Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall9-1 Human Resource Management Chapter Nine Performance Management

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-1

Human Resource Management

Chapter NinePerformance Management


Basic Concepts in PerformanceManagement and Appraisal

Performance Management:An integrated approach to ensure that an employee’s performance supports and

contributes to the organization’s strategic aims.

Performance Appraisal:Setting work standards,

assessing performance, and providing feedback to

employees to motivate, correct, and continue their

performance.

ComparingPerformance Appraisal

and Performance Management


Performance Appraisal

Provides feedback to employees on how effectively they are performing in their jobs.

Includes a set of goals or objectives the employee must accomplish within the review period as well as the standards or criteria for determining whether the defined goals have been accomplished.


Effective Performance Management Links individual goals to the corporate and work unit

business plans and goals; Focuses on

results behaviours (competencies)

Has regular reviews and updates of performance plans to address changing demands;

Includes training for both managers and employees on how to effectively give and receive feedback,

Includes training for managers on how to provide performance evaluations that are valid, fair and unbiased


Purposes of Performance Management

Administrative because it directly affects a firm’s decisions regarding its workforce

(raises, incentives, promotions, etc.) Developmental because it helps employees

improve performance, achieve their potential and add value to the company


Basic Building Blocks of Basic Building Blocks of Performance ManagementPerformance Management

Direction sharing

Goal alignment

Ongoing performance monitoring

Rewards, recognition,

and compensation

Coaching and development

support

Ongoingfeedback


Steps in the Performance Management Process

1. Identify performance dimensions2. Develop performance measures3. Evaluate employee performance4. Providing Feedback5. Develop Action Plans to improve performance


Identifying Performance Dimensions

Global performance measure is a single score to reflect overall performance

Performance dimensions are different areas that are being evaluated—should reflect: Work output (quality and quantity)Work output (quality and quantity)

Personal competenciesPersonal competencies

Goal (objective) achievementGoal (objective) achievement


Developing Performance Measures

Should be valid, specific, and have clear standards

Reliable refers to how well a measure yields consistent results over time and across raters

Deficient measures leave out important aspects of an individual’s performance

Contaminated measures capture information irrelevant to an individual’s job performance


Performance Measurement Standards

Performance standards set a level of expected performance, a benchmark

Can be quantitative or qualitative Should be clear (specificity) and reflect

the entire performance spectrum


Owns and supports the system

Responsible from monitoring the system to make sure everything goes as planned. Provides advice and assistance.

Train supervisers

Has the main responsibility in determining the

goals of the subordinants,

evaluating their performance and making sure the system runs as

planned, according to the policies and the

procedures

Responsible from determining own personal goals, following up, and making sure the performance interviews are madeEmployee

Human Resources

Manager

Top Management

Roles in Performance Management


Performance Appraisal Process

*Establishing the performance criteria

*Setting goals* Setting

competency goals *Consensus on

the goals

* Follow up and mid-year review

*Year-end evaluation*Providing feedback

about the:Goals and

Competencies

Monitoring Evaluating

Compensation

Succession Planningand

Career Planning

PersonalDevelopment

Plans

Planning


Evaluating Employee Performance

Individual Comparisons Ranking approach—comparing employees to

each other (e.g. best to worst) Paired comparison—each employee is compared

to every other employee and points are assigned to the “better” individual, points are totaled and compared

Forced distribution—managers are forced to distribute employees into predetermined categories and prevented from rating everyone as outstanding, or average


Scale for Alternate Ranking of Appraisees


Ranking Employees by the Paired Comparison Method

Note: + means “better than.” – means “worse than.” For each chart, add up the number of +’s in each column to get the highest-ranked employee.


Forced Distribution


Absolute Approaches

Comparing employees against certain “absolute” standards rather than against each other

Each employee’s evaluation is independent of others and includes traits, attributes, and behaviors


Graphic Rating Scale

Raters evaluate employees based on various traits or attributes they possess relevant to their performance


Behavior-Based Approaches

Rely on variety of performance dimensions and evaluate employees’ behavior along a range of standards

Critical incident approach— examples of exceptionally good or poor performance throughout the evaluation period (behaviors)

Forced-choice approach— managers choose from a set of alternative statements regarding employee’s performance


Examples of Critical Incidents for a Plant Manager

Continuing Duties Targets Critical Incidents

Schedule production for plant

90% utilization of personnel and machinery in plant; orders delivered on time

Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month

Supervise procurement of raw materials and inventory control

Minimize inventory costs while keeping adequate supplies on hand

Let inventory storage costs rise 15% last month; overordered parts “A” and “B” by 20%; underordered part “C” by 30%

Supervise machinery maintenance

No shutdowns due to faulty machinery

Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part


Behaviorally Anchored Rating Scales (BARS)


Contemporary Performance Appraisal Systems

Management by Objectives (MBO)

Competency Based Performance Evaluation

Balanced Scorecard (BS)

360-Degree Approach


Management by Objectives (MBO)

Based on goals set with employees at the beginning of the performance period

A comprehensive and formal goal-setting and appraisal program requiring:

1. Setting of organization’s goals.

2. Setting of departmental goals.

3. Discussion of departmental goals.

4. Defining expected results (setting individual goals).

5. Conducting periodic performance reviews.

6. Providing performance feedback.



Goal: Raising the present competency levels of the employees to the expected levels

Result based performance appraisal focuses only on “what” they have accomplished (i.e., performance goals),

Competency based performance appraisal focuses on “how” the work was performed, using competencies for providing feedback.

