CHAPTER 10: PERFORMANCE MANAGEMENT AND FEEDBACK Copyright © 2005 South-Western. All rights reserved

Performance Management & Feedback Organizations need broader performance measures to insure Performance deficiencies addressed in timely manner through employee development programs Employee behaviors channeled in appropriate direction toward performance of specific objectives Employees provided with appropriate & specific feedback to assist with career development Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-2 Strategic Choices in Performance Management Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-3 Reciprocal Relationship Between T&D & Performance Management Copyright © 2005 South-Western. All rights reserved.

Who Evaluates? Problems with immediate supervisors conducting performance evaluations Lacking appropriate information to provide informed feedback on employee performance Insufficient observation of employee’s day-to-day work to validly assess performance Lack of knowledge about technical dimensions of subordinate’s work Lack of training or appreciation for evaluation process Perceptual errors by supervisors that create bias or lack of subjectivity in evaluations Copyright © 2005 South-Western. All rights reserved.

Perceptual Errors of Raters Halo effect Rater allows single trait, outcome or consideration to influence other measures of performance Stereotyping Rater makes performance judgments based on employee’s personal characteristics rather than employee’s actual performance Recency error Recent events & behaviors of employee bias rater’s evaluation of employee’s overall performance Copyright © 2005 South-Western. All rights reserved.

Perceptual Errors of Raters Central tendency error Evaluator avoids higher & lower ends of rating in favor of placing all employees at or near middle of scales Leniency or strictness errors Evaluator’s tendency to rate all employees above (leniency) or below (strictness) actual performance level Personal biases & organizational politics Have significant impact on ratings employees receive from supervisors Copyright © 2005 South-Western. All rights reserved.

Purposes of Performance Management Systems Facilitate employee development Determine specific training & development needs Assess individual & team strengths & weaknesses Determine appropriate rewards & compensation Salary, promotion, retention, & bonus decisions Employees must understand & accept performance feedback system Enhance employee motivation Employee acknowledgment & praise reinforces desirable behaviors & outcomes Copyright © 2005 South-Western. All rights reserved.

Purposes of Performance Management Systems Facilitate legal compliance Documentation is strong defense against charges of unlawful bias Facilitate HR planning process Alert organization to deficiencies in overall level & focus of employee skills Copyright © 2005 South-Western. All rights reserved.

Other Performance Feedback Systems Peers Only effective when political considerations & consequences are minimized, & employees have sense of trust Subordinates Insights into interpersonal & managerial styles Excellent measures of individual leadership capabilities Same political problems as peer evaluations Customers Feedback most free from bias Copyright © 2005 South-Western. All rights reserved.

Other Performance Feedback Systems Self-evaluations Allow employees to participate in critical employment decisions More holistic assessment of performance Multi-rater systems or 360-degree feedback systems Can be very time-consuming More performance data collected, greater overall facilitation of assessment & development of employee Costly to collect & process Consistent view of effective performance relative to strategy Copyright © 2005 South-Western. All rights reserved.

Behavior-based measures What to Evaluate? Traits measures Assessment of how employee fits with organization’s culture, not what s/he actually does Behavior-based measures Focus on what employee does correctly & what employee should do differently Copyright © 2005 South-Western. All rights reserved.

What to Evaluate? Results-based measures Focus on accomplishments or outcomes that can be measured objectively Problems occur when results measures are difficult to obtain, outside employee control, or ignore means by which results were obtained Limitations Difficult to obtain results for certain job responsibilities Results sometimes beyond employee’s control Ignores means or processes Fails to tap some critical performance areas Copyright © 2005 South-Western. All rights reserved.

Job Performance Competencies Closely tied to organization’s strategic objectives Can take tremendous amount of time to establish Must be communicated clearly to employees Must be tied in with organization’s reward structure Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-4 Multilevel Corporate Competency Model Copyright © 2005 South-Western. All rights reserved.

Capital One Success Factors & Competencies Builds relationships Communicates clearly & openly Treats others with respect Collaborates with others Applies integrative thinking Analyzes information Generates & pursues ideas Develops & shapes strategies Identifies & solves problems Applies integrated decision making Drives toward results Focuses on strategic priorities Organizes & manages multiple tasks Directs & coordinates work Gets job done Leads in learning environment Recruits talent Motivates & develops Builds & leads teams Influences others Promotes culture Takes personal ownership Takes responsibility Learns continuously Embraces change Initiates opportunities for improvement Shows integrity Maintains perspective Copyright © 2005 South-Western. All rights reserved.

How to Evaluate? Absolute measurement Relative assessment Measured strictly by absolute performance requirements or standards of jobs Relative assessment Measured against other employees & ranked on distance from next higher to next lower performing employee Ranking allows for comparison of employees but does not shed light on distribution of performance Copyright © 2005 South-Western. All rights reserved.

Forced Ranking/Distribution Arguments in favor of forced ranking Best way to identify highest-performing employees Data-driven bases for compensation decisions Forces managers to make & justify tough decisions Arguments critical of forced ranking Can be arbitrary, unfair, & expose organization to lawsuits Inherent subjectivity Forced rankings tend to be more effective in organizations with high-pressure, results-driven culture Copyright © 2005 South-Western. All rights reserved.

