PERFORMANCE APPRAISAL

PERFORMANCE APPRAISAL 

Q. 1. What is Performance appraisal ? Throw some light on methods of performance appraisal.
Answer: 1. Performance appraisal is defined by Wayne Cascio as “the systematic description of
employee’s job relevant, strength, weakness. Performance appraisal may be conducted once in every 6
months or once in a year. The basic idea of the appraisal is to evaluate the performance of the employee,
giving him a feed back. Identify areas where improvement is required so that training can be provided.
Give incentives and bonus to encourage employees etc.
Following are the tools used by the organizations for Performance Appraisals of their employees.
1. Ranking
2. Paired Comparison
3. Forced Distribution
4. Confidential Report
5. Essay Evaluation
6. Critical Incident
7. Checklists
8. Graphic Rating Scale
9. BARS
10. Forced Choice Method
11. MBO
12. Field Review Technique
13. Performance Test
We will be discussing the important performance appraisal tools and techniques in detail.
1. Ranking Method
The ranking system requires the rater to rank his subordinates on overall performance. This
consists in simply putting a man in a rank order. Under this method, the ranking of an employee
in a work group is done against that of another employee. The relative position of each
employee is tested in terms of his numerical rank. It may also be done by ranking a person on his
job performance against another member of the competitive group.
Advantages of Ranking Method
i. Employees are ranked according to their performance levels.
ii. It is easier to rank the best and the worst employee.
Limitations of Ranking Method
iii. The “whole man” is compared with another “whole man” in this method. In practice, it is
very difficult to compare individuals possessing various individual traits.
iv. This method speaks only of the position where an employee stands in his group. It does
not test anything about how much better or how much worse an employee is when
compared to another employee.
v. When a large number of employees are working, ranking of individuals become a
difficult issue.
vi. There is no systematic procedure for ranking individuals in the organization. The ranking
system does not eliminate the possibility of snap judgements.
2. Forced Distribution method
This is a ranking technique where raters are required to allocate a certain percentage of rates to
certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent,
bottom 20 percent etc). Both the number of categories and percentage of employees to be
allotted to each category are a function of performance appraisal design and format. The workers
of outstanding merit may be placed at top 10 percent of the scale, the rest may be placed as 20 %
good, 40 % outstanding, 20 % fair and 10 % fair. 
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Advantages of Forced Distribution
i. This method tends to eliminate raters bias
ii. By forcing the distribution according to pre-determined percentages, the problem of
making use of different raters with different scales is avoided.
Limitations of Forced Distribution
iii. The limitation of using this method in salary administration, however, is that it may lead
low morale, low productivity and high absenteeism.
Employees who feel that they are productive, but find themselves in lower grade(than
expected) feel frustrated and exhibit over a period of time reluctance to work.
3. Critical Incident techniques
Under this method, the manager prepares lists of statements of very effective and ineffective
behaviour of an employee. These critical incidents or events represent the outstanding or poor
behaviour of employees or the job. The manager maintains logs of each employee, whereby he
periodically records critical incidents of the workers behaviour. At the end of the rating period,
these recorded critical incidents are used in the evaluation of the worker’s performance.
Example of a good critical incident of a Customer Relations Officer is : March 12 - The Officer
patiently attended to a customers complaint. He was very polite and prompt in attending the
customers problem.
Advantages of Critical Incident techniques
i. This method provides an objective basis for conducting a thorough discussion of an
employees performance.
ii. This method avoids recency bias (most recent incidents are too much emphasized)
Limitations of Critical Incident techniques
iii. Negative incidents may be more noticeable than positive incidents.
iv. The supervisors have a tendency to unload a series of complaints about the incidents
during an annual performance review sessions.
v. It results in very close supervision which may not be liked by an employee.
vi. The recording of incidents may be a chore for the manager concerned, who may be too
busy or may forget to do it.
4. Checklists and Weighted Checklists
In this system, a large number of statements that describe a specific job are given. Each
statement has a weight or scale value attached to it. While rating an employee the supervisor
checks all those statements that most closely describe the behaviour of the individual under
assessment. The rating sheet is then scored by averaging the weights of all the statements
checked by the rater. A checklist is constructed for each job by having persons who are quite
familiar with the jobs. These statements are then categorized by the judges and weights are
assigned to the statements in accordance with the value attached by the judges.
Advantages of Checklists and Weighted Checklists
i. Most frequently used method in evaluation of the employees performance.
