HRM’s role in the performance management process

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8.2a What Are the Performance Standards?

Performance standards should be based on job-related requirements derived from a job analysis and reflected in an employee’s job description and job specifications. Realistic and specific performance standards that are measurable and written down communicate precise information to employees. For example, “the ability and willingness to handle customer orders” is not as good a performance standard as “all customer orders will be filled in four hours with a 98 percent accuracy rate.” When the standard is expressed in specific, measurable terms, comparing an employee’s performance against it results in more accurate feedback. As Figure 8.4 shows, there are four basic elements that must be considered when establishing performance standards: strategic relevance, criterion deficiency, criterion contamination, and reliability.

Figure 8.4

Establishing Performance Standards

Strategic Relevance

Strategic relevance refers to the extent to which the performance standards relate to the strategic objectives of the organization in which they are applied. For example, if an organization has established a standard that “95 percent of all customer complaints are to be resolved in one day,” then it is relevant for the customer service representatives to be held to this standard when they are evaluated. Companies such as 3M and Buckman Laboratories have strategic objectives to the effect that a certain percent of their sales are to be generated from products developed within the past five years. These objectives are then translated into performance standards for their employees. General Motors and Whirlpool’s

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strategic objectives include cost, quality, and speed, and the two companies have developed metrics to identify and compare their performance around the world on these measures. A strategy-driven performance evaluation process also provides the documentation HR managers need to justify various training expenses in order to close any gaps between employees’ current skills and those they will need in the future to execute the firm’s strategy. Moreover, because they provide evidence of a person’s performance, evaluation metrics based on a firm’s strategy are more defensible in court.

Criterion Deficiency

The performance standards should capture the entire range of an employee’s performance. When they focus on a single criterion (such as sales revenues) to the exclusion of other important but less quantifiable performance dimensions (such as customer service), then the performance management system is said to suffer from criterion deficiency.

Criterion Contamination

Just as performance criteria can be deficient, they can also be contaminated. There are factors outside an employee’s control that can influence his or her performance. A comparison of performance of production workers, for example, should not be contaminated by the fact that some work with newer machines than others do. A comparison of the performance of traveling salespeople should not be contaminated by the fact that territories differ in terms of their sales potential.

Reliability

As we discussed in Chapter 6, reliability refers to the stability or consistency of a standard or the extent to which individuals tend to maintain a certain level of performance over time. Reliability can be measured by correlating two sets of ratings made by a single rater or by two different raters. For example, two managers would rate the same individual. Their ratings would then be compared to determine inter-rater reliability.

To make sure managers are rating employees consistently, some companies use a process called calibration (A process whereby managers meet to discuss the performance of individual employees to ensure their employee evaluations are in line with one another) . During calibration meetings, a group of supervisors, led by their managers and facilitated by an HR professional, discuss the performance of individual employees to ensure all managers apply similar standards to all of the firm’s employees. The supervisors begin the process by rating employees whose performances are especially good or especially poor. They then attempt to rate employees who lie more in the middle and try to achieve a consensus on their performance. Initially, the ratings are likely to vary considerably simply because some managers are hard raters and others are not. Over subsequent evaluation periods and calibration meetings, however, the ratings should begin to converge, or become more similar.

As we will discuss, calibration meetings can be particularly helpful when it comes to training new managers to appraise employees. The meetings can also be very useful after a merger

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or acquisition—especially one that is global. Why? Because differences in the corporate cultures and performance standards of the formerly separate companies can cause the same employees to be rated quite differently. When Lawson Software, a Minnesota- headquartered firm, grew from 1,400 employees in three countries to 4,000 employees in thirty countries, it successfully used calibration to be sure its managers across the globe were assessing employees accurately. Keep in mind, too, that evaluation practices differ from country to country. For example, later in the chapter we will discuss subordinate evaluations whereby employees appraise the performances of their bosses. In some countries it’s not culturally acceptable for workers to evaluate their superiors.

Fairness and Acceptability

One of the main concerns employees have about performance management systems in general and evaluations in particular relates to fairness. Organizational politics, a firm’s culture, the orientation of its managers, history, and current competitive conditions can all affect how managers view how well their employees are doing on the job as well as rate them. Sometimes managers inflate evaluations because they want to obtain higher salaries for their employees or because higher ratings for their subordinates make them look good as supervisors. Alternatively, managers might want to get rid of troublesome employees by inflating their performance and passing them off to another department.

Even when evaluations are supposed to be confidential, employees often have a keen sense about whether the process is fair or not, or at least they think they do. Employees who believe the system is unfair are likely to consider the process a waste of time or feel frustrated and cynical. As we discussed earlier, in the section on developing a management performance system, if employees are allowed input as to what constitutes a good performance and how the performance management system operates, they are more likely to feel reassured that it’s fair. As a result, the program is more likely to be successful.

Acceptability relates to hard or how difficult it is to administer and use the performance management system. If using it is time consuming or difficult or if it’s hard to see how it’s really helping the organization, the system is likely to fail.

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