MGT 463 SDSU Chen Ch. 1

Performance Management
1. The continuous process of
• identifying
• measuring
• developing
the performance of individuals and teams
2. Aligning performance with the strategic goals
of the organization
Performance Management vs. Performance Appraisal (Performance Management is )
• Driven by line manager
• Ongoing feedback
• Strategic business considerations
Performance Management vs. Performance Appraisal (Performance Appraisal)
• Driven by HR
• Typically once a year
• Assesses employee strengths & weaknesses
Performance Management Advantages (Employees)
Good PM
1. Increases motivation to perform
2. Increases self-esteem
3. Provides insight about employees
4. Clarifies definitions of the job and success criteria
5. Enhances self-insight and development
Performance Management Advantages (Managers)
Good PM
1. Creates fairer and more appropriate
administrative actions
2. Clarifies organizational goals
3. Increases employee competence
4. Minimizes employee misconduct
5. Provides better protection from lawsuits
Performance Management Advantages (Organization and HR Function)
Good PM
1. Better differentiates good and poor performers
2. Clearly communicates supervisors’ views of
3. Facilitates organizational change
4. Enhances commitment and intentions to stay
5. Voice behavior is encouraged
6. Employee engagement is enhanced
Performance Management Disadvantages (Employees)
Poor PM
1. Increase turnover
2. Create false or misleading information
3. Lower self-esteem
4. Waste time and money
Performance Management Disadvantages (Managers)
Poor PM
1. Damage relationships
2. Decrease motivation to perform
3. Lead to burnout and job dissatisfaction
4. Increase the risk of litigation
Reward Systems
Set of mechanisms for distributing
• Tangible returns
• Intangible or relational returns as part of an
employment relationship
Tangible Returns
• Cash compensation
• Benefits
Cash compensation
• Base pay
• Cost-of-living
• Contingent (merit) pay
• Incentives (short- and long-term)
• Income protectio
• Allowances
• Work/life focus
Intangible Returns
• Recognition and status
• Employment security
• Challenging work
• Learning opportunities
Returns with a Low Dependency on the Performance Management System
• Cost of living adjustment
• Income protection
Returns with a Moderate Dependency on the Performance Management System
• Work/Life focus
• Allowances
• Relational returns
• Base pay
Returns with a High Dependency on the Performance Management System
• Contingent pay
• Short-term incentives
• Long-term incentives
Purposes of Performance Management Systems
• Strategic
• Administrative
• Informational
• Developmental
• Organizational maintenance
• Documentational
Strategic Purpose
• Link individual and organizational goals
• Communicate crucial strategic initiatives
• Onboarding
Administrative Purpose
Provide information for making decisions
• Salary adjustments
• Promotions
• Recognition of individual performance
• Retention or termination
• Layoffs
• Merit increases
Informational Purpose
Communicate to employees:
• Expectations
• What is important
• How they are doing
• How to improve
Developmental Purpose
• Performance feedback/coaching
• Identification of individual strengths and weaknesses
• Causes of performance deficiencies
• Tailor development of individual career path
Organizational Maintenance Purpose
• Plan effective workforce/talent inventory
• Assess future training needs
• Evaluate performance at the organizational level
• Evaluate effectiveness of HR interventions
Documentational Purpose
• Validate selection instruments
• Document administrative decisions
• Help meet legal requirements
Ideal Performance Management System
1. Congruent with organizational strategy
2. Congruent with context
3. Thorough
4. Practical
5. Meaningful
6. Specific
7. Identifies effective/ineffective performance
8. Reliable
9. Valid
10. Acceptable and fair
11. Inclusive
12. Open
13. Correctable
14. Standardized
15. Ethical
1. Congruent with organizational strategy
• Aligned with unit and organizational goals
2. Congruent with context
• Aligned with cultural context
3. Thorough
• All employees, all responsibilities, entire review period, positive as well as constructive
4. Practical
• Easy to use, benefits outweigh the costs
5. Meaningful
• Important, relevant, control, timely, skill
6. Specific
• Concrete and detailed expectations
7. Identifies effective/ineffective performance
• Distinguishes level of performance
8. Reliable
• Consistent and free of error
9. Valid
• Relevant, no deficiency or contamination
10. Acceptable and fair
• Distributive, procedural, interpersonal and
informational justice
11. Inclusive
• Represents employee concerns
12. Open
• Ongoing, factual 2-way communication
13. Correctable
• Appeals process
14. Standardized
• Consistent across people and time
15. Ethical
• Full information, respects privacy, no self-interest
Performance Management Fits with Other HR Activities
Provides information for:
• Development of training
• Workforce planning
• Recruitment and hiring decisions
• Development of compensation systems