Chapter 8 - Performance Management

PERFORMANCE MANAGEMENT

Group 5Bulut, KyleCano, JeffreyGregorio, GabbyManguba, MikeTan, Kim

OBJECTIVES

Identify the major determinants of individual performance.

Discuss the three general purposes of performance management.

Identify the five criteria for effective performance management systems.

Discuss the four approaches to performance management.

Discuss the pros and cons of the different sources of performance information.

Identify the cause of a performance problem.

WHAT IS PERFORMANCE MANAGEMENT?

Employees’ outputs and activities = Company’s goals

DEFINING PERFORMANCE

Specifies which aspects of performance are relevant to the organization through job analysis

Job Analysis- getting detailed information about jobs

MEASURING PERFORMANCE

Measures those specified aspects through performance appraisal

Performance Appraisal- method for managing employee performance

FEEDING BACK PERFORMANCE INFORMATION

Provides feedback to the employees through performance feedback

Performance feedback- process of providing employees information about their performance effectiveness

PRACTICE OF PERFORMANCE MANAGEMENT

Frequency of Reviews= 76% Annually Use: Individual performance management

(82%), Pay decisions (66%), Setting individual development needs (52%), Establishing training priorities (17%), Succession planning (21%)

Many companies are moving to more frequent, streamlined performance reviews.

MODEL OF PERFORMANCE MANAGEMENT

PURPOSES OF PERFORMANCE MANAGEMENT

Strategic

Administrative

Developmental

STRATEGIC

Link employee activities with the organization’s goals

ADMINISTRATIVE

Administrative decisions like salary, pay raises, promotions, retention, terminations, layoffs

DEVELOPMENTAL

Develop employees who are effective at their jobs

RECOMMENDATIONS FOR DEVELOPING AN EFFECTIVE PERFORMANCE MANAGEMENT SYSTEM Mirror the corporate culture and values Have visible CEO and senior management support. Focus on the right company performance measures. Link job descriptions to the performance management system. Differentiate performance fairly and effectively. Train managers in performance management. Communicate the total rewards system. Require managers to search, offer and acquire regular

performance feedback. Set clear expectations for employee development. Track effectiveness of the performance management system. Adjust the system as required.

PERFORMANCE MEASURES CRITERIA

STRATEGIC CONGRUENCE

- the extent to which the performance management system elicits job performance that is consistent with the organization’s strategy, goals and culture.

VALIDITY

- the extent to which a performance measure assesses all the relevant – and only the relevant—aspects of job performance.

RELIABILITY

- the consistency of a performance measure; the degree to which a performance measure is free from random error.

ACCEPTABILITY

- the extent to which a performance is deemed to be satisfactory or adequate by those who use it.

SPECIFICITY

- the extent to which a performance measure gives detailed guidance to employees about what is expected of them and how they can meet those expectations.

APPROACHES TO MEASURING PERFORMANCE

COMPARATIVE APPROACH

- the comparative approach to performance measurement requires the rater to compare an individual’s performance with that of the others. This approach usually uses some overall assessment of an individual performance or worth, and seeks to develop some ranking of the individuals within a work group.

THERE ARE THREE (3) KINDS:

1. Ranking Simple Ranking – the employer ranks every one from

the highest performer or the poorest performer (or best to worst).

Alternative Ranking – rater picks first the best employee, then “keeps” him. The left names would slowly taught about who the worst performer was and crosses his name off the list, and so on.

2. Forced Distribution

This technique requires the manager to put certain percentages of employees into predetermined categories.

3. Paired Comparison

This method requires managers to compare every employee with every other employee in the work group, giving an employee a score of 1 every time he or she is considered the higher performer. In the end, the manager computes for the number of times each employee received a favorable decision, making it their evaluation.

EVALUATING THE COMPARATIVE APPROACH

PROS: Effective tool in differentiating employee performance Eliminates problems of leniency, central tendency, and

strictness Good basis for pay raises and promotions Easy to develop, easy to use

CONS: If not enough evaluators, personal biases and opinions

would greatly affect the ratings Lack for specificity for feedback purposes, as employees

aren’t aware of what they should improve on for their ranking individually

ATTRIBUTE APPROACH

- This approach focuses on the characteristics and traits of the people that are geared towards the success of the company. The techniques that use this approach define a set of traits – such as initiative, leadership, and competitiveness—and evaluate individuals on them.

EVALUATING THE ATTRIBUTE APPROACH

PROS: Easy to develop Generalizable across variety of jobs If much attention is devoted in identifying attributes related to

job performance, it would be reliable and valid

CONS: Little congruence between the techniques and the company’s

strategy Could be vague due to different interpretations by different

raters

BEHAVIORAL APPROACH

CRITICAL INCIDENTS

Requires managers to keep a record of specific examples of effective and ineffective performance on the part of each employee.

BEHAVIORALLY ANCHORED RATING SCALES

BEHAVIORAL OBSERVATION SCALES

ORGANIZATIONAL BEHAVIOR MODIFICATION

Entails managing the BAHAVIOR of employees through a formal system of BEHAVIORAL feedback and reinforcement.

