Performance Management
Deonpalmgrove
Chapter8-Revised-9thEdition.pptxHuman Resource Management Gaining a Competitive Advantage
Chapter 8
Performance Management
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, All Rights Reserved.
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Lecture Script 6-1
Companies seeking a competitive advantage through employees must be able to manage the behavior and results of all employees.
An important part of appraisal is to establish employee goals that align with the company’s strategic goals.
It helps attract, motivate, and retain good workers (as does training).
I. Introduction
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Lecture Script 6-2
True Scores and the Reliability of Measurements—The concept of reliability is demonstrated by measuring height at different times. Even though height is supposedly a stable characteristic, slightly different results are generated every time height is measured.
Standards for Reliability—Clearly, the more reliable the measure, the more likely decisions can be made on score differences
I. Introduction
Performance Management is the process through which managers ensure that employees’ activities and outputs are congruent with the organization's goals.
Performance Appraisal is the process through which an organization gets information on how well an employee is doing his or her job.
Performance Feedback is the process of providing employees information regarding their performance effectiveness.
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Lecture Script 6-3
This chapter examines a variety of approaches to performance management. The chapter begins with a model of the performance-management process that examines the system's purposes. Finally, the causes of performance problems are identified.
II. The Practice of Performance Management
Most companies just do annual reviews.
Less than 25% use performance management to help manage talent through identifying training and development needs.
66% use the same system across all levels of the organization.
Only 28% have automated their systems.
If companies want to be learning organizations and achieve continuous improvement, they need more frequent, streamlined performance reviews.
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Lecture Script 6-4
This chapter examines a variety of approaches to performance management. The chapter begins with a model of the performance-management process that examines the system's purposes. Finally, the causes of performance problems are identified.
III. The Process of Performance Management
Step 1
Define performance
outcomes for company
division and department
Step 3
Provide support and
ongoing performance
discussions
Step 2
Develop employee goals,
behavior, and actions to
achieve outcomes
Step 4
Evaluate performance
Step 5
Identify
improvements
needed
Step 6
Provide
consequences for
performance results
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Lecture Script 6-5
The goal of performance appraisal systems was to measure individual employee performance reliability and validity.
Another important component of the model is the organization's strategy.
Situational constraints are always at work within the performance management system.
IV. Purposes of Performance Management
Strategic Purpose
Administrative Purpose
Developmental Purpose
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Lecture Script 6-6
First and foremost, a performance management system should link employee activities with the organization's goals.
Performance management is critical for companies to execute their talent management strategy.
Performance‑management information is used for such administrative decisions.
Performance management can be used to develop employees who are ineffective at their jobs.
IV. Purposes of Performance Management
Developing an Effective PM System
Mirror corporate culture and values.
Visible CEO and senior management support.
Focus on the right performance measures.
Link with job descriptions.
Differentiate performance fairly and effectively.
Train managers in performance management.
Adjust the system as required.
Link compensation to performance ratings.
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Lecture Script 6-7
First and foremost, a performance management system should link employee activities with the organization's goals.
Performance management is critical for companies to execute their talent management strategy.
Performance‑management information is used for such administrative decisions.
Performance management can be used to develop employees who are ineffective at their jobs.
V. Performance Measures Criteria
Five performance criteria stand out:
1. Strategic Congruence
2. Validity
3. Reliability
4. Acceptability
5. Specificity
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Lecture Script 6-8
Strategic congruence is the extent to which the performance management system elicits job performance that is congruent with the organization's strategy, goals, and culture.
Validity is the extent to which the performance measure assesses all the relevant—and only the relevant—aspects of job performance.
Reliability refers to the consistency of the performance measure.
Acceptability refers to whether the people who use the performance measure accept it.
Specificity is the extent to which a performance measure gives specific guidance to employees about what is expected of them and how they can meet these expectations.
VI. Approaches to Measuring Performance
The Comparative Approach
The Attribute Approach
The Behavioral Approach
The Results Approach
The Quality Approach
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1. The Comparative Approach
Ranking
Simple Ranking—Ranks employees from highest to lowest performer.
Alternation Ranking—Crossing off the best and worst employees.
Forced Distribution
Employees are ranked in groups.
Example: GE—Rank-and-Yank (20-70-10)
Paired Comparison
Managers compare every employee with every other employee in the work group.
With just 10 employees (10 x 9/2)—45 comparisons.
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Lecture Script 6-10
The comparative approach to performance requires the rater to compare an individual’s performance with that of others.
1. Ranking is one of the techniques that arrive at an overall assessment of the individual's performance.
a. Simple ranking requires managers to rank employees within their departments from highest performer to poorest performer.
Alternation ranking consists of a manager looking at a list of employees, deciding who is the best employee, and crossing that person’s name off the list.
2. Forced Distribution—The forced distribution method requires the managers to put certain percentages of employees into predetermined categories.
3. Paired Comparison—The paired comparison method requires managers to compare every employee with every other employee in the work group, giving an employee a score of one every time he or she is considered the higher performer. Employees are ranked by how many points they receive.
2. The Attribute Approach
Graphic Rating Scales (GRS)
A list of traits is evaluated by a five-point rating scale.