Limitations of Checklists and Weighted Checklists
ii. This method is very expensive and time consuming
iii. Rater may be biased in distinguishing the positive and negative questions. 
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iv. It becomes difficult for the manager to assemble, analyze and weigh a number of
statements about the employees characteristics, contributions and behaviours.
Performance Appraisal Biases
Managers commit mistakes while evaluating employees and their performance. Biases and judgment
errors of various kinds may spoil the performance appraisal process. Bias here refers to inaccurate
distortion of a measurement. These are:
1. First Impression (primacy effect): Raters form an overall impression about the ratee on the
basis of some particluar characteristics of the ratee identified by them. The identified qualities
and features may not provide adequate base for appraisal.
2. Halo Effect: The individual’s performance is completely appraised on the basis of a perceived
positive quality, feature or trait. In other words this is the tendency to rate a man uniformly high
or low in other traits if he is extra-ordinarily high or low in one particular trait. If a worker has
few absences, his supervisor might give him a high rating in all other areas of work.
3. Horn Effect: The individual’s performance is completely appraised on the basis of a negative
quality or feature perceived. This results in an overall lower rating than may be warranted. “He
is not formally dressed up in the office. He may be casual at work too!”.
4. Excessive Stiffness or Lenience: Depending upon the raters own standards, values and physical
and mental makeup at the time of appraisal, ratees may be rated very strictly or leniently. Some
of the managers are likely to take the line of least resistance and rate people high, whereas
others, by nature, believe in the tyranny of exact assessment, considering more particularly the
drawbacks of the individual and thus making the assessment excessively severe. The leniency
error can render a system ineffective. If everyone is to be rated high, the system has not done
anything to differentiate among the employees.
5. Central Tendency: Appraisers rate all employees as average performers. That is, it is an
attitude to rate people as neither high nor low and follow the middle path. For example, a
professor, with a view to play it safe, might give a class grade near the equal to B, regardless of
the differences in individual performances.
6. Personal Biases: The way a supervisor feels about each of the individuals working under him -
whether he likes or dislikes them - as a tremendous effect on the rating of their performances.
Personal Bias can stem from various sources as a result of information obtained from colleagues,
considerations of faith and thinking, social and family background and so on.
7. Spillover Effect: The present performance is evaluated much on the basis of past performance.
“The person who was a good performer in distant past is assured to be okay at present also”.
8. Recency Effect: Rating is influenced by the most recent behaviour ignoring the commonly
demonstrated behaviours during the entire appraisal period.
Therefore while appraising performances, all the above biases should be avoided.
Wages and compensation management
Compensation is a tool used by management for a variety of purpose to further the existence of the
company. It is a remuneration that an employee receives in return for his or her contribution in theorganisation.
So, the employee compensation programs are designed to attract capable employees to the organisation, to
motivate them towards superior performance and to retain their services over an extended period of time.
Meaning and Definition of Compensation
In layman‘s language the word ‗compensation‘ means something, such as money, given or received as
payment for service. The word compensation may be defined as money received in the performance of
work, plus the many kinds of benefits and services that organization provides their employee. It refers to wide
range of financial and non-financial rewards to employee for their service rendered to the organization. It is paid in
the form of wages, salaries , special allowance and employee benefits such as paid vacation, insurance,
maternity leaves, free travel facility, retirement benefits etc. 
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According to Wendell French,‖ Compensation is a comprehensive term which includes wages, salaries and
all other allowance and benefits.‖
Wages are the remuneration paid for skilled, semi-skilled and unskilled operative workforce. Salaryis the
remuneration of those employees who provides mental labour to the employer such as supervisor, office staff,
executive etc wages are paid on daily or hourly basis where as salary is paid on monthly basis.
Objectives of Compensation Planning
The basic purpose or objective of establishing sound compensation isto establish and maintain an equitable
rewards system. The other aim is the establishment and maintenance of an equitable compensation structure
an optimal balancing of conflicting personnel interestso that the satisfaction of employees andemployers is
maximised and conflicts minimized, the compensation management is concerned with the financial aspect of
employees need, motivation and rewards.
A sound compensation structure tries to achieve these objectives:
To attract manpower in a competitive market.
To control wages and salaries and labour costs by determining rate change and frequency of
increment.
To maintain satisfaction of employees by exhibiting that remuneration is fair adequate and equitable.
To induce and improved performance, money is an effective motivator.
