Performance management of Employees

Allocating Merit Raises: Situation
Small State University is located in the eastern part of the United States and has an enrollment of about 8,000 students. The College of Business has 40 full-time and more than 30 part-time faculty members. The college is divided into five departments: management, marketing, finance and accounting, decision sciences, and information technology.
Faculty members in the management department are evaluated each year based on three primary criteria: teaching, research, and service. Teaching performance is based on student course evaluations over a two-year period. Service to the university, college, profession, and community is also based on accomplishments over a two-year period. Research is based on the number of journal articles published over a three-year period. Teaching and research are considered more important than service to the university. In judging faculty performance, the department chair evaluates each professor in terms of four standards: Far Exceeds Standards, Exceeds Standards, Meets Standards, and Fails to Meet Standards. The results of this year's evaluations are shown on the next page.
This year the state has agreed to give raises totaling $17,400 to the management department. Your task as department chair is to divide the $17,400 among the six faculty members. Keep in mind that these raises will likely set a precedent for future years and that the professors will view the raises as a signal for what behavior is valued and what is not.
A profile of each of the professors is provided below.
Professor Houseman: 55 years old; 25 years with the university; teaches Principles of Management mass sections; teaches over 400 students per year; has written over 40 articles and given over 30 presentations since joining the college; wants a good raise to catch up with others.
Professor Jones: 49 years old; 10 years with the university; teaches Human Resource Management and Organizational Behavior; stepped down as department chair three years ago; teaches about 200 students a year; has written over 30 articles and 2 books since joining the college; recently received an $80,000 grant for the college from a local foundation. Wants a good raise as a reward for obtaining the grant.
Professor Ricks: 61 years old; 6 years with university; teaches Labor Relations and Organizational Development; stepped down as dean of the College of Business two years ago and took a $20,000 pay cut; teaches about 180 students per year; has written only two articles in the last 6 years due to administrative duties; very active in the community and serves on several charity boards. Wants a good raise to make up for loss of $20,000 stipend.
Professor Matthews: 28 years old; new hire- only four months with the university; teaches Employee Relations and Compensation Management; just graduated with a PhD; will teach about 110 students this year. To be competitive in the job market, the college needed to pay Prof. Matthews $97,000 plus provide a reduced teaching load for two years and a $6,000 per year summer stipend; none of the other faculty received this when they were first hired or subsequently; had 2 minor publications while a doctoral student but none since joining the college. Wants a good raise to pay student loans and furnish a new residence.
Professor Karas: 32 years old; 4 years with university; teaches International Business and Honors sections of Management Principles; teaches about 150 students per year; won Teacher of the Year Award this year; published 12 articles in the last four years; has been interviewing for a new job at other universities and may leave if good raise is not forthcoming.
Professor Franks: 64 years old; 18 years with university; teaches Principles of Management and Human Resource Management; teaches about 150 students per year; principal advisor for management-major students; has not written any articles during the last 4 years; plans on retiring within 2-3 years. Wants a good raise to enhance pension plan.
Department Chairs' Rating of Job Performance
Professor Current Salary Teaching Research Service
Houseman $92,000 Exceeds Exceeds Meets
Jones $116,000 Exceeds Far Exceeds Exceeds
Ricks $135,000 Meets Meets Far Exceeds
Matthews $97,000 New Hire New Hire New Hire
Karas $100,000 Far Exceeds Exceeds Meets
Franks $90,000 Meets Fails to meet Exceeds

Develop a fair procedure that will be used to determine merit raises and then decide the dollar amount raise to be given to each professor with a rationale. You must explain your criteria and procedure rationale, i.e. How did you determine what was "fair" (equity theory).
determine which of many variables (e.g., teaching, research, service, length of service at the university, number of students taught) should be included in determining merit raises and how each should be weighed. The concept of merit raises argues that rewards should be based on job performance. Yet, how does one define "job performance?" Students can be challenged to defend their definitions and weights. This exercise demonstrates the difficulty of applying the merit pay concept to practical situations.
This exercise also relates to other wage and salary administration issues besides merit pay. Most HR textbooks argue that organizations should establish a tier of pay grades, each of which should be based on the skills, knowledge, and abilities required to perform a job. Then, within each pay grade, pay is determined by the job performance and, perhaps, length of service of each individual. In this exercise, the university does not appear to have developed a series of pay grades for professors. Rather, Assistant Professors, Associate Professors, and Full Professors all seem to be lumped together into one grade, if indeed, any grades exist at all.
This raises the issue of whether the university should develop different duties and pay grades for each rank. Also, the exercise raises the issue of what salary should be given to an individual who steps down from a former administrative job. In this case, Professor Ricks has stepped down from the position of Dean of the College and is still receiving a salary that reflects those old job duties, not the ones associated with a professor's job. Should the University change its pay policy so that this does not happen in the future? Should Professor Ricks still receive raises given his/her high salary or should no raises be given until other professors catch up?
The exercise also raises the issue of pay inversion. Professor Matthews is receiving a higher salary that Professor Housman even though the later has a far superior record. The university probably justifies this on the basis that in order to attract new professors, it must pay market rate.
In addition, it would argue that it can't afford to raise the pay of all faculty who are affected. This raises the question of what is "market rate" and the issue of whether it is fair, ethical, and in the best interests of the university to follow a policy of paying market rate. What alternatives does it have? What are the possible negative long-term outcomes of this policy?