Employee Performance System Kathmandu University School of Management Animesh KC Lecturer, KUSOM animesh@kusom.edu.np

Some basic principles of HRM Equity Theory Expectancy Theory Reinforcement Theory Goal Setting Theory Kathmandu University School of Management

A. Equity Theory This process theory focuses on workers' perceptions of the fairness of their work outcomes and inputs. Specifically they strive to maintain ratios of their own rewards to contributions which are equal to others' ratios 𝐈𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚 𝐥 ′ 𝐬 𝐎𝐮𝐭𝐜𝐨𝐦𝐞 𝐈𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚 𝐥 ′ 𝐬 𝐈𝐧𝐩𝐮𝐭 = 𝐎𝐭𝐡𝐞𝐫′𝐬 𝐎𝐮𝐭𝐜𝐨𝐦𝐞 𝐎𝐭𝐡𝐞 𝐫 ′ 𝐬 𝐈𝐧𝐩𝐮𝐭 Kathmandu University School of Management

Inputs and Outputs Inputs Outputs Individual’s contribution to an Organization. Time Effort Loyalty Hardwork Commitment Abilities Outputs Outputs Organization’s return to an Individual. Job Security Salary Employee benefits Recognition Reputation Sense of achievement Kathmandu University School of Management

Consequences of Inequity Based on Equity Theory When employees perceive an inequity, they can be predicted to make one of six choices. They change their inputs. They change their outcomes They distort perceptions of self They distort perceptions of others They choose a different referent They leave the field Kathmandu University School of Management

B. Expectancy Theory The expectancy theory says that individuals have different sets of goals and can be motivated if they have certain expectations. If people expect a positive and desirable outcome, they will usually work hard to perform at the level expected of them. Kathmandu University School of Management

Variables of Expectancy Theory Valence Expectancy Instrumentality Kathmandu University School of Management

“Is the outcome I get of any value to me?” Valence “Is the outcome I get of any value to me?” It refers to the emotional orientations which people hold with respect to outcomes [rewards]. The depth of the want of an employee for extrinsic [money, promotion, free time, benefits] or intrinsic [satisfaction] rewards. Management must discover what employees appreciate. Kathmandu University School of Management

“I am able to complete the actions” Expectancy  “I am able to complete the actions” Expectancy refers to the strength of a person’s belief about whether or not a particular job performance is attainable. Assuming all other things are equal, an employee will be motivated to try a task, if he or she believes that it can be done. Management must discover what resources, training, or supervision the employees need. Kathmandu University School of Management

“if I do a good job, there is something in it for me”. Instrumentality  “if I do a good job, there is something in it for me”. It is the belief that if you perform well that a valued outcome will be received Management must ensure that promises of rewards are fulfilled and that employees are aware of that. For Eg: Commission pay schemes are designed to make employees perceive that performance is positively instrumental for the acquisition of money. Kathmandu University School of Management

Instrumentality is affected by: Clear understanding of the relationship between performance and outcomes – e.g. the rules of the reward ‘game’ Trust in the people who will take the decisions on who gets what outcome Transparency of the process that decides who gets what outcome Kathmandu University School of Management

C. Reinforcement Theory The term reinforcement means to strengthen, and is used in psychology to refer to anything stimulus which strengthens, encouraging the designated behavior, or increases the probability of a specific response This theory focuses totally on what happens to an individual when he takes some action   It is based on “law of effect”, i.e., individual’s behaviour with positive consequences tends to be repeated, but individual’s behaviour with negative consequences tends not to be repeated. Kathmandu University School of Management

Methods of Controlling Behaviour Positive Reinforcement- This implies giving a positive response when an individual shows positive and required behaviour Addition of stimulus to increase the behavour Eg. Immediately praising an employee for coming early for job. This will increase probabilty of outstanding behaviour occurring again. Reward is positive reinforcement Kathmandu University School of Management

