CHAPTER 10 - PERFORMANCE MANAGEMENT
Jan 03, 2016
CHAPTER 10 - PERFORMANCE MANAGEMENT
KEY CONCEPTS AND SKILLS
➲ Performance appraisal and the appraisal process➲ Difference between performance appraisal and
performance management➲ What are key performance indicators and the role
of Balanced Scorecard in performance management
➲ Key points for a successful performance appraisal interview
➲ Some common performance appraisal errors➲ Process of counselling employees with
performance problems
CHAPTER OUTLINE
➲ What is performance appraisal?➲ What is performance management?➲ Ensuring fairness in performance appraisals➲ Performance appraisal systems➲ Selection of factors➲ The appraisal interview➲ The appraisal programme➲ Training of appraisers ➲ Common errors in appraisals➲ Managing performance➲ When performance does not meet standards➲ Performance improvement plan➲ Correcting performance problems through
counselling
PERFORMANCE MANAGEMENT
➲ Two aspects of performance management – evaluative and developmental
➲ Performance appraisal is evaluative ➲ Performance management includes performance
appraisal but involves more comprehensive process
WHAT IS PERFORMANCE APPRAISAL?
➲ A formal system of periodic review of an employee’s job performance
➲ Process of describing an employee’s job-related strengths and weaknesses
➲ An exercise in observation and judgement, and a feedback process
PERFORMANCE APPRAISAL
➲ For performance appraisal to succeed there should be performance standards set
➲ If no standards set, then appraisal process very subjective
➲ Process also requires dependable performance measures
➲ Measures are observations or other data collection methods to measure actual performance
➲ Last aspect of performance appraisal is actual appraisal
➲ This is comparison between what has actually happened (obtained through performance measures) and what should have happened (standards)
WHAT IS PERFORMANCE MANAGEMENT?
➲ Management aimed at improving performance➲ Begins with setting of objectives or KPIs➲ Then managing performance through both rewards
and reinforcements for performance above expectations and coaching, counselling or disciplining for performance below expectations
➲ Should be face-to-face session where employee is provided with feedback and at same time given opportunity to express his feelings and how he feels he has performed.
➲ Performance management is continual and ongoing whereas performance appraisal is periodic.
16:13
Model of Performance Management
Above ExpectationsReinforce
Below Expectations Coach/ Counsel/ Discipline Plan Manage
Appraise
ENSURING FAIRNESS IN PERFORMANCE APPRAISALS
➲ System should be based on job analysis and factors appraised should be developed from analysis of job duties, providing content validation
➲ Should be clear performance standards linked to job being appraised
➲ Appraisal instrument is behaviour-oriented rather than trait-oriented
➲ Appraisers should be provided adequate training ➲ Results of performance appraisal are
communicated to employee and should be provision for appeal to higher authorities in event of disagreement
Relationship of Performance Standards to Performance Appraisal
Job Performance PerformanceAnalysis Standards Appraisal
JD Translate JD Compares and into levels actual JS of acceptable performance
levels of of individual performance with standards
PERFORMANCE APPRAISAL SYSTEMS
Rating Scales➲ A method of performance appraisal which rates
employees based on established scales for a number of defined factors.
➲ A widely used method➲ Judgements recorded on a scale usually divided
into five or seven categories➲ Selection of factors is crucial part of rating scales
method➲ Factors chosen typically of two types:
characteristics and contributions
PERFORMANCE APPRAISAL SYSTEMS
Grading➲ A system of performance appraisal where certain
grades of performance are established in advance and carefully defined and employee performance is then compared with these grade definitions.
➲ Person allocated to grade that best describes his performance.
➲ Some organisations modify grading system into forced-distribution system, in which pre-determined percentages are established for each grade
PERFORMANCE APPRAISAL SYSTEMS
Key Performance Indicators (KPI) or Management by Objectives (MBO)
➲ KPI is a refinement of MBO ➲ Method first mentioned by Peter Drucker in 1954
and developed further by Douglas McGregor. ➲ Heart of system is that both appraisee and
appraiser jointly establish performance goals or objectives for future
➲ Should ideally be mutually agreed upon and objectively measured
➲ Appraisee should be given periodic feedback on a regular basis so that he can make adjustments as required.
