CERA Case Study: Optimizing HRM Practices for Diversity and Performance

The assignment content discusses the importance of perceived equity and its impact on employee attitudes and behavior. The bonus scheme at CERA is flawed, with defective criteria for administering performance bonuses and uneven access to bonus payments. To improve the design of the bonus scheme, changes can be made to address these problems, such as using a fair and transparent process for determining bonuses, providing clear criteria for evaluating performance, and ensuring that all employees have an equal opportunity to receive bonuses.

Assessment item 2
Topic short answer assessments
Value: 20%
Due date: Variable
Return date: -
Length: 700 words maximum +/-10%
Task
You are required to answer any two topic short answer assessment tasks from Topics 2 to 6.
These assessments tasks can be found at the end of each of these topics. The topic short answer
assessment tasks focus on evaluating aspects of HRM practice. Paste your answer into the
journal tool on the Interact2 site.
Requirements
• A minimum of five sources must be used in your answer, including academic sources.
• Copy your answer into the journal space, do not attach files. Use Ctrl C to copy and Ctrl V to
paste.
• Format the answer to enable ease of reading.
• Use the APA 6 referencing system.
• Do not number or dot point the reference list.
https://doms.csu.edu.au/csu/file/677decc2-6646-404b-8e59-8920a739d262/1/CERA%20.zip/CERA%20/
index.html
This is website on which everything is dependent of this Subject

Topic 3 short answer assessment task: Selection methods and minority
representation in CERA
Imagine that CERA wants to increase the representation of Aboriginal people in its
workforce. Using one job category in CERA as an example, discuss the merits of two
selection methods that you believe, based on research evidence, may be problematic if
CERA is to achieve its goal.
Topic 4 - short answer assessment - CERA's bonus scheme
Mark French asked his people to come up with some options to improve the design of
the bonus scheme in CERA. You have seen the problems; now for some options to
improve the design.
Suggest changes that could be made to fix the problems with CERA's bonus scheme.
Use relevant lierature to support your argument. State the problem that you’re
addressing first, followed by the proposed solutions. Justify your suggestions and
include citations and a reference list for sources used. Should the bonus scheme be
scrapped altogether? Why, or why not?
Topic 3: Diversity, Recruitment and Selection

CERA has managed to attract some very good people to its workforce, but Israel and others
want to make recruitment and selection practice much better aligned with the goals of the
business. Part of this task is working through how to use the range of techniques and tools
available, and to integrate these two areas of HR practice with diversity management. Easier
said than done? Perhaps. After studying the concepts introduced in this topic, you will be asked
to make some recommendations on improving CERA's recruitment and selection practices.
 Diversity, Recruitment and Selection

 “It was ok that we’d started to make progress on connecting job design to
CERA’s goal to be an innovative organisation, as well as being known for its
commitment to high-contact service. The project with Rachel Amaro was at least
partially successful because we were able to identify some good reasons why job
design could be leveraged better, and we worked out specific features of job
design that would promote innovative behaviour. I think Rachel was starting to
mellow a bit, and even to take HR more seriously.
 We’d also started to think more systemically, I think, as a senior management
team – that HR was not disconnected from the rest of the business, but it was a
key piece in achieving the strategy. This was on the right track for sure. But
something wasn’t right. I kept feeling like there was something we were missing.
Like most HR teams, my small team and I catch up weekly to talk over how
various projects are going, and how the culture of CERA is developing. This is
also a chance for me to feedback to the team on our senior management team
meetings, and for my team to feedforward things that are on their minds.
 One of the projects that we have been working on is to review the recruitment
and selection practices used in CERA. Since I joined the organisation I felt that
we were just doing what everyone else was doing in this area and not really
getting the most from these two HR practices. (Maybe you can relate to this.)
True, no one was screaming out for change, but I’d heard a few rumblings from
staff about poor cultural fit and misdirected selections to know that all wasn’t
perfect in the garden. Mind you, these kinds of complaints are not at all unusual
in organisations; in fact, they’re probably commonplace. It’s just that they brought
to my attention the importance of getting the most from our investment in HR
practices, specifically recruitment and selection practices, if we wanted to keep
achieving our stated point of difference in terms of service quality and being
innovative.
 In places I’d worked at before, we’d talked about the value add of HR practices to
the goals of the organisation, whether it was training or recruitment, or whatever;
but nothing much was ever done. We all knew that there were many options in
recruitment and in selection, but, remarkably, we ended up using the same
methods as always, and as everyone else in our industry used. Perhaps we
might have tinkered with behavioural interviews, but that was pretty much about it

– application, interview, second interview, reference check, offer. Wham bam,
etc.
 To be honest, and without being overly critical of my peers, I wondered whether
our success in attracting and keeping good people at CERA was more a matter
of good luck than good management. (I daresay there would be many
organisations where managers might feel the same way.) After all, the transition
matrices for the Engineering and Planning divisions didn’t look too bad in regard
to retention, so why was I uncomfortable?
 I think it was Susumu Takada, our Manager, Finance, Legal and Administration,
who led me to take all of this more seriously. Susumu is a quietly-spoken guy;
considered, not in a rush to make judgments, and a smart operator. Even though
he doesn’t seem to be all that knowledgeable about HR, what has struck me
most about him is that he takes time to think through efficient and effective
solutions to things, not just the obvious, or the path that most people would take.
 Take the time when we were looking at our strategy for the next five years. I’m
pretty certain it was Susumu who raised the possibility of extending our footprint
into regional NSW, because there were strong signs of strengthening demand for
infrastructure which could be sustainable. At first, the others were sceptical.
Plans for infrastructure investment in regional Australia had come and gone over
the years: the rhetoric often outweighed the reality. Sure, in places like
Queensland and Western Australia, the mining boom had stimulated pretty rapid
infrastructure development, but that wasn’t typical and it was waning in recent
years. Anyhow, Susumu was quietly confident and he seemed to know what he
was talking about.
 I’d invited him to attend one of my weekly HR team meetings. We were talking
over the project on reviewing our processes in recruitment and selection. Sipping
his tea Susumu listened intently, head slightly turned, as Miriam and I spoke
about the need to avoid a cookie-cutter approach that squeezed every candidate
into the same mould. Yes, it’s true, I said, we want person-organisation fit, but we
know that there’s a wealth of talent out there and it comes in different packages
so to speak. So, there is a risk that using a fairly standard set of instruments in
predictable ways has a decent probability of filtering out otherwise qualified,
suitable people. We need to be smarter about reaching a wide pool of suitable
people and then in how we select the right people.”
“You mean there isn’t enough of a focus on diversity management?”,
Susumu reflected.