Methods of Controlling Behaviour Negative Reinforcement- This implies rewarding an employee by removing undesirable consequences. Removal of stimulus to increase the behaviour For Eg: Blocking facebook (or other social media websites) from the office’s internet server as employees were misusing them during the office hours Kathmandu University School of Management

Methods of Controlling Behaviour Extinction- It implies absence of reinforcements. In other words, extinction implies lowering the probability of undesired behaviour by removing reward for that kind of behaviour If an employee no longer receives praise and admiration for his good work, he may feel that his behaviour is generating no fruitful consequence Kathmandu University School of Management

D. Goal Setting Theory This theory states that goal setting is essentially linked to task performance. It states that specific and challenging goals along with appropriate feedback contribute to higher and better task performance. In simple words, goals indicate and give direction to an employee about what needs to be done and how much efforts are required to be put in. Specific and clear goals lead to greater output and better performance. Unambiguous, measurable and clear goals accompanied by a deadline for completion avoids misunderstanding. Employees’ participation in goal setting goal makes it more acceptable and leads to more involvement. Kathmandu University School of Management

Organization goals and strategies HRM and Performance Organization goals and strategies Development Staffing Appraisal Performance Kathmandu University School of Management Rewards and relations Employee needs HR information

Employees Want to Know….. What am I supposed to be doing? How well am I required to do it? What do you think of my performance? How will I be rewarded? How can I improve my performance? Kathmandu University School of Management

Outcomes of Effective Performance Management Clarifying job responsibilities and expectations Enhancing individual and group productivity Developing capabilities through feedback Align behavior of the employee(s) with the organizational mission and values Providing a basis for making HR decisions Improving employee-manager communication Kathmandu University School of Management

Foundational Concepts Employee – the core asset of organization Employee performance - foundation of organizational survival and success Managing employees for organizational performance and member satisfaction Need for development and utilization of employees for better performance Need for integration of organizational needs and individuals’ needs Influence of organizational culture, structures and management systems on employee performance Alignment of HR policies and practices with organizational goals and strategies Kathmandu University School of Management

Work Behavior What a person does in relation to a given situation or task An action that can be observed and measured in some way An observable response to a work-related situation Measurable in some way (e.g. frequency or completeness) Feelings or attitudes present in all behaviors, but not behaviors per se Kathmandu University School of Management

Measurement of Work Behavior Critical for evaluating desirability or acceptability Basis for influencing behaviors Reinforcement of the desirable or acceptable behaviors at the work place for continuation Minimization or termination of the undesirable or unacceptable behaviors Kathmandu University School of Management

External Influences Economic conditions Change in technology Socio cultural practices Political practices Regulatory framework Unionism Industry Kathmandu University School of Management

Work Environment Supervision and leadership The organization Tremendous effect on employee behaviour Self –fulfilling prophecy or Pygmalion effect Leadership theories – Path Goal theory and Leader Member Exchange theory The organization Rewards – types, modes and criteria for distribution Organizational culture Job design Kathmandu University School of Management

Work Environment Co-workers Performance norms Group dynamics – groupthink, social loafing Teamwork Cohesiveness Kathmandu University School of Management

Employee Attitude Subjective norms General feeling of favorableness or un-favorableness towards certain objects based on beliefs about consequences Helps form behavioral intention in similar direction Two way relationships with behavior Subjective norms Perceived social pressure about expected behavior Kathmandu University School of Management

Employee Behavioral intention Knowledge, ability and skills Inclination to certain course of action determined by attitudes and social norms Knowledge, ability and skills Knowledge – information about and understanding of factors or principles related to something Ability – general capacity related to the performance of certain tasks developed through interaction of aptitude and experience; more cognitive Skill – combination of abilities with capabilities developed as a result of training and experience; more psycho-motor Kathmandu University School of Management

Employee Motivation – psychological process that energize, direct and lead to the persistence of voluntary behavior Needs Cognitive process Goal setting Equity Reinforcement Social learning Kathmandu University School of Management

Concept of Performance Two views Conformance to organisational norms, rules, and process Achievement of the job/ position objective, output or result Kathmandu University School of Management

