with employee development programs; behaviors are being channeled toward specific objectives; and appropriate and specific feedback is provided to the employee to assist in career development. Exhibit 10.1 illustrates the critical differences between performance appraisal and performance feedback. III. USE OF THE SYSTEM EXHIBIT 10.3: STRATEGIC CHOICES IN PERFORMANCE MANAGEMENT SYSTEMS outlines a useful strategic decisions model. Performance management systems should: A. Facilitate employee development through a reciprocal relationship with training and development. B. Determine appropriate rewards and compensation. C. Enhance employee motivation by reinforcing desired behavior. D. Facilitate legal compliance . E. Facilitate HR planning process. V. WHO EVALUATES A. Traditionally, performance evaluation was performed by the employees immediate supervisor. A variety of perceptual errors by supervisors can occur, including: Halo effect - rater allows one positive or negative trait, outcome or consideration to influence other measures. Stereotyping or personal bias - rater makes performance judgments based on characteristics of employee, not performance. Contrast error - employee assessment is based on those being given to other employees. Recency error - evaluation is biased toward events and behaviors immediately preceding the evaluation. Central tendency error - evaluator avoids the higher and lower ends of performance assessment ratings. Leniency or strictness error - employees are generally all rated well above or well below average. B. Many managers have no true knowledge of the technical or other skills that a worker may have or the ability to observe the employee and the means by which the employee accomplishes work. Other individuals, such as peers, customers, subordinates, or others could provide insights into an employee’s performance. The employee her/himself could also provide self-assessment date. Multi-rater or 360 degree feedback uses some combination of assessments by various individuals. Example – Peer Assessment at Coffee & Power and Performance Management at Otis Elevator. C. Supervisors might also intentionally inflate or deflate employee ratings. In addition supervisors and subordinates may agree on levels of performance but disagree on the reasons for such. VI. WHAT TO EVALUATE Example - Competency-Based Performance and Development at Capital One. Employee evaluations can be made based on their traits (not recommended), their behaviors or the results or outcomes they achieve. A. Behavior-based measures focus on what the employee does by examining specific behaviors, although observed necessary behaviors do not guarantee success or results. B. Results-based measures focus on specific accomplishments or direct outcomes. However, not all jobs have measurable results; sometimes external events influence results; and results focus on the end and not the means, which may be very important. C. Outcomes-based measures focus on specific accomplishments or direct outcomes of the employee’s work. While often most meaningful to organizations, these measures have some limitations as to their usefulness. VII. HOW TO EVALUATE Absolute or relative measures can be used to evaluate employees. A. Absolute measures evaluate employees strictly according to performance requirements or job standards. B. Relative measures evaluate employees in comparison to co-workers. VIII. MEASURES OF EVALUATION Various measures of evaluation are available, including: Graphic rating scales - provide the evaluator with performance measures for traits, behaviors or results listed below the scale. Weighted checklist - evaluator checks criteria that apply to the employee. Behaviorally-anchored rating scales (BARS) - addresses the problem of inconsistent employee performance by measuring frequencies along a scale. Behavioral observation scale (BOS) – notes frequencies of behaviors; useful when employee behaviors under BARS are inconsistent over time Critical incident measures – specific examples of behaviors / outcomes recorded over the feedback/evaluation period Objectives-based performance measures (MBO) - employee and supervisor jointly agree on work objectives that are consistent with organizational strategy; satisfy job requirements; and provide challenging work assignments consistent with employee career goals. Three common oversights include setting objectives that are too vague; unrealistically difficult; or without clarifying measurement specifics. IX. OTHER CONSIDERATIONS AND CONCLUSIONS Organizations must ensure the link between the performance management system, T&D, and compensation. Performance evaluations systems may need to be updated to reflect contemporary reality. Organizations must determine the extent that performance management systems should be flexible as opposed to standardized. There is no one-size-fits all performance evaluation system. Exhibit 10.11 presents reasons why managers resist or ignore performance management. Exhibit 10.12 presents strategies for improving the performance management system. Five critical guidelines for providing feedback include: Provide specific rather than general feedback. Credible, trustworthy sources should provide feedback. Immediate feedback is best. Performance measures should be based on clear, measurable goals. Employee-manager dialogue is essential in evaluation and future planning. READINGS Reading 10.1 – Effective Leadership Behaviors: What We Know and What Questions Needs More Attention This reading focuses on attempting to make sense of the thousands of studies on leadership which have been conducted over the past half century. The author develops a hierarchical taxonomy of 15 leadership behaviors which are organized into four separate meta-categories (task-oriented, relations-oriented, change-oriented and external). Hierarchical Taxonomy of Leadership Behaviors Task-oriented (ensure that people, equipment, and other resources are used in an efficient way to accomplish the mission of a group or organization) • Clarifying - ensure that people understand what to do, how to do it, and the expected results • Planning – making decisions about objectives and priorities, organizing work, assigning responsibilities, scheduling activities, and allocating resources among different activities. • Monitoring operations - assess whether people are carrying out their assigned tasks, the work is progressing as planned, and tasks are being performed adequately • Problem solving - deal with disruptions of normal operations and member behavior that is illegal, destructive, or unsafe Relations-oriented (enhance member skills, the leader–member relationship, identification with the work unit or organization, and commitment to the mission) • Supporting - show positive regard, build cooperative relationships, and help people cope with stressful situations • Developing - increase the skills and confidence of work-unit members and to facilitate their career advancement • Recognizing - show appreciation to others for effective performance, significant achievements, and important contributions to the team or organization • Empowering - by giving subordinates more autonomy and influence over decisions about the work Change-oriented (increase innovation, collective learning, and adaptation to external changes) • Advocating change - explaining why change is urgently needed • Envisioning change - articulate a clear, appealing vision of what can be attained by the work unit or organization • Encouraging innovation - encourage people to look at problems from different perspectives, to think outside the box when solving problems, to experiment with new ideas, and to find ideas in other fields that can be applied to their current problem or task • Facilitating collective learning – promote improvement of current strategies and work methods (exploitation) or discovery of new ones (exploration) External (facilitate performance with behaviors that provide relevant information about outside events, get necessary resources and assistance, and promote the reputation and interests of the work unit) • Networking - build and maintain favorable relationships with peers, superiors, and outsiders who can provide information, resources, and political support • External monitoring - analyzing information about relevant events and changes in the external environment and identifying threats and opportunities for the leader’s group or organization • Representing - transactions with superiors, peers, and outsiders (e.g., clients, suppliers, investors, and joint venture partners) Reading 10.2 – Managing the Life Cycle of Virtual Teams This article presents two traditional models of team development and applies them to virtual teams, explaining the typical behaviors seen during each stage as well as the particular challenges faced by virtual teams during each stage (Table 1). It then presents suggested managerial interventions during the virtual project team life cycle (Table 3). Chapter 11 Compensation A. OVERVIEW This chapter provides insight into key compensation topics. Equity issues are examined from the individual, internal and external points of view. Basic coverage is provided of legal requirements of compensation, including Title VII of the Civil Rights Act of 1964; the Equal Pay Act of 1963; and the Fair Labor Standards Act of 1938. Executive compensation closes the chapter with topics related to over compensation; controlling compensation; tying individual compensation to organizational performance, etc. B. LECTURE OUTLINE I. OPENING CASE - JAMBA JUICE Jamba Juice is a leading retail purveyor of blended-to-order fruit smoothies, fresh-squeezed juices, and healthy soups and breads. They are a high growth company in an intensively competitive industry, and have developed a compensation plan that keeps them competitive with others in their industry, and also with tech-based employers as well. Jamba’s J.U.I.C.E. Plan allows general managers to receive a percentage of store cash flow; share profits where money accrues in a retention account payable in three year cycles; and stock options. II. INTRODUCTION Compensation is a key strategic area for organizations, impacting ability to attract applicants, as well as insure optimal performance levels from employees. Compensation programs continue to assume an increasingly larger share of organizational operating expenses, especially in service industries. Three separate components to an organizational compensation system are illustrated in EXHIBIT 11.1: COMPENSATION SYSTEM,, including direct cost of base and incentive pays, as well as indirect costs. III. EQUITY Perceived equity or fairness of the compensation system is critical. Equity theory of motivation holds that workers assess their perceived inputs and outcomes relative to those of others. When individuals perceive inequities, they generally act to establish equity by increasing their outcomes or decreasing inputs. Internal, external and individual equity impact motivation, commitment and on the job performance. A. Internal equity - involves perceived fairness of pay differentials within an organization. Four techniques can be utilized to establish internal equity: job ranking; job classification; point systems; and factor comparison. Salary compression issues are becoming more prevalent in certain industries based on supply and demand for entry-level skilled employees. B. External equity - involves employee perceptions of compensation fairness relative to those outside the organization. Organizations must be sure they have