To Employees:
Employees are paid according to requirement of their jobs i.e highly skilled jobs are paid more compensation
than low skilled jobs. This eliminates inequalities.
The chances of favouritism are minimised.
Jobs sequence and lines of promotion are established wherever they are applicable.
Employee‘s moral and motivation are increased because of the sound compensation structure.
To Employers: 
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Theycan systematically plan for and control the turnover in the organization.
Asound compensation structure reduces thelikelihood offriction and grievanceover remunerations.
It enhance anemployee moraleandmotivation because adequate and fairly administrative incentives are basisto his
wants and need.
It attracts qualified employees by ensuring and adequate payment for all the jobs.
In dealing with a trade union, theycan explain the basis of their wages programme because it is based upon a
systematic analysis of jobs and wages facts.
Factors Affecting Compensation Planning
Factors determining compensation of an employee considerable amount of guess word and negotiation are
involved. But following are the certain factors which have been extracted as having an important bearing
upon the final decision:
Supply and Demand of Labour: Whatever the organization produces as commodity they desire services and
it must pay a price that of workers acting in concert. If more the labour is required, such as at war time
prosperity, there will be tendency to increase the compensation; whereas the situation when anything works to
decrease the supply of labour, such as restriction by a particular 
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labour union, there will be a tendency to increase the compensation. The reverse of each situation is likely to
result in a decrease in employee compensation, provided, labour union, ability to pay, productivity, government
do not intervene.
Ability to Pay: Labour Unions has often demanded an increase in compensation on the basis that the firm is
prosperous and able to pay.
Management’s Philosophy: Management‘s desire to maintain or improve moral, attract high calibre
employees, reduce turnover, and improve employees standard of living also affect wages, as does the relative
importance of a given position to a firm.
Legislation: Legislation related to plays a vital role in determining internal organization practices. Various acts
are prescribed by government of country for wage hours laws. Wage-hour laws set limits on minimum wages to
be paid and maximum hours to be worked. In India minimum wages act 1948 reflecting the wage policy for an
organization and fixation of minimum rates of wages to workers in sweated industries. In 1976 equal
remuneration act was enacted which prohibits discrimination in matters relating to remuneration on the basis
of religion, region or gender.
Various Modes of Compensation
Various modes of compensation are as followsWages and Salary- Wages represent hourly rates of pay and salary refers to monthly rate of pay irrespective of
the number of hours worked. They are subject to annual increments. They differ from employee to employee
and depend upon the nature of jobs, seniority and merit.
Incentives- These are also known as payment by results. These are paid in addition to wages and salaries.
Incentive depends upon productivity, sales, profit or cost reduction efforts. Incentive scheme are of two types:
Individual incentive schemes.
Group incentive schemes.
Fringe Benefits- These are given to employees in the form of benefits such as provident fund, gratuity,
medical care, hospitalization, accident relief, health insurance, canteen, uniform etc.
Non- Monetary Benefits- They include challenging job responsibilities, recognition of merit, growth
prospects, competent supervision, comfortable working condition, job sharing and flexi time.
Incentives
Incentives are monetary benefits paid to workmen in lieu of their outstanding performance. Incentives vary from
individual to individual and from period to period for the same individual. They are universaland are paid in
every sector. It works as motivational force to work for their performance as incentive forms the part total
remuneration. Incentives when added to salary increase the earning thus increase the standard of living. The
advantage of incentive payment are reduced supervision, better utilisation of equipment, reduced scrap, reduced
lost time, reduced absenteeism and turnover & increased output.
According to Burack & Smith, ―An incentive scheme is a plan or programme to motivate individual or group
on performance. An incentive programme is most frequently built on monitory rewards ( incentive pay or
monetarybonus ), but mayalso include a variety of non monetary rewards or prizes.‖
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Kinds of Incentives
Incentives canbe classified under the following categories:
Individual and Organizational Incentives
Financial and Non-Financial Incentives
Positive and Negative Incentives
Individual and Organizational Incentives- According to L.G. Magginson, ―Individual incentives are the extra
compensation paid to an individual for all production over a specified magnitude which stems from his
exercise of more than normal skill, effort or concentration when accomplished in a predetermined way involving
standard tools, facilities and materials.‖ Individual performance is measured to calculate incentive where as
organizational or group incentive involve cooperation among employees, management and union and purport to
accomplish broader objectives such as an organization-wide reduction in labour, material and supply costs,
strengthening of employee loyalty to company, harmonious management and decreased turnover and
absenteeism
Individual Incentive System is of two types:
Time based System- It includes Halsey Plan, Rowan Plan, Emerson Plan and Bedeaux Plan
Production based System- it includes Taylor‘s Differential Piece Rate System, Gantt‘s Task and Bonus Plan
Group Incentive System is of following types
Scalon Plan
Priestman‘s Plan
Co-Partnership Plan
Profit Sharing
Some important these plans of incentive wage payments are as follows:
Halsey Plan- Under this plan a standard time is fixed in advance for completing a work. Bonus is rewarded to
the worker who perform his work in less than the standard time and paid wages according to the time wage
system for the saved time.