Measures of Evaluation Graphic rating scales Weighted checklists Behaviorally anchored rating scales (BARS) Behavioral observation scales (BOS) Critical incident method Management by objectives (MBO) Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-6 Graphic Rating Scales Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-7 Weighted Checklist Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-8 Behaviorally Anchored Rating Scale (BARS) Copyright © 2005 South-Western. All rights reserved.

Exhibit 10-9 Behavioral Observation Scale (BOS) Copyright © 2005 South-Western. All rights reserved.

Objectives-Based Performance Measurement Enhanced employee motivation Employees can far more committed to reaching performance objectives they have agreed to When employee participates, his/her trust & dependability placed on line Copyright © 2005 South-Western. All rights reserved.

Objectives-Based Performance Measurement Three common oversights Setting vague objectives Setting unrealistically difficult objectives Not clarifying how performance will be measured Objectives selected must be valid Copyright © 2005 South-Western. All rights reserved.

Other Considerations Ensure link between performance management, training & development, & compensation Assignments & responsibilities Traditional performance evaluation may need redesign due to changes in contemporary organizations Degree of standardization or flexibility of performance management system Standardization important to prevent job bias Flexibility important differing levels of responsibility & accountability Copyright © 2005 South-Western. All rights reserved.

Reasons Managers Resist or Ignore Performance Management Process is too complicated No impact on job performance Possible legal challenges Lack of control over process No connection with rewards Complexity & length of forms Copyright © 2005 South-Western. All rights reserved.

Strategies for Improving Performance Management System Involve managers in design of system Hold managers accountable for performance & development of subordinates Set clear expectations for performance Set specific objectives for system Tie performance measures to rewards Gain commitment from senior managers Copyright © 2005 South-Western. All rights reserved.

Reading 10.1 Has 360 Degree Feedback Gone Amok? Purposes of 360 Degree feedback systems Furthering management & leadership development Facilitating organizational change & improvement initiatives that allow organization to become more open & participative Expand formal appraisal system by making feedback evaluative & linking more with formal performance appraisal Copyright © 2005 South-Western. All rights reserved.

Reading 10.1 Has 360 Degree Feedback Gone Amok? Recommendations for increasing likelihood that 360 feedback will benefit organization Assign internal consultant or champion to oversee process & hold him/her accountable for results Initial implementation should be on limited basis to allow for evaluation of process using pre-post test control group test design Create focus group to identify effectiveness criteria that organization values & will be used in measurement process Train all raters to avoid systematic rater errors Copyright © 2005 South-Western. All rights reserved.

Reading 10.2 “Super-Measure” (SM) Single measure with great relevance up, down, & across organization & customer base Used to align behaviors & actions of various parts of firm with value proposition Transcends other measures by unifying actions of disparate organizational functions & levels Copyright © 2005 South-Western. All rights reserved.

Reading 10.2 “Super-Measure” (SM) Clearest examples from firms within service sector Service encounters often require various elements of supply system to have direct customer interface Most powerful service guarantees are those that guarantee satisfaction with no exclusions Copyright © 2005 South-Western. All rights reserved.

Reading 10-2 Reasons for Adopting SM Management Crises may provide pressure to resolve conflict & to arrive at consensus Continuous improvement Achieve better alignment with strategy Market-share-grabbing strategy Achieve rapid growth Maintain culture Decentralize management Copyright © 2005 South-Western. All rights reserved.

Reading 10-2 Selecting & Implementing SM SMs tie directly to firm’s market & follow strategy SMs are simple & common Need not be comprehensive or balanced Nave horizontal & vertical relevance Relevant from executives to employees, across functional departments & are linked to market Both monetary & behavioral rewards tied to SM All employees must understand how they affect SM Dynamic reward system Copyright © 2005 South-Western. All rights reserved.

Reading 10.3 Strategic Performance Appraisal in Team Organizations Effective performance-appraisal systems require careful consideration of team contingencies Team membership configuration Team task complexity Nature of interdependencies among team & external groups Copyright © 2005 South-Western. All rights reserved.

Reading 10-3 Work or Service Teams Well-developed social system Quality of interpersonal relationships important Individual& team performance appraisals recommended Outcome-based performance appraisal recommended for team, but not for individual members Members typically responsible for monitoring & documenting own performance on individual tasks Copyright © 2005 South-Western. All rights reserved.

Reading 10-3 Project Teams Assembled for specific purpose & expect to disband once task is complete Focused more on tasks than on team members Metrics developed that relate to various stages of project Teams can self-correct before things go too far off course Copyright © 2005 South-Western. All rights reserved.

Reading 10-3 Project Teams Multisource performance appraisal particularly useful Project leader & peer ratings good sources of behavioral ratings Members rated on both individual performance & team contribution Copyright © 2005 South-Western. All rights reserved.

Reading 10-3 Network Teams Virtual Potential membership not constrained by time or space Work extremely nonroutine Rapid-response units charged with strategically responding to market challenges Performance of whole team often not assessed formally Appraisal focused on Developing individual capacity to initiate, participate, & lead improvisational action, rather than on past outcomes Copyright © 2005 South-Western. All rights reserved.

Reading 10-3 Network Teams Competency-based appraisal systems optimal Employees assessed on extent to which they Apply learning to current activities Set developmental goals Seek out feedback Behavior-based appraisal used to assess extent to which members engage in collaborative communication & teamwork Copyright © 2005 South-Western. All rights reserved.