We both looked at him, silent for several seconds before I intervened. “No, I
don’t see it as a diversity issue; it’s more just about better or smarter practice in
recruitment and selection. I mean, we have a fairly diverse group, given our
size and the type of business we run. We select on merit, so we get the best
possible candidate, no matter who they are. I’m talking about using recruitment
and selection practice smarter to support CERA’s goals. I’m not sure it’s the
same thing as what you’re talking about, Susumu.”
“Yes, I see”, he replied. “I'm no expert in these things, but what I’m
hearing you say is that you need to have recruitment and selection
processes that are more sensitive to individual differences, rather than
processes that reinforce homogeneity, right.”
“Well... er..” (I wasn’t sure).
It was Miriam who now joined in. “You know, I hadn’t thought of it that
way. I think you’re both kind of on the same or similar wavelength. We
want our recruitment and selection processes to embrace diversity, and
we want our recruitment and selection processes to best support our
goals – or, to give us the best available candidates for our business
goals. By the way, Israel, I’d say best available candidate, not best
possible candidate. What if the best possible candidate is otherwise
occupied or quite happy where she is, or doesn’t know about us?”
“When I worked at Hetherington’s [a shipping agency] we regarded
diversity as being about employing people of different races, gender,
disability, and eliminating discrimination. It wasn’t till later, maybe after
attending a conference on diversity and inclusion put on by the
Australian Human Rresources Institute (you know, AHRI), that I
understood that diversity was much broader and it was different to equal
employment opportunity.”
“I think what you’ve both been talking about is tied up, or should be tied
up, with how you’re seeing diversity management as part of your HR
toolkit,” Susumu replied as he pushed his chair back. “Anyway, I have to
go to a meeting, but think about this. It may be a useful principle to apply
in your review of recruitment and selection practices.”

“I felt that Susumu was on to something, but how to connect diversity
management and recruitment and selection practice? Surely, diversity
was one thing and recruitment and selection was much broader? Or, was
diversity a cultural element and recruitment and selection one of the tools
to foster it? I needed to think about this and maybe do some reading and
talking with others. Besides, I still hadn’t really thought through how to
take a more tactical approach to our recruitment and selection so that we
could attract wide pools of suitable applicants....”
Diversity management
Israel and Susumu have raised two issues here that are important in HR practice. First,
what is diversity and diversity management, and how does diversity management relate
to recruitment and selection? Second, how should recruitment and selection practice be
constructed to attract wide pools of suitable applicants and to select the right people to
support organisational goals? These two questions form the two parts of this topic.
Learning activity 1
To begin, consider your own point of view on whether diversity, say, gender diversity in
leadership roles, can make a difference to the performance of an organisation? This is a
debatable proposition in practice, to be sure.
Now, take a look at the evidence presented here by James Heskett of the Harvard
Business School.
Blog posting
Heskett, J. (2015, November 4), Why does gender diversity improve financial
performance? Working knowledge: The thinking that leads,
visit site
Notice the responses of readers of Heskett’s discussion. As you can see, there is
debate around the merits of gender diversity in leadership roles. Nonetheless, there is
mounting evidence on the impact of diversity on performance. McKinsey&Company
have some useful resources in this area that are well work exploring.
Chapter 9 of Kramar et al. (2014) provides a discussion of the conceptual foundations of
diversity and diversity management. Diversity management (or managing diversity) is “a
process of managing people’s similarities and differences; it is built on a set of values
that recognises that the differences between people are a potential strength for the

organisation; this process of management creates an environment that allows all
employees to contribute to organisational goals and experience personal growth”
(Kramar et al., 2014, p. 286). Notice that organisational goals are a predominant driver
of diversity management. This is explained in the model of diversity management,
summarised in the figure below (Figure 9.1 in Kramar et al.).
Source: (Kramar et al., 2014, p. 288)
Learning activity 2
Evaluate the thinking behind this diagram (and the related explanation in Kramar et al. (2014).
Does it make sense to you? Do you accept it? What counter arguments would you mount? This
learning activity will help you to prepare for the short answer assessment task, below.
Some people see diversity management in relatively narrow terms as complying with
legislation, centring on promoting equal employment opportunity (EEO) and removing
discrimination from the workplace. “This approach to diversity management identifies
groups with particular personal characteristics, such as gender or ethnicity, and focuses
on issues that arise from discrimination based on these personal characteristics.
Policies are then developed to provide for equal treatment of members of different
groups by making concessions so that employees with certain personal characteristics

or domestic arrangements can assimilate into the prevailing employment patterns
(Kramar et al., 2014, p. 290). This is a compliance-oriented, reactive approach. This is
essential, but perhaps not sufficient.
As Kramar et al. (2014, p. 287) point out, managing diversity can be seen as a more
wide-ranging process of cultural change, with appropriate supporting policies and
practices, that recognises that the differences between people are a source of strength
and competitive advantage for the organisation in product, service and labour markets.
This takes us to the business reasons for diversity management, which you will see
discussed in Chapter 9 and also in the material from McKinsey&Company noted and
linked above. It is important to evaluate the business arguments for diversity
management right up front. Five arguments have been made for the introduction of a
diversity management approach:
There is a ‘business case’ associated with competing effectively in the labour market;
 It provides a source of competitive advantage;
 The process provides a means of effectively adapting to change;
 There are ideological grounds for its introduction;
 It will be a source of innovation.
Learning activity 3
Do we need a business case argument for diversity management in the 21st century? Is it time to
simply accept that diversity management has a self-evident 'good'?
This 20-minute video (produced in 2006) signals the business case argument from a product
market perspective.
Watch
Multiculturalism: How retailers reposition themselves to address ethnic diversity,
produced by Steve Clements, fl. 2001 (Sunrise, FL: D.E. Visuals, 2007), 20 mins
available through the CSU VAST video library collection
access online
As you can see in Chapter 9 of Kramar et al. (2014), action to embed a broad-based
diversity management approach involves multiple levels – strategic, managerial and
operational. At the most fundamental level, we’re talking about cultural transformation,
which is then brought to bear in a practical way through managerial and operational
actions involving several areas of HR practice, such as recruitment and selection,
training and development, and performance management.

