Chapter 8: Performance Management
LO2: Performance Appraisal Purpose
LO1: Intro to Performance Management
Performance Management System Goals
Objective 1: Transform organizational objectives into clearly understood measurable outcomes that define success. They're shared with stakeholders in and outside the organization
Objective 2: Provides instruments for measuring success of organization
Quality
Cost
Speed
Customer Service
Employee Satisfaction
Motivation
Skills
Objective 3: Provides forward looking strategic partnership between top and middle management as well as employees
Objective 4: Make clear connections between organization goals & objectives and work plans as well as criteria for success
Aligning organizational goals with individual performance goals
Linking up Approach
Faster
Allows for a more direct line of sight between individual and organizational goals
More meaningful and clearer goals generated
Cascading Approach
Time-consuming
Risk being distorted down the chain until the individual no longer contributes to the organizational goals
Administrative Decisions
Termination
Promotions
Transfers
Pay Raises
Strategic Planning
HR Planning
Working conditions
LO3: Evaluation Methods
Employee Development and Career Planning
Improving employees KSAs
Counseling, coaching and mentoring
Training
Training Program Objectives
Identify individual training needs
Provide insights into effectiveness of HR systems
Training program
Selection system
Promotion of internal hires
Performance Appraisal Process
Identification
Performance dimensions
Beyond job descriptions
Strategy
Culture
Measurement
Direct/indirect observation
Objective/subjective measures
Type of judgement required
Focus of measure
Relative
Absolute
Comparative Methods
LO4: Raters and Rater Training
Forced Distributions
Pros
Cons
Overcomes bias of
Trait
Central Tendency
Behaviour
Outcome
Leniency
Strictness
Production
Personnel Data
Relative differences among employees unknown
Quantity
Quality
Trainability
Absenteeism
Tenure
Rate of advancement
Accidents
Ranking Method
Pros
Cons
Management
Ease of administration and explanation
Providing feedback
Improving performance
Subject to halo and recency effect
Taking action
Don't know by how much one employee is better than another
Evaluative
Administrative
Developmental
Multiple Sources for Performance Ratings
L05: Evaluation Methods
Performance targets may relate to
Pros
Useful for deciding merit pay increases, promotions, and organizational rewards
360-Degree Feedback
Cons
Tell & Listen Approach
Rater Training
Problem-solving Approach
Tell & Sell Approach
Offer little job-related feedback
Quality
Quantity
Time
Non-comparative Methods
Self-Appraisals
inward appraisal
Peer-Appraisals
lateral appraisal
Direct Report Appraisals
Behaviouraly Anchored Rating Scales
Performance Tests and Observations
Rating Scales
Management-by-Objectives
Subordinates - downward appraisal
Supervisors - upward appraisal
Best used on new employees
Example: An employer noting that a new employee is not meeting performance standards, the employer will first try to convince the employee to perform better
Interview: Review the employees performance and tries to convince the employee to perform better
Best used for consoling employees in regards to poor performance
Example: Employer assisting the employee in overcoming these reactions by counselling the employee on how to perform better
Interview: Allows the employee to explain reasons, excuses and deference feelings about performance
Best used for mitigating specific problems related to employee performance
Example: Employers attempts to train, coach, or counsel to remove the deficiencies while setting future goals for performance
Interview: Identifies problems that are interfering with employee performance
Customers
External appraisal
Challenges
Cost
Time
Role in Technology
Pros
Cons
Potential rating errors information and how to minimize them
Halo
Central Tendency
Leniency
Strictness
Personal Prejudice
Recency Efffect
Contrast Errors
Frame of reference training
Learn purpose of performance evaluations and understand how they align with organization's strategy
Trained in observation technique and categorization skills
Inexpensive to develop and administer
Raters need little training or time to complete form
LO6: Talent Management
LO7: Establishing a Performance Improvement Plan
Can be applied to a large # of employees
Rater's biases reflected
Specific performance criteria may be omitted
Identifying and developing specific individuals withing the organization who are seen as having high potential
Top performers vs. High potential individuals
Subject to individual interpretations
Possible Opportunities granted
Form may rely on irrelevant personality
Specific Work Assignments
Help grow skills in particular area
Educational opportunities
Example: Advanced degree/certificate programs or other training activities
Inclusion in events or mentor activities
Purpose: Give employee visibility and access to senior employees
Pros
Objective behaviour more likely
9 Box Grid - Performance by Potential
Job-related, practical, standardized
Rough Diamond
Low performer and high potential
Cons
Inconsistent Player