PERFORMANCE APPRAISAL SYSTEMS
Key Performance Indicators (KPI) or Management by Objectives (MBO)
➲ Individual objectives should focus on key-result areas and measurements which have the highest priority
➲ Some criteria for objectives are:➲ SPECIFIC➲ MEASURABLE ➲ ACTIONS➲ RESOURCES REQUIRED➲ TIMED
PERFORMANCE APPRAISAL SYSTEMS
Key Performance Indicators (KPI) or Management by Objectives (MBO)
Limitations ➲ Emphasis on individual goals sometimes are
achieved at expense of group or organisational goals
➲ Difficulty of applying to many non-managerial jobs ➲ Makes comparison of individual employees rather
difficult➲ Employees tempted to set non-challenging or
easily-attainable goals
PERFORMANCE APPRAISAL SYSTEMS
The Balanced Scorecard➲ Concept developed by Robert Kaplan and David
Norton ➲ They believed using only financial measures of
performance was ineffective for modern organisations
➲ Felt the need for performance measures that can capture activities throughout organisation.
PERFORMANCE APPRAISAL SYSTEMS
The Balanced Scorecard➲ Balanced Scorecard settled on four key
perspectives which could ensure organisation achieves it mission, vision and strategies.
➲ Perspectives are:➲ Customer issues (Customer)➲ Internal business processes➲ Employee activities (Learning and Growth)➲ Shareholders concerns (Financial)
The Balanced Scorecard Perspectives
CUSTOMER
VISION INTERNALFINANCIAL MISSION BUSINESS
STRATEGY PROCESSES
LEARNING AND GROWTH
PERFORMANCE APPRAISAL SYSTEMS
Peer Review➲ Appraisal of an individual employee’s performance
by his co-workers➲ Belief is that peers often have greatest contact with
and understanding of the employee at work, and are most affected by the employee's work behaviours.
➲ Peer review useful when a supervisor is not able to properly observe or evaluate work performance of subordinates
PERFORMANCE APPRAISAL SYSTEMS
Upward Appraisal➲ A performance appraisal process for managers
that includes subordinates’ evaluations➲ Involves subordinates providing both positive and
negative feedback to their superiors➲ Each employee asked to complete a confidential
questionnaire regarding his superior➲ Completed questionnaires then sealed and sent to
an independent third party for analysis➲ Once analysed, third party provides feedback to
the superior and at no time is feedback related to an individual employee.
PERFORMANCE APPRAISAL SYSTEMS
360-degree appraisal➲ A performance appraisal process that includes
evaluations from a wide range of persons who interact with the manager, including self-evaluation as well as evaluations from the person’s immediate superior, subordinates, peers, and even customers.
PERFORMANCE APPRAISAL SYSTEMS
Self appraisal➲ A system of appraisal where employees rate their
own performance and then this is compared to the ratings by the superior.
➲ Caution should be exercised in deciding to use self appraisals as problems could arise if the gap between what superior rates and employee’s self appraisal is too large
➲ Could lead to more frustrations on part of employee
SELECTION OF FACTORS
➲ Where rating scales used, then factors should be carefully selected
➲ Should be meaningful and job-related➲ Separate factors should be used for different
categories of employees.
➲ The use of ratings assumes that the human observer is reasonably objective and accurate. Because we know that this is not always the case, organisations are advised to have more objective than subjective factors to be appraised.
THE APPRAISAL INTERVIEW
➲ Essential part of performance appraisal process and one of the most important elements of MBO programme
➲ Recommended atmosphere is one characterised by empathy, mutual respect, equality, and supportive informational contributions
➲ An atmosphere that encourages discussion
THE APPRAISAL INTERVIEW
Sequence of interview phases:1. Subordinate made to feel at ease.2. Subordinate asked to take lead in discussion of
accomplishments and failures. Superior participates through questions and comments. Reasons for non-accomplishment examined
3. Superior takes lead in establishing goals for next period. Subordinate proposes new set of goals
4. Both superior and subordinate equally involved in establishing performance standards
5. Last stage devoted to discussions about subordinate’s future and mutually agreeing on personal development goals
THE APPRAISAL INTERVIEW
➲ Key points for a successful performance appraisal interview:
1. high level of participation by the appraisee2. helpful and constructive attitude by superior3. help from superior in solving job problems
hampering subordinate’s performance4. mutual setting of goals, with agreement of the
subordinate.