Although the arguments for diversity management grounded in business rationales may
be plausible, appealing to certain dominant stakeholders in organisations, points of
contention have been raised in the literature that we should pay attention to; not least,
that the claimed benefits may not be realised or are more complex to achieve than first
thought. As you saw earlier in the reactions to the discussion item by James Heskett,
there may also be certain co-conditions required. Furthermore, if the business rationale
for diversity management does not gain traction among senior management, there is a
risk that the whole diversity project fails. The following articles by Agrawal (2012) and by
D’Netto, Shen, Chelliah and Monga (2014) will give you a flavour for some of the points
of contention surrounding the operationalisation of diversity management. Both articles
are reasonably easy to read and they will add depth to your understanding of this
complex area.
Agrawal’s (2012) particular interest is in the extent to which diversified teams make a
difference to organisational performance. It is set in the Indian context and anchored in
the business case discourse on diversity management. I selected this article because it
provides a pragmatic, accessible review of the literature on diversity management in
organisations and the evidence of impact using a SWOT framework. Following a
detailed review of the literature, Agrawal reports on empirical work that he undertook to
evaluate the application of diversity management in teams in Indian manufacturing and
service organisations. Although it is contextualised in the Indian experience, we can
apply our own judgment and critical thought to translating his insights into our own
realities.
Read
Agrawal, V. (2012). Managing the diversified team: challenges and strategies for
improving performance. Team Performance Management: An International
Journal,18(7/8), 384-400
access online
Read
D'Netto, B., Shen, J., Chellah, J., & Monga, M. (2014). Human resource
diversity management prctices in the Australian manufacturing sector.
International Journal of Human Resource Management, 25(9) 1243-1266.
doi: 10.1080/09585192.2013.826714
access online
The second article that I’ve selected is set in the Australian manufacturing industry.
Brian D’Netto and colleagues researched the application of cultural diversity
management in several HR practices, as well as employee perceptions of diversity
management. Their research confirms several benefits and challenges of diversity
management, and reports a reluctance of firms in their sample to embrace a broad-
based view.

Learning activity 4
Who are the beneficiaries of diversity management policies?
What are the debates surrounding the business case argument for diversity management can you
glean from these two articles? Are you persuaded by these arguments? Are you aware of
examples that would support these debates? Is there a risk of a balcklash against those who are
the beneficiaries?
To conclude this section of the topic, here is a piece of commentary from McKinsey &
Company on gender equality, which is both visionary and aspirational.
Executive briefing
A CEO's guide to gender equality: The case for gender equality is strong. Why is
progress so slow (November 2015) McKinsey Quarterly,
McKinsey & Company
visit site
Recruitment and selection
Recruitment and selection are closely related to the discussion above because these
two HR practices represent key managerial policy arenas for enacting diversity
management. You would have seen something of this connection in the reading by
D’Netto et al. We now take another step. The second question that was raised in the
exchange above between Israel Tobin, Susumu Takada and Miriam is: how can
recruitment and selection be improved to attract a wide pool of suitably qualified
candidates and to select the right people to support the goals of the organisation? This
question goes to the methods that are used in these two areas of HR practice, and to
the importance of thinking about the choices available in the light of the goals that we
want to achieve in the organisation.
In this part of the topic we will be working with Chapter 8 of Kramar et al. (2014) and
some additional resources. At the end of this section, you will be able to complete the
short answer assessment task for this topic.
Recruitment refers to any practice or activity carried out by an organisation with the
primary purpose of identifying and attracting potential employees (Kramar et al., 2014,
p. 244.) Human resource planning sets the context for recruitment because it identifies
the knowledge, skills, experience and other qualities that candidates need to have to
satisfy the requirements of positions within the organisation. As you know, this, in turn,

is derived from the organisation’s strategy as well as external labour market trends that
impact on the availability and quality of potential candidates.
Learning activity 5
To test your ability to apply the point made above, think of an example of how recruitment,
human resource planning and business strategy are connected. Do you think there might be an
argument that this connection may not be necessary in some situations?
The industry and business context of the organisation is also an important factor; for
example, non-profit and volunteer organisations face special challenges in recruitment,
as do organisations that can only offer casual, fractional or fixed-term roles due to the
nature of funding sources and/or other funding constraints. Clearly, not all organisations
are in a position to offer permanent, full-time positions.
Recruitment is not a one-directional activity – applicant characteristics, vacancy
characteristics and recruiter characteristics, together with HR policies, have a bearing
on job choice. This, in part, makes the task of recruitment a little more complex than
what might first appear.
There are four HR policies that can impact on the appeal of vacancies:
 Internal versus external recruiting;
 Lead-the-market pay strategies;
 Image advertising, and
 Emerging recruitment strategies, such as relationship building.
Learning activity 6
From what you know of CERA so far, how might these policies be applied in this organisation?
Think through each one, carefully. You may need to make some assumptions to complete this
activity, but it is worth doing to ensure that you can apply this knowledge in a practical way.
As we know, several recruitment sources are available to organisations, and some will
work better than others. These are summarised below.
Recruitment sources
 Internal versus external
 direct applicaiton and
referrals
 advertisements
 internet recruitment
 public employment
agencies
 private employment
agencies
 universities

