8 Pay, Careers,
and Changing Employment Relationships
Understanding and
Managing
Organizational
Behavior
Fifth Edition
Image from opening case
Jennifer M. George
Gareth R. Jones
©2007 Prentice Hall
Learning Objectives
 Describe the determinants and types of
psychological contacts and what happens
when they are broken
 Appreciate the two major roles of
performance appraisal
 Understand the different kinds and methods
of performance appraisal
8-2
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Learning Objectives
 Appreciate the importance of merit pay and
the choices organizations face in using pay
to motivate employees
 Understand the importance of careers,
different kinds of careers, and effective
career management
8-3
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Valuing Employees at Costco
 Can organizations treat their employees
very well and still remain competitive?
 Competitive pay
 Health insurance
 401(k) retirement plan
8-4
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Psychological Contract
 An employee’s perception of
– his or her exchange relationship with an
organization,
– outcomes the organization has promised
to provide to the employee, and
– contributions the employee is obligated to
make to the organization
8-5
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Sources of Information
 Direct communication from coworkers and
supervisors
 Observations of what actually transpires in
the organization
 Written documents
8-6
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Exhibit 8.1 Determinants of
Psychological Contracts
Direct
Communication
Observation
Written
Documents
Psychological
Contract
8-7
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Exhibit 8.2 Types of
Psychological Contracts
Transactional
Contracts:
Short term
Narrow and specific
Limited promises
and obligations
8-8
Relational
Contracts:
Long term
General and evolving
Extensive and
broad promises
and obligations
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Consequences of
Broken Contracts
 Poor motivation and performance
 Negative moods and emotions
 Job dissatisfaction
 Intent to quit
8-9
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Performance Appraisal
 Encourage high levels of employee
motivation and performance
 Provide accurate information to be used in
managerial decision making
8-10
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Information Provided to
Employees
 Level of contribution
 Accuracy of tasks and direction
Performance appraisals give
employees feedback that
contributes to intrinsic
motivation!
8-11
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Information Functions
Developmental purposes
Evaluative,
decision-making purposes
8-12
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Developing a Performance
Appraisal System
Choice 1: The mix of
formal and informal appraisals
Choice 2: What factors to evaluate
Choice 3: Methods of appraisal
Choice 4: Who appraises performance
8-13
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Factors to Evaluate
Traits
Behaviors
8-14
Results
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Methods of Appraisal
8-15
Objective:
Subjective:
numerical
counts
based on fact
perceptions
based on traits,
behaviors, and
results
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Exhibit 8.4 Graphic Rating Scale
8-16
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Exhibit 8.4 Behaviorally Anchored
Rating Scale
8-17
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Exhibit 8.4 Behavioral
Observation Scale
8-18
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Who Appraises Performance?
 Supervisors
 Subordinate appraisals
 Self-appraisals
 Customer/client
appraisals
 Peer appraisals
 Multiple raters
360-degree appraisal
8-19
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Problems and Biases
 Stereotypes
 Primacy effect
 Contrast effect
 Halo effect
 Similar-to-me
effect
8-20
 Harshness,
leniency, and
average tendency
biases
 Knowledge-ofpredictor bias
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Merit Pay Plans
 Use when
– Individual performance can be accurately
assessed
– Employees are highly independent
 Distribute by
– Salary increase
– Bonuses
8-21
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Individual-Based Merit Pay Plans
8-22
Piece-rate
Commission
pay
pay
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Gain-Sharing
 Employees receive share of profits or saved
expenses
– Encourages camaraderie and team spirit
– Discourages personal motivation
 Types
– Scanlon plan
– Profit sharing
8-23
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Pay Differentials and
Comparable Worth
Gender
Age
Race
Leadership level
8-24
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Types of Careers
8-25
Steady-state
Spiral
Linear
Transitory
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Exhibit 8.6 Career Stages
Preparation
for Work
Organizational
Entry
Early Career
Mid-Career
Late Career
8-26
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Contemporary Career Challenges
 Ethical Career Management
 Career Management That Supports
Diversity
 Career Management in an Era of DualCareer Couples
8-27
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