Performance Management. Performance Management and Reward Systems in Context

Performance Performance ManagementManagement

Performance Management Performance Management and Reward Systemsand Reward Systemsin Contextin Context

OverviewOverview

Definition of Performance Management (PM)

The Performance Management Contribution

Disadvantages/Dangers of Poorly Implemented PM Systems

Definition of Reward SystemsAims and Role of PM SystemsCharacteristics of an Ideal PM System Integration with Other Human Resources

and Development Activities

Definition of Definition of Performance Performance Management Management (PM)(PM)

Definition of PMDefinition of PM

1. Continuous Process of Identifying Measuring Developing

The performance of individuals and teams

Definition of PM (continued)Definition of PM (continued)

and

2. Aligning performance

with

Strategic Goals of the organization

Performance Performance Management Management is NOT is NOT performance performance appraisalappraisal

PM is NOT performance PM is NOT performance appraisalappraisal

Performance Management◦Strategic business considerations◦Driven by HR & line manager◦Ongoing feedbackSo employee can improve performance

PM is NOT performance PM is NOT performance appraisalappraisal

Performance Appraisal◦Assesses employeeStrengths & Weaknesses

◦Once on regular intervals◦Lacks ongoing feedback

Contributions of Contributions of Performance Performance ManagementManagement

Contributions of Performance Contributions of Performance ManagementManagement For EmployeesFor EmployeesClarify definitions of

jobsuccess criteria

Increase motivation to perform Increase self-esteemEnhance self-insight and development

Contributions of Performance Contributions of Performance Management Management

For ManagersFor ManagersCommunicate supervisors’ views of

performance more clearlyManagers gain insight about subordinatesBetter and more timely differentiation

between good and poor performersEmployees become more competent

Contributions of Performance Contributions of Performance ManagementManagement For Organization/HR FunctionFor Organization/HR Function

Clarify organizational goals Facilitate organizational changeFairer, more appropriate administrative

actionsBetter protection from lawsuits

Disadvantages/Dangers Disadvantages/Dangers of of Poorly-implemented Poorly-implemented PM SystemsPM Systems

Disadvantages/Dangers of Poorly-Disadvantages/Dangers of Poorly-implemented implemented PM SystemsPM Systems

For EmployeesFor Employees

Lowered self-esteemEmployee burnout and job dissatisfactionDamaged relationshipsUse of false or misleading information

Disadvantages/Dangers of Poorly-Disadvantages/Dangers of Poorly-implemented implemented PM SystemsPM Systems

For ManagersFor ManagersIncreased turnoverDecreased motivation to performUnjustified demands on managers’

resourcesVarying and unfair standards and

ratings

Disadvantages/Dangers of Poorly-Disadvantages/Dangers of Poorly-implemented implemented PM SystemsPM Systems

For OrganizationFor OrganizationWasted time and moneyUnclear ratings systemEmerging biasesIncreased risk of litigation

Reward SystemsReward Systems

Reward SystemsReward Systems

DefinitionDefinitionSet of mechanisms for distributingTangible returns

and Intangible or relational returns

As part of an employment relationship

Reward SystemsReward Systems Tangible returnsTangible returns

Cash compensationBase payCost-of-Living & Contingent PayIncentives (short- and long-term)

Reward Systems Reward Systems

Tangible returns Tangible returns ((continuedcontinued))Benefits, such as

Income ProtectionAllowancesWork/life focus

Reward SystemsReward Systems Intangible returnsIntangible returnsRelational returns, such as

Recognition and statusEmployment securityChallenging workLearning opportunities

Returns and Returns and Their Degrees of DependencyTheir Degrees of Dependencyon the on the Performance Management Performance Management SystemSystem

Returns with Low DependencyReturns with Low Dependencyon the on the Performance Management SystemPerformance Management System

Cost of Living Adjustment Income Protection

Returns with Moderate DependencyReturns with Moderate Dependencyon the on the Performance Management SystemPerformance Management System

Work/Life Focus Allowances Relational Returns Base Pay

Returns with High DependencyReturns with High Dependencyon the on the Performance Management SystemPerformance Management System