Source: (Kramar et al., 2014, pp. 247-25)
This video gives you a flavour for the creative use of recruitment sources to amplify
diversity in applicant pools.
Watch
Recruitment, produced by ITV Granada Manchester, in Handling the Media, 3
(Teachers TV/UK Department of Education, 2006), 13 mins
available through the CSU VAST video library collection
access online
The key decision to be made is which sources work best for the organisation in the
labour markets that it is targeting to attract a wide pool of suitable applicants, given the
goals that it wants to achieve from the position. The discussion in Chapter 8 of Kramar
et al. canvasses several recruitment sources, and that’s a good start. Issues, challenges
and benefits of each source are discussed.
Learning activity 7
After reading this material on recruitment sources, complete this activity. CERA wants to
recruitment for a senior engineer and a graduate engineer. Which source/s should it use for each
of these positions? Justify your selection using the strengths and limitations of the sources.
But organisations need a view of recruitment strategy, not just a menu of sources to
choose from. These are related, but not the same thing. Past experience provides a
guide to what will work best. We can look, for example, at the numbers and quality of
applicants from various sources that have been used and track this through to selection
and then post-hiring outcomes. We can also examine cost-per-recruit data to determine
the efficiency of different sources. In your experience, do organisations track metrics
such as these? Here is a hypothetical example to illustrate these measures.

Source: (Kramar et al., 2014, p. 254)
I have selected three additional resources below to get you thinking deeper about
contemporary recruitment strategy. These readings will give you points to consider in
trying to improve the probability of attracting wider pools of suitable applicants for a
position. These readings are optional. Refer to them as needed, based on interest and
assessment tasks. The first article is by Van Hoye and Lievens.
Read
Van Hoye, G., & Lievens, F. (2007). Social influences on organisational
attractiveness: Investigating if and when word of mouth matters. Journal of
Applied Social Psychology, 37(9), 2024-2047.
doi: 10.1111/j.1559-1816.2007.00249.x
access online
Van Hoye and Lievens (2007) tackle the impact of external sources of information
available to job seekers on their perceptions of organisational attractiveness.
Learning activity 8
When applying for a job, how often have you sought independent advice from friends,
colleagues, family beyond what you are told by the organisation in their advertising or on
their web site? How has this advice impacted on your behaviour?

Think about this. Most of us do this. The problem for organisations is that they have little
control over these external sources of information, so it is useful to know how important
these are in the way potential applicants perceive the attractiveness of an organisation
and its vacancy. You should be able to extract some points from this article about how
word-of-mouth information works to influence perceptions of applicants, and what
organisations can do to try and influence this. You can then use these points in building
your advice to CERA.
My second selection is a 2010 paper by Doherty on recruitment and social media. If you
are working in HR or have been keeping up with some of the general literature on HR,
there may be few surprises here. However, I selected this article to shine a light on the
gap that sometimes occurs between the rhetoric and reality in professional life. So, read
this article with this question: how much of what’s described is happening today, is
commonplace? True, perhaps we know about several of the possibilities raised in the
paper, but how many of them are a reality today? Can you see potential in these
suggestions?
Read
Doherty, R. (2010). Getting social with recruitment. Strategic HR Review, 9(6),
11-15.
doi:10.1108/14754391011078063
access online
The third article is a more substantial piece. What of the employer side of social
networking – (informal) employer networks that are used to gain information about
potential applicants as part of the recruitment process? We know that for some roles,
particularly those that involve a fair amount of discretion in job tasks such as
management positions or senior/specialist technical positions, this is exactly what
happens in practice; yet it is rarely canvassed in textbooks. Gerxhani and Koster (2015)
investigate how this occurs. Note especially the kinds of informal employer networks
that are found to be most effective, and see if you can translate these into your own
reality. I found this reading to be heavy going in places. If you can pick up the main
contours of the argument, it will assist you in thinking more tactically about recruitment,
as well as in considering ethical aspects of this practice.
Read
Gerxhani, K., & Koster, F. (2015). Making the right move: Investing employers'
recruitment strategies. Personnel Review, 44(5), 781-800.
doi: 10.1108/PR-12-2013-0229
access online
Before leaving recruitment, it is important to see that recruiter characteristics have a
bearing on the quality of outcomes. Which characteristics? The functional area within

which the person first contacted comes from; the nature of the first interaction with the
recruiter – warmth and informativeness; and the realism portrayed. These are relatively
straightforward points that you can read about further in Chapter 8 of Kramar et al.
(2014).
Having attracted a pool of suitable candidates, the next step is to select the right or
best available person. Here’s two thought-starters. The first is an easy read that tells
the story of one company’s approach to recruitment and selection, as told by Pathak
(2015).
Read
Pathak, A. (2015). Thought works for ThoughtWorks: Recruitment process
ensures that company gets the people it wants. Management Development
Review, 23(2), 5-8.
doi: 10.1108/HRMID-01-2015-0009
access online
Learning activity 9
How realistic do you believe this approach is for your context? What downsides can you
see? How would you measure the impact?
The second thought-starter is a newspaper item that points to the involvement of
stakeholders in selection processes. Do you see merit in this approach?
Read
Community to have say in principal selection. (2014, Feb 04). Daily News.
Retrieved from http://search.proquest.com/docview/1493777744?
accountid=10344
access online
There are five generic standards that shape selection methods used in organisations
(Kramar et al., 2014, pp. 258-266). These are:
 Reliability;
 Validity;
 Generalisability;
 Utility, and
 Legality.
Failure to understand and apply these standards correctly is one reason why selection
outcomes may be sub-optimal. What do you think are the most commonly-used

selection techniques? In my own experience, they are interviews and reference checks.
Yet, these are among the least reliable techniques. The following table lists the
selection techniques used by organisations today.
Types of selection methods
Interviews:
-structured
-standardised
-focused
-situational interview items:
experience-based and future-oriented
References and biographical data
Physical ability tests
Cognitive ability tests
Personality inventories
Work samples
Honesty tests and drug tests
Source: (Kramar et al., 2014, pp.267-272)
As you will see in Chapter 8 of Kramar et al., each has its advantages and
disadvantages. The key decision is which set of techniques works best for your
organisation.
Learning activity 10
What would you say are the criteria or factors that would determine which ones to apply
in an organisation, beyond the five standards? Thinking about the CERA story, are there
selection techniques that might disadvantage certain social groups? What are the
implications of this for talent management in CERA?
I’ve selected two resources to elaborate on the material above. These are optional.
The first one looks at whether certain kinds of testing disadvantage minority groups.
This item is meant to stimulate your thinking about the issue I raised above. It is not the
complete answer, and you may think of other points relating to the way this
phenomenon occurs in practice.
Read
Nga, E., & Sears, G. (2010). The effect of adverse impact in selection practices
on organizational diversity: a field study. International Journal of Human
Resource Management, 21(9), 1454-1471.
doi: 10.1080/09585192.2010.488448
access online

