1. Performance Management
2nd Edition

2. Performance Management and Reward Systems in Context

3. 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

4. Definition of Performance Management (PM)

5. Definition of PM Continuous Process of
Identifying
Measuring
Developing
The performance of individuals and teams

6. Definition of PM (continued)
and
Aligning performance
with
Strategic Goals of the organization

7. Performance Management is NOT performance appraisal

8. PM is NOT performance appraisal
Performance Management
Strategic business considerations
Driven by line manager
Ongoing feedback
So employee can improve performance

9. PM is NOT performance appraisal
Driven by HR
Assesses employee
Strengths &
Weaknesses
Once a year
Lacks ongoing feedback

10. Contributions of Performance Management

11. Contributions of Performance Management For Employees
Clarify definitions of
job
success criteria
Increase motivation to perform
Increase self-esteem
Enhance self-insight and development

12. Contributions of Performance Management For Managers
Communicate supervisors’ views of performance more clearly
Managers gain insight about subordinates
Better and more timely differentiation between good and poor performers
Employees become more competent

13. Contributions of Performance Management For Organization/HR Function
Clarify organizational goals
Facilitate organizational change
Fairer, more appropriate administrative actions
Better protection from lawsuits

14. Disadvantages/Dangers of Poorly-implemented PM Systems

15. 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

16. 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

17. Unclear ratings system Emerging biases Increased risk of litigation
Disadvantages/Dangers of Poorly-implemented PM Systems For Organization
Wasted time and money
Unclear ratings system
Emerging biases
Increased risk of litigation

18. Reward Systems

19. Reward Systems Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment relationship

20. Reward Systems Tangible returns
Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-term)
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)

21. Reward Systems Tangible returns (continued)
Benefits, such as
Income Protection
Allowances
Work/life focus

22. Reward Systems 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

23. Returns and Their Degrees of Dependency on the Performance Management System

24. Returns with Low Dependency on the Performance Management System
Cost of Living Adjustment
Income Protection

25. Returns with Moderate Dependency on the Performance Management System
Work/Life Focus
Allowances
Relational Returns
Base Pay

26. Returns with High Dependency on the Performance Management System
Contingent Pay
Short-term Incentives
Long-term Incentives

27. Purposes of PM Systems

28. Purposes of PM Systems: Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentational

29. Strategic Purpose Link individual goals 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

30. Administrative Purpose
Provide information for making decisions re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs

31. Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve

32. Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and weaknesses
Causes of performance deficiencies
Tailor development of individual career path

33. Organizational Maintenance Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions

34. Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements

35. An Ideal PM System: 14 Characteristics
Congruent with organizational strategy
Thorough
Practical
Meaningful
Specific
Identifies effective/ ineffective performance
Reliable

36. An Ideal PM System: 14 Characteristics (continued)
Valid
Acceptable and Fair
Inclusive
Open (No Secrets)
Correctable
Standardized
Ethical

37. Congruent with organizational strategy
Consistent with organization’s strategy
Aligned with unit and organizational goals

38. 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

39. Practical Available Easy to use Acceptable to decision makers
Benefits outweigh costs

40. 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

41. Specific Concrete and detailed guidance to employees What’s expected
How to meet the expectations

42. Identifies effective and ineffective performance
Distinguish between effective and ineffective
Behaviors
Results
Provide ability to identify employees with various levels of performance

43. Reliable
Consistent
Free of error
Inter-rater reliability

44. Valid Relevant (measures what is important)
Not deficient (doesn’t measure unimportant facets of job)
Not contaminated (only measures what the employee can control)

45. 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

46. 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

47. Open (No Secrets) Frequent, ongoing evaluations and feedback
2-way communications in appraisal meeting
Clear standards, ongoing communication
Communications are factual, open, honest

48. Correctable Recognizes that human judgment is fallible
Appeals process provided

49. Standardized Ongoing training of managers to provide
Consistent evaluations across
People
Time

50. Ethical Supervisor suppresses self-interest
Supervisor rates only where she has sufficient information about the performance dimension
Supervisor respects employee privacy

51. Integration with other Human Resources and Development Activities

52. PM provides information for:
Development of training to meet organizational needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems

53. Quick Review 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