Concept of Performance A set of outcomes (job results and behaviors) produced on A specified job during A specified period of time with the use of Certain competencies of the performer Kathmandu University School of Management

Aims of PMS Empowering, motivating and rewarding employees to do their best Focusing employee’s tasks on the right things and doing them right. Aligning everyone’s individual goals to the goals of the organization Proactively managing and resourcing performance against agreed accountabilities and objectives Linking job performance to the achievement of the Organization’s strategic plans Maximizing the potential of individuals and teams to benefit themselves and the organization, focusing on achievement of their objectives Kathmandu University School of Management

Aims of PMS All individuals being clear about what they need to achieve and expected standards, and how that contributes to the overall success of the organization; receiving regular, fair, accurate feedback and coaching to stretch and motivate them to achieve their best. Identifying HR developmental objectives that will help the employee grow his or her skills, knowledge and competencies related to the work Identifying career development objectives that can be part of longer-term career Kathmandu University School of Management

Determinants of Performance P = f (A x M) E where P is performance A is ability M is motivation E is environment Ability = Aptitude X Training X Resources Motivation = Desire X Commitment Kathmandu University School of Management Aptitude - innate skills and abilities a person brings to the job (physical/ mental capabilities and personality characteristics) Training - job related skills and knowledge developed after joining the job Resources - the availability of adequate resources. Desire- willingness to complete a task Commitment - continued persistence to complete it

Campbell’s taxonomy of individual performance Gilbert’s performance engineering model Rummler and Brach’s performance model Characteristics of HPT Kathmandu University School of Management

Individual Level Performance Models Campbell’s taxonomy of individual performance Performance components Performance determinants and their predictors Kathmandu University School of Management

Individual Level Performance Models Performance components Job -specific task proficiency Non-job -specific task proficiency Written and oral communication Demonstrating effort Maintaining personal discipline Facilitating peer and team performance Supervision Management Kathmandu University School of Management Job -specific task proficiency (the extent to which one performs core substantive and technical tasks) Non-job -specific task proficiency (the extent to which one performs additional tasks or executes residual behaviors) Written and oral communication (the extent to which one can communicate independent of the correctness of the subject matter) Demonstrating effort (the extent to which one is consistent on a regular basis, expends extra effort or willing to work under averse conditions) Maintaining personal discipline (the extent to which one avoids negative behaviors) Facilitating peer and team performance (the extent to which one supports and helps others) Supervision (the extent to which one influences supervisees’ tasks through face to face interactions) Management (the extent to which one engages in planning, organizing, directing and controlling the unit’s tasks)

Individual Level Performance Models Performance determinants and their predictors Declarative knowledge Procedural knowledge and skills Motivation Kathmandu University School of Management Declarative knowledge (facts, principles, goals and self knowledge) Procedural knowledge and skills (cognitive skills, psychomotor skills, physical skills, self management skills, interpersonal skills) Motivation (choice to perform, level of effort, persistence of effort)

Individual Level Performance Models Gilbert’s performance engineering model Performance – a function of worthy performance (W), which is a function of the ratio of valuable accomplishment (A) to costly behavior (B) or effort A W = ---------- B Kathmandu University School of Management

Individual Level Performance Models Gilbert’s performance engineering model Performance not same as activity Activity, knowledge or amount of work – not performance and hence not to be rewarded Rewarding efforts, and not worthy performance - incompetence Kathmandu University School of Management

Individual Level Performance Models Gilbert’s performance engineering model Measure of competence and potential for improving performance (PIP) – the ratio of exemplary performance (Wex ) to typical performance (Wt) PIP= Wex : Wt For any given accomplishment, a deficiency in performance – a function of deficiency in a behavior repertory (P), or in the environment that supports the repertory (E), or in both Ultimate cause - deficiency in the management system (M) Kathmandu University School of Management The gap between desired and current performance can be determined by comparing "the very best instance of that performance with what is typical" (Gilbert, 1988, p.49). Exemplary performance (W ex ) is demonstrated when behaviors result in the best outcomes. Typical performance (Wt) is the current level of performance.

