Performance Management

Performance ManagementUnit I

Performance means how well or badly an activity can be donePerformance is measured in terms of effectiveness and efficiency

Efficiency means utilising the resources in an optimum manner so as to maximise productivityEffectiveness means completing a given task in stipulated time frame.

Factors affecting Performance1. Personal factors the individual skill, competence, motivation, commitment etc2. Leadership factors quality of encouragement, guidance and support provided by managers and team leaders3. Team factors- quality of support from peers4. System factors infrastructural facilities which include the system of work and facilities provided by the organisation.5. Contextual factors internal & external environmental pressures and changes.

Performance managementPerformance management is defined as a strategic and integrated approach for delivering sustained success to organisation by improving the performance of the peopleStrategic in the sense it is connected with broader issues of businessIntegration of PM in four ways:

Vertical integration linking or aligning business, team and individual needsFunctional integration linking functional strategies of businessHuman resource integration linking different aspects of HRMIndividual need integration linking individual needs

Concerns of performance managementConcerned with :achievement of resultsImpact made on performanceProcess required to achieve resultsThe capabilitiesPlanningMeasurement and reviewContinuous development and improvement

Concerned for communication information made available to allEthical concerns Respect for individualMutual respectProcedural fairnessTransparency

Scope of PMBringing success to businessManaging the contextNatural processContinuous processFor everyone

Features of effective organisation

Making whole range of business statements in to small number of general statementsTesting of the statementsPrediction of behaviourChecks the soundness of decisionImprovement of performanceDeveloping competence

Approaches for making effective organization

According to Tom peters following approaches make the organisation effective

Break the organisation into small unitsMake every employee aware about the profit/loss of the companyClose involvement with customerReduce organisational layersEmpower the peopleImplement change with new leadershipPursue innovation

What makes companies different

According to Robert Waterman top companies are different because

They meet the needs of peopleThey meet the needs of customers

Methods of making organisation effective through competence

setting the goals and measuring the performance against set goalManaging the structure, process and people can bring success to the organisationAchieving high performance by developing core, team and individual level of performanceAchieving revenue growth through employees and customers

Techniques of AppraisalPerformance Appraisal (PA)

PA can be defined as a process of systematically evaluating a persons performance against set standards

BenefitsPA provides important record for the companyProvides information for improving performance and motivation of employeesImproves quality of employeesHelps in deciding promotion and incrementPerformance expectations can be communicated to employees.

PA techniques

1)Graphic rating scale this is the simplest and most popular technique. Job performance criterion such as dependability, initiative, output, attendance, attitude etc are taken as rating scale. Each scale ranges from excellent to poor. The ratee usually receives a score of 1 to 5 with 5 being excellent.Advantages1)Easy to use2)Low cost3)A large number of employees can be evaluated in a short time4)No training is required for the raterDisadvantage1)Ratings are subjective2)Ratings may not be real

Modifications to Graphic rating scaleA mixed standard scale gives the rater three statements describing each traitOperational and bench mark statements are added to describe different levels of performance

2) Check list Appraisal- A check list appraisal is a record of performance not an evaluation by the supervisor. It contains a series of yes or no type questions about the employees performance. HR department check the score using the keyAdvantageEasy to completeDisadvantage1) Difficult to prepare the check list2) No way for adjusting the questions according to employee behaviour.

3) Forced choice approach Here a set of statements describing employee behaviour is preparedThe appraiser chooses the most or least statement matching the employee characteristicsExamples of statements-Learns fast, work hard, work is reliable, high performance, highly motive, absents oftenAdvantagesPrevents the supervisor from saying only positive thingsDisadvantagesStatements may not be properly framed or they may not be the descriptive of the ratees traits.

4) Forced distribution method- this method assumes that the employee performance follows a bell shaped curve. The assumed distribution of number of employees will be excellent 10 %, Good 20 %, Average 40 % , below average 20 %, Unsatisfactory 10 %Advantages 1) Useful for overall performance2) Help in making promotion and merit decision3) Controls leniency and central tendency errors4) To make distinctions between employees when differential rewards are to be distributed.DisadvantagesEmployee performance always conform normal distributionEmployees are evaluated based on their overall performance rather than on a distinct aspects.

