Implementing a Performance Management System

chapter

7 Rolling Out the Performance Management System

Good governance with good intentions is the hallmark of our government. Implementation with integrity is our core passion.

-Narendra Modi

Learning Objedives By the end of th is chapter, you will be able to do the following:

1. Prepare the rollout and 1mplementat1on of a new or up- and possibly. a manager 1n the role of arbitrator dated and rev1sed performance management system by and final decision maker. sett1ng up a commumcat1on plan. appeals process. rater s. Antic1pate unmtent1onal ratmg errors such as s1milar to tra1mng program. and pilot test me. contrast. halo. pnmacy. recency. negat1v1ty. f1rst lm-

2. Create a commumcahon plan that answers the followmg key pression. stereotype. and attr1but1on. quest1ons: What IS performance management? How does 6. Design and 1mplement rater errors. frame of reference. performance management lit 1n the orgamzabon·s strategy7 and behavioral observat1on trammg programs to mmi- How does everyone benefrt from the system7 How does the mize the impact of umntent1onal ratmg errors. performance management system work7 What are every- 7. Devise a pilot test of the performance management system one's responsrb1ht1es7 How IS performance management using a selected group of employees and managers from related to other key organrzatronal inrt1at1ves7

3. Prepare interventions aimed at dealing with cognitive biases (i.e .. selective exposure. selective perception. selective retention) and resistance to change, involve all employees and understand their needs. provide facts and consequences of the system. and use multiple channels of communication and credible communicators.

4. Devise an appeals process to enhance the integrity of the performance management system that involves the human resources (HR) department. a panel of managers and peers.

the organization. 8. As soon as the performance management system is in place.

collect various measurements. such as number of individuals evaluated, quality of performance informat1on gathered. quality of performance discussion meetings. user satisfac- tion with the system. overall cosUbenefit ratio. and unrt- and organization-level performance indicators-all of these will provide information regarding the system's effectiveness and the extent to which it is working the way rt should and whether it is producing the expected results.

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1518 Part II System Implementation

Chapters 4 and 5 described operational details about how to define and measure performance. Chapter 6 described operational details about perfor- mance analytics- the process of collecting and compiling performance data. This chapter, the last one in Part II, continues to address operational issues in implementing a performance management system. Specifically, it addresses the steps needed to roll out the system, such as setting up good communica- tion and appeals procedures that will gain system acceptance, implement training programs to minimize unintentional rating errors, and pilot test the system. Finally, the chapter describes how to monitor the system as soon as it is in place to make sure it is working properly. Taken together, these steps are necessary to make sure that performance management is implemented w ith integrity.

Before we begin, here is an important clarification: The term "implementation" of the performance management system does not refer only to launching an entirely new system . In most cases, an organization will already have some type of performance management system, although it may be closer to a once-a-year performance appraisal system and not very effective. So, by using the term "implementation" we are referring not only to launching a new system from scratch, but also to revising and improving an existing one. For example, it may be the case that the organization is under new leadership, and this new leadership wants to implement a better system.

7-1 COMMUNICATION PLAN In general, having more and better knowledge of the performance management system leads to greater employee acceptance and satisfaction.1 Organizations often design a communication plan to ensure that information regarding the performance management system is disseminated widely in the organization. A good communication plan answers the following questions2:

• What is performance management? Answering this question involves providing general information about performance management, how performance management systems are implemented in other organizations, and the general goals of performance management systems.

• How does perfonnance management fit into our strategy? To answer this question, we should provide information on the relation between performance management and strategic planning. Specifically, information is provided on how the performance management system will help accomplish strategic goals. Recall that Chapter 3 addressed this issue in detail.

• What is in it for me? A good communication plan describes the benefits of implementing performance management for all those involved.

• How does it work? Answering this question entails giving a detailed description of the performance management process and time line: for example, when meetings will take place, what the purposes of each meeting are, and when decisions about rewards will be made.

• What are my responsibilities? The communication plan should include information on the role and responsibilities of each person involved at

Chapter 7 Rolling Out the Performance Management System 1H

each stage of the process. For example, it includes a description of the employees' and supervisors' main responsibilities in the performance management process.

• How is perfonnance management related to other initiatives? The communication plan should include information on the relationship between performance management and other initiatives and systems, such as training, promotion, and succession planning.

Figure 7-1 summarizes the questions that should be answered in a state-of-the science performance management communication plan. As an example, consider the performance management system for the position of Senior Executive Service (SES), which is a position in U.S. federal agencies such as the Department of Justice, Department of Interior, Department of Energy, and Department of Commerce.3 SES members serve in key leadership positions directly below the top presidential

Performance Management Communication Plan

FIGURE 7-1 Performance Management Communication Plan: Basic Components

200 Part II System Implementation

appointees. SES members link the appointees to the rest of the federal govern- ment, and they are charged with overseeing various governmental functions in U.S. federal agencies.

The communication plan that the Department of Justice implemented for this performance management system answers each of the questions described earlier and included in Figure 7-1:

• What is performance management? The plan states the reasons for the department's implementing a performance management system and d iscusses what it is expected to accomplish. For example, it explains that performance management aims at promoting efficient and effective attainment of the department's mission, program objectives, and strategic planning initiatives, and it also aims at motivating high levels of achievement and accountability. It also includes definitions of several key terms, including performance management system, performance, progress review, rating levels, and annual summary rating.

• How does performance management fit into our strategy? The plan includes a list of principles that g uide the system, including, "The Department of Justice federal leaders and managers create a climate for excellence by communicating their vision, values and expectations clearly." It goes on to detail all of the ways in which leaders in the agency do this. In addition, the director of the Office of Personnel Management (OPM) describes how the system would be used to implement key principles, including excellence.

• What is in it for me? There is clear information on how the performance management system will help the SES members be more effective leaders so that the department's mission can be achieved.

• How does it work? The plan outlines the steps in a performance management process, detailing the managers' responsibilities at each step. For example, it outlines the performance dimensions, the rating categories, and how to assign an overall rating.

• Wlzat are my responsibilities? The communication plan outlines the responsibilities of theSES members as well as their rating official, the person in charge of rating their performance. The plan em phasizes that leaders must create a high-performing culture by continually communicating expectations and rewarding high-achieving performers.

• How is performance management related to other initiatives? The communication plan touches briefly on the importance of linking system outcomes to performance-based pay. The importance of training to maximize performance is also considered.

In summary, the communication plan implemented by the Department of Justice is quite detailed and provides answers to most, if not all, of the key ques- tions that should be addressed by a good plan. However, even if a communication plan answers all or most of the important questions, the fact that the information has been made available does not necessarily mean the communication plan will be successful in gaining acceptance of the system. This is because people have cognitive biases that affect what information is taken in and how it is processed . Also, in the case of an organization that already has a system in place, and a better

Chapter 7 Ro lling Out the PerFormance Management System 201

one is being rolled out, it is likely that many people will not be comfortable with the change, and might engage in what is called resistance to change.4 We discuss these issues next.

7 ·1·1 Dealing with Cognitive Biases and Resistance to Change There are three types of biases that affect the effectiveness of a communication plan, regardless of whether it includes the six components shown in Figure 7-1. Also, these biases are accentuated when people are not willing or interested in change. The biases are selective exposure, selective perception, and selective retention..5 First, selective exposure is a tendency to expose our minds only to ideas with which we already agree. Those employees who already agree that performance management is a good idea may become involved in the communication plan activities, including reading about the system and attending meetings describing how the system works. On the contrary, those who do not see much value in a performance management system may choose not to read information about it and to not attend meetings about it. Second, selective perception is a tendency to perceive a piece of information as meaning what we would like it to mean even though the information, as intended by the communicator, may mean the exact opposite. Someone who believes performance management is about only rewards and punishments may incorrectly interpret that receiving formal performance feedback at the end of each quarter translates exclusively into receiving a pay increase or a bonus. Third, selective retention is a tendency to remember only those pieces of information with which we already agree. U an employee perceives his employer as vindictive, that employee is not likely to remember information about how the appeals process works or about other fair and equitable aspects of the system.

Selective exposure, selective perception, and selective retention biases are pervasive and could easily render the communication plan ineffective. Fortunately, there are several ways to minimize the negative impact of these biases, and therefore, help gain support for the system. Consider the following6:

• Involve employees. Involve employees in the design of the system. People s upport what they help create. The higher the level of participation is in designing the system, the greater the support for the system will be.

• Understand employee needs. Understand the needs of the employees and identify ways in which these needs can be met through performance management. For example, do they want more feedback? Are they interested in development activities that would eventually lead to a promotion or a different job within the organization?

• Strike first. Create a positive attitude toward the performance system before any negative attitudes and rumors are created. Make communications realistic and do not set up expectations you cannot deliver. Discuss some of the arguments that might be used against the system and provide evidence to counter them.

• Provide facts and consequences. Because of the presence of cognitive biases, facts do not necessarily speak for themselves. Clearly explain facts about the system and also explain what they mean or what the consequences are. Do not Jet employees draw their own conclusions because they may differ from yours.

202 Part II System Implementation

• Put it in writing. In Western cultures, written communications are usually more powerful and credible than spoken communications because they can be carefully examined and challenged for accuracy. Create documentation, which is often posted online for everyone to download, describing the system.

• Use multiple channels of communication. Use multiple methods of communication, including face-to-face (especially in the case of small and medium-size organizations) and virtual meetings, email, TED talks, and short video clips. In other words, allow employees to be exposed repeatedly to the same message delivered using different communication channels . Of course, make sure that all channels convey consistent information.

• Use credible communicators. Use credible sources to communicate the performance management system. In companies where HR department members are perceived as "HR cops" because they continually emphasize what cannot be done as opposed to how one's job can be done better, it may be better to use a different department or group. In such situations, communication should be delivered by people who are trusted and admired within the organization. It also helps if those delivering the communication and endorsing the system are regarded as key and powerful organizational players.

• Say it, and then, say it again. Repeat the information frequently. Because people can absorb only a small amount of information at a time, and may be resistant to change, the information must be repeated frequently.

Table 7-1 summarizes what can be done to minimize cognitive biases, including selective exposure, selective perception, and selective retention. Consider the Department of Justice communication process, described earlier in this chapter. That p lan attempts to mirtimize negative biases and gain sup- port for the performance management system. For example, although it is a government agency and the performance management system is a federal mandate, the Office of Personnel Management (OPM) offered to help managers tailor the systems to their specific agencies. This is likely to help employees become more involved and is also helpful in addressing the specific needs of the employees in the various agencies. The director of the OPM, who is a ·· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · credible source of information on the TABLE 7·1 performance management system, set a positive tone and even appealed to employees' patriotism by including a message from the United States Presi- dent, reminding them of the importance of serving the "American people." The communication plan also provides facts and conclusions about the system. For example, it explains the reasoning for realigning the performance management system with the fiscal year, how to carry ou t this time line, and the importance of

Interventions to Minimize the Effects of Cognitive Biases and Resistance to Change

Involve employees

Understand employee needs

Stnke flfst

Provide facts and consequences

Put it in wnting

Use multiple channels of communication

Use credible communicators

Say 1t, and then, say 1t again

Chapter 7 Rolling Out the Performance Management System 203

doing so. The communication plan is also posted on the department's website. There are also links to other websites with information about performance management. It is not clear whether the Department of Justice d isseminated the information using other media, such as short video clips. But all in all, the p lan implemented by the Department of Justice is a good example of a com- munication plan that attempts to minimize the detrimental impact of cognitive b iases and resistance to change.

In addition to implementing a communication plan, support for the performance management system can be gained by implementing an appeals process. This topic is discussed next.

7-2 APPEALS PROCESS The inclusion of an appeals p rocess is important in gaining employee acceptance for the performance management system. The reason is that it allows employees to understand that if there is a disagreement regarding performance ratings or any resulting decisions, then such disagreements can be resolved in an amicable and nonretaliatory wal In addition, the inclusion of an appeals process increases the system's fairness.

When an appeals process is in place, employees have the ability to question two types of issues: judgmental and adrninistrative.8 Judgmental issues center on the validity of the performance eval uation. For example, an employee may believe that a manager 's performance ratings for that employee do not reflect his actual performance. Administrative issues involve whether the policies and procedures were followed. For example, an employee may argue that her supervisor d id not meet with her as frequently as he had with her coworkers and that the feedback she is receiving about her performance is not as thorough as that received by her coworkers. Figure 7-2 includes a surnrnary of the three main levels involved in an appeals process.

Typically, when an appeal is first filed, the HR department serves as a mediator between the employee and the supervisor. An appeal sent to the HR department is usually called a Level 1 appeal. The HR department is in a good position to judge whether policies and procedures have been implemented correctly, and also, has good information about the various jobs, levels of performance expected, and levels of performance of other employees within the unit and organization. The HR department gathers the necessary facts and brings them to the attention of either the rater to encourage reconsideration of the decision that caused the appeal or to the complainant to explain why there have been no biases or violations. In other words, the HR d epartment either suggests corrective action to the supervisor or informs the employee that the decision or procedures were correct.

If the rater does not believe corrective action should be taken or if the employee does not accept the HR decision, and the appeal continues, then the process moves to Level 2. In Level 2, there is an outside arbitrator that usually consists of a panel of peers and managers. The panel reviews the case, asks questions, interviews witnesses, researches precedents, and reviews policy. Then, they simply take a vote to make the decision. In some cases, the vote represents

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FIGURE 7-2 Steps in Appeals Process

• Appeal sent to human resource (HR) Department • HR gathers necessary facts • HR contacts rater and suggests corrective action

(if neocesary)

• Appeal sent to outside arbitrator (e.g., panel of peers and managers)

• Arbitrator reviews the case, gathers additional inforrnatoin as needed, votes, and/or forwards to a high-level manager

• High-level manager (e.g., vice president) • Takes panel's vote into consideration and makes final decision

the final decision. In other cases, the vote is forwarded to a high-level manager (vice president or higher level), who takes the panel's vote into consideration in making the final decision.

Box 7-1 shows some of the key sections of the performance management appeals process for employees at the University of Lethbridge in Canada. The appeals process is intended to air concerns and to resolve disagreements. The purpose of this specific policy is to provide employees and management with a means for resolving disagreements involving performance evaluations.

The information shown in the box describing the appeals process at the University of Lethbridge spells out the steps involved, the time line that should be followed, and the various outcomes that could be expected. Given that such a policy is in place, employees are given assurances that if there is an appeal, the case will be treated fairly and as objectively as possible. Once again, this should help gain support for the performance management system. From your perspective, how does this process compare to the one summarized in Figure 7-2? Is there anything missing that the University of Lethbridge should consider adding?

Chapter 7 Rolling Out the PerFormance Management System 205

Box 7-1

Company Spotlight: University of Lethbridge Performance Management Appeals Process Purpose The Appeal Process is a means for Employees and Supervisors to resolve disagreements involving the Performance Evaluation process. This Appeal Process does not in any way circumvent or prohibit an employee from the invocation of Article 12; Grievance Procedure.

Principles All appeals:

1. Are to be conducted with diplomacy and impartiality.

2. Aspire to construct and provide the best possible information.

3. Maintain confidentiality and respect for the individual.

Process If an Employee disagrees with the result of their Performance Evaluation, as conducted by their Supervisor, the Employee may appeal in writing to the Office of Human Resources. A request for appeal must be received within ten (10) Work Days of the date of the Employee's signature on the Performance Evaluation. The deadline for all written appeals is the last work day in June. Late applications shall not be subject to appeal except under extraordinary circumstances as determined by the Associate VP HR and Admin. Submission of an appeal must be with the use of the Performance Evaluation Appeal Form.

Level 1 Following the receipt of an appeal, a member of the Human Resources Department will conduct a confidential investigation, gathering information in discussion with the Employee, the Supervisor, and where necessary other informed parties. A recommendation for resolution will be

put forward by HR to the Supervisor and Employee. If an agreement cannot be reached at Level 1 then the appeal w ill move to Level 2 of the Appeals Process.

Level 2 The appeal will be brought before a Performance Evalu- ation Committee whose membership sha ll consist of three (3) AUPE (Alberta Union of Provincial Employees) Representatives, three (3) Representatives of the Board and a Facilitator from Human Resources. The committee members will rema in consistent for all appeals relating to the evaluation period except in circumstances where members with a substantial personal or professional relationship with the employee under appeal shall not participate in the review.

The committee will consider the information collected by Human Resources in Level 1, as well as any relevant evidence that may be offered by the Employee and the Supervisor, and may seek out other sources that the committee deems to be of relevance to the appeal. The committee will have f ive (5) Work Days from the date the committee was convened to review the evidence and then forma lly issue a ruling.

Level 3 In the event that an agreement is not achieved in Level 2 the matter will continue as a grievance commencing at Step 2 of Article 12: Grievance Procedure.

Once a consensus has been reached and signed by all parties involved, at any point in the appeal process, the revised Performance Eva luation wi ll be fina l and not subject to further appeal. All documentation w ill be forwarded to the Human Resources department and will remain confidential. The employee may at anytime withdraw the appeal request by writing to the Associate VP HR and Admin who will inform the members of the committee.

Performance Management- Appeals Process & Appeals Form. AvaiJable online at https://www.uleth.ca/hr/perfonnance--management..appeals· p rocess-appeaJs.lonn. Retrieved on january 2, 2018.

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7-3 TRAINING PROGRAMS FOR MINIMIZING UNINTENTIONAL RATING ERRORS

Training the raters is another necessary step to prepare for the rollout of the performance management system. Training not only provides participants in the performance management system with needed skills and tools to do a good job implementing it, but also helps increase satisfaction with the system.9

In Chapter 6, we discussed what to do to minimize intentional rating distortion. But unintentional errors also affect the accuracy of ratings. Specifically, before rolling out the performance management system, we should consider implementing rater training programs that address how to identify and rank job activities and how to observe, record, and measure performance.

7-3-1 Rater Error Training Many performance management systems can be plagued with rating errors. In fact, rating errors are usually the reason why so many performance management systems are usually criticized. to Accordingly, the goal of rater error training (RE'T) is to make raters aware of what rating errors they are likely to make and to help them develop strategies to minimize those errors. In other words, the goal of RET is to increase rating accuracy by making raters aware of the unintentional errors they are likely to make.

RET programs generally include definitions of the most typical errors and a description of possible causes for those errors. Such programs also allow trainees to view examples of common errors and to review suggestions on how to avoid making errors. This can be done by showing video vignettes designed to elicit rating errors and asking trainees to fill out appraisal forms regarding the situations they observed on the video clips. Finally, a comparison is made between the ratings provided by the trainees and the correct ratings. The trainer then explains why the errors took place, which specific errors were made, and ways to overcome the errors in future.

RET does not guarantee increased accuracy. Raters do become aware of the possible errors they can make, but precisely because many of the errors are unintentional, simple awareness of the errors does not mean that errors will not be made. Nevertheless, it may be useful to expose raters to the range of possible errors. These errors include the following:

• Similar to me error. Similarity leads to attraction, so we tend to favor those who are similar to us. Consequently, in some cases, raters are more likely to give higher performance ratings to those employees who are perceived to be more similar to them in terms of attitudes, preferences, personality, and demographic variables, including race and gender.

• Contrast error. Contrast error occurs when, even if an absolute measurement system is in place, raters compare individuals with one another, instead of against predetermined standards. For example, when a rater rates an individual of only average performance, the rating may actually be higher than deserved if the other individuals rated by the same rater display substandard performance levels: the average performer may seem to be much better in comparison to the others. This error is most likely to occur

Chapter 7 Rolling Out the Performance Management System 207

when raters complete multiple appraisal forms at the same time because, in such situations, it is difficult to ignore the ratings given to other employees.

• Halo error. Halo error occurs when raters fail to d istinguish between the different aspects of performance being rated. Recall, we described this error in Chapter 6 in the context of peer eval uations. If an employee receives a high score on one d imension, she also receives a high score on all other d imensions, even though performance may not be even across all dimensions. For example, if an employee has a perfect attendance record, then the rater may give her a high mark on dedication and productivity. The perfect attendance record, however, may be caused by the fact that the employee has large loan payments to make and cannot afford to miss work, not because the employee is actually an excellent overall performer. In other words, being present at work is not the same as being a productive employee. This error is typically caused by the rater's assigning performance ratings based on an overall impression about the employee instead of evaluating each performance d imension independently.

• Primacy error. Primacy error occurs when performance evaluation is influenced mainly by information collected during the initial phases of the review period. For example, in rating communication skills, the rater gives more weight to incidents involving communication that took place toward the beginning of the review period, as opposed to incidents taking place at all other times.

• Recency error. Recency error occurs when performance evaluation is influenced mainly by information gathered during the last portion of the review period. This is the opposite of the primacy error: raters are more heavily influenced by behaviors taking place toward the end of the review period, instead of giving equal importance and paying attention to incidents occurring throughout the entire review period .

• Negativil:lj error. Negativity error occurs when raters place more weight on negative information than on positive or neutral information. For example, a rater may have observed one negative interaction between the employee and a customer and several positive interactions in which customers' expectations were surpassed. The rater may focus on the one negative incident in rating the "customer service" dimension. The negativity error explains why most people have a tendency to remember negative rather than positive news that they read online or watch on television.

• First impression error. First impression error occurs when raters make an initial favorable or unfavorable judgment about an employee, and then, ignore subsequent information that does not support the initial impression. This type of error can be confounded with the "similar to me error" because first impressions are likely to be based on the degree of similarity: the more similar the person is to the rater, the more positive the first impression will be.

• Spillover error. Spillover error occurs when scores from previous review periods unjustly influence current ratings. For example, a rater makes the assumption that an employee who was an excellent performer in the

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previous period ought to be an excellent performer during the current period also, and provides performance ratings consistent with this belief.

• Stereol:l;pe error. Stereotype error occurs when a rater has an oversimplified view of individuals, based on group membership. That is, a rater may have a belief that certain groups of employees (e.g., women) are unassertive in their communication style. In rating women, therefore, he may automatically describe communication as being "unassertive" without actually having any behavioral evidence to support the rating.n This type of error can also lead to biased evaluations of performance when an individual (e.g., woman) violates stereotypical norms by working in an occupation that does not fit the stereotype (e.g., assembly of airplane parts). 12 This type of error can also result in consistently lower performance ratings for members of certain groups. For example, a study including an identical sample of black and white workers found that white raters gave higher ratings to white workers relative to black workers than did black raters. In other words, if a white worker is rated, then it does not really matter whether the rater is black or white; however, if a black worker is rated, the rater's ethnicity matters because this worker is likely to receive a higher rating from a black rater than from a white ratern

• Attribution error. The attribution error takes place when a rater attributes poor performance to an employee's dispositional tendencies (e.g., personality, abilities) instead of features of the situation (e.g., malfunctioning equipment). In other words, different raters may place different relative importance on the environment in which the employee works in making performance evaluations. If raters make incorrect inferences about the employees' dispositions and ignore situational characteristics, actions taken to improve performance may fail because the same situational constraints may still be present (e.g., obsolete equipment).14

As a recap, Table 7-2 includes a summary list of unintentional errors that raters may make in assigning performance ratings. RET exposes raters to the different errors and their causes; however, being aware of unintentional errors does not mean that raters will no longer make these errors. 15 Awareness TABLE 7-2 is certainly a good first step, Unintentional Errors Likely to Be Made in Providing but we need to go further if we Performance Ratings want to minimize unintentional .. ____________ _ errors. One fruitful possibility is

Contrast the implementation of a frame of reference training. Halo

7·3·2 Frame of Reference Training

Frame of reference (FOR) training helps improve rater accuracy by thoroughly familiarizing raters with the various performance dimensions to be assessed. t6 The

Primacy

Recency

Negativity

F1rst impression

Spillover

Stereotype

Attribution

Chapter 7 Roll ing Out th e PerFormance Managemen t System 209

overall goal is to give raters skills so that they can minimize unintentional errors and provide accurate ratings on each performance dimension by developing a common FOR.

A typical FOR training program includes a discussion of the job description for the individuals being rated and the duties involved. Raters are then familiarized with the performance dimensions to be rated by reviewing the definitions for each dimension and discussing examples of good, average, and poor performance. Raters are then asked to use the appraisal forms to be used in the actual performance management system to rate fictitious employees usually shown in video practice vignettes. The trainees are also asked to write a justification for the ratings. Finally, the trainer informs trainees of the correct ratings for each dimension and the reasons for such ratings and d iscusses d ifferences between the correct ratings and those provided by the trainees. Typically, FOR training programs include the following formal steps17:

1. Raters are told that they will eval uate the performance of three employees on three separate performance dimensions.

2. Raters are given an appraisal form and instructed to read it as the trainer reads aloud the definition for each of the dimensions and the scale anchors.

3. The trainer discusses various employee behaviors that illustrate various performance levels for each rating scale included in the form. The goal is to create a common "performance theory" (frame of reference) among raters so that they will agree on the appropriate performance d imension and effectiveness level for different behaviors.

4. Participants are shown a video clip of a practice vignette, including behaviors related to the performance dimensions being rated, and are asked to evaluate the employee's performance using the scales provided.

5. Ratings provided by each participant are shared with the rest of the group and discussed . The trainer seeks to identify which behaviors participants used to decide on their assigned ratings and to clarify any discrepancies among the ratings.

6. The trainer provides feedback to participants, explaining why the employee should receive a certain rating (target score) on each dimension, and shows discrepancies between the target score and the score given by each trainee.

Consider how the Canadian military uses FOR training.18 First, the training program includes a session regarding the importance of performance management systems in the military. In the next session, raters are told that they will be evaluating the performance of four direct reports. They are given the appraisal form to be used and information on each of the scales included in the form. As the trainer reads through each of the scales, participants are encouraged to ask questions. At the same time, the trainer gives examples of behaviors associated with each level of performance. The trainer thus makes sure that the trainees come to a common FOR concerning what behaviors constitute the different levels of performance. Participants are shown a video clip of a soldier and are asked to evaluate the performance using the appraisal form explained earlier. Next, the

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ratings are discussed as a group, focusing on the behaviors exhibited in the video clip and the ratings that would be most appropriate in each case. This process is repeated several times. Finally, the participants are given three more samples of behavior to rate, as displayed by three hypothetical soldiers, and they receive feedback on how well they evaluated each sold ier.

It should be evident by now that FOR training can take quite a bit of time and effort to develop and administer, but it is well worth it. Specifically, as a consequence of implementing this type of training, raters not only are more likely to provide consistent and more accurate ratings, but they are also more likely to help employees design effective development plans. This is because sharing a common view of what constitutes good performance allows super- visors to provide employees with better guidelines to employ to reach such performance levels. 19

7-3-3 Behavioral Observation Training Behavioral observation (BO) training is another type of program implemented to minimize tmintentional rating errors. BO training focuses on how raters observe, store, recall, and use information about performance. Fundamentally, this type of training improves raters' skills at observing performance.

For example, one type of BO training involves showing raters how to use observational aids such as notes or diaries. These observational aids help raters record a preestablished number of behaviors on each performance d imension. Using these aids helps raters increase the sample of incidents observed and recorded during a specific time period. In addition, an aid such as a diary is an effective way to standardize the observation of behavior and record of critical incidents throughout the review period . In addition, it serves as a memory aid when filling out evaluation forms. Memory aids are beneficial because ratings based on memory alone, without notes or d iaries, are likely to be distorted due to factors of social context (e.g., friendship bias) and time (i.e., duration of supervisor-direct report relationship).20

Consider how BO training is also implemented by the Canadian military. The Canadian military has found that a combination of FOR and BO training works best. Earlier, we described how the Canad ian military uses FOR training. BO training is added to the FOR training program. In addition to FOR training, there are sessions on the importance of BO and common BO errors, including first impression, stereotypes, and halo effects. Finally, the participants are trained in the importance of keeping diaries and taking notes on their direct reports throughout the year. Furthermore, the trainer explains the criteria for each performance d imension and provides written descriptions of the different levels of performance. The participants are given a chance to practice keeping a diary while watching the video clips used in the FOR training section of the training program. After watching each video clip, participants are given tips on note-taking and recording behaviors as well as the resulting outcomes.

In summary, raters are likely to make several types of urtintentional errors when providing performance information. Unintentional errors are the product of the complex tasks of observing, encoding, storing, and retrieving performance information- and resistance to change exacerbates these errors. Through the implementation of three different types of training programs, these errors can be substantially minimized. Training programs focus on describing the errors

Chapter 1 Rolling Out the Performance Management System 211

that raters usually make (i.e., RET programs). In addition, they should allow raters to generate a common FOR to be used in evaluating performance as well as offer raters tools to improve observation and memory skills and help mitigate the discomfort generated by the interpersonal demands of the performance management process. FOR training is particularly beneficial when performance measurement emphasizes behaviors. On the contrary, BO training is particularly beneficial when performance measurement emphasizes results because raters learn not only how to observe behaviors, b ut also how these behaviors are linked to results.

Thus far, this chapter has described how to prepare for the launching of a performance management system by designing a communication plan and an appeals p rocess and by delivering training programs that will minimize unintentional rating distortions. Next, we turn to the final set of activities required before the performance management system is put into practice: p ilot testing.

7-4 PILOT TESTING Before the performance management system is fully rolled out, it is a good idea to test a version of the entire system so that adjustments and revisions can be made as needed.21 In the pilot test of the system, evaluations are not recorded in employee files; however, the system is implemented in its entirety from beginning to end, including all the steps that would be included if the system had actually been implemented . In other words, meetings take place between supervisor and employee, performance data are gathered, developmental plans are designed, and feedback is provided. The most important aspect of the pilot test is that all participants maintain records, noting any difficulties they encountered, ranging from problems with the appraisal form and how performance is measured to the feedback received. The pilot test allows for the identification and early correction of any flaws before the system is implemented throughout the organization.

We should not assume that the performance management system will necessarily be executed or that it will prod uce the anticipated results. The pilot test allows us to gain information from the perspective of users on how well the system works, to learn about any difficulties and unforeseen obstacles, to collect recommendations on how to improve all aspects of the system, and to understand personal reactions to it. In addition, conducting a pilot test is yet another way to achieve early acceptance from a small group who can then act as champions for the performance management system, rather than putting the burden on the HR department to sell the idea. A final reason for conducting a pilot test is that users are likely to have a higher system acceptance rate, knowing that stakeholders in the company had a say in its design, rather than feeling that the system was created by the HR department alone.

In larger organizations, an important decision to be made is the selection of the group of employees with whom the system will be tested. In choosing this group, we need to understand that the managers who will be participating should be willing to invest the resources required to do the pilot test. In addition, this group should be made up of managers who are flexible and willing to try new things. Thus, managers should know what the system will look like and receive a realistic preview before they decide to participate in the pilot test.

212 Part II System Implementation

In selecting the group, we must also consider that it should be sufficiently large and representative of the entire organization so that reactions will be generaliz- able to the rest of the organization. Thus, in selecting the group, we should select jobs that are similar to those throughout the company, and the group selected should not be an exception in either a positive or a negative way. Specifically, the group should not be regarded as particularly productive, hardworking, lazy, and so forth. For example, at The Gap, Inc., the pilot testing of their revamped performance management system was conducted in one store, given that it is a self-contained business unit.22

Pilot tests provide crucial information to be used in improving the system before it is actually put in p lace. Pilot testing the system can provide huge savings and identify potential problems before they become irreversible and the credibility of the system is ruined permanently. For example, consider the case of the Washington State Patro1.23 This organization realized that several changes were occurring, just like similar changes were occurring in patrol departments in other states, which prompted the revision of its performance management system. It established a committee to develop the new appraisals. Before implementing the system, the state patrol pilot tested it in two districts. First, the committee prepared a training chapter that included a pre-appraisal work group meeting. In this meeting, employees discussed their roles and expectations surrounding the performance management system and applied those discussions to a common goal. The training also focused on how new developments in the patrol Jed to new elements in the performance management system. During the training, the trainers encouraged the participants to ask questions regarding the shift to the new approach. The trainers then used the feedback received in these sessions to fix specific operational issues before introducing the training to the entire agency. After the appraisal process was fine-tuned, it was submitted for the approval of the troopers' and sergeants' associations. A select number of individuals across the districts received "train the trainer" training. Finally, the system was instituted agency-wide. Each of these steps allowed for the identification of potential barriers that could have prevented the system from being successful.

7-5 ONGOING MONITORING AND EVALUATION When the testing period is over and the performance management system has been implemented organization-wide, it is important to use clear measurements to monitor and evaluate the system14 This also involves understanding the extent to which the training programs are achieving the objective of minimizing rating errors. In a nutshell, a decision needs to be made about how to evaluate the system's effectiveness, how to evaluate the extent to which the system is being implemented as planned, and how to evaluate the extent to which it is producing the intended results. As an illustration, the U.S. federal government takes the evaluation of performance management systems very seriously. Specifically, several Jaws have been passed and bills are being prepared that mandate federal agencies to develop a strategic plan, a performance plan, and a performance report.25 Although these initiatives concern agencies and not individuals, ultimately, the performance of anx agency depends on the performance of the individuals working in that agency. 6 The net result of such Jaws as the Government Performance and Results Act is an

Chapter 7 Rolling Out the Performance Management System 213

increase in accountability and funding allocation based on performance. Thus, federal agencies are required to evaluate the relative efficiency of their various management practices and initiatives including performance management systems.

Evaluation data should include reactions to the system and assessments of the system's operational and technical requirements. For example, a confidential survey could be administered to all employees, asking about perceptions and attitudes regarding the system. This survey can be administered during the initial stages of implementation, and then, at the end of the first review cycle to find out if there have been any changes. In addition, regarding the system's results, one can assess performance ratings over time to see what positive effects the implementation of the system is having. Finally, interviews can be conducted with key stakeholders, including managers and employees who have been involved in developing and implementing the performance management system.27

Several additional measures can be used on a regular basis to monitor and evaluate the system:

• Number of individuals evaluated. One of the most basic measures is to assess the number of employees who are actually participating in the system. If performance evaluations have not been completed for some employees, we need to find out who they are and why a performance review has not been completed.

• Quality of non-quantitative performance data. An indicator of quality of the performance data refers to the information provided in the open-ended sections of the appraisal forms. For example, how much did the rater write? What is the relevance of the examples provided?

• Quality of follow-up actions. A good indicator of the quality of the system is whether it leads to important follow-up actions in terms of development activities or improved processes. For example, to what extent do follow-up actions involve exclusively the supervisor as opposed to the employee? If this is the case, then the system may not be working as intended because it may be an indicator that employees are not sufficiently involved.28 Also, to what extent have employees learned from their successes and failures and applying those lessons to the future?

• Quality of perfonnance discussion meeting. A confidential survey can be distributed to all employees on a regular basis to gather information about how the supervisor is managing the performance discussion meetings. For example, is the feedback useful? Has the supervisor made resources available so the employee can accomplish the developmental plan objectives? How relevant was the performance review discussion to one's job? To what degree have developmental objectives and plans been discussed? To what extent does the supervisor's way of providing feedback encourage direct reports to receive more feedback in the htture?29

• System satisfaction. A confidential survey could also be distributed to assess the perceptions of the system's users, both raters and ratees. This survey can include questions about satisfaction with equity, usefulness, and accuracy.

• Overall cost/benefit ratio or return on investment (ROI). A fairly simple way to address the overall impact of the system is to ask participants to rate the overall cost/benefit ratio for the performance management system. This

214 Part II System Implementation

is a type of bottom-line question that can provide convincing evidence for the overall worth of the system. The cost/benefit ratio question can be asked in reference to an individual (employee or manager), her job, and her organizational unit.

• Unit-level and organization-level perfonnance. Another ind icator that the system is working well is provided by the measurement of unit- and organization-level performance. Such performance indicators might be customer satisfaction with specific units and indicators of the financial performance of the various units or the organization as a whole. We need to be aware that it may take some time for changes in individual and group performance level to be translated into unit- and organization- level results. We should not expect results as soon as the system is implemented; however, we should start to see some tangible results at the unit level a few months after the system is in place.

Consider the case of Caterpillar, which designs, develops, engineers, manufactures, markets and sells machinery, engines, financial products, and insurance. Caterpillar is a leading manufacturer of construction and mining equipment, d iesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. In 2017, Caterpillar was ranked #74 on the Fortune 500 list and #264 on the Global Fortune 500 list. In their own words, Caterpillar's "value advantage" is that they "have the people, processes, tools and investments to deliver the quality, reliability and durability customers expect from Caterpillar in each new product introduction." Given this value proposition, Caterpillar has a strategic view of how managers should improve the performance of their people, so they have had a performance management system in place for many years. Caterpillar embarked on an impressive initiative to evaluate their performance management system. Specifically, the goal of this evaluation was to assess the cost/benefit ratio-return on invest- ment (ROI)- of the training sections of the system that targeted managers and included modules about goal setting and coaching, among others. This eval uation included three steps. First, there was an estimated ROI, based on how much performance management training would cost and its expected benefits. This information was used prior to implementing the program to establish the program's business case. Second, there was an ROI forecast, which enabled the program's leaders to better understand how to make full deployment of the initiative successful. Participants in this study completed a questionnaire in which they described the potential financial and nonfinancial effects of the program. Third, an ROI study was conducted three months after the performance management training intervention to Jearn about financial as well as non tangible returns. This was done via focus groups that documented how training participants had used the knowledge they had acquired and the business impact and financial benefits. Finally, a follow-up study was conducted two months later to confirm the results of the third step. This final study included an online questionnaire completed by the direct reports of the managers who had participated in the program. This final step provided cross-validation data from the perspective of d irect reports.

Results were quite impressive. For example, results of the ROI study ind icated that 88 percent of respondents believed the program had a positive

Chapter 7 Rolling Out the PerFormance Management System 2115

impact on the organization; 5 percent reported that their personal productivity increased; 28 percent reported that prod uct quality improved; and 33 percent reported that costs were reduced. The overall ROI was calculated as fol- lows: [(Benefits - Costs)/Costs] x 100. Benefits were annualized, treated as sustainable benefits to the business, and one-time benefits were excluded, and were not treated at face value- rather, they included weighting factors. For example, assume a respondent who reported that his productivity increased 5 hours per week, his estimate of percentage of these hours saved d ue to the performance management training program was 60 percent, and his confi- dence in this estimate is 75%. If the hourly rate is estimated at US$65 and we consider 48 weeks per year, then 5 hours x $65 x 48 = $15,600. This estimate was revised, taking into account the answers to the follow-up questions (i.e., hours due to performance management and confidence in the estimate). In other words, $15,600 x 60% x 75% = $7,020. This resulting dollar figure was added to the total benefits pool. Finally, costs included all those associated w ith the program, including administration, communication, training design and delivery, evaluation, vendor fees, and so forth. What was the bottom-line? The final calculation indicated an impressive ROI of 194 percent.30

Now, Jet us return to the performance management system at the Washington State Patrol to examine how it has evaluated effectiveness since the system was implemented ?1 The patrol has several measures in place for continual evaluation of the effectiveness of the program. First, before all employees were reviewed using the system, they were surveyed regarding their satisfaction with the new system. This input was then used to further improve the appraisal process. In addition, the patrol used the results of a biyearly citizen's survey conducted by Washington State University. The results of this survey are used to determine whether the state patrol's customers are satisfied with its performance, and the data are also used to adjust and reprioritize performance objectives. In addition, the data are used to measure division-level performance, one indicator of the s uccess of the performance management process. The Washington State Patrol collects other types of data as well. For example, every six months, division managers give presentations regarding performance management to their peers and to several executives. Initially, the meetings focused on efforts to implement the new performance management system and increase quality, but this will change as new issues arise. The presentation is 30-40 minutes long, followed by 20-30 minutes of questions from peers and executives. The feedback from these presentations is used to measure how well the system is being implemented, and feedback on the success of the meetings will be used to make any necessary changes to the system. The Washington State Patrol may also want to consider measuring how many people are participating in the system. The patrol would also benefit from assessing whether the new system is distinguishing high- from low-level performers and from ascertaining the overall cost/benefit ratio of implementing the system.

Box 7-2 describes the process of rolling out the performance management system at BT Global. As you will see, this included a communication plan, training, and ongoing commitment to monitoring and improvement.

The next chapter addresses a critical goal of good performance management systems: Employee development. This includes the creation of personal development plans, the role of one's supervisor, and the use of 360-degree feedback systems.

2115 Part II System Implementation

Box 7-2

Company Spotlight: Performance Management System Rollout at BT Global Services BT Global Services, a global communication services company, employs more than 17,000 people worldwide, and provides information and communications technology services to 5,500 multinational companies in 180countries. They provide ser- vices in three core areas (a) digital customer (aimed at driving deeper and richer interactions with their end customers), (b) d igital business (aimed at increasing business agility and innovation through the move to cloud), and (c) digital em- ployee (aimed at creating a productive and efficient business environment by facilitating employee col laboration across technologies). BT Global Services util ized several steps to effectively roll out a new performance management system, called "Maximizing Performance," designed to bring new consistency to managing and developing employees and to create a high-performance cu lture. After obta ining support f rom senior management, the first steps included a series of communications, including a workshop for executives so all employees would receive a clear message about why

a new system was being developed, what roles employees would play, and how those roles wou ld contribute to the success of the company. The next step included training line managers, to ensure involvement and commitment, includ- ing the important role these managers play in ensuring success. Among other areas covered, training included how to set effective goals with employees, and how to provide coaching and feedback to facilitate development. Roles were reviewed and clarified to ensure employees under- stood expectations and how their work contributes to the success of their team, business unit, and the company as a whole. For ongoing monitoring of the program, data were collected through employee surveys, face-to-face meetings w ith line managers, and team meetings. In summary, BT Global Services i llustrates an example of an effective roll- out of a new performance management system, including communication plan, training, and ongoing commitment to monitoring and improvement.32

SUMMARY POINTS

• Four important steps need to be taken before the new or revised and updated performance management system is launched and implemented. These include (1) implementing a communication plan and then (2) an appeals process, which will help gain system acceptance, (3) training programs for raters, which will help minimize unintentional errors in performance ratings, and (4) pilot testing the system, which will allow revisions and changes to be made before the system is actually implemented. Careful attention to these pre-system implementation steps will help improve the integrity and success of the system.

• The main goal of the communication plan is to gain support for the system. A good communication plan addresses the following questions: • What is performance management? What are its general goals? How

have performance management systems been implemented in other organizations?

• How does performance management fit with the organizational strategy?

• What are the tangible benefits of the performance management system for all parties involved?

• How does the system work? What are the various steps in the process?

Chapte r 7 Rolling Out the Performance Management System 217

• What are the roles and responsibilities of each organizational member? • How does performance management relate to other initiatives and

programs, such as training, promotion, and compensation?

• Including detailed, convincing, and clear answers for each of these questions is likely to help increase support for the system.

• People engage in unconscious cognitive processes in how they take in and process information. Even though a good communication plan may be in p lace, these biases create rnisperceptions about the system, and also, resistance to change. First, selective exposure is a tendency to expose our minds only to ideas with which we already agree. Second, selective perception is a tendency to perceive a piece of information as meaning what we would like it to mean even though the information, as intended by the communicator, may mean the exact opposite. Finally, selective retention is a tendency to remember only those pieces of information with which we already agree.

• The negative effects of the unconscious cognitive processes can be minimized by involving employees in system design, considering employees' needs in designing and implementing the system, delivering the communication plan before negative attitudes are established and rumors start circulating, putting information concerning the system in writing, providing facts and consequences and not just facts, using multiple channels of communication to present information about the system, using credible and powerful communicators, and repeating the information frequently. A good communication plan includes as many of these features as possible.

• In addition to a communication plan, the establishment of an appeals process helps gain system acceptance. An appeals process allows employees to understand that if there is a disagreement regarding performance ratings or any resulting decisions, such disagreements can be resolved in an amicable and nonretaliatory way.

• The appeals process begins with an employee filing an appeal with the HR department, which serves as a mediator between the employee and her supervisor. This is a Level 1 appeal. If the appeal is not resolved, then an outside and unbiased arbitrator makes a final and binding resolution. This is a Level 2 appeal. The arbitrator for a Level 2 appeal is usually a panel that includes peers and managers. Finally, the Level3 appeal involves the participation of a senior level manager, who makes the final decision.

• In rating performance, raters may make unintentional errors, which occur because observing, encoding, storing, and retrieving performance information is a complex cognitive task. Unintentional errors include the following (1) similar to me, (2) contrast, (3) halo, (4) primacy, (5) recency, (6) negativity, (7) first impression, (8) spillover, (9) stereotype, and (10) attribution. Unintentional errors can be minimized by implementing three types of rater training program.

• Rater error training (RET) exposes raters to the different errors and their causes. RET does not guarantee rating accuracy, but becoming aware of what types of errors are likely to occur and the reasons for these errors is a very good first step in minimizing them.

218 Part II System Implementation

• Frame of reference (FOR) training familiarizes raters with the various performance dimensions to be assessed. The goal is that raters will develop a common FOR in observing and evaluating performance. This type of training is most appropriate when performance measurement focuses on behaviors.

• Behavioral observation (BO) training focuses on how ra ters observe, store, recall, and use information about performance. For example, this program teaches raters how to use aids such as d iaries to standard ize performance observation. This type of training is most appropriate when performance measurement focuses on counting and recording how frequently certain behaviors and results take place.

• Pilot testing the system before it is rolled out fully is useful because it allows potential problems and glitches to be discovered and corrective action to be taken before the system is p ut in place. Pilot testing consists of implementing the entire system, including all of its components, but only with a select group of people. Results are not recorded in employees' records. Instead, the goal is that the people participating in the pilot test provide feedback on any possible problems and on how to improve the system.

• The group participating in the pilot test needs to understand that the test will take time and resources. A representative group should be selected so that conclusions drawn from the group can be generalized for the organization as a whole. The group should not be regarded as an exception in either a positive or negative way.

• As soon as the system has been implemented, there should be a measurement system to evaluate the extent to which it is working the way it should and producing the results that were expected. Such measures include confidential employee surveys assessing perceptions and attitudes about the system and whether there is an upward trend in performance scores over time. Other measures include number of individ uals evaluated, quality of performance information gathered, quality of performance discussion meetings, user satisfaction with the system, overall cost/benefit ratio, and unit- and organization-level performance indicators. Taken together, these indicators are a powerful tool that can be used to demonstrate the value of the performance management system.

EXERCISE 7-1 TRAINING RATERS AT BIG QUALITY CARE CENTER

Located near the city of Caesarea, Israel, Big Quality Care Center (BQCC) is a nursing home facility for the elderly, serving about 125 residents. Because of the sheer size and diverse range of occupants served, the Center predominantly relies on highly skilled nursing professionals. Since Caesarea has had a long-term short- age of quality nursing professionals, the Center has some of the state-of-the-art management p ractices to both retain and maximize the performance of the Center's nurses.

Recently, however, BQCC has received several anonymous complaints from the nursing staff that many ratings seemed inaccurate and inconsistent.

Chapter 7 Ro lling Out the Performance Management System 21e

Concerned that the Center may lose many of its quality nurses to competitors if the complaints are left unaddressed, the head of HR has decided to implement an organization-wide rater training program to correct for any true rater inaccuracies and inconsistencies.

Your performance management consulting business is now thriving, and luckily for you, the head of HR has gathered enough trust in you that she has decided to Jet you design the rater training program. But before hiring you to do so, she wants you to create a five-minute video presentation offering an overview and details of your recommended training program. This video clip will be shown to the company's CEO and the rest of the senior staff. Although you are somewhat nervous and scared, you soon regain your confidence and comfort level when you find out that you had kept a copy of a textbook called "Performance Management."

Using the information in Section 7-3 Training Programs for Minimizing Unintentional Rating Errors, create this five-minute video presentation to include (a) a brief explanation of the nature of your suggested rater training program; (b) anticipated benefits; and (c) its requirements in terms of resources (e.g., time, cost).

EXERCISE 7-2 PROPOSING AN APPEALS PROCESS FOR NURSING HOMES

As a follow-up to Exercise 7-1, your training proposal for Big Quality Care Center (BQCC) was a success. Congratulations! Your proposal has been accepted and the training program, together with the entire performance management system is now in place at BQCC. In fac t, BQCC's CEO is so pleased with your work that she has forwarded your name to the American Association of Americans and Canadians in Israel (AACI), which keeps a list of nursing homes in Israel. And now, several nursing homes have reached out to you to solicit your consulting services so they can improve their own performance management systems.

To make your services more scalable, you decided to create online tools and services that you can offer to several nursing homes w ithout the need to have to physically visit each. This is particularly important for you, given that you do not reside in Israel. Although no nursing home other than BQCC has reached out to you yet, BQCC's CEO told you that she heard through the grapevine that this will happen soon. So, you decided to create a five-minute video presentation describing what an appeals process is and how it would work at a nursing home.

You have done your homework about nursing homes and know that in addition to registered and licensed nurses, they typically employ administration staff (HR, accounting, operations), and also, support staff including custod ians, maintenance staff, and groundskeepers. Using the information in Section 7-3 Training Programs for Minimizing Unintentional Rating Errors, and in Section 7-2 Appeals Process, create this five-minute video presentation to include (a) a brief explanation of the nature of an appeals process; (b) its anticipated benefits; and (c) its requirements in terms of resources (e.g., time, cost).

CASE STUDY 7-1

Implementing a Performance Management Communication Plan at Accounting, Inc.

A ccounting, Inc. is a consulting and accounting firm headquartered in Amsterdam, the Netherland s. Recently, Accounting, Inc. implemented a performance management system. The first step in the implementation of the new system was the development of a set of core competencies that would be used to evaluate most employees, regardless of function or level. In addition, each employee was evaluated using more job-specific performance dimensions.

As the first step in the communication plan, the employees received individual email messages, asking them to define what the core competencies meant to them and to give descriptions and examples of how each of the core competencies played out in their specific positions. Next, the company held meetings, handed out frequently asked questions (FAQs)

sheets, and placed posters around the company, detailing how the core competencies were related to the organization's strategic priorities and how performance scores would be related to monetary rewards. In these communications, Accounting, Inc., detailed how the performance system worked, how the raters were chosen, how performance feedback was used, and other details about the system. The information also outlined the benefits employees could expect from the new system as well as employees' responsibilities regarding the system.

Please evaluate Accounting, Inc.'s communication plan. Specifically, does it answer all of the questions that a good communication plan should answer (Hint: see Figure 7-1)? Which questions are left unanswered? How would you provide answers to the unanswered questions (if any)?

Source: Adapted from Brotherton. P. (2003). Meyners pays for performance: Changing a compensation system is a sensitive undertaking. Here's how one firm handled it . Journal of Accountancy,: 196, 41-46.

CASE STUDY 7-2

Implementing an Appeals Process at Accounting, Inc.

Following up on Case Study 7-1, when the system was implemented , many employees were not happy with the ratings and the type of performance feedback information they received from their supervisors. If you were to design an

220

appeals process to handle these complaints well, what would the appeals process be like? (Hint: Use the appeals process shown in Box 7-1: UniversihJ of Lethbridge Perfomumce Management Appeals Process as a model.)

