8 – Performance Management

Performance Management:
the use of performance data to affect culture, systems, and processes, set goals, and share results.
Uses of Performance Data (Informs):
-Corporate culture.
-Organizational Benchmarks.
-Human capital potential.
-Systems and processes.
-Current Policies.
-Program directions.
-Sharing results with stakeholders.
-Asking for shareholder input.
5 Characteristics of Effective Performance Management:
-Performance objectives.
-Performance goals.
-Performance measurement.
-Output measures.
-Outcome measures.
Performance Management System Goals (What do organizations try to achieve?):
1) Transform organizational objectives into understood, measurable outcomes.
2) Provide instruments for measuring, managing, and improving organizational success.
3) Include measures of quality, cost, and speed to provide an in-depth and predictive system.
4) Shift to an ongoing, forward-looking strategic partnership between management and employees.
Performance Management as part of Managerial Strategy (Performance Appraisals and Balanced Scorecards):
Performance Appraisals: the process by which organizations evaluate employee job performance. This provides data to assess every employee.

Balanced scorecards, a very popular approach, combine the performance measures of the total organization into 4 different perspectives — financial, customer, internal, and learning.

Uses of Performance Appraisals:
-pay raises and promotions.
-feedback and improvement.
-job redesign.
-development and career planning.
-criteria for test validation.
-training program objectives.
Key Elements of Performance Appraisal Systems:
The HR department develops performance appraisals for all employees.
-This centralization ensures uniformity to provide useful results.
Elements include:
1) Performance criteria
2) Performance measures
3) Performance Appraisal interviews
4) Employee feedback
5) Employee records
6) HR decisions
Appraisal Systems must be:
-Have performance standards.
-Have performance measures.
Performance Measures:
Includes direct, indirect, objective, and subjective measures.
1) Direct:
where the rater sees the employee’s performance.
2) Indirect (constructs)
where the rater has only substitutes for performance. For example, waste, output, profit, etcetera.
-These examples are called constructs.
3) Objective:
are verifiable by others and usually quantitative.
4) Subjective:
are not verifiable by others and are based on rater’s opinions.
12 Characteristics for Effective Appraisal Systems:
-Did employees have input into its development?
-acceptable standards.
-acceptable goals.
-Are standards under the control of employees?
-frequent feedback.
-rater training.
-ratee training.
-employee input into interview process.
-appraisal consequences.
-different sources (raters).
Past Performance: 4 Non-Comparative Measures
1) Rating scale.
2) BARS.
3) Tests and observations.
4) 360-degree.
Rating Scale:
-oldest and most widely used method.
-the rater provides a subjective evaluation of an individual’s performance along a scale from low to high.
-responses may be given numerical values.
BARS (Behaviourally Anchored Rating Scales):
-raters place employees along a rating scale by means of specific behaviour examples on the scale (eg. employee knowledge, customer relations, etc.)
-Job-related, practical, and standardized for similar jobs
Tests and Observations:
-may include paper and pencil tests or an actual demonstration of skills.
-multiple sources of ratings.
-For example, by the self, peers, supervisors, subordinates, or customers.
Past Performance: 2 Comparative Measures:
1) Ranking Method.
2) Forced Distributions.
Ranking Method:
-employees are ranked from best to worst.
-this is subject to the halo effect and recency effect.
Forced Distributions:
Employees are sorted into categories.
-Usually, a certain proportion must be put into each category.
2 Future Performance Methods:
1) Management by Objectives (MBO) Approach
2) Assessment Centre Technique.
Management by Objectives (MBO)
-Employee and supervisor jointly establish performance goals for the future.
Assessment Centre Technique:
-Relies on multiple types of evaluations and multiple raters.
-Usually used for middle-level managers.
3 Other Developments for future performance measurement:
1) Web-based performance appraisals
2) Competencies
3) Talent management
Implications of Appraisal Training:
-Training raters.
-Rater biases.
-evaluation interviews.
-HRM feedback.
Common rater biases include:
-halo effect.
-recency effect.
-central tendency.
-leniency and strictness.
-personal prejudice.
-contrast errors.
Implications of Appraisal Evaluation Interviews:
-Evaluation interviews are performance review sessions that give employees feedback:
3 ways to provide employee feedback:
1) Tell and sell (convince employee)
2) Tell and listen (listen to excuses)
3) Problem-solving.
9 Criteria for Effective Evaluation Interviews:
-Emphasize positive aspects of employee performance.
-Tell each employee the evaluation session is to improve performance, NOT discipline.
-Provide immediate positive and developmental feedback in a private location.
-Review performance formally at least annually.
-Focus criticisms on performance, NOT personality.
-Stay calm and do not argue.
-Identify specific actions that employees can take
-Emphasize the evaluator’s willingness to assist.
-End the evaluation session by stressing the positive aspects of performance and reviewing plans for performance.
HR Management Feedback:
-Performance management process also provides insight into the effectiveness of HRM.
If poor performance is widespread throughout the organization:
many employees will not be promoted or transferred.
However, unacceptably high numbers of poor performers may indicate:
-errors that occur elsewhere in the HR management function.
Legal Aspects of Performance Appraisal:
-if an employee loses his job due to performance, HR must prove the performance criteria was valid and consistent.
Legal time frame:
a legal requirement stating that a reasonable time must be set for performance improvement before termination can occur.