Rater bias
Low performer and moderate potential
Limited number of performance categories and specific behaviours
Talent Risk
Low performer and moderate potential
Future Star
Moderate performer and high potential
Key Player
Steps of Performance Improvement Plan Process
Moderate performer and moderate potential
Solid Professional
Pros
Moderate performer and moderate potential
Consistent Star
Employees more motivated to achieve goal
High performer and high potential
Current Star
High performer and moderate potential
Bias reduced
High Professional
Cons
High performer and low potential
Objectives too ambitious or too narrow
Frustrated employees or overlooked areas of performance
1. Getting Started
Record employee's current performance and discover areas that require improvement
2. Develop an Action plan
Set specific goals and assign the resources and training needed to reach goals
3. Review the Performance Improvement Plan
Plan should be reviewed by HR department before meeting with employee
Plan should lay out expectations and consequences of not meeting the goals
4. Meet with the employee
Discuss the areas in need of improvement and the action plan
After hearing employee's feedback, make required changes
5. Follow Up
Follow-up meetings on a weekly or bi-weekly basis
6. PIP Conclusion
If employee met objectives
Continue their employment
If employee doesn't meet objectives
Consider termination
If employee improved a bit
Employer may agree to extend PIP
Employer may revise objectives
Pros
Employees ensured feedback and opportunity to improve
Employees empowered to take control of performance
Provides documentation of performance for legal implications
Cons
Takes time and resources
Can be a waste if unsuccessful
May cause employees discomfort and disrupt workflow
Advantages
Contributes in retaining top talent
Helps in understanding employees better and shaping their future
Promotes effective communication across different disciplines
Disadvantages
The implementation of talent management program could be expensive in terms of time, resources and financial costs
Lack of support from line mangers can impede the level of commitment from employees
A core drawback of talent management is that it can contribute in raising the conflicts between HR and management by not reaching to proper agreement or consensus
Example:Used in Medium-Large Sized Companies. Microsoft, Global Companies with multiple offices
Example: Small sized companies, Ex. Local third party coffee shop
Assessing overall performance of organization
Balanced Scorecard
Example: Over 50% of the top 1000 Fortune companies use a version of the Balanced ScoreCard. (Example: Microsoft
Example: Ratings and comments on performance appraisals justify raises and promotions
Example: Using performance appraisal to identify strong candidates for an upcoming role
Example: if multiple employees have poor performance in one area, It may indicate a poorly designed training program.
Example: Wendy’s customer feedback survey helps identify the need for faster service
Example: Feedback from McDonalds boss identify the need for better performance in the kitchen (i.e.make burgers faster)
Examples: Facebook has put forced ranking back.
Industries: being phased out of all industries.
Industries: commonly seen in sales-based industries, and used to evaluate sales teams
Example: ranking sales employees based on new clients sign up or sales per quarter
Industries: widespread among all industries, most commonly used
Industries: used in technical industries or positions that require high levels of technical skills
Industries: one of best evaluation methods for performance evaluation. Widespread among all industries and goals can be tailored to individual department.
Example: Sales MBO- achieve the new booking target of 30 per month, hit average deal size of $100,000
Applicable if goal is to further self-development
Useful to observe employees' interpersonal, collaborate and influence skills
Example: How a supervisor provides praise or feedback, autonomy, and guidance to employees
Help identify leadership or management issues
Example: Complaints or compliments
Approach is better suited for employee development purposes
Example: Friendship and favourable impression of social skill leads to a rating of high productivity
Example: Not giving out any ratings of 1 or 7 on 7-pt scale to employees
Example: All employees rates as above average
Example: All employees rated as below average
Example: Someone who actually performs well vs. someone who can develop in order to perform well
Example: Key business unit or overseas assignment
Example: Companies like Pepsi Co., Citi and SC Johnson have talent management groups
Employees will receive evaluations of potential and performance ratings which can be used by HR department to inform their decisions related to development and compensation
Application: Use facts, examples and patterns of performance concerns to address performance issues
Example: Employee should not be late for work during 60-day performance improvement cycle
Application: Discuss any roadblocks and tools or training required. Provide opportunity for employees to ask questions as well