Chapter 1 Rolling Out the Performance Management System 221

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ENDNOTES

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2. Grote, D. (1996). The complete guide to perftmnanceappraisal. New York, NY: AMACOM. 3. U.S. Department o f Commerce, Human Resources, Senior Executive Service Performance

management system. Retrieved January 2, 2018, from http://hr.commerce.gov I sf groups/ public/@doc/@doasa/@ohrm/ documents/ content/ dev01_006513.pdf

4. Rafferty, A. E., & Jimmieson, N. L. (2017). Subjective perceptions of organizational change and emp loyee resistance to change: Direct and mediated relationships with employee well-being. British journal of Management, 28, 24&-264.

5. Kahneman, D. (2011). Thinking fast and slow. New York, NY: Farrar, Straus, and Girou x. 6. Morhman, A. M., Resnick-West, S. M., & Lawler, E. E. (1989). Designing performance appraisal

systems (p. 133). San Francisco, CA: Jossey-Bass. 7. O'Reilly, J. T. (2001). Burying Caesar: Replacement of the veterans appeals process is needed

to provide fairness to claimants. AdministratiV<' Law Review, 53,223-256. 8. Grote, D. (1996). The complete guide to perftmnance appraisal (pp. 263-269). New York, NY:

AMACOM. 9. Spears, M. C., & Parker, D. F. (2002). A probit analysis of the impact of training on

performance appraisal satisfaction. American Business Review, 20, 12-16. 10. Aguinis, H., Joo, H., & Gottfredson, R. K. (2011). Why we hate performance management-

And why we shou ld Jove it. Business Horizons, 54,503-507. 11. Aguinis, H., & Adams, S. K. R. (1998). Social-role versus structural models of gender

and influence use in organizations: A strong inference approach. Group and Organization Management, 23,414--446.

12. Heilman, M. E., Wallen, A. S., Fuchs, D., & Tamkins, M. M. (2004). Penalties for success: Reactions to women who succeed at male gender-typed tasks. journal of Applied Psychology, 89,411H27.

13. Stauffer, J. M., & Buckley, M. R. (2005). The existence and nature of racial bias in supervisory ratings. journal of Applied Psychology, 90, 58Cr591.

14. Jawahar, I. M. (2005). Do raters consider the influence of situational factors on observed performance when evaluating performance? Evidence from three experiments. Group & Organization Management, 30, IH1.

15. London, M., Mone, E. M., & Scott, J. C. (2004). Performance management and assessment: Methods for improved rater accuracy and employee goal setting. Human Resource Management, 43, 319-336.

16. Aguinis, H., Mazurkiewicz, M. D., & Heggestad, E. D. (2009). Using web-based frame-of-reference training to decrease biases in personality-based job analysis: An experimental field s tudy. Personnel Psychology, 62, 405-438.

17. Pulakos, E. D. (1986). The development of training programs to increase accuracy with d ifferent rating tasks. Organizational Behavior and Human Decision Processes, 38, 7Cr91.

18. Noonan, L. E., & Sulsky, L. M. (2001). Impact of frame-of-reference and behavioral observation training on a lternative training effectiveness criteria in a Canadian military sample. Human Performance, 14,3-26.

19. Gorman, C. A., & Rentsch, J. R. (2017). Retention of assessment center rater training: Improving performance schema accuracy using frame-of-reference training.jounzal of Personnel Psychology, 16,1-11.

20. Duarte, N. T., Goodson, J. R., & Klich, N. R. (2004). Effects of dyadic quality and duration on performance appraisal. Academy of Management journal, 37, 499-521.

21. Grote, D. (1996). The complete guide to perfonnance appraisal (pp. 254-256). New York, NY: AMACOM.

22. Gap Inc. encourages employees to grow, performance and succeed without ratings. Retrieved January 2, 2018 from https:f/www.e-reward.co.uk/ up loads/ editor I files/Gaplnc _Case_Study.pdf

23. Cederblom, D., & Pemerl, D. E. (2002). From performance appraisal to performance management: One agency's experience. Public Personnel Managemmt, 31, 131-140.

24. Grote, D. (1996). The complete guide to perfonnanceappraisal (pp. 260-263). New York, NY: AMACOM.

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25. Somers, M. (2017). Government accountability legislation gets house backing, heads to senate. Federal Ntws Radio. Retrieved jan uary 2, 2018, from https:// federalnewsradio.com/ congress/2017 /01 I govemment-accountabil ity-legislation-gets-house-backing-heads-senate/

26. Aguinis, H., Davis, G. F., Detert, ) . R., Glynn, M. A., Jackson, S. E., Kochan, T., . .. Sutcliffe, K. M. (2016). Using organizational science research to address U.S. federal agencies' management and labor needs . Behavioral Scimct & Policy, 2{2),

27. Harper, S., & Vilkinas, T. (2005). Determining the impact of an organisation's performance management system. Asia Pacific journal of Human RPsourcts, 43, 76-97.

28. Fletcher, C. (2008). Appraisal,feedbock, and dt'Vf'lopment: Making perfonnanct r<'Vitw work. New York, NY: Routledge.

29. Dipboye, R. L., & de Pontbriand, R. (1981). Correlates of employee reactions to performance appraisal and appraisal systems. journal of Applied Psychology, 66, 248-251.

30. Goh, F. A., & Anderson, M. C. {2007). Driving business value from performance management at Caterpillar. Organization Dtvtlopmtnl joumal, 25(2), 219-226.

31. Cederblom, D., & Pemerl, D. E. (2002). From performance appraisal to performance management: One agency's experience. Public Ptrsomrel Managtmmt, 31,131-140.

32. Kelly, S. (2004). Maximizing performance at BT Global Services. Strategic HR RPvitw, 3, 32-35.

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chapter

8 Performance Management and Employee Development

One of the tests of leadership is the ability to recognize a problem before it becomes an emergena;.

- Arnold H. Glasow

Learning Objectives By the end of this chapter, you will be able to do the following: 1. Design your own personal developmental plan that ad·

dresses how you can continually learn and grow in the next year, how you can do better in the future. how you can avoid performance problems faced in the past. and where you are now and where you would like to be in terms of your ca reer path.

2. Formulate a developmental plan so you can improve your own reflective, communicative, and behavioral ca reer competencies.

3. Prepare a developmental plan that includes professional development needs, resources/support needed, and a timeline for meeting each need with the goals of improving performance in current position, sustaining performance in current position. preparing employees for advancement . and enriching the employee's work experience.

4. Produce a development plan that includes a range of activities (e.g .. on-the-job training, courses. self-guided studying, mentoring. attending a conference or trade show. mixing with the best. job rotation. getting a degree).

5. Propose a developmental plan that highlights the key role of the supervisor as a guide and facilitator of the devel- opmental process (e.g., explaining what is required of the employee to reach a required performance level. referring to appropriate developmental activiti es. reviewing and making suggestions about developmental objectives).

6. Implement a multisource (i.e .. supervisors. peers. self, di- rect reports. customers) feedback system with the goal of providing feedback on and improving performance.

7. Implement multisource feedback systems that takes ad- vantage of all of its benefits (e.g .• increased awareness of expectations. improved performance, reduced "undis- cussables" and defensiveness).

8. Implement multisource feedback systems that minimize potential risks and pitfalls (e.g .• could hurt employees' feel· ings. individuals may feel uncomfortable with the system and believe they will not be rated honesHy and treated fairly, is un· likely to work well in organizations that have highly hierarchical cultures that do not support open and honest feedback).

225

226 Part Ill Employee and Leadership Development

Part I of this text described strategic and macro-organizational issues in designing a performance management system. Part II described operational and technical details on how to roll out and implement the system. As is mentioned throughout this book, employee development is a key result of state-of-the-science performance management systems. Accordingly, Part III includes two chapters dealing with developmental issues and pertains to two key stakeholders in the developmental process: (1) the employees of the organization, who are improving their own performance, and (2) the managers (i.e., performance management leaders), who g uide and facilitate the process of employee development for their direct reports so that it can successfully occur. Development planning is a joint activity entered into by both the employee and the manager. This chapter addresses how to use a performance management system to help employees develop and improve their performance. Chapter 9 addresses the leadership skills needed by managers so that they can best manage the performance of their employees. Let us begin this chapter by discussing personal developmental plans.

8-1 PERSONAL DEVELOPMENT PLANS Personal development plans specify courses of action to be taken to improve performance. Also, achieving the goals stated in the development plan allows employees to keep abreast of changes in their field or profession. Such plans highlight an employee's strengths and the areas in need of development, and they provide an action plan to improve in areas of weaknesses and further develop areas of strength.1 In a nutshell, personal development plans allow employees to answer the following questions:

• How can I continually learn and grow in the next year? • How can I do better in the future? • How can I avoid performance problems faced in the past? • Where am I now and where would I like to be in terms of my career path?

Development plans can be created for every job, ranging from entry level to the executive suite (e.g., CEO, CFO). No matter how high up the position within the organization and how simple or complex the nature of the job in q uestion, there is always room for improvement. Information to be used in designing development plans comes from the appraisal form. Specifically, a development plan can be designed based on each of the performance dimensions evaluated . For example, if the performance dimension "communication" is rated as substandard, this area would be included in the development plan.

Development plans focus on the short term and on specific roles and positions, but also on the knowledge and skills needed for more long-term career aspirations and career development. Specifically, good development plans also focus on developing career competencies, including the following three sets of competencies2:

• Reflective career competencies. Being aware of one's career and combining personal reflections with one's professional career. The two competencies that comprise this dimension are reflection on motivation, which refers to reflecting on values, passions, and motivations with regard to one's career; and reflection on qualities, which refers to reflection on strengths, shortcomings, and skills with regard to one's career.

Chapter 8 Performance Management and Employee Development 227

• Communicative career competencies. Being able to effectively communicate with others to improve one's chances of career success. The two competencies are networking, which refers to the awareness of the presence and professional value of one's network, and the ability to expand this network for career-related purposes; and self-profiling, which refers to presenting and communicating one's personal knowledge, abilities, and skills to individuals inside and outside the organization.

• Behavioral career competencies. Being able to shape one's career by taking action and being proactive. The two specific competencies are work exploration, which refers to actively exploring and searching for work-related and career-related opportunities inside and outside the organization, and career control, which refers to actively influencing learning processes and work processes related to one's career by setting goals and planning how to reach these goals.

Now, pause for a few minutes and give yourself some time to think about the three aforementioned sets of career competencies. Where do you stand regarding reflective, communicative, and behavioral career competencies? What are your strongest and your weakest competencies? Which ones should you be working on to improve your future career prospects?

In addition to improved short-term performance and career path clarity, the inclusion of development plans, and in more general terms, the identification of employee strengths and weaknesses as part of the performance management system have another important benefit: employees are more likely to be satisfied w ith the performance management system.3 For example, a study including 137 employees at a production equipment facility in the southern United States showed that the greater the extent to which employees believed that the system was being used for development purposes, the more satisfied they were with the system. On the contrary, perceptions of the extent to which the system was

Box 8-1

Company Spotlight: Individual Development Plans at General Mills At General M ills, individual development plans (lOPs) are promote the process for employees by host ing speakers, promoted strongly throughout the company. The Minneapolis, offering Web-based learning tools, and holding workshops Minnesota-based General Mills is an international foods for employees and managers to get the most out of the company. Some of the best-known brands include Annie's process. Some of these sessions are specifically ta ilored Homegrown, Betty Crocker, Yoplait, Colombo, Totino's, to d ifferent k inds of posit ions within t he company w ith Pillsbury, Old El Paso, Haagen-Dazs, Cheerios, Trix, Cocoa d ifferent needs in the development process. Also, the IDP is Puffs, and Lucky Charms. The formally written lOPs are kept separate f rom t he annual performance appraisal, as the completed annually, but the expectation is for ongoing belief is that development planning cannot be sufficient ly conversations wit h managers and employees, f ocusing addressed in the context of appraisal. In summary, General not only on competencies t hat are well developed and M ills provides an example of a company that has made those that are in need of improvement, but also on the a strong commitment to the growth and learning of all employee's career aspirations. The company's IDP sessions employees.•

228 Part Ill Employee and Leadership Development

used for evaluative purposes did not relate to employee satisfaction with the system. In other words, using the system for evaluative purposes d id not relate to employee satisfaction, but using the system for development purposes had a positive relationship with satisfaction. This is precisely the reason why so many companies, such as the The Gap, Ely Lilly, Microsoft, and Accenture, emphasize that their performance management systems have a strong focus on employee development. Box 8-1 describes how development plans, including short- and long-term objectives, are implemented at General Mills.

Finally, another important aspect of personal development plans is that they allow organizations to gather information that can be used for succession planning purposes.5 For example, based on individual career aspirations, an organization is able to identify employees who may be interested and able to serve in leadership positions in the future. Many "high-potential" programs are essentially based on combining employees' current performance and future aspirations with the organization's future talent needs. Thus, development plans serve an important strategic role in helping an organization address future possible talent gaps.

8·1·1 Development Plan Objectives The overall objective of a development plan is to encourage continuous learning, performance improvement, and personal growth. In addition, development plans have other, more specific objectives:

• Improve performance in a1"ent position. A good development plan helps employees meet performance standards. Thus, a development plan includes suggested courses of action to address each of the performance dimensions that are deficient. This is an important point, given that surveys have shown that about 25 percent of federal employees and between 11 percent and 16 percent of private sector employees in the United States are not performing up to standards.6

• Sustain perjom1nnce in current position .. A good development plan provides tools so that employees can continue to meet and exceed expectations regarding their current position. Thus, the plan includes suggestions about how to continue to meet and exceed expectations for each of the performance dimensions included in the appraisal form.

• Prepare employees for advancement. A good development plan includes advice and courses of action that should be taken so that employees will be able to take advantage of future opportunities and career advancement. For example, a good p lan indicates which new competencies should be learned to help with career advancement.

• Enrich the employee's work experience. Even if career opportunities within the organization are not readily available, a good plan provides employees with growth opportunities and opportunities to Jearn new skills. These opportunities provide employees with intrinsic rewards and a more challenging work experience, even if the new skills learned are not a formal part of their jobs.7 Such opportunities can make jobs more attractive and serve as a powerful employee retention tool. In addition, the new skills can be useful in case of lateral transfers within the organization.

As an illustration, consider the employee development plan used for staff at Texas A&M University in College Station, Texas. Because the development plan

Chapter 8 Performance Management and Employee Development 229

is a formal component of the university's performance management system, the development plan is included within the appraisal form. The appraisal form used by Texas A&M first lists the six objectives of the performance management system:

1. Provide employees with feedback to improve or maintain job performance.

2. Outline areas for employee development. 3. Set standards for the next review period. 4. Recognize job-related accomplishments. 5. Enhance communication and working relationships. 6. Identify job performance deficiencies (any factor "Does Not Meet

Expectations") and report to the next level of supervisory responsibility.

Based on objective 2, the employee development plan is an important component of the performance management system. The inclusion of this objective upfront sets the tone for the development process by helping managers understand that this is an important issue.

After the sections in the form in which the manager rates employee performance, the following material is included:

i Please list professional development activities to be completed and resources needed to support these activities, if appl icable

Professional Development Needs Resourc.es/Support Needed Time f rame

The inclusion of this information after performance ratings allows the manager and employee to focus on developmental areas identified as weaknesses in the performance review process. In this way, the development plans created for employees at Texas A&M are directly related to performance dimensions important for the unit and the overall organization. In addition, including the development plan at the end of the review and after setting annual performance goals allows the employee to determine whether there are areas he or she needs to develop in order to attain the specified goals.

8·1·2 Content of Development Plan What does a developmental plan look like? Plans should include a description of specific steps to be taken and specific objectives to reach. In other words, what is the new skill or knowledge that w ill be acquired and how will this occur? This includes information on the resources and strategies that will be used to achieve

230 Part Ill Employee and Leadership Development

the objectives. For example, will the employee Jearn the skill from a coworker through on-the-job training? Will the company reimb urse the employee for expenses associated with taking an online course?

The plan's objectives should include not only the end product, such as the new skill to be learned, but also, the completion date and what evidence will be gathered to know whether the new skill has indeed been acquired. For example, in the case of an online course, the objective could state that it w ill be completed by July 23, 2019, and the employee is expected to receive a grade of B+ or better. Overall, objectives included in the development plans should be practical, specific, time-oriented, linked to a standard, and developed jointly by the supervisor and the employee.

An additional important feature of development plans is that it should keep the needs of both the organization and the employee in mind. As mentioned earlier, state-of-the-science development plans are used strategically to connect the organization's future talent needs with an employee's performance and aspirations. The choice of what specific skills or performance areas will be improved is influenced by the needs of the organization , especially w h en the organization is investing substantial resources in the plan. In addition, the plan created is influenced by the needs of the employee. The supervisor and the employee need to agree on what development or new skills will help enrich the employee's work experience, as well as help accomplish organizational goals now or in the near future.

As an example, Jet us consider once again the content of the development plan at Texas A&M. First, employees are directed to a website that includes examples of possible developmental activities. This list includes workshops; certifications; local, state, and national conferences; on-the-job training; and other activities. This information presents employees and managers with various options they can use to achieve the developmental objectives. Second, the form includes space so that each professional developmental need is paired with a description of resources or support needed and a time frame for completion. For example, the developmental plan for an administrative assistant in the business school may look like this:

SECTION B: PROFESSIONAL DEVELOPMENT PLAN

Please list profess ional development activities to be completed and resources needed to support these activit ies, if appl icable

P rofessional Development Resources/Support Needed Time frame Needs

I. Knowledge of Excel Reimbursement for online Course to be completed by (spreadsheet program) course August I, 2019

2. Customer service ski lls in Reimbursement for one-day Workshop to be completed dealing with students and workshop. Time to receive by October 15, 2019. faculty on-the-job training from On-the-job training to be

administrative assistant in completed by November communications department 8,2019

Chapter 8 Performance Management and Employee Development 231

Overall, the Texas A&M p lan includes all of the required components . There is a description of developmental objectives, activities that will be conducted to reach these objectives, and dates of completion. One important piece seems to be missing, however. The p lan does not include specifics of how the accomplishment of each objective will be measured. Specifically, how will the supervisor know if the administrative assistant has a good work- ing knowledge of Excel after he has completed the online course? How will the supervisor know if the administrative assistant's customer service skills have improved after he has attended the workshop and has undergone on- the-job training? Excel proficiency could be measured by the administrative assistant's performance in the course or by examining answers to questions about knowledge of Excel that faculty, and others giving Excel assignments to the administrative assistant, answer in filling out appraisal forms. Regarding customer service skills, the accomplishment of the objective might be measured by gathering data from those customers served by the administrative assistant (i.e., faculty and students).

8-1-3 Developmental Activities C learly, developmental activities are dependent on an organization's strategic goals and objectives, and also, on resources that may or may not be available. For example, on-the-job training is more likely to take place in small, compared to large organizations, which may have a training and development unit, or have sufficient resources to offer in-house courses, or pay for an employee to take a course at a local university. There are several ways through which employees can reach the objectives stated in their development p lans, including:

• On-the-job training. Employees are paired with a peer or supervisor who designs a formal on-the-job training course. The design of these "mini-training programs" includes how many hours a day or week training will take place and specific learning objectives.

• Courses. Some large organizations, such as McDonald's, Motorola, Capgemini, Ernst & Young, and others, offer in-house courses given at their own corporate universities. Other organizations may provide tuition reimbursement. Given the proliferation of online courses, there is a wide variety of options from which to choose.

• Self-guided studying. Employees can read books, watch video presentations, and study other materials on their own. Once again, it is important that an objective be set regarding what will be read and within what time frame, as well as what measure(s) will be used to assess whether learning has taken place.

• Mentoring. Many organizations have mentoring programs. In general terms, mentoring is a developmental process that consists of a one-on-one relationship between a senior (mentor) and junior (protege) employee. For such programs to be successful, it is best to allow the mentor and protege to choose each other, rather than arbitrarily assigning who will be mentoring whom. In general, mentors serve as role models and teach proteges what it takes to succeed in the organization. In more specific terms, mentors can help proteges gain targeted skills.

232 Part Ill Employee and Leadership Development

• Attending a conference or trade show. Another way to acquire required knowledge and skills is to sponsor an employee's attendance at a conference or trade show. It is useful to require that the employee provide a written report and deliver a brief presentation upon returning from the conference. In this way, it is easier to assess what has been learned, and in addition, the knowledge gained can be shared with other organizational members. As is true for most developmental activities, they have to be directly linked to an employee's development plan and also an organization's needs. This principle clearly applies to attending off-site conferences and trade shows, given that this developmental activity is particularly prone to abuse.8

• Mixing with the best. A developmental activity particularly targeting entrepreneurs and high-level executives involves the "Genius Network," a by-application-only network whose participants pay $100,000 to attend three meetings a year. This network connects high-achieving entrepreneurs, industry innovators, and best-selling authors and their goal is to help them grow their business tenfold.9

• Getting a degree. Some organizations provide tuition reimbursem ent benefits for their employees to obtain additional degrees or certifications. For example, the organization can sponsor an employee's MBA program or an employee's taking specialized courses with the goal of earning a certification designation (e.g., Certified Novell Administrator, Professional in Human Resources). In most cases, employees commit to continuing the relationship with their employer for a prespecified amount of time after completing the degree. If the employee leaves the organization before this time frame, she may have to reimburse the organization for the cost of her ed ucation. As an example, the firm Boston Consulting Group (BCG) sponsors "BCG MBA Fellows," which is a scholarship program that includes not only a tuition reimbursement, but also ind ividual mentorship by senior BCG consultants. To be eligible for this program, a BCG employee must work for the company for at least two years, and then, be enrolled in a full-time MBA program approved by BCG. This is a developmental activity that serves an important strategic p urpose for BCG because it helps build a talent pool needed for its succession planning needs, given that it has more than 80 offices in 48 countries and more than 14,000 employees.

• Job rotation. Another way to gain necessary skills is to be assigned to a different job on a temporary basis. This is the model followed in the medical profession in which residents have to rotate across specialty areas for several months (e.g., OB-GYN, psychiatry, pediatrics). For example, residents may be required to rotate across the various emergency medicine services for a 19-month period.

• Temporary assignments. A less systematic rotation system includes the opportunity to work on a challenging temporary assignment. This allows employees to gain specific skills within a limited time frame.

• Membership or leadership role in professional, trade, or nonprofit organizations. Some employers sponsor membership in professional, trade, or nonprofit organizations. Such an organization distributes publications to its members and holds informal and formal meetings in which employees have an opportunity to Jearn about best practices and other useful information for

Chapter 8 Performance Management and Employee Development 233

On-the-job training

Courses

Self-guided studying

Mentoring

Attend1ng a conference or trade show

Mixing with the best

Getting a degree

Job rotation

Temporary assignments

Membership or leadership role in professional, trade, or nonprofit organizations

their jobs. For example, this could include the Society for Human Resource Management, Chartered Institute of Personnel and Development for Human Resources (HR) Professionals or the Australian Human Resources Institute. Also, presentation, communication, planning, and other skills can be learned while serving in a leadership role in a volunteer organization outside of work (e.g., local charity, church, or synagogue).

Table 8-1 includes a summarized list of developmental activities that may be available to achieve goals included in a development plan. Based on your own preferences and learning style, which of these activities do you believe would be most beneficial to you? Please rank these activities in terms of your preference. Does the organization you work for now, or worked for most recently, offer any of these opportunities? If not, to what extent is this a factor that would motivate you to look for a job elsewhere, where more of these developmental activities would be made available to you?

An example of a development plan is included in Figure 8-L The development plan can be part of the appraisal form, or it can be included in a separate form. The form included in Figure 8-1 shows that employees have several choices in terms of developmental activities. Note that the form includes space so that information can be inserted regarding what activities will take place when, what the objectives are, and whether the objective has been met or not.

Many of the activities listed above are relevant for employees at all levels. However, some, such as the "mixing with the best" activity, pertain specifically to high-level managers. In fact, the issue of managerial development is very important on its own because it is directly related to succession planning- as discussed earlier. For example, employees who aspire to secure managerial positions should evaluate all developmental activities to understand which ones would be most beneficial to achieve this particular career goal.10

Consider your future career expectations and developmental needs. Then, fill out the form included in Figure 8-1, assuming your current or future employer will be willing to provide any developmental opportunities of your choosing. What does your plan look like? What did you discover about what you would like to Jearn in the future? What does this information tell you about your level of aspirations and future prospects for your career advancement?

TABLE 8-1 Summary List of Development Activities

234 Part Ill Employee and Leadership Development

FIGURE 8-1 Example of a Development Plan Form

Update Date: Name: Job TiUe/Job Code: Department Prima1y Reviewer: Education: Prior Training: Job History: Career Goals:

Next !year Next 2 years Next 3years Next 5 years

OptionsOJT ... ,I (on-the-job) Type of Training Development

Classes Current Quarter

Conferences

On-line

Self-study

Job rotation Next Quarter

Videos

Books

Temporary assignment

Mentorship Current +£

Other (specify)

II Current +il.

I I Completed I Hours Comments- How (ThiS Approximate Objectives/

When Long Quarter) Cost-Other Evaluation

8-2 DIRECT SUPERVISOR'S ROLE The direct superv isor has an important role in the creation and comple- tion of the employee's development plan. Because of the pivotal role of the direct supervisor in the employee development process, it is a good idea for the superv isor to have her own development plan a s well. This will help the supervisor understand the process from the employee's perspective, anticipate potential roadblocks and defensive attitudes, and create a plan in a collaborative fashion. n

Chapter 8 Performance Management and Employee Development 2315

In terms of the specific role of the supervisor, consider the following five ftmctions:

1. explaining what is required of the employee to reach a required performance level

2. referring to appropriate developmental activities 3. reviewing and making suggestions about developmental objectives 4. checking on the employee's progress toward developmental objective

achievement 5. offering the opportunity for regular check-ins and reinforcing positive

behaviors

Let us d iscuss each of these functions in tum. First, the supervisor needs to explain what would be required for the employee to achieve the desired performance level, including the steps that an employee must take to improve her performance. This information needs to be provided together with information on the probability of success if the employee completes the suggested steps. A good tool that supervisors can use to accomplish this goal is to use the feedforward interview (FFD. The goal of the FFI is to understand the types of behaviors and skills that individuals have that allow them to perform well, and to think about ways to use these same behaviors and skills in other contexts to make further improvements in the future. The FFI includes a meeting between the supervisor and employee and involves the following three steps12:

1. Eliciting a success story. The supervisor sets the stage as follows: "All of us have both negative and positive experiences at work. I would like to meet with you to discuss some positives aspects only and see how we can Jearn from those experiences about things that work well." Then, the supervisor can ask, "Could you please tell me a story about an event or experience at work during which you felt at your best, full of life and in flow, and you were content even before the results of your actions were known?" It is important that the story be very specific about an actual incident and not a general statement about "In general, these are the things I do at work .... " So, the story must be situated within a specific context. After the supervisor hears the story, she can summarize it for the employee to hear it, and then, the supervisor can ask whether any information is missing or anything else should be added to the story. A follow-up question is, "Would you be happy to experience a similar process again?" If the answer is in the affirmative, then the subsequent questions attempt to go deeper into the details of the story. If the story is associated with mixed feelings and is not completely positive, then a different story must be elicited.

2. Uncover the underlying success factors . The second step involves understanding the factors that Jed to the successful story. For example, the supervisor can ask, "What were some of the things you did or did not do, such as your specific personal strengths and capabilities, that made this success story possible?" and "What were the conditions that made this success story possible?" It is important to uncover both the personal and contextual factors that Jed to the success story. This step is similar to conducting detective work to try to understand the various factors

2315 Part Ill Employee and Leadership Development

that Jed to success, includ ing the role that the work environment (e.g., technology) and others (e.g., customers, peers) played in the story.

3. Extrapolating the past into the future. The third step involves asking questions that will lead to an employee's ability to replicate the conditions that Jed to success in the past into the future. So, the supervisor can first note that "The conditions you have just described seem to be your personal code for reaching [insert the key achievement in the story such as happiness at work, optimal performance, outstanding leadership, etc.]." Then, follow up with questions such as, "Think about your current actions, priorities, and plans for the near future (e.g., next week, month, or quarter) and tell me how you think you may be able to replicate these conditions to be able to achieve the same level of [insert satisfaction, achievement, performance, etc.] as you d id before."

An experiment involving all 25 managers in the sales and customer service units of a business equipment firm in Canada provided evidence regard ing the effectiveness of the FFI.13 The managers and their direct reports were randomly assigned to one of two experimental cond itions (a) feedforward interview (n = 13 managers, 70 employees), or (2) traditional feedback (n = 12 managers, 75 employees). Results showed that compared to traditional feedback, the FFI increased performance four months later. So, the effects of the FFI are relatively enduring. Also, the training required to teach managers how to use the FFI is fairly short. In this particular experiment, it took just two-and-a-half hours to train 13 managers, which helped shift the role of the manager from a judge or critic of an employee's past performance to appreciative inquiry of what an employee will do in the future.

As an outcome of the FFI, there may be resources that the employee may need to achieve his developmental goals. Thus, as a second important function, the supervisor has a primary role in referring to appropriate developmental activities that can assist the employee in achieving her goals. For example, this includes helping the employee select a mentor, appropriate study resources, courses, and so forth .

Third, the supervisor reviews and makes suggestions about the developmental objectives. Specifically, the supervisor helps assure the goals are achievable, specific, and doable (recall our discussion about goals in Chap ter 5).

Fourth, the supervisor has primary responsib ility for checking on the employee's progress toward achieving the developmental goals. For example, the supervisor can remind the employee of due dates and revise goals, if needed.

Finally, in addition to regular check-ins, the supervisor need s to provide reinforcements so the employee will be motivated to achieve the developmental goals. Reinforcements can be extrinsic and include rewards such as bonuses and additional benefits, but reinforcements can also include the assignment of more challenging and interesting work that takes advantage of the new skills learned .

To be successful in performing the five aforementioned functions, supervisors themselves need to be motivated to support the employees' completion of their developmental objectives. For this to happen, supervisors must be held accountable and rewarded for doing a good job in helping their employees de- velop. 14 Consider how this is done at KLA-Tencor Corporation, one of the world's top 10 developers and manufacturers of inspection and measurement equipment for the semiconductor and nanoeletronics ind ustries. KLA-Tencor is a global

Chapter 8 Performance Management and Employee Development 237

company including 6,000 people in 17 countries, united by a "culture that rewards innovation and recognizes the power of collaboration to deliver breakthroughs." At KLA-Tencor, between 10 percent and 30 percent of supervisors' bonus pay is directly tied to employee development, which is measured in terms of employee training and certification levels. Managers are given at least quarterly updates on the status of their staff development. In addition, employees themselves are rewarded for engaging in developmental activities. In fact, only employees with up-to-date trairting and certification levels are eligible for bonuses. Thus, employee development is successful at KLA-Tencor because both employees and managers are directly rewarded for employee development. After several years of implementing these practices, employee development has become the norm and is part of the KLA-Tencor's culture.15 As an additional example specifically regarding the role of supervisors in implementing the development plan, Jearn how this is done at Diageo, as described in Box 8-2.

In sum, direct supervisors play a key role in the success of the development plan because they are directly involved in the assessment of objective accomplishment and monitor progress toward accomplishing developmental objectives. Also, they must be highly committed to the development of their employees and motivated to help their employees fulfill their career aspirations. To do so, supervisors must be evaluated, in part, based on how well they manage the developmental process for their employees. When these conditions are present, the development plan becomes an integral part of the performance management system, all employees have a plan (including managers from all levels in the organization), all employees are able to access different types of developmental opportunities on an ongoing basis, and alignment between employee and organizational goals is enhanced.16

Box 8-2

Company Spotlight: Role of Direct Supervisor in Development at Diageo Diageo makes and distributes alcoholic beverages that development goals that are aligned with the employee's include brands such as Smirnoff (the world's best-sell ing career aspirations. Monthly meetings, referred to as "call vodka), Johnnie Walker (the world's best-sell ing blended overs," are held to review progress toward goals and Scotch whisky), Baileys (the world's best-selling liqueur), to adjust goals as necessary. Also, t he supervisor helps and Guinness (the world's best-sell ing stout). Also, Diageo provide a means for development and reach ing goals owns 34 percent of Moet Hennessy, which owns brands by ensuring employees receive t raining, course work, or including Moet & Chandan, Veuve Clicquot, and Hennessy. studying material on relevant topics. Another strategy Diageo sells its products in more than 180 countries and has includes g iving assignments outside of one's current po- offices in about 80 countries. The company has recognized sition responsibilities, such as leading a project, to test the va lue of employee development and expects supervi- one's skil ls and practice what the employee has learned sors to play an important role in the development of their in the development process. In summary, Diageo has direct reports. Specifically, the company's career develop- recognized the critical role t hat managers shou ld play ment program includes a formal review and goal setting, in the employee development process. Th is involvement along with regular meetings to keep development fresh benefits the individua l employee's growth and also aids in the minds of employees. The supervisor faci litates the in aligning employee skil ls and actions with the strategic process in several ways. The supervisor helps identify specific goals of the organization as a whole."

238 Part Ill Employee and Leadership Development

Next, we address an important tool used for employee development purposes: multisource feedback systems. Although these systems are called using different labels, such as 360-degree systems, multi-rater, multisource, full circle, or 450 feedback, the basic principle is the same: We gather the most useful information about employee's development needs when we use multiple sources of performance information.18

8-3 MULTISOURCE FEEDBACK SYSTEMS The multisource feedback system has become a preferred tool for helping employees, particularly those in supervisory roles, improve performance by gathering information on their performance from different sources.19 As mentioned above, multisource feedback systems are usually called "360-degree" systems because information is gathered from sources all around the employee. Specifically, information on what performance dimensions could be improved is gathered from superiors, peers, customers, and direct reports. This information is usually collected anonymously to minimize rating inflation. Employees also rate themselves on the various performance dimensions and compare self-perceptions with the information provided by others. A gap analysis is conducted to examine the areas for which there are large discrepancies between self-perceptions and the perceptions of others. A multisource feedback system report usually includes information on dimensions for which there is agreement that further development is needed. This information is used to create a development plan, as described earlier in the chapter.

A multisource feedback system is most helpful when it is used for developmental purposes only and not for administrative purposes.20 This is because people are more likely to be honest if they know the information will be used to help individuals improve and not to punish or to reward them. However, it is possible to implement such systems successfully for administrative f.urposes after they have been in place for some time-usually, two years or so. 1

Feedback reports usually include graphs showing the areas in which employees' perceptions differ the most from the perceptions of other sources of performance data. They can also show average scores, across sources of information, so that the areas that need improvement are readily identified . The resulting report is usually made available to the employee and his supervisor so that both have an opportunity to review it before meeting to create a development plan.

A trend adopted by many vendors that offer online multisource feedback systems is to offer a bundle of systems, includ ing multisource feedback together with learning management, compensation, and even recruiting and succession planning.22 These integrative applications, usually called "talent management" systems, allow to manage data about employees in a systematic and coordinated way. Such integrative software applications allow organizations to create an inventory of their human capital and better understand their strengths and weaknesses at the organizational level. For example, an organization that uses such applications is quickly able to deploy project teams with the appropriate mix of skills and experience after doing a quick search in the database. Another important advantage of these integrative applications is that performance management can be more easily linked to recruiting, compensation, training, and succession planning. In other words, the system can keep track of an employee's developmental needs and how these needs have been addressed (e.g., via training) over time.

Chapter 8 Performance Management and Employee Development 239

As an illustration, consider a system offered by Profiles International, called CheckPoint 360. This system, designed for employees in supervisory roles, in- cludes information on the following competencies:

• Communication (listens to others, processes information, communicates effectively)

• Leadership (instills trust, provides direction, delegates responsibility) • Adap tability (adjusts to circumstances, thinks creatively) • Relationships (builds personal relationships, facilitates team success) • Task management (works efficiently, works competently) • Production (takes action, achieves results) • Development of others (cultivates individ ual talent, motivates

successfully) • Personal d evelopment (displays commitment, seeks improvement)

The CheckPoint 360 system includes self-evaluations as well as evaluations provided by the direct supervisor, d irect reports, and peers. After performance information has been collected from all these sources, the manager evaluated re- ceives feedback in the form of the graph shown in Figure 8-2. This graph illustrates the discrepancies between self- and others' ratings as well as the scores obtained for each competency. For example, this graph shows that this particular manager has the greatest gap for the competency "development of others." Specifically, the manager assigned a score of about 4.5 to herself, whereas the average score p rovided by her direct supervisor, direct reports, and peers is only 2.55. The CheckPoint system uses the following scale to rate competencies:

0

2

3

4

5

Not Applicable (not averaged into scores)

Never demonstrates this

Seldom demonstrates this

Sometimes demonstrates this

Usually demonstrates th1s

Always demonstrates this

In this particular illustration, the manager believes that she displays behaviors indicating the competency " development of others" somewhere between "usually" and "always." By contrast, her s upervisor (i.e., "boss"), employees, and peers believe that she demonstrates these behaviors somewhere between "seldom" and "sometimes." In other words, the self-rating falls within the favorable zone whereas the ra tings provided by others do not.

To explore this gap further, the report provided to the manager also includes more detailed information on the scores provided by each source of information. The Reference Group Comparison chart included in Figure 8-3 shows this information. An examination of the scores p rovided for the competency "development of others" indicates that all sources, except for the manager herself, agree that work is needed regarding this competency because all scores are between the "seldom" and "sometimes" categories. By contrast, the manager believes she is doing an exceptional job of cultivating individual talent (score of 5) and motivating successfully (score of 4).

240 Part Ill Employee and Leadership Development

FIGURE 8-2 Checkpoint 360-degree Competency System: Executive OveNiew. © Profiles International, Inc., Waco, Texas, USA

Executive Overview Overview of Self vs. All Observers

Total CheckPoint Scores N«

I

Colorll.cy: O &tf 4-GfV+: All Obtl'r.ffib} I p(llll Wlll(lf'i'.

Differential 0.34

Source Bob Strategic Business Partner of Profiles Internationa l, lnc. SQS.634--7748, [email protected]. com, http://v.rww.ga.telyoonsulting.oom/chkpointhtm. Courtesy of Profiles In ternationa l, Inc.

Chapter 8 PerFormance Management and Employee Development 241

Reference Group Comparison with Management Alignment of Self and Boss

StiiiSm I I Ptrforman« A111lysis low

I ..... ' ·-Conmtunication Listens To O!hers

Processes Information

Communicates

Leadership lustUI.s T mst

Provides Direction

Delegates Re:,ponsibility

Adaptahilitv Adjlists to Circumstances

Thinks

Relationshill!! Builds Personal Relationships

FaciliwJes Team

Task Management Works Ejjicielllly

Work.t Compelently

Production Takes Action

Acbif!l.Y!S Resulls

Development Of Others Culthtllf!S bu/i,•idutd Talents

.IIJotivGies Succes.sfu/Jy

Personal Development Commifmenr

Seeks lmprovemem

Total CheckPoint Scores I , ..

• • Sdf Qu. C)l'ftN

Source: Bob Strategic Business Partner of Profiles International, Inc. 508-634--7748, bob®gate:lyconsulting. com, http://www.gate:lyoonsulting.com/ chkpoinlhtm. Courtesy of Profiles international, Inc.

FIGURE 8-3 Checkpoint 360-degree Competency System: Reference Group Comparison. © Profiles International, Inc., Waco. Texas, USA

242 Part Ill Employee and Leadership Development

FIGURE 8-4 Checkpoint 360-degree Competency System: Development Summary. © Prof1les In ternational, Inc., Waco, Texas, USA

It is not sufficient, however, just to provide scores regarding each of the competencies. Becoming aware that there is a problem with a competency is a very good first step, but a good multisource feedback system also provides concrete suggestions about what to do to improve competencies.24 The CheckPoint system does this by providing what is called a development summary. The development summary describes strengths and areas that should be developed further. An example of this is shown in Figure 8-4. According to the graph, this

Development Summary for Darcy Walker

SkiiiS.t

Strengths A consensus of youneference gmup Jatings shows these competencies are clear strengths. as they fall in or above the Favornble Zone.

1.'1 Oisploys Commilmcnt Works Competently

Achieves Takes J.\ction Bu1lds Personal Relationships Works Efficiently II Adjusts to Circumstances Instills T•·ust Listens To Others

Development Areas A consensus of yourreference gmup Jatings shows these competencies (which faiJ below the Favornble Zone) as in need of improvement and should be considered a lop pliotity foryou.rcat-eerdevelopment.

Thinks Creatively 1iJ Communicates EITecth·ely

Facilitates Team Succe.ss II Information m Seeks lmprO\'tment Motivates Cultivates Individual Talents m PrO\'ides Direction

Delegates Rt"Sponsibility

Critical Devetopme1n Area!

Critical Developme.Jlt Area!

Critical Development Area! Critical Development Area!

The critical development areas ate deteonined by input from Boss and Self and the telalionship of the Favornble Zone.

,1,.

,1,.

All Obs<rvtrs Rating

• , ....

' , ....

' , .... Source-: Bob Strategic Business Partne r of Profi les International, lnc. SQS.634--7748, [email protected] .com, http://'"'"vw.gatelyconsulting.oom/ chkpoint.htm. Courtesy of Profi les International, lnc.

Chapter 8 Performance Management and Employee Development 243

particular manager has several strengths, but also, some areas that deserve further development. For example, there is a need to work on the "facilitates team success" dimension of the competency "relationships." The report also includes specific suggestions on how to improve this competency, which are shown in Figure 8-5. Specifically, the manager is given tips and advice regarding concrete steps to be taken to improve performance. For example, in terms of learning to collaborate on team decisions, the manager is given advice about how to compromise and reach win-win decisions and how to gain support for decisions.

Suggestions for Improvement tor Darcy Walker

following suggestions will help direct your development efforts:

Facilitates Team Success

• Don't ignore conflict. thinking it will disappear. 11 won't. And don't expect a conflict-free workplace. Some discord is inevitable and constructively dealing with it will create a more productive work environment.

• Listen carefully to all viewpoints in a disagreement. Define the problem. Tiren begin tlte process of resolution.

• Explore multiple options. Tiren resolve with solutions that are acceptable to all involved parties.

• When recognizing outstanding perfonnance, go beyond the acknowledgment of individual successes. Give equal emphasis to team achlevernents and effective cooperntion among learns.

• Validate the importance of each and eve!)' team member's contribution.

• Prnctice tlte art of compromise when making decisions. creating win/win situations. • To gain support fordecisions. involve the team in considering altemative approaches. Strive for

consensus in orderto increase commitment to O•e final decision.

ESS>lishT Elm Obju tive.

• As much as possible involve the team in fonnulating goals consistent with. and supportive of. tlre overnll mission of your business. Also solicit input when planning the implementation of the goals.

• Make sure evel)'one under:stands tlte team's goals, as well as tlreirrole in attaining the goals. • Keep evel)'One apprised of team progress.

D& Eiqt Gro.p DynmicsThai:BrirgO<.tttEII.S:inEva-ya-e

• Recruit individuals witlr talents tlrat will complement tire skills of otlrertearn member:s. • Capitalize on each per:son's strengths and experiences to create a potent team effort.

Souru: Bob Strategic Business Partner of Profiles international, Inc. 508-634--7748, bob®gate:lyconsulting .com, http://v.rww.gatelyoonsulting.oom/chkpoinlhtm. Courtesy of Profiles International, Inc.

FIGURE 8-5 Checkpoint 360-degree Competency System: Suggestions for Improvement. ©Profiles International, Inc., Waco. Texas, USA

244 Part Ill Employee and Leadership Development

8-3-1 Benefits of Multisource Feedback Systems Organizations and individuals can gain several advantages as a consequence of implementing a multisource feedback system. These include the following:

• Decreased possibilif:lJ of biases. Because these systems include information from more than one source, there is a decreased possibility of biases in the identification of employees' weaknesses.

• Increased awareness of expectations. Employees become aware of others' expectations about their performance. This includes not only the supervisor's expectations, but also, the expectations of other managers, peers, direct reports, and customers.

• Increased commitment to improve. By using multisource feedback systems, information about performance is no longer a private matter. Thus, employees become aware of what others think about their performance, which increases their commitment to improve in the future.

• Improved self-perceptions of performance. Employees' distorted views of their own performance are likely to change as a result of the feedback received from other sources. In other words, it is difficult to continue to have distorted views of one's own performance in the presence of overwhelming evidence that these perceptions may not be correct.

• Improved perfonnance. Although receiving information about one's performance is not sufficient cause to improve, it is certainly a very important step. Thus, having information on one's performance, if paired with a good development plan, is likely to lead to performance improvement.

• Reduced "undiscussables" and defensiveness. Multisource feedback systems provide an excellent opportunity for coworkers, superiors, and direct reports to give information about performance in an anonymous and nonthreatening way. Many supervisors may feel uncomfortable about providing negative feedback and some issues become "tmdiscussables." But a multisource system makes providing such feedback easier. Also, from the perspective of employees, it is harder to ignore and become defensive regarding the accuracy of performance feedback when it originates from multiple sources.25

• Employees enabled to take control of their careers. By receiving detailed and constructive feedback on weaknesses and strengths in various areas, employees can gain a realistic assessment of where they TABLE 8 ·2 should go with their careers. Summary Ust of Benefits Resulting From a Table 8-2 includes a summa-

rized list of benefits that organiza- tions can obtain from implementing a multisource feedback system. Consider an organization for which you have worked that has imple- mented a multisource feedback system. If you carmot think of one, talk to friends or family members and ask them about a system they

Multisou rce Feedback System

Decreased possibility of biases

Increased awareness of expectations

Increased comm1tmentto improve

Improved self-perceptions of performance

Improved performance

Reduced ·undiscussables'' and defensiveness

Employees enabled to take control of tihelf careers

Chapter 8 Performance Management and Employee Development 245

have experienced. Then, consider the list of benefits listed in Table 8-2. Which of these were not actually realized by the system? Why not?

8-3-2 Risks, Contingencies, and Potential Pitfalls in Implementing Multisource Feedback Systems

We have discussed the many advantages of multisource feedback systems, but we should also consider that there are some risks and potential pitfalls involved.26 For example, negative feedback can hurt an employee's feelings, particularly if those giving the feedback do not offer their comments in a constructive way. Second, the system is likely to lead to positive results only if individuals feel comfortable with the system and believe they will be rated honestly and treated fairly. User acceptance is an important determinant of the system's success. Third, when very few raters are providing the information, say, two or three, it may be easy for the employee being rated to identify who the raters are. When anonymity is compromised, raters are more likely to distort the information they provide. Fourth, raters may become overloaded with forms to fill o ut because they need to provide information on so many individuals (peers, superiors, and direct reports). Finally, implementing a multisource feedback system should not be a one-time-only event. The system should be in place and data collected over time on an ongoing basis. The implementation of ongoing multisource feedback systems is sometimes labeled a 720-degree feedback Sljstem, referring to the fact that the collection of multisource data takes place at least twice. In short, admirtistering the system only once will not be as beneficial as administering the system repeatedly.

In addition, we need to be cognizant that multisource feedback systems are not necessarily beneficial for all individuals and all organizations. For example, individuals who are high on self-efficacy (i.e., they believe they can perform any task) are more likely to improve their performance based on feedback received from peers compared to individuals low on self-efficacy.27 Also, the effect of receiving feedback from multiple sources is most beneficial for individuals who perceive there is a need to change their behavior, react positively to feedback, believe change is feasible, set appropriate goals to improve their performance, and take concrete actions that lead to performance improvement.28 On the other hand, individuals who score lower on self-efficacy pay more attention to the feedback received from their line managers. In other words, an employee's confidence in her own performance influences which sources of feedback are most useful to her.

In terms of organizational characteristics, multisource systems work best in organizations that have cultures that support open and honest feedback. Also, these systems work best in organizations that have a participatory, as opposed to authoritarian, leadership style in which giving and receiving feedback is the norm and is regarded as valuable. For example, consider the case of the Patent Office of the United Kingdom. This organization is characterized by a hierarchical structure, typical of many civil service organizations, as opposed to a flat structure, where employees are involved and teamwork is the norm. The implementation of a multisource feedback system did not lead to the anticipated positive results, and there was a mismatch of expectations between what the board members wanted (i.e., better working relations and a culture change) and what

24S Part Ill Employee and Leadership Development

the employees wanted (i.e., individual improvement). Moreover, managers did not show a good understanding of the behaviors they were expected to display, and their performance did not show improvement. Overall, the multisource feedback system was not sufficiently linked to other HR systems and policies.29

Answering the following questions can give a good indication as to whether implementing a multisource system would be beneficial in a specific organization:

1. Are decisions that are made about rewards and promotion fairly free of favoritism?

2. Are decisions made that take into account the input of people affected by such decisions?

3. Do people from across departments usually cooperate with each other and help each other?

4. Is there little or no fear of speaking up? 5. Do people believe that their peers and direct reports can provide valuable

information about their performance? 6. Are employees trusted to get the job done? 7. Do people want to improve their performance?

In short, the successful implementation of a multisource feedback system is heavily dependent on the culture of the organization and the work context.30 If the answer to most of these questions is "yes," the implementation of a multisource feedback system is likely to be successful and lead to performance improvement.

The risks associated with implementing a multisource system can be illustrated by Watson Wyatt's Human Capital Index (HCI)3 1 This is an ongoing study of the effects of HR practices on the stock value of more than 700 publicly traded companies. One particular result was especially alarming. Of the companies surveyed, those that had implemented multisource feedback had lower stock value! Specifically, the companies that used peer reviews had 4.9 percent lower market value than did similar companies that did not implement peer reviews. Furthermore, companies that implemented upward feedback, where employees rated managers, had a 5.7 percent lower stock value than did similar companies that did not implement upward feedback. Does this necessarily mean that implementing multisource feedback systems causes the stock price to decrease? Based on the data collected, there is no definitive answer to this question. It could be that organizations that are not performing well financially decide to implement multisource feedback systems precisely to help improve their performance. Nevertheless, these results highlight the importance of following best practices in implementing multisource feedback systems to avoid any negative con- sequences of implementing such a system, which we address next.

8·3·3 Characteristics of a Good Multisource Feedback System Fortunately, there are several things that can be done to maximize the chance that the system will work properly. When systems have the following characteristics, they are most likely to be successfuJ32:

• AnonymihJ In good systems, feedback is anonymous and confidential. When such is the case, raters are more likely to provide honest information regarding performance, particularly when direct reports are providing information about superiors.

Chapter 8 Performance Management and Employee Development 247

• Observation of employee perfonnance. Only those with good knowledge and firsthand experience with the person being rated should participate in the process. There is no point in asking for performance feedback from people who are not able to observe performance directly.

• Feedback interpretation. Good systems allow the person being rated to d iscuss the feedback received with those genuinely interested in the employee's development. In most cases, feedback is discussed with the d irect supervisor. In other cases, the discussion can involve a representative of the HR department, a superior, or peer to whom the person does not report directly.

• Follow-up. The information gathered has little value if there is no follow-up action. Once feedback is received, it is essential that a development plan is created right away.

