Welcome to Performance Management!

A little about me, Dr. Natalie Wright Undergraduate degree in psychology from Colorado State University M.S. and Ph.D. in industrial and organizational psychology from North Carolina State University

My research My research focuses on several different areas: Psychometric evaluation of psychological measures Particular interest in item response theory (IRT) Work analysis Use of O*NET to understand work across time and cultures Humanitarian work psychology Development of work analytic and selection tools for disaster response

Things I enjoy Running Hiking Riding horses My dog Freya Picture pending until I’m good enough to bother with a picture… My dog Freya

Learning about you What is your name? What year are you in the program? What is your undergraduate degree? Where did you graduate? Where are you from? What are your primary interests in I/O? What are you hoping to get out of this class?

The syllabus

Performance management systems in context

What is performance management? Continuous process of identifying, measuring, and developing performance of individuals and teams and aligning performance with the strategic goals of the organization

Good Performance management Systems: Increase motivation to perform Know how you’re doing Increase self-esteem Feel recognized and valued Managers gain insight about subordinates Understand how individual contributes to organization Understanding of performance style and needs Definition of job and performance criteria identified Know what you’re supposed to be doing

Good Performance Management Systems: Self-insight and development enhanced Understanding of strengths and weaknesses and how to improve Administrative actions more fair and appropriate Evidence of performance for personnel actions Organizational goals made clear Understand link between individual performance and organizational success Employees become more competent Helps to create development plans for improvement

Good Performance Management Systems: Employee misconduct minimized Problems can be identified early Better protection from lawsuits Well-defined performance criteria and appraisal process provide evidence to protect organization in case of lawsuit Better differentiation between good and poor performers Identify who might need help before their poor performance becomes a problem Supervisors’ views of performance communicated effectively More accountability in expectations and feedback

Good Performance Management Systems: Organizational change facilitated Align performance goals with new organizational strategy Motivation, commitment, and intentions to stay with organization enhanced Know what’s expected and how performance can be improved, and see system as objective rather than arbitrary Voice behavior encouraged Voice behavior-suggestions for changes or improvements Employee engagement enhanced Engaged employee=involved, committed, passionate, empowered

Bad Performance Management Systems: Increased turnover If process isn’t seen as fair, likely to leave or withdraw Use of misleading information Possible to fabricate performance information or obtain it from inaccurate source Lowered self-esteem Inaccurate feedback problematic Wasted time and money Resources for system not being used effectively

Bad Performance Management Systems: Damaged relationships Poor supervisor-employee or employee-employee relationships Decreased motivation to perform Don’t know what’s required and don’t see clear rewards for good performance Employee burnout and job dissatisfaction Performance isn’t rewarded, so why bother? Increased risk of litigation More likely to view personnel actions as unfair

Bad Performance Management Systems: Unjustified demands on managers’ and employees’ resources Eat up time and other resources without offering clear benefit Varying and unfair standards and ratings Standards and ratings may vary across individuals and organizational units Emerging biases Values, biases, and relationships may affect ratings more than performance Unclear ratings system Uncertainty about how ratings are made and what they’re used for

Rewards System Rewards system: set of mechanisms for distributing tangible and intangible returns Tangible returns: cash compensation, benefits Intangible returns: recognition, status, employment security, challenging work, learning opportunities

Types of Returns Base pay: given for work performed Determined based on requirements of position, not individual contribution to organization Cost-of-living adjustments: given to compensate for inflation-given regardless of individual performance Contingent pay (merit pay): Given in addition to base pay: performance-based Short-term incentives: temporary pay increase based on performance (commissions, bonuses, etc.) Long-term incentives: attempt to improve performance for longer time span (stock options, etc.)

Types of Returns Income protection: Backup to salary if employee can no longer work (i.e., Social Security, medical insurance, pension plans, etc.) Work-life focus: help employee balance work and nonwork activities (flexible work schedules, onsite daycare, etc.) Allowances: cover housing, transportation, and other needs-common for expatriate workers Relational returns: any benefit not related to money or other tangible entity: relationships, status, learning opportunities, etc.

