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Prentice Hall, Inc. © 2006.

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Presentation on theme: "Prentice Hall, Inc. © 2006."— Presentation transcript:

1 Prentice Hall, Inc. © 2006

2 Performance Management in Context: Overview
Definition of Performance Management (PM) The Performance Management Contribution Disadvantages/Dangers of Poorly-implemented PM systems Definition of Reward Systems Aims and role of PM Systems Characteristics of an Ideal PM system Integration with Other Human Resources and Development Activities Prentice Hall, Inc. © 2006

3 Performance Management: Definition
Continuous Process of Identifying performance of individuals and teams Measuring performance of individuals and teams Developing performance of individuals and teams and Aligning performance with the strategic goals of the organization Prentice Hall, Inc. © 2006

4 PM is NOT performance appraisal
Strategic business considerations Ongoing feedback So employee can improve performance Driven by line manager Performance appraisal Assesses employee Strengths & Weaknesses Once a year Lacks ongoing feedback Driven by HR Prentice Hall, Inc. © 2006

5 Contributions of PM For Employees
The definitions of job and success are clarified Motivation to perform is increased Self-esteem is increased Self-insight and development and enhanced Prentice Hall, Inc. © 2006

6 Contributions of PM For Managers
Supervisors’ views of performance are communicated more clearly Managers gain insight about subordinates There is better and more timely differentiation between good and poor performers Employees become more competent Prentice Hall, Inc. © 2006

7 Contributions of PM For Organization/HR Function
Organizational goals are made clear Organizational change is facilitated Administrative actions are more fair and appropriate There is better protection from lawsuits Prentice Hall, Inc. © 2006

8 Disadvantages/Dangers of Poorly-implemented PM Systems for Employees
Lowered self-esteem Employee burnout and job dissatisfaction Damaged relationships Use of false or misleading information Prentice Hall, Inc. © 2006

9 Disadvantages/Dangers of Poorly-implemented PM Systems for Managers
Increased turnover Decreased motivation to perform Unjustified demands on managers’ resources Varying and unfair standards and ratings Prentice Hall, Inc. © 2006

10 Disadvantages/Dangers of Poorly-implemented PM Systems for Organization
Wasted time and money Unclear ratings system Emerging biases Increased risk of litigation Prentice Hall, Inc. © 2006

11 Reward Systems: Definition
Set of mechanisms for distributing Tangible returns and Intangible or relational returns As part of an employment relationship Prentice Hall, Inc. © 2006

12 Tangible returns Cash compensation Benefits, such as Base pay
Cost-of-Living & Contingent Pay Incentives (short- and long-term) Benefits, such as Income Protection Allowances Work/life focus Base pay Hourly wages Salary Cost-of-Living & Contingent Pay Usually permanent increases in pay based on either cost of living or performance Covered in more detail in Module 11 Incentives (short- and long-term) Used to increase performance E.g., bonuses (short term) or stock options/ownership (long term) Income Protection Sometimes required under law, such as Social Security (what about unemployment insurance in the USA?) Disability pay, medical insurance, pension plans, savings plans Allowances E.g., housing transportation (e.g., company provides car) Prentice Hall, Inc. © 2006

13 Intangible returns Relational returns, such as Recognition and status
Employment security Challenging work Learning opportunities Work/life focus (to help employee balance work/home life) Such as vacation time, flextime and telecommuting, services (e.g., counseling, financial planning, fitness activities) Relational Returns Such as recognition, status, employment security, challenging work, opportunities to learn, opportunities to form personal relationships Prentice Hall, Inc. © 2006

14 Returns and Their Degree of Dependency on the Performance Management System
Cost of Living Adjustment Income Protection Work/life Focus Allowances Relational Returns Base Pay Contingent Pay Short-term Incentives Long-term Incentives Degree of Dependency Low Moderate High Prentice Hall, Inc. © 2006

