Chapter 8

8-1McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

fundamentals of

Human Resource Management 3rd editionby R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright

CHAPTER 8Managing Employees’ Performance

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What Do I Need to Know?

1. Identify the activities involved in performance management.

2. Discuss the purposes of performance management systems.

3. Define five criteria for measuring the effectiveness of a performance management system.

4. Compare the major methods for measuring performance.

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What Do I Need to Know? (continued)

5. Describe major sources of performance information in terms of their advantages and disadvantages.

6. Define types of rating errors and explain how to minimize them.

7. Explain how to provide performance feedback effectively.

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What Do I Need to Know? (continued)

8. Summarize ways to produce improvement in unsatisfactory performance.

9. Discuss legal and ethical issues that affect performance management.

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Introduction

• Performance management: the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.

• This process requires:– Knowing what activities and outputs are desired– Observing whether they occur– Providing feedback to help employees meet

expectations

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Test Your Knowledge

• If the performance management system created competition among team members, I wouldA. Make collaboration a criterion to be evaluated.B. Nothing, competition is good.C. Increase the specificity of the feedback.D. Focus on personal traits rather than behaviors.

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Figure 8.1: Stages of the Performance Management Process

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Purposes of Performance Management

• Strategic Purpose – means effective performance management helps the organization achieve its business objectives.

• Administrative Purpose – refers to the ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs.

• Developmental Purpose – means that it serves as a basis for developing employees’ knowledge and skills.

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Performance Management Needsto Be Managed

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Criteria for EffectivePerformance Management

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Figure 8.2: Contamination and Deficiency of a Job Performance Measure

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Test Your Knowledge

• Martin is a computer programmer whose job mainly consists of independently coding software. If interpersonal and teamwork skills were weighted heavily on his job performance measure it would suffer fromA. Criterion contaminationB. Criterion deficiencyC. Unreliability

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Methods for Measuring Performance

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Table 8.1:Basic Approaches to Performance Measurement

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Measuring Performance:Making Comparisons

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Measuring Performance:Rating Individuals - Attributes

Graphic Rating Scale• Lists traits and provides a

rating scale for each trait.• The employer uses the scale

to indicate the extent to which an employee displays each trait.

Mixed-Standard Scale• Uses several statements

describing each trait to produce a final score for that trait.

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Figure 8.3:Example of a Graphic Rating Scale

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Figure 8.4: Example of a Mixed-Standard Scale

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An employee’s performance measurement differs from job to job. For example, a car dealer’s performance is measured by the dollar amount of sales, the number of new customers, and customer satisfaction surveys.

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Measuring Performance:Rating Individuals - Behaviors

Critical-Incident Method• Based on managers’ records

of specific examples of the employee acting in ways that are either effective or ineffective.

• Employees receive feedback about what they do well and what they do poorly and how they are helping the organization achieve its goals.

Behaviorally Anchored Rating Scale (BARS)• Rates behavior in terms of a

scale showing specific statements of behavior that describe different levels of performance.

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Figure 8.5: Example of Task- BARS Rating Dimension for a Patrol Officer

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Measuring Performance:Rating Individuals – Behaviors (continued)

Behavioral Observation Scale (BOS)

• A variation of a BARS which uses all behaviors necessary for effective performance to rate performance at a task.

• A BOS also asks the manager to rate the frequency with which the employee has exhibited the behavior during the rating period.

Organizational Behavior Modification (OBM)

• A plan for managing the behavior of employees through a formal system of feedback and reinforcement.

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Figure 8.6: Example of a Behavioral Observation Scale (BOS)

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Measuring Performance:Measuring Results

• Management by Objectives (MBO): people at each level of the organization set goals in a process that flows from top to bottom, so that all levels are contributing to the organization’s overall goals.

• These goals become the standards for evaluating each employee’s performance.

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Table 8.2: Management by Objectives – Two Objectives for a Bank

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Test Your Knowledge

• The performance management system at XYZ company currently is perceived as unfair and is time consuming for managers. Which of the following systems is the most likely and least likely used, respectively.A. Paired comparisons; ResultsB. Results; Forced distributionC. Behavioral; AttributesD. Attributes; Comparative

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Measuring Performance:Measuring Quality

• The principles of total quality management (TQM), provide methods for performance measurement and management.