The second item is a topical research study on the use of social networking web sites in
selection. This is not in the list of methods canvassed in Kramar et al.; you might argue,
with good reason. However, we know from anecdotal reports that some
employers/managers do indeed use this method, even if only as a last resort or as a
back-up. Kluemper and Rosen are interested in the reliability and validity of judgments
made about applicants based on information available on these sites, taking into
account rater characteristics.
Read
Kluemper, D., & Rosen, P. (2009). Future employment selection methods:
Evaluating social networking web sites. Journal of Managerial Psychology,
24(6), 567-580.
doi:
access online
This is a controversial practice, as the authors recognise, and there are, no doubt,
ethical issues that need to be explored further. I think there are gaps in the design of the
study, but as this is a preliminary study in a highly topical, if under-researched, area, I
have provided it to you as food for thought.
Topic 3 short answer assessment task: Selection methods and
minority representation in CERA
Imagine that CERA wants to increase the representation of Aboriginal
people in its workforce. Using one job category in CERA as an example,
discuss the merits of two selection methods that you believe, based on
research evidence, may be problematic if CERA is to achieve its goal.
Post your answer to the relevant journal within the journal tool on the Interact 2
site by the due date shown in the study Schedule. Cite and reference sources
used in your answer. Follow the presentation requirements set out in the Subject
Outline for Assessment 2.
If you are taking this subject in a face-to-face class, your lecturer will
provide instructions on how to complete this task.
top

Topic 4: Performance Management and Reward
Like many organisations today, CERA's performance management system is satisfactory on
paper, but it leaves a lot to be desired in practice. It doesn't recognise the good work done by
staff, it's cumbersome and is poorly connected with reward. You are asked to consider how
measurement of performance can be improved as well getting better alignment between
performance and reward.
.
Performance Management and Reward
I’m pretty satisfied that the HR function in CERA is starting to focus on
the right things. We’d made the case successfully that HR isn’t just about
paying people and advertising vacancies and trouble–shooting; but it is
an important asset in getting this place where it wants to go. We’ve made
the case for an ordered, organised and, to some extent, a planned
approach to staffing and we’ve made headway in work design, diversity
management and looking at recruitment and selection in a more tactical
way. As our year drew to a close, the annual round of performance
appraisal meetings was getting underway.
Today’s senior executive team meeting was part-celebration, part
business. Mark French started off by going over some of the
achievements of the company in the last year and talking about plans for
expansion to be rolled out soon enough. We’ve been working on various
options for this over quite a long period now. Kellie Lincoln and the
others added their bits and pieces about achievements and staff
performances in their own areas. Jonathon Simon recounted an incident
where one of his people had been able to win a fairly sizeable planning
consultancy by being in the right place at the right time with one of our
clients. This was a relatively inexperienced staff member who was
showing considerable promise. Jonathon's story got us talking about the
way we manage performance and recognise and reward our people.”
“Israel, I think you might want to take a look at our processes on this
one”, Kellie said. “In my area, I think people sometimes just go through
the motions with performance, and there isn’t a great deal of
enthusiasm... And once we complete the appraisals, the management of
performance, I mean, the way we try to shape the performance of
people, is pretty variable, execept where there are gross problems."

1
“A bit tick-and-flick, I think”, added Jonathon. “Basically, in a firm like
ours, we know who is doing well and who isn’t; what’s more everyone
else knows it too. So, the idea that we need a system to manage
performance seems overkill”
Rachel added: “And I’m not convinced that the way we’re rewarding
people is cutting the mustard. I've read what we say about rewarding
excellence on our website. To some extent, that might be true - we
certainly look after our best people in a financial sense, paying well
above the market and encouraging them to give their best work through
challeneing projects, informal recognition and paying bonuses. But I think
we have some work to do to really connect performance and reward in
CERA in a broad sense. Making it worthwhile for a few isn't enough,
Rachel added, looking at Kellie for support.”
“Meaning?”, I shot back.
“Meaning, that we have some extraordinary talent around here that is
critical to what we say is our strategy, but we treat some of them like
school children when it comes to doing performance management, and
our reward structure doesn’t really get linked up to the quality of
performance. It doesn’t distinguish well, if you know what I mean. Having
a bonus scheme is fine, but just look at the coverage of it and the way it
is administered. And another thing is....”
“Sure, but Rachel we need some way of tracking what people are doing
and how well they do their work. There’s probably some legal
requirements too”, Mark French broke in. “I was talking with Alan Hume
from Civils the other day at that Contractor’s Federation thing I went to,
and he was saying that they’re close to ditching their system because it
is so cumbersome. Paper warfare he called it. Anyway, from the stories
he was telling me it sounded like it was pretty counterproductive and a
waste of time and money. Israel, is this ringing any bells for you?”