15 Purposes of PM Systems: Overview
Strategic Administrative Informational Developmental Organizational maintenance Documentation Prentice Hall, Inc. © 2006

16 Strategic Purpose Link employee behavior with organization’s goals
Communicate most crucial business strategic initiatives Note: the following is slide used before (some of this is not in Module 1) Links employee activities with organization’s mission and goals Identifies results and behaviors needed to carry out strategy Maximizes extent employees exhibit those behaviors and results Only 13% of organizations use PM to communicate organizational purpose and goals Prentice Hall, Inc. © 2006

17 Administrative Purpose
Provide information for making decisions re: Salary adjustments Promotions Retention or termination Recognition of individual performance Layoffs Prentice Hall, Inc. © 2006

18 Informational Purpose
Communicate to Employees: Expectations What is important How they are doing How to improve Prentice Hall, Inc. © 2006

19 Developmental Purpose
Performance feedback/coaching Identification of individual strengths and weaknesses Causes of performance deficiencies Tailor development of individual career path Prentice Hall, Inc. © 2006

20 Organizational Maintenance Purpose
Plan effective workforce Assess future training needs Evaluate performance at organizational level Evaluate effectiveness of HR interventions Prentice Hall, Inc. © 2006

21 Documentational Purpose
Validate selection instruments Document administrative decisions Help meet legal requirements Prentice Hall, Inc. © 2006

22 Characteristics of an Ideal PM System
Prentice Hall, Inc. © 2006

23 Congruent with organizational strategy
Consistent with organization’s strategy Aligned with unit and organizational goals Prentice Hall, Inc. © 2006

24 Thorough All employees are evaluated
All major job responsibilities are evaluated Evaluations cover performance for entire review period Feedback is given on both positive and negative performance Prentice Hall, Inc. © 2006

25 Practical Available Easy to use Acceptable to decision makers
Benefits outweigh costs Prentice Hall, Inc. © 2006

26 Meaningful Standards are important and relevant
System measures ONLY what employee can control Results have consequences Evaluations occur regularly and at appropriate times System provides for continuing skill development of evaluators Prentice Hall, Inc. © 2006

27 Specific Concrete and detailed guidance to employees what’s expected
how to meet the expectations Prentice Hall, Inc. © 2006

28 Identifies effective and ineffective performance
Distinguish between effective and ineffective Behaviors Results Provide ability to identify employees with various levels of performance Prentice Hall, Inc. © 2006

29 Reliable Consistent Free of error Inter-rater reliability
Prentice Hall, Inc. © 2006

30 Valid Relevant (measures what is important)
Not deficient (doesn’t measure unimportant facets of job) Not contaminated (only measures what the employee can control) Prentice Hall, Inc. © 2006

31 Acceptable and Fair Perception of Distributive Justice
Work performed  evaluation received  reward Perception of Procedural Justice Fairness of procedures used to: Determine ratings Link ratings to rewards Prentice Hall, Inc. © 2006

32 Inclusive Represents concerns of all involved
When system is created, employees should help with deciding What should be measured How it should be measured Employee should provide input on performance prior to evaluation meeting Prentice Hall, Inc. © 2006

33 Open (No Secrets) Frequent, ongoing evaluations and feedback
2-way communications in appraisal meeting Clear standards, ongoing communication Communications are factual, open, honest Prentice Hall, Inc. © 2006

34 Correctable Recognizes that human judgment is fallible
Appeals process provided Prentice Hall, Inc. © 2006

35 Standardized Ongoing training of managers to provide
Consistent evaluations across People Time Prentice Hall, Inc. © 2006

36 Ethical Supervisor suppresses self-interest
Supervisor rates only where she has sufficient information about the performance dimension Supervisor respects employee privacy Prentice Hall, Inc. © 2006

37 Integration with other Human Resources and Development activities
PM provides information for: Development of training to meet organizational needs Workforce planning Recruitment and hiring decisions Development of compensation systems Prentice Hall, Inc. © 2006


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