The total earnings of the worker = wages for the actual time + bonus
Bonus = 33.5% of the time saved (standard time set on past experience)
Or
50% of the time saved (standard are scientifically set)
Example: Time required to complete job (S) = 20 hours Actual Time taken (T) = 15 hours
Hourly Rate of Pay (R) = Rs 1.5
Calculate the wage of the worker.
Solution: T X R + (S-T ) X R 
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2
15 X 1.5 + (20-15 ) X 1.5 = 22.5 + 3.75 = 26.25 Rs
2
In this equation 3.75 Rs are the incentives for saving 5 hours.
Rowan Plan – Under this method minimum wages are guaranteed given to worker at the ordinary rate for the
time taken to complete the work. Bonus is that proportion of the wages of the time taken which the time
saved bears to the standard time allowed. 
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Incentive = Wages for actual time for completing the work + Bonus where,
Bonus = S-T X T X R
S
Emerson Plan – Under this system, wages on the time basis are guaranteed even to those workers whose output
is below the standard. The workers who prove efficient are paid a bonus. For the purpose of determining
efficiency, either the standard output per unit of timeis fixed, or the standard time for a job is determined, and
efficiency is determined on the basis of a comparision of actual performance against the standard.
Bedeaux Plan – It provide comparable standards for all workers. The value of time saved is divided both
to the worker and his supervisor in the ratio of ¾ and ¼ respectively. A supervisor also helps a worker in saving
his time so he is also given some benefit in this method. The standard time for each job is determined in terms of
minutes which are called Bedeaux points or B‘s. each B represents one minute through time and motion
study. A worker is paid time wages upto standard B‘s or 100% performance. Bonus is paid when actual
performance exceeds standard performance in terms ofB‘s.
Taylor’s Differential Piece Rate System - F.W. Taylor, founder of the scientific management evolved this
system of wage payment. Under this system, there isno guarantee of minimum wages. Standard time and standard
work is determined on the basis of time study. The main characteristics of this system is that two rates of wage
one lower and one higher are fixed. Those who fail in attaining the standard, are paid at a lower rate and
those exceeding the standard or just attaining the standard get higher rate. Under this system, a serve
penalty is imposed on the inefficient workers because they get the wages at lower rates. The basic idea
underlying in this scheme is to induce the worker at least to attain the standard but at the same time if a worker
is relatively less efficient, he will lose much. For example, the standard is fixed at 40 units per day and the
piece rate are 40 P. and 50 P. per unit. If a worker produces 40 units or more in a day, he will get the wages
at the rate of 50 P per unit and if he produces 39 units will get the wages at 40 paise per unit for the
totaloutput.
Gantt’s Task and Bonus Plan - In this, a minimum wage is guaranteed. Minimum wage is given to
anybody, who completes the job in standard time. If the job is completed in less time, then there is a hike in
wage-rate. This hike varies between 25% to 50% of the standard rate.
Profit Sharing – It is a method of remuneration under which an employer pay his employees a share in form
of percentage from the net profits of an enterprise, in addition to regular wages at fixed intervals oftime.
Financial and Non-financial Incentives- Individual or group performance can be measured in financial
terms. It means that their performance is rewarded in money or cash asit has a great impact on motivation as a
symbol of accomplishment. These incentives form visible and tangible rewards provided in recognition of
accomplishment. Financial incentives include salary, premium, reward, dividend, income on investment etc. On
the other hand, non-financial incentives are that social and psychological attraction which encourages people to
do the work efficiently and effectively. Non-financial incentive canbe delegation of responsibility, lack of fear,
worker‘s participation, title or promotion, constructive attitude, security of service, good leadership etc..
