Ch 8 Performance Management

Performance management system has three parts
defining performance, measuring performance and feeding back performance information
performance management
managers ensure that employees’ activities and outputs are congruent with organizational goals
performance appraisal
organization gets information on how well an employee is doing on the job

-appraisal is done by the employee themselves

performance feedback
provides employees information regarding their performance effectiveness
Performance Management Process
1. define performance outcomes for company division and department
2. develop employee goals, behavior and actions to achieve outcomes
3. provide support and ongoing performance discussions
4. evaluate performance
5. identify needed improvements
6. provide consequences for performance results
Situational constraints
are always at work within the PMS.
3 purposes of performance management (PMS)
system needs to link employee activities to goals

-best way to do this is to define results, behaviors, etc necessary to carry out these strategies

use performance, management information in making administrative decisions

-salary, promotions, lay-offs

to develop employees that are effective at their jobs
5 criteria of performance measures
strategic congruence
strategic congruence
extent to which PMS elicits job performance that is congruent with the organization’s strategy, goals, and culture. Strategic congruence emphasizes the need for the performance management system to guide employees in contributing to the organization’s success
extent to which the performance measures assesses all the relevant- and only the relevant- aspects of job performance. Validity is conceded with maximizing the overlap between actual job performance and the measure of job performance

-focus on big picture
-don’t care about irrelevant things

consistency of the performance measure
whether the people who use the performance measure accept it. Acceptability is affected by the extent to which employees believe the performance management system is fair. Performance management systems that are perceived as unfair are likely to be legally challenged, be used incorrectly, and decrease employee motivation to improve

-do people stand behind it? do they think that it’s right?

extent to which a performance measure gives specific guidance to employees about what is expected of them and how they can meet these expectations.
Comparative approach
compares performance with others
3 techniques with comparative approach
forced distribution
paired comparison
techniques that arrive at an overall assessment of the individual’s performance
simple ranking
requires managers to rank employees within their departments from highest performer to poorest performer
alternation ranking
manager looks at a list of employees, decking who is the best employee, and crossing that person’s name off the list
forced distribution
requires the managers to put certain percentages of employees into predetermined categories

-motivate employees and open the door for more talent

paired comparison
requires managers to compare every employee with every other employee in the work group, giving an employee a score of one every time he or she is considered the higher performer. Employees are ranked by how many points they receive.
attribute approach
performance management focuses on the extent to which individuals have certain attributes that are desired for success
graphic rating scales
-list of traits evaluated by 5-point rating scale
-legally questionable
mixed standard scales
-define relevant performance dimensions
-develop statements representing good, average, and poor performance along each dimension

-created to get around not being able to use graphic rating scales

behavioral approach
attempts to define the behaviors an employee must exhibit to be effective in the job.
critical incidents
requires managers to keep record of specific examples of effective and ineffective performance
behaviorally anchored rating scales (BARS)
specifically define performance dimensions by developing behavioral anchors associated with different levels of performance
behavioral observation scales
variation of a BARS developed from critical incidents but use a larger number of the behaviors that are necessary for effective performane
organizational behavior modification (OBM)
entails managing the behavior of employees through a formal system of behavioral feedback and reinforcement
assessment centers
used for measuring managerial performance
sets of skills, knowledge, abilities and personal characteristics that enable employees to successfully perform their jobs.
competency model
identifies competencies necessary for each model and provides descriptions common for an entire occupation, organization, job family or specific job. Also useful for recruiting, selection, training and development.
results approach
to PM focuses on managing the objective, measurable results of a job or work group. It assumes that subjectivity can be eliminated from the measurement process and that results are the closest indicator of one’s contribution to organizational effectiveness.
management by objectives (MBO)
is a joint goal‑setting process in which goals are agreed upon between the managers and each subordinate. These goals then become standards used to evaluate the individual’s performance.
Productivity measurement and evaluation system (ProMES)
The goal of ProMES is to motivate employees to higher levels of productivity. Four steps:
Identify objectives, products, or set of activities or objectives that the organization expects to accomplish; staff defines indicators of the products;
Staff establishes contingencies between the amount of the indicators and the level of evaluation associated with the amount;
A feedback system- provides employees and groups with information about their specific level of performance on each indicators.
ProMES -measures and feeds back productivity information to personnel.
Balanced Scorecard Approach
includes four perspectives of performance – financial, customer, internal or operations and learning and growth.
Balanced Scorecard Approach
Financial focuses on creating sustainable growth in shareholder value.

