Thomas G. Cummings Christopher G. Worley Chapter Seventeen : Performance Management Organization Development and Change

17-2 Learning Objectives for Chapter Seventeen To present a model for understanding the components and relationships associated with performance management To explore three interventions concerned with managing the performance of human resources: goal setting, performance appraisal, and reward systems

17-3 A Performance Management Model Workplace Technology Business Strategy Employee Involvement Goal Setting Goal Setting Reward Systems Reward Systems Performance Appraisal Performance Appraisal Individual and Group Performance Individual and Group Performance

17-4 Characteristics of Effective Goals Goals are Challenging  Challenging but realistic  Goals are set participatively Goals are Clear  Goals are specific and operationally defined  Resources for goal achievement are negotiated

17-5 Management by Objectives (MBO) MBO attempts to align personal goals with business strategy through increased communications and shared perceptions between managers and subordinates MBO programs may go beyond manager and subordinate roles to address individuals, work groups, and to reconcile conflicts.

17-6 MBO Application Stages Involve the whole work group Goals set jointly by manager and subordinate Action plans are established Criteria and yardsticks are established Work progress and contract reviewed and adjusted periodically Records of meetings are maintained

17-7 Performance Appraisal Elements

17-8 Performance Appraisal Application Stages Select the appropriate stakeholders Diagnose the current situation Establish the system’s purposes and objectives Design the performance appraisal system Experiment with implementation Evaluate and monitor the system

17-9 Characteristics of Effective Appraisal Systems Timely Accurate Accepted by the users Understood Focused on critical control points Economically feasible

17-10 Reward System Design Features Design FeatureDefinition Person/Job Based vs. Performance Based The extent to which rewards are based on the person, the job or the outcomes of the work Market Position (External Equity) The relationship between what an organization pays and what other organizations pay Internal EquityThe extent to which people doing similar work within and organization are rewarded the same HierarchyThe extent to which people in higher positions get more and varied rewards CentralizationThe extent to which reward system design, decisions and administration are standardized Rewards MixThe extent to which different types of rewards are available and offered to people SecurityThe extent to which work is guaranteed SeniorityThe extent to which rewards are based on length of service

17-11 Characteristics of Effective Reward Systems Availability Timeliness Performance Contingency Durability Equity Visibility

17-12 TYPES OF REWARDS Pay  Skill-based pay plans  Performance-based pay systems link pay to performance  Gain sharing involves paying bonuses based on improvements in the operating results Promotions Benefits

17-13 Individual Plan Productivity4114 Cost effectiveness3114 Superiors’ rating3113 Group Productivity3124 Cost effectiveness3124 Superiors’ rating2123 Organization- Productivity2134 wide Cost effectiveness2124 Salary-Based Pay for Performance Ratings Ties pay to performance Negative side effects Encourage cooperation Employee Acceptance

17-14 Employee Acceptance Individual Plan Productivity5312 Cost effectiveness4212 Superiors’ rating4212 Group Productivity4133 Cost effectiveness3133 Superiors’ rating3133 Organization- Productivity3134 wide Cost effectiveness3134 Profit2133 Ties pay to performance Negative side effects Encourage cooperation Stock/Bonus Pay for Performance Ratings

17-15 Gain Sharing Pay Plan Considerations Process of design - participative or top-down? Organizational unit covered - plant or companywide? Determining the bonus - what formula? Sharing gains - how and when to distribute? Managing change - how to implement system?

2-16