• Used for developmental purposes only (at least initially). When multisource feedback systems are used for administrative p urposes such as p romotions and compensation, raters are likely to d istort the information provided. Make it clear that the purpose of the system is developmental, and developmental only. Ini tially, the information collected should not be used for making reward allocations or any other administrative decisions. However, the system may be used for administrative purposes after it has been in place for some time- approximately, two years or so.

• Avoidance of rater fatigue. Rater fatigue can be avoided if individuals are not asked to rate too many people at the sam e time. For example, data collection can be staggered so that not all surveys are distributed at the same time.

• Emphasis on behaviors. Although systems can include feedback on both behaviors (competencies) and resul ts, it is better to emphasize behaviors. Focusing on behaviors can lead to the identification of concrete actions that the person being rated can take to improve performance.

• Raters go beyond ratings. In addition to providing scores on the various dimensions, raters should provide written descriptive feedback that gives detailed and constructive comments on how to improve performance.33 It is helpful if this information also includes specific examples that help support the ratings and recommendations provided.

• Raters are trained. As in the case of provid ing evaluations for ad ministrative p urposes, raters should be trained. Mainly, this includes skills to discriminate good from poor performance and how to provide feedback in a constructive manner.

Table 8-3 includes a summ arized list of characteristics of good multisource feedback systems. Given this list, consider the case of AAH Pharmaceuticals, described in Box 8-3. Based on this information, which characteristics are present? Which are absent?

In closing, this chapter referred to the important role of supervisors in the employee development process. But for managers to become true "performance management leaders," they require specific knowledge and skills. This is the topic that we will address in Chapter 9.

248 Part Ill Employee and Leadership Development

TABLE 8-3 Characteristics of a Good Multlsource Feedback System

Box 8-3

Anonymity

Obse,vation of employee performance

Feedback Interpretation

Follow-up

Used for developmental purposes only (at least initially)

Avoidance of rater fatigue

Emphasts on behaViors

Raters go beyond ratings

Raters are trained

Company Spotlight: Multisource Feedback at AAH Pharmaceuticals AAH Pharmaceuticals (AAH) utilizes a multisource feedback several sources through an automated online system of system that includes several characteristics of a good system. quest ionnaires, ensuring that information was anonymous The company, which has nine depots around t he United and confidential. After the results were obtained, participants Kingdom, including locations in Belfast, Glasgow, and Sussex, attended a one-day meeting about the results away f rom is a wholesaler of pharmaceuticals, providing medical products the office that included one-on-one interpretation and d is- and services in the UK. AAH, with the help of professional cussion w ith the consultant to initiate a development plan. consultants, found the multisource feedback process helpful Six-month follow-up meetings were held to review progress in providing feedback and useful information for develop- toward developmental objectives. AAH found the process ment planning. To help ease employee concern, the company to be successful w ith a f irst group of managers who went clearly outlined for employees that development planning through the process and made plans for a broad rollout of and f eedback were t he on ly purposes, and information the program for more employees to take advantage of de- would not be used for any other purpose. Employees were velopmental opportunities. In summary, the system utilized also given the option of sharing information w ith supervi- by AAH provides an example of several of the characteristics sors. The system included gathering performance data f rom of a successful multisource feedback instrument.34

SUMMARY POINTS

• Personal developmental plans are a key component of a performance management system because they specify courses of action to be taken to improve performance. A performance management system that Jacks information about how to improve performance will not help employees Jearn skills beyond what they know and use already. In a nutshell, a good development plan allows employees to answer the following four questions: How can I continually Jearn and grow in the next year? How can I do better in the future? How can I avoid performance problems faced

Chapter 8 Pe rformance Management and Employee Development 24e

in the past? Where am I now and where would I like to be in terms of my career path?

• Development plans focus on both the short term and the long term. Specifically, development plans address how to improve performance in the current position, how to sustain good levels of performance in the cu rrent position, and how to prepare employees for future advancement. In addition, development plans provide employees with growth opportunities so that even if advancement within the organization is not clear, employees are able to enrich their daily work experiences. In terms of the future, good development plans also help employees build th ree types of career competencies: reflective (i.e., reflection on motivation, reflection on qualities), communication (i.e., networking and self-profiling), and behavioral (i.e., work exploration and career control). A long-term orientation is also important for organizations because it allows them to use development plans strategically and to gather information usehtl for succession planning.

• Good development plans include a description of the specific steps to be taken and specific developmental objectives. A good plan includes information about (1) developmental objectives, (2) how the new skills or knowledge will be acqu ired, (3) a time line regarding the acquisition of the new skills or knowledge, and (4) standards and measures that will be used to assess whether the objectives have been ach ieved. Learning objectives should be designed stra tegically to take into account both the needs of the individual and those of the organization.

• Developmental objectives can be achieved by one or more of the following activities (1) on-the-job training, (2) courses, (3) self-guided studying, (4) men to ring, (5) attending a conference or trade show, (6) mixing with the best, (7) getting a degree, (8) job rotation, (9) temporary assignments, and (10) membership or leadership role in professional, trade, or nonprofit organizations. Developmental activities for specific objectives are chosen by the employee and the d irect supervisor. This choice is guided by taking into account the employee's learning preferences, the developmental objective in question, and the organization's available resources. Many of these activities are suited for all positions, but some are particularly suited for managerial jobs (e.g., mixing with the best).

• The d irect supervisor has a key role in helping the employee define the scope of the development plan and in explaining the relationship between the developmental objectives and strategic priorities for the unit and the organization. The direct supervisor also has direct responsibility for checking on the employee's progress toward achieving the developmental objectives and providing resources so that the employee will be able to engage in the appropriate activities (e.g., courses, mentoring). Also, supervisors can help employees uncover the factors that lead to achievement and job satisfaction by cond ucting feedforward interviews, whose goal is to understand the types of behaviors and skills that individuals have that allow them to perform well and to think about ways to use these same behaviors and skills in other contexts to make further improvements in the future. Supervisors must reinforce an employee's accomplishments toward completing a development p lan so that the employee remains motivated. Finally, supervisors themselves must be motivated to perform all these

2110 Part Ill Employee and Leadership Development

functions in support of their employees' development plans. To do so, supervisors' performance regarding how well they help their employees develop should be measured and rewarded appropriately. In short, the supervisory role includes the following five functions (1) explaining what is required of the employee to reach a required performance level, (2) referring to appropriate developmental activities, (3) reviewing and making suggestions about developmental objectives, (4) checking on the employee's progress toward developmental objective achievement, and (5) offering the opportunity for regular check-ins and reinforcing positive behaviors.

• Multisource feedback systems are tools that help employees build new skills and improve their performance in general by gathering and analyzing performance information from several sources, including peers, superiors, direct reports, and oneself. Performance information gathered from oneself is compared to information gathered by other sources to perform a gap analysis showing discrepancies between how one sees one's own performance in relation to how others see one's performance. These types of systems are also used to identify performance dimensions for which all, or most, performance information sources agree there is little or substantial room for improvement. Accordingly, this information can be used in creating a development plan.

• The implementation of multisource feedback systems can produce many benefits, including (1} decreased possibility of biases, (2) increased awareness of performance expectations, (3) increased commitment to improve, (4) improved self-perceptions of performance, (5) improved performance, (6) reduction of undiscussables and defensiveness, and (7) increased career control on the part of employees.

• In spite of the many advantages associated with implementing multisource feedback systems, there are some risks involved. For example, negative feedback can hurt an employee's feelings; ind ividuals may not be ready to receive such feedback and may therefore not participate willingly; anonymity may be compromised, and therefore, information may be distorted; and raters may be overloaded with forms to fill out. These risks, and the associated failure of the system, are particularly high when the organization does not value participation in decision making; there is little cooperation among employees; there is favoritism; employees do not value the opinion of others (i.e., peers, direct reports); decisions are based on hearsay; and/or employees are not trusted to get the job done.

• There are some characteristics that will enhance the success rate of a multisource feedback system. These features include the following: there is anonymity; raters have firsthand knowledge of the performance of the person being evaluated; feedback is interpreted by a person genuinely interested in the development of the person evaluated; there is follow-up after receiving feedback; the system is used for development purposes only; raters do not become fatigued; there is an emphasis on behaviors, instead of on results; raters provide information beyond performance ratings only; and raters are trained. The presence of these characteristics is likely to lead to the successful design and implementation of the system.

I_

Chapter 8 PerFormance Management and Employee Development 2151

EXERCISE 8-1 MAKING THE CASE FOR A TOP-NOTCH MULTISOURCE FEEDBACK SYSTEM DEMO

You are in charge of selecting a multisource feedback system that will be purchased by the organization for which you work for or have most recently worked for. First, you need to make sure the system has as many of the ideal characteristics as possible as described in this chapter. Second, you need to select a system that will be particularly suitable to your organization's culture and goals, ind ustry context, as well as resource constraints.

As a first step, do a Google search for "360-degree" and "multisource" feedback system demos. For example, one such demo is available at https:// www.hr-survey.com/360FeedbackDemos.htm. Second, critically review a few of the demos, taking into account their positive and less positive features. Third, select a good system and prepare a 5-10 minute presentation to be delivered to the rest of the class, describing the reasons you selected the system you did. Keep in mind that you need to describe, at a minimum, what the good features of the system are and why this system is appropria te for your particular organization.

EXERCISE 8-2 OBTAINING MULTISOURCE FEEDBACK ON YOUR OWN PERFORMANCE

The goal in this exercise is to conduct a multisource feedback system regard ing your performance in this class. First, create a list of competencies that are related to the performance of a student taking a performance management course (hint: see Figure 8-2). Second, create a rating form including these competencies (hint: see Figure 8-3). Third, fill out the form and also give the same form to at least three other classmates. After you collect the forms, create a list of strengths and development areas (hint: see Figures 8-4 and 8-5). Finally, schedule individual meetings with each of the classmates who filled out the forms to discuss areas in which there was d isagreement. What were those areas? What are the reasons for disagreements across raters? Also, what are your strengths? What are your areas in need of development and what specific actions would you take to address each?

CASE STUDY 8-1

Content of a Personal Development Plan at Brainstorm, Inc.

Cathy is a sales manager at Brainstorm, Inc., a computer software training company that sells Microsoft, Novell, Corel, and Open Office training software, located in Lehi, Utah. One of Cathy's responsibilities is to complete annual performance evaluations with all of her direct reports and create

Performance Appraisal Form

individual development plans for these employees, based on their performance evaluations. Recently, Jay, an inside sales representative and Cathy's direct report, finished his first year's performance evaluation with Cathy. Cathy's performance evaluation of Jay's key competencies and key results is as follows:

Key Competencies Supervisor Comments Score

Sales and Marketing: Demonstrate knowledge of pnnciples and methods for showtng, promoting. and selling products or seNices.

Customer and Personal Service: Knowledge of principles and processes for providing high-quality customer and personal services.

Interpersonal Communication: Talking to others to convey informat1on effectJvely as well as giv1ng full attention to what other people are say1ng, taking time to understand the points being made, and asking questions as appropriate.

Persuasion and Negotiation: Persuading others to change their minds or behavior. Bringing others together and t;ying to reconcile differences.

Problem Sensitivity and Ethics: The ability to tell When something is wrong or is likely to go wrong. ethically or otheiW1se. It does not involve solving the problem, only recognizing there is a problem.

Could be more proficient w1th greater product knowledge. Needs greater understanding of the benefitS of each of the products.

Good verbal and sales skills most of the time. Had a couple occasions when customers felt like they weren't getting enough personal assistance with recently purchased products.

Very good. Always enthusiastic w1th customers and quickly develops a good rapport with new customers.

Adequate. but could be more direct and persuasive With customers.

Excellent. Shown great ability to anticipate if contract negotiat1ons are taking an unethical or unprofitable turn for the worse.

B-

B+

A-

B

A

Key Results Supervisor Comments Score

Degree to which employee met monthly sales goals ($50,000 In sales revenue a month):

Degree to which employee met referral goals (10 referrals a month):

Number of cold calls made monthly (2 50):

Place yourself in Cathy's shoes, and use the above performance evaluation to develop an individual

2152

Adequate. Met sales goals 66 percent of the time 1n the last six months.

Needs improvement. Met referral goals 50 percent of the time in the last six months.

Excellent. Tlfeiessly exhibits persistence and hard work in reaching out to businesses.

B

B-

A

development plan for Jay (Hint: use information included in Section 8-1 Personal Development Plans).

CASE STUDY 8-2

Improving a Personal Development Plan at Brainstorm, Inc.-Part II

Joe, one of the Partners of Brainstorm, Inc., has been looking into development plans as a pos-sible way of increasing the productiv ity and morale of the company's sales force. To help him in this project, Cathy has adapted a development plan form from a business magazine she has recently seen and asks you for feedback. Since Cathy is unfamiliar w ith the characteristics of good development plans, she is particularly interested in your critique of a development plan that she developed for a sales representative, Jay. Note: Brainstorm, Inc., may not be

Brainstorm, Inc., Development Plan

Updated: June 28, 2019

Name: Jay

Job Title/Job Code: Sales Representative

Department: Sales

Developmental Options OJT (On·the·job training) Courses SeiF·guided studying Mentoring Attending a conFerence or trade show Mixing with the best Getting a degree Temporary assignments

able to finance much in the way of outside learning; however, the company could provide some paid time off and may be able to negotiate some better rates for attending classes or conferences, based on various industry memberships.

1. How would you improve and/or change the following form and its content?

2. Because there are only six employees in the company, how would you adapt the form to meet the needs of this small business? Provide an example.

Membership or leadership role (proFessional, trade, non· profit organizations) Other (speciFy)

Description Type or Development When How Long Completed Hours (this Quarter) Comments-Approximate Cost-Other Objectives/ Evaluation

Current Quarter

Next Quarter

(Cononuedj

2113

2114 Part Ill Employee and Leadership Development

Primary Reviewer: Cathy

Education: High school graduate

Prior Training: Bachelor's degree in Sales and Marketing

Job History: 10 years of experience in sales. Two years of experience in software training sales.

Career Goals:

Next1 year

Next2 years

Next3 years

Next 5 years-Become head of sales and lead sales trainer.

ENDNOTES

1. Orlando, )., & Bank, E. (2016). A new approach to performance management at Deloitte. People & Strategy, 39(2), 42-44.

2. Akkermans,)., Brenninkmeijer, V., Schaufeli, W. B., & Blonk, R. B. (2015). It's aU about CareerSKJLLS: Effecti\'eness of a career development intervention for young e mployees. Human Resource Management, 54,533-551.

3. Boswell, W. R., & Boudreau,). W. (2000). Employee satisfaction w ith performance appraisals and appraisers: The role of perceived appraisal use. Human Resource Development Quarterly, 11,283-299.

4. Ellis, K. {2004). Individual development plans: The building blocks of development. Training, 41 (December), 20-25.

5. Church, A. H., Rotolo, C. T., Ginther, N. M., & Levine, R. (2015). How are top companies designing and managing their high-potential programs? A follow-up talent management benchmark study. Consulting Psychology Journal: Practice & Research, 67, 17--47.

6. Tyler, K. (2004). One bad apple: Before the whole bunch spoils, train managers to deal with poor performance. HR Magazine, 49(12), 77-86.

7. Parker, S. K., Margeson, F. P., & johns, G. (2017). One hundred years of work design research: Looking back and looking forward. Journal of Applied Psychology, 102,403--420.

8. Watanabe, T. {2016). UC Berkeley chancellor under investigation for alleged misuse of public funds. Los Angeles Times. Retrieved january 2, 2018, from http: //www.latimes.com/local/ education/la-me-ln-berkeley-chancellor-probe-20160712-snap-story.html

9. Harnish, V. (2017). 5 trends to ride in 2017. Fortune, 175(4), 32. 10. Dragoni, L., Tesluk, P. E., Russell,). A., & Oh, L (2009). Understanding managerial

development: Integrating developmental assignments, learning orientation, and access to developmental opportunities in predicting managerial competencies. Academy of Managemeut Journal, 52, 731-743.

11. Dunning, D. (2004). TLC at work: Training, leading, coaching all types for star performance. Palo Alto, CA: Davies-Black.

12. Kluger, A. N., & Nir, D. {2010). The feedforward interview. Human Resource Management Review, 20, 235-246.

13. Bud worth, M., Latham, G. P., & Man roop, L. (2015). Looking forward to performance improvement: A field test of the feed forward interview for performance management. Human Resource Management, 54,45-54.

14. Young, S., Gentry, W., & Braddy, P. (2016). Holding leaders accountable during the 360° feedback process. Industrial and Organizational Psychology, 9, 811-813.

15. Ellis, K. {2003). Developing for dollars. Training, 40(5), 34-38. 16. Bracken, D. W., & Rose, D. S. {2011). When does 360-degree feedback create behavior change?

And how would we know it w hen it does? Journal of Business and Psyclwlogy, 26,183-192. 17. Garretson, C. (2005, January). Diageo distills IS Leaders. Nehoork World, 42. 18. Bracken, D., Rose, D., & Church, A. (2016). The evolution and devolution of 360° feedback.

Industrial and Organizational Psyclwlogy, 9, 761-794.

Chapter 8 Performance Management and Employee Development 21515

19. Margeson, F. P., Mumford, T.V., & Campion, M.A. (2005). Coming full circle: Using research and practice to address 27 questions about 360-degree feedback programs. Consulting Psychology joumal: Practice and Research, 57, 196-209.

20. Toegel, G., & Conger, ). A. (2003). 360-degree assessment: lime for reinvention. Academy of Management LMnzing & Education, 2, 29"7-311 .

21. Mone, E. M., & London, M. (2010). Employee engagement throug/1 effective performance management. New York, NY: Routledge.

22. 360 employee feedback from app on Morf Playbook. (2016). Worldwide Videotex Update, 35(6), 7-8.

23. Frauenheim, E. (2006). Talent management software is bundling up. Workforce Management, 85(19), 35.

24. Luthans, F., & Peterson, S. ). (2003). 36Q-degree feedback with systematic coaching: Empirical analysis suggests a winning combination. Human Resource Management, 42, 243-256.

25. Campion, M. C., Campion, E. D., & Campion, M.A. (2015). Improvements in performance management through the use of 360 feedback. Industrial and OrganiZIItional Psychology, 8,85-93.

26. Vukotich, G. (2014). 360° feedback: Ready, fire, aim-Issues with improper implementation. Performance Improvemmt, 53(1), 30-35.

27. Bailey, C., & Austin, M. (2006). 360 degree feedback and developmental outcomes: The role of feedback characteristics, self-efficacy and importance of feedback dimensions to focal managers' current role. International jouma/ of Selection and Assessmmt, 14,51-66.

28. Smither, J. W., London, M., & ReiJJy, R. R. (2005). Does performance improve foJJowing multisource feedback? A theoretical model, meta-analysis, and review of empirical findings. Personnel Psychology, 58, 33-66.

29. Morgan, A., Cannan, K., & Cullinane, J. (2005). 360° feedback: A critical enquiry. Personnel Review, 34, 663-680.

30. Maurer, T. )., Barbeite, F. G., & MitcheJJ, D. R. (2002). Predictors of attitudes toward a 360-degree feedback system and involvement in post-feedback management developmen t activity. jounza/ of Occupational & Organizational PsyciJOiogy, 75, 87-107.

31. Pfau, B., & Kay, I. (2002). Does 360-degree feedback negatively affect company performance? HR Magazine, 47(6), 54--59.

32. Some of these recommendations are adapted from DeNisi, A. S., & Kluger, A. N. (2000). Feedback effectiveness: Can 360-degree appraisals be improved? Academy of Management Executive, 14, 129-139; and McCarthy, A. M., & Caravan, T. N. (2001). 360° feedback process: Performance, improvement and employee career de\•elopment. journal of European Industrial Training, 25, 5-32.

33. Kabins, A. (2016). Why the qualms with qualitative? Utilizing qualitative methods in 360° feedback. Industrial and Organizational PsyciJOiogy, 9, 806-810.

34. Towner, N. (2004, February). Turning appraisals 360 degrees. Personnel Today, 18. Retrieved January 2, 2018, from http://www.personneltoday.com/ Artides/2004/02/17 / 22398/ tuming-appraisals-36Q-degrees.htrnl

chapter

9 Performance Management Leadership

The ability to learn is the most important qualihj a leader can have.

- Shen;l Sandberg

Learning Objectives By the end of this chapter, you will be able to do the following:

1. Become an effect1ve performance management leader by be1ng a coach who creates a good relat•onshtp with direct reports. understands that the employee IS the source and director of change. that each employee IS umque. and that you. as a performance management leader. are the factlltator of the employee growth process.

2 . Prepare a program that (a) abtdes by the key pnnc1ples of a good manager-employee relationshtp, an understanding that the employee 1s the source and dtrector of change. and that each employee 1s umque; (b) includes acltonable funcltons such as aclvlce. prov1d1ng guid- ance. gtV1ng support. and employee confidence and competence; and (c) 1ncludes spectfic behaviors such as establishing development obJeCtives. communicating effecltvely. motivating employees. documenting perfor · mance. giving feedback. diagnosing performance problems and performance decline. and developing employees.

3 . Assess your own coaching style as a driver, persuader, amiable. or analyzer.

4 . Minimize time. Situa tional. and activity constraints that create biases when assessing the extent to which

employees have made progress 1n develop- mental goals.

5. Give effective pratse (i.e .. also called "postltve feed- back") and construct1ve (t.e .. also called ·negat•ve") feedback that helps bUild conf1dence and self-eff1cacy. develops employee competence and engagement, mimmizes defens•veness. and cons1ders generat1onal and mdtvtdual dtfferences m feedback preferences and reactions.

6. Implement a disCiplinary or termtnation process 1f an em- ployee does not overcome performance problems over t1me.

7. Design and lead formal performance rev1ew meetings that serve the purposes of allowmg employees to improve their performance. bu ild ing a good relation- ship between the supervisor and the employee. and identifying important factors that will motivate star performers to stay in the organization.

8. Lead effective performance review meetings by estab- lishing and maintaining rapport. bemg empathetic and open-minded. observing verbal and nonverbal cues. min- imizing threats. and encouraging employee participation.

2 5 7

2!58 Part Ill Employee and Leadership Development

9-1 COACHING

Chapter 8 addressed issues about employee development. Specifically, Chapter 8 discussed how to use a performance management system to help employees develop and improve their performance, and also address more long-term career goals and aspirations. However, performance management systems are not likely to help employees develop and improve their performance if managers do not guide and facilitate the employee development process. To do so, managers must Jearn several important skills to become performance management leaders. These skills include being able to serve as coaches, to observe and document performance accurately, to give both positive feedback (i.e., praise) and constructive feedback (referred to as "negative" feedback), and to cond uct useful performance review discussions- including discussions about employee termination and the retention of star performers. Unfortunately, these skills seem to be in short supply; hence, this chapter addresses each of these topics. Let us begin with the first of these issues: coaching.

Coaching is a collaborative, ongoing process in which the managers interact with their direct reports and take an active role and interest in their performance. In general, coaching involves directing, motivating, and rewarding employee behavior. Coaching is a day-to-day and ongoing function that involves observing performance, complimenting good work, and helping to correct and improve performance when it does not meet expectations and standards. Coaching is also concerned with long-term performance and involves ensuring that the development plan is being achieved . Being a coach thus is similar to serving as a consultant, and for coaching to be successhtl, a coach must establish a helping relationship. 1 Establishing this helping and trusting relationship is particularly important when the supervisor and direct report do not share similar cultural backgrounds, as is often the case with expatriates or when implementing global performance management systems.2 In such situations, a helping and trusting relationship allows for what is labeled cultural transvergence in performance management, which means that cultural d ifferences are discussed openly, and alternate practices, which enhance individ ual and team performance, are implemented.

Coaching is a pervasive organizational activity, and since the mid-1990s, there has been an explosion of interest in coaching. Currently, organizations are becoming more aware that the tight pool of talent makes employee development much more attractive and cost-effective than replacement; the massive retirement of baby boomers has forced organizations to think seriously and systematically about succession planning; and at the same time, many managers Jack performance management skills and time and often outsource feedback and development of employees to external consultants. 3

The increased importance given to coaching is certainly justified, given its positive results. For example, consider a study involving sales teams of between 6 and 12 members each and district managers in a U.S. affiliate of a global pharmaceuticals company.4 Results showed that managerial coaching skills had a significant, direct effect on sales goal attainment. In this particular study, the reason why coaching was effective is that it helped improve team role clarity. In

Chapter 9 Performance Management Leadership 21Sil

other words, managers who had better coaching skills were able to help sales teams resolve ambiguity in what they should and should not do to reach their sales goals. In addition, coaching is not beneficial to large organizations only. On the contrary, it is particularly important in small and medium-sized enterprises (SMEs) as well. A study conducted in the United Kingdom involving more than 1,200 SME managers over a three-year period revealed that coaching training was seen as a very positive experience. Moreover, for some of the SME managers, it was seen as a "life changing experience.''5 Also, coaching seems to be a worldwide phenomenon. For example, a study involving 324 employee-supervisor pairs from 11 service companies in Taiwan found that coaching has positive effects on both employees' task performance and their proactive career behaviors. In other words, coaching helped employee development regarding their current positions as well as their future career prospects and advancement.6

Taken together, the evidence regarding coaching effectiveness is quite convincing. A review and integration of 17 different empirical studies found that employees who received coaching do their jobs better and improve their task-related as well as affective-related skills. As a result, coaching also improves performance measured in terms of results and overall organizational performance as well. These effects were larger when coaching was done by an internal organizational coach (e.g., one's direct supervisor), as compared to an external coach (i.e., external consultant).7

Although many theories on coaching exist, there are four guiding principles that provide a good framework for understanding successful coaching8:

1. A good coaching relationship is essential. For coaching to work, it is imperative that the relationship between the coach and the employee be trusting and collaborative. As noted by Professors Farr and Jacobs, the "collective trust" of all stakeholders in the process is necessary.9 To achieve this type of relationship, first, the coach must listen in order to understand. In other words, the coach needs to try to walk in the employee's shoes and view the job and organization from the employee's perspective. Second, the coach needs to search for positive aspects of the employee because this is likely to lead to a better understanding and acceptance of the employee. Third, the coach needs to understand that coaching is not something done to the employee, but done with the employee. Overall, the manager needs to coach with empathy and compassion. Such compassionate coaching will help develop a good relationship with the employee. In addition, there is an important personal benefit for the coach. This type of compassionate coaching has the potential to serve as an antidote to the chronic stress experienced by many managersw Specifically, this type of coaching can ameliorate stress because the experience of compassion elicits responses within the human body that arouse the parasympathetic nervous system (PSNS), which can help mitigate stress.

2. The employee is the source and director of change. The coach must understand that the employee is the source of change and self-growth. After all, the purpose of coaching is to change employee behavior and set a direction for what the employee will do better in the future.n This type of change will not happen if the employee is not in the driver's

2150 Part Ill Employee and Leadership Development

seat. Accordingly, the coach needs to facilitate the employee's setting the agenda, goals, and direction.

3. The emplm;ee is whole and unique. The coach must understand that each employee is a unique individ ual with several job-related and job-unrelated identities (e.g., computer network specialist, father, skier) and a unique personal history. The coach must try to create a whole and complete and rich picture of the employee so that employees bring their whole selves to work and are fully engaged.12 It will be beneficial if the coach has knowledge of the employee's life and can help the employee connect his life and work experiences in meaningful ways.

4. The coach is the facilitator of the employee's grmvth. The coach's main role is one of facilitation. A coach must direct the process and help with the content (e.g., of a developmental plan), but not take control of these issues. The coach needs to maintain an attitude of exploration; help expand the employee's awareness of strengths, resources, and challenges; and facilitate goal setting.

In more actionable terms, coaching involves the following functions13:

• Giving advice to help employees improve their performance. In other words, coaching involves not only describing what needs to be done, but also, how things need to be done. Thus, coaching is concerned with both results and behaviors.

• Providing employees with guidance so that employees can develop their skills and knowledge appropriately. Coaching involves provid ing information both about the skills and knowledge that are required to do the work correctly and information about how the employee can acquire these skills and knowledge.

• Providing employees support and being there only when needed . Coaching involves being available when the employee needs help, but it also involves not monitoring, controlling, and micromanaging an employee's every move. In the end, coaching is about facilitation. As already mentioned, the responsibility for improving performance ultimately rests on the shoulders of the employee.

• Giving employees confidence that will enable them to enhance their performance continuously and to increase their sense of responsibility for managing their own performance. Coaching involves giving positive feedback that allows employees to feel confident about what they do, but it also involves giving feedback on things that can be improved (i.e., constructive feedback).

• Helping employees gain greater competence by guid ing them toward acquiring knowledge and sharpening the skills that can prepare them for more complex tasks and higher-level positions. Coaching involves a consideration of both short-term and long-term objectives, including how the employee can benefit from acquiring new skills and knowledge that could be usehtl in future positions and in novel tasks and responsibilities.

Based on this list of the various actionable functions of coaching, it is evident that coaching requires a lot of effort from the managers. But when done right, mangers become performance management leaders and an organization is able to create a "coaching culture," as illustrated in the case of Becton, Dickinson, and Company (BD), described in Box 9-1.

Chapter 9 Performance Management Leadership 261

Box 9 -1

Company Spotlight: Turning Managers into Performance Management Leaders at Becton, Dickinson, and Company A coaching culture and leadership development are viewed as competitive strengths at Becton, Dickinson, and Company (BD). The Washington, D.C.-based company manufactures and sells medical supplies, devices, laboratory instruments, antibodies, reagents, and d iagnostic products to health-care organizations, clinical laboratories, private industry. and the public. BD provides innovative solutions that help advance medical research and genomics, enhance the diagnosis of infectious diseases and cancer, improve medication man- agement, promote infection prevention, equip surgical and interventional procedures, and support the management of diabetes. The coaching culture at BD includes the fol- lowing points, as noted by Joseph Toto, who served as the company's director of leadership development and learning for about a decade:

1. We place high expectations on corporate leaders to model coaching as a productive and effective way to improve performance.

2. We expect leaders at all management levels to be coached, as well as to coach the development of others.

3. We establish coaching as a norm. Leaders must view coaching and development as one of the key responsibilities and deliverables in their roles.

Part of the company's training program includes developing skills through peer coaching and building management skills through peer interaction, support, and guidance. The training sessions emphasize several skil ls, including l istening, asking facilitating and open-ended questions, sharing experiences, and challenging assumptions or discussing actions that might not be productive in the view of t he coach. Training of manag- ers also involves self-assessment of strengths and weaknesses and identifying behaviors that would assist them in any given circumstance in which they might find t hemselves as managers in the company. In summary, BD has uti lized training programs to turn managers into performance management leaders by developing and reinforcing a coaching culture. This culture is credited with developing performance management leaders who play a critical role in helping people develop and grow w ithin a very challenging context of a constantly changing industry and business environment. ••

Given the available empirical evidence, coaching helps turn feedback into results. For this to happen, coaches need to engage in the following specific behaviors:

• Establish development objectives. The manager works jointly with the employees in creating the development plan and its objectives.

• Communicate effectively. The manager maintains regular and clear communication with employees about their performance, including both behaviors and results.

• Motivate entployees. Managers must reward positive performance. When positive performance is rewarded, employees are motivated to repeat the same level of positive performance in the future.

• Document perfonnance. Managers observe employee behaviors and results. Evidence must be gathered regarding instances of good and poor performance.

• Give feedback. Managers measure employee performance and progress toward goals. They praise good performance and point out instances of s ubstandard performance. Managers also help employees avoid poor performance in the future.

262 Part Ill Employee and Leadership Development

TABLE 9·1 Coaching: Guiding Principles, Actionable Functions, and Specific Behaviors

• Diagnose performance problems and performance decline. Managers must listen to employees and gather information to determine whether performance deficiencies and declines in performance are the result of a lack of knowledge and skills, abilities, or motivation or whether they stem from situational and contextual factors beyond the control of the employee. Diagnosing performance problems is important because such a diagnosis d ictates whether the course of action should be, for example, providing the employee with resources so she can acquire more knowledge and skills, or addressing contextual issues that may be beyond the control of the employee (e.g., the employee is usually late in delivering the product because he receives the parts too late).

• Develop employees. Managers provide financial support and resources for employee development (e.g., funding training, allowing time away from the job for developmental activities) by helping employees plan for the future and by giving challenging assignments that force employees to learn new things.

Not all coaches abide by the guiding principles, fulfill the coaching func- tions, and engage in the specific coaching behaviors described here. Managers who do so, of course, are highly effective performance management leaders. In fact, some have become legendary. Consider Table 9-1, which summarizes the key coaching principles, functions, and behaviors, and let us examine the case of Jack Welch, who was extremely dedicated to performance management when he was CEO of General Electric (GE).15 To get involved with his employees, Welch spoke during a class held at a three-week developmental course for GE's high-potential managers. Over the course of his career, he attended more than 750 of these classes, engaging over 15,000 GE managers and executives. During these presentations, he answered hard questions, and he communicated honestly and candidly with his employees. After the class, he invited all the participants to talk with him after the course concluded. In addition to attend- ing these sessions, he held meetings with his top 500 executives every January. Although Welch did not engage in formal coaching, he used the opportunities to communicate his expectations and receive feedback from the various busi- ness groups at GE.

Welch also conducted formal performance reviews in which he engaged in several of the behaviors included in Table 9-1, including establishing developmental

Principles Functions Behaviors

I. A good coaching relat1onsh'P is essenual

2. The employee is the source and of change

3. The employee is Whole and un1que

4. The coach is the facilitator of the employee's growth

1. 2. 3. 4. 5.

Give adv1ce Prov1de guidance Prov1de support Give confidence Promote greater competence

1. Establish developmental objectives 2. Commun1cate effectively 3. Mot1vate employees 4. Document performance 5. Give feedback 6. D1agnose performance problems

and performance decline 7. Develop employees

Chapter 9 Performance Management Leadership 2153

objectives, motivating employees, documenting performance, giving feedback, and diagnosing performance problems. He set performance targets and monitored them throughout the year. Each year, the operating heads of GE's 12 businesses received individual, two-page, handwritten notes about their performance. Welch attached the previous year's comments to the new reviews with comments in the margin about the progress made by the individual managers toward his goal or the work that he still needed to do to reach the goal. Then, he distributed bonuses and reiterated the goals for the upcoming year. This process cascaded throughout the organization, as other operating heads engaged in the same performance review discussions with their direct reports.

Another example of Welch's coaching behaviors occurred after he had heard customer complaints about a specific product. Welch charged the manager of the d ivision with improving the productivity of that product fourfold. The manager sent Welch detailed weekly reports over the course of the next four years. Welch would send the reports back every three or four weeks, with comments congratulating successes or pointing out areas in which the manager needed to improve. The manager stated that the fact that the CEO took the time to read his reports each week and send back comments motivated him to reach the lofty goal that Welch had set for him.

In addition to this, Jack Welch took the time to recognize hourly workers and managers who impressed him. For example, after one high-ranking leader turned down a promotion and transfer because he did not want his daughter to change schools, Welch sent him a personal note stating that he admired the man for many reasons and he appreciated his decision to put his family first. The employee explained later that this incident proved that Welch cared about him both as a person and as an employee.

In short, Jack Welch was a legendary performance management leader who developed his employees by setting expectations, communicating clearly, docu- menting and diagnosing performance, motivating and rewarding his employees, and taking an interest in their personal development. In fact, he followed the principles, played the functions, and engaged in virtually all the behaviors listed in Table 9-1.

Now, give yourself some time to reflect on the following issue. How does Jack Welch compare to the CEO of your current company, or to a CEO you have known or heard about? Which of the principles, functions, and behaviors are missing? What would happen in the organization if these missing principles, ftmctions, and behaviors were put in place?

9-2 COACHING STYLES A manager 's personality and behavioral preferences influence his or her coach- ing style. There are four main coaching styles: driver, persuader, amiable, and analyzer. First, coaches can adopt a driving style in which they tell the employee being coached what to do. Assume that the coach wants to provide guidance regarding how to deal with a customer. In this situation, the preference for a driver is to say to the employee, "You must talk to the customer in this way." Such coaches are assertive, speak quickly and often firmly, usually talk about

2154 Part Ill Employee and Leadership Development

tasks and facts, are not very expressive, and expose a narrow range of personal feelings to others. Second, coaches can use a persuading style in which they try to sell what they want the employee to do. Someone who is a persuader would try to explain to the employee why it is beneficial for the organization, as well as for the employee himself, to talk to a customer in a specific way. Like drivers, persuaders are assertive, but they tend to use expartSive body gestures, talk more about people and relationships, and expose others to a broad range of personal feelings. Third, other coaches may adopt an amiable style and want everyone to be happy. Such coaches are likely to be more subjective than objective and direct employees to talk to customers in a certain way because it "feels" like the right thing to do or because the employee feels it is the right way to do it. Such coaches tend not to be very assertive and to speak deliberately and pause often, seldom interrupt others, and make many conditional statements. Finally, coaches may have a preference for analyzing performance in a logical and systematic way, and then, follow rules and procedures when providing a recommendation. To use the same example, such analyzer coaches may tell employees to talk to a customer in a specific way "because this is what the manual says." Analyzers, then, are not very assertive, but like d rivers, are likely to talk about tasks and facts, rather than personal feelings.

Which of these four styles is best? Are drivers, persuaders, amiable coaches, or analyzers most effective? The answer is that no style is necessarily superior to the others. Performance management leadership involves sometimes providing direction, sometimes persuading employees how to do things a certain way, sometimes showing empathy and creating positive effects, and sometimes paying close attention to established rules and procedures. One thing is for sure, however: an exclusive emphasis on one of these four styles is not likely to help employees develop and grow. Ineffective coaches stick to one style only and cannot adapt to using any of the other styles. On the other hand, adaptive coaches, who are able to adjust their style according to an em ployee's needs, are most effective. In fact, 56% of participants in a survey of employees who had a coach at work reported that coaching was not helping them because there was a mismatch between coaching style and employee need.16 In sum, a combination of styles is needed.

9-3 COACHING PROCESS The coaching p rocess is shown in Figure 9-1. We already discussed the first three stages of the process in previous chapters. The first step involves setting developmental goals. As discussed in Chapter 8, these developmental goals are a key component of the developmental plan. These goals must be reasonable, attainable, and derived from a careful analysis of the areas in which an employee needs to improve. In add ition, goals should take into account both short- and long-term career objectives.

The second step in the coaching process is to identify developmental activi- ties and needed resources tha t will help the employee achieve the developmental goals. As discussed in Chapter 8, these activities can include on-the-job training, courses, self-guided studying, mentoring, attending a conference or trade show, mixing with the best, getting a degree, job rotation, temporary assignments, and membership or leadership role in professional, trade, or nonprofit organizations.

FIGURE 9-1 Overview of Coaching Process

Chapter 9 Perfo rmance Management Leadership 265

• Goals are reasonable, attainable, and based on employee and organizational needs and short- and long-term objectives (see Chapter 8)

• Possibilities include on-the-job training, courses, self-guided studying, mentoring, attending a conference or trade show, mixing with the best, getting a degree, job rotation, temporary assignments, and membership or leadership role in professional, trade, or non-profit organizations (see Chapter 8)

• Begin developmental activities

• Gather data to assess the extent to which each developmental goal has been achieved

• Based on the extent to which each of the goals has been achieved, the developmental goals are revised and the entire process begins again.

2M Part Ill Employee and Leadership Development

The third step involves implementing the particular developmental activities that will allow the employee to achieve the developmental goals. For example, the employee may begin her job rotation plan or enroll in an onl ine course.

The fourth step in the process is to collect, evaluate, and document data to assess the extent to which each of the developmental goals has been achieved . For example, did the employee complete the developmental activity within the agreed-upon timeline? What are the standards and measures that are used to assess whether the objectives have been achieved and has the employee met these standards (e.g., becoming certified in a particular knowledge domain)?

Finally, the coach provides feedback to the employee. Based on the extent to which each of the goals has been achieved, the developmental goals are revised and the entire process begins again.

Let us discuss the two last stages in the coaching process in detail: observing and documenting developmental behaviors and results, and giving feedback.

9·3·1 Observation and Documentation of Developmental Behaviors and Results

As described in Chapters 6 and 7, respectively, people may make intentional errors and unintentional errors while observing and evaluating performance. Similar errors may occur in observing and evaluating behaviors and results related to developmental goals. For example, a manager might make a halo error by assuming that if an employee does a good job at working toward one devel- opmental goal (e.g., improving her programming skills), she is also doing a good job of working toward a different developmental goal (e.g., improving customer service). As is the case for performance in general, it is important to observe and document behaviors and results specifically related to developmental activities. In addition to data collected by supervisors, other data can also include memos, letters, email messages, handwritten notes, comments, observations, descriptions, and evaluations provided by peers.17

The discussion presented in this section complements information given in previous chapters because although it is specifically related to behaviors and results regarding developmental activities, it can be easily generalized to behaviors related to performance in general. In other words, the following discussion applies to the observation of performance in general, not just those displayed while working toward achieving developmental goals.

Observing an employee's progress in achieving developmental goals is not as easy as it may seem. Consider the following constraints that people might experience in attempting to observe an employee's performance regarding developmental activities:

• Time constraints. Managers and peers may be too busy to gather and document information about an employee's progress toward his developmental goals. Consequently, too much time may elapse between the assignment of the activity and when there is a check on the employee's progress.

• Situational constraints. Managers are often unable to observe employees as they engage in developmental activities, and therefore, may not have

Chapter 9 PerFormance Management Leadership 267

firsthand knowledge about their performance. For example, managers do not observe the extent to which an employee enrolled in an online course is an active participant and contributor or is a passive learner. In this context, it may be appropriate to gather performance data from peers or others who are able to observe performance directly.

• Activity constraints. When the developmental activity is highly unstructured, such as an employee reading a book, the manager may have to wait until the activity is completed to assess whether the activity has been beneficial.

How can we address these constraints and make sure that a manager will be able to observe and evaluate an employee's performance regarding developmental activities? The recommendations provided in Chapter 7 regarding the observa- tion and evaluation of performance in general apply here as well. Specifically, a good communication plan should explain the benefits of implementing a development plan effectively. This helps managers accept the plan. Also, managers should be trained so that they minimize errors (i.e., rater error training), share notions of what it means to complete developmental activities successfully (i.e., frame-of-reference training), and observe performance accurately (i.e., behavioral observation training). As an example, Box 9-2 includes a description of how managers are trained at Hallmark.

Finally, we need to understand the forces that motivate managers to invest time and effort, or not, in the development of their employees. Clearly, some managers will be more motivated than others to help their d irect reports because they may be "givers" rather than "takers.''18 In other words, there are individual differences in how different people behave toward others. However, in spite of differences in how people tend to behave naturally, it is important that managers see a direct connection between their efforts to develop people around them and outcomes for themselves. In other words,

Box 9-2

Company Spotlight: Turning Managers into Performance Management Leaders at Hallmark Hallmark sought to improve management communica- with employees. Training sessions included self-assessment, tions with employees and initiated a train ing program small group role-p laying, and viewing video cl ips to that has been well received and viewed as a strategic enhance understanding of the role of communication. benefit to the company. U.S.-based Hallmark is a retailer Engagement training focused on gaining the trust of and wholesaler o f greeting cards, stationery, f lowers, employees as well as their involvement and ownership in and gifts, w ith operations in the United States and Great business outcomes. Follow-up resources were also made Britain. The company initiated training to help managers available for managers to continue to improve their lead- become performance management leaders. The training ersh ip competency. Following the train ing in this area, program sought to provide skill development in increasing managers gave positive feedback, and employee surveys two-way communicat ion, with a great er f requency of have shown that employee engagement has increased at communication and increased interaction of managers all levels of the organization.••

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what does the manager gain if her employee's developmental activities are supervised app ropriately? What does the manager gain if she becomes a performance management leader?

The importance of documenting an employee's progress toward the achievement of developmental goals cannot be overemphasized. Similarly, it is critical to document employee performance in general. Why is it so important for performance management leaders to do so? Consider the following reasons:

• Minimize cognitive load. Observing and evaluating developmental activities, and performance in general, is a complex cognitive task. Thus, documentation helps prevent memory-related errors.

• Create trust. When documentation exists to support evaluations, there is no mystery regarding the outcomes. This, in turn, promotes trust and acceptance of decisions based on the evaluation provided .

• Plnn for the future. Documenting developmental activities and their outcomes enables discussion about specific facts instead of assumptions and hearsay. A careful examination of these facts permits better planning of developmental activities for the future.

• Provide legal protection. Specific Jaws prohibit discrimination against members of various classes (e.g., sex or religion) in how developmental activities are allocated. For example, it is p rohibited to provide male employees with better developmental opportunities than female employees. In addition, some court rulings have determined that employees working under contract may challenge a dismissal. Thus, keeping accurate records of what developmental activities employees have completed and with what degree of success, as well as performance in general, p rovides a good line of defense in case of litigation based on d iscrimination or wrongful termination.

The importance of keeping thorough performance documentation and tak- ing actions consistent with this documentation is illustrated by the outcome of several legal cases. In one such case, John E. Cleverly, an at Western Electric Co., was d ischarged after 14 years of good service.2 Western Electric was found guilty of age discrimination, and Cleverly was awarded back pay because the documentation indicated that Cleverly had been given adequate performance ratings and increases to his salary over a course of 14 years. Upon his d ischarge, six months before his pension vested, Cleverly was informed that one reason for his d ischarge was to make room for younger employees. As illustrated by this case, documentation of performance should be taken seri- ously. In th is case, the documentation available indicated the employee had a valid claim. In other cases, documentation could be used to discount charges of discrimination. If Cleverly had alleged age d iscrimination, but the company could show that his performance was declining over time, then the company could have won the case.

What can performance management leaders do to document performance regarding developmental activities, and performance in general, in a useful and constructive way? Consider the following recommendations2 1:

Chapter 9 Perfo rmance Management Leadership 26il

• Be specific. Document specific events and outcomes. Avoid making general statements, such as "He's lazy." Provide specific examples to illustrate your point, for example, "He turns in reports after deadlines at least once a month."

• Use adjectives and adverbs sparingly. The use of evaluative adjectives (e.g., good, poor) and adverbs (e.g., speedily, sometimes) may lead to ambiguous interpretations. In addition, it may not be clear whether the level of achievement has been average or outstanding.

• Balance positives with negatives. Document instances of both good and poor performance. Do not focus only on the positives or only on the negatives.

• Focus on job-related information. Focus on information tha t is job-related, and specifically, related to the developmental activities and goals at hand.

• Be comprehensive. Include information on performance regarding all developmental goals and activities and cover the entire review period as opposed to a shorter time period. Also, document the performance of all employees, not just those who are not achieving their developmental goals.

• Standardize procedures. Use the same method and format to document information for all employees.

• Describe observable behavior and results. Phrase your notes in behavioral and results terms and avoid statements that would imply subjective judgment or prejudice.

Obviously, not all managers do a good job of documenting performance about the accomplishment of developmental goals or performance in general. Table 9-2 includes a summarized list of recommendations to follow in the documentation process.

Now, consider the recommendations listed in Table 9-2 in evaluating the set of quotes appearing in Table 9-3 taken from actual employee performance evaluations in a large corporation in the United States.22 We can be sure that the employees at the receiving end of these quotes would not be very happy with them. It also goes without saying that this type of documentation would be extremely detrimental ... .. ... .. to the performance management system. In fact, this organization would have serious problems beyond the scope of its performance evaluation system.

Now, Jet us tum to the final important component of the coaching process: giving feedback.

9-3-2 Giving Feedback Giving feedback to an employee regard ing her prog- ress toward achieving goals is a key component of the coaching process.23 Feedback is information about past

Documenting Developmental Performance Activities and Performance in General: Some Recommendations

Be specific.

Use adjectives and adverbs sparingly.

Balance posit1ves w1th negat1ves.

Focus on job·related information.

Be comprehensive.

Standardize procedures.

Descnbe observable behaVior.

270 Part Ill Employee and Leadership Development

TABLE9-3 Individual Quotes Taken f rom Actual Employee Performance Evaluations

Since my last report, th1s employee has reached rock bouom .. . and has started to dig.

I would not allow this employee to breed.

This employee 1S really not so much of a has-been, but more of a definllely won't be.

Works well when under constant supe!Vision and cornered like a rat in a trap.

He would be out of his depth 1n a parking lot puddle.

He sets low personal standards and then consistently fails to achieve them.

This employee 1S deprlv1ng a village somewhere of an idiot.

This employee should go far ... . and the sooner he starts, the beller.

He's been working w11h glue too much.

He would argue w11h a signpost.

He has a knack for mak1ng strangers immediately detest h1m.

He brings a lot of joy whenever he leaves the room.

If you see two people talk1ng and one looks bored ... he's the other one.

Donated his brain to science before he was done using 1t.

Gates are down. the lights are nashing, but the train 1sn't coming.

If he were any more stupid, he'd have to be watered twice a week.

If you gave him a penny for his thoughts, you'd get change.

If you stand close enough to him, you can hear the ocean.

One neuron short of a synapse.

Some drink from the fountain of knowledge ... he only gargled.

Takes him 2 hours to watch 60 Mmutes.

The wheel is turning. but the hamster is dead.

... .... .. .... .

performance with the goal of improving future performance. Although "back" is part of feedback, giving feedback has both a past and a future component. This is why, when done properly, feedback can be relabeled feedforward- as described in Chapter 8 regard ing the feedforward interview.

Feedback includes information about both positive and negative aspects of job performance and lets employees know how well they are doing with respect to meeting the established standards.24 For example, the so-called 2 + 2 performance appraisal model for teachers includes peer teachers who observe each other per- form in the classroom, and then, offer two compliments and two suggestions for improvement.25 Feedback is important in the context of performance regarding development activities and goals. Our discussion of feedback, however, goes beyond that and includes feedback abo ut performance in general. Feedback is not a magic bullet for performance improvement26; however, it serves several important purposes:

• Helps build confidence and self-efficaet;. Praising good performance builds employee confidence regarding future performance. It also lets employees know that their manager cares about them. In addition, praising good performance enhances self-efficacy: An employee's belief that she will

Chapter 9 Performance Management Leadership 271

succeed in specific situations or accomplish a task.27 Note that self-efficacy is not the actual probability that the employee will succeed, but an employee's subjective belief that she will. Self-efficacy is critical because if an employee does not believe he has a good chance of improving his performance, he is not likely to even try.

• Develops competence. Communicating clearly about what has been done right and how to do the work correctly is valuable information that helps employees become more competent and improve their performance. In addition, communicating clearly about what has not been done right and explaining what to do the next time provides useful information so that past mistakes are not repeated.

• Enhances engagement. Receiving feedback and discussing performance issues allow employees to understand their roles in the unit and organization as a whole. This, in turn, helps employees become more engaged in the unit and the organization.

Unfor tunately, however, the mere presence of feedback, even if it is delivered correctly, does not necessarily mean that all of these purposes will be fulfilled. For example, a review of 131 studies that examined the effects of feedback on performance concluded that 38% of the feedback programs reviewed had a negative effect on performance.28 In other words, in many cases, the implementation of feedback Jed to lower performance levels. Th is can happen when, for example, feedback does not include useful information or is not delivered in the right way.

