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Performance Management

Learning Outcomes

Identify why performance management is necessary

Describe the advantages and disadvantages of using various sources of performance rating

Discuss the differences between rating, ranking, and goal-setting methods of appraisal

Identify several errors often committed by raters

Performance Management Systems

Performance management is an ongoing organizational process that is conducted to maximize the productivity of employees with the overall intention of improving the organization’s effectiveness.

Performance appraisal: Process of determining how well employees do their jobs relative to a standard and communicating that information to them

A performance appraisal is a formal system of review and evaluation of individual or team performance.

Performance management has a broad organizational focus, whereas performance appraisals are the processes used to evaluate how employees perform their jobs and then communicate that information to employees.

Performance management is an ongoing organizational process that is conducted to maximize the productivity of employees with the overall intention of improving the organization’s effectiveness. It is strategic in nature and involves every person and all HR processes in the organization. All are directly tied to achieving the organization’s goals.

The performance appraisal is a periodic event to reflect and evaluate past performance with the intent to identify strengths and weaknesses of an employee’s performance and to identify developmental goals. A performance appraisal is just one part of a performance management system.

Key part of performance management is performance appraisal because it helps employees improve their job performance

Effective Performance Management System

Should do the following:

Clarify organizational expectations

Document performance for personnel records

Identify areas of success and needed development

Provide performance feedback to employees

Performance Management Linkage

Steps Related to Performance Management

Step 1: Identify performance dimensions

Step 2: Develop performance measures

Step 3: Evaluate performance

Step 4: Provide feedback

Step 5: Develop action plans to improve performance

Evaluate

Feedback

Change

Plan

Step 1: Identify Performance Dimensions

Strategic plan

Job analysis

Example: What are the dimensions of a professor’s performance?

Teaching

Research

Service

Identifying and Measuring Employee Performance

Common employee performance measures

Quality of output

Quantity of output/productivity

Timeliness of output/meeting deadlines

Punctuality and attendance

Efficiency of work completed

Effectiveness of work completed

Job duties: Important elements in a given job

Weights: Used to show the relative importance of different duties in a job

Types of Performance Information

Trait-based information

Identifies a character trait of the employee

May or may not be job related

Less useful information than the other methods

Examples: Attitude, teamwork, initiative, creativity, values, and dispositions

Behavior-based information

Focuses on specific behaviors that lead to job success

Examples: Customer satisfaction, verbal persuasion, timeliness of response, citizenship/ethics, and effective communication

Types of Performance Information (continued)

Results-based information

Considers employee accomplishments

Works well for jobs in which measurement is easy and obvious

More useful information than the other methods

Examples: Sales volume, cost reduction, units produced, and improved quality

Types of Performance Information

Trait approaches

Based on people’s specific traits in relation to the job

Behavioral approaches

Look at individual actions within a specific job

Results methods

Focuses on the measurable performance

Factors that Affect an Employee’s Performance

Factors that Affect an Employee’s Performance (Cont.)

Step 2: Develop Performance Measures

Performance measure must be reliable and valid

Reliability refers to how well a measure yield consistent results over time and across raters

Validity is the extent to which you are measuring what you want to measure and how well that is done.

**Performance Measures Characteristics

Calibration: Process whereby managers meet to discuss the performance of individual employees to ensure their employee appraisals are in line with one another

Reliability

Reliability refers to how well a measure yield consistent results over time and across raters

Validity

The extent to which the performance measures reflect the actual performance of your employees

Calibration: Process whereby managers meet to discuss the performance of individual employees to ensure their employee appraisals are in line with one another

Establishing Performance Measure

Criterion deficiency: Important aspects of an individuals’ performance are not measured

Criterion contamination: When performance measure captures information that is irrelevant to an individuals’ job performance