ASSESSMENT CENTERS

A process in which multiple raters evaluate employees’ performance on a number of exercises.

RESULT APPROACH

MANAGEMENT BY OBJECTIVES

QUALITY APPROACH

Emphasize an assessment of both person and system factors in the measurement system.

Emphasize that managers and employees work together to solve performance problems.

Involve both internal and external customers in setting standards and measuring performance.

Use multiple sources to evaluate person and system factors.

DIFFERENCES FROM TRADITIONAL APPROACH

Most existing systems measure performance in terms of quantity, not quality

Employees are held accountable for good or bad results to which they contribute but do not completely control

Companies do not share the financial rewards of successes with employees according to how much they have contributed to them

Rewards are not connected to business results

STATISTICAL PROCESS CONTROL TECHNIQUES

Process-flow analysis Cause and effect diagrams Pareto chart Control charts Histograms Scattergrams

PARETO CHART

CONTROL CHART

HISTOGRAM

SCATTERGRAM

PERFORMANCE INFORMATION SOURCES

Customers Peers

Self Subordinates

Managers

8-44

HEURISTICS

Research consistently reveals that humans have tremendous limitations in processing information.

Because we are so limited, we often use heuristics, or simplifying mechanisms, to make judgments, whether about investments or about people.

These heuristics, which appear often in subjective measures of performance, can lead to rater errors.

Performance evaluations may also be purposefully distorted to achieve personal on company goals (appraisal politics).

PERFORMANCE MEASUREMENT RATER ERRORS

1. Similar to Me2. Contrast3. Distributional

Errors4. Halo and Horns5. Appraisal Politics

8-46

REDUCING RATER ERRORS AND POLITICS

Approaches to Reducing Rater Error: Rater error training Rater accuracy training

Calibration Meetings - attended by managers to discuss employee performance ratings

8-47

PERFORMANCE FEEDBACK

It is necessary to feed performance information back to employees so they can correct any deficiencies.

The performance feedback process is complex and provokes anxiety for both the manager and the employee.

PERFORMANCE FEEDBACK (CONT.) To provide effective performance feedback

managers should consider the following recommendations: Feedback should be given frequently, not once a year. Create the right context for the discussion. Ask the employee to rate his/her performance before the

session. Encourage the subordinate to participate in the session.

Tell-and-sell Tell-and-listen Problem-solving approach

Recognize effective performance through praise. Focus on solving problems. Focus feedback on behaviour or results, not on the

person. Minimize criticism. Agree on specific goals and set a date to review pro

WHAT MANAGERS CAN DO

Diagnose the causes of poor performance.

EmployeeCharacteristics

Performance Standards/

Goals

Feedback Consequences

Input

5 Factors to Consider

When AnalyzingPoor Performance

WHAT MANAGERS CAN DO (CONT.)

Marginal employees – are those employees who are performing at a bare minimum level because of lack of ability and/or motivation to perform well.

Four different types of employees: Solid performers Underutilizers Misdirected effort Deadwood

DEVELOPING SYSTEMS

Because performance measures play a central role in such administrative decisions such as promotions, pay raises, and discipline, employees who sue an organization primarily attack measurement systems on which the decisions were made.

Two types of cases have dominated: Discrimination

Uniform Guidelines on Employee Selection Procedures Unjust dismissal

CHARACTERISTICS OF A SYSTEM THAT WILL WITHSTAND LEGAL SCRUNITY

Developed by conducting job analysis that ascertains the important aspects of job performance.

Based on either behaviours or results. Raters should be trained. Reviewed by upper-level management;

employees should be able to appeal. Provide some form of performance

counseling or corrective guidance for poor performers.

Engages multiple raters. Employees should be asked to comment on their appraisals.

USE OF TECHNOLOGY

Electronic tracking systems include hand and fingerprint recognition systems, global positioning systems (GPS), computer software, and systems that can track employees using handheld computers and cellphones.

To avoid the potential negative effects of electronic monitoring, managers must communicate why employees are being monitored.

SUMMARY

Performance management is one of the key factors in gaining competitive advantage.

These systems serve strategic, administrative, and developmental purposes.

Deciding on which approach and which source of performance information are best depends on the job in question.

Performance information has to be sent back to employees in a way that results in improved performance rather than defensiveness and decreased motivation.

MINI-QUIZ

________ systems seek to tie the formal performance appraisal process to the company’s strategies by specifying at the beginning of the evaluation period the types and level of performance that mush be accomplished to achieve the strategy.

A.) People Development System B.) Performance Planning and

EvaluationC.) Strategic CongruenceD.) Organizational Behaviour

Modification

Managers find that out of all the primary sources for performance information, _____ helps them make more appropriate performance ratings based on the discussion and feedback they receive from employees.

A.) peer evaluationB.) subordinate evaluationC.) self-evaluationD.) customer evaluation

Employees with poor performance resulting from lack of ability but not motivation.

A.) UnderutilizersB.) Solid PerformersC.) DeadwoodD.) Misdirected efforts

VIDEOS TO WATCH:

http://www.youtube.com/watch?v=6GufMa-J8cI

http://www.youtube.com/watch?v=DgiHW10tRe4&feature=related

THANK YOU!