As an alternative perspective and course of action, now consider the possible cost of not providing feedback. First, organizations would be depriving employees of a chance to improve their performance. Second, organizations might be stuck with chronic poor performance because employees do not recognize any per- formance problems and feel justified in continuing to perform at substandard levels. Finally, employees migh t develop inaccurate perceptions of how their performance is regarded by others.

Given that, overall, feedback systems can be beneficial, what can we d o to make the most of them? Consider the following suggestions to enhance the positive effects of feedbacJ<29:

• Timeliness. Feedback should be delivered as close to the performance event as possible. For feedback to be most meaningful, it must be given immed iately after the event.

• Frequency. Feedback should be provided on an ongoing basis; daily, if possible. If performance improvement is an ongoing activity, then feedback about performance should also be provided on an ongoing basis.

• Specificity. Feedback should include specific work behaviors, results, and the situation in which these behaviors and results were observed.30 Feedback is not about the employee and how the employee "is," but about behaviors and results and situations in which these behaviors and results occurred .

• Verifiability. Feedback should include information that is verifiable and accurate. It should not be based on inferences or rumors. Using information that is verifiable leads to more accurate feedback and subsequent acceptance.

272 Part Ill Employee and Leadership Development

• ConsistenetJ Feedback should be consistent. In other words, information about specific aspects of performance should not vary unpredictably between overwhelming praise and harsh criticism.

• Privacy. Feedback should be given in a place and at a time that prevents any potential embarrassment. This applies to both criticism and praise, because some employees, owing to personality or cultural background, may not wish to be rewarded in public.

• Consequences. Feedback should include contextual information that allows the employee to understand the importance and consequences of the behaviors and results in question. For example, if an employee became frustrated and behaved inappropriately with an angry customer and the customer's complaint was not addressed satisfactorily, feedback should explain the impact of these behaviors (e.g., behaving inappropriately) and results for the organization (e.g., the customer's problem was not resolved, the customer was upset, the customer was not likely to give repeat business to the organization).

• Description first, evaluation second. Feedback should first focus on describing behaviors and results rather than on evaluating and judging behaviors and results. It is better first to report what has been observed, and once there is agreement about what happened, to evaluate what has been observed. If evaluation takes place first, employees may become defensive and reject the feedback.

• Perfonnance continuum. Feedback should describe performance as a continuum, going from less to more in the case of good performance, and from more to less in the case of poor performance. In other words, feedback should include information on how to d isplay good performance behaviors more often and poor performance behaviors less often. Thus, performance is a matter of degree, and even the worst performer is likely to show nuggets of good performance that can be described as a starting point for a discussion on how to improve performance.

• Pattern identification. Feedback is most useful if it is about a pattern of poor performance, rather than isolated events or mistakes. Identifying a pattern of poor performance also allows for a better understanding of the causes leading to poor performance.

• Confidence in the employee. Good feedback includes a statement that the manager has confidence that the employee will be able to improve her performance. It is important for the employee to hear this from the manager, as this enhances employee self-efficacy. This reinforces the idea that feedback is about performance and not the performer. Note, however, that this should be done only if the manager indeed believes the employee can improve her performance. In the case of a chronic poor performance, this type of information could be used out of context later if the employee is fired.

• Advice and idea generation. Feedback can include advice given by the supervisor about how to improve performance. In add ition, however, the employee should play an active role in generating ideas about how to improve performance in the future.

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Consider the following vignette in which Alexandra, a supervisor, has observed a specific performance event and provides feedback to her direct report. Alexandra is the manager of a small retail store with approximately five employees. With a small staff, Alexandra looks for coaching opportunities on a weekly basis. Alexandra is working with Caleb today, and she has just witnessed him complete a customer sale. Caleb did not follow several steps, however, that should be included at each sale, and because the store is now empty, Alexandra decides it is a perfect opportunity for a coaching session.

ALEXANDRA: Hey, Caleb, that was great the way that you just assisted that customer in finding her correct size in the jeans. Thanks for taking the extra time to help her.

CALEB: Thanks, Alexandra, not a problem. ALEXANDRA: I would like to go over the sales transaction with you. CALEB: Sure. ALEXAN DRA: After you helped the woman find her jeans, you

promptly brought her over and rang her up. That was a good sale because those jeans were a full-priced item; however, you didn't complete all of the tasks associated with closing a sale. In the training last week, we discussed the importance of adding on add itional sales, entering the customer's personal contact information in our system, and Jetting them know about upcoming sales.

CALEB: Yes, I just remembered us talking about that. When customers seem in a hurry, I feel bad about asking them additional questions.

ALEXANDRA: That's a very valid concern. Can you think of ways to increase the efficiency of adding these few steps into the sales transaction process so that you feel comfortable performing them in the future? I would like to help you do that because increasing the number of items you sell during each transaction could help you win the upcoming sales contests.

CALEB: That would be great. I would really like some new ideas about talking to customers.

ALEXANDRA: No problem; I know that you are a very capable salesperson. You have great customer service skills, and I think that you can improve your sales and possibly win one of the upcoming contests.

Alexandra and Caleb then generate ideas about how to improve Caleb's performance.

In this vignette, Alexandra demonstrated several of the behaviors listed in Table 9-4. She was specific about the behaviors and results, the information was verifiable, and it was timely because the behavior had just occurred. In addition, since Alexandra communicates her expectations on a weekly basis,

274 Part Ill Employee and leadership Development

TABLE9-4 the information she provides is consistent. Finally, she Characteristics of Effective Feedback described the behavior first, and then, evaluated its

effectiveness; she communicated confidence in Caleb and she offered to help him generate ideas about how to improve his effectiveness. On the other hand, Alexandra left out several important things while coaching Caleb. First, she did not communicate the consequences of his behavior, for example, that his failure to follow the pro- cedures could hurt sales for the entire store. Although the vignette does not describe the idea generation por- tion of the feedback session, Alexandra did not describe

Timely

Frequent

Specific

Verifiable

Cons1stent

Private

Consequential

Descriptive first and evaluative second small behaviors that Caleb could use to improve his performance. Finally, Alexandra did not communicate to Caleb whether this behavior was a one-time incident or whether it was a pattern that was affecting his overall work performance.

Related to a performance conunuum

Based on identifiable patterns of performance

A conf1dence builder for employees

A tool for generating advice and ideas Overall, if Alexandra continues to look for coaching

opportunities with her employees, her relationship with her employees and their performance in the store will

continue to improve. To be more effective as a performance management leader, however, she may need to work on communicating the patterns of behavior that result in poor performance and the consequences of continued poor performance. Now, let us discuss the nuts and bolts of how to give two types of feedback: praise and constructive (i.e., "negative").

Giving Praise Good feedback includes information about both good and poor performance. Although most people are a lot more comfortable giving feedback on good performance than they are on poor performance, some guidelines must be followed when giving praise-also called "positive feedback"-so that the feedback is useful in terms of future performance.

First, praise should be sincere and given only when it is deserved. If praise is given repeatedly and when it is not deserved, employees are not able to see when a change in direction may be needed .31 Second, praise should be about specific behaviors or results and be given within context so that employees know what they need to repeat in the future. For example, a manager can say the followint2:

Naomi, thanks for providing such excellent service to our client. Your efforts helped us renew our contract with them for another two years. It's these types of behaviors and results that our group needs to achieve our goal for this year. And, this is exactly what our company is all about: providing outstanding customer service.

Third, in giving praise, managers should take their time and act pleased, rather than rush through the information, looking embarrassed . Finally, avoid giving praise by referring to the absence of the negative, for example, "not bad" or "better than last time." Instead, praise should emphasize the positives and be phrased, for example, as "I like the way you did that" or "I admire how you did that."33

Consider the following vignette, which illustrates how a manager might give praise to her employee.

Chapter 9 Performance Management Leadership 275

After the successful completion of a three-month project at a large telecom- munications company, Hannah, the manager, wants to congratulate Jacob on a job well done. Hannah calls Jacob into his office one day after the project is completed.

HANNAH:

JACOB:

HANNAH:

Thanks for stopping by Jacob, and thank you for all of your hard work over the past three months. I know that I might not have congratulated you on every milestone you reached along the way, but I wanted to take the time to congratulate you now. Your organizational skills and ability to interact successfully with multiple departments Jed to the successful completion of the project on time and within budget. Thanks, Hannah. I have really been putting extra effort into completing this project on time. It shows, Jacob, and I appreciate all of your hard work and dedication to this team and our department. Thanks again and congratulations on a great end to a long three months.

In this vignette, Hannah delivered praise to Jacob successfully and followed the recommendations provided earlier. She was sincere and made sure not to praise Jacob too often, so that when she did praise him, it was meaningful. She described how Jacob's organizational and project management skills Jed to the successful completion of the project. Finally, Hannah took her time in delivering the praise and made sure that Jacob took the praise seriously.

Giving Constructive Feedback Constructive feedback includes information that performance has fallen short of accepted standards. This type of feedback is sometimes referred to as "negative feedback," but we use constructive feedback because this label has a more positive and future-oriented connotation.

The goal of providing constructive feedback is to help employees improve their performance in the htture; it is not to punish, embarrass, or chastise them. It is important to give constructive feedback when it is warranted because the consequences of not doing so can be detrimental for the organization as a whole. For example, Francie Dalton, founder and president of Columbia, Maryland-based Dalton Alliances, Inc., noted the following:

In organizations where management imposes no consequences for poor performance, high achievers will leave because they don't want to be where mediocrity is tolerated. But med iocre performers will remain because they know they're safe. The entire organizational culture, along with its reputation in the marketplace, can be affected by poor performers. 34

In spite of the need to address poor performance, managers are usually not very comfortable provid ing constructive feedback. Why is this so? Consider the following reasons:

• Negative reactions and consequences. Managers may fear that employees will react negatively. Negative reactions can include being defensive and even becoming angry at the information received. In addition, managers may

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fear that the working relationship, or even friendship, with their direct reports may be affected adversely and that giving constructive feedback can introduce elements of mistrust and annoyance.

• Negative experiences in the past. Managers themselves may have received constructive feedback at some point in their careers and have experienced firsthand how feelings can be hurt. Receiving constructive feedback can be painful and upsetting, and managers may not want to put their direct reports in such a situation.

• Plnying "God." Managers may be reluctant to play the role of an all-knowing, judgmental God. They may feel that giving constructive feedback puts them in that position.

• Need for irrefutable and conclusive evidence. Managers may not want to provide constructive feedback until after they have been able to gather irrefutable and conclusive evidence about a performance problem. Because this task may be perceived as too onerous, managers may choose to skip giving constructive feedback altogether.

\Nhat happens when managers avoid giving constructive feedback and employees avoid seeking it? A feedback gap results, in which managers and employees mutually instigate and reinforce lack of communication, which creates a vacuum of meaningful exchanges about poor performance.35 A typical consequence of a feedback gap is that in the absence of information to the contrary, the manager gives the employee the message that performance is adequate. When performance problems exist, they are likely to become more intense over time. For example, clients may be so dissatisfied with the service they are receiving that they may eventually choose to close their accounts and work instead with the competition. At that time, it becomes impossible for the manager to overlook the performance problem, and she has no choice but to deliver the feedback. At this stage of the process, however, feedback is delivered too late and often in a punitive fashion. Of course, feedback delivered so late in the process and in a punitive fashion is not likely to be helpful.

Alternatively, constructive feedback is most useful when early coaching has been instrumental in identifying warning signs and the performance problem is still manageable. Constructive feedback is also useful when it clarifies unwanted behaviors and consequences and focuses on behaviors that can be changed. There is no point in providing feedback on issues that are beyond the employee's control because there is not much she can do to improve the situation. In addition, employees are more likely to respond positively to constructive feedback when the manager is perceived as being trustworthy and making a genuine attempt to improve the employee's performance. In other words, the manager needs to be perceived as credible, and also, as instrumental in improving the employee's performance in the future.36 Finally, constructive feedback is most likely to be accepted when it is given by a source who uses straight talk and not subtle pressure and when it is supported by hard data. The supervisor must control her emotions and stay calm. If managers follow these suggestions, it is more likely that employees will benefit from constructive feedback, even if employees are not particularly open to receiving it.37 Following these suggestions leads to what has been labeled "actionable feedback," meaning that such feedback will allow employees to respond in constructive ways and will lead to learning and performance improvement.38

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A final and important issue to consider when giving constructive feedback is to use a strengths-based approach.39 The traditional, also called weaknesses-based approach, involves identifying employee weaknesses (e.g., deficiencies in terms of their job performance, knowledge, and skills); providing negative feedback on what the employees are doing wrong or what the employees did not accomplish; and finally, asking them to improve their behaviors or results by overcoming their weaknesses. In contrast, using a strengths-based approach involves iden- tifying employee strengths in terms of their exceptional job performance and asking them to improve their behaviors or results by making continued or more intensive use of their strengths. The key issue is to highlight how strengths can generate success on the job, as this motivates employees to intensify the use of their strengths to produce even more positive behaviors and results.

How is this done? First, the conversation can start with something like "I want to talk to you about some of the great things that you've been doing lately, as well as areas where you can improve. I'd like this time to be about how I can help you be your very best." The supervisor can request assistance from the employee in identifying strength areas by asking, "In what ways do you feel like you've been stand ing out?" Then, the last step involves identifying how employee strengths, which are used in some types of behaviors and results, can be used in others.

Generational and Individual Differences Regarding Feedback Reactions and Preferences Regardless of whether feedback includes praise or constructive comments, an important contemporary issue that we should consider is related to feedback reactions and generational differences regarding feedback preference and reactions.40 Specifically, socioemotional selectivity theory (SST) suggests that younger individuals, because they are closer to the beginning of their life cycles, anchor the concept of "time" as time since birth, and in their minds, time is mostly open-ended. As a consequence of this particular time orientation, Millennials and Post-Millennials (i.e., Generation Z) tend to have work-related goals that are clearly future-oriented: knowledge acquisition, career planning, and the development of ability and skills that will pay off in the future. In contrast, older workers (e.g., Baby Boomers) anchor the concept of time as time left in their careers and in life in general, and thus, see time as more limited. Consequently, they tend to have work-related goals that are more present-oriented: regulating their emotions to be positive and the pursuit of positive social relationships at work (i.e., "social awareness" goals). Offering support for SST, a recent study found that older workers were more open to feedback regarding social awareness issues, but less open to feedback that can be readily used to improve future performance and achieve desired career goals (i.e., "utility" goals) compared to younger workers. The lesson? Performance management leaders are aware of the needs and feedback orientations and reactions of their employees. Accordingly, they modify the type of feedback so that it is most useful, given individual needs and orientations.

Pause for a moment to consider how open you are to receiving feedback about your performance. What is your personal feedback orientation? How receptive are you to receiving feedback? Are you more interested in social awareness or utility feedback? Given your own age, is your feedback orientation consistent w ith other members of your generation? To help you ponder on

278 Part Ill Employee and Leadership Development

these issues, answer the following questions, which are part of the Feedback Orientation Scale.41 In answering these questions, use a 5-point scale, ranging from strongly d isagree to strongly agree. Then, compare you r scores with those of a coworker, classmate, or family member who is a member of a different generation:

Social Awareness:

1. I try to be aware of what other people think of me. 2. Using feedback, I am more aware of what people think of me. 3. Feedback helps me manage the impression I make on others. 4. Feedback lets me know how I am perceived by others. 5. I rely on feedback to help me make a good impression.

Utility:

1. Feedback contributes to my success at work. 2. To develop my skills at work, I rely on feedback. 3. Feedback is critical for improving performance. 4. Feedback from supervisors can help me advance in a company. 5. I find that feedback is critical for reaching my goals.

In addition to generational differences, individuals also differ in what is called feedback-seeking behavior.42 In other words, individuals differ in the amount of effort they devote toward understanding the extent to which they are performing well. Specifically, people differ regarding the extent to which they proactively ask peers, supervisors, and others for feedback, and also, in the extent to which they proactively monitor their own performance themselves. What this means in terms of being a performance management leader is that feedback-giving should be proactive and ongoing. Otherwise, individuals who are higher on the feedback-seeking behavior continuum are more likely to receive feedback compared to those who are lower. This is particularly important for newcomers in the organization because not receiving sufficient feedback early on may mean that they may not be able to meet organizational objectives, and possibly, remain within the organization in the long term.

Making the Tough Calls: Disciplinary Process and Organizational Exit This last section about giving feedback is about making some tough calls. In some cases, an employee may not respond to the feedback provided and may not make any improvements in terms of performance. Giving bad news is never an easy process.43 But in such cases, there is one intermediate step that can be taken before the employee enters a formal disciplinary process, which involves a verbal warning, a written warning, and may lead to termination. The employee can be given a once-in-a-career decision-making /eave.44 This is a "day of contemplation" that is paid and allows the employee to stay home and decide whether working in this organization is what he or she really wants to do. This practice is based on adult learning theory, which holds individ uals responsible for their actions. Unlike a formal disciplinary action, the decision-making leave does not affect employee pay. As noted by Tun Field, principal of a consulting firm in Los Angeles, California, "This element of holding people accountable without negatively impacting their

Chapter 9 PerFormance Management Leadership 27SI

personnel file or payroll tends to catch people off guard, because problem em- ployees, like problem children, are often expecting negative attention for their bad behavior." How can the decision to grant an employee a decision-making leave be communicated? Assuming this is a company policy and there is senior management support, you can communicate the leave as follows45:

Hailey, as you know, you and I have met on several occasions to talk about your performance. In spite of these feedback sessions, I see that you are still having some difficulties with important tasks and projects. Consistent with my observations, I have received comments from some of your peers related to some performance deficiencies they have also noticed. I think that issuing a written warning would be counterproductive-! am concerned that it may decrease your motivation and do more harm than good. Instead, what I am going to do is to put you on what we call a "decision-making leave" for a day. This is a type of intervention that has worked very well with other individuals in your same position in the past. I want you to know that this is a once-in-a-career benefit that you should use to your advantage and I decided to do this because I truly believe that you are capable of improving your performance. It works like this. I am going to ask you to not come to the office tomorrow but you will be paid for that day, so you don't have to worry about your paycheck being affected. While you are away from the office tomorrow, I want you to give serious thought about whether you really want to work in this company. You and I will meet when you return to the office the day after tomorrow and I will ask you to tell me whether you'd rather resign and look for work elsewhere. I will understand and will be fully supportive if that is your decision. On the other hand, if when we meet, you tell me you want to keep your job here, then I will give you an additional assignment the day you return to the office. I will ask you to prepare a one-page Jetter addressed to me, convincing me that you assume full and total responsibility for the performance issues we discussed during our feedback sessions. You will have to provide clear and specific arguments as well as describe a specific set of actions you will take to convince me that you will address the problems. I will keep the Jetter in a safe place but I am not planning on including it in your personnel file for now. To be clear, however, this Jetter is a personal com- mitment from you to me and our agreement is that if you don't stick to the terms of your Jetter, you will essentially fire yourself. This is a very important moment for you and also for me and it could be a turning point in your career development. Now that I have explained the process, I would like to hear any questions or comments you may have about this "decision-making leave day" that you will be taking tomorrow.

Using a decision-making leave as part of the performance management system can be a powerful tool to give problem employees an opportunity to improve their performance. However, this tool may not lead to the desired outcomes and the employee may have to enter into a disciplinary process. Note that a demotion or transfer may be a more appropriate action when there is evidence that the employee is actually trying to overcome the performance deficiencies, but is not able to do so. However, termination is the appropriate

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action w hen performance does not improve and the employee continues to make the same mistakes or fails to meet standards. Also, termination is the appropriate course of action when an employee engages in serious violations of policies, laws, or regulations such as theft, fraud, falsifying documents, and related serious offences.

The disciplinary process should not come as a surprise to the employee or supervisor if there is a good performance management system in p lace because there are ongoing check-ins and p lenty of opportunities for the employee to overcome performance problems and for the supervisor to offer support and feedback so that willing and able employees will be able to do so. However, when a disciplinary process seems to be the only recourse, it is important to follow a set of steps so as not to fall into legal problems. Also, all employees, even those who are terminated, deserve to be treated with respect and dignity. Nevertheless, even if there is a top-notch performance management system in place, there are several pitfalls that must be avoided and specific actions supervisors can take to do so, which are the following46:

1. Pitfall1: Acceptance of poor performance. Many supervisors may just want to ignore poor performance, hoping that the problem will go away. Unfortunately, in most cases, the performance problems escalate and become worse over time. Suggested course of action: Do not ignore the problem. Add ressing it as soon as possible can not only avoid negative consequences for the employee in q uestion, peers, and customers, but also help put the employee back in track in terms of his career objectives.

2. Pitfall2: Failure to get the message through. The poor performing employee may argue that she did not know the problem was serious or that it existed at all. Suggested course of action: In the decision-making leave described earlier, make sure to be very specific about the performance problem and the consequences of not addressing it effectively. Make sure you document the action plan and that you have secured the employee's agreement regard ing the plan.

3. Pitfall3: Performance standards are "unrealistic" or "unfair." The employee may argue that performance standards and expectations are tmrealistic or unfair. Suggested course of action: Remind the employee that his performance standards are similar to others hold ing the same position. Also, remind the employee that performance standards have been developed over time with the participation of the employee in question and share with h im documentation regarding past review meetings, including past appraisal forms with the employee signature on them.

4. Pitfall 4: Negative affective reactions. The employee may respond emotionally, ranging from tears to shouts and even threats of violence. This, in turn, creates an emotional response on the part of the supervisor. Suggested course of action: Do not let em otional reactions derail you from your mission and role as a performance management leader, which is to describe the nature of the problem, what needs to be done,

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and consequences of not doing so. If the employee is crying, do offer compassion and give him some space to compose himself. You can give the employee some time and resume the meeting a few minutes later or a rescheduling of the meeting at a later time may be a good alternative. If the employee reaction involves a threat or suggest possible violence, call security immediately. If such threats do take place, report them to the human resources (HR) department.

5. Pitfall 5: Failure to consult HR. There are hundreds of wronghtl termination cases that have cost millions of dollars to organizations that have not followed the appropriate termination procedures. Suggested course of action: If you are planning on implementing a disciplinary or termination process, consult with your HR department regarding legal requirements. For the most part, if you have a good performance management system in place, you have all necessary steps in place. However, consulting with HR is a good idea to ensure you are following all appropriate steps.

Avoiding the above pitfalls will minimize the possibility of problems during the formal disciplinary process. If the goals are not reached, there will be a need for a termination meeting. This meeting is, of course, extremely unpleasant for all involved, to say the least. However, it is the right and fair thing to do at this stage. Suggestions for the termination meeting are as follows47:

1. Be respectful. It is important to treat the terminated employee with respect and dignity. Keep the information about the termination confidential, although it is likely others will learn about it in subsequent days.

2. Get right to the point. At this stage, the less said, the better. You can start by saying "There is no easy way to say this . . . ," and then, summarize the performance problems, actions taken to try to overcome these problems, outcomes of these actions, and the decision about termination that you have reached.

3. Let the employee grieve.48 It is important to Jet the employee grieve because it is likely that there will be a sense of loss. Show empathy with phrases such as "I know this is sad for you .. . "and "Go ahead and take a moment . . . when you're ready, we'll continue."

4. Wish the employee well. The purpose of the meeting is not to rehash every single reason why you are Jetting the employee go and every single instance of poor performance. Instead, use the meeting to wish the person well in her next job and endeavors and tell her that she will be missed.

5. Send the emplm;ee to HR. Let the employee know that she needs to go to HR to receive information on benefits, including vacation pay, and also to receive information on legal rights. If you are working in a small business, seek outside legal counsel regarding the information to give to the terminated employee.

6. Have the employee leave immediately. Keeping the terminated employee on-site can lead to gossip and conflict, and disgruntled employees may engage in sabotage.

7. Have the temtination meeting at the end of the day. It is better to conduct the termination meeting at the end of the day so the employee can leave the office as everyone else and there are fewer people around.

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The aforementioned information regarding the disciplinary process and termination may be used as a follow-up to a formal performance review meeting held because of a Jack of remedial action on the part of the employee. So, Jet us discuss performance review meetings next, which may or may not lead to the disciplinary process and termination we just discussed.

9-4 COACHING, DEVELOPMENT, AND PERFORMANCE REVIEW MEETINGS

Performance management leaders often feel uncomfortable in this role because managing performance requires that they judge and coach at the same time.49 In other words, supervisors serve as judges by eval uating performance and allocating rewards. In addition, supervisors serve as coaches by helping employees solve performance problems, identify performance weaknesses, and design developmental plans that will be instrumental in h1ture career development. In addition, supervisors feel uncomfortable because they feel they need to convey bad news and employees may react negatively. In other words, there is a concern that managing performance unavoidably leads to negative surprises.

Because performance management leaders play these paradoxical roles, it is usually helpful to separate the various meetings related to performance. Separating the meetings also minimizes the possibility of negative surprises. 50 Moreover, when meetings are separated, it is easier to separate the discussion of rewards from the discussion about future career development. This allows employees to give their full attention to each issue, one at a time.

Chapter 6 noted that performance management systems can involve as many as six formal meetings. Each of these sessions should be seen as a work meeting with specific goal, including the following:

• System inauguration. The purpose of this meeting is to discuss how the performance management system works and which requirements and responsibilities rest primarily on the employee and which rest primarily on the supervisor.

• Self-appraisal. The purpose of this meeting is to discuss the self-appraisal prepared by the employee.

• Classical performance review. The purpose of this meeting is to discuss employee performance, including the perspectives of both the supervisor and the employee.

• Merit/sa/an; review. The purpose of this meeting is to d iscuss what, if any, compensation changes will result as a consequence of the employee's performance during this period.

• Developmental plan. The purpose of this meeting is to discuss the employee's developmental needs and what steps will be taken so that performance will be improved during the following period.

• Objective setting. The purpose of this meeting is to set performance goals, both behavioral and results-oriented, regarding the following review period.

Although six types of meetings are possible, not all six take place as sepa- rate meetings. For example, the self-appraisal, classical performance review,

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merit/salary review, development p lan, and objective setting meetings may all take place during one umbrella meeting, labeled "performance review meeting." As noted above, however, it is better to separate the various types of information discussed so that the employee and supervisor focus on each of the components separately. Note, however, that the conversation about com- pensation should be related to performance (i.e., employees must understand the direct link between performance and compensation decisions).

Regardless of the specific type of meeting, there are several steps that performance management leaders take before the meeting takes placeY Specifically, it is useful to give at least a two-week advance notice to the employee to inform her of the purpose of the meeting and enable her to prepare for it. Also, it is usehtl to block out sufficient time for the meeting and arrange to meet in a private location without interruptions. Taking these steps sends a clear message that the meeting is important and that, consequently, performance management is important.

As noted above, most organizations merge several meetings into one labeled "performance review meeting." The typical sequence of events for such a meeting is the following52:

• Explain tlte purpose of the meeting. The first step includes a description of the purpose of the meeting and the topics to be discussed.

• Conduct self-appraisal. The second step includes asking the employee to summarize her accomplishments during the review period. This is more easily accomplished when the employee is given the appraisal form to be used by the supervisor before the meeting. This portion of the meeting allows the employee to provide her perspective regarding performance. The role of the supervisor is to listen to what the employee has to say and to summarize what he hears. This is not an appropriate time for the supervisor to disagree with what the employee says.

• Share perfonnance data and explain rationale. Next, the supervisor explains the rating he provided for each performance dimension and explains the reasons that led to each score. It is more effective to start with a discussion of the performance dimensions for which there is agreement between the employee's self-appraisal and the supervisor's appraisal. This is likely to reduce tension and to demonstrate to the employee that there is common ground and that the meeting is not confrontational. Also, it is better to start with a discussion of the performance dimensions for which the scores are highest, and then, move on to the dimensions for which the scores are lower. For areas for which there is disagreement between self- and supervisor ratings, the supervisor must take great care in discussing the reason for his rating and provide specific examples and evidence to support the score given. At this point, there should be an effort to resolve discrepancies and the supervisor should take extra care with sensitive areas. The employee should be provided with the opportunity to explain her viewpoint thoroughly. This is a very useful discussion because it leads to clarifying performance expectations. For dimensions for which the score is low, there should be a discussion of the possible causes for poor performance. For example, are the reasons related to lack of knowledge, lack of motivation, or contextual factors beyond the control of the employee?

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• Discuss development. After the supervisor and employee have agreed on the scores given to each performance dimension, there should be a d iscussion about the developmental plan. At this point, the supervisor and the employee should discuss and agree on the developmental steps that will be taken to improve performance in the future.

• Ask employee to swmnarize. Next, the employee should summarize, in her own words, the main conclusions of the meeting: which performance dimensions are satisfactory, which need improvement, and how improvement will be achieved. This is an important component of the meeting because it gives the supervisor an opportunity to determine whether he and the employee are in accord.

• Discuss rewards. The next step d uring the meeting includes discussing the relationship between performance and any reward allocation. The supervisor should explain the rules used to allocate rewards and how the employee would be able to reach higher reward levels as a consequence of future performance improvement.

• Schedule follow-up meeting. Before the meeting is over, it is important to schedule the next performance-related formal meeting. It is important that the employee understand that there will be a formal follow-up and that performance management is not just about meeting with the supervisor once a year. Usually, the next meeting will take place just a few weeks later to review whether the developmental plan is being implemented effectively.

• Discuss approval and appeals process. Finally, the supervisor asks the employee to sign the form to attest that the evaluation has been discussed with him. This is also an opportunity for the employee to add any comments or additional information he would like to see included on the form. In add ition, if d isagreements about ratings have not been resolved, the supervisor should remind the employee of the appeals process.

• Conduct final recap. Finally, the supervisor should use the "past-present- future model." In other words, the supervisor summarizes what happened during the review period in terms of performance levels in the various dimensions, reviews how rewards will change based on this level of performance, and sums up what the employee w ill need to do in the next year to maintain and enhance performance.

Performance review discussions serve very important purposes. First, these discussions allow employees to improve their performance by identifying performance problems and solutions for overcoming them. Second, they help build a good relationship between the supervisor and the employee because the supervisor shows that she cares about the employee's ongoing growth and development and that she is willing to invest resources, including time, in helping the employee improve. Third, s§ood performance management leaders use review discussions as stay interviews. Stay interviews focus on finding out what makes employees stay in the organization and help managers create strategies to enhance employee engagements and retain star performers. As part of the stay interview, managers can ask questions such as (a) Have you ever thought about leaving our team? (b) How can I best support you? (c) What do you want to Jearn here? (d) What can you Jearn here that will make you feel good when you go home

Chapter 9 PerFormance Management l eadership 2815

every day? Although stay interviews will not ensure that a star employee will never move, they can be very useful in identifying the factors that matter most to a firm's or team's most impactful contributors.

Unfortunately, these purposes are not always realized because employees may be defensive and many supervisors do not know how to deal w ith this attitude because they Jack the necessary skills to conduct an effective performance review. How can we tell when an employee is being defensive? Typically, there are two patterns of behavior that indicate defensiveness. 54 First, employees may engage in a fight response. This includes blaming others for performance deficiencies, staring mutely at the supervisor, and other, more aggressive responses, such as raising her voice or even pounding the desk. Second, employees may engage in a flight response. This includes looking away, turning away, speaking softly, continually changing the subject, or quickly agreeing with what the supervisor is saying w ithout basing the agreement on a thoughtful and thorough discussion about the issues at stake. When employees have a fight-or-flight response during the performance review d iscussion, it is unlikely that the meeting will lead to improved performance in the future. What can supervisors do to prevent defensive responses? Consider the following suggestions:

• Establish and maintain rapport. It is important that the meeting take place in a good climate. As noted earlier, this can be achieved by choosing a meeting p lace that is private and by preventing interruptions from taking place. Also, the supervisor should emphasize two-way communication and put the employee at ease as quickly as possible. This can be done by sitting next to the employee as opposed to across a desk, by saying his name, by thanking him for coming, and by beginning with small talk to reduce the initial tension. When good rapport is established, both the supervisor and the employee are at ease, relaxed, and comfortable. They can have a friendly conversation and neither is afraid to speak freely. Both are open-minded and can express disagreement without offending. On the other hand, when there is no good rapport, both participants may be nervous and anxious. The conversation is cold and formal and both may fear to speak openly. The supervisor and employee are likely to interrupt each other frequently and challenge what the other is saying.

• Be empathetic. It is important for the supervisor to put herself in the shoes of the employee. The supervisor needs to make an effort to understand why the employee has performed at a certain level during the review period. This includes not making attributions that any employee success was caused by outside forces (e.g., a good economy) or that employee failures were caused by inside forces (e.g., employee incompetence).

• Be open-minded. If the employee presents an alternative and different point of view, be open-minded and d iscuss them directly and openly. There is a possibility that the employee may provide information that is relevant and of which you are not aware. If this is the case, ask for specific evidence.55

• Observe verbal and nonverbal cues. The supervisor should be able to read verbal and nonverbal signals from the employee to determine whether further clarification is necessary. The supervisor should be attentive to the employee's emotions and react accordingly. For example, if the

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employee becomes defensive, the supervisor should stop talking and allow the employee to express her point of view regarding the issue being d iscussed.

• Minimize threats. The performance review meeting should be framed as a meeting that will benefit the em ployee, not punish him.

• Encourage participation. The employee needs to have her own conversational space to speak and express her views. The supervisor should not dominate the meeting; rather, she should listen without interrupting and avoid confrontation and argument.

In spite of these suggestions, defensiveness may be unavoidable in some situations. In such situations, supervisors need to recognize that employee defensiveness is inevitable, and they need to allow it. Rather than ignoring the defensive attitude, supervisors need to deal with the situation head on. First, it is important to Jet the employee vent and to acknowledge the employee's feelings. To do this, the supervisor may want to pause to accept the employee's feelings. Then, the supervisor may want to ask the employee for additional information and clarification. If the situation is reaching a point where communication becomes impossible, the supervisor may want to suggest suspending the meeting tmtil a later time.56 For example, the supervisor may say,

I understand that you are angry, and that you believe you have been treated unfairly. It's important that I understand your perspective, but it's difficult for me to absorb the irlformation when you are so upset. This is an important matter. Let's take a break, and get back together at 3:00P.M. to continue our discussion.

To be sure, if the relationship between the supervisor and the employee is not good, the performance review meeting is likely to expose these issues in a blatant and often painful way.

Consider the following vignette. Hannah is the manager at a large accounting firm, and Sofia is one of the employees on her team. She chooses a conference room with privacy away from the other offices.

HANNAH: Hi, Sofia. I wanted to meet with you today to discuss your performance appraisal for this quarter. At any time, please offer your input and ask questions if you have any.

SOFIA: OK. HANNAH:

SOFIA: HANNAH: SOFIA:

HANNAH:

You did meet two important objectives that we set this quarter: sales and customer service. Thanks for your hard work. No problem. You d id miss three of the other objectives. What? I worked as hard as I could! It wasn't my fault that the other people on the team d id not carry their weight. Sofia, I am not here to blame anyone or to attack you. I want to generate some ideas on what we can do to ensure that you meet your objectives and receive your bonus next quarter.

SOFIA:

HANNAH :

SOFIA: HANNAH :

SOFIA:

HANNAH :

SOFIA:

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5/IT/NG BACK WITH CROSSED ARMS: I told you I worked as hard as I could. I know that you worked hard, Sofia, and I know how hard it is to balance all of the objectives that we have in our department. When I first started, I had a hard time meeting all of the objectives as well. It is hard and I try my best. Sofia, can you think of anything that we can work on together that would help you meet the last three objectives? Is there any additional training or resources that you need? I am having a hard time prioritizing all of my daily tasks. There is a class offered online on prioritizing, but I feel I am too busy to take it. That is good that you think the class will help. Take the class online, which will not disrupt your work schedule, and I will go to all of your meetings and follow up with clients as needed. Thanks, Hannah. I really appreciate your help.

How did Hannah do in dealing with Sofia's defensiveness? Overall, she did a good job. Hannah was empathetic, she picked up on Sofia's nonverbal behavior, she had Sofia offer her input, she held the meeting in a comfortable, private location, and she emphasized that the meeting was to work on future performance and not to punish Sofia. In the end, she was able to address Sofia's defensiveness and turned a meeting that could have gone very poorly into a productive exchange of information and ideas.

In closing, this third section in the book addressed employee development (Chapter 8) and skills that managers need to acquire and things they need to do to become performance management leaders (Chapter 9). The next section will address additional important issues in all performance management systems. Specifically, Chapter 10 will address the relation between performance management and rewards and performance management and the Jaw, and Chapter 11 will discuss team performance management.

SUMMARY POINTS

• To become performance management leaders, managers must acquire several important skills. Managers need to serve as coaches, to observe and document performance accurately, to give both positive and constructive feedback, and to conduct performance review meetings- including meetings that address disciplinary and termination issues.

• Coaching is a collaborative and ongoing process in which the manager directs, motivates, and rewards employee behavior. Successful coaching involves a good manager-€mployee relationship, an understanding that the employee is the source and director of change, and that each employee is unique.

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• Effective coaching involves giving advice about performance expectations and how to perform well, giving employees guidance so they know how to improve their performance, providing employees with support without being controlling, and enhancing employees' confidence and competence. Coaching must be based on a helping and trusting relationship. This is particularly important when the supervisor and the direct report do not share similar cultural backgrounds.

• Performance management leaders need to engage in a complex set of behaviors to perform the various coaching functions. These include the following: establish developmental objectives, communicate effectively, motivate employees, document performance, give feedback, d iagnose performance problems, and help employees improve their performance.

• Managers' personalities and behavioral preferences influence their coaching style. Some managers prefer to be drivers and just tell employees what to do. Others prefer to be persuaders and try to sell what they want the employees to do. Yet others adopt an amiable style in which feelings take precedence and urge the employee to do what feels right or what the employee feels is the right way to do things. Finally, others prefer to be analyzers and have a tendency to follow rules and procedures in recommending how to perform. None of these four styles is necessarily better than the others in all conditions. The best performance management leaders are able to change their styles and adapt to the needs of the employees.

• The coaching process is ongoing and cyclical, and it includes the following five components: (1) setting developmental goals, (2) identifying the activities needed to achieve the developmental goals as well as securing resources that will allow employees to engage in activities to achieve their developmental goals, (3) implementing developmental activities (e.g., enrolling the employee in an online course), (4) observing and documenting developmental behaviors (e.g., checking on the progress of the employee toward the attainment of developmental goals), and (5) giving feedback (e.g., providing information to the employee that will help him adjust his current developmental goals and guide his future goals).

• Observing and documenting developmental behaviors and results and performance in general is not as easy as it may seem. Tune constraints can play a role when managers are too busy to gather performance information. Situational constraints may prevent managers from observing the employee directly. Finally, activity constraints may be a factor; when developmental activities are unstructured, such as reading a book, the manager may have to wait until the activity is completed to assess whether any new skills and knowledge have been acquired.

• Observation and documentation of performance can be improved in several ways. These issues, which were described in detail in Chapter 7, include implementing a good communication plan and establishing training programs that help managers minimize rater errors (i.e., rater error training); share notions of what it means to complete developmental activities successfully (i.e., frame-of-reference training); and observe performance more accurately (i.e., behavioral observation training).

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• Documenting an employee's progress toward achieving developmental goals and improving performance in general has several important benefits. These include the reduction of the manager's cognitive load, the enhancement of trust between the employee and the manager, the collection of important input to be used in planning developmental activities in the future, and the development of a good line of defense in case of litigation.

• For performance documentation to be most useful, it must be specific, use adjectives and adverbs sparingly, balance positives with negatives, focus on job-related information, be comprehensive, be standardized across employees, and be stated in behavioral and results terms rather than subjective judgments.

• Feedback about performance in general, and about developmental activities in particular, serves several important purposes. These include building employee confidence and self-efficacy, developing employee competence, and enhancing employee engagement with the unit and the organization as a whole.

• The mere presence of feedback does not mean that there will be positive effects on future performance. For feedback to be most usehtl, it must be timely, frequent, specific, verifiable, consistent over time and across employees, given in private, and tied closely to consequences (e.g., rewards); address description first, and evaluation second; discuss performance in terms of a continuum and not in terms of d ichotomies (i.e., in terms of more and less and not in terms or all versus nothing or present versus absent); address patterns of behavior and events and not isolated errors or mistakes; include a statement that the manager has confidence in the employee; and include the active participation of the employee in generating ideas about how to improve performance in the htture.

• When giving praise (i.e., "positive feedback"), it is important to be sincere and to give it only when it is deserved . Also, praise should be about specific behaviors or results and be given within context so that employees know what they need to repeat in the future. In addition, in giving praise, managers should take their time and act pleased, rather than rush through the information looking embarrassed . Finally, avoid giving praise by referring to the absence of the negative-for example, "not bad" or "better than last time."

• In general, managers do not feel comfortable about giving constructive (i.e., "negative") feedback. They may fear that employees will react negatively because they themselves have been given constructive feedback in the past in a way that was not helpful and do not want to put their employees in the same situation, because they do not like playing God, or because they think they need to collect an onerous amount of information and evidence before giving constructive feedback. When constructive feedback is warranted, however, and managers refuse to give it, poor performers may get the message that their performance is not that bad. Eventually, the situation may escalate to the point that the manager has no choice but to give feedback; the situation then becomes ptmitive, and feedback is not likely to be useful. For constructive feedback to be useful, it must be given early when the performance problem is still manageable.

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• Performance management leaders play the paradoxical roles of judge and coach at the same time. These roles are most evident during the performance review meetings, which can include as many as six separate formal meetings: system inauguration, self-appraisal, classical performance review, merit/salary review, developmental plan, and objective setting. In most organizations, these meetings are merged into one or two meetings. It is most effective to separate the meetings so that employees can focus on one issue at a time (e.g., supervisor's view on the employee's performance, rewards allocation, developmental plan).

• In giving feedback, it is important to consider generational and individual d ifferences and preferences and reactions. In general, Millennials and Post-Millennia is (i.e., Generation Z) tend to have work-related goals that are more future-oriented (i.e., "utility" goals) compared to Baby Boomers. In contrast, older workers tend to have work-related goals that are more present-oriented (i.e., "social awareness"): regulating their emotions to be positive and the pursuit of positive social relationships at work. Also, ind ividuals d iffer in the extent to which they proactively seek feedback about their performance (i.e., feedback-seeking behavior). Good performance management leaders are aware of the need to p rovide feedback to all employees to make sure nobody falls through the cracks.

• In some cases, an employee may be unwilling or unable to overcome performance problem s. When that happens, there is a need to implement a formal disciplinary process, including a verbal warning, followed by a written warning, and eventually, if needed, termination. When implementing a disciplinary process, supervisors must be aware of several pitfalls including the acceptance of poor performance, failing to get the message through, arguments that performance standards are unfair or unrealistic, employee and supervisor emotional reactions, and the failure to consult with HR.

• The termination meeting creates important challenges and is extremely unpleasant for both the employee and supervisor. For termination meetings to be more effective and less painful, supervisors must (1) be respectful, (2) get right to the point, (3) Jet the employee grieve, (4) wish the employee well, (5) send the employee to HR (or offer information, based on the advice of outside counsel), (6) have the employee leave immediately, and (7) conduct the termination meeting at the end of the day. Overall, all employees deserve to be treated with d ignity and respect, even those who are being terminated .

• When all the performance review meetings are merged into one, the components of such a meeting include the following (1) explanation of the p urpose of the meeting, (2) self-appraisal, (3) d iscussion of the supervisor 's performance ratings and rationale and resolution of discrepancies with self-appraisal, (4) developmental discussion, (5) employee summary, (6) rewards discussion, (7) setting up follow-up meeting, (8) approval and appeals process d iscussion, and (9) final recap.

• Performance management leaders also use the performance review meetings to conduct "stay interviews," which involve gathering information on what makes employees stay in the organization and help managers create strategies to enhance employee engagements and retain

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star performers. As part of the stay interview, managers can ask questions such as (a) Have you ever thought about leaving our team? (b) How can I best support you? (c) What do you want to Jearn here? (d) What can you Jearn here that will make you feel good when you go home every day?

• In meeting with the supervisor to discuss performance issues, employees may become defensive. Defensiveness is indicated by a fight-or-flight response. The supervisor can minimize defensiveness by (1) establishing and maintaining rapport, (2) being empathetic, (3) observing verbal and nonverbal cues, (4) minimizing threats, and (5) encouraging employee participation. When defensiveness becomes unavoidable, the employee's attitude must be recognized and allowed expression. If the situation becomes intolerable, the meeting may be interrupted and rescheduled for a later time.

EXERCISE 9-1 WHAT IS YOUR COACHING STYLE?

Below are 15 rows of four words each. From each row, select and circle two words out of the four that best describe the way you see yourself. If all four words sound like you, select the two that are most like you. If none of the four sounds like you, select the two that are closest to the way you are. Then, total the number of words selected under each respective column.

A B C 0

All· business Bold Personable Deliberate

2 Organized listening Telling Courteous listening

3 Industrious Independent Companionable Cooperauve

4 No-nonsense Decisive Talkauve Reflective

5 Serious Determined Warm Careful

6 To-the-point Risk-taker Amiable Moderate

7 Pract1ca1 Aggress1ve Empathetic Nonassert1ve

8 Self-controlled Authoritative Shows emotions Thorough

9 Goal-directed Assert1ve Friendly Pauent

10 Methodical Unhesitating Sincere Prudent

11 Businesslike Definite Sociable Prec1se

12 Diligent Firm Demonstrative Particular

13 Systematic Strong·m1nded Sense of humor Thinking

14 Formal Confident Expressive Hes1tauve

15 Persevering Forceful Trusung Restrained

Total

After you have totaled the number of words circled under each respective column, plot those numbers on their respective axes of the grid on the following page. For example, if you circled six words in column A, mark the A axis next to the 6. Complete the same procedures for columns B, C, and D. Then extend the

2512 Part Ill Employee and Leadership Development

Goa/driven Chang Stress "Doer"

e addicted drN8n

Driver

4 12 10 A

ANIIyzer

8 6 4 2

nd procedures Rules a Logica I They are the only people

in the world Info flow charts

B

0

14 12 10

6 4 2 2 4 6 8

2 4 8

" 10 12 14

Visionary ssib/lities

good at entlng

Seea//po No/as

imp/em "Trost me•

Ex pres Persua

10 12 1 4 c

Amlabl • Heart bafo Likes ave

re head 1)1'ne to

be happy Passionate

marks into each respective quadrant to create a rectangle. For example, consider the example of circling nine words from the A list, eight from the B list, seven from the C list, and eight from the D list. The rectangle would be the following:

B 14 12 10

8 6 4

2 14 12 10 8 6 4 2 2 4 6 8 10 12 14

c 2 4 6 8

10 12 14

0

Chapter 9 Performance Management Leadersh ip 2•3

In this particular example, the area covered by the rectangle shows that this person is predominantly a driver and an analyzer, but can also be a persuader and amiable. Now, create your own rectangle using your scores:

What is your coaching style? Is there a dominance of one style over the other three, as indicated by an area predominantly covering one of the quadrants and not the others? If there is, what can you do to start using the other styles as well?

Source: Coaching Guides. Available online at httpJ/www.specialolympicswisconsin.org/wp<ontentluploads/ 2015/08/coach_philo_course.pdf. Retrieved on January 2, 2018. Used with the kind permission of Special Olympics. Inc.

EXERCISE 9-2 DEALING WITH DEFENSIVENESS

Spencer, Jeff's manager, needs to talk to Jeff about his poor performance over the previous quarter. Jeff enters the room and sits across the desk from Spencer.

JEFF: Spencer, you wanted to talk to me? SPENCER: Yes, Jeff, thanks for coming by. I wanted to talk about your

performance last quarter. (Spencer's phone rings and he answers it. Five minutes later, Jeff is still waiting for Spencer. Jeff finally gets frustrated and Spencer notices Jeff looks at his watch several times.) Sorry for the interruption, Jeff, I know it is frustrating to be kept waiting.

JEFF: I am very busy. Can we get on with this? SPENCER: Yes, absolutely. As you know you had some problems

JEFF: SPENCER: JEFF: SPENCER:

JEFF:

meeting all of your goals last quarter. Now, wait a second, I met the most important goal. Yes, you did, but you missed the other four. Just by a little and it wasn't my fault. Jeff, you need to accept responsibility for your own performance and not push blame onto others. You need to meet your goals this coming quarter or I will have to take more serious action. One bad quarter and you threaten to fire me? I can't believe this!

SPENCER: Just meet all of your goals and I won't have to take that action.

Now, you will play the role of Spencer and one of your classmates will play the role of Jeff- who is behaving defensively. Cond uct the entire meeting from scratch. Your goal is to address Jeff's defensiveness more effectively. (Hint: use material from Section 9-4 Coaching, Development, and Performance Review Meetings in this chapter.)

CASE STUDY 9-1

Was Robert Eaton a Good Performance Management Leader?

Robert Eaton was CEO and chairman of Chrys-ler from 1993 to 1998, replacing Lee Iacocca, who retired after serving in this capacity since 1978. Eaton then served as cochairman of the newly merged DaimlerChrysler organization from 1998 to 2000. In fact, Eaton was responsible for the sale of Chrysler Corporation to Daimler-Benz, thereby creating DairnlerChrysler. With 362,100 employees, DaimlerChrysler had achieved revenues of €136.4 billion in 2003. DaimlerChrysler's passenger car brands included Maybach, Mercedes-Benz, Chrysler, Jeep, Dodge, and Smart. Commercial vehicle brands included Mercedes-Benz, Freightliner, Sterling, Western Star, and Setra.

From the beginning of his tenure as CEO, Eaton communicated with the people under him. He immediately shared his plans for the future with his top four executives, and upon the advice of his colleague, Bob Lutz, decided to look around the company before making any hasty decisions concern- ing the state of affairs at Chrysler. Eaton and Lutz ascertained that Chrysler was employing the right staff and that they did not need to hire new people; they just had to lead them in a different manner, in a more participative style.

Eaton listened to everyone in the organization, including executives, suppliers, and assembly-line workers, to determine how to help the company succeed. Eaton also encouraged the employees at Chrysler to talk with one another. The atmosphere of collaboration and open-door communication between Eaton and Lutz (the two men sat across the hall from one another and never closed their doors) permeated the entire organization. Eaton and Lutz's walk-around management style indicated to employees that they were committed to and engaged in the organization. Furthermore, Eaton and Lutz held meetings with their executive team on a regular basis to exchange ideas and information from all areas of the organization.

Eaton even reorganized the manner in which Chrysler designed cars, based on a study, previously

2M

disregarded by Iacocca, that indicated that Chrys- ler needed to be more flexible and its executives needed to be in constant communication with the product design team. One employee was quoted as saying,

Bob Eaton does not shoot the messenger when he hears something he doesn't like or understand. He knows that not every idea is right. But Bob is off-the-wall himself .... He'll say something, and we'll tell him that it's a crazy idea ... . He may not change his mind in the end, but he'll spend the time explaining to you what is behind his thought processes. Do you know what kind of confidence that inspires?

