Class 11 - Chapter 9 Performance Management MGT 430 – Spring 2016

Performance Appraisals WHY???

Corporate Purposes of Performance Management Used for personnel decisions, e.g. promotions, transfers, assignments and terminations; Provide a legal paper trail to justify the above Used to identify training and development needs;   Used as a criterion against which selection and development programs are validated; Used as a basis for reward allocation, i.e. salary increases; Uses to keep our companies in compliance with, and in the spirit of, our labor laws.

Personal Reasons for Performance Evaluations Compare yourself with others Identify strengths & weaknesses that you can exploit for personal gain

Performance Management Where was I then Where am I now Where do I need to be

Step 1: Identify the Performance Dimensions What am I to deliver in this job How will I be evaluated What criteria will I be measured against Ideally and rationally, these criteria will be articulated in a job description and jointly modified during the rating period

Step 2: Developing Performance Dimensions Developing measureable and meaningful performance criteria Quantitative, i.e.: That which can be objectively measured, e.g. # new hires, turnover, payroll costs, benefit costs, disciplinary measures, tardiness, etc. Qualitative, i.e. Harder to measure and justify, e.g. morale, job satisfaction, satisfied customer service, etc.

PERFORMANCE MANAGEMENT EXAMPLE You have just hired a bus driver for Mega-Bus. What are some of the quantitative and qualitative performance dimensions for this job? QUANTITATIVE QUALITATIVE 1. 1. 2. 2. 3. 3. 4. 4. 5. 5.

Step 3: Evaluating Employee Performance (1) Individual Comparisons Ranking approach — comparing employees to each other (e.g. best to worst). Easiest to do if quantitative data is available (e.g. sales volume); Paired comparison — each employee is compared to every other employee and points are assigned to the “better” individual, points are totaled and compared Forced distribution — managers are forced to distribute employees into predetermined categories and prevented from rating everyone as outstanding, or average.

RANKING APPROACH Superior Above average Average Below average Marginal/unacceptable

FORCED DISTRIBUTION Top 20% ________________________ Middle 70% ___________________________________________ Bottom 10% _________________________________________________________

Absolute Approaches to Performance Management Employees are compared to a pre-determined standard. The evaluation is independent of any other employee in a work group Attribute – Designed to measure the extent to which an employee possess certain desirable characteristics - such as loyalty, dependability, creativity, initiative, and leadership – that are viewed as important for the job and the organization in general Examples: Graphic Rating Scale

Absolute Approaches to Performance Management Behavioral Attempts to define the behaviors an employee must exhibit to be effective in the job. Examples: Critical Incidents, Behavior Observation Scales, Behaviorally Anchored Rating Scales

Other Concepts of Performance Management Management By Objectives (MBO) Results based evaluation approach where managers meet with their employees to jointly set goals for them to accomplish during a rating period. Commentary Employees participate in the setting of goals Evaluation is based upon quantifiable data Objectives may change frequently and significantly during the rating period Not all employees are capable to setting corporate goals or aligning these goals to the company’s business plan.

360 Degree Appraisals A comprehensive measurement approach that involves gathering performance data from as many sources as possible, e.g. Supervisors — a key source but may not have time to monitor and observe employees every day Co-Workers — may be able to comment on cooperation and support, but may intentionally skew rating Self-Appraisal — can be useful starting point and developmental tool to help employee improve performance Subordinates — may be hard to separate skill from “likeability” Customers — satisfaction levels may only report extremely good or bad experiences

Pros & Cons With 360-Degree Ratings Employee performance as seen from multiple perspectives Studies indicate that 360 degree feedback may be an indicator of future performance Cons - Raters may be unqualified to rate objectively May not elicit accurate data Inconclusive empirical studies – the jury is still out Some can use this system for revenge

Evaluating Employee Performance (5) Weighting Performance Criteria Each job differs in terms of how it adds value to the organization Some forms of contributions may be more important than others for particular jobs Weights are used to adjust the relative importance of different performance dimensions

COMMON PERFORMANCE MEASUREMENT ERRORS Halo error — A bias that occurs when a positive characteristic of an employee affects the evaluation of that persons other attributes; Horn Error - A bias that occurs when a negative characteristic of an employee affects the evaluation of that persons other attributes; Contrast effect — manager artificially inflates or deflates an employee’s rating after comparing employee to another individual Primacy error — rater’s earlier impressions of individual biases later evaluations of the person Recency error — rater focuses on employee’s performance near the time of the evaluation

Performance Measurement Errors Similar-to-me error — when managers rate more highly employees who resemble them in some way Leniency error — constantly rating employees on the high end of the scale Strictness error — constantly rating employees on the low end of the scale Error of central tendency — rating everyone “average”

Step 4: Providing Feedback Most managers are required to appraise employees every six months to a year Feedback meeting on performance could be separate from meeting on salary decisions Focus on behaviors rather than employee Balance approach — positive and improvement areas Involve/engage employee in discussion

Developing Action Plans to Improve Performance Understanding the causes of poor performance which could stem from Work environment Design of jobs Technology Support or performance of co-workers Employee’s competencies, attitudes and behaviors NOTE: This assumes that the manager knows well what excellent performance looks like.

Developing Action Plans to Improve Performance Taking action Removing barriers to employee success Training and development activities Coaching and mentoring Work design and technology solutions Addressing quality of employee’s performance

HRM CHALLENGE QUESTION Should Performance Evaluations be abolished? Yes – Why No – Why