Where appropriate you shall introduce a company, give company data or description and site the communication issue or problem or any communication phenomenon according to the attached document; but also remember;

9/28/2015

1

Business and Economics

MGF 5921

Foundations in Human Resource Management

PERFORMANCE MANAGEMENT

Learning Objectives  Understand the changing context of organisations and how this impacts

on performance management

 Distinguish between performance management and performance appraisal

 Review a model for, and the purposes of, performance management and discuss the criteria used when choosing an effective performance management system

 Compare and contrast different methods of performance appraisal and performance management and implementation relating to them.

Relevant readings

 Kramar et al 2014 Human Resource Management in Australia : Strategy, People, Performance, (5th ed), McGraw-Hill, Sydney, Chapter 10.

 Nankervis A. & Compton, R. 2006 Performance management: Theory in practice? Asia Pacific Journal of HR, 44(1): 83-101.

 See also Nankervis et al 2014, Chapter 8 pages 364-368.

9/28/2015

2

Strategic Performance

Management

Individual

Group

Organisation

Horizontal integration

V e

rtic a

l in te

g ra

tio n

Simplified SHRM

Model &

Performance

Management

External environment inc.

Industrial relations and

Employment legislation

Firm’s strategic planning

process

Strategic choice

HRM Strategy leading to

HR planning

Performance •Perf Planning &

Evaluation

•Review (Appraisal)

•Feedback

Addressing ongoing performance issues

• Counselling

• Discipline

• Managing absences

• Termination

Performance management (PM)

A systematic process through which

managers ensure that employees’ activities and outputs are congruent with

an organisation’s goals (Kramar et al, 2011:323).

• It consists of:

• Perf Planning & Evaluation

• Performance Review (Appraisal)

• Performance Feedback

Some work for you……

Thinking about where you come from and your experience, think

of a time where your performance was managed or measured

eg at work, at school, at home, in other contexts.

• What was the purpose?

• What was the process?

• What was the outcome?

• How did you feel?

What assumptions do we make about managing performance?

6

9/28/2015

3

Many views of performance management – here is one view

7

 https://www.youtube.com/watch?v=f60dheI4ARg

 Working in groups,

 Discussion, communication

 Trust

Performance expectations in a Chinese University

Wang, Shu, Zheng & Mayson (2014)

 Chinese public section performance expectations include (see below) and Cadres need to

perform well across all categories but often criteria vague and different interpretations used

depending on circumstances:

» De (morality, political loyalty)

» Neng (ability to perform tasks required)

» Qin (diligence – work behaviours and performance)

» Ji (achievements and work experiences) » Lian (integrity, non-corruptible)

“For me, I will retire from the managerial position in two years. So I have to play it cool. I am not young and

have experienced a lot here. What I really care about now is to arrange my life after retirement, my benefits,

healthcare etc. I heard that recently, some other cadres have spent more time on doing research. We all know

the person will be retired as cadre next year. He is experienced and performs well on the job, and there won’t

be any big problem […]. It is impossible for anyone to dismiss him unless he commits crimes. In China,

normally, promoted cadres will never get demoted (“干部能上不能下”).” (p. 168).

The paper finds that parallel systems of performance expectations and discrepancies between

them created great complexity around performance management. 8

Performance management : Key concepts

Performance planning and evaluation (PPE) (strategic HRM) • Systems that see to tie formal appraisal systems to

organisational objectives

Performance appraisal (PA) (operational HRM) • The process through which an organisation gets information

on how well an employee is doing his or her job.

Performance feedback (PF) (operational HRM)

• The process of providing employees with information regarding their performance effectiveness

9/28/2015

4

Purpose of a performance management system

Strategic

• Strong link or alignment between employee

behaviour and outcomes to business strategy

Developmental

• Forward focused and motivational

Administrative

• Make decisions about promotion, bonuses &

redundancy

10

Current context of performance management

Uncertain and changing global environment

Performance is a key concern of managers

• Productivity

• Responsiveness

• Goal achievement

But also time consuming, problems with process

and motivational effects

Going back to the Chinese example – similar issues there

Global Human Capital Trends 2014: Engaging the 21st-

century workforce

“Performance management is broken: Replace “rank and

yank” with coaching and development” (p. 45)

• Today’s widespread ranking- and ratings-based performance management is damaging

employee engagement, alienating high performers, and costing managers valuable time.

• Only 8 percent of companies report that their performance management process drives

high levels of value, while 58 percent said it is not an effective use of time.

• Leading organizations are scrapping the annual evaluation cycle and replacing it with

ongoing feedback and coaching designed to promote continuous employee development.

https://documents.dupress.deloitte.com/HCTrends2014 12

9/28/2015

5

Deloitte’s Performance Management in the “New World of Work”

Why???