This type of open communication at the top proved extremely successful, as summed up by one designer: "It's a system that recognizes talent early and rewards it, and that creates a sense of enthusiasm for your work, and a sense of mission."

Another program that Eaton describes as empow- ering employees at Chrysler includes requiring all employees, including executives, to participate in the process of building a new vehicle. Eaton explains that this shows all of the employees in the plant that executives are concerned about the proper functioning of new cars, and it gives executives the opportunity to understand and solve problems at the factory level. Eaton states, "When we're done with our discussions, these guys know where we want to go and how we want to get there, and they go back and put the action plans together to do that. This goes for every single thing we do." He concludes,

Clearly at a company there has to be a shared vision, but we try to teach people to be a leader in their own area, to know where the company wants to go, to know how that affects their area, to benchmark the best in the world and then set goals and programs to go after it. We also encourage

people not only to go after the business plan objectives, but to have stretch goals. And a stretch goal by definition is a fifty-percent increase .. .. If we go after fifty percent, something dramatic has to happen. You have to go outside of the box.

Chapter 9 Performance Management Leadership BIS

Based on the above description, please evaluate Bob Eaton's performance management leadership skills using the accompanying table. If a certain principle, function, or behavior is missing, please provide recommendations about what he could have done more effectively.

Principles Present? (YIN) Comments/Recommendations

A good coach1ng relauonship 1S essential

The employee is the source and director of change

The employee is whole and unique

The coach is the facilitator of the employee's growth

Functions Present? (YIN) Comments/Recommendations

Give advice

Provide guidance

Give support

Give confidence

Promote greater competence

Behaviors Present? (YIN) Comments/Recommendations

Establish developmental objectives

Communicate effectively

Mot1vate employees

Document performance

Give feedback

Diagnose performance problems and performance decline

Develop employees

Source: This case is loosely based on infonnatlon provided by Puris, M. (1999). Comcl1ack: How sewn stroight-slwoting CEOs tumed orouud troubled pauits (pp. 80-118). New York, NY: Times Books, specifically Chap. 4, "Robert Eaton and Robert Lutz; The Copilots."

CASE STUDY 9-2

Performance Management Leadership at Henry's Commercial Sales and Leasing

Henry is the owner of a small real estate agency that handles the sale and leasing of commercial property. He has two real estate agents working in the office, along with himself. He also has two customer service representatives

(CSRs), each of whom has a real estate license, and one receptionist who has worked for the company for about three months.

Henry has recently decided that he needs another customer service representative. He has

2M Part Ill Employee and Leadership Development

ENDNOTES

noticed that the receptionist, Tara, is very smart, seems to learn quickly, and is very good in dealing with clients. He has decided to promote Tara to CSR and hire a new receptionist. In order to familiarize Tara with her new d uties, Henry has assigned Martin, the senior CSR in the company, to be her direct supervisor and coach her.

1. In the context of the material in this chapter, provide a critical analysis of the decisions that Henry has made in assigning Martin to this role.

2. Provide a detailed discussion of Martin's new role as a performance management leader.

Three months into Tara's training program, she seems constantly upset and has expressed concerns that she is not able to learn the information and feels she may be "in over her head." Henry knows that Tara is capable of the work required and is confident that she will be a very good CSR, so he talks to her about what she feels is going wrong. Some of Tara's comments include information that Martin is very abrupt with her, and rather than explaining why certain procedures are required and why certain procedures are given certain circumstances, he simply directs her to do certain things.

3. Critically assess Martin's coaching style. 4. Discuss possible solutions to help Tara become an effective CSR. What

should Martin be doing to help her?

1. Schein, E. H. (2006). Coaching and consu ltation revisited: Are they the same? In M. Goldsmith & L. S. Lyons (Eds.), Coochingfor leadership: The practice of leadership coaching from the world's greatest cooc/1es (2nd ed., pp. 17-25). San Francisco, CA: john Wiley.

2. Vance, C. M. (2006). Strategic upstream and downstream considerations for effective global performance management. International journal of Cross Cultural Management, 6, 37-56.

3. Bono, J. E., Purvanova, R. K., Towler, A. J., & Peterson, D. B. (2009). A survey of executive coaching practices. Personnel Psychology, 62,361-404.

4. Dahling, j. j., Taylor, S. R., Chau, S. L., & Dwight, S. A. (2016). Does coaching matter? A multilevel model linking managerial coaching skill and frequency to sales goal attainment. Personnel Psychology, 69,863-894.

5. Gray, D. E., Ekinci, Y., & Goregaokar, H. (2011). Coaching SME managers: Bus iness development or personal therapy? A mixed methods study. International joumal of Human Resource Management, 22, 863-882.

6. Huang, J., & Hsieh, H. (2015). Supervisors as good coaches: Influences of coaching on emp loyees' in-role behaviors and proactive career behaviors. lnteruational joumal of Human Resource Management, 26,42-58.

7. jones, R. J., Woods, S. A., & Guillaume, Y. F. (2016). The effectiveness of workplace coaching: A meta-analysis of learning and performance outcomes from coaching. jourual of Occupational and Organizational Psychology, 89, 249-277.

8. Stober, D. R. (2006). Coaching from the humanis tic perspecti\•e. In D. R. Stober & A. M. Gra nt (Eds .), Evidence based coaching handbook: Putting best practices to work for your clients (pp. 17-50). Hoboken, Nj: John Wiley.

9. Farr, j. L., & jacobs, R. (2006). Trust us: New perspectives on performance appraisal. In W. Bennett, C. E. Lance, & D. J. Woehr (Eds.), Performance measurement: Curm1t perspectives and futuruhal/enges (pp. 321-337). Mahwah, Nj: Lawrence Erlbaum .

10. Boyatzis, R. E., Smith, M. L., & Blaize, N . (2006). Developing sustainable leaders through coaching and compassion. Academy of Management Learning and Education, 5, 8-24.

Chapter 9 Performance Management Leadership 297

11. Peterson, 0 . B. (2006). People are complex and the world is messy: A behavior-based approach to executive coaching. In 0. R. Stober & A.M. Grant (Eds.), Evidence based coaching handbook: Putting best practices to work for your clients (pp. 51-76). Hoboken, NJ: john Wiley.

12. Aguinis, H., & Glavas, A. (2017). On corporate social responsibility, sensemaking, and the search for meaningfulness through work. Jouma/ of Management. doi:10.1177 /0149206317691575

13. Hunt, J. M., & Weintraub, J. R. (2002). TJ.- coaching manager: Developing top talent in business. Thousand Oaks, CA: Sage.

14. Toto,). (2006, April). Untapped world of peer coaching. T&D, 60, 15. Byne,J. A. (1998, June 8). How Jack Welch runs GE. Business Week. Retrieved January 2, 2018,

from http://www.businessweek.com/ 1998/23/b3581001.htrn 16. Bacon, T. R., & Spear, K. I. (2003). Adaptive conching: The art and practice of a client-cmtered

approach to perfonnance improvement. Palo Alto, CA: Davies-Black. 17. Foster, P. (2002). Performance documentation. Business Communication Quarterly, 65, 108-114. 18. Grant, A. (2013). Give and take. New York, NY: Penguin. 19. Fletcher, N ., & Rodenbaugh, D. (2006, June/July). Coaching Hallmark's managers to value

communication. Strategic Communication Management, 10, 26-29. 20. Cleverly v. Western Electric Co., 594 F.2d 638 (8th Cir. 1979). 21. Walther, F., & Taylor, S. (1988). An active feedback program can spark performance. In A. D.

Timpe (Ed.), Performance: Tl1e art & science of business management (pp. 293-299). New York, NY: Facts on File Publications.

22. These quotes have circulated worldwide on the In ternet. See, for examp le, http:// blogannath.blogspot.com/ 2010/ 03/humorous-look-at-emp loyee-performance.htrnl. Retrieved January 2, 2018.

23. Blake Jelley, R., & Goffm, R. D. (2001). Can performance-feedback accuracy be improved? Effects of rater priming and rating-scale format on rating accuracy.joumal of Applied Psychology, 86,134-144.

24. Becker, T. E., & Klimoski, R. J. (1989). A field study of the relationship between the organizational feedback environment and performance. Personnel Psyclwlogy, 42, 343-358.

25. Allen, 0 . W., & LeBlanc, A. C. (2005). Collaborative peer coaching that improves instruction: The 2 + 2 performance appraisal model. Thousand Oaks, CA: Corwin.

26. Silverman, S. B., Pogson, C. E., & Cober, A. B. (2005). When employees at work don't get it: A model for enhancing individual employee change in response to performance feedback. Academy of Management Executive, 19,135-147.

27. Bandura, A. (2012). On the functional proper ties of perceived self-efficacy revisited. journal of Management, 38,9-44.

28. Kluger, A. N., & DeNisi, A. S. (1996). The effects of feedback interventions on performance: Historical review, a meta-analysis, and a preliminary feedback intervention theory. Psychological Bulletin, 119,254-284.

29. London, M. (2003)./ob feedback: Giving, seeking, and using feedback for perfonnance improvement (2nd ed.). Mahwah, NJ: Lawrence Erlbaum.

30. Goodman, J. S., Wood, R. E., & Hendrickx, M. (2004). Feedback specificity, exploration, and learning. journal of Applied Psychology, 89, 248-262.

31. Audia, P. G., Locke, E. A., & Smith, K. G. (2000). The paradox of success: An archival and a laboratory study of strategic persistence following a radical environmental change. Academy of Management journal, 43, 837-853.

32. Nelson, B. (1996). Providing a context for recognition. Executive Edge Newsletter, 27(11), 6. 33. Watkins, T. (2004). Have a heart. New Zealand Managemmt, 51(2), 4&-48. 34. Tyler, K. (2004). One bad apple: Before the whole bunch spoils, train managers to deal with

poor performance. HR Magazine, 49(12), 79. 35. Moss, S. E., & Sanchez, J. I. (2004). Are your employees a\•oiding you? Managerial strategies

for closing the feedback gap. Academy of Managemmt Executive, 18, 32-44. 36. Kinicki, A. J., Prussia, G. E., Wu, B. )., & McKee-Ryan, F. M. (2004). A covariance s tructure

analysis of employees' response to performance feedback. journal of Applied Psychology, 89, 1057-1069.

37. Audia, P. G., & Locke, E. A. (2003). Benefiting from negative feedback. Human Resource Management Review, 13, 631-<>46.

38. Cannon, M. D., & Witherspoon, R. (2005). Actionable feedback: Unlocking the power of learning and performance improvement. Academy of Management Executive, 19, 12Q-134.

298 Part Ill Employee and Leadership Development

39. Aguinis, H., Gottfredson, R. K., & Joo, H. (2012). Delivering effective performance feedback: The strengths-based approach. Business Horizons, 55, 105-111.

40. Mo, W., Burlacu, G., Truxillo, D., james, K., & Xiang, Y. (2015). Age differences in feedback reactions: The roles of employee feedback orientation on social awareness and utility. jouma/ of Applied Psychology, 100,1296-1308.

41. Linderbaum, B. A., & Levy, P. E. (2010). The development and validation of the feedback orientation scale (FOS). jouma/ of Management, 36,1372-1405.

42. Ashford, S. J., De Stobbeleir, K., & Nujella, M. (2016). To seek or not to seek: Is that the only question? Recent developmen ts in feedback-seeking literature. Amwa/ Review of Organizntiollal Psychology and OrganiZlltiona/ Behavior, 3, 213-239.

43. Bies, R. j. (2013). The delivery of bad news in organizations: A framework for analysis. jouma/ of Managemmt, 39,136-162.

44. Falcone, P. (2007). Days of contemp lation. HR Magazine, 52(2), 107-111. 45. Based on Falcone, "Days of contemp lation." 46. Stone, F. M. (2007). Coaching, counseling, & mentoring (2nd ed.). New York, NY: American

Management Association. 47. Ibid. 48. Folz, C. (2016). Bad news bearer. HR Magazine, 61(7), 18. 49. McGregor, D. (1957). An uneasy look at performance appraisal. Harvard Business Review,

35(3), 89-94. 50. Falcone, P. (2007). Productive performance appraisals (2nd ed.). New York, NY: American

Management Association. 51. Meinecke, A. L., Lehmann-Willenbrock, N., & Kauffeld, S. (2017). What happens during

annual appraisal interviews? How leader-follo\over interactions unfold and impact interview outcomes. Jouma/ of Applied Psychology, 102, 1054-1074.

52. Adapted from Kirkpatrick, D. L. (1982). How to improve perjon11ance through appraisal and coaching (pp. 55-57). New York, NY: AMACOM.

53. Tyler, K. (2011). Who w ill stay and who will go? To retain star employees, train managers to conduct s tay interviews. HR Magazine, December, 101-103.

54. Grote, D. (2002). The perfonnance appraisal question and answer book (pp. 131-132). New York, NY:AMACOM.

55. Mone, E. M., & London, M. (2010). Employee engagement through effective performance management. New York, NY: Routledge.

56. Society for Human Resource Management. (2015). Managing difficult employees and disruptive behaviors. Retrieved January 2, 2018, from https://www.shrm.org/resourcesand tools/ tools-and-samples/toolkits/pages/managingdifficultemployeesa.aspx

part four

Reward Systems, Legal Issues, and Team Performance Management

2H

chapter

10 Performance Management, Rewards, and the Law

You have to get rewarded in the soul and the wallet. The money isn't enough, but a plaque isn't enough either . .. you have to give both.

- Jack Welch

Learning Objectives By the end of this chapter, you will be able to do the following:

1. Design a rewards system that includes returns with varying degrees of dependence on the performance management system, including base pay, cost-of-living adjustments, short-term incent ives, long-term incentives, income protection, work-life focus, allowances, and relational (i.e., intangible) returns.

2. Create traditional (i.e., based mostly on position and seniority) and contingent (i.e., based mostly on performance) pay plans.

3. Prepare contingent pay plans that improve employee motivation and performance and minimize potential pitfalls, such as not rewarding meaningful behaviors and results, not offering meaningful rewards, and not holding managers accountable for performance management.

4. Propose a contingent pay plan that takes into account key success factors such as the organization's culture, strategic business objectives, and the right balance bel\'lleen individual and collective incentives.

5. Set up pay plans with the understanding that pay is an important motivator, but to improve performance management effectiveness, there is a need to define and measure performance first, and then, allocate rewards; use only rewards that are available; make sure all employees are eligible; and make rewards visible, contingent, timely, and reversible.

6. Turn recognition and other nonfinancial incentives into meaningful rewards.

7. Create a performance management system that considers key six legal principles: employment at will , negligence, defamation, misrepresentation, adverse impact, and illegal discrimination.

8. Develop a performance management system that does not violate laws regarding discrimination based on race, sex, religion, age, disability status, and sexual orientation and is legally sound.

30 1

302 Part IV Reward Systems, Legal Issues. and Team Performance Management

As you will recall based on material in Chapter 1, one of the six purposes of a performance management system is to make administrative decisions about employees. Decisions about rewards (what used to be labeled "compensation and benefits") are the most meaningful consequences of a performance management system for many employees. Clearly, most people are interested in their personal growth and development. But pay is often at the top of the list in terms of people's needs-although they may rarely admit it openly.1 In addition, from the perspective of organizations, compensation shapes the culture because it sends a very clear message about what behaviors and results are more and less valued. Accordingly, this chapter provides a detailed discussion of the basic ingredients of reward systems, different types of pay plans (i.e., traditional and contingent), reasons for introducing contingent pay plans and possible pitfalls of those plans, and what pay can and carmot do in terms of motivating employees to perform better.

You will also recall that Chapter 1 referred to the documentation purpose of performance management systems, including the documentation of important administrative decisions. We have also referred to issues about justice and fairness throughout the book. For the most part, our discuss thus far has been about how the performance management system is perceived, which is clearly an important factor influencing reactions, and acceptance and involvement, on the part of all organizational members. In addition, however, there are legal requirements that organizations have to meet when implementing performance management. So, this chapter add resses legal issues regarding performance management which, again, are related to the documentation and administrative purposes.

Let us highlight an important caveat: The topics of compensation and legal issues require their own books. So, this chapter only offers an overview of these topics, with a particular emphasis on their relation with performance manage- ment. Let us begin by defining reward systems.

10-1 DEFINITION OF REWARD SYSTEMS Until a few years ago, the terms" compensation" and "compensation and benefits" were used commonly. But more recently, these terms have been replaced with "rewards" and "total rewards." A reward system is the set of mechanisms for dis- tributing both tangible and intangible returns as part of an employment relationship.

An employee's tangible returns include cash compensation (i.e., base pay, cost-of- living and merit pay, short-term incentives, and long-term incentives) and benefits (i.e., income protection, work- life focus, tuition reimbursement, and allowances). In addition, employees also receive intangible or relational returns, which include recogni- tion and status, employment security, challenging work, and learning opportunities.

Not all types of returns are directly related to performance management systems. This is the case because not all types of returns are allocated based on performance. For example, some allocations are based on seniority, as opposed to performance. The various types of returns are defined next.2

10·1·1 Base Pay Base pay is given to employees in exchange for work performed. The base pay, which usually includes a range of values, focuses on the position and duties performed, rather than an individual's contribution. Thus, the base pay is usually the same for all employees performing similar duties and ignores differences

Chapter 10 PerFormance Management. Rewards, and the law 303

across employees. However, differences within the base pay range may exist, based on such variables as experience. In some countries (e.g., United States), there is a difference between wage and salary. Salary is base cash compensation received by employees who are exempt from regulations of the Fair Labor Standards Act, and in most cases, cannot receive overtime pay. Employees in most professional and managerial jobs (also called salaried employees) are exempt employees. On the other hand, nonexempt employees receive their pay calculated on an hourly wage.

10-1-2 Cost-of-Living Adjustments and Contingent Pay Cost-of-living adjustments (COLA) imply the same percentage increase for all employees, regardless of their individual performance. COLA are given to combat the effects of inflation in an attempt to preserve the employees' buying power. For example, in 2017, in the United States, organizations that implemented a COLA used a 3 percent pay increase. In 1980, this same percentage was 14.3 percent, whereas in 2013, it was only 1.5 percent. Year-by-year COLA percentages can be obtained from such agencies as the Social Security Administration in the United States (http://www.ssa.gov /OACT /COLA/ colaseries.html).

Contingent pay, sometimes referred to as merit pay, is given as an addition to the base pay, based on past performance. As we will describe later in more detail, contingent pay means that the amount of additional compensation depends on an employee's level of performance. So, for example, the top 20 percent of employees in the performance score distribution may receive a 10 percent annual increase, whereas employees in the middle 70 percent of the distribution may receive a 4 percent increase, and employees in the bottom 10 percent may receive no increase at all.

10-1-3 Short-Term Incentives Similar to contingent pay, short-term incentives are allocated based on past performance. However, incentives are not added to the base pay and are only temporary pay adjustments based on the review period (e.g., quarterly or annual). Incentives are one-time payments, and are sometimes referred to as variable pay.

A second difference between incentives and contingent pay is that incentives are known in advance. For example, a salesperson in a pharmaceutical company knows that if she meets her sales quota, she will receive a US$6,000 bonus at the end of the quarter. She also knows that if she exceeds her sales quota by 10 percent, her bonus will be US$12,000. By contrast, in the case of contingent pay, in most cases, the specific value of the reward is not known in advance. As a concrete example, see Box 10-1 describing short-term incentives for physicians.

10-1-4 Long-Term Incentives Whereas short-term incentives usually involve an attempt to motivate perfor- mance in the short term (i.e., quarter, year) and involve cash bonuses or spe- cific prizes (e.g., two extra days off), long-term incentives attempt to influence future performance over a longer period of time. Typically, they involve stock ownership or options to buy stocks at a preestablished and profitable price. The rationale for long-term incentives is that employees will be personally invested in the organization's success, and this investment is expected to translate into a sustained high level of performance.

304 Part IV Reward Systems. Legal Issues, and Team Performance Management

Box 10-1

Company Spotlight: Short-Term Incentives for Physicians in Colorado Short-t erm incentives were used in a reward program in Colorado Springs, Colorado. Eight health care providers and t hree insurance companies teamed up with the nonprofit Colorado Business Group on Health to pay physicians cash awards per patient for providing diabetes care that results in posit ive outcomes for patients. Doctors in the program received the additional pay as an incentive without an increase in base salary. The program required doctors to work closely with patients and focus on preventative medicine, including education, goal setting, and follow-up meetings. Physical indicators, such as blood pressure, blood sugar, and cholesterol, are measured against goals to

determine whether successful outcomes are being achieved. The goals of the program were to provide better disease control for the patient and to cut down on expensive future t reatments, such as emergency room visits and inpatient stays in the hospita l. Addit ional savings were expected through reduced medica l claims and health insurance premiums paid by employers. In summary, t he health providers and insurers used short-term incentives as part of the performance management systems with the goal of motivating physicians to focus on treatments that will enhance the overall health and well-being of the patient in an ongoing manner.'

Both short-term and long-term incentives are quite popular. For example, surveys involving several hundred HR practitioners across the public, private, and voluntary sectors by the Chartered Institute of Personnel and Development conducted over the past few years showed that between 50 percent and 65 percent of their organizations offer performance-based rewards.4 As we will d iscuss later in this chapter, some organizations such as Google are taking this idea to the limit and offer what we may call "big pay for big performance."

10-1-5 Income Protection Income protection programs serve as a backup to employees' salaries in the event that an employee is sick, disabled, or is no longer able to work. Some countries mandate income protection programs by Jaw. For example, Canadian organiza- tions pay into a fund that provides income protection in the case of a disability. Take, for instance, the University of Alberta, which offers a monthly income of 70 percent of salary to employees who become severely disabled. In the United States, employers pay 50 percent of an employee's total contribution to Social Security so that income is protected for family members in case of an employee's death or a disability that prevents the employee from doing substantial work for one year and for an employee when he or she reaches retirement age. For example, a 40-year-old employee earning an annual salary of US$90,000, and expected to continue to earn that salary until retirement age, would receive about US$1,739 a month if he retired at age 62 (in 2039), about US$2,509 a month if he retired at age 67 (in 2044), and about US$3,133 if he retired at age 70 (in 2047)- all of these in 2017 dollars without calculating inflation.

Other types of benefits under the income protection rubric include medical insurance, pension plans, and savings plans. These are optional benefits provided by organizations, but they are becoming increasingly important and often guide an applicant's decision to accept a job offer.

Chapter 10 Performance Management, Rewards, and the Law 3015

10-1-6 Work-Life Focus Benefits related to work- life focus include programs that help employees achieve a better balance between work and nonwork activities. These include time away from work (e.g., vacation time), services to meet specific needs (e.g., counseling, financial p lanning), time off for volunteering, and flexible work schedules (e.g., telecommuting, non paid time off). For example, Sun Microsystems actively promotes an equal balance between work and home life and closes its Broomfield, Colorado, campus from late December through early January every year. This ben- efit (i.e., vacation time for all employees in addition to ind ivid ual yearly vacation time) is part of Sun's culture. Sun believes in a work hard- play hard attitude, as is evidenced by CEO Scott McNealy's motto: "Kick butt and have fun.''5

Many Silicon Valley companies, including Google, Apple, Asana, and Face- book, have become famous for offering these types of benefits, which also include free on-site gourmet cafeterias serving anything from Indian food to fresh fruit smoothies, auto insurance, free dry cleaning, concerts and "beer bashes," on-site yoga classes, and "concierge" services that help employees plan vacations and even buy tickets for sporting events.6•7 But does this mean that Google and other Silicon Valley companies are overly generous with their employees? Maybe not. This is a strategic and well thought-out reward policy because, as noted by Center for Effective Organizations Gerry Ledford," An employee who never has to leave the workplace to eat, shower, exercise, run errands, or sleep is an employee who can work extraordinarily long hours- and expected to do so.''8 Also, a benefit of these policies is that some programs are designed specifically to attract and retain Millennia Is, who typically place greater importance on work- life balance, compared to Baby Boomers.9 For example, Pricewaterhouse Coopers makes an- nual contributions toward employees' student loan repayment and IBM, GE, and Accenture help nursing mothers by providing materials and funds to ship breast milk home when they are traveling on a work-related assignment.

10-1-7 Allowances Benefits in some countries and organizations include allowances covering housing and transportation. These kinds of allowances are typical for expatriate personnel and are also popular for high-level managers throughout the world . In South Africa, for example, it is common for a transportation allowance to include one of the following choices:

• The employer provides a car and the employee has the right to use it both privately and for business.

• The employer provides a car allowance, more correctly referred to as a travel allowance, which means reimbursing the employee for the business use of the employee's personal car.

Other allowances can include smartphones and their monthly charges, club and gym fees, d iscount loans, and mortgage subsidies.10 Although these allowances are clearly a benefit for employees, as mentioned earlier, some of them directly or indirectly also prod uce a benefit for the employer. For example, smartphones means that employees are reachable via phone, text, and email 24/7. Similarly, if employees take advantage of a gym fee allowance, they are likely to stay healthier, which in turn, may lead to less health-related expenses for the organization.

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TABLE 10-1 Returns and Their Degree of Dependency on the Performance Management System

10-1-8 Relational (Intangible) Returns Relational returns are intangible in nature. They include recognition and status, employment security, challenging work, opportunities to Jearn, and opportunities to form personal relationships at work (includ ing friendships and romances)." For example, Sun Microsystems allows employees to enroll in SunU, which is Stm's own online education tool. SunU encapsulates a mix of traditional class- room courses with online classes that can be accessed anywhere in the world at any time. Sun offers its employees enormous scope for development and career progression, and there is a commitment to ensuring that all employees are given the opportunity to develop professionally. The new knowledge and skills ac- quired by employees can help them not only to further their careers within Sun, but also, to take this knowledge with them if they seek employment elsewhere. Thus, some types of relational returns can be long-lasting.

Table 10-1 includes a list of the various returns, together with their degree of dependency on the performance management system. As an example, cost-of-living adjustment has a low degree of dependency on the performance management system, meaning that the system has no impact on this type of return. In other words, all employees receive this type of return, regardless of past performance. On the other end, short-term incentives have a high degree of dependency, meaning that the performance management system dictates who receives these incentives and who does not. Long-term incentives (e.g., profit sharing and stock options, which we d iscuss later in this chapter) also have a high degree of dependency; although this type of incentive is not specifically tied to individual performance, it does depend on performance measured at the team, unit, or even organizational levels. Between the high and low end, we find some returns with a moderate degree of dependency on the performance management system, such as base pay, a type of return that may or may not be influenced by the system.

Think about the performance management system of your current em- ployer, the system used by your most recent employer, or the system in place at an organization where someone you know is employed at present. Based on Table 10-1, try to think about the various types of tangible and intangible returns allocated in this organization. To what extent is each of these returns dependent on the organization's performance management system? Does the organization

Return Degree of Dependency

Cost-of-living adJUStment Low

Income protection Low

Work-hie focus Moderate

Allowances Moderate

Relational returns Moderate

Base pay Moderate

Conungent pay High

Short-term incentives High

Long-term incent1ves H1gh

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emphasize returns that are related to performance or not? What does this tell you about the culture of this organization?

10-2 TRADITIONAL AND CONTINGENT PAY PLANS A "traditional" approach in implementing reward systems is to reward employees for the positions they fill as indicated by their job descriptions and not necessarily by how they do their work. In other words, employees are rewarded for filling a specific slot in the organizational hierarchy. In such traditional pay systems, one's job directly determines pay and indirectly determines benefits and incentives received. Typically, there is a pay range that determines minimum, midpoint, and maximum rates for each job. For example, a university may have five ranks for professors who have just been hired, with the following base pay:

1. Instructor (pay range: US$50,000-US$65,000) 2. Senior instructor (pay range: US$60,000-US$75,000) 3. Assistant professor (pay range: US$80,000-US$110,000) 4. Associate professor (pay range: US$105,000-US$125,000) 5. Professor (pay range: US$120,000- US$160,000)

As noted above, in a traditional reward system, each of these positions would have a minimum, midpoint, and the maximum base salary. For assistant professors, the minimum is US$80,000 per year, the midpoint is US$95,000, and the maximum is US$110,000. Salary increases at the end of the year would be determined by seniority or by a percentage of one's base salary (and the same percentage would be used for all workers). Rewards would not be based on teach- ing quality, as indicated by student teaching ratings, or research productivity, as indicated by the number and quality of publications. If an assistant professor's base salary is US$110,000, she cannot realize an increase in her salary unless she is promoted to associate professor because US$110,000 is the maximum pos- sible salary for this job title. In short, in traditional reward systems, the type of position and seniority are the determinants of salary and salary increases, not performance. In such reward systems, there is a very weak or no relationship between performance management and rewards.

This type of system is quite pervasive in numerous organizations, particularly outside of North America. South Korea is one country where systems based on seniority are still quite pervasive.12 In Korea, as is the case in other collectivistic cultures (e.g., China), employees tend to avoid confrontation for fear of losing face. 13 Thus, supervisors may be reluc tant to give employees unsatisfactory performance ratings or ratings based on individual performance because this would single out individuals. Instead, systems that measure and reward team performance may be more appropriate in collectivistic cultures. It is possible, however, to move away from more traditional systems based mainly on seniority by establishing clear links between performance management and other functions such as training, as described in Chapter 1. When such links have been clearly established, employees are more likely to see the benefits of the performance management system and believe that the system is fair.

Contingent pay (CP), also called pay for performance, means that individuals are rewarded based on how well they perform on the job. Thus, employees receive

308 Part IV Reward Systems. Legal Issues, and Team Performance Management

increases in pay based wholly or partly on job performance. These increases can either be added to an employee's base salary or can be a one-time bonus. Origi- nally, CP plans were used only for top management. Gradually, the use of CP plans extended to sales jobs. Currently, CP plans are more pervasive. For example, in 2001, about 70 percent of workers in the United States have been employed by organizations implementing some type of variable play plan, and many of these organizations tie variable pay (e.g., bonus, commission, cash award, lump sum) directly to performance. A remarkable change in the past two decades has been a steady decrease in base pay and an increase in different types of variable pay.14 In other words, rewards are increasingly influenced by performance, which highlights the increased importance of having a good performance management system that yields useful and fair information for making decisions about the allocation of rewards.

Let us return to the example of salaries for university professors. When a CP plan is implemented, pay raises are determined in part or wholly based on performance. For example, two assistant professors may be hired at the same time at the same base salary level (e.g., US$80,000). If one of them outperforms the other, year after year for several years, then eventually, the better perform- ing assistant professor may make $117,000, which may be a higher level of pay than many associate professors make. This is because every year, this assistant professor receives a substantial salary increase, part of which may be added to the base salary, based on her outstanding teaching and research performance. On the other hand, the other assistant professor may still be making the same amount, or close to the same amount, he was making when he was first hired . Under a traditional pay plan, an assistant professor would not receive a higher salary than most associate professors. Under such a plan, the assistant professor would have to be promoted to associate professor before she could receive a sal- ary of US$110,000, which is outside the traditional range for assistant professors.

10-3 REASONS FOR INTRODUCING CONTINGENT PAY PLANS Why are organizations embracing CP plans? One reason is given by results of a survey of Fortune 500 companies, which showed that performance management systems are more effective when results are d irectly tied to the reward system.15 When the performance management system has a d irect relationship with the reward system, performance measurement and performance improvement are taken more seriously. In other words, CP p lans force organizations to define effective performance more clearly and to determine what factors are likely to lead to effective performance. When a CP plan is implemented, organizations need to make clear what is expected of employees, what specific behaviors or results will be rewarded, and how employees can achieve these behaviors or results. This, in and of itself, serves as an important communication tool because supervisors and employees are better able to understand what really matters.

Also, high-achieving performers are attracted to organizations that reward high-level performance, and high-level performers are typically in favor of CP plans.16 This tendency is called the sorting effect: star performers are likely to be attracted to and remain with organizations that have implemented CP plans.17 An organization's ability to retain its star performers is obviously crucial if it wan ts

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to win the talent war and have a people-based competitive advantage.18 For example, a study conducted at a glass installation company found that produc- tivity improved by 44 percent when the compensation system was changed from salaries to individ ual incentives.19 A closer look at the data indicated that about 50 percent of the productivity improvement was d ue to the current employees being more prod uctive, whereas the other 50 percent improvement was due to less productive employees quitting and the organization's ability to attract and recruit more productive workers. In short, CP plans can serve as a good tool to recruit and retain star performers as a result of the sorting effect, which in turn, can lead to greater prod uctivity.

Hicks Wald ron, former CEO of cosmetics giant Avon, in an eloquent state- ment, explained why CP plans are so popular: "It took me 30 years to figure out that people don't do what you ask them to do; they do what you pay them to do." How about organizations that are struggling financially? Can they still implement CP plans? Can they afford to give performance-based rewards to their employees? The answer is Yes to both questions. Making sure that top perform- ers are rewarded appropriately can help keep them motivated and prevent them from leaving the organization in difficult times. It is these top performers who are the organization's hope for recovery in the future. In fact, giving rewards to poor performers means that these rewards are taken away from high-level performers.20

Overall, CP plans enhance employee motivation to accomplish goals that match organizational needs.21 More specifically, CP plans have the potential to help change people's behaviors and improve performance. For example, assume an organization is trying hard to improve customer satisfaction. Some units in this organization decide to implement a CP plan that awards cash to employees who improve their customer satisfaction ratings. By contrast, other units continue with a traditional pay plan, in which there is no clear tie between performance levels and rewards. Who do you think will perform better-employees under the CP plan or those under the traditional plan? Well, if all other things are equal, it is likely that employees under the CP plan will improve the service they offer to customers.22 In fact, a review of several studies concluded that using individual pay incentives increased productivity by an average of 30 percent.23 Similarly, another study, which was based on 21 fast food franchises, showed a 30 percent increase in average profits and a 19 percent decrease in the drive-through times as a result of the implementation of a CP plan.24 These figures, of course, are averages, and productivity and profits do not necessarily improve by 30 percent in every case. Recall our discussion in Chapter 4 regard ing the determinants of performance. An employee's performance is determined by the joint effects of abilities and other traits, knowledge and skills, and context. CP plans address just one aspect of the "knowledge and skills" category: malleable or "state" (versus trait) motivation. In other words, CP plans can influence whether employees are likely to choose to expend effort (e.g., "I will go to work today") and their level of effort (e.g., "I will put in my best effort at work" versus "I will not try very hard"). But the fact that employees are trying hard to provide good customer service does not mean that they will necessarily succeed. They still need abilities and other traits, as well as a context conducive to high performance (e.g., suf- ficient resources do the job well). If they do not know how to please customers, then they won't be able to satisfy them, no matter how hard they try.

310 Part IV Reward Systems. l egal Issues. and Team Performance Management

CP plans can help improve the motivation of employees when each of the following conditions is presenf5:

1. Employees see a clear link between their efforts and the resulting performance (expectancy).

2. Employees see a clear link between their performance level and the rewards received (instrumentality).

3. Employees value the rewards available (valence).

There is a multiplicative relationship among these three determinants of motivation so that:

Motivation = Expectancy x Instrumentality x Valence

If the expectancy, instrumentality, or valence conditions are not met, the CP plan is not likely to improve performance. For example, consider the situation in which the instrumentality condition is not present. Employees may value the rewards available and may want to get them (valence). They may also see that if they exert sufficient effort, they will be able to achieve the desired performance level (expectancy). They believe, however, that the rewards received are not necessarily related to their performance level (i.e., no instrumentality). In this situation, employees are not likely to choose to exert effort because this will not get them the desired rewards.

Let us be clear: CP plans and pay, in general, should not be regarded as the Holy Grail of employee performance. First, pay can affect only the state motivation aspect of performance. Pay may not solve the p roblem if poor performance results from a lack of knowledge as opposed to lack of motiva- tion. Thus, we should be aware that pay is not necessarily the perfect solution and that giving people more money will not automatically solve performance problems. Even when an excellent CP plan is in place, the best possible result is that there will be an increase in state motivation- but not necessarily in abilities and other traits (including trait motivation). Recall our discussion in Chapter 4 regarding state versus trait motivation. Trait motivation is considered a fairly stable personality trait called "achievement motivation," and it is a facet of conscientiousness.

10-4 POSSIBLE PROBLEMS ASSOCIATED WITH CONTINGENT PAY PLANS

In spite of the overall positive impact of CP plans, we should be aware that not all CP plans work as intended. In fact, several recent corporate scandals are directly related to the implementation of CP plans. Consider the case of Wells Fargo, where retail bank employees had specific rewards associated with specific performance targets, such as selling eight banking prod ucts per house- hold. Wells Fargo's retail banking unit is critical because it has about 40 million customers. What d id this type of CP plan unwittingly motivate Wells Fargo employees to do? Many employees secretly opened phony bank and credit accounts without customers' knowledge!26 Specifically, bank employees opened over 2.1 million deposit accounts that may not have been a uthorized . From the employees' perspective, the CP plan was quite straightforward. To receive rewards associated with the CP plan, employees knew what to do exactly: They

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moved funds from customers' existing accounts into newly created ones, such as cred it card accounts (often without their knowledge). Then, customers were charged for insufficient funds or overd raft fees due to lack of funds in their original accounts, which resulted in monetary rewards for employees. About 14,000 of those accounts incurred over US$400,000 in fees, including annual fees, interest charges, and overdraft protection fees. What was the result for Wells Fargo? It faced the largest penalty since the Consumer Financial Protection Bureau was founded in 2011. The bank agreed to pay US$185 million in fines, along w ith US$5 million to refund customers. The company's latest estimate of the total cost of litigation losses is about US$2 billion. Also, Wells Fargo had perennially been ranked as one of Fortune's most admired companies and it had been ranked #25 in 2016. But, not surprisingly, it did not even make the list in 2017. Also, Harris Poll's 2017 survey of corporate reputation showed that it p lunged to the 99th place among the "most visible companies," above only Takata, the company whose defective airbags have been linked to 11 deaths. The scope of the Wells Fargo scandal is truly shocking, b ut it demonstrates the motivational power of CP plans-even to motivate people to do things clearly not in the interest of customers, the organization, or themselves. In fact, 5,300 Wells Fargo employees have been fired due to this scandal. But the blame should not be put entirely on employees because the performance management system played a critical role. At Wells Fargo, branch managers were told that they "would end up working for McDonald 's" if they missed sales quotas.27

In general, why is it that CP plans may not succeed and may, in cases such as Wells Fargo, produce results that are so opposite to what they intend to do? Consider the following reasons28:

• A poor performance management system is in place. What happens when a CP plan is paired with a poorly designed, poorly implemented performance management system, one that includes biased ratings and the measurement of unrelated performance dimensions? This situation may lead some employees to challenge the CP plan legally. Also, rewarding behaviors and results that are not job-related is likely to cause good performers to leave the organization. Finally, those who stay are not likely to be motivated to perform well.

• There is the folly of rewarding A while hoping for B29 What happens when the system rewards results and behaviors that are not those that will help the organization succeed, such as in the example of Wells Fargo? Employees are likely to engage in counterproductive behaviors when this is what will earn them the desired rewards. One example is the hope that executives will focus on long-term growth and environmental responsibility when, in fact, they are rewarded based on quarterly earnings. Given this situation, what are these executives likely to do? Will they think in the long term, or quarter by quarter? A second example is an organization that would like its employees to be more entrepreneurial and innovative, but it does not reward employees who think creatively. What are employees likely to do? Will they be innovative and risk not getting rewards, or will they continue to do things the old way? A third example is an organization that would like employees to focus on teamwork and a one-for-all spirit, but it rewards employees based on ind ividual results. This happens in many professional sports teams. What are professional athletes likely to do? Will they pass

312 Part IV Reward Systems, Legal Issues. and Team Performance Management

the ball, or will they try to score themselves as often as possible to improve their own individual statistics?

• Rewards are not considered significant. What happens when a CP plan includes pay increases, and other rewards, that are so small that they do not differentiate between outstanding and poor performers? For example, what happens when the top performers receive a 5 percent pay increase and an average performer receives a 3 percent or 4 percent pay increase? In this context, rewards are not viewed as performance-based rewards, and they do not make an impact. The message sent to employees is that performance is not something worth being rewarded . For rewards to be meaningful, they need to be significant in the eyes of the employees. Usually, an increase of approximately 12 to 15 percent of one's salary is regarded as a meaningful reward and would motivate people to do things they would not do otherwise.

• Managers are not accountable. What happens when managers are not accountable regarding how they handle the performance and the performance evaluation of their employees? They are likely to inflate ratings so that employees receive what the manager thinks are appropriate rewards. Similarly, employees may set goals that are easily attainable so that performance ratings will lead to the highest possible level of reward. In other words, when managers are not held accountable, rewards may become the driver for the performance evaluation, instead of the performance evaluation being the driver for the rewards.

• There exists extrinsic motivation at tire expense of intrinsic motivation .. 30 What happens when there is so much, almost exclusive, emphasis on rewards? Employees who have jobs that require a great deal of absorption and personal investment may start to lose interest in their jobs, which in turn, can decrease motivation. In some cases, the extrinsic value of doing one's job (i.e., rewards) can supersede the intrinsic value (i.e., doing the work because it is interesting and challenging). Sole emphasis on rewards can lead to ignoring the fact that employee motivation can be achieved not only by providing rewards, but also by creating a more challenging, more interesting work environment in which employees have control over what they do and how they do it. Both intrinsic and extrinsic motivation influence performance.

• Rewards for executives are disproportionately large, compared to rewards for everyone else. In many organizations, executive rewards are disproportionately large, compared to the rewards received by everyone else in the organization. In 1980, the average U.S. CEO made 42 times the average worker's salary; this multiple was 107 in 1990; and it increased to 525 in the year 2000.31 Moreover, between 1970 and 2008, the average compensation for CEOs increased from US$850,000 to US$10.5 million, which represents a 1,135 percent increase that is more than twice the 568 percent increase in average wages calculated using the National Average Wage Index.32 Such a large difference, particularly when the performance of the organization is not stellar, can lead to serious morale problems. CEOs should be compensated according to their performance, and an important indicator of CEO performance is overall firm (e.g., stock price in the case of publicly traded organizations). 3

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Table 10-2 summarizes typical reasons for the failure · · of CP plans. Consider two examples of situations in which Reasons Why contingent Pay Plans Fail CP plans failed because of one or more of the reasons listed in this table. First, consider what happened at Green Giant, A poor performance management system is in place. which is part of the General Mills global food conglomerate, There is the Folly or rewarding A while hoping For B. which includes such brands as Betty Crocker, Wheaties, and Rewards are not considered significant Bisquick. Green Giant implemented a bonus plan that rewarded Managers are not accountable. employees for removing insects from vegetables. What was the result regarding performance? Initially, managers were There exists an extrinsic motlvat1on at the expense

of intnnsic motivation. p leased because employees were finding and removing a substantially higher number of insects. The initial enthusi- Rewards For executives are disproportionately large,

d d h h f d h compared to rewards For everyone else. asm isappeare , owever, w en managers otm out t at employees were bringing insects from home, putting them into vegetables, and removing them to get the bonus! A second example comes from the automotive division of Sears, a leading retailer of apparel, home, and automotive products and services, with annual revenues of more than US$40 billion. Sears Auto Center's CP plan rewarded employees on the basis of parts and services sold to customers who brought cars in for repair. In California, a disproportionate number of Sears auto centers were making repairs. The California Consumer Affairs Commission conducted an 18-month investigation, during which it sent some of its members to the auto centers posing as customers. What d id they find? Sears employees were "finding" a lot of problems and making a lot of unnecessary repairs. Half of Sears' 72 auto-service centers in California were routinely overcharging customers for repairs, and Sears mechanics billed the undercover agents for work that was never done on 34 of 38 undercover operations. 34

Let us go back to the Wells Fargo Scandal described earlier. Since 2017, Wells Fargo implemented a new CP plan that "eliminates sales goals, measures performance based on customer experience and adds more oversight and risk."35 Other banks that offer brokerage services are making a similar decision. For example, Merrill Lynch, which has US$2 trillion in assets and has been acquired by Bank of America, armounced that it will abandon the industry's traditional CP model based on charging clients for each transaction, and instead, would charge a fee based on a percentage of a portfolio's assets.36 From what you learned in this chapter, and considering the failure factors listed in Table 10-2, what is the appropriateness of this new way of approaching contingent pay at these brokerage firms?

10-5 SELECTING A CONTINGENT PAY PLAN Assuming an organization wishes to implement a CP plan, what should the plan look like? Based on the discussion of different forms of compensation earlier in this chapter, what considerations should be taken into account in choosing, for example, among offering employees group incentives, profit sharing, or individual sales commissions? What is the appropriate mix of incentives at the organization, team, and individual levels?

A critical issue to consider is that of organizational culture. An organization's culture is defined by its unwritten rules and procedures. For example, is

314 Part IV Reward Systems. l egal Issues. and Team Performance Management

the organization fundamentally built around individual performance, or is teamwork the norm? Is the organization one in which high-level performers are regarded as role models who should be emulated, or are they viewed as a threat to upper management? Are we happy with the current culture, or do we wish to change it? CP p lans are powerful tools that help solidify the current culture, and they can also be used to create a new type of culture. There should be a careful consideration of the culture of the organization before a specific type of CP plan is selected.

Consider the types of systems that can be implemented in cultures that we can label traditional versus involvement cultures. Traditional cultures are character- ized by top-down decision making, vertical communication, and clearly defined jobs. What type of plan should be implemented in organizations with this type of culture? An effective choice would be a plan that rewards specific and observable measures of performance, where that performance is clearly defined and directly linked to pay. Examples of such CP systems are the following:

• Individual incentives: (1). Piece rate. Employees are paid based on the number of units produced or repaired. This system is usually implemented in manufacturing environments. In service organizations, this could involve the number of calls made or the number of clients, or potential clients, contacted. This system is usually implemented in call centers. (2) Sales commissions. Employees are paid based on a percentage of sales. This system is usually implemented in car dealerships.

• Group incentives. Employees are paid based on extra group production based on result-oriented measures (e.g., sales volume for the group). This system is implemented frequently in the retail industry.

An involvement culture is different from a traditional culture. Organizations with involvement cultures are characterized by shared decision making, lateral communications, and loosely defined roles. Examples of systems that work well in organizations with involvement cultures are the following:

• Individual incentives: Skill-based pay. Employees are paid based on whether they acquire new knowledge and skills that are beneficial to the organization. This type of system is usually implemented in knowledge-based organizations such as software development companies. A Compensation Programs and Practices survey conducted by WorldatWork showed that about 70 percent of private sector firms used skill acquisition as a yardstick for employees' base pay increase.

• Group, unit, and organizational incentives: Profit sharing. Employees are paid based on the performance of a group (e.g., team, unit, or entire organization) and on whether the group has exceeded a specific financial goal. This type of system is implemented in many large law firms.

In addition to the organization's culture, an important consideration in selecting a CP plan is the organization's strategic direction. Strategy is not only a key element in designing the performance management system, it is also a key element in designing a CP plan. Table 10-3 includes a selected list of strategic objectives and CP plans that are most conducive to achieving each objective.

Based on Table 10-3, if employee development is a key strategic priority, rewards should emphasize new skills acquired. If customer service is a priority,

Chapter 10 PerFormance Management. Rewards, and the Law 3115

Strategic Business Objective CP Plan

Employee development

Customer service

Productivity: IndiVIdual

Productivity: Group

Teamwork

Overall profit

Skill-based pay

Competency-based pay

Gain sharing

Piece rate

Sales commissions

Gain sharing

Group incentives

Team sales commissions

Gam shanng

Competency-based pay

Executive pay

Profit or stock sharing

then rewards should emphasize competencies related to customer service and gain sharing. Gain sharing links individ ual and group pay to an organization's overall profitability: the greater the organization's overall profit, the greater the rewards given to individuals and teams in the organization. In this case, gain sharing would be based on whether customer service ratings improve during the review period . U the major goal of the CP plan is to increase the organization's overall profit, choices include executive pay and profit or stock sharing. Executive pay includes cash bonuses that are given in response to successful organizational performance. Usually, however, executive pay includes company stock to ensure that executives' activities are consistent with the shareholders' interests and to encourage executives to tend to the long-term performance of the organization. This is also called profit sharing, although profit sharing is usually short-term and focused on organizational goals while stock sharing and executive pay are more long-term.

Stock sharing has caught media attention in recent years. In this type of plan, stock is distributed as a reward, or executives are given the option to buy com- pany stock at a red uced rate per share. Unfortunately, this type of CP plan has Jed many executives to attempt to maximize their personal wealth by inflating the price of their personal stock, often through fraudulent means, and selling their stock before the public is aware of the situation. This happened at Enron and WorldCom, where thousands of investors lost their retirement funds. This is an example of the folly of rewarding A while hoping for B, described in the previous section.

Consider the example of Google, described in Box 10-2. Some argue that Google can only do this because they have so much money. But this is not accurate. Google, like all other companies, has a limited amount of money to be allocated to employee compensation- albeit the total pool may be larger than other companies. As noted by Google's former VP for People Operations Laszlo Bock, "The only way to stay within budget is to give smaller rewards to the poorer performers, or even

TABLE 1o-3 Plans Recommended for Various Strategic Business Objectives

3115 Part IV Reward Systems, Legal Issues. and Team Performance Management

Box 10-2

Company Spotlight: Big Pay for Big Performance at Coogle At Google, contingent pay has, for many years, been a part of the company's approach to compensation. Google has long ago realized that the best people are increasingly d iscoverable and mobile. Just a few years ago, performance information on individual employees was very d ifficult to come by. But social media websites such as linkedln make this information quite obvious. Many companies use sys- tems labeled "internal equity," which involves restricting pay so that top performers are not paid much more than average performers. In contrast, Google's approach em- phasizes "fairness" over "equality." Specifically, Google's definition of fairness is not to pay everyone the same, but that pay is commensurate with contribution. Thus, given

our discussion of star performers and the non-normal d istribution of performance in Chapter 5, at Google, there are situations where "two people doing the same work can have a hundred times difference in their impact and in their rewards. For example, there have been situations where one person received a stock award of US$10,000 and another working in the same area received USS 1,000,000 ... the range for rewards at almost any level can easily vary by 300 to 500 percent ... we have many cases where people at more junior levels make far more than average performers at more senior levels. It's a natural result of having greater impact, and a compensation system that recognizes that impact. " 37

the average ones. That won't feel good initially, but take comfort in knowing that you've now given your best people a reason to stay with you, and everyone else a reason to aim higher." Google's policy works because it is based on empirical evidence. A review of 146 studies involving more than 30,000 people showed that when rewards are distributed equitably (i.e., based on performance), performance improves compared to a distribution based on the principle of equality (i.e., similar salaries for people in similar positions).38

10-6 PUTTING PAY IN CONTEXT Is pay the mair1 motivating factor driving people? For most of the twentieth century, the belief was that people go to work to collect a paycheck and money was the main, or even the sole, motivator. In the twenty-first century, however, we now recognize that pay is not everythir1g. For most people, money is an important motivator because it supplies many things from fulfilling basic needs (e.g., food and shelter) to providing higher education for one's children and a means for retirement.39 People seek more than just a paycheck, however, when they go to work. People want to work in an environment of trust and respect, where they can have fun and develop relationships with others, and do mean- ingful and interesting work. People also want to balance their work and home lives, and this is particularly salient for Millennials. For example, a survey by the online job-searching site CareerBuilder.com showed that 42 percent of working fathers say they are willing to see a reduction in their pay if this means having a better balance between work and home.40 In addition, people look for learning and developmental opportunities that may lead to better career opportunities in the future. Thus, managers must realize that pay is just one element in a set of management practices that can either improve or reduce employee commitment

Chapter 10 Performance Management. Rewards, and the law 317

and satisfaction, teamwork, and performance. It is true that people do work for money and an organization's pay level and pay structure affect productivity.4 t On the other hand, people also seek meaning in their lives and need leisure time to pursue nonwork interests. Organizations that believe that money is all that motivates people are basically bribing their employees and will eventually pay a high price in a Jack of employee loyalty and commitment.42

When we think about rewards, then, we should think in broader terms than just pay. We can define a reward as something that increases the frequency of an employee action. In other words, when an employee is given a reward, we expect to increase the chances that specific results and behaviors will be repeated or that the employee will engage in new behaviors and produce better results. If pay raises are not producing this result, because they are not meaningful or are given arbitrarily, then they should not be viewed as rewards. What can organi- zations do to ensure that actions intended to be rewards are actually regarded as rewards? What can we do to make rewards work? Consider the following recommendations43:

• Define and measure performance first, then allocate rewards. Before rewards are allocated, there must be a good performance management system in place that (1) defines performance and performance expectations, and (2) measures performance well. In many cases, organizations believe that they have a rewards problem when in fact, the problem is with the definition and measurement of performance.