a means of remaining competitive relative to cost structure and market prices. Choices of lead, lag or market policy are available. C. Individual equity - considers employee perceptions of pay differentials among individuals who hold identical jobs in the same organization. The effectiveness and appropriateness of merit pay, incentive pay, skillbased pay, and team-based pay systems are also discussed as a means of ensuring individual equity. See Joe Torre and the New York Yankees example,; Team-based Incentive Pay at Children’s Hospital Boston example,; Team-based Pay at Phelps Dodge example. IV. LEGAL ISSUES IN COMPENSATION A. Compensation is a condition of employment covered under both Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963. Some note that the Equal Pay Act is not very effective, as men and women often are not employed in the same jobs, and the Act only requires equal pay for equal work. To combat these limitations, the concept of comparable worth has been advanced, although it is generally seen as falling outside of existing federal law. B. Fair Labor Standards Act (FLSA) of 1938 regulates federal minimum wage, as well as policies on overtime and child labor. Certain workers are exempt from minimum wage laws (generally managers, administrators, outside sales people and professionals who exercise “independent judgement” in carrying out job duties). Note: Federal minimum wage laws and groups covered changed substantially in 2004. V. EXECUTIVE COMPENSATION Executive compensation is a controversial area. There is no real standard or average due to the wide variety of factors faced by organizations and their executives. Criticisms include the excessiveness of executive pay, and a lack of relationship between pay and performance. Accounting practices relative to stock options for executives is also an area of concern. VI. CONCLUSION Key compensation issues include: compensation relative to the market; balance between fixed and variable compensation; utilization of individual versus team-based pay; the appropriate mix of financial and nonfinancial compensation; and developing an overall cost-effective program that results in high performance. Compensation systems must be tied to behavior necessary for achievement of strategic organizational goals. READINGS Reading 11.1 – Exposing Pay Secrecy This article focuses on the issue of pay secrecy, describing its cost and benefits. Pay secrecy essentially is a policy which restricts the amount of information employees are provided about regarding what their co-workers are paid. Whether pay secrecy benefits or is detrimental to an organization depends on a variety of factors. It is best understood as a continuum rather than an all-or-nothing construct. Employers could have varying levels of pay secrecy. It also is related to employee privacy issues, which have become much more prevalent in recent years. Costs of pay secrecy include; 1) employee judgments about fairness and their perceptions of trust may be sacrificed; 2) employee performance motivation can be expected to decrease; and 3) from an economics perspective, the labor market may be less efficient because employees will not move to their highest valued use. Benefits of pay secrecy include organizational control, protection of privacy, and decreased labor mobility. Factors which influence the cost-benefit tradeoff of pay secrecy for an individual employer: 1) nature of human capital (firm-specific versus general); 2) criteria for pay allocation (objective versus subjective); 3) gauging of relative pay status (individual employee “guesses” where they stand or rank in the organization’s relative pay distribution). Reading 11.2 –The Development of a Pay-for-Performance Appraisal System for Municipal Agencies : A Case Study This reading presents a case study of a pay-for-performance system and outlines the process by which it was developed. Despite its importance, both employees and management often view the performance appraisal process as frustrating and unfair. These frustrations are largely attributed to a reliance on performance appraisal instruments that 1) are not job related; 2) have confusing or unclear rating levels, and; 3) are viewed as subjective and biased by staff To address these issues, this case study: (1) identified a systematic procedure for creating performance appraisal instruments; (2) described the appropriate training for those conducting an appraisal interview; (3) implemented performance reviews using the developed instruments and appraisal interview/review training, and; (4) evaluated employee attitudes toward the newly developed system. Steps Taken in Defining Job Performance and the Creation of an Appraisal Instrument Step #1: Job analysis Step #2: Rating of tasks Step #3: Creation of appraisal instrument Step #4: Identifying raters Step #5: Rater training Step #6: Performance appraisal interview The process employed was collaborative throughout (between employee and supervisor). Once the employee and supervisor had independently completed the appraisal instrument they met and discussed the ratings. During this time the employee and supervisor reached an agreed upon rating for each task statement. At this point, the appraisal was completed and signed by both the employee and supervisor. Once the employees completed the workshops and the trial run of the newly developed system, they completed the performance appraisal reaction instrument again to assess their attitudes toward the new system. Employee perceptions of procedural justice were also assessed. Instructor Manual for Accounting Theory: Conceptual Issues in a Political and Economic Environment Harry I. Wolk, James L. Dodd, John J. Rozycki 9781285426792, 9781337619998
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