• High levels of competition require a

“relentless pursuit to improve performance”

• Organisational structures are

changing employees are no longer

bound by place

• Teams temporary and may be virtual

• Flatter structures (less or no

hierarchy)

• New technologies ie social , mobile,

cloud, analytics, gaming

• Generational expectations

Emerging trends in PM

• Networked/bottom up

• Coaching and outcome

focused

• Democratic

• Focus on improvement and

internal rewards

• Focus on identifying

strengths

• Just in time feedback

(continuous)

Resetting Horizons – Human Capital Trends 2013 (Deloittes) page 62 13

This is what a recent HBR article said about performance

management

Reinventing performance management (Buckingham and Goodall)

• Deloittes (large accounting firm) are redesigning their PM system. Why???

• Beginning to question the wisdom on convention PM eg not flexible enough,

not timely enough and takes too much time to do and ratings are not reliable

• 3 objectives of the new system

– Recognise performance

– See it clearly through future focused and focus on supervisor actions not

the ratee’s actions

– Fuel performance (enable improvement and strengthen performance)

• Three sources of data annual compensation review, 1/4ly review and weekly

check in that provides a rich body of evidence for a performance review.

• so that it is agile, speedy and universal (one size fits all)

Harvard Business Review April 2015 pp. 40 - 50 14

Performance Management and the RBV

According to a recent study from Hay group

“Employee performance has been found to

account for a differential in business results

of up to 30%, so creating an energising work

environment which encourages employees

to put in that little bit extra can mean the

difference between achieving an average or

a high-performing organisation”.

What is an ideal work environment

according to Hays?

• Clarity

• Understanding one’s role in relation to the organisation’s strategy

• Understanding what is expected of

them in that role

• Standards

• Standards of performance and work

behaviours

• Determined in consultation with staff

and management

• Rewards related to performance

• Consistent and constructive feedback

15

9/28/2015

6

An Effective Performance System

Criteria for performance measures

• Strategic congruence

• If strategy changes so must behaviours

• Validity & Reliability

• Consistently measure aspects of performance relevant to the job

• Acceptability & Specificity

• Measure accepted as a relevant and fair measure by those who use it

• Measure specifies what is expected of employee and how to meet expectations

An effective performance management system:

• Strategic • Specific • Supported • Simple

It should:

• Facilitate • Motivate • Measure • Feedback

Uptake of PM: Theory and practice

Re Nankervis & Compton (2006)

• Large survey (n=992) to determine use of and satisfaction with PM and whether it is considered an effective strategic tool for organisations

Findings

• Main purpose of PM

• Determine training and development needs (89.2%)

• Appraisal of past performance (88.9%)

• Alignment of individual and organisational objectives (75.5%) Conclusions

• Use of and satisfaction with PM is problematic to some extent • Some evidence of broader strategic approach using ‘balanced

scorecard’

Updating Nankervis and Compton’s study

New survey of Australian managers (N=992) in 2008

•Main purpose of performance management

•Developmental

–Determine training and development (89.2%)

•Administrative

–Appraise past performance (88.9%)

•Strategic

–Align objectives (75.5%)

•Retention (developmental and strategic)

–Retain high calibre staff (27.5%)

See Nankervis et al 2014 pages 364-368 18

9/28/2015

7

Employee views of performance management

More than 50% receive a review one a year or less (C/f Delloite’s suggestions)

Focus on past and future performance (a good thing!)

Increased use of developmental approaches ie personal development plans and

performance measured against that (65.6%)

Strategic approaches ie performance compared against organisational strategy (66.2%) But

note this means that approx 1/3 employees were not.

While 59.6% see benefits for personal development. 40% see no real benefit of

performance evaluation

See Nankervis et al 2014 page 367 19

Developmental focus of performance a management

system (re Deloittes’ new world of work)

Importance of developmental purpose of performance management. This is demonstrated by Nankervis’ & Compton’s findings

• Motivate desired behaviours • Facilitate high performance • Measure performance • Provide Feedback

Levels of Performance management

• Organisation eg Monash university

• Division/group eg a department or workgroup

• Individual eg an employee

Performance at the organisational level

Organisational performance is the sum of individual actions

directed towards particular kinds and level of outcomes

• Competitive advantage comes from a function of harnessing and managing individual

performance

Organisational performance may be measured in narrow

(hard) terms (economic) eg return on shareholders funds,

profit or using broader measures (social & economic) such as

balanced scorecard

9/28/2015

8

Measuring organisational performance: The balanced

scorecard

Strategic and broad range of performance measures

• Financial

• Eg profitability, growth, shareholder value • Customers

• Eg time, quality, performance, cost of customer service/response

• Internal business processes

• Eg HR’s ability to respond to internal clients • Learning and innovation

• Eg organisational responsiveness to new products, continuous improvement, empowerment of workforce

Sustainability at Westpac

http://www.westpac.com.au/about-westpac/sustainability-and-community/reporting-our-performance/stakeholder-impact-reports/

Benefits of Performance Management…

For the individual

• Feedback on strengths

and weaknesses

• Improvement

• Future development

• Motivation

For the organisation

• strategic

• staff development -

career links

• staff motivation

• serves as proper

evaluation tool

• gives feedback to

organisation

• identifies needs - e.g.

training

9/28/2015

9

Dissatisfaction with Performance Management

Nankervis & Compton (2006) report sources of dissatisfaction

includes:

• Lack of links between PM system and organisational goals;

• Lack of links to promotion and reward systems;

• Lack of employee participation/feedback opportunities;

• Inadequate appraisal training;

• Implementation and administrative difficulties.

