Training and Development and Performance Management

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8.3c Results Methods

Rather than looking at the traits of employees or the behaviors they exhibit on the job, many organizations evaluate employees’ accomplishments—the results they achieve through their work. Advocates of results evaluations argue that they are more objective and empowering for employees. Looking at results such as sales figures and production output involves less subjectivity. Results evaluations often give employees responsibility for their outcomes while giving them discretion over the way they accomplish them (within limits). This is employee empowerment and engagement in action.

Productivity Measures

A number of results measures are available to evaluate performance. Salespeople are evaluated on the basis of their sales volume (both the number of units sold and the dollar amount in revenues). Production workers are evaluated on the basis of the number of units they produce and perhaps the scrap rate or number of defects detected in their work. Executives are frequently evaluated on the basis of a company’s profits or growth rate. Each of these measures directly links what employees accomplish to results that benefit the organization. In this way, results evaluations can directly align employee and organizational goals.

But there are some problems with results evaluations. First, recall our earlier discussion of criteria contamination. Results evaluations can be contaminated by external factors that employees cannot influence. Sales representatives who have extremely bad sales territories or production employees who cannot get materials due to shipping delays will not be able to perform up to their abilities. Obviously, it is unfair to hold employees accountable for circumstances beyond their control. Furthermore, results evaluations can inadvertently encourage employees to “look good” on a short-term basis while ignoring the long-term ramifications. Line supervisors, for example, might let their equipment go without needed tune-ups to reduce maintenance costs.

For jobs that are more service oriented, it is not enough to simply look at production or sales figures. Factors such as cooperation, adaptability, initiative, and concern for human relations are important to the job success of employees, too. If these factors are important job standards, they should be added to the evaluation review. Thus, to be realistic, both the results and the methods or processes used to achieve them should be considered.

Management by Objectives

One method that attempts to overcome some of the limitations of results evaluations is management by objectives (MBO) (A philosophy of management that rates the performance of employees based on their achievement of goals set mutually by them and

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their manager) . MBO is a philosophy of management that has employees establish objectives (such as production costs, sales per product, quality standards, and profits) by consulting with their superiors. Employees are then evaluated based on these objectives.

An MBO system (see Figure 8.7) consists of a cycle that begins with setting the organization’s common goals and objectives and ultimately returns to that step. The system acts as a goal-setting process whereby objectives are established for the organization (Step 1), departments (Step 2), and individual managers and employees (Step 3).

Figure 8.7

Performance Appraisal under an MBO Program

As Figure 8.7 shows, employees help establish specific goals, but those goals are based on a broad statement of an employee’s responsibilities prepared by the person’s supervisor. The employee-established goals are then discussed with the supervisor and jointly reviewed and modified until both parties are satisfied with them (Step 4). The goal statements are accompanied by a detailed account of the actions the employee proposes to take to reach the goals and how they will be measured (the metrics).

During periodic reviews, the progress the employee makes toward the goals is then assessed (Step 5). The goals and metrics may be changed at this time as new or additional information is received. After a period of time (usually six months or one year), the employee makes a self-evaluation of what he or she has accomplished, substantiating the self-evaluation with documentation when possible. The final review is an examination of the employee’s self-evaluation by the supervisor and the employee together (Step 6). The final step (Step 7) is reviewing the connection between the employees’ performance and the

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(1)

(2)

(3)

(4)

organization’s. Notice how the steps in an MBO program are similar to the steps in Figure 8.1 at the beginning of the chapter but are more specific.

Goal setting via an MBO or other program can measurably improve how well employees perform because it helps them clearly focus on what they need to do to meet their objectives. It also aids learning because employees can regularly evaluate their performance against the objectives they’ve set for themselves. The following guidelines can help an MBO program succeed:

1. The objectives should be quantifiable and measurable and accompanied by a description of how they will be accomplished.

2. The results that are expected must be under the employee’s control. Managers must be willing to empower employees to accomplish their goals on their own, giving them discretion over the methods they use (but holding them accountable for the outcomes).

3. The firm’s goals and objectives must be consistent, or aligned, with the goals of employees at all levels, including a firm’s top managers.

4. Timeframes for when the goals are to be reviewed and evaluated need to be established.

The Balanced Scorecard

The Balanced Scorecard (BSC), which we first discussed in Chapter 2, can be used to appraise individual employees, teams, business units, and the corporation itself. A BSC evaluation takes into account four related categories:

financial measures,

customer measures,

process measures, and

learning measures. Highlights in HRM 5 shows how a balanced scorecard in the financial category translates to a personal scorecard for an employee. The corporation’s financial objectives have already been spelled out on the top of the scorecard. Then the various business unit targets are added, followed by the target objectives of the firm’s teams and individual employees. The scorecard allows each individual to see clearly how his or her performance ties into the overall performance of the firm. The target objectives for the customer category of the scorecard (not shown) might include customer satisfaction and retention rates, delivery performance to customers, and so forth.

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Highlights in HRM 5

Personal Scorecard

Source: Adapted from Robert Kaplan and David Norton, “Using the Balanced Scorecard as a Strategic

Management System,” Harvard Business Review (January–February 1996): 75–85.

The BSC evaluation method is similar to an MBO system in that it translates broad corporate goals into divisional, departmental, team, and individual goals in a cascading way. This ensures that implementing the firm’s strategy becomes “everyone’s” job.

Some recommendations for ensuring the method’s success include the following:

Translate the firm’s strategy into a scorecard of clear objectives. Clear objectives provide managers and frontline employees with goals that are more understandable and attainable. Typically, having fewer goals adds clarity and focus.

Attach measures to each objective. Each objective should be measurable and the measure included on the scorecard.

Provide performance feedback based on measures. Are employees meeting their targets? Why or why not? Unless managers provide employees with solid feedback, the system is likely to be ineffective.

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Empower employees to make performance improvements. One of the benefits of a results-based system such as the BSC is that it gives employees the latitude to continuously improve their work methods.

Reassess the strategy. Information from the process should be used to reassess the firm’s strategy and make continuous adjustments. Those who have had the best success with the BSC say the system helps improve communication and learning rather than fixing in place a mechanical set of controls.

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