Forced Distribution on a Bell-Shaped Curve

5) Critical incident method Here the supervisor keeps a written record of incidents that show positive and negative behaviour of an employeeThe record should show date, people involved, action takenAt the time of the appraisal the supervisor reviews the record and reach an overall evaluation of the employeeDuring appraisal interview the employee has a chance to respond to each of the incidents recorded.AdvantagesIt focuses actual behaviourIt is easyDisadvantages1)Time consuming2) Negative behaviour is noted most

6) Behaviourally Anchored Rating Scale (BARS)Smith and Kendall developed BARS.Here the employee is rated in scales containing statements describing performance in several areasThese scales are prepared by behavioural scientists or organisational psychologistThe supervisor selects the best statement that describes the employee performance.Each job has different set of rating standardsAdvantages1.Objectives of organisation is covered2.Less subjectiveDisadvantages1.Time consuming2.Expensive

Behaviorally-Anchored Rating Scale for Customer Service Skills

7) Behavioral Observation Scales (BOS)Developed by LathamThis is similar to BARSThis uses critical incidents instead of behavioural statements

8) Peer reviewsPerformance appraisal conducted by an employees co-workers. These are not commonly used.This is used for appraising teamsThe purpose is to give managers the feed back about their approaches to subordinates.

9) Field Review MethodThis is done by someone outside the assessees own departmentThe assessor reviews the employee record and holds interview with the ratee and his superior.This method is used for promotion at managerial level.AdvantagesLess expensiveHelps in making promotionServe as a control for leniency and central tendency errorsDisadvantageRater not familiar with the work affects the appraisal process

10) Essay Appraisal here the supervisor writes a detailed description of the employee performanceThis method is used along with other appraisal methods like Graphic ratingFollowing traits of employee are used in this method overall impression of the employee, promotability, ability to perform different jobs, strength and weakness, training and development.AdvantageUseful in filling information gap about the employeeDisadvantageRating depends upon supervisors writing skillTime consuming process

11) Work Standards approach here employee performance is compared with the standards. Usually supervisor sets standardThis is used for appraising the production workers

12) Cost accounting: this method evaluated the monetary returns of the employee. The performance of the employee is evaluated based on the relation between cost and benefit.

13) Paired comparison method- this is a group appraisal method. Employees are ranked by the first two employees on the list. The supervisor puts a check mark next to the name of the employee whose performance is better. The process is repeated, comparing the first employees performance with all others. The employee with most check marks is considered most valuable.Number of comparison = N(N-1)/2

14)Management by Objective (MBO)The concept of MBO evolved from the works of Peter Drucker.Assumptions :

People perform better when they know what is expected of them and can relate their personal goals to that of organisational goals

People are interested in goal setting process and in evaluating their performance against the targets

MBO is a process where by the superior and the subordinate of the organisation jointly identify its common goals, define each individual major areas of responsibility in terms of results expected from him and use these measures as a guide for operating the unit and also in assessing the contribution of each of its members.Principle of MBOCascading of organisational goals and objectivesSpecific objectives for each memberParticipative decision makingExplicit time periodPerformance evaluation & feedback

Process of MBO

15) Psychological appraisal industrial psychologist evaluates the employees intellectual, emotional, motivational & other related characteristics that suggest individual potential and may predict future performanceThe quality of appraisal depends on the skills of the Psychologist. This is slow and costly 16) 360 degree feed back -

Performance appraisal that combines assessment from several sources. Here the rater collects rating from different sources and an overall rating is given to the ratee.ProsCombined opinion is more accurateSome skills are best judged by peersIncreases motivationMore transparentConsBurden someResults can be difficult to interpretCan generate suspicionRater can hide better rating and project the worst ratingConflicting rating can be confusing