Contingent Pay Short-term Incentives Long-term Incentives

Purposes of PM SystemsPurposes of PM Systems

Purposes of PM Systems: Purposes of PM Systems:

OverviewOverview

StrategicAdministrative InformationalDevelopmentalOrganizational maintenanceDocumentational

Strategic PurposeStrategic Purpose

Link individual goals with organization’s goals

Communicate most crucial business strategic initiatives

Administrative PurposeAdministrative Purpose

Provide information for making decisions re:Salary adjustmentsPromotionsRetention or terminationRecognition of individual performanceLayoffs

Informational PurposeInformational Purpose

Communicate to Employees:ExpectationsWhat is importantHow they are doingHow to improve

Developmental PurposeDevelopmental Purpose

Performance feedback/coaching Identification of individual strengths

and weaknessesCauses of performance deficienciesTailor development of individual

career path

Organizational Maintenance Organizational Maintenance PurposePurpose

Plan effective workforceAssess future training needsEvaluate performance at organizational

levelEvaluate effectiveness of HR interventions

Documentational PurposeDocumentational Purpose

Validate selection instrumentsDocument administrative decisionsHelp meet legal requirements

An Ideal PM System: An Ideal PM System: 14 Characteristics14 Characteristics

1. Congruent with organizational strategy

2. Thorough3. Practical4. Meaningful5. Specific6. Identifies effective/ ineffective

performance7. Reliable

An Ideal PM System: An Ideal PM System: 14 Characteristics 14 Characteristics (continued)(continued)

8. Valid9. Acceptable and Fair10. Inclusive11. Open (No Secrets)12. Correctable13. Standardized14. Ethical

Congruent with organizational Congruent with organizational strategystrategy

Consistent with organization’s strategyAligned with unit and organizational

goals

ThoroughThorough

All employees are evaluatedAll major job responsibilities are

evaluatedEvaluations cover performance for

entire review periodFeedback is given on both positive and

negative performance

PracticalPractical

AvailableEasy to useAcceptable to decision makersBenefits outweigh costs

MeaningfulMeaningful

Standards are important and relevantSystem measures ONLY what employee

can controlResults have consequences Evaluations occur regularly and at

appropriate timesSystem provides for continuing skill

development of evaluators

SpecificSpecific

Concrete and detailed guidance to employees •What’s expected •How to meet the expectations

Identifies Identifies effective and ineffective effective and ineffective performanceperformance

Distinguish between effective and ineffective◦Behaviors◦Results

Provide ability to identify employees with various levels of performance

ReliableReliable

ConsistentFree of errorInter-rater reliability

ValidValid

Relevant (measures what is important)Not deficient (doesn’t measure

unimportant facets of job)Not contaminated (only measures what

the employee can control)

Acceptable and FairAcceptable and Fair

Perception of Distributive Justice◦Work performed Evaluation received

Reward

Perception of Procedural Justice◦Fairness of procedures used to:Determine ratingsLink ratings to rewards

InclusiveInclusiveRepresents concerns of all involved◦When system is created, employees should help with decidingWhat should be measuredHow it should be measured

◦Employee should provide input on performance prior to evaluation meeting

Open (Open (NoNo Secrets) Secrets)

Frequent, ongoing evaluations and feedback

2-way communications in appraisal meeting

Clear standards, ongoing communication

Communications are factual, open, honest

CorrectableCorrectable

Recognizes that human judgment is fallible

Appeals process provided

StandardizedStandardized

Ongoing training of managers to provide

Consistent evaluations across◦People◦Time

EthicalEthical

Supervisor suppresses self-interestSupervisor rates only where she has

sufficient information about the performance dimension

Supervisor respects employee privacy

Integration with other Integration with other Human Resources Human Resources and and Development ActivitiesDevelopment Activities

PM provides information for:◦Development of training to meet organizational needs

◦Workforce planning◦Recruitment and hiring decisions◦Development of compensation systems

Quick ReviewQuick Review

Definition of Performance Management (PM)The Performance Management Contribution Disadvantages/Dangers of Poorly Implemented PM

SystemsDefinition of Reward SystemsAims and Role of PM SystemsCharacteristics of an Ideal PM SystemIntegration with Other Human Resources and Development

Activities