• Use only rewards that are available. If the organization does not have financial rewards available, then employee expectations should be adjusted accordingly, and the focus should be on intangible rewards. It makes no sense to discuss pay raises as an important component of a CP plan if existing budget constraints mean meager raises.

• Make sure that all emplm;ees are eligible. In many organizations, top executives receive benefits such as profit sharing, stock options, executive life and liability insurance, invitations to meetings in attractive locations, and permission to fly first-class. Are these benefits truly rewards as we have defined them here? Do these incentives enhance motivation? In general, they seem to do so because they motivate lower-level employees to strive to become executives; however, what would happen if these types of incentives were extended to the lower ranks of an organization? What if nonexecutive members of organizations were also eligible for such rewards based on their performance level? By making more employees eligible for the potential reward, there is a greater chance that more employees will strive to become top performers.

• Make rewards visible. Rewards should be visible to those who receive them. Rewards should also be visible to others, together with information about what needs to happen for an employee to receive the reward in the future. This recommendation applies to both tangible (most financial) and intangible (mostly nonfinancial) rewards. Nonfinancial rewards, in particular, are usually more effective if they are made public. An exception to the visibility recommendation is that some individuals may prefer a nonvisible reward allocation to avoid being singled out for attention or to prevent the disruption of group harmony.

318 Part IV Reward Systems. l egal Issues. and Team Performance Management

• Make rewards contingent. Rewards should be tied to performance d irectly and exclusively. Imagine that an o utsider is asked to guess the salary levels for various employees in an organization. Assume tha t she can ask the following questions: What do people do (e.g., administrative assistant, mailroom clerk, VP for HR)? How long have they done it? How well have they done it? If irtformation based on the "How well?" question is not the most usehtl in guessing what salaries are, then the organization is not making rewards contingent on performance. Unforttmately, this is the case in many organizations in which what people do and how long they have done it are far better predictors of their salaries than how well they perform. As an illustration, in many countries around the world, including Eritrea in Africa, all employees receive one month's extra salary as a noncontingent reward each year.44 In other words, employees receive pay for a "13th month." When rewards are not contingent on performance, organizations can alienate their best workers, precisely those who make the greatest contributions and can easily find employment elsewhere.

• Make rewards timely. Rewards should be given soon after the occurrence of the result or behavior being rewarded. Experimental psychologists know that if a mouse in a cage p ulls a lever and a lump of sugar appears 10 months later (on the mouse's anniversary date), no learning will take place. This is why many organizations implement on-the-spot rewards.45 For example, at Lake Federal Bank in Hamburg, Indiana, the president has an annual budget that he can use to give relatively small, spur-of-the-moment gifts to employees who are performing well. These spot bonuses do not have to be cash awards. They can be theater tickets, a prime parking space, or anything else that targets an employee's specific needs. How does he know what type of reward to give? The answer is simple: he gets to know his employees and watches what they do and how they spend their time when they have a chance to choose. If this does not work, he can simply ask them.

• Make rewards reversible. Increasing an employee's base pay creates an armuity for the employee's tenure with the organization. If mistakes are made in the allocation of increases in base salary (especially upward), they are usually irreversible and can be very costly over time. This is why variable pay, which is not added to an employee's base salary, has become an attractive option for many organizations. Variable pay is consistent with the recommendations that rewards be contingent and reversible. If high-quality performance occurs again, then the employee receives the additional compensation again. If high-quality performance does not occur, then the additional compensation is not given.

10-6-1 Turning Recognition and Other Relational Incentives into Rewards

Similar to financial incentives, p raise and recognition for a job well done, without a monetary value attached, can be a powerful reward if such praise and recognition enhance the chances that specific results and behaviors w ill be repeated. Similarly, praise and recognition should not be considered rewards if

Chapter 10 Performance Management. Rewards, and th e law 31il

they do not motivate employees to perform well in the future. Unfortunately, many organizations underestimate the impact of nonfinancial (i.e., intangible, relational) rewards, including the following:

• Formal commendations and awards • Favorable mention in company publications • Private, informal recognition for jobs well done • Public recognition, including praise, certificate of accomplishment, and

letters of appreciation • Status indicators, such as a new and enhanced job title, larger work area,

improved office decoration (e.g., prints, flowers), promotion, ability to supervise more people, and newer or more equipment

• Trme, such as taking a longer break, leaving work earlier, and getting time off with or without pay

• A more challenging work environment, responsibility, and freedom • Sabbaticals (i.e., paid time off work to devote to job-related growth and

development activities, such as learning new skills or traveling abroad)

Because so many organizations Lmderestimate the value and impact of nonfinancial rewards, they use the phrase "rewards and recognition" to mean that rewards are financial and meaningful, whereas recognition is nonfinancial and not as meaningful. As noted above, we must put pay in context and under- stand that pay is important, but people go to work for other reasons as well. One advantage of nonfinancial rewards is that they are typically allocated following the recommendations provided here for making rewards work in general. That is, nonfinancial rewards are usually available (there is an unlimited supply of recognition); all employees are usually eligible; and nonfinancial rewards are visible and contingent, usually timely, and certainly reversible. But do they work? Fortunately, the answer is yes. For example, think about the following professions and what they have in common: teachers, soldiers, sailors, police officers, nurses, and volunteer workers in not-for-profit organizations. They all involve nonfinancial rewards, including challenge, responsibility, and interest- ing and meaningful work.46 The financial rewards for doing these jobs are not very high or nonexistent. In spite of this, people in these professions tend to be highly motivated to do their jobs well.

To understand the power of nonfinancial rewards more concretely, consider the example of the SAS Institute, the world's leader in business analytics software. This company is legendary for having one of the lowest turnover rates in the software industry. Does SAS pay higher salaries than its competitors? Not really. What do SAS employees say about their organization? They say that they do not leave for other, perhaps more lucrative, jobs because SAS offers opportunities to work with the most up-to-date equipment, jobs have variety, other employees are congenial and smart, and the organization cares about its employees and appreciates their work.47 In fact, a 2017 survey of tens of thousands ofMillennials conducted by Great Place to Work placed SASas #2on the list of best workplaces. Millennials at SAS say that there is a "sense of community" and that "manage- ment fully believe Millennials are the future of the company."4S

In sum, the concept of a reward is broader than just pay. Of course, money allows people to do great many things, and people do incredible things to get

320 Part IV Reward Systems, Legal Issues. and Team Performance Management

TABLE 10-4 Recommendations for Making Rewards Work

Box 10-3

Define and measure performance first and then allocate rewards.

Use only rewards that are available.

Make sure all employees are eligible.

Make rewards visible.

Make rewards contingent.

Make rewards timely.

Make rewards reversible.

Use recognition and other nonfinancial rewards.

Company Spotlight: Financial and Nonfinancial Rewards at Graniterock Graniterock utilizes a number of strategies to recognize and reward performance. Graniterock provides materials to the construction industry, including products such as asphalt, concrete, and building materials. The U.S.-based company employs 750 people and its core purpose is to "provide a place where inspired People can do their best work- building great projects, producing quality materials, and developing enduring customer relationships." The company utilizes both financial and nonfinancial incentives. Employees earn bonus pay of as much as USS 1,000 for specific performance achievements that require an effort that go "above and beyond" normal job expectations. Several nonfinancial incentives are also utilized, such as sending a letter from the president along with cash rewards. The company holds regular events called •recognition days, • where employees

give presentations before the CEO, executive management, and coworkers about improvements they have made on the job. This gives employees the chance to receive credit in a highly visible manner, directly from others in the company. As part of an emphasis on improvement, employees continually seek out better ways of handling processes, and about one- third of all company processes are changed each year as a result. The company publishes stories about special efforts in a weekly newsletter. Supervisors also util ize rewards on a day-to-day and less formal basis, such as providing lunch to a group of employees who are putting forth a strong effort on a large job pouring concrete. In summary, Graniterock utilizes both financial and nonfinancial rewards to motivate employees and to reinforce a culture that values constant improvement and innovation in the workplace.••

more and more of it. For rewards to be effective, however, they must motivate employees to become, or continue to be, excellent performers. Pay can do this if it is allocated based on the recommendations listed in Table 10-4. We should not forget that people go to work for reasons other than money. If an organization is trying to solve performance problems by focusing on money only, one result is expected for sure: the organization will spend a lot of money. It is not always clear that anything will change unless rewards are given, taking into account the recommendations listed in Table 10-4.

Consider the case of Graniterock, described in Box 10-3. This particular company uses both financial and nonfinancial rewards. Consider this company in the context of recommendations in Table 10-4. Also, think about your current job or the last job you had. How were rewards allocated? Which of the eight recommendations listed in Table 10-4 were followed in the process of allocating

Chapter 10 PerFormance Management, Rewards, and the Law 321

rewards? Based on this, how effective were the rewards that were given? Did they help improve employee motivation and performance?

10-7 PERFORMANCE MANAGEMENT AN D THE LAW50 Although we have not discussed legal issues explicitly, several chapters have touched upon how to design and implement performance management systems to be fair and acceptable. Usually, performance management systems that are fair and acceptable to employees are also legally sound. A basic principle that g uides the design of a fair system is that procedures are standardized and that the same procedures are used with all employees. In other words, when the rules and procedures are known by everyone and they are applied in the same way to everyone, the system is likely to be regarded as a fair one. This is also the basic principle that underlies the implem entation of performance management systems that are legally sound.

Legislation and court cases in the United States, Canada, the United King- dom, and many other countries around the world indicate that discriminatory effects of a performance management system can be minimized by applying this "golden rule": treat even;one in exactly the same way, regardless of sex, ethnicity, and otlzer demographic characteristics that are unrelated to job performance. This golden rule also applies to international employers- multinational organizations that imple- ment their performance management systems across countries around the world.

Given its increasing global importance and economic power, it is interesting to consider how recent legislation is affecting performance management and reward systems in firms in China. The Chinese government has recognized that performance management systems can contribute to firm productivity and also to the competitiveness of China in the global arena. Thus, the Chinese govern- ment is accelerating economic reforms related to performance management, s uch as giving employers more rights to terminate employees. These changes have Jed to what can be considered very innovative performance management practices in many Chinese companies. For example, software developers Ufida, Shanda, and Natease are adopting practices that are quite consistent with those used by U.S. firms. Ufida uses performance information to determine as much as 25 percent of annual salaries, and Shanda has a company-wide performance management system with clearly specified standards: employees are evaluated twice a year, there is a multisource feedback system, and bonuses are awarded based on performance ratings. 51

In spite of an increased global awareness regarding legal issues regarding performance management, the golden rule is not applied as often as it should be. As a consequence, there has been a 100 percent increase in the number of employ- ment d iscrimination cases filed in the United States from 1995 to2005, and many of these cases have involved issues around the design and implementation of the performance management system. 52 In 2016, the United States Equal Employment Opportunity Commission received 91,503 charges claiming discrimination based on race, age, national origin, religion, color, retaliation, disability, equal pay, and GINA (discrimination against employees based on genetic information). 53 For an organization to minimize legal exposure regarding performance management, it is important to follow the specific principles described next.

322 Part IV Reward Systems. Legal Issues, and Team PerFormance Management

10-8 SOME LEGAL PRINCIPLES AFFECTING PERFORMANCE MANAGEMENT

There are six important concepts that often come into play in the case of litigation related to the implementation of a performance management system: employ- ment at will, negligence, defamation, misrepresentation, adverse impact, and illegal discrimination.

• Employment at will. In employment at will, the employer or employee can end the employment relationship at any time. This type of employment relationship gives employers considerable latitude in determining whether, when, and how to measure and reward performance. Thus, an employer could potentially end the employment relationship without documenting any performance problems. There are two exceptions regarding an organization's ability to terminate an employee under these circumstances. First, there may be an implied contract derived from conversations with others in the organization or from information found in the company's documentation (e.g., employee handbook) indicating that employees would be terminated for just cause only. Second, decisions about terminating an employee should consider a potential violation of public policy. A case decided by the United States District Court for the District of Minnesota illustrates that employment- at-will does not mean that employers can terminate employees without proper cause.54 Charles Freiberg filed a suit against Sprint/Nextel for wrongfully termination based on incorrect performance evaluations by his supervisor although the company had an employment-at-will provision in its "Employment Guide and Code of Conduct." In the case of Mr. Freiberg, his supervisor cautioned him that his performance was inadequate, but the supervisor used a different method of measuring performance than the one used company-wide. Specifically, some of Mr. Freiberg's peers had received similar ratings from the supervisor, but were not cautioned for low performance. Also, the supervisor scheduled Charles' weekly check-in performance review meetings during regularly scheduled training meetings, which prevented Mr. Freiberg from receiving developmental feedback regarding his performance. What did Mr. Freiberg do? He reported his supervisor's actions to the company's ethics hotline. But although he completed a corrective action plan, he was subsequently fired by his supervisor. Because of its employment-at- will provision, Sprint/Nextel argued the dismissal was appropriate. But the company's request for dismissing the suit was denied because the s upervisor used different measures of performance, and the court ruled in favor of Mr. Freiberg.

• Negligence. Many organizations outline a performance management system in their employee manual, employment contract, or other documents. When the system is described in such documents and not implemented as described, legal problems can arise. For example, there may be a description of how frequently appraisals take place, or how frequently supervisors and employees are to meet formally to discuss performance issues. If an employee receives what she believes is an unfair performance evaluation and the system has not been implemented as was

Chapter 10 Performance Management, Rewards, and the Law 323

expected, she may be able to challenge the system, based on negligence on the part of the organization. Consider the 2015 case of Gwendolyn Damiano, who was a principal in the Scranton, Pennsylvania, school district. 55 She was dismissed by the school district due to "unsatisfactory performance." Ms. Damiano claimed that there was negligence in her dismissal because the decision did not properly take into account the performance standards outlined by the district. In its defense, the school district claimed that Ms. Damiano's performance was below par with regard to teacher evaluations and student discipline. For example, the district argued that she had left standardized tests in her office without locking them in a cabinet. Also, regarding teacher evaluations, the district argued that she did not observe teachers' performance for the required number of times per year. However, the court found that the performance management system d id not clearly specify a method for conducting such teacher evaluations, nor the number of evaluations to be conducted. In addition, the court also noted that the district did not implement its own policies regarding student d isciplinary procedures consistently. Accordingly, the court ruled that the district had been negligent in the manner in which it used its performance management system, and therefore, Ms. Damiano should be reinstated to her position of principal- with full back pay.

• Defamation .. Defamation is the d isclosure of untrue, unfavorable performance information that damages an employee's reputation. An employee can argue that the organization defamed her if the employer states false and libelous information during the course of the performance evaluation, or negligently or intentionally communicates these statements to a third party, such as a potential htture employer, thus subjecting the employee to harm or loss of reputation. Note that the definition of defamation includes the disclosure of untrue information. Defamation can take place when an employee is evaluated based on behaviors that are irrelevant and not job-related, when an evaluator does not include information that would explain or justify poor performance, or when an evaluator revises a prior evaluation in an attempt to justify subsequent adverse action taken against the employee. Defamation does not exist when information regarding poor performance is clearly documented. As an example, consider the case of Susan Reese, who filed a suit against Barton Healthcare Systems, alleging that the company committed defamation against her by using unrelated information, such as the fact that Ms. Reese taught dancing on the weekends, as factors that were included in her performance evaluation.56 The court decided that the appraisal forms used in the performance management process by Barton Healthcare systems (e.g., Disciplinary Notices) did rely on unrelated information. Moreover, the court found that the company used d isparaging language in referring to Ms. Reese (e.g., "pole dancer").

• Misrepresentation .. Whereas defamation is about d isclosing untrue unfavorable information, misrepresentation is about disclosing untrue favorable performance and this information causes risk or harm to others. When a past employer provides a glowing recommendation for a former employee who was actually terminated because of poor performance, that employer is guilty of misrepresentation. As an

324 Part IV Reward Systems, Legal Issues. and Team Performance Management

example, consider a case decided by the Supreme Court of California.57 Randi W., a 13-year-old female student enrolled in a midd le school, accused her school vice-principal, Robert Gadarns, of sexual molestation. Gadams had received glowing letters of recommendation from other school districts (i.e., his former employers), who had recommended him without reservation. For example, one Jetter of recommendation stated, "I wouldn't hesitate to recommend [the vice-principal] for any position!" However, the former employers knew that Gadams had performance problems that included hugging female students and making sexual overtures to them. In fact, he had been pressured to resign because of such behavior. The Supreme Court of California ruled that employers can be held liable for negligent misrepresentation or fraud when an employer fails to use reasonable care in recommending former employees without disclosing material information that has a bearing on their performance.

• Adverse impact. Adverse impact, also called unintentional discrimination, occurs when the performance management system has an urtintentional impact on members of a protected class, such as sex or race.58 Contrary to a common misconception that "class" refers to ethnic minorities or women only, adverse impact also happens when, for example, men receive consistently lower performance ratings than women. In other words, a protected class is a group of people with a common characteristic who are legally protected from discrimination on the basis of that characteristic. So, if a group of white men consistently receive lower performance scores, then there is adverse impact because these individuals share the same characteristic (male) of a class that is protected (i.e., sex). As an example where adverse impact exists against women, consider the position of firefighter, and more specifically, the performance dimension of physical strength. If members of a protected class receive consistently lower performance ratings, then the employer must be able to demonstrate that the performance dimension measured is an important part of the job. In this case, the fire department should demonstrate that physical strength is a key KSA for the job of firefighter, and based on the argument of business necessity, an appropriate measure should be included as part of the performance evaluation and every employee should be evaluated in the same fashion. As a precautionary measure, data should be gathered on an ongoing basis regarding performance scores obtained by members of various groups, broken down by the categories indicated by the Jaw (e.g., sex, ethnicity). A periodic review of these data can help detect the presence of adverse impact, and the organization can take corrective action if necessary. 59

• Illegal discrimination. Illegal discrimination, also called disparate treatment, means that raters assign scores differentially to various employees, based on factors that are not performance related, such as race, nationality, color, or ethnic and national origin. As a consequence of such ratings, some employees receive more training, feedback, or rewards, than others. Illegal discrimination is usually referred to as d isparate treatment because employees claim they were intentionally treated differently because of their sex, race, ethnicity, national origin, age, disability status, or other status protected under the Jaw. For example, consider the case of Michael Chapman, who filed suit against the supermarket

Chapter 10 PerFormance Management. Rewards, and the law 325

Safeway for illegal age discrimination.60 Mr. Chapman had received positive performance reviews and promotions during his more than 30 years with the supermarket. Then, after a labor dispute between the union representing store employees (including managers) and Safeway, Mr. Chapman's performance evaluations were considerably lower, he was subject to previously undisclosed performance standards, and the company began selectively applying performance standards. The court determined that Safeway had engaged in illegal discrimination based on age to try and "force out" long-serving and older employees and replace them with younger staff, whom they could pay less, by arbitrarily applying performance management standards.

The majority of legal cases involving performance management systems involve a claim of disparate treatment. What can an employee do if, for example, she feels she was given unfairly low performance scores and skipped over for promotion because she is a woman? To make such a claim, an employee can present direct evidence of d iscrimination, such as a supervisor making sexist comments that may have influenced the performance management process. Alternatively, she needs to provide evidence regarding the following issues:

• She is a member of a protected class. • She suffered an adverse employment decision as a result of a performance

evaluation (i.e., was skipped over for promotion). • She should not have been skipped over for promotion because her

performance level deserved the promotion. • The promotion was not given to anyone, or it was given to an employee

who is not a member of the same protected class (i.e., another woman).

If an employee provides this kind of evidence, the employer must articulate a legitimate and nondiscriminatory reason for not having given the promotion to this female employee. Usually, this involves a reason that is clearly performance related. This is the point at which employers benefit from having designed and implemented a system that is used consistently with all employees (again, our "golden rule"). Such a system is legally defensible, and any decisions that resulted from the system, such as promotion decisions, are also defensible.

Here is an important caveat: We must distinguish illegal discrimination from legal d iscrimination. A good performance management system is able to d iscriminate among employees based on their level of performance, and this is legal d iscrimination. In fact, a system that does not do this is not very useful. But a good performance management system does not discriminate illegally. Illegal discrimination is based on variables that should not usually be related to performance, such as sex, national origin, ethnicity, and sexual orientation.

10-9 LAWS AFFECTING PERFORMANCE MANAGEMENT In the past few decades, several countries have passed Jaws prohibiting discrimination based on several factors, such as race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability,

326 Part IV Reward Systems, Legal Issues. and Team Performance Management

or genetic information. For example, the following Jaws have been passed in the United States and are enforced by the United States Equal Employment Opportunity Commission:

• Equal Pay Act of1963. Prohibits sex discrimination in the payment of wages.

• Title VII of the Civil Rights Act of1964 (as amended by the Equal Employment Opportunity Act of1972). Prohibits discrimination on the basis of race, color, religion, sex, or national origin.

• Age Discrimination in Employment Act of 1967 (as amended in 1986). Prohibits discrimination on the basis of age.

• The Pregnancy Discrimination Act of1978. Makes it illegal to discriminate against a woman because of pregnancy, childbirth, or a medical condition related to pregnancy or childbirth.

• Americans with Disabilities Act (ADA) of 1990. Makes it illegal to discriminate against people with disabilities.

• Sections 102 and 103 of the Civil Rights Act of1991. Among other things, this Jaw amends Title VII and the ADA to permit jury trials and compensatory and punitive damage awards in intentional discrimination cases.

• Genetic lnfonnation Nondiscrimination Act of2008 (GINA). Makes it illegal to discriminate against employees because of genetic information, which includes information about an individual's genetic tests and the genetic tests of an individual's family members, as well as information about any disease, disorder, or condition of an individual's family members.

Similar Jaws exist in numerous countries around the world, including Canada, Australia, Germany, and Spain, among many others. In fact, a study comparing Jaws and regulations across 22 countries found that the majority of countries have Jaws similar to the ones listed above for the United States.61 For example, in Canada, there is the Canadian Human Rights Code of 1985, Section 15 of the Charter of Rights and Freedoms (1982), Federal Employment Equity Act (2004), Federal Contractors Program, and Pay equity legislation (federal and some provinces). In Australia, there is The Crimes Act (1914), Racial Discrimination Act (1975), Sex Discrimination Act (1984), Human Rights and Equal Opportunity Commission Act (1986), Disability Discrimination Act (1992), Workplace Relations Act (1996), Equal Opportunity for Women in the Workplace Act (1999), and Age Discrimination Act (2004). In Germany, there is the Allgemeines G/eichbehandlungsgesetz: General Equal Opportunity Law Qast modified in April 2013), which covers all stages of the employment relationship, including definition of payment, performance appraisal, promotion, and dismissal. As a final example, Spain has the Spanish Constitution (1978), Law of Worker's Statute (1980 and 2005), Organic Law for Effective Equality between Women and Men (2007), and the Law of Basic Statute of Public Employee (2005).

Taken together, these Jaws aim at forcing organizations to implement performance management systems that are applied consistently to all employees, regardless of demographic characteristics. Although these Jaws are not enforced to the same degree throughout the world, their collective goal is that performance manage- ment systems focus on measuring performance by assessing job-related factors and not personal, individual characteristics that are tmrelated to job performance.

When you thirtk about it, designing a system that is legally defensible is not a difficult goal to achieve, and it is a natural consequence of following the

Chapter 10 Performance Management. Rewards, and the law 327

o Performance dimensions (1nclud1ng behav1ors and results) and standards are clearly defined and explained to the employee. are job-related. and are within the control of !he employee.

o Procedures are standardized and uniform for all employees Within a job group.

o The system is formally explained and communicated to all employees.

o Employees are given timely information on performance deficiencies and opportunities to correct them.

o Employees are given a voice 1n !he review process and are treated w1th courtesy and civ1iity throughout !he process.

o The performance management system includes a formal appeals process.

o Performance information Is gathered from multiple, diverse, and unbiased raters.

o Supervisors and other raters are provided with formal training and in formation on how to manage the performance of !heir employees.

o The system includes thorough and consistent documentation. including specifiC examples of performance based on knowledge.

o The system includes procedures to detect potentially discriminatory effects or biases and abuses in !he system.

Source: Adapted from Exhibits 2.2 and 2.3 in Malos, 5. B. (1998). Current legal issues in performance appraisal. In j. W. Smither (Ed.), Performance npproisnl: Stnteoftile nrl in prod ice (pp. 49-94). San Francisco, CA: jossey-Bass.

best-practice recommendations offered in this book. To summarize some of the key issues that have been discussed throughout the book, Table 10-5 lists key recommendations on how to implement a legally sound performance manage- ment system. You will see that this table summarizes many of the practices about system design and implementation that we d iscussed throughout the book.

One question that is particularly pertinent to organizations that operate across borders is the extent to which Jaws from the company's headquarters apply to performance management systems in the subsidiaries. In the case of applying U.S. Jaws, there are four questions that we need to ask :

L What is the work geographic location? 2. What is the employer status (e.g., U.S.-based firm or not)? 3. What is the employee status (e.g., U.S. citizenship status)? 4. Are there international law defenses (i.e., international treaties)?

For example, we may assume that U.S. laws apply to non-U.S. firms working in the United States. But U.S. employment discrimination laws do not apply to jobs located inside the United States when the employer is a foreign entity ex- empted by a treaty. As a second example, U.S. employment discrimination Jaws also do not apply to jobs located outside the United States when the employer is a foreign entity, even though the employee is a U.S. citizen. As a third scenario, U.S. Jaws apply to jobs located outside the United States when the employer is a U.S. entity and the employee is a U.S. citizen, if compliance with U.S. Jaws would not violate foreign Jaws.

Two researchers from the United States reviewed 295 different U.S. circuit court decisions regarding litigation involving performance management systems.63 The goal of their study was to tmderstand the factors carrying the most weight in the decisions reached by the court. They investigated various features of the performance management systems that were challenged in court, including many

TAB LE 1o-S Characterist ics of Legally Sound Performance Management Systems

328 Part IV Reward Systems, l egal Issues. and Team Performance Management

of the characteristics listed in Table 10-5. What was their conclusion? They found that systems that emphasized the measurement of job-related performance dimen- sions, provided written instructions to raters, and allowed employees to review appraisal results were more likely to withstand legal challenge. Overall, these researchers concluded that the employees' perceptions of whether the system was fair and whether they were given due process were the most salient issues considered by the courts. This conclusion reinforces the recommendation offered throughout this book: it is important to allow employees to participate in the design and implementation of the system because employee participation leads to the design of systems viewed as fair. Fairness and lawfulness do not neces- sarily go hand in hand. But systems that are fair are less likely to be challenged on legal grounds.

SUMMARY POINTS

• A reward system is the set of mechanisms for distributing both tangible and intangible returns as part of an employment relationship. Tangible returns include cash compensation (i.e., base pay, cost-of-living and merit pay, short-term incentives, and long-term incentives) and benefits (i.e., income protection, work- life focus, tuition reimbursement, and allowances). Intangible returns, also called relational returns, include recognition and status, employment security, challenging work, and learning opportunities. Not all types of returns are directly related to performance management systems. This is the case because not all types of returns are allocated based on past performance.

• Traditional pay plans do not have a link with the performance management system. Instead, pay and other rewards are allocated based on position and seniority. By contrast, contingent pay plans, also called pay for performance plans, allocate rewards wholly or partly based on job performance. When rewards given in the context of contingent pay plans are not added to an employee's base pay, they are called variable pay.

• Contingent pay plans are increasingly popular because when they are in place, performance measurement and performance improvement are taken more seriously. Specifically, these plans force organizations to define effective performance and to determine what factors are likely to lead to effective performance. In addition, these plans can serve as a good tool to recruit and retain top performers because they are attracted to organizations that reward high-level performance.

• Contingent pay plans also enhance employee motivation to accomplish goals that match organizational needs. But, for contingent pay plans to affect motivation positively, there needs to be a clear link between employee effort and employee performance (expectancy) and between employee performance and the rewards received (instrumentality), and employees need to value the rewards available (valence).

• Contingent pay plans often fail for several reasons. First, they may be tied to a poor performance management system in which the performance

Chapter 10 PerFormance Management. Rewards, and the Law 329

dimensions measured are not relevant to organizational success. Second, the system may be rewarding behaviors and results that are counter to the needs of the organization, such as rewarding executives for short-term results as opposed to long-term growth and environmental responsibility. Third, employees may not view the rewards as valuable, for example, when the difference between the rewards received by the best and the average performers is not really meaningful. Fourth, managers may not be accountable for the system and implement it ineffectively. Fifth, the focus may be only on extrinsic rewards, such as pay and other tangible compensation, instead of also on intrinsic rewards, such as a challenging and interesting work environment in which employees have control over what they do and how they do it. Finally, rewards for executives are disproportionately large compared to the rewards for everyone else.

• There are many choices in the design of a contingent pay plan. It is important that the plan be congruent with the culture of the organization. People in organizations that have a trad itional or an involvement culture are likely to feel more comfortable with d ifferent types of plans and include rewards at the individual or collective (e.g., group, unit, entire organization) level. For example, organizations with a traditional culture involving top-down decision making and clearly defined jobs are likely to find that a system including piece rate, sales commissions, and group incentives works well. On the other hand, organizations with an involvement culture, including shared decision making and loosely defined jobs, would benefit most from a system that includes profit sharing and skill-based pay. In addition to an organization's culture, the strategic business objectives may determine which type of system would work best. For example, if an organization prioritizes customer service, then competency-based pay would work well, whereas an organization prioritizing teamwork would benefit most from a plan including team sales commissions and gain sharing. In sum, decisions about how rewards are allocated and what types of rewards are given must be made based on the organization's culture and strategic business objectives.

• Pay is a critical, but not the only factor that motivates people. People want more out of a job than a paycheck. People seek an environment based on trust and respect, where they can have fun and develop relationships with others, and engage in meaningful and interesting work. Reward systems that focus on pay and other monetary rewards exclusively at the expense of nonfinancial rewards are basically bribing their employees, and eventually, will pay a high price in a Jack of employee loyalty and commitment. Rewards systems must go beyond pay and consider as rewards anything that increases the chances that specific behaviors and res ults will be repeated, or that employees will engage in desirable behaviors and produce desirable results in the future.

• Several recommendations must be followed for rewards to work as intended. First, performance must be defined clearly and measured well before rewards are allocated. Second, if financial rewards are not available,

330 Part IV Reward Systems, Legal Issues. and Team Performance Management

employee expectations should be adjusted accordingly and the focus should be on nonfinancial rewards only. Third, all employees must be potentially eligible to receive the rewards. Fourth, rewards must be visible. Fifth, rewards must be contingent on performance and received only if the desired behaviors are displayed and the desired results are produced. Sixth, rewards must be timely and given soon after the result or behavior being rewarded has taken place. Seventh, rewards must be reversible so that employees do not feel a sense of entitlement and continue to be motivated by the desire to obtain the reward again in the future. Finally, rewards should be both tangible (i.e., mostly financial) and non tangible (mostly nonfinancial).

• Many organizations use nonfinancial incentives, such as formal commendations and awards, favorable mention in company p ublications, private and p ublic recognition for jobs well done (including certificates of accomplishment and letters of appreciation), status indicators (e.g., a new and enhanced job title, larger work area, improved office decoration), the ability to supervise more people, newer or more equipment, time (e.g., ability to take longer breaks, leaving work earlier, and getting time off with or without pay), a more challenging work environment involving more responsibility and freedom, and sabbaticals (i.e., paid time off work to devote to job-related growth and development activities, such as learning new skills or traveling abroad to job-related activities). But for these activities to become rewards that are valued and lead to positive results (e.g., enhance performance and employee well- being), they have to be meaningful and abide by similar principles as those for tangible rewards such as being timely, relevant, reversible, and so forth .

• One or more of six legal principles are usually involved in cases of litigation regard ing performance management systems. First, employment at will implies that the emp loyer can end the relationship at any time and gives employers latitude in determining whether, when, and how to measure and reward performance. Even in employment at will relationships, however, organizations benefit from having a well-designed, well-implemented performance management system to g uide decisions because other principles, such as implied contract and violation of public policy, may take precedence over employment at will. Second, employers can be accused of negligence if they do not follow the performance management practices outlined in training manuals, employee handbooks, or other company documents. Third, employers can be accused of defamation if they make false statements d uring the course of the performance evaluation, negligently or intentionally communicate these statements to a third party such as a potential future employer, and thus, subject employees to harm or loss of reputation. Employers can be accused of misrepresentation if they disclose untrue, favorable performance information that causes risk or harm to others. Fourth, employers can be accused of adverse impact, also called unintentional discrimination, if the performance management system has an unintentional impact on members of a protected class (i.e., groups

Chapter 10 PerFo rmance Management, Rewards, and the Law 331

based on race, sex, or national origin) and they receive consistently lower performance evaluations than members of other groups (e.g., women vs. men, whites vs. Latinos/ as). Finally, employers can be accused of illegal d iscrimination, also called d isparate treatment, when evaluators assign scores d ifferentially to various employees based on factors that are not performance-related, such as race, nationality, color, or ethnic and national origin.

• In the context of performance management, an employee alleging illegal discrimination needs to show that he or she is a member of a protected class, suffered an adverse employment decision as a result of a performance evaluation, should not have suffered this adverse impact because he or she performed adequately, and any rewards he or she deserved (e.g., promotion) were not given to anyone or were not given to an employee who is not a member of the same protected class (e.g., religious minority, ethnic minority, women). On the other hand, if an organization receives a legal challenge, it needs to provide evidence that the decision made was based on a legitimate and nondiscriminatory reason that was clearly performance-related. In contrast to illegal discrimination, legal discrimination, an essential characteristic of a good performance management system, differentiates among employees based on performance-related factors.

• Several cotmtries, such as the United States, Canada, Australia, Germany, and Spain have passed Jaws prohibiting discrimination based on race, sex, religion, age, and disability status. Although the enforcement of these Jaws is tmeven across countries, these Jaws have as their goal that organizations implement performance management systems that are applied consistently to all employees, regardless of demographic or other personal characteristics that are not job related.

• Designing and implementing a performance management system that is legally sound is not as difficult as it may seem. Overall, the goal is to follow the "golden rule:" treat everyone in exactly the same way, regardless of sex, ethnicity, and other demographic characteristics that are unrelated to job performance. This involves creating a system following the best-practice recommendations described throughout this text. Specifically, performance dimensions (including behaviors and results) and standards should be clearly defined and explained, job related, and within the control of the employee. Procedures should be standardized, used uniformly, and communicated to all employees. Employees should be given timely information on performance deficiencies and opportunities to correct them. Employees should be given a voice in the review process and treated with courtesy and civility throughout the process. The system should include a formal appeals process, and performance information should be gathered from multiple, diverse, and unbiased raters. Supervisors should be provided with formal training and the system should include consistent and thorough documentation as well as procedures to detect potentially discriminatory effects or biases and abuses. Overall, employees' perceptions that the system is fair go a long way in terms of minimizing legal challenges.

332 Part IV Reward Systems. Legal Issues, and Team PerFormance Management

-- EXERCISE 10-1 PROPOSING A CONTINGENT PAY PLAN FOR SOM ARCHITECTURAL FIRM

SOM (Sanchez, Oliver, & Meirovich) is a large commercial architectural firm that specializes in the design of small- to medium-sized structures, such as churches, private schools, and business offices. The company employs commer- cial architects and engineers with various levels of education, credentials, and experience. The current performance management system utilizes a traditional pay system that uses seniority for the basis of pay ranges and increases. The company currently has three ranks for architects and engineers. Each of these pay ranges determines minimum, midpoint, and maximum rates. The following o utlines the three ranks:

1. Entry-level architect/engineer (base pay range: US$55,000-US$70,000) 2. Junior architect/engineer (base pay range: US$65,000-US$95,000) 3. Senior architect/engineer (base pay range: US$75,000-US$120,000)

Seniority and a percentage of the base salary determine salary increases at the end of the year, and the same percentage is used for all employees. Rewards are not based on the quality of work performed, new design innovations, productivity, or customer satisfaction. Therefore, if a junior architect/engineer reaches a base salary of US$95,000, the employee cannot realize a salary increase unless he or she is promoted to a senior architect/engineer position because the maximum salary for a junior architect/engineer is US$95,000.

You own your own total rewards consulting firm and SOM has invited you to propose the implementation of a contingent pay (CP) plan. Please prepare a 10-minute presentation to be delivered to the president of the company describing the potential benefits of your plan, how you are planning on avoiding possible problems with the CP plan, the particular features and rewards included in your plan and which business objectives will be served by each, and which specific nonfinancial rewards will be included and why. Make sure your presentation is tailored to this specific industry and firm in particular.

EXERCISE 10-2 PERFORMANCE MANAGEMENT MOCK TRIAL

This exercise involves conducting a "mock trial" involving performance manage- ment that will include applying the legal principles described in this chapter. The instructor will serve as the judge overseeing proceedings. There will be two teams of attorneys: One representing the plaintiff (employee), and another representing the company (defendant). Other students in the class will serve the role of members of the jury.

Background: In February 2013, Chloe Smith, was hired by WeinsTech, a technology company, as its senior vice president of sales. Chloe was the only female executive in the company. A veteran with more than 10 years of experience in the technology sales industry, Chloe was recruited by the company's CEO, Aarav Gupta, and

Chapter 10 Performance Management, Rewards, and the Law 333

reported directly to him. In July 2018, d ue to family circumstances, Chloe, 45, decided to look for jobs at other companies. She asked Aarav for a letter of rec- ommendation and he agreed.

Given her experience and skills, Chloe was very confident that she would find another job quickly. However, as the months went by, none of her leads materialized into a job offer. As Chloe understood it, the prime reason was the recommendation Aarav (her ex-boss) gave. It said that while she had performed well initially, she had seemed unwilling to support the company's values. Furthermore, the recommendation noted that although Chloe helped boost the company's sales in the first few years, she lacked the perseverance and attitude to continue to drive sales as years went by. In January 2019, Chloe sued WeinsTech for negligence, defamation, and discrimination.

Supporting Information WeinsTech's company values are: Risk taking, proactiveness, ownership, high-impact, and results focus. The company prides itself in creating a culture where top performers are rewarded (monetary rewards and promotions), regardless of their position in the company. WeinsTech's performance review document includes 10 performance dimensions. For each dimension, both the employee and the supervisor rate performance on a three-point scale: "must improve," "meets requirements," and "exceeds requirements." The form also includes space for comments explaining the rating given. In addition, the form includes five sections to be filled out by both the employee and the supervi- sor: "strengths," "weaknesses," "challenges to overcome," "future goals," and "overall comments." For the first three years of her employment, Chloe received a rating of "exceeds requirements" on most of the dimensions. Her first two reviews did not have any notes in the "challenges to overcome" sec- tion. However, her last two reviews were less positive and listed a number of items in the "weaknesses" and "challenges to overcome" sections. Chloe's own comments on these last two reviews noted that declining performance can be attributed to the general slowdown in the ind ustry, while Aarav noted that Chloe should do better.

Plaintiff's Claims Chloe Smith claims that:

1. During the course of Chloe's employment with WeinsTech, Chloe consistently averaged "meets requirements" or "exceeds requirements."

2. To the extent that Chloe received negative comments, WeinsTech was using it as a pretext for sex d iscrimination. In her second performance review (2013), Chloe's review indicated that she had met or exceeded expectations across the board. Under the "Overall comments" section, however, Aarav had noted that Chloe sometimes demonstrated poor attitude. The review noted: "Chloe often seems frustrated or at least comes across that way. She sometimes seems to be too emotional. It would be great if Chloe engaged more with her employees in a more outgoing and friendly manner."

3. Chloe only received a "must improve" rating in the area of "Supporting a culture that aligns with the company's goals and values." Chloe argues

334 Part IV Reward Systems, Legal Issues. and Team Performance Management

that she emphasized teamwork as the current company's culture resulted in inter-office competition, rivalry, or pitting employees against each other.

4. Chloe claims that she wanted to fire an employee who was accused of sexual harassment by another female employee, but Weins Tech decided to only give him a "strong warning" as the employee in question was a top performer. The employee in question is accused of having made inappropriate comments to another female employee during a company social event.

5. Chloe claims that she received lower performance ratings in the later years of her employment (2015-2018) because she was not a member of the "old boys' club" so typical in the high-tech industry. Chloe alleges that her performance was not evaluated in the same manner as that of her male colleagues, who often seemed to receive "brownie points" for attending parties with Aarav, which, as a married mother of two, she seldom did.

Defendant's Claim Weins Tech contends that:

1. Under Chloe's leadership, WeinsTech's sales performance had declined in the last six quarters. Throughout her tinne with the company, sales innproved in the first ten quarters (little over two years), stagnated, and then decreased in the last six quarters.

2. Chloe's attitude caused many of her top performers to feel estranged from her and the rest of the team. She was unable to engage with the employees in a positive manner, leading to decreased morale and a decline in sales during the latter period of her tenure.

3. The section on performance management in the company's employee handbook clearly states that adherence to company values is a key requirement and major consideration during the performance management process. As such, a failure to comply with company values is reflected in her performance evaluation.

4. Chloe's desire to fire an employee was not due to his behavior but because he had submitted a complaint about her management style to the HR department. The employee in question clainns that Chloe seemed to thwart efforts to obtain the best possible results, rather than encourage high performance. The employee also submitted a complaint that Chloe developed a reputation as an aggressive person who would take offense at the slightest provocation. Finally, because this was a first offense for the employee, HR decided to warn the employee and give him a second chance.

5. The "parties" that Chloe refers to were, in fact, company-sponsored social events aimed at building morale and a sense of community within the company. Furthermore, attendance or non-attendance at these events was not a factor in making performance evaluations. All employees were invited, and had the option of attending or not attend ing the event.

Plaintiff's Team (Chloe's Attorneys) Your task is to convince the jury and the judge that WeinsTech indeed vio- lated the law and demonstrated negligence, defamation, and discrimination.

Chapter 10 PerFormance Management. Rewards, and the Law 3315

A successful and convincing argument is one that is strictly fact-based, and provides evidence to support your claims. Your ability to present evidence that Chloe was a top performer that deserved a better recommendation than the one Aarav gave will determine your s uccess. To present strong evidence in your favor, you need to analyze the performance management process, and the per- formance review that Chloe received to identify where WeinsTech (a) violated Jaws (e.g., created a performance management system that adversely affected Chloe's recommendation), (b) acted in ways that support your claims, and (c) demonstrate that Chloe's performance deserved a better recommendation Jetter from Aarav.

Defendant's Team (WeinsTech's Attorneys) Your task is to convince the jury and the judge that WeinsTech did not violate any Jaws. A successful and convincing argument is one that is strictly fact-based, and provides evidence to support your defense. Your ability to present evidence that Aarav gave what he believed was an honest and truthful recommenda- tion based on a performance management that did not violate any Jaws will determine your success. To present strong evidence in your favor, you need to analyze the performance management process, and the performance review to demonstrate that WeinsTech (a) did not violate any Jaws (e.g., created a perfor- mance management system that was legal, and fair to all employees), (b) d id not act in ways that support Chloe's claims, and (c) demonstrate that Aarav gave a recommendation Jetter that he perceived to be truthful and honest, one that Chloe deserved, rather than misrepresent the facts.

Jurors As members of the jury, your task is to reach a final verdict on whether the de- fendant (WeinsTech) is guilty or not guilty. As members of the jury, you need to suspend all prior judgment regarding the case. You need to make your final determination based solely on the facts as presented by the plaintiff (Chloe) and the defendant (WeinsTech). In other words, even if you have a preconceived judgment that one party is g uilty, your final determination should be based on the evidence and arguments presented In; the teams of It is essential to take notes on what the attorneys present. You will use these notes to form your own opinion, and possibly, also to convince other members of the jury why your verdict is correct.

Procedural Steps 1. Opening Statement:

Select one team member from each team of attorneys (plaintiff/ defendant) to present the opening statement to the judge and jury. The plaintiff's attorney goes first, and the defendant's attorney follows. The opening statement should: a. Be brief (one to two minutes) b. State why they believe their argument is correct c. Outline what evidence they will present during the trial (Hint: Make

sure to mention the legal principles at stake in the case)

336 Part IV Reward Systems, Legal Issues. and Team Performance Management

2. Evidence: Next, the plaintiff's and defendant's attorneys present evidence to build their argument. Again, the plaintiff's side goes first. Once the p laintiff's attorneys have presented all their evidence, the defendant presents their case. Each side can p resent no more than five p ieces of evidence. a . Evidence presented might include, for example: performance

evaluations; relevant sections of the employee handbook, and so forth . (Hint: The arguments and evidence should focus exclusively on whether it can be proved that the company has violated any of the legal principles outlined in Section 10-8 Some Legal Principles Affecting Performance Management)

3. Judge Instructions: The judge then instr ucts the jury to consider the arguments presented by both sides. Jurors are asked to consider whether either side has proved, beyond a reasonable doubt, whether the lawsuit has merit. Jurors are also asked to pay attention only to the evidence that pertains to the legal principles of the case, and d isregard any other evidence, arguments, or claims.

4. Closing Statement: Select one team member from each team of attorneys to present the closing statement to the judge and jury. The plaintiff's attorney goes first, and the defendant's attorney follow. The closing statement should: a. Be brief (one to two minutes) b . State why they believe the other side failed to prove their case c. Request for summary judgment (plaintiff) or dismissal (defendant)

(Hint: Make sure to mention the legal principles at stake in the case) 5. Jury Deliberation:

The legal teams, plaintiff, and defendant are then asked to stand at the front of the classroom. They may not participate or interrupt the jury deliberation. a. Each juror is asked to line up on one side of the classroom, based on

whether they believe the plaintiff or defendant was correct. Those who believe neither side was convincing are asked to stand in the middle of the classroom.

b. Each side (defendant is guilty or not guilty) has two minutes to present an argument why they are correct to the opposing and undecided jurors. Jurors then receive an additional minute to make their final decision.

c. The votes are tallied by the judge and the side with the highest count is declared the winner. If both sides receive equal votes, the case is declared a mistrial and a date is set for a new trial.

CASE STUDY 10-1

Contingency Pay Plan at Altenergy LLC

Jack, Tom, and Ed are all former employees of Accenture and have just started their own energy consulting company called Altenergy. For the past six months, Jack, Tom, and Ed have been the only consultants in the company. They have now picked up enough business that they want to add five new consultants in order to have three different consult- ing teams. Because Altenergy LLC has such a unique niche in the consulting market and is a recent start-up, Jack, Tom, and Ed feel that it is necessary that they hire consultants with (a) experience with dealing with alternative energy sources, (b) connections to a variety of alternative energy companies, and (c) sales experi- ence since these new consultants will be responsible for finding and obtaining new clients. Based upon past experience with Accenture, Jack, Tom, and Ed know that it will be very difficult not only to attract consultants with this kind of experience, but also to retain them. In order to combat these concerns, Jack, Tom, and Ed feel that if they can implement a proper contingency pay plan they will be able to recruit and retain consultants with the necessary experience.

Strategic Business Objective CP Plan

Employee development

Customer service

ProductiVIty: IndiVIdual

Productivity: Group

Teamwork

Overall profit

Skill-based pay

Competency-based pay

Gain sharing

Piece rate

Sales commissions

Gain sharing

Group incentives

Team sales commissions

Ga1n sharing

Competency-based pay

Execuuve pay

Profit or stock sharing

Based upon this information, and your knowledge of various contingency pay systems, how would you recommend that Altenergy LLC structure a contingency pay plan for these new consultants? Please explain why you gave the recommendation that you d id and why you did not recommend the other contingency pay systems possible. As a way to get started on this case study, consider the table below (Table 10-3 from Section 10-5 Selecting a Contingent Pay Plan of the text), and imagine that you have 100 "weight" points that you can assign to different strategic business objectives. For example, if you think that Altenergy should place a pretty heavy emphasis on the strategic business objective of providing excellent customer service, then you might assign 35 weight points to competency-based pay and 15 weight points to gain sharing. Then, 35 percent of the total compensation will come from competency-based pay, and 15 percent of the total compensation will come from gain sharing for each employee.

TABLE 10-3 Plans Recommended for Various Strategic Business Objectives

337

U8 Part IV Reward Systems. Legal Issues. and Team Performance Management

CASE STUDY 10-2

Possible illegal Discrimination at Tractors, Inc.

T ractors, Inc., is a family-owned heavy equip-ment (e.g., excavators, tractors, paving equip-ment) company that has been in business for more than 25 years. Over the past several years, the company has experienced rapid growth, increasing from 100 employees to 500 employees. Tractors, Inc., is beginning to realize that it needs to change or en- hance its current performance management system. The company still uses the performance management system it implemented more than 10 years ago.

The current performance management system consists of the following documented process:

• Performance reviews are to be conducted on a yearly basis (at the time of the employee's anniversary date with the company). One month prior to the employee's anniversary date, the supervisor /manager is to complete the standard performance appraisal form and pay increase form (if applicable), which should then be reviewed by the supervisor's manager prior to the supervisor 's meeting with the employee. There are no set guidelines about how to complete the form or rate the employee's actual job performance- this is left to the reviewing supervisor 's discretion.

• Once approvals have been secured, the supervisor schedules a formal meeting with the employee to discuss the appraisal.