Legally questionable.
Mixed-Standard Scales
Define relevant performance dimensions and then develop statements representing good, average, and poor performance along each dimension.
Using a key, a numerical score is determined.
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Lecture Script 6-11
The attribute approach to performance management focuses on the extent to which individuals have certain attributes
1. Graphic Rating Scales
a. Graphic rating scales can provide a number of different points (a discrete scale) or a continuum along which the rater simply places a check mark (a continuous scale).
2. Mixed Standard Scales
a. Mixed standard scales are developed by defining the relevant performance dimensions with statements representing good, average, and poor performance along each dimension.
3. Behavioral Approach
Critical Incidents Approach—Requires managers to keep a record of specific examples of effective and ineffective performance.
Behaviorally Anchored Rating Scales (BARS)—Gather a large number of critical incidences, classify into performance dimensions, and assign a rating value for each incident.
Behavioral Observation Scales (BOS)—Rate frequency of behaviors derived from critical incidences.
Competency Models—Identify and provide descriptions of competencies that are common for an occupation, organization, job family, or specific job .
Assessment Centers—Multiple raters evaluate employees’ performance on a number of exercises.
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Lecture Script 6-12
The behavioral approach to performance management attempts to define the behaviors an employee must exhibit to be effective in the job.
Critical Incidents—The critical incident approach requires managers to keep a record of specific examples of effective and ineffective performance for each employee.
2. Behaviorally anchored rating scales (BARS) specifically define performance dimensions by developing behavioral anchors associated with different levels of performance
Behavioral observation scales (BOS) is a variation of a BARS. They are developed from critical incidents but use a larger number of the behaviors that are necessary for effective performance. Rather than assessing which behavior best reflects an individual’s performance, a BOS requires managers to rate the frequency with which the employee has exhibited each behavior during the rating period. These ratings are then averaged to compute an overall performance rating
Organizational behavior modification (OBM) entails managing the behavior of employees through a formal system of behavioral feedback and reinforcement.
Assessment centers can be used for measuring managerial performance. During an assessment, individuals usually perform a number of simulated tasks, and assessors observe and evaluate the individual's skill or potential as a manager.
4. Results Approach
The Use of Objectives or Management by Objectives (MBO)—Top management passes down company’s strategic goals to next layer of management, and these managers define the goals they must achieve.
Balanced Scorecard—Includes four perspectives of performance—financial, customer, internal or operations, and learning and growth.
Productivity Measurement and Evaluation System (ProMES)—Goal is to motivate employees to improve team or company-level productivity—Measures and feeds back productivity information to personnel.
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Lecture Script 6-13
The results approach to performance management focuses on managing the objective, measurable results of a job or work group. This approach assumes that subjectivity can be eliminated from the measurement process and that results are the closest indicator of one's contribution to organizational effectiveness.
Management by objectives (MBO) is a joint goal‑setting process in which goals are agreed upon between the managers and each subordinate. These goals then become standards used to evaluate the individual's performance. This goal‑setting process cascades down the organization so that all managers are setting goals that help the company achieve its goals.
Productivity measurement and evaluation system (ProMES) consists of four steps: (1) identify the objectives the products, or the set of activities or objectives, the organization expects to accomplish; (2) the staff defines indicators of the products; (3) the staff establishes the contingencies between the amount of the indicators and the level of evaluation associated with the amount; (4) a feedback system is developed that provides employees and work groups with information about their specific level of performance on each of the indicators.
5. Quality Approach
Three fundamental characteristics to a quality approach:
Customer Orientation
Prevention Approach to Errors
Continuous Improvement
A performance management system designed with a strong quality orientation can be expected to:
Emphasize an assessment of both person and system factors in the measurement system.
Emphasize that managers and employees work together to solve performance problems.
Involve both internal and external customers in setting standards and measuring performance.
Use multiple sources to evaluate person and system factors.
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Lecture Script 6-14
Two fundamental characteristics of the quality approach are a customer orientation and a prevention approach to errors. Improving customer satisfaction is the primary goal of the quality approach.
5. Quality Approach (continued)
Statistical process control techniques provide employees with an objective tool to identify causes of problems and potential solutions.
Statistical process quality control techniques used:
Process-Flow Analysis
Cause-and-Effect Diagrams
Pareto Chart
Control Chart
Histogram
Scattergram
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Lecture Script 6-15
Process‑flow analysis involves identifying each action and decision necessary to complete work.
Histograms display distributions of large sets of data and allow data to be grouped into a smaller number of categories or classes (text Figure 8.8).
Scattergrams show the relationship between two variables, events, or different pieces of data.
VII. Choosing a Source for Performance Information
Customers
Peers
Self
Subordinates
Managers
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Lecture Script 6-16
Managers are the most frequently used source.
Peers, or coworkers, are excellent sources of information when the supervisor does not always observe the employee.
Subordinates are a valuable source of performance information when managers are evaluated. They often have the best opportunity to evaluate how well a manager treats employees.
Self‑ratings can be valuable but are not usually used as the sole source of performance information.