Performance Standards

Define the expected levels of employee performance

Should be realistic, measurable, and clearly understood

Benefit both organizations and employees

Ensure that everyone involved knows the performance expectations

Performance level: Superior

Demonstrated Ability

Visits table quickly after guests are seated

Takes order exactly when guests are ready

Serves drinks and food immediately after items are prepared

Clears table and presents check immediately after meal is complete

Performance level: Acceptable

Demonstrated Ability

Visits table in a reasonable time after guests are seated

Takes order in a timely manner

Serves drinks and food after items are prepared

Clears table and presents check after meal is complete

Performance level: Needs improvement

Demonstrated Ability

Visits table when there is time to do so

Takes order when ready

Serves drinks and food after other duties are completed

Clears tables and presents check after servicing other tables

Step 3: Evaluate Performance

Comparative Methods

Ranking

Forced Distribution

Absolute Methods

Essay

Critical Incidents

Graphic Rating-scale Method

Behaviorally Anchored Rating Scale (BARS)

Behavioral Checklist

Management by Objective (MBO)

Comparative Method

Ranking

Employees are evaluated from best to worst along some performance dimensions

Drawbacks

Magnitude of the performance differences between employees is not clearly indicated

Ranking task becomes unwieldy if the group of employees to be ranked is large

Ranking means that someone must be last, which ignores the possibility that the last-ranked individual in one group might be equal to the top-ranked employee in a different group

Comparative Method (Cont.)

Forces managers to identify high, average, and low performers, with a limited percentage permitted to earn each ranking level

Absolute Performance Evaluation Approach - Essay Method

Requires the rater to write a statement describing employee behavior

Absolute Performance Evaluation Approach - Critical Incident Method

Critical incident: exceptionally effective and ineffective behavior employees display

Manager keeps a written record of both favorable and unfavorable employee actions during the entire rating period

Manager keeps a log or diary for each employee throughout the appraisal period

Absolute Performance Evaluation Approach - Graphic Rating-scale Method

Allows the rater to mark an employee’s performance on a continuum indicating low to high levels of a particular characteristic

Suitable for development purpose than the comparative approaches

Concerns

Evaluation criteria may not be representative of job performance elements

Reduces employees’ confidence in evaluation fairness and leads to more legal issues for firms

Traits or factors are often grouped, and the rater is given only one box to check

Absolute Performance Evaluation Approach - Behaviorally Anchored Rating Scale (BARS)

Specific examples of job behaviors are anchored or measured against a scale of performance levels

BARS are rating scales that add behavioral scale anchors to traditional rating scales (e.g., graphic rating scales).

Behaviorally Anchored Rating Scale for Customer Service Skills

Creating a BARS system

Identify important job dimensions

Write short statements of job behaviors (anchors)

Assign anchors to job dimensions

Set scales for anchors

Absolute Performance Evaluation Approach - Behavioral Checklist Method

Rater checks statements on a list that the rater believes are characteristic of the employee’s behavior

A checklist developed for salespeople who sell electronic products might include a number of statements such as the following:

Absolute Performance Evaluation Approach - Management by Objectives (M B O)

Specific performance appraisal method that highlights the performance goals that an individual and manager identify together

Stages

Job review and agreement

Development of performance standards

Setting of objectives

Frequent performance discussions

Combinations of Methods

No single appraisal method is best for all situations

Performance measurement system that uses a combination of methods may be sensible

Managers can work with H R staff to choose and mix methods to realize advantages of each approach

Multisource Appraisal

Determining who will provide evaluation input

Supervisors rating their employees

Employees rating their superiors

Team members rating each other

Employees rating themselves

Outside sources rating employees

**Types of Rater Errors

Varying Standards

Recency and Primacy Effects

Central Tendency, Leniency, and Strictness Errors

Rater Bias

Halo and Horns Effects

Contrast Error

Similar-to-Me/Different-from-Me Errors

Sampling Error

1) Varying standards - 2) Recency effect - giving greater weight to recent events 3) Primacy Effect - giving greater weight to info received first. 4) Central tendency - gives everyone average 5) Leniency error - rates everyone highly 6) Strictness error - rates everyone low 7) Rater bias 8) Halo Effect - rates highly in all areas bc good performance in one 9) Horns effect - 1 bad characteristic leads to overall low rating 10) Contrast error - rate people against each other rather than against the performance standards 11) Similar / different to me - 12) Sampling Error - rater only has a small sample of work

360-Degree Evaluation

Conducted by different people who interact with the employee on forms compiled into a single profile for use in the evaluation meeting

What are the pros and cons of 360-degree evaluation?

