人事经济学（院选）Chapter 9 Performance Evaluation.pptx

Chapter 9 Performance Evaluation Introduction It is a difficult and costly way to measure the performance of employees in the organization. If the evaluation does not accurately reflect the employee’s contributions, it may cause several negative outcomes. Even though evaluations are difficult and costly to do, they are a necessary component of a good reward system, and it is important for firms to strive for effective performance evaluation methods and procedures. In this chapter, we discuss important issues that arise when evaluating performance Purposes of Performance Evaluation Employee performance depends on, among other factors: innate abilities, accumulated skill or human capital, and effort. Quantitative Performance Measurement Quantitative measures have several advantages, because they are numeric and can be tied to compensation more easily. Quantitative performance measures are often perceived as more objective than the use of judgment in evaluations. Question: what performance measure properties should a manager look for in determining whether it is a good measure for incentives? Five General Properties Risk Profile There are two important types of risk– uncontrollable risk and controllable risk that must be considered in a performance measures, and these have very different implication for incentive scheme. Uncontrollable Risk Uncontrollable Risk: It corresponds to the classic definition of risk: variation in performance that is beyond the employee’s ability to control. For example, consider a CEO with stock price as the performance measure. Uncontrollable risk is an important problem facing incentive plans. Controllable Risk Controllable Risk: It is variation in the work environment that the employee has some ability to control. Firm value can be controlled by the employee when he takes actions. All employees have some specific knowledge that arises when they do their jobs and this knowledge is not available when the incentive plan is designed. Contr