Performance Management

Definition of Performance Management: Performance management is the Continuous process

of identifying, measuring and developing.

Performance of individuals and teams.

Aligning performance with Strategic Goals of the organization

Performance Management
is NOT
performance appraisal

Performance management: Performance Appraisal:

Strategic business considerations Driven by HR

Driven by line manager Assesses Employee strength and weaknesses

Ongoing feedback Once a year

So employee can improve performance Lacks ongoing feedback

The Performance Management Policy:

Supervisors must conduct at least four performance management activities with employees:

I. Expectation and goal setting conversation

II. Informal conversation
III. Mid-point conversation
IV. Summary evaluation

• Managers/supervisors should have initial expectation and goal-setting conversations with each of their new employees
within 30 days of their start date, and annually after that. These discussions should cover the major duties of the
employee’s position, work priorities, and how performance will be evaluated.
 • Managers/supervisors should regularly engage in informal conversations with their employees about the
duties, expectations and performance.

• Managers/supervisors should conduct a feedback and coaching conversation approximately midway through
a new employee’s probationary period and midway through each performance year after that.

• All managers/supervisors should conduct summary performance evaluations with their employees at the
conclusion of each new employee’s probationary period and at the end of each performance year after that.

 At a minimum, supervisors should discuss:

a. Whether the employee’s performance met expectations

b. Whether the employee achieved annual goals

c. Professional development needs and opportunities

d. Options to develop additional skills and knowledge to foster career growth.

Contributions of Performance Management for Contributions of Performance Management for

Employees managers

 job  Communicate supervisors’ views of

performance more clearly
 success criteria
 Managers gain insight about subordinates
 Increase motivation to perform
 Better differentiation between good and poor
 Increase self-esteem
performers
 Enhance self-insight and development
 Employees become more competent

Contributions of Performance
Management for organization/HR function

 Clarify organizational goals

 Facilitate organizational change

 Fair & appropriate administrative

actions

 Better protection from lawsuits

Disadvantages/Dangers of Poorly-implemented PM Systems

For Employees For managers

 Lowered self-esteem  Increased turnover

 Employee burnout and job  Decreased motivation to perform

dissatisfaction
 Unjustified demands on managers’
 Damaged relationships resources

 Use of false or misleading  unfair standards & ratings

information

For organization

 Waste time and money

 Unfair ratings system

 Emerging biases

Reward System
Returns and their Degrees of Dependency on the Performance Management System

Low dependency

 Cost of Living Adjustment

 Income Protection

Moderate dependency

 Work/Life Focus

 Allowances

 Relational Returns

 Base Pay

High dependency

 Contingent Pay

 Short-term Incentives

 Long-term Incentives

Purposes of PM Systems

Strategic

Administrative

Informational

Developmental

Organizational maintenance

Documentational
 Strategic:

Link individual goals with organization’s goals

Communicate most crucial business strategic initiatives

 Administrative:

Salary adjustments

Promotions

Retention or termination

Recognition of individual performance

 Informational:

Communicate to employees:

What is important? How they are doing? How to improve?

 Developmental:

Performance feedback/coaching

Identification of individual strengths and weaknesses

Causes of performance deficiencies

 Organizational maintenance:

Plan effective workforce

Assess future training needs

Evaluate performance at organizational level

Evaluate effectiveness of HR interventions

 Documentation:

Validate selection instruments

Document administrative decisions

Help meet legal requirements

 An Ideal PM System

14 Characteristics

1. Congruent with organizational strategy

2. Thorough

3. Practical

4. Meaningful

5. Specific

6. Identifies effective/ ineffective performance

7. Reliable

8. Valid

9. Acceptable and Fair

10. Inclusive

11. Open (No Secrets)

12. Correctable

13. Standardized

14. Ethical

Congruent with organizational strategy: Consistent with organization strategy and goals.

Thorough: All employees and job responsibilities are evaluated and feedback is given on both positive
and negative performance.

Practical: Available, Easy to use and acceptable to decision makers.

Meaningful: Standards are important and relevant, Results have consequences, Evaluations occur
regularly and at appropriate times.

Specific: What’s expected and how to meet the expectation.

Identify effective/ ineffective performance: distinguish behaviors and results and indentify
performance.

Reliable: free of error, consistent.

Valid: only measures what is important, not contaminated.

Acceptable and fair: perception of distributive justice and procedural justice

Inclusive: represents concerns of all involved, when system created employees help with deciding, what
should be measure and how it should be measured?

Open (no secrets): communications are factual and honest, on-going evaluation and feedback, 2-way
communication in appraisal meeting.

Correctable: Recognizes that human judgment is fallible (capable of making mistakes).

Standardized: ongoing training of managers to provide

Ethical: supervisors prevent self interest and respect employ privacy.

Integration with other Human Resources and Development Activities

 PM provides information for:

• Development of training to meet organizational needs

• Workforce planning

• Recruitment and hiring decisions

• Development of compensation systems

 Who perform the appraisal?
 Supervisor

 Higher Management

 Self-Appraisals

 Peers (Co-Workers)

 Evaluation Teams

 Customers

 “360° Appraisals”

Supervisor: Performance appraisal done by an employee’s manager and often reviewed by a manager
one level higher.

Self Appraisal: Performance appraisal done by the employee being evaluated.