• During the meeting, the manager reviews the ratings with the employee, including any comments that the manager may have made, discusses opportunities for improvement and development, and informs the employee about his or her change in pay (if applicable). At that time, the employee is given the opportunity to add any comments and sign the form for official submittal to the human resources department. The company's unwritten policy is that employees arc not permitted to keep a copy of their performance review; however, they can go to the human resources department at any time to request

permission to review their past performance appraisals. Employee performance reviews are kept on file in the human resources department during the employee's tenure at the organization.

In recent months, the company has received several complaints from female employees regard- ing the performance management system. Examples include:

• The employee does not have the opportunity to provide input in to her performance evaluation prior to the actual meeting.

• Managers do not complete performance reviews in a timely manner. For instance, several employees have complained that they received their review three to six months after their actual anniversary date.

• Two female employees have complained that they were passed up for promotions for reasons other than performance issues. One employee cited the example of her rating in the "attendance" category as follows: "Overall Sue's attendance is acceptable and she works the hours necessary to complete her job; however, if she were to make better arrangements for handling her children's after-school activities, she would be available to work longer hours." Sue felt that because she is a single mother, men in her department with less experience and job knowledge are promoted because they either do not have families or have stay-at-home wives to take care of their children.

Consider Tractors, Inc.'s performance manage- ment system in light of what we have discussed as an ideal system and how a company can ensure that its system is legally sound. As the new human resources manager, you have been asked to identify those areas of the current performance management system that could face a legal challenge. Please develop a one- page summary, identifying the potentially illegal aspects of the current system and your suggestions for making the current system more legally sound.

Cha pter 10 PerFormance Management. Rewards, and the Law 339

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ENDNOTES

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25. Vroom, V. H. (1995). Work and motivation. San Francisco, CA: Jossey-Bass. 26. Egan . M. (2016). 5,300 Wells Fargo employees fired over 2 million phony accounts. CNN

Money. Retrie\•ed January 2, 2018, from http://money.cnn.com/ 2016/09/08/investing/ wells-fargo-created-phony-accoun ts-bank-fees/index.html

340 Part IV Reward Systems. Legal Issues, and Team Performance Management

27. Colvin, G. (2017). Can Wells Fargo get well? Fortune, 175(8), 138-146. 28. Adapted from Grote, D. (1996). TIJe complete guide to perfonuauce appraisal (Chap. 14). New

York, NY: AMACOM. 29. Kerr, S. (1975). On the folly of rewarding A while hoping for B. Academy of Management

joumal, 18, 769-783. 30. Cerasoli, C. P., Nicklin,). M., & Ford, M. T. (2014). Intrinsic motivation and extrinsic

incentives jointly predict performance: A 40-year meta-analysis. Psychological Bulletin, 140, 98(}-1008.

31. Gabaix, X., L.andier, A., & Sauvagnat, ). {2014). CEO pay and firm size: An update after the crisis. The Economic journal, 124, F4(}-F59.

32. Faulkender, M., Kadyrzhanova, D., Prabhala, N., & Senbet, L. {2010). Executive compensation: An overview of research on corporate practices and proposed reforms. journal of Applied Corporate Finance, 22,107-118.

33. Aguinis, H., Martin, G. P., Gomez-Mejia, L. R., O'Boyle, E. H., & joo, H. (in press). The two sides of CEO pay injustice: A power law conceptualization of CEO O\'er and underpayment. Management Research, journal of the lberoamericau Academy of Mnllagemeut, 16, 3-30. Also see: Aguinis, H., Gomez-Mejia, L. R., Martin, G. P., & joo, H. (in press). CEO pay is indeed decoupled from CEO performance: Charting a path for the future. Management Research, journal of the lberoamericau Academy of Mauagemetzl, 16,117-136.

34. "Systematic Looting:" In an undercover sting, Sears' auto-repair service gets nailed. (1992, June 22) Time. Retrieved january 2, 2018, from http://www.time.com/time/magazine/ article/0,9171,975793,00.htrnl

35. Glazer, E. (2017, january 7-8). Wells re\•amps pay after scandal. Wall Street journal, 61-62. 36. Wursthom, M. (2017, january 7-8). Brokerages tack to the adviser model. Wall Street journal, B7. 37. Bock, L. (2015). Work rules! Insights from inside Coogle thatwilltrausfonu how you live and lend.

New York, NY: Twelve. 38. Garbers, Y., & Konradt, U. (2014). The effect of financial incentives on performance:

A quantitative review of individual and team-based financial incentives. joumal of Occupational and OrgauizatiOilal Psychology, 87,102-137.

39. Rynes, S. L., Gerhart, B., & Minette, K. A. (2004). The importance of pay in employee motivation: Discrepancies between what people say and what they do. Human Resource Management, 43,381-394.

40. Singletary, M. {2004, june 20). Divorced fathers need to be more than cash machines. The Denver Post, 1, K13.

41. Brown, M.P., Sturman, M. C., & Simmering, M. j. (2003). Compensation policy and organizational performance: The efficiency, and financial implications of pay levels and pay structure. Academy of Management Joumal, 46, 752-762.

42. Pfeffer, J. (1998). Six dangerous myths about pay. HarV(Ird Business Review, 76(3), 109-111. 43. These recommendations are adapted from Kerr, S. (1999). Organizational rewards: Practical,

cost neutral alternatives that you may know, but don't practice. Organizational Dynamics, 28, 61-70.

44. Ghebregiorgis, F., & Karsten, L. (2006). Human resource management practices in Eritrea: Challenges and prospects. Employee Relations, 28,144-163.

45. Taylor, C. (2004). On-the-spot incenti\•es. HR Magazine, 49(5), 8(}-84. 46. Aguinis, H., & Glavas, A. (2017). On corporate social responsibility, sensemaking,

and the search for meaningfulness through work. joumal of Ma11agemeut. doi:10.1177 /0149206317691575

47. Pfeffer, ) . (1998). Six dangerous myths about pay. HarV(Ird Business Review, 76(3), 109-111. 48. Austin, C. (2017). The 10 best workplaces for Millenials. Fortune, 176(2), 20. 49. Henneman, T. (2005). Graniterock reinforces innovation. Workforce Management, 84(10), 46-48. 50. This section relies heavily on Posthuma, R. A., Roehling, M. V., & Campion, M. A. (2006).

Applying US employment d iscrimination laws to international employers: Advice for scientists and practitioners. Personnel Psychology, 59, 705-739; Malos, S. B. (1998). Current legal issues in performance appraisal. In j. W. Smither (Ed.), Performance appraisal: Stale of the art iu practice (pp. 49-94). San Francisco, CA: jossey-Bass.

51. Tsang, D. (2007). Leadership, national cultural and performance management in the Chinese software industry. Juteruatiollal Joumal of Productivity and Performance Mauagemetzl, 56, 27(}-284.

52. Latham, G. P., Almost, J., Mann, S., & Moore, C. {2005). New developments in performance management. Organizational Dy11amics, 34, 77-87.

Chapter 10 PerFormance Management, Rewards, and the Law 341

53. U.S. Equal Employment Opportunity Commission. Charge statistics (charges filed w ith EEOC) FY 1997 through FY 2016. Retrieved January 2, 2018, from https://www.eeoc.gov I eeoc I statistics/ enforcement/ charges.cfm

54. Freiberg v. Nextel W. Servs. LLC, CIV. NO. 13-361(Mj D/jSM), United States District Court for the District of Minnesota, 2013 U.S. Dist. LEXIS 172665, November 18,2013, Decided, November 18,2013, Filed, Adopted by, Motion granted by, in part, Motion denied by, in part Freiberg v. Nextel West Servs. LLC, 2013 U.S. Dist. LEX!S 172523 (D. JV!inn., Dec. 3, 2013)

55. Scranton Sch. Dist. \'. Damiano, No. 1369 C.D. 2014, Commonwealth Court of Pennsylvania, 2015 Pa. Commw. Unpub. LEX IS 389, May 5, 2015, Argued, june 5, 2015, Decided, June 5, 2015.

56. Reese v. Barton Healthcare Sys., NO. CIV. 5-08-1703 FCD GGH, United States Disctrict Court of the Eastern District of California, 606 F. Supp. 2d 1254; 2008 U.S. Dist. LEX IS 108598; 21 Am . Disabilities Cas. (BNA) 1125, December 15, 2008, Decided, Summary judgment denied by, Motion to strike denied by Reese v. Barton Healthcare Sys., 2010 U.S. Dist. LEX!S 19501 (E.D. CaL, Mar. 2, 2010)

57. Rllndi W. v. Muroc joint Unified School District, 14 CaL 4th 1066,60 Cai.Rptr.2d 263 (1997). 58. Aguinis, H., & Smith, M.A. (2007). Understanding the impact of test validity and bias on

selection errors and adverse impact in human resource selection. Personnel Psychology, 60, 165-199.

59. J. L. (Ed.). (2014). Adverse impi!ct: Implications for organizational staffing and high stakes selection. New York, NY: Taylor & Francis.

60. Chapman v. Safeway Inc., No. B218227, Court of Appeal of Cali fornia, Second Appelate Dis trict, Division Six, 2010 CaL App. Unpub. LEXJS 3824, May 24, 2010, Filed.

61. Myors, B., Lie\•ens, F., Schollaert, E., Van Hoye, G., Crenshaw, S. F., Nlladinic, A., . . . Sackett, P. R. (2008). International perspectives on the legal environment for selection. Industrial and Organizntio11al Psychology: Perspectives on Science and Practice, 1, 206-246.

62. Posthuma, R. A., Roehling, M. V., & Campion, M.A. (2006). Applying US employment discrimination laws to international employers: Advice for scientists and practitioners. Personnel Psyclwlogy, 59, 705-739.

63. Werner, ). M., & Bolino, M. C. (1997). Explaining U.S. courts of appeals decisions involving performance appraisal: Accuracy, fairness, and validation. Persorme/ Psychology, 50, 1-24.

chapter

11 Team Performance Management

Great things in business are never done by one person. They're done by a team of people.

-Steve fobs

Learning Objectives By the end of this chapter, you will be able to do the following:

1. Include a formal team performance management component m the performance management system.

2. Desogn a performance management system that is con- gruent woth the types of exostmg teams. including work or servoce teams. proJect teams. and network teams.

3. Prepare a performance management system for vortual teams.

4 . Set up team performance management following the fol- lowmg sox proncoples: make sure teams are really teams. make the necessary onvestment to measure. define mea- surement goals clearly. use a multi-method approach to measurement. focus on process as well as outcomes. and measure long-term changes.

5. Propose a performance management system that addresses team-related challenges. such as how to assess relatove mdivodual contribution, how to

balance individual and team performance. and how to ident ify individual and team measures of performance.

6. Roll out a team performance management system that on- eludes the components of a state-of-the-scoence system: prerequisotes (e.g .. team charters). performance plannong (i.e .. results and behavoors). performance executoon (e.g .. how to turn a B-player team onto a wonnong team). perfor- mance assessment (e.g .. ondovodual controbutoons to team performance. performance of the team as a whole). and performance revoew (o.e .. meetmgs woth ondovodual team members and the team as a whole).

7. Set up team-based rewards dorectly linked to the perfor- mance management system.

8. Formulate an effectove team-based contongent-pay reward system.

343

344 Part IV Reward Systems. Legal Issues, and Team PerFormance Management

11-1 DEFINITION AN D IMPORTANCE OF TEAMS Thus far, this book has focused mainly on the performance of employees work- ing individ ually and not in teams. Although the book has referred to individ ual and team performance, the emphasis until this point has been on individual performance. The discussion of team performance is important and deserves its own chapter, given the increasing pervasiveness of teams in organizations worldwide. It is virtually impossible to think of an organization that does not organize its functions, at least in part, based on teams.

Team-based organization design is often seen as a way to keep pace with the challenges of a fluid and unpred ictable world. Several surveys conducted by Deloitte and other consulting firms show that more than 90 percent of com- panies believe that redesigning organizations by including a team component is of critical importance to achieve goals such as decentralizing authority, improving communication, and creating more customer-centric organizations.1 And this is not an ind ustry-based phenomenon. It is happening everywhere: IT, consulting, health care, and the military.2 For example, the U.S. military's hierarchical command and control structure hindered operational success d ur- ing the early stages of the Iraq war. Consequently, retired U.S. Army General Stanley McChrystal, who served as Commander of U.S. Forces in Afghanistan, decentralized authority to empowered teams. In his view, a team-based approach Jed to grea ter dynamism and flexibility and enabled officers to quickly move from their administrative positions to mission-oriented p rojects for a set pur- pose, knowing that they would once again have a home to return to within the larger organizational structure after the mission was completed. This type of organization structure, which consisted of a "network of teams" is now becoming popular in nonmilitary organizations in all industries.3 Given the pervasiveness of teams in organizations, it is only natural that so many undergraduate and graduate level courses include team assignments.4 The goal of these assignment is to p repare students for future jobs that, in all likelihood, will include a team component.

A team is in place when two or more people who have different roles or responsibilities interact dynamically and interdependently and share a common and valued goal, objec- tive, or mission .5 Examples of teams range from a group of top managers working together face-to-face on an ongoing basis with the goal of achieving corporate goals to a group of programmers in India and the United States writing code that eventually will be put together as one app. Teams do not have to be permanent, and team members do not have to be in the same geographical location. In fact, team members do not need to have ever met in person to be members of the same team. As long as they work together, need each other, and share common goals, they are considered to be members of the same team. N umerous organizations are structured around teams, including teams called autonomous work groups, p rocess teams, self-managing work teams, or cross-functional teams. When autonomous work groups are in place, members have the authority to manage their own tasks and interpersonal processes as they carry out their work.

Why are teams so popular? First, businesses are facing increased pressures and global competition. Using teams is one way to address these challenges because teams can include members from different parts of the world. Second, d ue to rapid changes in the environment, organizations need to be prepared

Chapter 11 Team Performance Management 345

to adapt and change quickly. Using teams provides greater flexibility because individuals can be rotated in and out of teams, based on particular needs. Third, products and services are becoming very complex, requiring many people con- tributing their diverse talents to the same project. Teams are able to respond more quickly and more effectively to changes than can individuals working alone. Finally, many organizations have gone through downsizing and restructuring, which has Jed them to become flatter and has reduced the number of hierarchical levels. A team-based structure is more congruent to these changes compared to traditional hierarchical structures.

Although many organizations choose to structure themselves around autonomous work teams, and teams in general, team-based organizations do not necessarily outperform organizations that are not structured around teams.6 In other words, team performance does not always fulfill its promise; therefore, it is important for performance management systems to go beyond focusing on individual performance and, following the definition of performance management, to also aim at identifying, measuring, and developing the performance of teams and aligning their performance with the strategic goals of the organization. Specifically, the system should target not only (1) individual performance, but also (2) an individual's contribution to the performance of his or her team(s) and (3) the performance of teams as a whole. An organization that includes any type of team would therefore benefit from managing the performance of both individuals and teams.7

Including team performance as part of a performance management system is an extension of a system that has focused on individual performance only. The general principles that we have discussed in this book thus far still apply. For example, we are still trying to design and implement the best possible system. Specifically, the system should be congruent with strategy (i.e., there is a clear link among team and organizational goals), congruent with context (i.e., the system is consistent with norms based on the culture of the organization and the region and country in which the organization is located), thorough (i.e., all teams are evaluated, they include all relevant performance dimensions), practical (i.e., they do not require excessive time and resources), meaningful (i.e., they have important consequences), specific (i.e., they provide a concrete team improve- ment agenda), able to identify effective and ineffective performance (i.e., they help distinguish teams at different performance levels), reliable (i.e., the mea- surement of performance is consistent), valid (i.e., the measures of performance are not contaminated or deficient), acceptable and fair (i.e., people participating in the system believe the processes and outcomes are just), inclusive (i.e., they include input from multiple sources on an ongoing basis), open (i.e., they are transparent and there are no secrets), correctable (i.e., they include mechanisms so that errors can be corrected), standardized (i.e., performance is evaluated consistently across teams and time), and ethical (i.e., they comply with ethical standards) (see Section 1-5 Characteristics of an Ideal Performance Management System in Chapter 1).

In addition, a system that includes team performance should also consider the possible dangers of a poorly implemented system, such as lowered self-esteem (i.e., self-esteem may be lowered if feedback is provided in an inappropriate and inaccurate way), increased turnover (i.e., if the process is not seen as fair, employees may become upset and leave the organization), damaged relation- ships (i.e., as a consequence of a deficient system, the relationship among the

34S Part IV Reward Systems. l egal Issues. and Team Performance Management

individuals involved may be damaged, often permanently), decreased moti- vation to perform (i.e., motivation may be lowered for many reasons, includ- ing the feeling that superior performance is not translated into meaningful tangible or intangible rewards), employee burnout and job dissatisfaction (i.e., when the performance assessment instrument is not seen as valid and the system is not perceived as fair, employees are likely to feel increased levels of job burnout and job dissatisfaction), use of misleading information (i.e., if a standardized system is not in place, there are multiple opportunities for fabricating information about an employee's performance), wasted time and money (i.e., performance management systems cost money and quite a bit of time and these resources are wasted when systems are poorly designed and implemented), emerging biases (i.e., personal values, biases, and relation- ships are likely to replace organizational standards), unclear ratings system (i.e., because of poor communication, teams may not know how their ratings are generated and how the ratings are translated into rewards), varying and unfair standards and ratings (i.e., both standards and ind ividual ratings may vary across teams and also be unfair), unjustified demands on team leaders and team members' resources (i.e., poorly implemented systems do not provide the benefits provided by well-implemented systems, yet they take up people's time), and increased risk of litigation (i.e., expensive lawsuits may be filed by individ uals who feel they have been appraised unfairly) (see Section 1-4 When Performance Management Breaks Down: Dangers of Poorly Implemented Systems in Chapter 1). Team performance, of course, adds a layer of complex- ity to any performance management system, but the fundamental principles that guide the design and implementation of the system d iscussed throughout this book remain the same.

It is important to note that some conditions are necessary for team performance management to lead to improved team performance; for example8:

• The processes involved in the performance of the team are relatively unconstrained by other requirements of the task or the organization. For example, the organization should not constrain the amount of effort and skill that the team members can invest in a particular team-based project. An example of a constraint may be individual and team goals that compete against each other.

• The team is designed well and the organizational context supports team performance. In other words, there are elements in the organization that support team performance (e.g., reward systems, training systems, resources are made available to the team, the team has an opportunity to perform).

• Performance feedback focuses on team processes that are under the control of team members. There is no point in providing feedback on aspects of performance that are beyond the control of the team.

11-2 TYPES OF TEAMS AN D IMPLICATIONS FOR TEAM PERFORMANCE MANAGEMENT

Teams can be classified based on the complexity of the task (from routine to non- routine tasks) and membership configuration (from static to dynamic).9 Routine tasks are well defined; there are few deviations in how the work is done; and

Chapter 11 Team Performance Management 347

Box 11-1

Company Spotlight: Expatriate Teams at an Aerospace Company The g lobalization of business has led many organizations to move f rom a traditional individual expatriate assign- ment (i.e., sending an individual manager overseas) to a team-based assignment, whereby several individuals are assigned-together- to a foreign location. Service firms rely on this strategy frequently because it is d ifficult to separate service " production• from service consumption. In other words, the nature of many services is such that it is needed for an entire team to work cl osely with a client to understand their needs. This was precisely the situation faced by a multinational aerospace f irm based in North America. A total of 17 expatriate teams originating from seven different countries f rom around the g lobe were assigned t o t he aerospace company's locat ion to work

FIGURE 11-1

together on the design of a new product. What types of challenges do such teams face in terms of implementing performance management? Moreover, what addit ional challenges exist when such expatriate teams include members who themselves are f rom d ifferent countries? The most important challenge is that each team will have to perform based on standards and expectations of their home country. However, expatriate teams must be con- cerned with three d ifferent stakeholders: the local client, the home company, and the other on-site teams. Thus, it is important that performance be measured in relationship to these three stakeholders groups. In other words, per- formance management of expatriate teams must include a multi-stakeholder perspective. 10

outcomes are easily assessed after the task has been completed . By contrast, nonrou- tine tasks are not defined well; there are no clear specifications about how to do the work; and outcomes are usually very long-term and difficult to assess. Member- ship configuration includes how long the team is expected to work together and the stability of its membership. For example, there can be product development teams, task forces, and committees. Also, teams could be created for a specific project or to assist a particular client, as in the ex- ample included in Box 11-1 of an aerospace company that sent teams of expatriates originating from seven different p laces around the world to the same location to work on common project. Figure 11-1 illustrates the three main types of teams based on task complexity and membership

Types of Teams Based on Membership Configuration and Task Complexity

configuration dimensions.

Dimensions

Dynamic

Membership ] configuration

Sialic

• Project teams

• Work or Service teams

• Network teams

Rouline Nonrouline Task complexity

S<Jurce: Adapt<>d from Scott, 5. G., & Einstein, W. 0 . (2001). Strawgic perlonnance appraisal in organizations: One size does not fi t all of Management EX£CIIIiVf', 15, 107- lt6, Fig. 1. p. 110.

• Work or service teams. These intact teams are engaged in routine tasks, including manufacturing or service tasks. An example is a group of people working at the assembly line in a car manufacturing plant, such as Toyota or Saab. The work or service team includes people who have worked together for some time and know each other well. Most members share a similar set of skills.

348 Part IV Reward Systems. Legal Issues, and Team Performance Management

• Project teams. These teams are assembled for a specific purpose and are expected to d isband as soon as their specific tasks have been completed. The tasks are outside the core production or service of the organization, and are therefore not as routine as those of work or service teams. Examples are the team that developed IBM's first personal computer and the team that developed the original Taurus/Sable at Ford. Project teams include members from different functional areas who may not know each others' specialties, and therefore, are highly dependent on one another's high level of specific knowledge and usually sophisticated skill sets.

• Network teams. These teams include members who are not constrained by time or space and members who are not limited by organizational boundaries. Usually, team members are geographically d ispersed and stay in touch via telecommunications technology such as email, Skype and Facetime, and of course, telephone. Their work is extremely nonroutine. Network teams usually include a combination of temporary and full-time workers, customers, vendors, and even consultants. One example is the group of Russian and U.S. astronauts and scientists who communicated and worked together during months of training using telecommunications technology, from their respective countries, before some of them actually worked face-to-face in the Mir space station. Team performance management must consider the type of team in ques-

tion before performance measures are put in p lace. Different performance measurement methods are particularly appropriate, depend ing on the type of team being evaluated. Work and service teams can clearly benefit from peer ratings because members observe one another's performance on a daily basis. In addition, because team members have similar responsibilities, everyone is familiar with the competencies needed to do the job. Project teams do not stay together for long periods of time, and therefore, the measure of results at the end of a project may not benefit the team's development since the team is likely to disband as soon as the project is finished. Instead, measurements should be taken period ically as the team works on the project so that correc- tive action can be taken as necessary before the project has been completed. This is precisely the type of measurement system Hewlett-Packard uses w ith its project teams in charge of product development. Network teams are transitory and engage in unique tasks on an as-needed basis. It is difficult to measure specific outcomes. Instead, performance management of network teams emphasizes the future instead of the past, and focuses on developing individual competencies, such as the team members' capacity to innovate, adapt, be flexible, and solve problems.

11·2·1 Virtual Teams In a 1974 television interview, science fiction author Arthur C. Clarke pred icted what the world would look like at the beginning of the twenty-first century. One of his many extraordinarily accurate predictions was about a "a console ... in a compact form . . . with a screen . . . through which he can talk" that people would have in their homes or offices: "Any businessman [sic], any executive, could live almost anywhere on Earth and still do his business through a device like this and this is a wonderful thing. " 11

Chapter 11 Team Performance Management 34il

Regardless of the particular type of team, the reality of today's organiza- tions, which are immersed in a global and highly competitive environment, dictates that many teams are virtual in nature. In other words, armed w ith laptops and smartphones, team members can do their work from anywhere and at any time. Virtual teams have become very popular, as shown by results of a Career Builders survey involving 1,700 knowledge workers- 79 percent reported working always or frequently as part of virtual teams.12 And results of a 2014 survey of business leaders at the Global Leadership Summit indicated that about 60 percent of them predict that more than half of their entire workforce will work remotely by 2020.

From an organization's practical and resource-based standpoint, it seems that the use of virtual teams has many benefits. First, virtual teams allow organiza- tions to save money on travel expenses. Second, from the employee point of view, personal and professional disruptions due to travel are minimized . Third, virtual teams also include individuals who live locally, but telecommute-an important benefit for employees with various personal and family needs who may want to minimize commuting time. Moreover, this type of work arrangement seems very attractive to Millennialsn And it also allows organizations to reduce the size of their brick-and-mortar offices, which can lead to substantial savings, particularly in highly populated urban areas with high leasing cost.

However, managing the performance of virtual teams also has its own unique challenges.14 For example, many virtual teams, precisely because of a Jack of face-to-face interactions, sometimes become "invisible" in organizations, and therefore, may Jack clear performance standards and even an identity as a team. Feeling that one is member of the team and trusting other team members are important determinants of team performance, but these factors may not be present in virtual teams. Also, only about 20 percent of organizations offer training on how employees can improve their performance within the context of virtual teams. In addition, although team members may communicate using Skype and other videoconferencing technology, they usually communicate less frequently compared to members of nonvirtual teams. And, this lower degree of communication often makes it difficult for team members to understand what is going on in the group. This is a particularly challenging issue when there is a team conflict that needs to be addressed or a controversial decision, such as charting a particular course of action that needs to be made.15

Fortunately, as described later in this chapter, a state-of-the-science perfor- mance management system can address the aforementioned challenges posed by virtual teams.16 For example, creating team charters (similar to job descriptions, b ut for teams rather than individuals) and regular check-ins help members feel that they are connected, which leads to improved cooperation and conflict man- agement tactics. Also, team performance review meetings provide structure and increase team effectiveness. In addition, team developmental activities including intercultural skills, teamwork, and technology usage also lead to improved team performance.

The reality of work today is that virtual teams are here to stay. This highlights the importance of implementing performance management systems that include a team component. Not doing so is likely to result in more negative than posi- tive outcomes resulting from the work of virtual teams. For an example of how MySQL attempts to reap the benefits and minimize potential pitfalls associated with virtual teams, see Box 11-2.

3150 Part IV Reward Systems. l egal Issues. and Team Performance Management

Box 11-2

Company Spotlight: Managing the Performance of Virtual Teams at MySQL MySQL, (pronounced "My S-Q-L"), based in Cupertino, California, produces and develops database soft- ware, and related tools. MySQL is the world's most popular open source database. The company employs more than 300 people spread across 25 countries, and 70 percent of the employees work from home. Employees in some cases have never met anyone they work w ith in person. This work arrangement requires a d ifferent approach to managing team performance, as compared to the tradit ional office w here face-to-face meetings and contact are the norm. Technology enables a different approach to performance management. The company utilizes an Internet Relay Chat, which employees sign onto regularly to hold real-t ime meet- ings. Also, a software system called Work log was developed by the company specifically to allow employees to mark off

tasks when they have been accomplished. The company's method for evaluation and feedback are also adapted for virtual teams. Output and results produced are the focus of measuring productivity. There is not a strict chain of command in the MySQL work environment. Colleagues often seek out advice or ask questions of coworkers electronically, and all employees help manage individual and team performance by evaluating one another. Performance is also evaluated based on required weekly reports of accomplishments and by keeping track of employee involvement through conference calls and frequency of electronic communications, such as chat sessions and emails. In summary, MySQL has adapted to a virtual work environment by utilizing technology that enables some unique strategies to be used for managing the performance of individuals and teams. "

11-3 PURPOSES AND CHALLENGES OF TEAM PERFORMANCE MANAGEMENT

Regardless of the extent to which a performance management system is concerned with individual performance, team performance, or both, the goals of the system are the same as those discussed in Chapter 1: strategic, administrative, informa- tional, developmental, organizational maintenance, and documentation. In the specific case of a system concerned with team performance, one additional goal is to make all team members accountable and to motivate them to have a stake in team performance.

Many organizations have become more team-based, but they have not changed their performance management systems to accommodate this new organizational reality, which presents a unique challenge. If the organization is based on teams, but performance is still measured and rewarded at the individual level, team performance will suffer. In fact, some of the existing individual rewards may motivate people to not contribute to team performance, and instead, to focus on individual performance only. In general, organizations that choose to include a team component in their performance management system must ask the fol- lowing questions:

• How do we assess relative individual contribution? How do we know the extent to which particular individuals have contributed to team results? How much has one member contributed in relation to the other members? Are there any slackers or free riders on the team? Is everyone contributing

Chapter 11 Team PerFormance Management 3151

to the same extent, or are some members covering up for the Jack of contribution of others?

• How do we balance individual and team perfonnance? How can we motivate team members so that they support a collective mission and collective goals? In addition, how do we motivate team members to be accountable and responsible individually? In other words, how do we achieve a good balance between measuring and rewarding individual performance in relation to team performance?

• How do we identify individual and team measures of performance? How can we identify measures of performance that indicate individual performance versus measures of performance that indicate team performance? Where does individual performance end and team performance begin? Finally, based on these measures, how do we allocate rewards to individuals versus teams?

A study including structured interviews with 102 working adults in Hong Kong and another 96 working adults in the Pearl River Delta (i.e., cities of Chung-shan, Quang-zhou, and Zhu-hai) suggested that, indeed, organizations are faced with these challenging questions.18 For example, interview results indicated that about 38 percent of ind ividuals participated in systems based on individual performance only, whereas about 34 percent participated in systems that included both individual and team components, and about 25 percent of respondents participated in systems that included a team component only. The remainder of this chapter d iscusses how to include a team component in a performance management system. In doing so, we consider how organizations can address each of these questions.

11-4 INCLUDING TEAM PERFORMANCE IN THE PERFORMANCE MANAGEMENT SYSTEM

Although the questions posed in the previous section may seem difficult to address, designing a performance management system that includes team performance is not difficult if we follow the following six team performance management principles19:

1. Make sure your team is really a team. As noted earlier, there are different types of teams. Before a team component is introduced in the performance management system, we need to make sure the organization has actual teams.

2. Invest in perfonnance management analytics. Measuring team performance, as is the case with measuring individual performance, takes time and effort. The organization must be ready to make this investment for the measures to yield useful data.

3. Define measurement goals clearly. Defining how the data will be used (e.g., administrative versus developmental purposes, or both) is a decision that must be made before measures of team performance are designed. As is the case with individual-level analytics discussed throughout the book, there are different variables that must be taken into account in relationship to the measures' purpose (e.g., what will be the sources of data, how data will be collected, and so forth).

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FIGURE 11-2 Performance Management Process

4. Use a multimethod and multisource approach to measurement. The measurement of team performance is complex. Thus, multiple methods and sources of data are often necessary.

5. Focus on process as well as results. Behavioral and process-oriented measures as well as results and outcomes are as useful for team performance management systems as for individuals. Thus, serious consideration must be given to how both types of measures will be used within the context of managing team performance. In other words, we should measure the results that teams produce, but also how they achieve those results.

6. Measure long-term changes. Although short-term processes and results are easier to measure, it is important to also consider long-term measures of performance. Team performance must be sampled over a variety of contexts and also over time.

Recall the basic components of the performance management process as shown in Figure 11-2. You may recall that this same figure appears in Chapter 2. Now, Jet us consider each of the components of the process when we design a system that includes team performance and Jet us incorporate the aforementioned six team performance management principles into the various steps in the process.

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11·4·1 Prerequisites The first component of the performance management process involves two pre· requisites. First, there is a need to have good knowledge of the organization's mission. This prerequisite is present regardless of whether there is an emphasis on team performance. This knowledge, combined with knowledge regarding the mission of the team's unit, allows employees and teams to make contributions that will have a positive impact on the unit and organization as a whole. Second, there is a need to have good knowledge of the job in question. In the case of individual jobs, a job analysis is conducted to determine the key components of a particular job: what tasks need to be done, how they are to be done, and what knowledge, skills, and abilities (KSAs) are needed to do them. Similarly, if we have good information abo ut what a team is supposed to do and how, then it is easier to establish criteria and measures for team success.

You will recall our d iscussion in Chapter 2 regarding job descriptions, which summarize the job d uties, needed KSAs, and working conditions for a particular position . In the case of teams, job descriptions take the form of what is called team charters. Much like job descriptions, team charters can be very detailed and refer to the team activities. However, team charters differ from job descriptions in that they also include information on within-team processes such as communication.20 Overall, team charters can include the following components2 1:

1. Strategic alignment: how does the team 's work support and relate to unit and organizational goals?

2. Team purpose: what is the team's reason for being? 3. Team objectives, goals, and priorities: what are the team's primary objectives

and how are they prioritized? 4. Key stakeholders: who are the key stakeholders that have an interest in the

team 's work? 5. Team customers: who are the team's internal and external customers? 6. Team leader and sponsor: who is the team leader and who is its champion

(i.e., a team supporter who is not a member of the team and has decision-making power in the organization)?

7. Team member roles and responsibilities: who are the team members and what are their respective roles and responsibilities?

8. Team member time commitments: what time commitments are expected of all team members?

9. Team communication plan: what are the communication rules for the team? How often will they communicate and what forms will communication take?

10. Team ground rules: what rules will the team adopt about interactions among team members such as how to conduct meetings?

11. In/out of scope elements: what tasks and functions are in scope for the team and which ones are out of scope?

12. Key deliverables: what are the team's key deliverables or tangible work products?

13. Perfonnan.ce analytics: how will we measure team success? In addition to considering the team 's charter, we still need to identify KSAs

that will allow individuals to make a positive contribution to the team. These include not only KSAs related directly to the task at hand, such as a programmer

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who needs to have knowledge of a particular programming language, which are usually included in each employee's job description. Rather, these are KSAs that are especially conducive to team performance. Examples include the following22.23:

• Communication. Giving and receiving constructive feedback, listening, and sharing information and ideas.

• Decision making. Helping the team make decisions. • Collaboration. Dealing with conflict effectively, committing to the team an d

its goals, valuing the diversity and experience of other team members, and sharing accountability.

• Team leaders/rip. Taking on the role of team leader, including knowing how to extract the best out of the team.

• Self-control. Keeping emotions under control and not displaying negative reactions even when faced with opposition or even hostility from others.

You will probably recognize these KSAs because they are closely related to our discussion in Chapter 4 of what we labeled contextual performance, pro- social behaviors, or organizational citizenship behaviors. Contextual and task performance must be considered separately because they are not necessarily parallel. An employee can be highly proficient at her task, b ut be an underper- former regarding contextual performance. In other words, an employee can be an excellent performer when working individually, but a substandard performer when working with others.

Consider how the prerequisites component in Figure 11-2 is implemented at the University of California at San Diego (UCSD). This university, as are many others around the world, is structured around academic and administrative units called departments. Each of these departments can be considered a team. In terms of the prerequisites component, individual departments at UCSD develop a mission statement that is clearly related to the overall university's mission. This process allows each member of the team to become knowledgeable regarding the university's overall mission. After the department's mission has been established, individual job descriptions are discussed and directly linked to both the mission of the university and the mission of the department. Job descriptions include KSAs needed for both individual and department performance.

11·4·2 Performance Planning The second component of the performance management process involves per- formance planning. Performance planning includes the consideration of results and behavior. In addition, performance planning involves the creation of a d evelopmental plan. Each of these issues needs to be considered at the team level: results expected of the team, behaviors and process expected, and devel- opmental objectives to be achieved by the team and its members. A d iscussion of results must include key team accountabilities, specific objectives for each key accountability (i.e., goals to be reached), and performance standards (i.e., what constitutes acceptable and unacceptable levels of performance). A discussion of behaviors needs to include competencies (i.e., clusters of KSAs). Finally, the d evelopmental plan includes a description of areas that need improving and goals to be achieved in each area. The plan includes not only goals for the team as a whole, but also developmental objectives for individual performance that w ill benefit team performance. For example, the team may have as its goal

Chapter 11 Team Performance Management 31515

improvement of its internal decision-making processes, and some team members may have the individual goal to improve listening skills, which would help to improve the team's decision-making processes.

Consider the following recommendations regarding how to facilitate and accelerate team learning and developmenf4:

1. Facilitate adaptive learning. As part of the team developmental plan, team members can be encouraged to try new behaviors. Also, as the team completes work or a specific project, changes that were made in processes can be reviewed in detail to understand what worked and what d id not.

2. Facilitate generative learning. Teams can be given information regarding best practices implemented by other teams in the same organization or even in other organizations. Teams can be given time to practice new skills until they become habitual.

3. Facilitate transformative learning. Teams can be encouraged to experiment with new ways of working together, including a d iscussion of feelings of uncertainty when facing change. Members from other teams can be invited to participate in discussions about performance or even to work as team members temporarily as a way of importing innovation and change into the team.

Consider how the planning component of the performance management system is played out at Duke University in Durham, North Carolina.25 Duke considers planning to be the foundation of its performance management system, which creates the groundwork for what the supervisor and the team expect of the individual throughout the performance year. The process at Duke consists of two parts (1) understanding the behaviors that will be expected, and (2) defining the job results expected.

11·4·3 Performance Execution The third component of the performance management process involves performance execution. Autonomous teams are solely responsible for performance execution; however, when a team has a supervisor or team leader, then both the team and the supervisor share responsibilities for performance execution. For example, team members need to be committed to goal achievement and should take a proactive role in seeking feedback from one another as well as from the team leader (if there is one). The burden is on the team to communicate openly and regularly with its supervisor. Also, team members are responsible for being prepared for the performance review by conducting regular and realistic peer assessments and check-ins. In this way, team members have solid information regarding their performance as perceived by other team members before they meet the team leader. The team leader also has important responsibilities, including observing and documenting team performance and the relative contribution of the team members, updating the team on any changes in the goals of the organization, and providing resources and reinforcement so that team members will be motivated to succeed.

Building and leading high-performing teams requires specific KSAs. First, trust is a critical issue in most organizational contexts.26 But trust is especially important in virtual teams.27 Specifically, team members have to trust their leaders, but also their peers, and the entire organization, to be most effective.

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Second, team leaders also need to help establish a motivating vision and goals for the team. Third, they need to be able to provide helpful feedback to the entire team, as well as individual team members (as described in the Section 11-4-5 Performance Review later in this chapter).28

What can team leaders do to turn "B players" into a winning team?29 In 2004, Greece, which was an underdog by a long shot, won the European Championship, which is one of the most competitive soccer tournaments in the world. Greece was considered a peripheral team composed of mostly unknown players. But they defeated favorites France and Portugal and lifted the trophy. This victory made Greece the first team to defeat both the holder (France) and the host (Portugal) in the same tournament. The odds that Greece would win had been estimated at 1 out of 150! But, they won. Why? The following four factors were key:

• Vision. The first success factor needed to turn B players into an A team is vision, which is the performance planning component of the performance management system. There needs to be a good idea of future goals. In addition, there should be a clear strategy on how to achieve them. In other words, what are the specific results and behaviors expected of team members and the team as a whole?

• Perfomlflnce analytics. The second success factor is performance analytics, which is the performance assessment component of the performance management system. Team leaders can make better decisions if they have accurate and fair performance data- from multiple sources.

• Feedback. The third success factor is feedback, which is an essential ingredient of the performance review component of the performance management system. In the context of team performance management, this involves information on individuals, but also information on the team as a whole.

• Morale. Finally, turning B players into a winning team requires the collective engagement of the entire team. When all the components of a state-of-the-science performance managem ent system are in place, the natural result is that team members share common goals, are motivated to achieve those common goals, and have the necessary resources to do so. When team members feel that they are part of something bigger than each individ ual, they work together and are able to achieve great things. This means that cooperation is val ued more than competition, and the team- as a whole-is on a journey of continuous improvement. To be able to enhance a team's morale, it is important for team members to also see that the leader is committed to the team, and not just using the team as a springboard of his next career move.

The German coach Otto Rehhagel, who Jed the 2004 Greek team, helped his team achieve such an amazing and unexpected victory following the aforementioned principles. For example, Rehhagel was able to create a common vision and improve morale-what in the sports world is known as "team spirit." As a result, the Greek team turned from a "dead-end squad nobody wanted to play for into a must-be-there-at-all-costs team." The government of Greece was so immensely pleased that he was given the "Greek of the Year" award after the team won the championship, the first time ever that a foreigner won this award .

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Related to team performance execution, team performance management can be fun. For example, consider the case ofWhataburger, a San Antonio, Texas-based fast food chain of about 800 restaurants that serves hamburgers, chicken, and other meals in the southern United States and in Mexico. The company holds an event called the "Whataburger games" twice per year, during which managers, cooks, dishwashers, servers, and busboys compete in events testing their team skills against others in the company. The top prize winners receive US$5,000 in cash. The company believes that many benefits result from holding the games twice per year. According to management, the goals of the games are to empha- size operating proced ures, to improve skills, to enhance teamwork, to reduce turnover, and to enhance the overall performance of the restaurants. The finals of the competition are held in conjunction with the managers' convention, where winners are formally recognized before corporate owners and executives, along with peers and management in a ceremony awarding medals and cash prizes. In summary, the leadership at Whataburger has identified a friendly and fun competition as part of the overall performance management system that aims to contribute to improved team performance and the success of the company.30

11·4-4 Performance Assessment The fourth component of the performance management process is performance assessment. All team members must evaluate one another's performance as well as the overall performance of the team. Peer evaluations are a key component of the assessment stage because they lead to higher levels of workload sharing, cooperation, and performance3 1 Also, team coordination and feedback improve when peers monitor the performance of all other members in the team. This, in turn, leads to the recognition of errors and to taking subsequent actions to correct these errors quickly.32 Peer eval uations can also include team members nominating someone else as the review period's most valuable performer (MVP). In addition, the team leader evaluates the performance of each team member as well as the team as a whole. Finally, members from other teams may also evaluate the performance of the team.33 This would apply only if members of other teams have firsthand experience with the performance of the team in question.

Involvement of each team member in the performance assessment process increases the members' ownership and commitment to the system. Self-appraisals also provide important information to be discussed during the performance review. In the absence of self-appraisals, it is often not clear to team leaders whether the team and its members have a real understanding of what is expected of them.

Similar to situations in which peers evaluate others regarding individual performance outside of team contexts, the assessment phase is prone to biases. A study including 34 teams of about four members each found that team members were more lenient in rating one another when they had previously received positive peer feedback, and they were more severe in rating one another when they had previously received negative peer feedback.34 Thus, it seems that receiving a positive rating from a peer leads to positive feelings, and receiving a negative rating from a peer leads to negative feelings, which translate into giving peers more positive and negative ratings, respectively. Accordingly, the model for rater motivation discussed in Chapter 6, as well as the training programs conducted

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to minimize rating biases as discussed in Chapter 7 are just as applicable to team performance management systems.

In short, three types of performance need to be assessed (1) individual performance based on task performance, which refers to the specific activi- ties required by one's individual job, such as a programmer's ability to write quality code; (2) individual performance based on contextual performance, which refers to specific activities that contribute to team performance, such as team members cooperating with each other; and (3) team performance as a whole. Although the saying goes, "There is no T in team," this just isn't so because teams consist of individuals with their individual motivation, needs, and talents. The system should include a good combination of both "me" and "we" considerations. 35

How can we assess the "we" side of performance? As in the case of measures of individual performance, measures of team performance should include both results and behaviors. Team performance as a whole can be measured using the following four performance dimensions36:

1. Effectiveness. This is the degree to which results satisfy team customers and stakeholders, including both internal and external customers. Results could be the same as those that are measured to evaluate individual performance. Specifically, these can include measures of quality, quantity, cost, and time.

2. Efficiency. This is the degree to which internal team processes support the achievement of results, team growth, and team member satisfaction. This can include measures of communication, coordination, collaboration, and decision making.

3. Learning and growth. This is the degree to which the team is able to Jearn new skills and improve performance over time. Specific measures can include innovation, documented learning, best practices, and process improvements.

4. Team member satisfaction. This is the degree to which team members are satisfied with their team membership. Specific measures can include team members' perceptions regarding the extent to which teamwork contributes to their growth and personal well-being.

In total, there should not be more than about 15 measures of overall team performance37; otherwise, team members may spend too much time collecting information and monitoring their activities and insufficient time actually work- ing on their assigned tasks. In addition, when the team has a meeting to assess its own overall performance, it is helpful to include a person from outside the team as part of the performance discussion. This helps team members to be as objective as possible when they evaluate their performance.

11·4·5 Performance Review The fifth component of the performance management process is the performance review, which takes place when the team members meet with the team leader or manager. In organizations that are structured around autonomous teams, there may not be a supervisor or manager. In that case, a team leader or representative

Chapter 11 Team Performance Management 31Sil

would meet with a performance review board, which includes representatives from all teams.

At least two meetings are needed. First, the team leader meets with all mem- bers of the team together. The focus of this meeting is to discuss the overall team performance, including results achieved by the team as a whole. Information for this meeting comes from team members evaluating their collective performance, other teams evaluating the team in question, and the supervisor's evaluation. Second, the team leader meets each team member individually. The focus of this meeting is to discuss how the individual's behaviors contributed to team performance. Information for this meeting comes from individuals evaluating their own performance, peer ratings of the individual's performance, and the supervisor's eval uation. Recall our discussion in Chapter 9 regarding giving praise and constructive feedback (including the use of a strengths-based approach to giving feedback).

Both meetings emphasize the past, the present, and the future. The past involves a discussion of performance during the review period. The present involves any changes in compensation, depending on results obtained. The future involves a discussion about goals and developmental plans the team and its members will be expected to achieve during the next review period . Are there specific KSAs that would be important for a particular team member to develop further in the future? In the particular case of virtual teams, a study involving more than 400 professionals, recruited through social networks or human resource representatives who d istributed the link in their organization, identified the following two KSAs that are related to virtual team member performance38:

• Leading and deciding: making clear decisions, taking responsibility, motivating other team members, acting on own initiative, working autonomously, and setting clear goals for other team members.

• Analyzing and interpreting: using communication med ia effectively, communicating in writing understandably and in a structured way, working in a solution-oriented way, analyzing data effectively, effectively learning to use new technologies, gaining an understanding of others' tasks, working effectively with computers and digital media, and showing analytical skills.

Now, pause for a moment to reflect on the two aforementioned competencies. Which of the behaviors involved in each of the competencies are your strengths? Which your weaknesses? Given the inevitability of virtual teams in your career progression, what steps could you take to improve your proficiency regarding each of your weaknesses?

In short, including team performance as a part of the performance management system includes the same five components as when a system included individual performance only. An important difference is that in addition to individual performance, the system includes individual performance as it affects the functioning of the team, as well as the performance of the team as a whole. As an additional example of team performance management in an organization that is global and includes thousands of teams, most of them virtual, see Box 11-3 describing Wikipedia.

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Box 11-3

Company Spotlight: Managing Performance of Volunteer and Virtual Teams at Wikipedia Wikipedia is a free online encyclopedia that any Internet user can edit. The encyclopedia is available in severa l lan- guages and has over 40 million articles in 293 languages. Wikipedia is run by the Wikimedia Foundation, a nonprofit organization with only 300 employees; however, the website has approximately 31.7 million registered user accounts across all language editions, of which around 270,000 are "active" (made at least one edit every month). The organization has tackled the question of how to manage the performance of this large, virtual, and volunteer com- munity. Several steps are taken to maintain the website in a way that allows readers to contribute and make edits. First, volunteers monitor one another. If an entry is made on a given page that a volunteer previously worked on, volunteers are immediately alerted so that they can review

the new entry. Edits are also t raced d irectly and openly to the person who made the edit. Others can correct errors, and the software allows simple reversals of any errors to be made. Any d iscussion between volunteers is also easily retrievable, so others can read about any d isagreement or questions. Second, Wikipedia has polici es that request all users to treat one another in a civil manner, and it is possible to be banished from making entries on the site. Volunteers are encouraged to work out disagreements. If that fails, an established escalation and d ispute-resolution process can be enacted, which includes a process of appeals w ith arbitration or mediation. In summary, Wikipedia pro- vides an example of how an organization utilizes policies and procedures to manage the performance of a virtual, volunteer workforce.39

11-5 REWARDING TEAM PERFORMANCE Teams are a pervasive fact of organizational life. Because of this, organizations that implement performance management systems that include team performance must redesign their rewards system to reward team performance. As an illustration, teams of workers in the production line at Motorola's plant in Tianjin, China, receive additional compensation if they keep the percentage of errors under a prespecified threshold . In a second example, a recent study investigated the effects of implementing a pay-for-performance system at the team level with top management teams at a global information technology company.40 The teams included seven or eight members. Each of the teams had team-level perfor- mance goals, which were specific but differed from team to team. Rewards were allocated based on organizational performance goals (25 percent), team-level goals (50 percent), and individual-level goals (25 percent). Similarly, at Apple and Google, team performance assessment and rewards are part of the formal review process.41

Organizations can reward team performance in ways similar to those in which they reward individual performance. For example, consider the case of Phelps Dodge Mining Company. The company implemented a team-based reward system involving more than 4,200 employees in six locations throughout North America. The company moved from being unionized to being non unionized, and a key strategic objective was to help employees move away from working for an hourly wage to understanding how to work as a salaried workforce. To accomplish this goal, team performance was measured and rewarded accordingly. For example, a

Chapter 11 Team PerFormance Management 361

team goal in a truck maintenance shop was to shorten the time that trucks were off-line for maintenance. Goals were set through the active participation of all team members, and employees are given additional compensation, depending on whether they accomplish team-based goals.

An organization can have a variable pay system in which an individual is eligible for a bonus if her team achieves specific results. This reward would be in addition to any performance-based rewards allocated according to individual performance (either task performance or contextual performance). The amount of the bonus could also be controlled by the team: teams that are able to generate savings that result from controlling cost and improving efficiency may see some of this money come back in the form of bonuses. In this case, the rewards are called self-funded. In other cases, the bonus can come from a company-wide pool that varies each year, based on overall organizational performance.

Team-based rewards are effective if they are implemented following similar principles as those used for individual rewards discussed in Chapter 10 (see Table 10-4). For example, all teams should be eligible, and rewards should be visible, contingent, and reversible. Do these team-based reward systems work? In one study, team performance-based pay motivated teams to spend 22 percent more time on the task at hand, which led to improved performance.42

There are several success factors specifically related to team rewards. First, a study consisting of a review of 30 separate investigations concluded that team rewards are more potent in smaller, compared to larger, teams.43 The reason? In smaller teams, it is easier for everyone to see everyone else's effort, motivation, and performance. Second, studies have provided evidence in support of team-based contingent pay plans. But similar to the case of individual rewards, in implement- ing team rewards, we need to be aware of the factors that make rewards fail (see Table 10-2). For example, rewards given to team members based on the extent to which they cooperate with each other are likely to enhance accuracy, but not necessarily speed.44 If the goal of the reward is to motivate employees to work faster, giving rewards for cooperation may be yet another example of the "folly of rewarding A while hoping for B."

, SUMMARY POINTS

• A team is in place when two or more people interact dynamically and interdependently and share a common and valued goal, objective, or mission. Individuals can be members of the same team even if they work in different geographic locations. Teams are pervasive in today's organizations, and it would be difficult to find an organization in which some type of work is not done by teams.