Purposes of PM Systems Strategic purpose: help management achieve business objectives Linking individual and organizational goals reinforces appropriate behavior: reward appropriate behavior that aligns with organizational objectives Example: if company moving towards customer service orientation, PM system should reward exemplary customer service Teaches new employees what is required of them Need to know what organization values most

Purpose of PM systems Administrative purpose: provides accurate information for personnel decisions Informational purpose: tell employees how they are doing and what they need to improve, provide information to employees about supervisor’s and organization’s expectations Developmental purpose: performance feedback helps employees improve their performance

Purpose of PM systems Organizational maintenance purpose: helps with workforce planning Workforce planning: set of systems that allow organizations to anticipate and respond to needs emerging within and outside organization, to determine priorities, and to allocate human resources where they will do most good Documentation purpose: Documentation for administrative actions Organizational research, such as validation of new selection assessment

Ideal PM System Strategic congruence: individual goals should align with unit goals which should align with organizational goals Reward behaviors that fit with organization’s goals Context congruence: should be congruent with organizational and country/regional culture Reward systems which don’t fit culturally won’t be effective Example: 360-degree feedback system in hierarchical organization or country

Ideal PM System Thoroughness: four dimensions that need to be included: All employees should be evaluated All major job responsibilities should be evaluated Should cover entire review period Feedback should include positive and negative aspects of performance Practicality: should be relatively inexpensive and easy to use

Ideal PM System Meaningfulness: Standards should be relevant for each job Should emphasize only things under employee’s control Evaluations need to happen at regular intervals Specificity: should provide concrete information about expectations Identification of effective and ineffective performance: needs to make distinctions between employees

Ideal PM System Reliability: Measures of performance should be consistent and as error-free as possible Validity: Measures of performance should only measure relevant aspects of performance Acceptability and fairness: should be perceived as fair Distributive justice: are outcomes allocated fairly? Procedural justice: are organizational processes fair? Interpersonal justice: are employees treated well by decision makers? Informational justice: is information disseminated appropriately, and does information make sense?

Ideal PM system Inclusiveness: should include input from multiple sources Participants should be given voice in process Openness: standards of performance should be clear, and feedback should be honest Correctability: need way in which employees can contest ratings and decisions Standardization: should function same way across time, people, and units Ethnicality: only relevant aspects of performance for which the supervisor has sufficient information are evaluated

Integration of PM systems with other Org Activities Training: what areas of performance need to be improved across organization? Selection: What aspects of performance are the most important? How do selection tools tie in with those aspects? Workforce planning: What skills will organization require in future? Are those available internally?

Cleveland, Murphy, & Williams (1989) Purposes of study: Assess ways in which performance appraisal information used Assess whether performance information is used for multiple, potentially conflicting purposes Assess organizational characteristics associated with performance appraisal use Method: Sent survey out to 243 I/O psychologists working in personnel departments/functions 110 surveys returned

Cleveland et al. (1989) Results: Performance appraisal information used most often for salary administration, performance feedback, and developmental purposes Identified 4-factor structure of performance appraisal uses: 1. Between-individual comparisons 2. Within-individual comparisons 3. Systems maintenance 4. Documentation Substantial correlations between factors: indicates performance appraisal often used for multiple purposes Organizations with low complexity and high coordination more likely to use performance appraisal information for within-individual comparisons and systems maintenance

Cawley, Keeping, & Levy (1998) Purpose of study: use meta-analysis to evaluate whether participation in performance appraisal process related to employee reactions Key outcome variables: Satisfaction with appraisal interview (feedback meeting) Satisfaction with appraisal system Utility of performance appraisal feedback: how useful is it? Motivation to improve Fairness of ratings

Cawley et al. (1998) Key participation variables: Value-expressive participation: voicing one’s thoughts about appraisal process without expectation that they will influence outcomes Instrumental participation: voicing one’s thoughts about appraisal process with expectation that they will influence outcomes Proportion of time talked (during appraisal meeting) Self-ratings of performance

Cawley et al. (1998) Meta-analysis Found all articles related to performance appraisal participation and reactions since 1967 Included in meta-analysis only articles that took place in field setting, measured relevant variables, and reported sufficient statistics to calculate effect size Final sample included 27 studies with 32 distinct samples

Cawley et al. (1998) Results: All types of reactions were highly correlated with participation in the appraisal process Strongest relationship was between participation and satisfaction Stronger relationship between value-expressive participation and reactions than instrumental participation and reactions Self-appraisal and time spent talking not very strongly related to reactions

Putting it Together In groups of 3: Discuss the performance management systems that you have experienced. What characteristics of these performance management systems did you like? How do these align with the characteristics of good PM systems discussed? What characteristics of these performance management systems did you dislike? How do these align with the characteristics of poor PM systems discussed?