Positive and Negative Incentives- Positive incentives are those agreeable factors related to work situation
which prompt an individual to attain or excel the standards or objectives set for him, where as
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negative incentives are those disagreeable factors in a work situation which an individual wants to avoid and
strives to accomplish the standards required on his or her part. Positive incentive may include expected
promotion, worker‘s preference, competition with fellow workers and own ‗s record etc. Negative
incentives include fear of lay off, discharge, reduction of salary, disapprovalbyemployer etc.
Fringe Benefits
Employees are paid several benefits in addition to wages, salary, allowances and bonus. These benefits and
services are called ‗fringe benefits‘ because these are offered by the employer as a fringe. Employees of the
organization are provided several benefits and services by the employer to maintain and promote employee‘s
favorable attitude towards the work and work environment. It not only increases their morale but also motivate
them. These provided benefits and services forms the part of salary and are generally refereed as fringe
benefits.
According to D. Belcher, ―Fringe benefits are any wage cost not directly connected with the employees
productive effort, performance,service orsacrifice‖. According to Werther and Davis, ―Fringe embrace a broad
range of benefits and services that employees receive as part of their total compensation, package- pay or direct
compensation and is based on critical job factors and performance‖.
According to Cockman, ―Employee benefits are those benefits which are supplied byan employer to or for the
benefits of an employee and which are not in the form of wages, salaries and time rated payments‖. These are
indirect compensation as they are extended condition of employment and are not related to performance
directly.
Kinds of Fringe Benefits
The various organizations in India offers fringe benefits that may be categorized as follows:
Old Age and Retirement Benefits - these include provident fund schemes, pension schemes, gratuity and
medical benefits which are provided to employee after their retirement and during old age as a sense of security
about their old age.
Workman’s Compensation - these benefits are provided to employee if theyare got ignored or die under the
working conditions and the sole responsibility is of the employer.
Employee Security- Regular wage and salary is given to employee that gives a feeling ofsecurity. Other than this
compensation is also given if there is lay-off or retrenchment inan organization.
Payment for Time Not Worked – Under this category of benefits, a worker is provided payment for the work
that has been performed by him during holidays and also for the work done during odd shifts. Compensatory
holidays for the same number in the same month are given if the worker has not availed weeklyholidays.
Safety and Health – Under this benefit workers are provided conditions and requirements regarding
working condition with a view to provide safe working environment. Safety and Health measures are also taken
care of in order to protect the employees against unhealthy working conditions and accidents.
Health Benefits – Employees are also provided medical services like hospital facility, clinical facility bythe
organization.
REWARD: 
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Reward Management is concerned with the formulation and implementation of strategies and policies
that aim to reward people fairly, equitably and consistently in accordance with their value to the
organization
Objectives of Reward Management
Support the organisation‘s strategy 
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Recruit & retain
Motivate employees
Internal & external equity
Strengthen psychological contract
Financially sustainable
Comply with legislation
Efficiently administered
Basic Types of Reward
Extrinsic rewards
satisfy basic needs: survival, security
Pay, conditions, treatment
Intrinsic rewards
satisfy higher needs: esteem,development
Rewards by Individual, Team, Organisation
Individual: base pay, incentives, benefits
rewards attendance, performance, competence
Team
team bonus, rewards group cooperation 
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Organisation
profit-sharing, shares, gain-sharing
Role of Compensation and Reward in Organization:
Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e
Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a
business process without Men.
Land, Labor, Capital and Organization are four major factors of production.
Every factor contributes to the process of production/business. It expects return from the business
process such as Rent is the return expected by the Landlord. similarly Capitalist expects Interest and
Organizers i.e Entrepreneur expects profits. The labour expects wages from the process.
It is evident that other factors are in-human factors and as such labour plays vital role in bringing about
the process of production/business in motion. The other factors being human, has expectations,
emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production
process.
Advantages of Fair Compensation System:
Therefore a fair compensation system is a m12u3st for every business organization. The fair
compensation system will help in the following: 
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If an ideal compensation system is designed, it will have positive impact on the efficiency and results
produced by workmen.
Such system will encourage the normal worker to perform better and achieve the standards fixed.
This system will encourage the process of job evaluation. It will also help in setting up an ideal job
evaluation, which will have transparency, and the standards fixing would be more realistic and
achievable.
Such a system would be well defined and uniform. It will be apply to all the levels of the organization as
a general system.
The system would be simple and flexible so that every worker/recipient would be able to compute his
own compensation receivable.
Such system would be easy to implement, so that it would not penalize the workers for the reasons
beyond their control and would not result in exploitation of workers.