In some instances, the customer is often the only person present to observe the employee's performance.
VIII. The Use of Technology in Performance Management
Technology is influencing performance management systems in three ways:
Many companies are moving to web-based online paperless performance management systems.
Social media tools are increasingly being used to deliver timely feedback.
Companies are relying on electronic tracking and monitoring systems and software to ensure that employees are working when and how they should be.
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Lecture Script 6-17
“Similar to Me” is the error we make when we judge those who are similar to us more highly than those who are not.
Contrast errors occur when we compare individuals with one another instead of with an objective standard.
Distributional errors are the result of a rater’s tendency to use only one part of the rating scale.
Halo errors occur when one positive performance aspect causes
the rater to rate all other aspects of performance positively.
Reducing Rater Errors, Politics, and Increasing Reliability and Validity or Ratings
VIII. The Use of Technology in Performance Management
Similar to Me
Contrast
Distributional Errors
Leniency
Strictness
Central Tendency
Halo and Horns
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Lecture Script 6-18
Rater error training attempts to make managers aware of rating errors and helps them develop strategies for minimizing those errors.
To reduce appraisal politics, companies can do many things to keep evaluators from distorting results. See Table 8.3 in the Text.
Reducing Rater Errors, Politics, and Increasing Reliability and Validity or Ratings
Three approaches to reducing rater error:
Rater Error Training
Rater Accuracy Training; Frame-of-Reference Training
Calibration Meetings
Appraisal Politics—A situation in which evaluators purposefully distort ratings to achieve personal or company goals.
VIII. The Use of Technology in Performance Management
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Lecture Script 6-19
Rater error training attempts to make managers aware of rating errors and helps them develop strategies for minimizing those errors.
To reduce appraisal politics, companies can do many things to keep evaluators from distorting results. See Table 8.3 in the Text.
IX. Performance Feedback
Feedback should be given frequently, not once a year.
Create the right context for the discussion.
Ask employee to rate his or her performance before the session.
Encourage the subordinate to participate in the session.
The Manager’s Role in an Effective Performance Feedback Process
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Lecture Script 6-20
Performance Feedback is a process that is complex and provokes anxiety for both the manager and the employee.
Feedback should be given frequently, not once a year.
Create the right context for the discussion.
Ask employee to rate his or her performance before the session.
Encourage the subordinate to participate in the session.
IX. Performance Feedback
Recognize effective performance through praise.
Focus on solving problems.
Focus feedback on behavior or results, not on the person.
Minimize criticism.
Agree to specific goals and set a date to review progress.
The Manager’s Role in an Effective Performance Feedback Process
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Lecture Script 6-21
Managers have a responsibility to correct performance deficiencies immediately upon becoming aware of them. Among other things that managers can do are:
Recognize effective performance through praise.
Focus on solving problems.
Focus feedback on behavior or results, not on the person.
Minimize criticism.
Agree to specific goals and set a date to review progress.
X. What Managers Can Do to Diagnose Performance Problems and Manage Employees’ Performance?
Diagnosing Causes of Poor Performance
Input
Employee Characteristics
Feedback
Performance Standards/Goals
Consequences
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Lecture Script 6-22
Many different reasons can cause an employee’s poor performance. The different factors that should be considered in analyzing poor performance are shown in Figure 8-11 in the text. The five categories to consider include input, employee characteristics, feedback, performance standards/goals, and consequences.
X. Managing Employees’ Performance? (continued)
Actions for Managing Employees’ Performance
Solid Performers
High ability and motivation; managers should provide development opportunities.
2. Misdirected Effort
Lack of ability, but high motivation; managers should focus on training.
3. Underutilizers
High ability, but lack motivation; managers should focus on interpersonal abilities; tie rewards to performance.
4. Deadwood
Low ability and motivation; managerial action, outplacement, demotion, firing.
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Lecture Script 6-23
As shown in the previous slide, the different factors that should be considered in analyzing poor performance are further described here.
XI. Developing and Implementing a System That Follows Legal Guidelines
Conduct a valid job analysis related to performance.
Base system on specific behaviors or results.
Train raters to use system correctly.
Review performance ratings and allow for employee appeal.
Provide guidance/support for poor performers.
Use multiple raters.
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Lecture Script 6-24
In discrimination suits, the plaintiff often claims that the performance ratings were subjective and that the rater was biased and influenced by gender or racial stereotypes.
XII. Use of Technology for Performance Management
Electronic tracking systems includes:
Hand and fingerprint recognition systems.
Global positioning systems (GPS).
Systems that can track employees using hand-held computers and cell phones.
Increased productivity can be a benefit from these systems.
These systems present privacy concerns.
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Lecture Script 6-25
An increasing trend in companies is using sophisticated electronic tracking systems to ensure that employees are working when they should be.
Some argue that electronic tracking systems are needlessly surveilling and tracking employees when there is no reason to believe that anything is wrong.
Research Topics in Performance Appraisal
What do you appraise?
Rating errors and accuracy issues.
How do you measure it (instruments)?
Training the rater.
Rater motivation.
Moderating variables:
Accountability.
Purpose.
Demographics.
360-degree performance feedback.
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