Customer defines value for customers.

Internal or operations focuses on processes that influence customer satisfaction.

Learning and growth focuses on company’s capacity to innovate and continuously improve.

Two fundamental characteristics of the quality approach are
customer orientation and a prevention approach to errors
increasingly important consideration of quality approach and continuous improvement
Statistical Process
1. process-flow analysis
2. cause-and-effect diagrams
3. pareto chart
4. control chart
5. histogram
6. scattergram
process-flow analysis
involves identifying each action and decision necessary to complete work
a paret chart
highlights the most important cause of a problem. In a Pareto chart, causes are listed in decreasing order of importance, where importance is usually defined as the frequency with which that cause resulted in a problem. The assumption of Pareto analysis is that the majority of problems are the result of a small number of causes.
cause-and-effect diagrams
events or causes that result in undesirable outcomes are identified
control charts
involve collecting data at multiple points in time. By collecting data at different times, employees can identify what factors contribute to an outcome and when they tend to occur
display distributions of large sets of data and allow data to be grouped into a smaller number of categories or classes.
show the relationship between two variables, events, or different pieces of data and help employees determine whether the relationship between two variables or events is positive, negative, or zero.
practices participated in by employees from all levels of the company that focus on continuous improvement of business processes The most effective way of measuring performance is to rely on a combination of two or more alternatives.
5 performance information sources
most frequently used source
excellent sources of information when the supervisor does not always observe the employee
a valuable source of performance information when managers are evaluated. they often have the best opportunity to evaluate how well a manger treats employees
valuable but are not usually used as the sole source of performance
often the only person present to observe the employee’s performance
360 technique
consists of having multiple raters (boss, peers, subordinates, customers) provide input into a manager’s evaluation. It provide a means for minimizing bias in an otherwise subjective evaluation technique.
3 ways technology influences PMS
1. aligns performance goals across all levels
2. access to performance information, data and tools
3. improves efficiency of PMS
electronic tracking and monitoring systems
software to ensure that employees are working when and how they should be and to block access to visiting certain websites (such as those containing pornographic images). These systems include hand and fingerprint recognition systems, global positioning systems (GPS), and systems that can track employees using cell phones and handheld computers
Typical rater errors
“Similar to Me” is the error we make when we judge those who are similar to us more highly than those who are not.
Contrast errors occur when we compare individuals with one another instead of with an objective standard.
Leniency- Rater gives high ratings to all employees regardless of their performance.
4. Strictness- Rater gives low ratings to all employees regardless of their performance.
5. Central Tendency- Rater gives middle or average ratings to all employees despite their performance.
6. Halo errors occur when one positive performance aspect causes the rater to rate all other aspects of performance positively. Halo error leads to employees believing that no aspects of their performance need improvement
7. Horns error works in the opposite direction: one negative aspect results in the rater assigning low ratings to all the other aspects. Horns error makes employees frustrated and defensive.
appraisal politics
evaluators purposefully distorting a rating to achieve goals
3 approaches to reducing rater error
rate error training

frame-of-reference or rater accuracy training

calibration meetings

5 factors to consider when analyzing poor performance

performance standards/goals



employee characteristics

marginal employees
are those employees who are performing at a bare minimum level because of a lack of ability and/or motivation to perform well.
ways to manage performance
solid performers

misdirected effort



solid performers
Employees with high ability and motivation are likely good performers
misdirected effort
Poor performance resulting from lack of ability but not motivation
Managers with employees who have the ability but lack motivation
Chronic poor performance by employees with low ability and motivation