• Teams have become popular because businesses are facing increased pressures, including global competition, and the use of teams is a way to improve products and services and to increase productivity. Also, many organizations have gone through downsizing and restructuring, which has led them to become flatter and has reduced the number of hierarchical levels. Using teams provides greater flexibility for these organizations. Third, products and services are becoming very complex, requiring many

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people contributing their diverse talents to the same project. In most cases, no one individual can surpass the combined talent of an entire group. Finally, rapidly changing business environments are also responsible for the popularity of teams because teams are able to respond more quickly and more effectively to changes than can individuals working alone.

• Because teams are so pervasive, it is important that the performance management system focus not only on individuals, but also on teams. Organizations should take proactive steps to make sure that teams perform well, that their performance improves on an ongoing basis, and that individuals are active and motivated contributors to their teams. So, performance management should include individual performance, an individual's contribution to the performance of his or her teams, and the performance of teams as a whole.

• There are three conditions that are necessary for team performance management to lead to improved team performance. First, the processes involved in the performance of the team are relatively unconstrained by other requirements of the task or the organization. Second, the team is designed well and the organizational context supports team performance. Third, performance feedback focuses on team processes that are under the control of team members.

• There are three basic types of teams, based on the tasks they perform (from routine to nonroutine) and based on membership configuration (from static to dynamic): work or service teams, project teams, and network teams. Also, these teams can be virtual (i.e., members do not interact in person, but through technology). A good performance management system should include measures of team performance that are congruent with the types of teams under consideration.

• A performance management system that includes a team component needs to focus on three types of performance (1) individual performance, (2) individual performance that contributes to team performance, and (3) team performance. All three are necessary for a system to be successful.

• We must consider six basic principles in including a team component in a performance management system: make sure teams are really teams, make the investment to measure, define measurement goals clearly, use a m ulti-method approach to measurement, focus on process as well as outcomes, and measure long-term changes.

• Including a team component in the performance management system has some unique challenges. The system needs to achieve a good balance between individual and team performance measurement and rewards. In other words, it is not sufficient to measure and reward overall team performance. There also needs to be a way to measure and reward the contribution that each individual makes to the team. In this way, individuals are held accountable for contributing to team performance.

• The performance management process of a system including a team performance component is similar to the process of a system including individual performance only. The components of the process include (1) prerequisites (e.g., knowledge of the organization's mission, team charters- serving a similar purpose as individual job descriptions),

Chapter 11 Team Performance Management 30

(2) performance planning (e.g., consideration of results, behaviors, and a developmental plan), (3) performance execution (e.g., role of team leaders, how to turn a team of B-players into a winning team), (4) performance assessment (e.g., evaluations from other team members, assessing the "we" side of performance), and (5) performance review (e.g., feedback about individual contributions to team performance, feedback on the performance of the team as a whole). Although the inclusion of a team component adds a layer of complexity to the process, the fundamental principles guiding the design and implementation of the system discussed throughout this book remain the same.

• If the performance management system includes the measurement of individuals' contribution to team performance and overall team performance, it also needs to reward these types of performance. The principles guiding the allocation of rewards in systems including a team component are similar to those guiding the allocation of rewards in systems including individual performance only. For example, rewards should be visible, contingent, and reversible. Also, similar pitfalls that take place in the allocation of individual rewards should be avoided, such as the "folly of rewarding A while hoping for B."

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EXERCISE 11-1 TEAM PERFORMANCE MANAGEMENT AT BOSE

Bose Corporation is an organization that specializes in audio equipment that meets virtually any audio challenge. Bose Corporation's audio technologies can be found in home stereos, stadiums, the Sistine Chapel, and even the U.S. space program. Bose Corporation was founded in 1964 and is headquartered in Framingham, Massachusetts, but has employees around the globe.

Many Bose employees work in a variety of teams. Three different types of teams within Bose are work teams, project teams, and network teams. The work teams are responsible for the production of audio equipment. These teams are long-term and are typically focused on producing a certain type of audio equip- ment. Project teams are responsible for the research and development of innova- tive audio equipment. Typically, these teams are focused on the development of a specific type of equipment (e.g., new home entertainment speakers). Network teams arise in instances where team members are spread across the globe. A specific example of a network team within Bose is a team that is designing a new audio system for Ferrari . Within this team, there are members located at Bose's headquarters, at Ferrari's plant location in Italy, and at one of Bose's production factories in Japan. The members at these various locations rarely meet face-to-face, but communicate frequently using technology.

Recently, Bose's executive team has been interested in implementing a new team-based performance management system for these different teams. They know of your expertise in performance management and they have asked you to help them. You have explained to them the five key components of a proper performance management system, but now, Bose's executive team is specifically interested in knowing how they may have to be expanded so the system can be used effectively across their three different types of teams. The reason why the

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executive team is interested in this is that they would like to establish a main performance management framework that can work across the different types of teams.

Please prepare a 10-minute video presentation specifying how you sug- gest expand ing the performance management system to accommodate the three types of teams. Make sure the p roposed system refers to each of the components (i.e., prerequisites, performance p lanning, performance execu- tion, performance assessment, and performance review). Also, make sure your recommendations comply with as many of the ideal characteristics as possible (e.g., congruent with strategy, congruent with context, thorough, practical) and avoids potential pitfalls (e.g., lowered self-esteem, increased turnover, damaged relationships).

EXERCISE 11-2 TEAM PERFORMANCE REVIEW

The goal of this exercise is to learn how to successhrlly conduct a team perfor- mance review. For this exercise, the instructor w ill divide the class into separate teams and appoint a "leader" for each team.

Team Leaders: You are the leader of a team at Carrefour, a large department store. The store is divided into teams based on the product types they sell, such as housewares, sporting goods, women's clothing, and cosmetics. Rewards for performance are d istrib uted in the form of individual monetary bonuses at the end of the year, and are calculated using an average of the percent of team and individual sales targets achieved. So, for example, if the sporting goods department achieves 80 percent of its target, and an individual achieves 50 percent of his target, the bonus for this person will be calculated based on average target achievement of 65 percent. In addition, you as the team leader have the ability to increase or decrease the bonus for a particular employee by up to 10 percent, based on their performance evaluations (which include self, peer, customer, and supervisor evaluations).

You are now going to conduct the team performance review meeting. This meeting, which lasts 15-20 minutes, is used to discuss overall team performance and give the team an opportunity to ask questions. Overall, the team achieved 70 percent of its team sales target. However, some team members significantly outperformed relative to their individual sales target, while others were well below the desired level.

1. Deliver an opening statement that outlines the goal and format of the meeting.

2. Reiterate the criteria used to evaluate overall performance and determine bonuses.

3. Provide information on how the team performed relative to its overall sales target.

Chapter 11 Team Performance Management 3615

4. Answer team member questions about the performance management and reward allocation processes.

5. Your goal, as you provide feedback, is to address the concerns of top performers and average/low performers in a satisfactory manner, where all members accept that the review was fair.

(Hint: It is important that this meeting focuses specifically on the results achieved by the team as a whole, and not highlight (positively or negatively) any specific individual. In addition, see Section 9-4 Coaching, Development, and Performance Review Meetings in Chapter 9 for additional information on key considerations to keep in mind when conducting performance review meetings).

Team Members: You are a member of one of the departments at Carrefour. It is now time for the annual performance review meeting and d istribution of monetary bonuses. As described above, rewards for performance at Carrefour are calculated using a mix of team- and individual-performance data, and also include a percentage allocated at the manager's discretion. Some of you have done very well this year, and have generated considerably more sales revenue than your individual target. Others however have fallen well short of their target.

1. To perform this exercise, as a team, you will need to assign members who will play the role of either an excellent performer or an average performer. Decide on the performance achieved by each team member with regard to their individual sales targets. At a minimum, two employees should have exceeded their target by 10 percent to 15 percent, while another two should have achieved 50 percent to 70 percent of their goal. Overall, the team should include employees with varying levels of performance.

2. After the leader provides information on the team's performance, respond with follow-up questions and comments consistent with your level of performance. For example: a. High performers (those who exceeded their sales goal) might talk

about how the feedback and rewards are unfair because they are being penalized for others' poor performance. For example, a top performer may say, "It is not fair that our team bonus won't be as good because of the poor performance of others on the team."

b. Average/Low performers (those who met or fell short of their sales goal) may opine that their contrib utions are being overlooked. They might mention that the situation is unfair because they undertook important functions, such as training, team-building, and boundary-spanning, which are not adequately factored into the bonus reward system.

c. Yet other employees might mention that they did not receive adequate information and coaching about their performance throughout the year. Therefore, the system is unfair because they d id not have opportunities to improve their performance.

CASE STUDY 11-1

Team Performance Management at American Electric and Gas

A merican Electric and Gas (AE&G) is a large public utility organization offering electricity and gas. The company's performance management system reflects the focus placed on results, the need for creativity and imagination, and the need for continuous improvement. Under its current framework, the system links individual performance with that of the team or department, as well as the organiza- tion. Therefore,

• Department business plan goals link to the business plan and business priorities.

• Performance goals and measures grow out of a department's business plan.

• Employee performance measures align with those of the organization.

• The department, teams, and individuals are rewarded and recognized on the basis of these measures.

The organization's team structure consists primarily of work or service teams, which align with the company's departments. Because of the close relationship with local government entities, how- ever, the organization also utilizes network teams that focus on government regulatory needs as they relate to public service providers and project teams that are assembled on an as-needed basis to work on various projects that come from the network teams.

The elements of the current performance man- agement system are as follows:

Organizatioual perfonnauce. Organizational performance measurement is a continuous process conducted to assess the department's performance-efficiency, effectiveness, and client satisfaction- in relation to the vision and business plan. The steps in the process include: 1. Business plan goals and strategies. Identify

the desired outcomes that the organization is seeking to achieve and outline how the goals will be realized.

2. Human resources department plan. Outline the key strategies the department will undertake to address identified human resources (HR) issues to meet its business plan, within the context of the vision, values, government business plan, and the HRplan.

3. Performance measures. Identify specific criteria that will be used to monitor progress toward the goals.

4. Targets. Describe specific performance levels that will be used to achieve the desired outcome.

5. Learning supports. Identify practices, policies, and initiatives that provide incentive and encouragement to employees to develop new skills, knowledge, and abilities.

Employee perfonuance. Employee performance can be enhanced through a continuous and interactive process to help departments and teams achieve business goals and to help employees continually improve. The steps in the process include: 1. Performance plans. Link employee

performance to that of the organization and identify and set measures for desired outcomes.

2. Orientation. Provide information for employees regarding their new job and the organization to enhance understanding and effectiveness.

3. Learning and developmental plans. Identify competency development required for employees to carry out the performance plan.

4. Performance coaching. Provide ongoing performance feedback and assistance to employees from managers, supervisors, and other key individuals.

5. Performance assessment. Provide a summary of feedback received throughout the

performance period, analyze what employees have achieved relative to the desired outcomes set out in their performance and learning plans, and handle the subject of performance pay increases.

AE&G's current performance recognition (pay) plan supports and reinforces the desired performance for both the organization and the employee as follows:

• Perfarmance pay. This compensation for employees links pay with individual performance. It consists of a market-driven base pay and a market-driven increase system that provides the ability to address cost-of-living increases and a bonus based on achievement of department, individ ual, and team goals.

• Special programs. The company also has two recognition programs for outstanding performance: (1) Award of Excellence, which can be applied for and awarded to team leaders, and (2) Executive Excellence Recognition, which is a unique program that

CASE STUDY 11-2

Chapter 11 Team Performance Management 367

recognizes teams that achieve measurable enhancements in the service they provide. Each of these programs requires an application process, and the award is determined by a committee.

Consider the performance management process (see Figure 11-2) as it is applied in implementing team-based systems. Then, please answer the fol- lowing questions:

1. How is AE&G implementing each of the components of the performance management process?

2. Consider how AE&G assesses performance. Which aspects of the measurement system are appropriate and which are not, given its goal of enhancing team performance?

3. What additions or revisions should be made to each of the components of the performance management process to make the system more effective from a team performance point of view?

Team-Based Rewards for the State of Georgia

T he state of Georgia's Department of Human Resources (DHR) updated its performance management system. The performance man- agement process is used for all employees who are to receive performance evaluations. The following outlines the critical features of this system:

• Manager training. Prior to utilizing the system, all managers receive training in how the system works and how to implement each phase of the system.

• Perfomwnce planning. This is the first step of the performance management system process and is used to create the employee's performance plan. Developing a performance plan involves identifying job and

individual responsibilities and performance expectations. It is the primary responsibility of the manager to develop this plan using input from the employee that he or she may want included in the performance plan.

• Performance coaching. Coaching is the key supervisory activity during a performance period. It involves ongoing communication, both formal and informal, that motivates employees by Jetting them know where they stand in meeting expectations and carrying out responsibilities. The three steps to performance coaching are (1) observing performance; (2) providing regular performance feedback, based on information gathered through personal observation, team

3A Part IV Reward Systems, l egal Issues, and Team Performance Management

input, and input from the employee; and (3) documenting performance.

• Perfonnance evaluation. This phase culminates with a meeting of the evaluating supervisor and the employee to rate performance and discuss appropriate salary increases and developmental planning for the employee.

• Perfomwnce development. Supervisors should discuss performance development with each employee. A developmental plan must be developed for each employee who is rated "does not meet expectations" or "needs improvement" in the area of Employment Terms and Conditions. The structured approach of the developmental plan has three objectives (1) to enhance employee strengths, (2) to decrease employee areas that need improvements, and (3) to meet organizational and team needs.

• Sa/an; increase. Salary increases are awarded annually to each eligible employee. To be eligible for a performance-based salary increase, employees must: • Receive an overall rating for Job and

Individual Responsibilities of at least "met expectations."

• Receive an overall rating for Terms and Conditions of Employment of at least "needs improvement."

• Salary increases for each evaluation period for employees who "met or exceeded expectations" are restricted to the following guidelines: • An overall rating of "met expectations"

will receive a standard increase, based on the amount identified for the evaluation period.

• An overall rating of "exceeded expectations" will receive a standard increase as noted above, along with a lump sum identified for the evaluation period.

• Each year, a specified amount of money is set aside for salary increases. Because funds are limited, the salary increase amounts may be reduced if the department exceeds the allocated funds. If the salary increase amounts must be reduced, the reduction percentage will be the same for all employees.

• Unless otherwise authorized, employees at or above pay grade are not eligible for a performance-based salary increase, and employees who are near the pay grade maximum will be granted an increase to the pay grade maximum only.

The performance management and reward system, as currently in place, focuses mainly on individual performance. But given the changing nature of work that is now team-based in many different units and departments, there is a need to revise the system so that it can accommodate team-based rewards. Please answer the following questions:

1. How would you revise the system to include team-based rewards?

2. What are some of the anticipated challenges in including a team-based reward component, given the nature of the organization and its customers?

3. Given the effectiveness of contingent pay plans for teams, what are your recommendations on how to implement this type of system in this particular organization?

Source: This case is based, in part, on information available online at httpJ/team.georgia.gov/periormance/ Retrieval date: January, 2, 2018.

ENDNOTES

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-

Chapter 11 Team Performance Management 36e

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370 Part IV Reward Systems, legal Issues. and Team Performance Management

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NAME AND COMPANY INDEX

A AAH pharmaceuticals, 248 Accenture, 228, 337

work-life focus, 305 Accounting, Inc., 220 Adobe Systems, 17, 136 AE&G (American Electric and Gas),

366-367 Aerospace company, expatriate teams

at,347 Airbnb, SWOT and gap analysis at, 78 Altenergy LLC, contingency pay plan

at,337 American Electric and Gas (AE&G),

366-367 Anderson, Gregory, 15 Apple

team performance rewards, 360 work-life focus, 305

Ard, Scott, 15 Asana, work-life focus, 305 Avon,309

B Bank of America, 5, 313 Bankers Life and Casualty, 89-90 Barton Healthcare Systems, in

defamation, 323 Basecamp company, 115 BCG (Boston Consulting Group), 232 Becton, Dickinson, and Company, 261 Berube, Edward M., 89 Betty Crocker, 313 Big Quality Care Center (BQCC),

218-219 Bisquick, 313 Bock, Laszlo, 315 Bose Corporation, 363-364 Boston Consulting Group (BCG), 232 BQCC (Big Quality Care Center),

218-219 Brainstorm, Inc., 252-254 Brummel, Lisa E., 135 BT Global Services, 216

c Canadian military

using BO training, 210 using FOR training, 209-210

Capgemini, 231 Car restoration business (CRB, Inc.), 36 Cargill, 136 Caterpillar, 214 CEB (Corporate Executive Board), 6 Chapman, Michael, 324-325 Chartered Institute of Personnel and

Development, 304 Chrysler, 294 Clarke, Arthur C., 348 Cleverly, john E., 268 Coca-Cola company, 79-80 Colorado Business Group on

Health, 304 Consumer Financial Protection

Bureau, 311 Corporate Executive Board (CEB), 6 CRB, Inc. (Car restoration business), 36

0 Daily Planet, 192-193 Daimler-Benz, 294 DaimlerChrysler, 294 Dalton Alliances, Inc., 275 Dalton, Francie, 275 Damiano, Gwendolyn, 323 DOl (Development Dimensions

International), 10 Dell computers, 74, 177-178 Dell, Michael, 177-178 Deloitte, 17, 344

forced distribution system at, 134 Department of Transportation (DOT),

147-148 Development Dimensions International

(001), 10 Diageo,237 Discover, performance planning

at, 53 Disney Consumer Products & Studios

accountabiJities, objectives, and s tandards at, 149

evaluating, 150 Dollar Genera l, 114 DOT (Department of Transportation),

147-148

E Eaton, Robert, 294-295 Ed,337 Ely Lilly, 228 Enron Corporation, 110, 315 Ernst & Young, 231 Expert Engineering, Inc., 193

F Facebook, work-life focus, 305 Facetime, 348 Farr, 259 Federa l Express (FedEx), 179 Ferrari, 363 Field, lim, 278 Ford,348 Fortune 500, 9 Freiberg, Charles, 322

G Gadams, Robert, 324 GAP, Inc., 228

performance management system at, 155

building support for, 92-93 pilot testing at, 212

Garcia, James, 171 GE (General Electric), 16-17,23,57,133,

136, 262-263 forced distribution system at, 133 work-life focus, 305

General Electric (GE), 16-17,23,57,133, 136, 262-263

forced distribution system at, 133 work-life focus, 305

General Mills, 313

371

372 Name and Company Index

Coogle. 124, 136, 3().1 big pay for big performance, 316 performance assessment at, 56 team performance rewards, 360 work-life focus, 305

Graniterod<, 320 Green Giant, 313 Greif, Inc., 81-82 Gupta, Aarav, 332-335

H Hallmark, 267 Hamilton Standard Commercial

Aircraft, 1n Harley·Da,idson, Inc., 83-84 Henry's commercial sales and leasing.

295-296 Hewlett-Packard (HP), 124,348 HP (Hewlett-Packard), 124,348

lacocca, Lee, 293 IBM (Internationa l Business Machines),

13, ss, n-78, 348 work- life focus, 305

lntermex, 180 employee performance monitoring

at, 181 International Business Machines (IBM),

13. ss, n-78, 348 work-life focus, 305

J jack, 337 jacobs, 259 johnsonville Foods, 174, 175 jones, Tom, 141 Juniper networks, 154

K Keith, jeffrey, 110 Key Bank

mission statement, 85 performance management and

strategic plan at, 71-n ''ision statement, 85

KLA·Tencor Corporation, 2.36-237 Kraft Heinz company, 124 KS Cleaners (KSC), 64-05 KSC (KS Cleaners), 64-05

L L Brands Inc., 115 Lake Federal Bank, 318 Levatich, MatthewS., 83-84

Lewis, Aylwin B., 7 Linked In, 124,316 Lutz, Bob, 29.1

M McChrystal, Stanley, 344 McCoy Federal Credit Union, 175 McDonald, 231, 311 McDonald, Peter, 75 McNealy, Scott, 305 Mercer, global diversified consulting

company, 22 Merrill Lynch, 5, 145,313 Microsoft Corporation, 135, 228

goals at, 127 job description for performance

solutions group manager at, 88 mission statement of, 85-87 vision statement of, 83

Morris, Donn.1, 136 Motorola, 231

team performance rewards, 360 MySQL,350

N NASA, 112-113 Nateasc, 321 Network Solutions, Inc., 34-35 Nohria, Nitin, 110 Norfolk State University (NSU), 86 NSU (Norfolk State Uni,·ersity). 86

0 Ollander·Kran, Rob, 155 Omega, Inc., 63 Owen, Robert, 24

p P&G (Procter & Gamble), 95 Packard, BiU, 124 Patent Office, 245 Pennington Performance Group, 13 Pennington, Randy, 13 PepsiCo

performance management system, 12

vision and mission statements at, evaluating. 9.j...95

Pharrna Co. Company differentiating task from contextual

performance at, 119 Phelps Dodge Mining Company, 360 Porter, Michael E., 75 Pricewaterhouse Coopers, 305 Procter & Gamble (P&G), 95 Profi les International, 239

R Randi, W., 324 Reese, Susan, 323 Rehhagel, Otto, 356 Rometty, Ginni, n Rostcd, Kasper, 8 Ryder company, 180, 181

s Saab,347 Safeway, in illegal discrimination, 325 SAS Institute, 319 Satum,347 School of Business, 86 Sears,313

uses performance management to focus on strategic business priorities, 7

SELCO Credit Union, 9 Shanda,321 Show Me the Money, 119-120 Sieg. Andy, 145 Sicmcns,5 Skype, 348 Smith, Chloe, 332-335 SOM architectural fi rm, 332 Southwest Airlines, 75 Spectrum Brands, 81 Sprint/Nextcl, 322

task and contextual performance at, 107 Sun Microsysten15, 156

and relational returns, 306 work-life focus in, 305

Synygy, Inc., In

T Takata, 311 Target Corporation, training specialist/

consu ltant-leadership & team development at

accountabilities, 12>-126 job description of, 125 objecti,·es, 127-128 standards, 129

Three Ireland, 112 Tom,337 Toto, Joseph, 261 Tractors, Inc., 338 Tumgo, 190-191 Twain, Mark, 134

u Ufida, 321 United Airlines, 75 University of Alberta, 304 University of Lethbridge, 204, 205

w Waldron. Hicks, 309 Waslungton State Patrol, 212, 215 Weins Ted>, 332-335 Welch, Jack, 16, 57, 133,262-263 WcUs Fargo, 144, 310-313 Western Electric Co., 268 Whataburger, 357 Wheaties, 313 Wikimedia Foundation, 360

Wikipedia, 360 "Wi.llis Towers Watson Talent

Management, 16 WorldatWork. 16 World Com, 315

X XCS (Xerox Capital Services), 130 Xerox Capital Services (XCS), 130

Name and Company Index :17. Xora company, 190-191

y Yahoo, 15, 136

z Zalando, 25 ZF TRW Automotive Holdings Corp.,

107-108

SUBJECT INDEX

CATA (computer-aided text analysis), 171

Absolute systems, to evaluate competencies, 132, 138-144

Accountabilities in appraisal form, 156 determining. 125-126

at Di>ney, 149 at Target Corporation, 125-126

Achievement and contributions, in approis.1l form, I 56 motivation, defined, 103

Active m01titoring, 181 Activity constraints, for employees, 267 Adaptive tea ming, 355 Adaptive performance, llQ-112 Administrative decis ions, of performance

management system, 6-7, 10 Administrative issues, in appeal

process, 203 Adverse impact, affecting performance

management, 324 Age Discrimination in Employment Act

of 1967,326 Agreeableness person.1lity trait, 103 AllianceHealth Deaconess Hospital, 51 Allowances, for employees, 305 Alternation rank order procedure, 132 Americans with Disabilities Act of

1990,326 Amiable, coaching style, 263-264 Analy.<er, coaching style, 263-264 Anchors, used in behavior checklist,

139-141 Appeals process, 203-204

at Accounting. Inc., 220 levels in, 203 for nursing homes, 219 at University of Lethbridge, 204, 205

Appraisal meeting/ discussion, 57- 58 Attribution error, 208 Australian National University Medical

School, 176 Automatic information p rocessing, 47 Autonomous and performance

ext.'CUtion, 355 Autonomous work g:roups, 344

Baby boomers, 26, 290 massive retirement of, 258

Balanced scorecard, 7Q-71 BARS (behaviorally anchored rating

scales), 142-144 for evaluating business student

performance in team projects, 148 Base pay, for employees, 302-303 Behavior checklist measurement

approach, 139 Behavioral indicators

in appraisal form, 156 of competency, 130-131

Behavioral observation (130) training, 21Q-211

Behaviorally anchored rating scales (BARS), 142-144

for evaluating business student performllnce in team projects, I 48

Behaviors approach for measuring performance, lOQ-101,

112-113, 120, 129-132 absolute systems, 138-144 comparative systems, 132-136 at DoUar General, 114 vs. results approach, 115

in performance planning. 52-53 Big Data, 24, 25, 179-181 "Big Five" personality traits, 103 "Blue-on-blue", 105 130 (behavioral observation) training.

21Q-211 Bonus reward, and individual

performance, 361 Buddy ratings, 176

c Canadian Human Rights Code of 1985,

326 Career competencies

behaviora l, 227 communicative, 227 reflective, 226

Carelessness bias, 47

Change management, 176 competency, 130

Check-ins, and performllnce touchpoints, 54

CheckPoint 360-<legrce system, 239. Su also Multisource feedback systems

development summary, 242-243 executive overview, 240 reference group comparison, 241 scale to rate competencies, 239

China, performance management and reward systems in, 321

Classical performance review meeting, 174

Cloud computing. 24-25 Coaching

actionable functions of, 260 confidence to employees, 260 culture, 260-261 guiding principles for, 259-260, 262 in performance management

leadership, lSS-263, 282-287 process, 264-266

developmental behaviors and results, observation and documentation of, 266-270

giving feedback, 269-282 specific behaviors of

development objectives, 261 diagnosing performllnce

problems, 262 document performllnce, 261 effective communication, 261 employee development, 262 giving feedback, 261 motivate employees, 261

styles of, 263-264,291-293 Cognitive abilities, 101, 103 Cognitive biases, of communication

plan, 201-203 negative impact of, ways to minimize,

201-202 COLA (cost-of-living adjustments), 303 Commitment, to goal achievement, 54 Communication competency, 130

:1715

3715 Subj ect Index

Communication plan, 19&-203 at Accounting, Inc., 220 cognitive biases and resistance to

change, dealing with, 201-203 implemented by Department of

jus tice, 200, 202-203 Comparative systems, to evaluate

competencies, 132-136 advantages of, 134-135 disadvantages of, 135

Compensation system, 73, 104. See also Rewards

Competencies, 52-53,129-132 in appraisal form, 156 and coaching, 260 components of, 131 differentiating, 129-130 measurement of, 131

at Department of Transportation, 147-148

modeling, 113 at Xerox Capital Services, 130

Computer-aided text analysis (CATA), 171 Conference/trade show, for

employees, 232 Conscientiousness personality trait, 103 Consideration competency, 131 Constraints, for employee's performance

activity, 267 situational, 266-267 time, 266

Constructive feedback, 275-277 strengths-based approach, 277 weaknesses-based approach, 277

Context effects, 177 Contextual performance, 101, 102,

104-105,106-109, 144-145 at Pharma Co. Company, 119 at Sprint, 107 vs. task performance, 108

Contingent pay (CP) plan, 303, 307-308 at Altenergy LLC, 337 employees, motivation of, 310 Coogle, big pay for big performance

at,316 problems associated with, 31Q-313 reasons for introducing, 30&-310 selection of, 313-316 for SOM architectural firm, 332 for various strategic business

objectives, 314-315 vs. incentives, 303

Contrast error, 206-207 Controlled information processing, 47 Core ideology, of vision statement, 81 Cost-of-living adjustments (COLA), 303 Cost/benefit ratio, 213-215 Counterproductive performance, 109-110 The Crimes Act (1914), 326

Critical incidents measurement approach, 141-143

Cultural transvergence, 258 Customers, as source of performance

information, 179 Cyberloafing, 180

0 Day of contemp lation, 278 Decision-making leave, 27&-280 Declarative knowledge, 101, 105 Defamation, and performance

management, 323 Defensiveness

dealing with, 293 fight response, 285 flight response, 285 illustration of, 28&-287 suggestions to prevent, 285-286

Deliberate practice, 103-104 Denver International Airport, 75 Department of justice, communication

plan, implementing, 200, 202-203 Development plans, 23, 53

of appraisal form, 15&-157 at Brainstorm, Inc., 252-254 career competencies

behavioral, 227 communicative, 227 reflective, 226

content of, 229-231 developmental activities, 231-233 form, 233-234 at General Mills, 227 objectives of, 22&-229

Developmental achievements, in appraisal form, 156

Developmental goals, of appraisal form, 15&-157

Developmental needs, of appraisal form, 15&-157

Developmental purpose, of performance management system, 7-8, 10

DICTION 5.0, software package, 171 Direct reports, as source of performance

information, 177-178 Direct supervisor's role, in employee's

development plan, 234-238 at Diageo, 237

Disability Discrimination Act (1992), 326 Disciplinary process, 27&-282

formal, 278 pitfalls

failure to consu lt HR, 281 failure to get message through, 280 negative affective reactions, 28Q-281 performance standards, unrealistic/

unfair, 280

poor performance, acceptance of, 280 Disparate treatment, 324-325 Distributive justice perception, 20, 21 Documentation purpose, of performance

management system, &-10 Driver, coaching style, 263-264

E Economic recessio n, 75 Effectiveness, in team performance, 358 Efficiency, in team performance, 358 Electronic performance monitoring

(EPM), 25, 175 Employee development, performance

management and development plans, 22&-228

activities, 231-234 at Brainstorm, Inc., 252-254 content of, 229-231 form, 233-234 at General Mills, 227 objectives of, 228-229

direct supervisor 's role, 234-238 multisource feedback systems, 23&-243

at AAH pharmaceuticals, 248 benefits of, 244-245 characteristics of, 24&-248 on own performance, 251 risks, contingencies, and potential

pitfalls in, 245-246 top-notch, demo for, 251

Employee performance monitoring (EPM), 179-181,187-188

at lntermex, 181 for learning and development, 181 atTumgo, 19Q-191 at Xora, 19Q-191

Employees allowances for, 305 base pay, 302-303 comments, in appraisal form, 15'7 cost-of-living adjustments. See Cost-of-

living adjustments (COLA) fight defensive response, 285 flight defensive response, 285 formal disciplinary process, 278 incentives. See Incentives income protection, 304 information, in appraisal form, 156 in performance assessment, 56 in performance execution,

responsibilities for, 54, 55 performance managemen t

contribution for, 1Q-14 performance review meetings. See

Performance review, meetings termination, 279-281 work-life focus, 305

Employment at will, affecting performance management, 322

Environmental analysis, 75-78 at Airbnb, 78 external, 75-76, 77, 78 gap, internal, 76-77, 78

Envisioned future, 81 EPM. See Electronic performance

monitoring (EPM); Emp loyee performance monitoring (EPM)

Equal Opportunity for Women in the Workplace Act (1999), 326

Equal Pay Act of 1963,326 Evaluative nature of performance, 100 Executive pay, CP plan, 315 External en vironment analysis, in

strategic planning, 75-76, 77 Extreme ownership, of performance,

105-106 exercise, 117-118

Extroversion personality trait, 103

F Fair Labor Standards Act, 303 Fairness perceptions, 20 False consensus bias, 47 Federal Contractors Program, 326 Federal Employment Equity Act

(2004), 326 Feedback, 7-8

characteristics of, 274 defined, 269-270 disciplinary process and

organizational exit. See Disciplinary process

gap, 276 generational and individual

differences, 277-278 illustration of, 273-275 performance 356 positive effects of, 271-272 purpose of, 27Q-271 types of

constructive, 275-277 positive, 274-275

Feedforward interview (FFI), 235 steps involved in, 235-236 vs. traditional feedback, 236

FFI (feed forward interview), 235 steps involved in, 235-236 vs. traditional feedback, 236

Fight defensive response, 285 First impression error, 207 Fi\,e-force analysis, 75 Five-point scales, 139, 140 Flight defensive response, 285 Follow-up actions, quality of, 213

FOR (frame of reference) training, 208-210,211

Forced d istribution ranking system, 133 criticisms of, 135-136 at Oeloitte, 134 at General Electric, 133

Formal meetings, appraisal period and, 172-175

Frame of reference (FOR) training, 208-210,211

Fro ntier airlines, 75

G Gap analysis, 77-78

at Airbnb, 78 General Equal Opportunity Law, 326 Generative learning, 355 Genetic Information Nondiscriminatio n

Act of 2008 (GINA), 326 Global competition, 108 Global Leadership Summit, 349 Goals, for better performance, 127 Gondolier, 20 Government Performance and Results

Act, 212-213 Graphic rating scale, to measure

performance, 143 Group incentives, 314 Guidance, and coaching, 260

H Halo effect, 177 Halo error, 207 HCJ (Human Capital Index), 246 Heavy-tailed performance

d istribution, 137 High-performing organizations, 86 High-potential employees (HiPos), 12 HiPos (high-potential employees), 12 Holistic procedure, to commute

performance score, 168 HR. See Human resources (HR) Human Capital Index (HCI), 246 Human resources (HR)

department, in appeal process, 203 and development activities, 23-24 function, 42, 43, 89, 157

performance management contribution for, lQ-14

in strategic planning process, role of, 73-74

Human Rights and Equal Opportunity Commission Act 1986, 326

lOPs (individual development plans), 227 Illegal discrimination, 324-325

Subj ect Index 377

vs. legal discrimination, 325 Incentives

group,314 individual, 314 long-term, 303-304 organizational, 314 short-term, 303

for physicians in Colorado, 304 unit, 314 vs. contingent pay plan, 303

Income protection programs, for employees, 304

Ind icators, of competency, 13Q-131 Individual development plans (lOPs), 227 Ind ividual incentives, 314 Informational justice perception, 21 Informational purpose, of performance

management system, 7, 10 Initiating structure competency, 131 Intangible returns, 302, 306-307 Internal enviro nment analysis, in

s trategic planning, 76-77 Internet, for performance management,

24,25 Interpersonal cooperation, 108 Interpersonal justice perception, 2Q-21 Interviews, during ·work analysis, 45 lnvoh'ement culture vs. traditional

culture, 314

J Job analysis. See Work analysis Job analyst, 44, 45 Job content information, 45 Job description, 44, 48, 51, 69-72,

86-88,125 exercises for, 92 for performance solutions group

manager at Microsoft, 88 of Target Corporation, 125 for trailer truck driver, 44, 87

Judgmental issues, in appeal process, 203 Judgmental procedure, to commute

performance score, 168, 171

K Key accountabilities, 52, 124 Knowledge, skills, and abiUties (KSAs),

44, 48,101-104, 129,353-354 for strategy implementation, 73 in virtual team member performance,

359 KSAs (knowledge, skills, and abilities),

44, 48,101-104, 129,353-354 for strategy imp lementation, 73 in virtual team member

performance, 359

378 Subject Index

L Law of Basic Statute of Public Em ployee

(2005), 326 Law of Worker's Statute

(1980 and 2005), 326 Laws

affecting performance management, 325-328

and performance 321 LeAD (Leadership Assessment and

Development), 12 Leadership Assessment and

De\'elopment (LeAD), 12 Leadership, role in performance, 145 Learning and growth, in team

performance, 358 Legal discrimination vs. illegal

discrimination, 325 Legal principles, affecting performance

management adverse impact of, 324 defamation, 323 emp loyment at will, 322 illegal discrimination, 324-325 misrepresentation, 323-324 negligence, 322-323

Leniency erro r, 183 Lenient ratings, 185 Long-term incentives, for employees,

303-304, 306

M Management by objectives (MBO), 124 Managers

appraisal form, 160, 161-164,167 performance management

contribution for, 1Q-14 Maximum performance, of employee, 104 MBO (management by objectives), 124 Mechanical procedure, to commute

performance score, 168, 171 Memory aids, 210 Mentoring programs, for employees, 231 Merit pay plan. See Contingent pay (CP)

plan Merit/salary review meeting, 174 Microsoft training and education (MSTE)

mission statement of, 85-86 performance solutions group manager

in, job description of, 87 Millennia Is, 290 Minim um performance, of employee, 128 Misrepresentation, affecting performance

management, 323-324 Missio n s tatements, 78-80

for Coca-Cola company, 79 for Spectrum Brands, 81

vs. vision statemen ts, 83 Morale,356 Most valuable performer (MVP), 357 Multidimensional nature of

performance, 100 Multisource feedback systems, 23&-243

at AAH pharmaceuticals, 248 benefits of, 244-245 characteristics of, 246-248 o n own performance, 251 risks, contingencies, and potential

pitfalls in, 245-246 top-notch, demo for, 251

MVP (most \'aluable performer), 357

N National culture, affecting

performance, 105 Negative feedback. See Constructive

feedback Negativity er ror, 207 Negligence, and performance

management, 322-323 Network team, and performance

management, 348 Neuroticism personality trait, 103 Nine-rank system, 24 Nonfinancial rewards

at Graniterock, 320 impact of, 319

0 O•NET. See Occupational Informational

Network (O•NET) Objectives

in appraisal form, 156 characteristics of, 126-127 determining, 126-128 at Disney, 149, 150 of mission, 83-84 of performance, 124 for performance planning, 52 setting meeting, 174,283 at Target Corporation, 127-128

Observation methods, for work analysis, 44

Observationa l aids, 210 Occupational Informational Network

(O•NET), 48, 51 descr iptions of, 48 heavy and tractor-trailer truck drivers,

summary report for, 49-50 uses of, 51

Off-the-shelf methods, for work analysis, 44

Office of Personnel Management (OPM), 200,202

On-the-job training, for employees, 231 Onboarding process, 6 Online forms, 156 Openness to experience personality

trait, 103 OPM (Office of Personnel Management),

200, 202 Opportunities, of external

environment, 75 Organic Law for Effective Equality

between Women and Men (2007), 326

Organizational culture, 76, 104, 105, 144, 313-314

Organizational incentives, 314 Organizational maintenance purpose, of

performance management system, 8, 10,27

Organizational s tructure, 76 Organizations

communication p lan, designing, 19&-203

constraint, 78 le\'erage, 77 mission, 7&-80 objectives, 83-84 performance management

contribution for, 1Q-14 problem, 78 s trategic plans at unit level,

developing, 85-86 strategies, 84-85 vision, 81-83 vulnerability, 78

Outstanding performance, 128 Ownership, of performance, 105-106

p Paired comparisons comparative

system, 132 Parasympathetic nervous system

(PSNS), 259 Passive monitoring, 181 Pay equity legislation, 326 Peers evaluation, as source o f

performance data, 176-177 Performance

analytics, 154-155,356 assessment, 56

at Coogle, 56 in perfo rmance management

process, 357-358 behaviors and results, 10Q-101 determinants of, 101-102

abilities and other traits, 103-104 context, 104-105 knowledge and skills, 103-104

dimensions

adaptive performance, 11Q-112 contextua l performance, 106-109 counterp roductive performance,

109-110 task performance, 106-109

distribution, 136-138 evaluation form, o f sales associates at

supermarket chain, 168-172 execution process, 54-55, 355-357 feedback, 54, 57 measurement approach

behavior approach, 112- 113 results approach, 113-115 at Show Me the Money, 119-120

pay for. See Contingent pay (CP) p lan p lanning

behaviors, 52-53 development plan, 53 at Discover credit card, 53 in performance management

process, 354-355 results, 52

poor, diagnosing causes of, 118 problems, addressing and anticipating,

implications for, 105-106 ratings, 154

distortion of, 182- 186 unintentional errors of, 206-211

score, 168-172 at Daily Planet, 192-193

time and timing of, 101, 104 unit and organization level of, 214

Performance appraisal forms, 134 components of, 155-165 defined, 5 desirable features of, 165-168 formal meetings, period and number

of, 172-175 for managers and supervisors, 160,

161-164 overa ll rating, determining,

168-172 performance touchpoints, 175-182 by vendors, exercise, 189-190 vs. performance management system,

5,31-33 Performance data, 155-156, 168

collecting and sharing, 54 at Expert Engineering, Inc., 193 quality of, 213 sources of

cus tomers, 179 direct reports, 177-178 disagreement across, 182 employee performance monitoring

and big data, 179-181 peers, 176-177 self-appraisals, 178-179 supervisors, 175-176

Performance management system, 101, 134,144-145. See also Team performance management

at Adobe Systems, 17 appeals process, 203-205 at Bank of America MerriU Lynch, 5 at Bankers Life and Casualty, 90 break down of, 14-18 at BT Global Services, 216 at China, 321 communication plan of, 19&-203 and compensation systems, 23 componen ts of, 42 contribution of, 1Q-14 at C RB, Inc, 36 and decision-making leave, 279-280 definition of, 4-6 formal and systematic, 10 formal meetings between direct

reports and supervisor, 173-174 in former East versus former West

Germany, 19 at Gap, Inc., 155 golden rule, 321 good and poor performers,

identification of, 12 human resources and development

activities, integratio n with, 23-24 ideal

character istics of, 1&-22 vs. actual, 29-31

illegal discrimination at Tractors, Lnc., 338

implementation of, 198 at johnsonville Foods, 174, 175 at KS C leaners, 64-65 Jaws affecting, 321, 325-328 leadership

at Becton, Dickinson, and Company, 261

coaching. See Coaching defensiveness, dealing with, 293 development, 282-287 Eaton, Rober t, good performance

management leader, 294-295 at Hallmark, 267 at Henry's commercial sales and

leasing, 295-296 performance review meetings,

282-287 process, coaching. See Coaching,

process learning and development,

recommendations for, 355 legal principles affecting

adverse impact of, 324 defamation, 323 employment at w ill, 322 illegal discrimination, 324-325

Subject Index 37SI

misrepresentation, 323-324 negUgence, 322-323

legally sound, characteristics of, 327 mock trial, 332-336 mo nitoring and evaluation of,

212-216 nature of \Vork and organizations

today, 24-26 at Network Solutions, Inc, 34-35 at Omega, Inc., disrupted Jinks

in, 63 performance assessment, 56 performance execution, 54-55 performance planning

behaviors, 52-53 development p lan, 53 results, 52

performance review, 57-58 exercise for, 62

pilot testing, 211-212 poor imp lementation of, 15

dangers of, 345-346 disad vantages of, 14-18

prerequisites of strategic p lanning, 43 work Gob) analysis, 43-51,61

process of, 41-65 purposes of, 9-10

administrative, 6-7, 10 and challenges of team, 35Q-351 developmental, 7-8, 10 documentation, &-9, 10 informational, 7, 10 organizational maintenance, 8, 10 strategic, 6, 10

ratings, 16-18 recruitment and hiring decisions,

23-24 returns and their degree of

dependency on, 306 at Sears, to focus on strategic business

priorities, 7 at Siemens, 5 and strategic planning. See Strategic

planning team perfo rmance in, 345, 351-352

assessment, 357-358 execution, 355-357 planning, 354-355 prerequisites, 353-354 review, 358-360

and training resources, 23 unintentional rating errors in,

206-211 U.S. Jaws and, 327 uses of, 6 vs. performance appraisal system,

5,31-33 at Washington State Patrol, 212, 215

380 Subj ect Index

Performance review, 57-58 exercise for, 62 form, 158-159, 160

desirable features of, 167 meetings, 282-287

benefits of, 284-285 at McCoy Federa l Credit Union, 175 sequence of events for, 283-284

in performance management process, 358-360

preparing for, 54 quality of, 213

Performance standards, 52, 124 in appraisal form, 156 characteristics of, 128-129 determining, 128-129 at Disney, 149, 150 at Target Corporation, 129

Performance touch poin ts, 54, 157 performance data, sources of

customers, 179 direct reports, 177-178 disagreement across, 182 employee performance monitoring

and big data, 179-181 peers, 17&-177 self-appraisals, 178-179 supervisors, 175-176

Persuader, coaching style, 263-264 Piece rate, and individual incentives, 314 Pilot testing

at Gap, Inc., 212 o f performance management system,

211-212 Positive feedback, 274-275 Post-Millennials, 290 The Pregnancy Discrimination Act of

1978,326 Primacy error, 207 Procedural justice perception, 20, 21 Procedural knowledge, 101, 105 Process management competency, 130 Process-oriented approach, 112 Profit/stock sharing, CP plan, 315 Project team, and performance

management, 348 PSNS (parasympathetic nervous

system), 259

Q

Questionnaires, work analysis, 45 for external contacts, 4&-47 for problem solving, 45-46

R Racial Discrimination Act (1975), 326 Rater error training (RET) programs,

20&-208

at Big Quality Care Center (BQCC), 218-219

Rating inflation, 183 Recency error, 207 Relational returns. See Intangible returns Relative percentile method scale, to

measure competency, 132-133 Resistance to change, communicatio n

plan, 201-203 Results approach, for measuring

performance, 10D-101, 113-115, 120, 124

accountabilities, determining, 125-126 at Basecamp, 115 context, role of, 144-145 objectives, determining, 12&-128 performance planning, 52 performance standards, determin ing,

128-129 vs. behavior approach, 115

RET (rater er ror training) programs, 20&-208

at Big Quality Care Center (BQCC), 218-219

Return on investment (RO!), 213-215 Review, team performance

team leaders, 364-365 team members, 365

Reward system

s

in context, 31&-320 contingent pay plan . See Contingent

pay (CP) plan definition of, 302 intangible returns, 302, 30&-307 for s tate of Georgia, team-based,

367-368 tangible returns. See Tangible returns and team performance, 360-361 traditional pay plan, 307-308

Sabbaticals, 319, 330 Salary vs. wage, 303 Sales commissions, and individual

incentives, 314 Scores on the test, performance

management system, 8-9 Sections 102 and 103 of the Civil Rights

Act of 1991,326 Selective exposure biases, 201 Selective perception biases, 201 Selective retention biases, 201 Self-appraisals, 54, 56, 176, 357

meeting, 173-174 as source of performance information,

178-179 Self-efficacy, 245 Self-funded rewards, 361 Self-serving bias, 47

Senior Executive Service (SES) members, 199-200

SES (Senior Executive Service) members, 199-200

Seven-point scales, 140 72Q-degree feedback system, 245 Severity error, 183 Sex Discrimination Act (1984), 326 Short-term incentives, 303, 306

for physicians in Colorado, 304 Signatures, in appraisal form, 157 Similar to me error, 206 Simple rank order procedure, 132 Situational constraints, for employees,

26&-267 Skill-based pay, individual

incentives, 314 SmaU and medium -sized enterprises

(SMEs),259 SMART acronym, 127 Smart Data, 25, 180, 187 SMEs (small and medium-sized

enterprises), 259 Social projection bias, 47 Social Security Administration, 303 Socioemotional selectivity theory

(SST), 277 Sorting effect, 308-309 Spanish Constitution (1978), 326 Spillover error, 207-208 SST (socioemotional selectivity

theory), 277 Star performers performance, 137-138 State motivation, 103 State-of-the-science missio n

s tatements, 80 Stay interviews, 284-285 Stereotype error, 208 Strategic business objectives,

314-315,329 Strategic management studies, 84 Strategic planning

building support for, 88-90 definition of, 68 Pepsico, evaluating visio n and missio n

s tatements at, 94-95 performance management to,

linking, 69-73 at Procter & Gamble, 95

process of, 43, 73 external and internal environmental

analysis, 75-78 HR function, role of, 73-74 job descriptions, 8&-88 mission, 78-80 objectives, 83-84 strategies, 84-85 at unit level, developing, 85-86 vision, 81-83

purposes of, 68-69

Strategic purpose, of performance management system, 6, 10

Strategies, to reach objectives, 84-85 competiti\•eness, 84 global corporate culture, 85 operations, 84 optimal use of resources, 84 research and development, 85

Strategy map, 71 Strengths, of organization, 76 Swrday Times, 10 Supervisors

appraisal form, 160, 161-164,167 as coaches, 282 inflated ratings, provid ing, 183-185 as judges, 282 in performance assessment, 56 in performance execu lio n,

responsibilities for, 54-55 performance management system,

views of, 12 performance review meetings. See

Performance review, meetings pitfalls. See Discip linary process,

pitfalls as source o f performance information,

175-176 suggestions, to prevent defensive

responses, 285-286 Support, building

at GAP, Inc., 92-93 for performance management system,

88-90 SWOT analysis. See Environmental

analysis System inauguration meeting, 173

T Talent inventory, of organizatio ns, 8, 23 Talent management systems, 238 Tangible returns, 302

allowances, 305 base pay, 302-303 cost-of-living adjustmen ts, 303 income protection programs, 304 long-term incentives, 303-304 short-term incentives, 303

for physicians in Colorado, 304 work-life focus programs, 305

Task performance, 106-109

at Sprint, 107 vs. contextual performance, 108

Team charters, 353 componen ts of, 353

Team leaders key factors for, 356 in performance review meetings,

358-359 Team performance management, 345,

351-352 aerospace company, expatriate

teams,347 American Electric and Gas, 366-367 in Bose Corporation, 363-364 definition of, 344-346 implications for, 346-350 importance of, 344-346 necessary conditions for, 346 performance 357-358 performance execution, 355-357 performance planning, 354-355 performance review, 358-360 prerequisites, 353-354 principles of, 351-352 purposes and challenges of, 350-351 review

team leaders, 364-365 team members, 365

rewards, 360-361 for state of Georgia, 367-368

team member satisfaction, 358 types of, 346-350

Termination process, 279-280 meeting, suggestions for, 281

Texas A&M University, de\•elopment p lan for

content of, 230-231 objectives of, 228-229

Threats, of external environment, ·75 Threshold competencies, 130 lime constraints, for emp loyees, 266 Title VII of the Civil Rights Act of

1964,326 Traditional culture vs. involvement

culture, 314 Traditional feedback vs. feedforward

interv iew, 236 Traditional pay plan, in reward system,

307-308 Traits, of performance, 101, 103-104 Transformative learning, 355

Subject Index 381

Typical performance, of employee, 104

u UCSD (Uni\•ersity of California at San

Diego),354 Unintentional discriminatio n, 324 Unintentional errors, of performance

ratings, 206-211 Unit incentives, 314 United States Equal Emp loyment

Opportunity Commission, 321, 326 University of California at San Diego

(UCSD), 354 Upward feedback system, 18,177

v Variable pay incentives, 303,308,318 Virtual teams, 348-349

in MySQL, 350 trust in, 355 Wikipedia, 360

Vision statements, 81-83,356 characteris tics of, 82-83 for Greif, Inc., 81-82 for Spectrum Brands, 81 vs. mission 83

Vitality curve, 133 Voice behavior, 109

w Wage vs. salary, 303 Weaknesses, of organization, 76 Web-based training program, work

analysis, 48 Work analysis, 43-51

biasing factors for, 47-48 defined, 44 exercise for, 61 questionnaires, 45-4'7

Workforce planning, 8, 23 Work- life focus programs, for

employees, 305 Workp lace Relations Act (1996), 326 Work/service team, 347-348

z Zynga, 124