History of performance managementAD 221- 265 imperial rating system to assess the performance of families1491- 1556 Ignatius loyola established a formal system of rating of societiesFirst formal monitoring was introduced by FW Taylor1920 rating of army officers by US and later by UK1950 merit rating in US and UK1960- MBO introduced followed by Critical incidence method and BARS1970 the term performance management was first used. Emergence of performance management1976 the first recorded use of the term performance management by Beer & Ruh1980 concept of performance management began to emerge in the USA.1987 Plachy described performance management as communicationThe manager and employee together plans what work to be accomplished and checks whether planned work has been achieved or not. After this they plan for next period.The first reference to performance management was made at a meeting of IPM by Don Beattie.1990 performance management has entered the vocabulary of HRM in UK1992 full recognition of Project management was given by IPMThe rise of HRM also contributed to the rise of PM Comparison of Performance Management with Performance Appraisal and MBOMBO PERFORMANCE APPRAISAL PERFORMANCE MANAGEMENT

Packaged system Tailor made Tailor made

Emphasis on individual objectives Individual objectives may be included Integrating corporate, team and individual objectives

Annual Appraisal Annual Appraisal Continuous with one or two reviews

Top Down systems with ratings Top Down systems with ratings Joint process ratings very less

May not be a direct link to pay Often linked to pay May not be a direct link to pay

Monolithic system Monolithic system Flexible process

Complex paper work Complex paper work Documentation minimum

Owned by line managers & personnel department Owned by personnel department Owned by the management

BARS for Police officerThe following are the important job dimension of a police officerJob KnowledgeInitiativeJob PerformanceFirst we have to prepare statements with rating for each dimension

1)Job knowledgeUses the correct rules always 5Uses the correct rules some times- 4Knows about the rule but does not use 3Knows some rules and not uses 2Does not know much of the rules - 1

2) InitiativeAlways takes initiative and completes the task 5Takes initiative but leaves the task half way -4Takes initiative but does not involve in task 3Takes initiative some times 2Does not take initiative - 1

3) Job performance Always perform the job with perfection till completion 5Perform the job till completion with some complaints 4Perform the job with more complaints -3Perform the job up to 50 % - 2Dose not perform the job - 1

Case studyCase summaryThe case is about the appraisal system followed by Uniqe Funds Ltd. Unique funds ltd is a reputed finance company having branches in different parts of the world. It has 290 operative employees and 70 executives. The company uses Graphic rating scale for appraising the employees . They uses several qualities for evaluation.The increments and promotion are based on the rating of the appraisal.Due to denial of increments of two employees appraisal system of the company is in question and worker unrest also erupted.

Key issues1. Denial of increments of two employees of Head office due to poor rating2. The aggrieved employees blamed the appraisal system and argued that Community service was not to be considered for appraisal.3. Automatic system of increment with our considering appraisal rating4. The chief executive fees that appraisal system is dangerous and should be discontinued

Graphic scale of appraisal this is the simplest and most popular technique. Job performance criterion such as dependability, initiative, output, attendance, attitude etc are taken as rating scale. Each scale ranges from excellent to poor. The ratee usually receives a score of 1 to 5 with 5 being excellent.

Question 1Job analysis of the staff is conducted to analyse whether community service is an essential part of the job or not. If it is not an essential part of the job then revise the graphic scale and do the rating of all the employees afresh. If it is an essential part of the job then call the aggrieved employees and give them a review period of three months for improving the performance and do the rating after three months.

Question 2Totally disagree with chief executive officer since performance appraisal is the best method of assessing the performance of an employee. If required a different appraisal method can be implemented. Increments must be based on appraisal system.

Question 3As a service company doing financial services, the company can implement 360 degree appraisal system. The salient features of the same is given below: 360 degree feed back -

Performance appraisal that combines assessment from several sources. Here the rater collects rating from different sources and an overall rating is given to the ratee.ProsCombined opinion is more accurateSome skills are best judged by peersIncreases motivationMore transparentConsBurden someResults can be difficult to interpretCan generate suspicionRater can hide better rating and project the worst ratingConflicting rating can be confusing