“Listening to Mark, I was reminded of something I’d read about how
companies around the world are having second thoughts about the way
they do performance management, especially, the performance
appraisal component, and how they reward people. Companies like
Netflix and Amazon were making some pretty radical moves; and some
of the big consulting houses were also stirring the pot.
CERA’s performance management system is pretty stock standard – in
regard to appraisal, we use a management-by-objectives scheme called
Performance Planning and Review (PPR), where each person sets
objectives for the year off their position description and last year’s
results. There is a mid-year review and a final review. It looks ok on
paper, so to speak (though it is in e format), but it isn’t taken very
seriously unless something is going wrong. I'd have to say that Rachel
and Kellie are probably right - once the results of appraisal meetings
come in, that seems to be the end of things in many cases. The crazy
result is that poor performers get more attention and good performers
can be taken for granted. (Go figure.)
A few years ago Mark had introduced a bonus-type arrangement where
areas that exceeded agreed performance goals by certain percentages
received such and such a cash reward, which was divided amongst the
staff. There was a scale of payments based on the extent to which goals
were exceeded. The bonus was allocated to the area and it was then
divided amongst the staff, usually based on seniority.
The reality, however, was that revenue generated or keeping under
budget were the main targets, and everyone knew this. As problematic
as that was, it was at least a known metric that was reasonably objective.
But areas like Rachel’s and Susumu’s didn’t really get a look in. So,
extraordinary performers in their areas got practically zip bonus, while
top performers in Kellie’s, Jonathon’s and even Lane’s areas could earn
significant additional money and prestige. One of the effects of this was
reported pretty forcefully in the recent pulse survey: people said that they
sometimes adjusted their effort or their work accordingly. Others reported
that the misalignment was causing tension in the workplace, some of
which was not seen (or not wanted to be seen) by managers.”
“Yeah, I wouldn’t want to throw the baby out etc, but it would be worth
looking into”, I replied, looking carefully at Mark to try to read how serious
he was being. “I think we’ve all been around long enough to know that
performance management generally gets an almost universal bad rap.
I’ve heard that some places are looking at other options, though perhaps
not abandoning it altogether” (I didn’t want to encourage revolution at
year’s end).

But how would we open this up without scaring the troops”, Jonathon
countered. “There is a connection to reward now, but as Rachel says, it
may not be well-crafted. Besides, people are used to it, even if they don’t
put a lot of store in it. I think the graduate level people probably find the
system we have now more useful. I think another factor that’s at work, at
least in my area, is that we expect a lot compared to what we pay. I know
we pay above the market, but the reality is that our people do a lot more
for their pay than their peers in some of the other consultancies; and a
whole heap more than their colleagues in government. Even though the
apprasials seem to stall at the end of the yeat, it is at least something
that people can hold on to - you know, have some certainty about.”
“I’d have to agree with what you’re all saying from my sense of things.
Maybe we should look at this in the New Year”, Susumu broke in.
"Anyway, I’ve got some quotes for the Christmas Party that I’d like to run
by you before we finish...”
Holding his hand up toward Susumu, Mark spoke: “Hang on people. Can
we talk over some options before we move on, please? It seems to me
that measurement is a weakness in our system, as well as the link
between performance results and bonuses. I’m sure there are other
issues with managing performance more broadly, but let’s focus on these
two areas first up....”
The mood of the meeting is about right. As the newspaper article below signals, there is
more than a little disquiet in organisations about performance management; and to a
lesser extent, perhaps, the links to performance-based reward. We will look into each of
these two areas using Chapter 10 and Chapters 13 and 14 of Kramar et al. (2014), plus
some additional material.
Learning activity 1
Thinking about people you know at work, or, your self as a potential employee, what
things do you believe inspire people to perform well at work?
Performance management

Read
Performance reviews' end is nigh. (2015, Jul 23). The New Zealand Herald
Retrieved from http://search.proquest.com/docview/1697781886?
accountid=10344
access online
The following link adds weight to this drive to reinvent performance management. It
contains short reports on the roads that some leading organisations are taking to
reinvent this HR practice.
Read
Taylor, C. (2015, July 20). HR's three biggest performance management
mistakes. HC Online
access online
But, for many organisations, the traditional formal performance management system is
seen as a necessity. This five-minute video explains the basics of the more traditional
approach.
https://www.youtube.com/watch?v=8XT6rAJOpcs
Learning activity 2
Having read the two short pieces on calls for change and having viewed this short
video, do you agree with the distinction that's being drawn between a traditional
approach that is outdated or inappropriate, and a new, more enlightened approach to
managing performance? If you are working, perhaps discuss this question with a trusted
colleague.
The terms performance management and performance appraisal are not
interchangeable; although they are sometimes (incorrectly) used in this way.
Performance management is the process through which managers ensure that
employees’ activities and outputs are congruent with the organisation’s goals; while
performance appraisal is a process that allows for assessing progress towards the
achievement of the desired goals or other performance standards (Kramar et al., 2014,
p. 323). As you can see, Mark French is taking a particular interest in appraisal, at this
point, as well as the use of the bonus scheme.
Typically, a performance management system has five parts:
 Defining performance expectations;
 Facilitating performance, by removing obstacles that interfere with desired
performance;

 Encouraging maximum performance, notably, by providing meaningful rewards;
 Measuring performance in a way that aligns with strategy, and is valid, reliable,
acceptable and reasonably specific, and
 Feeding back performance information.
We might add a sixth element, which is feeding forward performance issues that relate
to other aspects of the organisation’s performance; for example, critical customer
feedback relating to marketing or product design.
Learning activity 3
Which of these elements can you identify in CERA? What is missing?
This model of performance management illustrates the connections between
organisational strategy, individual attributes and behaviours, situational constraints and
results. Study the elements of the model in your textbook.
Source: (Kramar et al., 2014, p. 325)
Learning activity 4

Select one job category in CERA - choose one that you can relate to. Then, apply the model to
show how performance appraisal would be done for that job category.
In order to operate this model, several design features of a performance management
system are important, as set out in Chapter 10 of Kramar et al. Consistent with this
model, Clardy takes a few steps further in providing a more detailed look at design
elements, in a readable format.
Read
Clardy, A. (2013). A General Framework for Performance Management
Systems: Structure, Design, and Analysis. Performance Improvement, 52(2), 5-
15.
doi:10.1002/pfi.21324
access online
Clardy amplifies the model presented in Kramar et al. by adding important features such
as organisational culture and leadership, as well as specifying the need for supporting
organisational and HR systems and processes, such as workflow. This paper gives you
a more robust discussion of the way performance management systems are
constructed.
Learning activity 5
Clardy supports the position that the basic performance equation can/should be further
analysed into eight elements (p. 6). Read through these elements. Do you agree with
this analysis? Is there a need to drill down to this extent? Or, is this going unnecessarily
far? Test your view by applying these elements to a job that you are familar with. What
do these elements add to the evaluation of performance?
One of the most common stumbling blocks in the development of these systems is the
purpose/s to which they are directed. A performance management system can have
three purposes, and they sometimes may conflict: strategic, developmental, and
administrative. Read over the information on this in Chapter 10 of Kramar et al., as it will
help you with the activity at the end of this section.
Learning activity 6
From the slice of experience recounted above, work out:
 the purpose/s for which CERA uses its performance management system?
 whether there is a misalignment among these purposes?
 What clues have you relied on in forming your judgment?