Performance Review (Appraisal)

Performance appraisal

• Plan and review individual performance;

• Formal and time specific eg. an annual event.

• Link to individual plans for future development

Performance appraisal at “The Office”

http://www.youtube.com/watch?v=IkYUDQCYGHA

27

9/28/2015

10

Performance Appraisal

Characteristics of a dynamic performance appraisal system

• Goal establishment • Performance feedback

(coaching) • Performance improvement

(evaluation)

Purpose of a Performance Appraisal System

• Control

• Discriminate (legally of course!)

• Monitor

• Reward • Motivation

• Develop

• Feedback • Measure

• Outcomes – Individual

– Group

– Organisational

Performance criteria

Must be

• Congruent (aligned) with

strategic organisational

objectives

• Valid (measures assess all

relevant aspects of performance

• Reliable (consistency of

measure)

• Acceptable (to the people who

use it)

• Specific (gives guidance for

performance

Perceived fairness

• Procedural

• Interpersonal

• Outcomes

See pages 343-348

Performance review methods (appraisal)

Outcome oriented methods (results from what people do)

• Peer/self/upward appraisal • 360 degree feedback • Management by

Objectives

Relative judgement (assessing behaviours/attributes)

• Ratings scales

• Global

• Mixed ratings

• Behaviourally anchored scales

What people are (assess personal characteristics)

• Use competency based system

See pages 342 - 352 of your text

9/28/2015

11

Importance of fairness

Perceptions of fairness

• Procedural fairness

• Equal opportunity to participate in development processes

• Ensures consistent standards

• Minimises errors

• Interpersonal fairness

• Relates to use of performance appraisal systems eg can challenge ratings

• Timely feedback

• Respect and courtesy

• Outcome fairness

• Communicates performance and rewards expectations

See page 334 of your textbook 31

What kind of appraisal systems do companies use?

See page 365 of Nankervis et al 2014

Frequency

• Annual review (76%)

• Twice yearly (50%)

Type of appraisal system

• Ongoing review (41%)

• 360 degree review (20%) – low take up

• Peer review (18%)

• Self assessment (16%)

• Objective setting and review (61%)

• Competence assessment (27%)

• Personal development plans (33%)

• Coaching and mentoring (31%)

32 Nankervis, 2008)

Legal issues for performance appraisal

Documentation for legal protection

Do not condone poor performance by inaction

Employer’s duty to the poor performer

Adequate warning before dismissal

Equal employment opportunity (EEO)

Failure to do this may cause legal and industrial relations problems eg Toyota

9/28/2015

12

Sources of data and errors in evaluating performance data

Errors

• Similar to me • Diversity problems?

• Contrast • A vs B performers?

• Distributional errors • All highs or lows

• Halo and horn errors • Failure to differentiate between aspects of

performance

Reducing errors

• Rater error training • Rater accuracy training

Sources

• Managers • Immediate supervisors may lack

information, bias? • Peers

• Good source but may be biased • Subordinates

• As above • Self

• Tends to be inflated! • Customers

• Good source for service companies

Problems relating to performance appraisal

Staff do not see a clear link between P.A and organisational objectives;

Not viewed as particularly useful;

Training for performance managers often lacking.

Compliance task

Bureaucratic

Backward looking

• ie past performance

Negative

Subjective

Performance feedback

The process of providing

employees with information

regarding performance

effectiveness

Important for the Gen Ys

Characteristics of effective

performance feedback

process

• Frequent feedback

• Feedback context

• Self-ratings

• Participation in sessions

• Recognise performance through

praise

• Focus on solving problems

• Focus feedback on behaviour or

results

• Minimise criticism

• Set goals and dates for review

• Manage marginal performers

9/28/2015

13

Performance improvement

Sources of poor performance

• Individual issues

• Lack of appropriate skills

• Lack of appropriate training

• Organisational issues

• Ineffective job placement/selection

• Work design

• Boring work, role conflict/ambiguity

• External factors

• Extreme competition or decline of

industry

Performance improvement

• Flexibility

• Good HRM practices

• Training

• Retention strategies

See your textbook page 366-367

Summary – Performance management

Performance management is a strategic and dynamic process with the emphasis on self-development, the establishment of performance standards and the giving and receiving of feedback.

Performance reviews are an important motivator and employee development tool.

There are a number of issues that arise out of performance review methods and care should be taken to remove bias from performance review procedures