Ass. Prof. Dr. Özgür KÖKALAN
İstanbul Sabahattin Zaim University
Chapter Objectives
1.
2.
3.
Define what HRM
Classify functions of HRM
Define how an employee is selected and trained
5-2
HR Performance Appraisal
 Performance 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 like
 Self – appraisal methods: subordinates evaluate
themselves
 Peer appraisal methods: coleagues make the assessment
 Appraisal by subordinates methods: subordinates assess
the manager.
Performance Appraisal Methods
 There are three important approaches in performance
appriasal. These are:
 Absolute standards
 Relative standards
 Objectives
 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 job
 Time
 Cost of method
 Potential rating errors of method
 Acceptibility
 Usefulness of the methods for promotion, punishment,
rewards etc…
Performance Appriasal Methods
Using Absolute Standards
 In
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 subordinates
 Checklist 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 Standards
 In 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 Management
 Wage 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
FRINGE BENEFITS
COMPENSATIONS
IN
ORGANIZATIONS
WAGE
SALARY
INCENTIVE
BENEFITS AS
LEGAL
OBLIGATION
-----------------DIRECT
COMPENSATION
-----------------INDIRECT
COMPENSATION
Direct Compensation
 The 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
compensation
 External 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 Evaluation
 Job 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
Incentives
 Incentive 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- forperformance.
 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 predetermined 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 Compensation
 Indirect 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 companies
 Hire effective and qualified employees
 Changed attitudes of the employees
 Demand from employee unions
 Increase loyalty
Types of Fringe Benefits
 Some 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
Government
 Organization should also be concerned with health
and safety programs for its employees. They have legak
responsibilities to ensure these kinds of benefits.