Performance is viewed in terms of the process employees use to achieve their job results



Aims at minimizing the gap between performance expectations and actual performance

Focuses on the future, rather than the past Used mostly in jobs where:

quality and service is very important the results can not be measured objectively the employees can not control the work output the environment changes very often an essential change is expected in the organization the organization gets into new sector


Balanced ScoreCard (BS)

It is an integrated performance management system that directs and evalutes a company’s performance through “key performance indicators” set in the four areas

Balanced scorecard is an effective tool for creating organizational alignment


Key Performance Indicator (KPI)

A key performance indicator (KPI) is a measure of performance.

KPI’s should be tied to an organization's strategy

They help to evaluate the progress of an organization towards its vision and long-term goals.


Four Areas in Balanced Scorecards The “financial perspective" encourages the

identification of a few relevant high-level financial measures. Choose measures to answer to the question "How do we look to shareholders?"

The "customer perspective" encourages the identification of measures that answer the question "How do customers see us?"

The "internal business (operations) perspective" encourages the identification of measures that answer the question "What must we excel at?"

The "innovation and learning perspective" encourages the identification of measures that answer the question "Can we continue to improve and create value?".


MISSION

STRATEGICOBJECTIVES

KEY PERFORMANCE

INDICATORS

ANNUAL GOALS

DEPARTMENT/ TEAM

PERSONAL GOALS

KEY PERFORMANCE INDICATORS

OPERATIONS

STRATEGICOBJECTIVES

KEY PERFORMANCE INDICATORS

ANNUAL GOALS

ANNUAL GOALS

INDIVIDUAL

COMPANY


Five Dimensions of a Strategy Map(adapted from BCS Collaborative, Inc., 2001)

Human Capital Effectiveness

Human Resource Efficiency

Shareholder Value

Financial Perspective

Customer Perspective

Internal Process Perspective

Learning & Growth Perspective

Customer Satisfaction Employee Satisfaction

Manage Operating Efficiency

Two Tiers of Learning and Growth

CompetenciesStrategic

Alignment / Motivation

Cultural Climate Team Integration

Leadership

Deliver World Class services

Manage Customer Relationships

WORK CAPABILITYCopyright © Laske and Associates, LLC, 2002

Enablers

“Meta-Enablers”


360-Degree Approach

Involves gathering performance data from as many sources as possible—supervisors, peers, subordinates, and customers

Can be cumbersome and takes time to sift through all the feedback


Sources of Performance Data Supervisors—a key source but may not have time to

monitor and observe employees every day Co-Workers—may be able to comment on

cooperation and support, but may intentionally skew rating

Self-Appraisal—can be useful starting point and developmental tool to help employee improve performance

Subordinates—may be hard to separate skill from “likeability”

Customers—satisfaction levels may only report extremely good or bad experiences


Performance Measurement Errors

Halo/horn error —overall positive or negative view of employee’s performance biases the ratings given on individual criteria

Contrast effect —manager artificially inflates or deflates an employee’s rating after comparing employee to another individual

Primacy error —rater’s earlier impressions of individual bias later evaluations of the person

Recency error —rater focuses on employee’s performance near the time of the evaluation


Performance Measurement Errors (cont’d)

Similar-to-me error —when managers more highly rate employees who resemble them in some way

Leniency error —rating employees on high end of the scale

Strictness error —rating employees on low end of the scale

Error of central tendency —rating everyone “average”


Providing Feedback

Most firms require appraisals every six months to a year

Feedback meeting on performance could be separate from meeting on salary decisions

Focus on behaviors rather than employee Balance approach—positive and

improvement areas Involve/engage employee in discussion


Developing Action Plans to Improve Performance

Seek to understand causes of poor performance, which could stem from:

Work environment Design of jobs Technology Support or performance of co-workers Employee’s competencies, attitudes and

behaviors


Taking Action

Removing barriers to employee success Training and development activities Coaching and mentoring Work design and technology solutions Addressing quality of employee’s

performance


Taking Action to Improve Employee Performance

Ensure they know what is expected of them Ensure they know how to be successful Ensure performance measures are accurate Evaluate potential role overload or ambiguity Reach agreements on targets for improved

performance and timelines Ensure manager’s support


Disciplining EmployeesProgressive discipline

Verbal warning Written warning (copy to employee and file) Suspension Termination

Positive discipline Meeting to focus on constructive feedback—how to

improve the performance Meet to arrive at new action plan (documented) Final termination warning if problem not corrected Termination


Which Performance Dimensions Are Emphasized

Impacted by company’s strategy and how jobs add value

Low cost strategy will emphasize number of transactions performed

High customer service strategy will emphasize quality of interactions and relationships


Performance Evaluation Method Used

Comparative approach will foster a competitive climate and is more manageable in small companies

Absolute approach will enable each person to be evaluated on attributes and behaviors —more likely used in larger companies, but is time-consuming and expensive


Objectives of Performance Management Systems

In a competitive culture, an administrative approach to performance management might be used (comparative, attribute, results)

In cultures that focus on well-being of employees, a developmental approach might be used (how employees perform their jobs)


Perceptions of Procedural and Distributive Justice

When employees perceive performance evaluations reflect their true performance they are more likely to accept them (distributive justice)

When employees perceive evaluations included dimensions beyond their control, standards were too hard to achieve, or they were not given sufficient guidance (procedural justice) the evaluation process is less likely to motivate


Performance Management is Essential for Successful Organizatons 4857 Turkish Labor Law Maximizes the performance of the organizations Encourages employees to be more productive and perform better Motivates employees by rewarding high performance Provides groundwork for a fair compensation system Provides data for personal development programs Increase employee satisfaction Provides sustainable improvement both for the organization and the

employee Provides a chance for both the manager and the employee to come

together to discuss their expectations from each other

Documents

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall9-1 Human Resource Management Chapter Nine Performance Management