THE APPRAISAL INTERVIEW
The “Sandwich” Technique➲ To sandwich unfavourable comments between
favourable comments➲ Helpful guide to entire appraisal discussion➲ Appraisers start discussion off with a compliment➲ Discussion then focuses on areas that need to be
improved➲ Finally discussion ends by finding something else
good to say about employee’s work.
CONDUCTING SUCCESSFUL APPRAISALS
➲ Key to successful appraisal is focusing on work results, not personality of employee
➲ Appraisals are achieve work objectives, not to express personal feelings or to exchange accusations
➲ A businesslike and non-threatening approach gives superior more control
➲ When focus is on specific facts rather than personality traits and actual work results rather than personal characteristics, then employee is more relaxed, receptive and encouraged to offer comments and suggestions.
THE APPRAISAL PROGRAMME
Who Is To Rate➲ In most organisations appraiser is immediate
superior ➲ Management maintains control of appraisal
process by reviewing and approving all appraisals➲ In some organisations, group ratings undertaken
for more participation and fairness➲ Raters can be superiors, peers, and subordinates ➲ Another possibility is to allow subordinates to rate
themselves
THE APPRAISAL PROGRAMME
When to Rate➲ Most organisations have annual performance
appraisal ➲ Semi-annual schedules also practised➲ Also organisations that have three separate
appraisals, for performance, salary, and potential➲ Another basis is one formal performance appraisal
for salary increments and promotions, and three quarterly reviews aimed at improving performance and remedying weaknesses.
➲ No best frequency for appraisals
TRAINING OF APPRAISERS
➲ Three major aspects of appraiser training:➲ Initial training to be familiar with philosophy and
nature of organisation’s performance appraisal system including an analysis of the factors and factor scales used
➲ Be aware of common errors in ratings➲ How to conduct appraisal interview
COMMON ERRORS IN APPRAISALS
➲ The Halo Error➲ Recent Error➲ The Error of Central Tendency➲ Constant Errors➲ Similar-To-Me Error➲ Contrast Error➲ Position Error➲ Biases of Sex, Race, Religion, and Nationality
MANAGING PERFORMANCE
➲ To ensure good performance, managers should follow these guidelines:
➲ Communicating Standards➲ Showing Appreciation for Good Work➲ Not Failing to Discipline when Necessary
REINFORCING DESIRED PERFORMANCE
➲ Desired performance must be reinforced if employees expected to continue to perform
➲ Good performance can be rewarded through rewards including promotions, merit increments, bonuses, development opportunities, and even extra fringe benefits.
➲ Besides extrinsic rewards, wide variety of ways to recognise good performance, to reinforce it, and to encourage its repetition
➲ Managers can also add value to work through other rewards like committee appointment, career counselling, showing personal concern, and providing more freedom to the employee.
WHEN PERFORMANCE DOES NOT MEET STANDARDS
➲ Need to find out why➲ If reason is lack of skills or knowledge, then
coaching or training ➲ A performance improvement plan can be carried
out.➲ Where poor performance not due to a lack of skills
or knowledge, then counselling or disciplining need to be carried out
PERFORMANCE IMPROVEMENT PLAN (PIP)
➲ A formal process resulting from the annual performance appraisal intended to improve performance and correct deficiencies detected during the appraisal interview.
➲ PIP usually for six months with some organisations granting extension up to three months if necessary
➲ Process of guiding and monitoring employee’s performance towards improving job or behavioural performance through a planned improvement plan agreed upon by the employee and immediate superior
CORRECTING PERFORMANCE PROBLEMS THROUGH
COUNSELLING
Counselling➲ A form of communication between superior and
subordinate where a problem is discussed with the general objective of helping the subordinate to cope with it so that he can become more effective as an employee.
CORRECTING PERFORMANCE PROBLEMS THROUGH
COUNSELLING
Eight steps in counselling process:1. State the problem2. Get agreement on the problem3. Listen actively4. Consider mitigating circumstances5. Be prepared to refer elsewhere6. Find a desirable solution7. Design an action plan8. Follow up
Documentation in Counselling
➲ Record-keeping plays critical role in work-life of manager
➲ Counselling sessions and verbal warnings must be recorded with details like time, date, nature of offence, and action plan agreed upon.
➲ If no improvements shown by employee, then steps taken to issue warning letters with ultimate aim of terminating employee if he does not improve
➲ Becoming more difficult to terminate services of an employee unless can be proven that sufficient attempts have been made to give employee opportunities to perform a satisfactory job