Earlier, Mark French asked his senior executive team for some options on how to
approach performance appraisal. To help you to respond to Mark, and to go further in
evaluating performance management systems more broadly, focus on these four
design issues. The first is the approach taken to measuring performance.
According to Israel Tobin, CERA uses a management by objectives (MBO) method; but
there are several other options that might be considered. These are listed below, and
discussed in more detail in Chapter 10 of Kramar et al. Read through each one
carefully, in preparation for the activity that’s coming up. Note that each approach has
one or more specific methods that are associated with it.
Approaches to measuring performance
Comparative approach:
- ranking,
- forced distribution
- paired comparison
Attribute approach:
-graphic rating scales
- mixed standard scales
Behavioual approach:
- critical incidents
- behaviourally anchored rating scales (BARS)
- behavioural observation scales (BOS)
- organisational behaviour modification (OBM)
- assessment centres
Results approach:
- management by objectives (MBO)
- productivity measurement and evaluation system(ProMES)
Quality approach
- focus on customer orientation
- prevention approach to errors
Source: (Kramar et al., 2014, pp. 334-348)
There are several pages to read to get a good grasp of the approaches to measuring
performance. As a minimum, pay attention to how each approach is used, and the
evaluation of its merits. This will give you an informed basis for making suggestions on
options for CERA.
Learning activity 7

What practical value do these approaches provide? How would you use this information
in practice?
Closely associated with the approaches to measurement is a second required element
in the design of a good performance management system. This is the sources of
performance information – is it managers (the traditional, single source of
information), or peers, or subordinates, or self, or customers, other stakeholders, or a
combination of some of these? We saw in the previous topic the example of community
involvement in selection of school principals. Extending this, perhaps community
involvement in performance management processes.
Learning activity 8
Can you think of other examples where a broader range of performance information
sources (than managers alone) might be helpful?
A third, related design issue that’s important in considering options for CERA is the
nature of performance feedback. When and how should performance feedback be
communicated, and what quality of feedback should be given? One of the strong
rationales for re-booting performance management is the weakness of the traditional
approach in providing meaningful, timely feedback to employees. Perhaps you can
relate to this.
Assessor expertise is an interesting side diversion relating to feedback. Have you even
been in a situation where you felt that the appraiser was not well qualified to give you
meaningful feedback? Do you think this would impact on the perceptions of employees
about the quality of feedback? The short answer is yes, and you probably don’t need an
academic study to demonstrate this (although such studies do exist).
Learning activity 9
Do you think this is something that CERA senior managers need to consider? (Hint –
look at the CERA transition matrix in an earlier topic.)
Finally, a fourth design issue relates to rater errors in performance measurement.
These errors can bias results and undo good work in preparing people to use a
performance management system, because it is perceived as damaged in some way.
There are several types of rater error that you should know about, including appraisal
politics, and the halo and horns effects. Could these be an issue in CERA?
I have selected the following quite short article by Mayfield and Mayfield to conclude this
section because it draws together nicely several points in the section and offers a pretty
comprehensive way forward in providing feedback to individuals and teams. Their
approach is illustrated in this diagram.

Read
Mayfield, M., & Mayfield, J.(2012). Effective performance feedback for
learning in organizations and organizational learning, Development and
Learning in Organizations: An International Journal, 26(1), 15-18
access online
Learning activity 10
Among the propositions put by Mayfield and Mayfield are these:
In more innovative organizations, muti-source feedback, derived from major
employee stakeholders such as peers, customers, and subordinates can be quite
enlightening for development purposes. Finally, and ideally, feedback should not be
directly linked to organizational rewards such as pay. Financial rewards feedback
should be given at a separate time from performance feedback to minimize greater
resistance to the appraisal process (p. 17).
Do you agree that multi-source feedback is a good initiative, generally speaking? What
might be some of the limitiations?
Do you agree that feedback should not be directly linked to organisational rewards? Or,
is this reading too much into the ability of employees to make sense of reality?
Based on your reading so far, how would you answer Mark French’s question regarding
options for managing performance in CERA?
Rewarding employees/pay for performance
In the story of the CERA executive team meeting, above, the managers were concerned
with the link between performance results and the bonus scheme. At the end of this
account, Mark French asked the group for options relating to the design of this scheme.
We will use information from Chapters 13 and 14 of Kramar et al. (2014) to consider
this.
To start off, here is an interesting set of insights into Australian management attitudes to
performance and reward, set in the context of how these constructs work in sport. Do
you agree with the conclusions that are reported?