Peer Appraisal: Performance appraisal done by one’s fellow employees.

Team Appraisal: Based on Total Quality management (team accomplishment rather than individual).

The 360º Appraisal:

Super
visor
Other Other
Superi Indivi Superi
ors dual ors
Staff
Custo
Peers Self- mers
Asse
ssme
Team Team
s nt s
Sub-
Ordin
ates
Performance Appraisal Problems
 Popularity Contest

 Punitive Implications

 Control Relinquishment

 Stereotypes

 Poor Training of Raters

Rating Error issues

 Carefully Developed Behavior Descriptions Fair

 Evaluation Scales

 Factor Relatedness to the Job

Types of Rating Errors

 Leniency/Strictness Error

• Force A Curve

• Performance-rating error in which the appraiser tends to give employees either unusually
high or unusually low ratings.

 Central Tendency

• Reluctant to Give High/Low

• Performance-rating error in which all employees are rated about average.

 Recency Error

• Last Action Halo

• Performance-rating error in which the appraisal is based largely on the employee’s most
recent behavior rather than on behavior throughout the appraisal period.
 Similar to me Error

Performance-rating error in which appraisal of an employee’s based on a mutual personal

connection.

Rating Errors Example

Appraisal Training Programs Needs

1. Explain Objectives

2. Review the Instrument

3. Define the Performance Standards

4. Understand Typical Subjective Errors

5. Teach Interviewing Skills

Scheduling the Performance Appraisal

1. Schedule the review and inform the employee two weeks in advance.

2. Ask the employee to prepare for the session by reviewing his performance, job objectives,
and development goals.

3. Clearly state that this will be the formal annual performance appraisal.

Preparing for the Review for the Performance Appraisal

1. Review the performance documents collected throughout the year.

2. Give specific examples of above- or below-average performance.

3. When performance falls short of expectations, determine what changes need to be

made. If performance meets or exceeds expectations, discuss this and plan how to
reinforce it.

4. After the appraisal is written, then review it again.

5. Follow whatever steps are required by your organization.

Appraisal Interviews

 Schedule the interview 10 to 14 days in advance. Provide subordinates with a “guide” to follow.

 Consider which of the following approaches to use:

• Tell-and-sell method

Supervisor persuades employee to change in a prescribed way.

Employees see how changed behavior will be of great benefit.

• Tell-and-listen method

Supervisor covers strengths/weaknesses for first half

Solicits employee’s feelings about comments

Deal with disagreement, non-defensively

 • Problem-solving method (generally preferable)

Discuss strengths and weaknesses since last review

Explore feelings of sub-ordinate

Listening, accepting, and responding are essential

Discuss problems, needs, innovations, satisfactions and dissatisfactions since last review.

Appraisal Methods
 Rating Scales ( most popular )

 Essay

 Management by Objectives

 Check Lists by Key Words

 Forced Choice Statements

 Ranking of Employees

Rating scale method:

Global Scale (Total Performance)

Mixed Standard Scale (Choose from Different Statements)

Behaviorally anchored rating scale (BARS) – series of vertical scales.

Forced choice method:

Choose from statements designed to distinguish between successful and unsuccessful performance.

Essay Method:

Compose a statement describing employee behavior.

Management by Objective (MBO) Method:

Rates performance on the basis of employee achievement of goals set by mutual agreement of
employee and manager.

Procedural Guidelines

1. Listen More Than Talk (1/3 rule)

2. Vary the Questions (Open ended/elaboration)

3. Follow-up Questions (force through responses)

4. Reflect Feelings (clarify-sincerity)

5. Avoid Sandwich Technique (Positive-Negative-Positive)

 Why? Signals Bad News

 No More Bad News

 Discourages Real Communication

Case

 Sally is a sales manager at a large pharmaceutical company. The fiscal year will end in
one week. She is overwhelmed with end-of-the year tasks including reviewing the
budget she is likely to get for next year, responding to phone calls of customers, and
supervising a group of 10 salespeople. It’s a very hectic time, probably the most hectic
time of the year.

She receives a phone call from the HR Department: ‘Sally, we have not received your
performance reviews for your 10 employees; they are due by the end of the fiscal
year.’ Sally thinks ‘Oh, those performance reviews… What a waste of my time!’

 From Sally’s point of view, there is no value in filling out those meaningless forms. She
does not see her subordinates in action because they are in the field visiting
customers most of the time. All she knows about their performance is based on sales
figures, which depend more on the products offered and geographic territory covered
than the effort and motivation of each salesperson

 And nothing happens in terms of rewards regardless of her ratings. These are lean
times in her organization, and salary adjustments are based on seniority rather than
merit. She has less than 3 days to turn in her forms. What is she going to do?

 She decides to go down the path of least resistance: to please her employees, she gives
everyone the maximum possible rating.

In this way, she believes they will be happy with their ratings and Sally will not have to
deal with complaints or follow ups meetings.

Sally fills out the forms in less than 20 minutes and gets back to her ‘real job’.
 Learning objectives

 Definition of Performance Management (PM)

 The Performance Management Contribution

 Disadvantages/Dangers of Poorly Implemented PM Systems

 Definition of Reward Systems

 Aims and Role of PM Systems

 Characteristics of an Ideal PM System

 Integration with Other Human Resources and Development Activities