Individual Level Performance Models Performance deficiency - a result of deficiency in behavior repertory and/or environmental repertory Information Instrumentation Motivation Person’s repertory of behavior (P) Knowledge Scientifically designed training that matches the recruitments of exemplary performance Placement Capacity Flexible scheduling of performance to match peak capacity Physical shaping Adaptation Selection Motives Assessment of people’s motives to work Recruitment of people to match the realities of the situation Kathmandu University School of Management

Individual Level Performance Models Information Instrumentation Motivation Environmental support (E) Data Relevant and frequent feedback about the adequacy of performance Description of what is expected of performance Clear and relevant guides to adequate performance Instrument Tools and materials of work designed scientifically to match human factors Incentives Adequate financial incentives made contingent upon performance Non monetary incentives made available Career development opportunities Kathmandu University School of Management

Individual Level Performance Models Gilbert’s performance engineering model Behaviorist notion of human behavior – mechanistic and dehumanizing Kathmandu University School of Management

Multiple Level Performance Models Rummler and Brach’s performance model Three levels of performance Organizational level – organization’s relationship with its market and organizational components Process – the work flow Job/ performer – the individual doing the various jobs Kathmandu University School of Management

Multiple Level Performance Models Rummler and Brach’s performance model Three performance variables within each level Goals – specific standards that reflect customers’ expectations Design – configuration of components necessary Management – practices that ensure goals are current and being achieved Kathmandu University School of Management

Multiple Level Performance Models Rummler and Brach’s performance model Goals Design Management Organization Strategy articulated, sensible and communicated? Outputs determined? Necessary functions in place? Appropriate flow designed? Structure supporting strategy? Goal setting? Performance measurement? Resource allocation? Functional interfaces managed? Process Key process goals linked to customer and organization requirements? The process most efficient and effective for goal achievement? Appropriate process sub goals set? Process performance managed? Sufficient resources allocated to each process? Interfaces being managed? Kathmandu University School of Management

Multiple Level Performance Models Rummler and Brach’s performance model Goals Design Management Individual/ job Job outputs and standards linked to process requirements? Process requirements reflected in the appropriate jobs? Job steps in logical sequence? Supportive policies and procedures developed? Job environment ergonomically sound? Performers understanding the goals? Sufficient resources available? Rewarded for goals achievement? Feedback on performance? Necessary skills to achieve job goals? Physical, mental and emotional capacity to achieve the job goals? Kathmandu University School of Management

Basic Characteristics of HPT Distinction between human performance and behavior Result and process Worthy performance as a function of the value of the accomplishment and the costs to achieve it Costs and benefits of performance Systems approach to five components of performance Job, individual, responses, consequences, and feedback Engineering competent human performance Productivity enhancement strategies Kathmandu University School of Management

Basic Characteristics of HPT Analysis of performance problems, needs and goals Personal growth and pay-off to organization Recognition of the role of exemplary performance Finding benchmark performance models Identification of and addressing causes of human performance problems Learning – and non-learning problems Kathmandu University School of Management

Basic Characteristics of HPT Application of multiple performance improvement strategies Training, education, career development, job performance aids, feedback systems, employee selection, organization development/ redesign Kathmandu University School of Management

Model for Influencing Performance Job Situation Individual Performer Response by Performer Consequence to Performer Job Are job responsibilities clear? Have work standards been established? Does the job holder know what is expected? Individual Is there a good match between the person and the job? Does the person have the requisite ability to perform? Response Does the person know when and how to perform? Do experienced performers know what to do and when to do it? Consequences What happens to the performer as a result of performance? Is she rewarded, punished or neither rewarded or punished for performing? Feedback Are people given feedback on their performance? Kathmandu University School of Management

Employee Performance Outcomes of work behaviors of employees - achievement Environment and work context of performance Kathmandu University School of Management Cues What should employees perform? Means What actions must an employee carry out to achieve results? Performance What are the accomplishments or results of taking actions?