Chapter 7 – Performance Management

Chapter 7 Overview
Explain 5 steps in performance management

Describe 5 performance appraisal methods and pros and cons of each

Discuss major Problems inhibiting effective performance appraisals

Discuss 360 degree appraisal

Describe 3 types of appraisal interviews

Discuss future of performance management

Performance Management
The process of encompassing all activities related to improving employee PERFORMANCE, PRODUCTIVITY, and EFFECTIVENESS

-provides network of procedures that influence all behavior

Includes: goal setting, pay for performance, training and development, career management, and disciplinary action

What are the three Purposes of Performance Management?
1. Aligns employee actions with strategic goals

2. Vehicle for culture change

3. Provides input into other HR systems such as development and remuneration

Why is Performance Management considerable strategic advantage?
It is the most effective way for firms to differentiate themselves in a highly competitive, service-oriented, through the quality of its employees.
Performance Management Process Steps
1. Define performance expectations and goals
2. Provide ongoing feedback and coaching
3. Conducting performance appraisal and eval discussions
4. Determining performance rewards/consequences
5. Conducting development and career opportunities discussions
Step 1. Defining Performance Expectations
-Task vs Contextual Performance
Task (direct) versus Contextual (indirect) Performance

*Task:* an individual’s direct contribution to their job-related processes

*Contextual:* an individual’s indirect contribution in terms of improving organizational, social, and psychological
Eg: positive attitude, pitches in to help others,

Performance Appraisal in China
Eg: accepting overtime, helpful, hard work, loyal, respect to senior values

Teamwork is manifestation of group orientation in Eastern cultures.

Step 2. Providing Ongoing Coaching and Feedback
*Performance Improvement Plan* (PIP) is used to focus on discussion and facilitate performance improvement.

Provides: expectations, timelines, objectives in often 30 to 90 days

Step 3. Performance Appraisal and Evaluation Discussion I
*Graphic Rating scale*: lists a number of traits and range of performance for each. Then rated by a score that reflects their level of performance for trait.

*Alternation ranking:* ranking employees from best to worst on particular trait

*Paired Comparison*: ranking employees by making chart of all possible pairs of employees for each trait and indicating better employee of pair. The Most + means they rank the highest

*Forced Distribution*: predetermined percentages of ratees are placed in performance categories.
-been criticized as demotivating since majority of workforce are at or below average on bell curve.

Step 3. Performance Appraisal and Evaluation Discussion II
*Critical Incident*: keeping record of uncommon good or undesirable examples of employee’s work related behavior and reviewing list with employees.
-not useful for comparing employees

*Behaviorally Anchored Rating Scales*: Aims to combine benefits of narratives, critical incidents and quantified ratings by anchoring quantified scale with specific narrative examples of good and poor performance

*Management by Objective*: Involves setting specific measurable goals with each employee and then reviewing the progress
-time consuming, unclear objectives sometimes, tug of war with manager and employee

Step 3. Performance Appraisal and Evaluation III – Technology Use
*Electronic Performance Monitoring:* supervisors electronically monitor the amount of computerized data an employee is processing per day

Eg: tracking hourly keystrokes, delivery drivers GPS, calls of customer service clerk

-Provides employees with clear development path

Step 4. Determine Performance Rewards/Consequences
Two most important aspects used to determine appropriate reward/consequence are
-achievement of goals
-and how employees meets standards
Step 5. Career Development Discussion
Opportunities for development are discussed with employees
Performance Appraisal Problems and Solutions
*Validity and reliability:* valid for position being rated and reliable which is producing consistent ratings for same performance

*Graphic rating scale problems:*
-unclear standards, halo effect, central tendency, leniency and strictness, appraisal bias, recency effect, and similar to me bias

Unclear performance standards
Appraisal sale that is too open to interpretation of traits and standards
Halo effect
Problem when supervisor’s rating of employee on one trait that biases other traits
Central tendency
tendency to rate all employees in middle of scale
Strictness/Leniency
when supervisor rates all employees either low or high
Appraisal Bias
Tendency to allow individual differences such as age race sex to affect appraisal ratings
Recency Effect
Rating error that occurs when rating are based on employee’s most recent performance rather than through appraisal period
Similar to Me Bias
Tendency to give higher performance rating to employees who are perceived to be more similar
Four ways to Avoid Appraisal Problems
1. Being familiar and understanding the problem

2. Training supervisors to eliminate errors

3. Raters choose right appraisal tool.

4. Use multiple raters in evaluation to reduce errors

Who Should do Appraising?
Supervisors, self (generally rate higher)

Peers. problem of *logrolling* which is peers all rate each other higher

Committees: includes direct supervisor and 4 others

Subordinates: upward feedback

360 – Degree Appraisal
Appraisal technique that uses MULTIPLE RATERS including peers, subordinates, supervisors, and customers, employees reporting to the appraisee
Formal Appraisal Discussions
An interview where supervisor and employee review appraisal and make plans to account for deficiencies and strengths
Three types of Formal Appraisal Discussions
Satisfactory – Promotable -> promotion of job

Satisfactory – Not promotable -> time off, bonus, slightly enlarged job,

Unsatisfactory – Correctable vs Uncorrectable -> action plan such as PIP for correctable. Otherwise, tolerated or dismissed

Preparing For Formal Appraisal Discussion
1. Conduct interview

2. Handle criticism and defensive employees

Ensuring Formal Appraisal Discussion leads to Improved Performance
Set objectives and goals, and deal with poor performance with formal writing
Chapter 7 Summary I
1. *Graphic Rating Scale* is good but there is bias and often unclear. *Alternation* avoids central tendency but can be unfair if most employees are doing well. *Paired comparison* can be unfair if most employees are performing similarly. *Narrative* provides concrete info to the employee but is time consuming and can be subjective. *Force Distribution* can be demotivating for employees classified less than average. *Critical incident* is specific and forces supervisor to evaluate employee on ongoing basis, difficult to compare employees. *BARS* is accurate but difficult and time consuming. *MBO* is also time consuming.

2. Appraisal problems include unclear, halo, central, leniency or strictness, appraisal bias, recency, and similar to me bias

Chapter 7 Summary II
3. 360 degree feedback has grown rapidly, and supports activities of performance appraisal, coaching, leadership development, succession planning, and employees rewards and recognition

4. Three types of formal appraisal results
-unsatisfactory
-satisfactory – not promotable
-satisfactory – promotable

5. The key success factor for appraisals is quality of dialogue between managers and employees.