• With TQM, performance measurement combines measurements of attributes and results.– Subjective feedback– Statistical quality control

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• Coaches provide feedback to their team just as managers provide feedback to their employees.• Feedback is important so that individuals know what they are doing well and what areas they may need to work on.

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Sources of Performance Information

• 360-Degree Performance Appraisal: performance measurement that combines information from the employees’:– Managers– Peers– Subordinates– Self– Customers

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Performance management is critical for executing a talent management system and involves one-on-one contact with managers to ensure that proper training and development are taking place.

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Types of Performance MeasurementRating Errors

• Contrast errors: the rater compares an individual, not against an objective standard, but against other employees.

• Distributional errors: the rater tends to use only one part of a rating scale.– Leniency: the reviewer rates everyone near the top– Strictness: the rater favors lower rankings– Central tendency: the rater puts everyone near the

middle of the scale

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Types of Performance MeasurementRating Errors (continued)

• Rater bias: raters often let their opinion of one quality color their opinion of others.– Halo error: when the bias is in a favorable direction.

This can mistakenly tell employees they don’t need to improve in any area.

– Horns error: when the bias involves negative ratings. This can cause employees to feel frustrated and defensive.

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Test Your Knowledge

• Bill rates all of his employees very low except for Jan. Jan gets above average ratings because she consistently comes to work on time. The rating errors Bill makes are _______ and _______, respectively.A. Leniency; HornB. Strictness; HaloC. Similar-to-me; Central TendencyD. Horn; Strictness

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Giving Performance Feedback

• Scheduling Performance Feedback– Performance feedback should be a regular, expected

management activity.– Annual feedback is not enough.– Employees should receive feedback so often that they

know what the manager will say during their annual performance review.

• Preparing for a Feedback Session– Managers should be prepared for each formal feedback

session.

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• When giving performance feedback, do it in an appropriate meeting place.• Meet in a setting that is neutral and free of distractions.• What other factors are important for a feedback session?

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Giving Performance Feedback(continued)

• Conducting the Feedback Session– During the feedback session, managers can take any of

three approaches:1. “Tell-and-Sell” – managers tell employees their ratings

and then justify those ratings.2. “Tell-and-Listen” – managers tell employees their ratings

and then let the employees explain their side of the story.

3. “Problem-Solving” – managers and employees work together to solve performance problems.

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Figure 8.7: Improving Performance

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Legal and Ethical Issues inPerformance Management

• Legal– Performance management processes are often

scrutinized in cases of discrimination or dismissal.

• Ethical– Employee monitoring via electronic devices and

computers may raise concerns over employee privacy.

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Legal Requirements forPerformance Management

• Lawsuits related to performance management usually involve charges of:– Discrimination– Unjust dismissal

• To protect against both kinds of lawsuits, it is important to have a legally defensible performance management system.

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Legal Requirements forPerformance Management (continued)

• A legally defensible performance management system includes:– Based on valid job analyses, with requirements for job

success clearly communicated to employees.– Performance measurement should evaluate behaviors or

results, rather than traits.– Multiple raters (including self-appraisals) should be used.– All performance ratings should be reviewed by upper-level

managers.– There should be an appeals mechanism for employees.

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Summary

• Performance management is the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.

• Organizations establish performance management systems to meet three broad purposes:– Strategic purpose– Administrative purpose– Developmental purpose

• Performance measures should fit with the organization’s strategy by supporting its goals and culture.

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Summary (continued)

• Performance information may come from an employee’s self-appraisal and from appraisals by the employee’s supervisor, employees, peers, and customers.

• Using only one source makes the appraisal more subjective.

• Organizations may combine many sources into a 360- degree performance appraisal.

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Summary (continued)

• Organizations can minimize appraisal politics by establishing a fair appraisal system, involving managers and employees in developing the system, allowing employees to challenge evaluations, communicating expectations, and having open discussion.

• Performance feedback should be a regular, scheduled management activity, so that employees can correct problems as soon as they occur.

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Summary (continued)

• The performance feedback discussion should focus on behavior and results rather than on personalities.

• Managers must make sure that performance management systems and decisions treat employees equally, without regard to their race, sex, or other protected status.

• A system is more likely to be legally defensible if it is based on behaviors and results, rather than on traits, and if multiple raters evaluate each person’s performance.