Chapter 08 Performance Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Human Resource Management: Gaining a Competitive Advantage

Learning Objectives  Identify major determinants of individual performance.  Discuss three purposes of performance management.  Identify five criteria for effective performance management systems (PMS).  Discuss four approaches to performance management, specific techniques used in each approach and ways these approaches compare with criteria for effective PMS. 8-2

Learning Objectives, cont.  Choose the most effective approach to performance measurement for a given situation.  Discuss advantages and disadvantages of different sources of performance information.  Choose the most effective sources for performance information.  Distinguish types of rating errors and explain how to minimize each in a performance evaluation.  Conduct an effective performance feedback session.  Identify the cause of a performance problem. 8-3

Introduction  Performance Management is the process through which managers ensure that employees’ activities and outputs are congruent with organizational goals.  Performance Appraisal is the process through which an organization gets information on how well an employee is doing his or her job.  Performance Feedback provides employees information regarding their performance effectiveness. 8-4

Process of Performance Management 8-5

3 Purposes of Performance Management Strategic Developmental Administrative 8-6

5 Criteria of Performance Measures Strategic Congruence Validity Reliability Acceptability Specificity 8-7

Measuring Performance  Comparative approach compares performance with that of others.  Ranking Simple ranking ranks employees from highest to lowest performer. Alternation ranking is crossing off the best and worst employees.  Forced distribution is employees ranked in groups.  Paired comparison Managers compare every employee with every other employee in work group. 8-8

Attribute Approach  Graphic rating scales list of traits evaluated by 5-point rating scale. legally questionable.  Mixed-standard scales define relevant performance dimensions develop statements representing good, average, and poor performance along each dimension. 8-9

Behavioral Approach  Critical incidents approach requires managers to keep record of specific examples of effective and ineffective performance.  Behaviorally anchored rating scales (BARS)  Behavioral observation scales (BOS)  Organizational behavior modification is a formal system of behavioral feedback and reinforcement.  Assessment centers are multiple raters who evaluate employees’ performance on a number of exercises. 8-10

Results Approach  Management by Objectives top management passes down company’s strategic goals to managers to define goals.  Productivity Measurement and Evaluation System (ProMES ) goal is to motivate employees to higher levels of productivity. Goals Hierarchy 8-11

Competency Model Competencies are sets of skills, knowledge, abilities and personal characteristics that enable employees to successfully perform their jobs. A competency model identifies competencies necessary for each model and provides descriptions common for an entire occupation, organization, job family or specific job. Also useful for recruiting, selection, training and development. 8-12

Balanced Scorecard Approach financialcustomer internal or operations learning and growth 4 Perspectives of Performance 8-13

Quality Approach  A performance management system (PMS) designed with a strong quality orientation can: Assess both person and system factors in the measurement system. Emphasize managers and employees working together to solve performance problems. Involve both internal and external customers in setting standards and measuring performance. Use multiple sources to evaluate person and system factors. Sustainability is key element of quality approach. 8-14

6 Statistical Process Quality Control Techniques 1. Process-flow analysis 2. Cause-and-effect diagrams 3. Pareto chart 4. Control chart 5. Histogram 6. Scattergram 8-15

5 Performance Information Sources Peers Self Managers 8-16

Reducing Rater Errors and Politics  Approaches to Reducing Rater Error:  Rater error training  Rater accuracy training  Calibration Meetings- attended by managers to discuss employee performance ratings. 8-17

3 Ways Technology Influences PMS Web-based Online paperless PMS Technology -Social networking, etc. Aligns performance goals across all levels Access to performance information, data and tools Improves efficiency of PMS 8-18

Technology - Electronic Monitoring  Electronic tracking systems include:  Hand and fingerprint recognition systems  Global positioning systems (GPS)  Systems that track employees using handheld computers and cell phones  Potential increased efficiency and productivity benefits  Systems present privacy concerns. 8-19

Typical Rater Errors 1. Similar to Me 2. Contrast 3. Leniency 4. Strictness 5. Central Tendency 6. Halo 7. Horns Appraisal Politics- evaluations distort ratings to achieve goals. 8-20

Improve Performance Feedback 1. Give feedback frequently, not once a year. 2. Create right context for discussion. 3. Ask employees to rate performance before the session. 4. Encourage employee to participate. 5. Recognize effective performance through praise. 6. Focus on solving problems. 7. Focus feedback on behavior or results, not on the person. 8. Minimize criticism. 9. Agree to specific goals and set progress review date. 8-21

Employee Characteristics Performance Standards/ Goals Feedback Consequences Input 5 Factors to Consider When Analyzing Poor Performance 8-22

Ways to Manage Performance  Solid performers  High ability and motivation; provide development  Misdirected effort  Lack of ability but high motivation; focus on training  Underutilizers  High ability but lack motivation; focus on interpersonal abilities Deadwood  Low ability and motivation; managerial action, outplacement, demotion, firing 8-23

Withstand Legal Scrutiny 1. Conduct a valid job analysis related to performance. 2. Base system on specific behaviors or results. 3. Train raters to use system correctly. 4. Review performance ratings and allow for employee appeal. 5. Provide guidance/support for poor performers. 6. Use multiple raters. 7. Document performance evaluations. 8-24

Summary Measuring and managing performance are key to gaining competitive edge.  Performance management systems (PMS) serve strategic, administrative and developmental purposes.  PMS should be evaluated against criteria of strategic congruence, validity, reliability, acceptability and specificity.  Effective managers need to  be aware of the issues involved in determining best methods.  feed performance information back to employees  take action based on causes for poor performance: ability, motivation or both  be sure that PMS can meet legal scrutiny 8-25