It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would
provide satisfaction to the workers.
Such system would help management in complying with the various labor acts.
Such system would also bring about amicable settlement of disputes between the workmen union and
management.
The system would embody itself the principle of equal work equal wages. Encouragement for those who
perform better and opportunities for those who wish to excel.
Types of rewards
Rewards serve many purposes in organisations. They serve to build a better employment deal, hold on
to good employees and to reduce turnover.
The principal goal is to increase people's willingness to work in one‘s company, to enhance their
productivity.
Most people assimilate "rewards", with salary raise or bonuses, but this is only one kind of reward,
Extrinsic reward. Studies proves that salespeople prefer pay raises because they feel frustrated by their
inability to obtain other rewards,but this behavior can be modified by applying a complete reward
strategy.
There are two kinds of rewards: 
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Extrinsic rewards: concrete rewards that employee receive.
Bonuses: Usually annually, Bonuses motivates the employee to put in all endeavours and efforts during
the year to achieve more than a satisfactory appraisal that increases the chance of earning several
salaries as lump sum. The scheme of bonuses varies within organizations; some organizations ensure
fixed bonuses which eliminate the element of asymmetric information, conversely, other organizations
deal with bonuses in terms of performance which is subjective and may develop some sort of bias which
may discourage employees and create setback. Therefore, managers must be extra cautious and
unbiased.
Salary raise: Is achieved after hard work and effort of employees, attaining and acquiring new skills or
academic certificates and as appreciation for employees duty (yearly increments) in an organization.
This type of reward is beneficial for the reason that it motivates employees in developing their skills and
competence which is also an investment for the organization due to increased productivity and
performance. This type of reward offers long-term satisfaction to employees. Nevertheless, managers
must also be fair and equal with employees serving the organization and eliminate the 12p4ossibility of
adverse selection where some employees can be treated superior or inferior to others. 
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Gifts: Are considered short-term. Mainly presented as a token of appreciation for an achievement or
obtaining an organizations desired goal. Any employee would appreciate a tangible matter that boosts their
self-esteem for the reason of recognition and appreciation from the management. This type of reward
basically provides a clear vision of the employee‘s correct path and motivates employee into stabilising or
increasing their efforts to achieve higher returns and attainments.
Promotion: Quite similar to the former type of reward. Promotions tend to effect the long-term satisfaction
of employees. This can be done by elevating the employee to a higher stage and offering a title with
increased accountability and responsibility due to employee efforts, behaviour and period serving a specific
organization. This type of reward is vital for the main reason of redundancy and routine. The employee is
motivated in this type of reward to contribute all his efforts in order to gain managements trust and acquire
their delegation and responsibility. The issue revolved around promotion is adverse selection and managers
must be fair and reasonable in promoting their employees.
Other kinds of tangible rewards
Intrinsic rewards: tend to give personal satisfaction to individual Information / feedback: Also a significant
type of reward that successful and effective managers never neglect. This type of rewards offers guidance to
employees whether positive (remain on track) or negative (guidance to the correct path). This also creates a
bond and adds value to the relationship of managers and employees.
Recognition: Recognition: Is recognizing an employee‘s performance by verbal appreciation. This type of
reward may take the presence of being formal for example meeting or informal such as a ―pat on the back‖
to boost employees self- esteem and happiness which will result into additional contributing efforts.
Trust/empowerment: in any society or organization, trust is a vital aspect between living individuals in order
to add value to any relationship. This form of reliance is essential in order to complete tasks successfully.
Also, takes place in empowerment when managers delegate tasks to employees. This adds importance to an
employee where his decisions and actions are reflected. Therefore, this reward may benefit organizations for
the idea of two minds better than one.
Intrinsic rewards makes the employee feel better in the organization, while Extrinsic rewards focus on the
performance and activities of the employee in order to attain a certain outcome. The principal difficulty is to
find a balance between employees' performance (extrinsic) and happiness (intrinsic).
The reward also needs to be according to the employee‘s personality. For instance, a sports fan will be really
happy to get some tickets for the next big match. However a mother who passes all her time with her
children, may not use them and therefore they will be wasted.
When rewarding one, the manager needs to choose if he wants to rewards an Individual, a Team or a whole
Organization. One will choose the reward scope in harmony with the work that has been achieved.
Individual 
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Base pay, incentives, benefits
Rewards attendance, performance, competence
Team: team bonus, rewards group cooperation
Organization: profit-sharing, shares, gain-sharing