Read
Holmes, S. (2000, July 18). Weakness in reward system. Central Coast Herald
Retrieved from http://search.proquest.com/docview/365060785?accountid=1034
access online
Now, contrast this item with the following transcript of a radio news report on the drivers
of fraudulent behaviour is a leading Australian bank.
Read
Long, S. (2004). NAB reward system may be to blame for trading loss: Expert;
NAB 'fraud'. Sydney: Australian Broadcasting Corporation. Retrieved from
http://search.proquest.com/docview/190306939?accountid=10344
access online
Does this item lead you to alter your position?
We understand intuitively, and even moreso if we have worked, that there is a close
connection between performance and compensation or reward: this can make or break
motivation, sustained effort, results achieved and intention to stay. From the employer’s
vantage point, compensation is a powerful tool for furthering the organisation’s strategic
goals (Kramar et al., 2014, p. 451). From the employee’s perspective, policies relating
to salary, wages and bonuses impact on income and standard of living. The level of
compensation and its perceived fairness compared with others is of high importance.
This is self-evident. But, what is the explanation for this connection? To put in
differently, how can we theorise this connection?
Equity theory offers a powerful and widely regarded explanation for the importance of
fairness in compensation. Put simply, people evaluate the fairness of their situations by
comparing them with those of other people. In this theory, a person, P, compares
his/her ratio of perceived outcomes, O (e.g. pay, benefits, working conditions), to
perceived inputs, I (e.g. effort, ability and experience), to the ratio of a comparison other,
o. Outputs p(Op)/inputs p(Ip)<, >or = outputs o(Oo)/inputs o(Io). The consequences of
P’s comparisons depend on whether equity is perceived. If equity is perceived, no
change is expected in P’s attitudes or behavior. In contrast, perceived inequity may
cause P to restore equity. How might this occur? This is explained in Chapter 13 of
Kramar et al. (2014, p. 452). Notice that pay equity has both internal and external
dimensions. So, if there are perceptions of pay inequity, whether relative to insiders or
outsiders, there can be several deleterious effects.
Learning activity 11
Can you find any evidence of these problems in CERA? What clues alerted you?

Think of what these effects might be, perhaps drawing on your own experience if you
are working. Then, brainstorm how these problems might be overcome. Use Chapter 13
of Kramar et al. (2014) and the article below as stimuli.
Read
Torre, E., Pelagatti., M., & Solari, L. (2015). Internal and external equity in
compensation systems, organizational absenteeism and the role of explained
inequalities. human relations, 68(3), 409-440
doi: 10.1177/0018726714528730
access online
Torre, Pelagatti and Solari studied the effects of perceived external and internal
inequalities on employee behaviour. Aside from the behavioural effects that they
identified, perhaps the most interesting finding was the differences in impacts of each
type of perceived inequality on behaviour. Though a bit lengthy, I selected this article
because it is fairly readable, it summarises relevant literature well and adds to what we
see in standard textbooks on the consequences of perceived pay inequity.
Learning activity 12
To what extent do you believe that perceived external pay inequity is a driver of
employee exit? Is this too simple a connection to make?
As you saw above, there is a problem in CERA relating to the performance-related pay
arrangement.
Learning activity 13
Pause for a moment and answer this question: What is this problem?
In fact, there are two problems: the criteria used to administer performance bonuses are
defective, and access to bonus payments is uneven. So, it does not work as an
incentive for superior performance across the board. We need to develop some options
to respond to the question posed by Mark French. Chapter 14 of Kramar et al. (2014)
provides some of the concepts that we need.
There are many different varieties of performance or incentive pay, as shown in this list.
CERA is using an incentive pay scheme.
 Merit pay
 Incentive pay
 Profit-sharing
 Ownership
 Gainsharing
 Skill-based

Source: (Kramar et al., 2014, pp. 496-506)
The first thing to understand is the basis of performance pay. Why do we need to use
things like bonuses and other types of incentives? After all, isn’t superior
performance what we pay for in base pay? As you will see in Chapter 14 of Kramar et
al., there are three theories that help to explain the need for performance pay –
reinforcement, expectancy and agency.
 Reinforcement theory claims that a response followed by a reward is more likely
to recur in the future.
 Expectancy theory says that the attractiveness of any job is a function of
valence, instrumentality and expectancy.
 Agency theory states that targeted incentives can be used to direct the
behaviour of the agent (employee) to comply with the wishes of the principal
(owner of a business/manager)
Learning activity 14
Do you have any support for the view that bonuses should not be paid for work that is
reasonably to be expected from base pay?
Can you apply the theories above to explain why CERA uses performance pay? Then,
consider: what type of employees this mechanism might attract to an organisation?
As Kramar et al. point out, different pay systems may attract people with different
personality traits and values. So, organisations that link pay to individual performance
may be more likely to attract individualistic employees, while organisations relying more
heavily on team rewards are more likely to attract team-oriented employees.
Learning activity 15
Which way would you expect this to go in CERA?
Furthermore, employees at different life stages will be attracted and retained by different
rewards (page 495).
I’ve selected the following resources to provide some you with evidence to consider in
preparing advice to Mark French on options for improving the design of CERA’s
performance pay scheme.
Read
Grabner, I. (2014). Incentive System Design in Creativity-Dependent Firms.
Accounting Review, 89(5), 1729-1750.
doi:10.2308/accr-50756
access online

Grabner’s research article is directly related to the need at CERA. She investigates how
organisations’ creativity-dependency impacts on the design of their (extrinsic) incentive
systems. As you read, ask this question: what can this article tell me about the design of
CERA’s performance pay scheme? Her research will give you plenty of food for thought
as to how managers should design incentive programs to foster creativity. This is a
useful resource that is quite readable, even if you need to pass fairly quickly over some
of the detail in her empirical results.
Pazy’s work points to the importance of organisational support as part of a package that
works to reinforce performance pay effects. I selected this article to alert you to the fact
that performance pay is not a simple mechanical process of stimulus and response.
There can be mediating factors that go with the way performance pay operates. This
article points to some of these mediating variables, notably, perceived organisational
support and perceived supervisor support. As you read this item, think about the
implications for what you will be recommending to Mark French.
Read
Pazy, A. (2011). The relationship between pay contingency and types of perceived
support : Effects on performance and commitment. EuroMed Journal of Business, 6(3),
342-358
access online
Topic 4 - short answer assessment - CERA's bonus scheme
Mark French asked his people to come up with some options to improve
the design of the bonus scheme in CERA. You have seen the problems;
now for some options to improve the design.
Suggest changes that could be made to fix the problems with CERA's
bonus scheme. Use relevant lierature to support your argument. State
the problem that you’re addressing first, followed by the proposed
solutions. Justify your suggestions and include citations and a reference
list for sources used. Should the bonus scheme be scrapped altogether?
Why, or why not?
Post your answer as a new entry in the Journal tool.
If you are undertaking this class in face-to-face mode, your lecturer will
give you instructions on completing this activity.