Pros and Cons of 360-Degree Evaluation

Companies should consider the following safeguards

Assure anonymity

Make respondents accountable

Prevent gaming of the system

Use statistical procedures

Identify and quantify biases

Step 4: Provide Appraisal Feedback

Appraisal Interview

Communicate employee’s positive contributions

Discuss to enable employee to identify their own deficiencies and develop improvement plans

Reactions of Managers and Employees

Typically negative perceptions of appraisals

Avoidance of negative issues or biased ratings due to fear of having to confront or defend

Well-done appraisals often viewed as constructive

Appraisal Interview Hints for Appraisers

Be direct and specific. Use examples to show where the employee has room for improvement and where the employee exceeds expectations, such as, “The expectation is zero accidents, and you have not had any accidents this year.”

2. Do not be personal; always compare the performance to the standard. For example, instead of saying, “You are too slow on the production line,” say, the “expectations are ten units per hour, and currently you are at eight units.”

3. Remember, it is a development opportunity. As a result, encourage the employee to talk. Understand what the employee feels he does well and what he thinks he needs to improve.

4. Thank the employee and avoid criticism. Instead of the interview being a list of things the employee doesn’t do well (which may give the feeling of criticizing), thank the employee for what the employee does well, and work on action plans together to fix anything the employee isn’t doing well. Think of it as a team effort to get the performance to the standard it needs to be.

Writing the Appraisal Review Document

Are your comments accurate and meaningful to the employee or just clichés?

You need to improve your productivity.

You get along well with others.

You’re not trying to do your best.

You have to prove yourself before I can give you any more responsibility.

From SHRM 2009

Class activity: Ask students to rewrite the clichés (found in the instructor’s manual) and discuss their answers. Students could do this individually or in groups of two or three. Remind students of the importance of appraising behavior and not personality.

Step 5: Develop Action Plans to Improve Performance

Managing Ineffective Performance

Provide training to increase skills and abilities

Transfer employee to another job or department

Attention of actions to motivate employee

Cautions

Actions taken must be objective and fair

Do not treat underperformer differently, setting the employee up to fail

Focus on Changing the Behavior, Not the Person

Supervisor has to separate the employee from the behavior

When required action is taken, it should be done:

Legally

Fairly

With an understanding of the feelings of the individual involved

Way to communicate this to employees is to suggest more acceptable ways of performing

HR’s Role in Performance Management

Prerequisite stage

Participate in strategic planning.

Conduct job analysis.

Throughout the system

Design appraisal system.

Train and support managers.

Maintain documents.

Ensure compliance with nondiscrimination laws.

Ensure integrity of the system.

Advocate for all employees

From SHRM 2009

HR plays a significant role in the performance management process, from the prerequisites and through the entire process. In the prerequisite stage, HR participates in goal setting during the strategic planning process, conducts job analyses and ensures that job analysis information is current. These are crucial steps in a successful performance management system.

Throughout the system, HR supports and trains managers in the skills necessary to execute their part of the process. HR designs and implements the performance review system and makes sure managers have the skills necessary to offer timely, unbiased employee ratings. It is HR’s responsibility to monitor the process to ensure there is documentation that accurately represents employee performance and can be used to make personnel decisions without fear of discrimination and litigation.

HR supports employees as well as the managers throughout the process by acting as an advocate for all employees. HR should establish a due process system for employees who do not agree with their performance ratings. HR acts as a sounding board for employees, allowing their issues to be heard and addressed. HR protects the integrity of the system by insisting on objective, timely reviews and addressing employee concerns with due process. In addition, HR maintains employee records and ensures employee privacy.

Legal Guidelines for Evaluations

Job-related

Written copy of their job standards

Raters should be able to observe the behavior

See if minority groups are being adversely impacted

Discussed openly

Appeals procedure

Key Terms

behaviorally anchored rating scale

calibration

contrast error

critical incident

error of central tendency

essay method

forced distribution

management by objectives performance evaluation

performance management

recency error

similar-to-me error

360-degree evaluation

graphic rating scale method

leniency or strictness error