1. Human Resource Management
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Human Resource Management
Chapter Nine
Performance
Management
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

2. Basic Concepts in Performance Management and Appraisal
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Basic Concepts in Performance Management and Appraisal
Performance Management: An integrated approach to ensure that an employee’s performance supports and contributes to the organization’s strategic aims.
Performance Appraisal: Setting work standards, assessing performance, and providing feedback to employees to motivate, correct, and continue their performance.
Comparing Performance Appraisal and Performance Management
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

3. Performance Appraisal
Provides feedback to employees on how effectively they are performing in their jobs.
Includes a set of goals or objectives the employee must accomplish within the review period as well as the standards or criteria for determining whether the defined goals have been accomplished.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

4. Effective Performance Management
Links individual goals to the corporate and work unit business plans and goals;
Focuses on
results
behaviours (competencies)
Has regular reviews and updates of performance plans to address changing demands;
Includes training for both managers and employees on how to effectively give and receive feedback,
Includes training for managers on how to provide performance evaluations that are valid, fair and unbiased
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5. Purposes of Performance Management
Administrative because it directly affects a firm’s decisions regarding its workforce (raises, incentives, promotions, etc.)
Developmental because it helps employees improve performance, achieve their potential and add value to the company
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

6. Basic Building Blocks of Performance Management
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Human Resources Management 12e Gary Dessler
Basic Building Blocks of Performance Management
Direction sharing
Goal alignment
Ongoing performance monitoring
Ongoing feedback
Coaching and development support
Rewards, recognition, and compensation
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9–6

7. Steps in the Performance Management Process
Identify performance dimensions
Develop performance measures
Evaluate employee performance
Providing Feedback
Develop Action Plans to improve performance
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8. Identifying Performance Dimensions
Global performance measure is a single score to reflect overall performance
Performance dimensions are different areas that are being evaluated—should reflect:
Work output (quality and quantity)
Personal competencies
Goal (objective) achievement
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9. Developing Performance Measures
Should be valid, specific, and have clear standards
Reliable refers to how well a measure yields consistent results over time and across raters
Deficient measures leave out important aspects of an individual’s performance
Contaminated measures capture information irrelevant to an individual’s job performance
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

10. Performance Measurement Standards
Performance standards set a level of expected performance, a benchmark
Can be quantitative or qualitative
Should be clear (specificity) and reflect the entire performance spectrum
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11. Roles in Performance Management
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Roles in Performance Management
Owns and supports the system
Has the main responsibility in determining the goals of the subordinants, evaluating their performance and making sure the system runs as planned, according to the policies and the procedures
Top Management
Responsible from determining own personal goals, following up, and making sure the performance interviews are made
Employee
Manager
Human Resources
Responsible from monitoring the system to make sure everything goes as planned. Provides advice and assistance. Train supervisers
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12. Performance Appraisal Process
Planning
Monitoring
Evaluating
*Establishing the
performance criteria
*Setting goals
* Setting
competency goals
*Consensus on
the goals
* Follow up and
mid-year review
*Year-end evaluation
*Providing feedback
about the:
Goals and
Competencies
Compensation
Personal
Development
Plans
Succession Planning
and
Career Planning
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13. Evaluating Employee Performance
Individual Comparisons
Ranking approach—comparing employees to each other (e.g. best to worst)
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
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14. Scale for Alternate Ranking of Appraisees
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Scale for Alternate Ranking of Appraisees
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15. Ranking Employees by the Paired Comparison Method
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Ranking Employees by the Paired Comparison Method
Note: + means “better than.” – means “worse than.” For each chart, add up the number of +’s in each column to get the highest-ranked employee.
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Forced Distribution
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Absolute Approaches
Comparing employees against certain “absolute” standards rather than against each other
Each employee’s evaluation is independent of others and includes traits, attributes, and behaviors
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Graphic Rating Scale
Raters evaluate employees based on various traits or attributes they possess relevant to their performance
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19. Behavior-Based Approaches
Rely on variety of performance dimensions and evaluate employees’ behavior along a range of standards
Critical incident approach— examples of exceptionally good or poor performance throughout the evaluation period (behaviors)
Forced-choice approach— managers choose from a set of alternative statements regarding employee’s performance
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20. Examples of Critical Incidents for a Plant Manager
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Examples of Critical Incidents for a Plant Manager
Continuing Duties
Targets
Critical Incidents
Schedule production for plant
90% utilization of personnel and machinery in plant; orders delivered on time
Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month
Supervise procurement of raw materials and inventory control
Minimize inventory costs while keeping adequate supplies on hand
Let inventory storage costs rise 15% last month; overordered parts “A” and “B” by 20%; underordered part “C” by 30%
Supervise machinery maintenance
No shutdowns due to faulty machinery
Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part
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21. Behaviorally Anchored Rating Scales (BARS)
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22. Contemporary Performance Appraisal Systems
Management by Objectives (MBO)
Competency Based Performance Evaluation
Balanced Scorecard (BS)
360-Degree Approach
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23. Management by Objectives (MBO)
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Management by Objectives (MBO)
Based on goals set with employees at the beginning of the performance period
A comprehensive and formal goal-setting and appraisal program requiring:
Setting of organization’s goals.
Setting of departmental goals.
Discussion of departmental goals.
Defining expected results (setting individual goals).
Conducting periodic performance reviews.
Providing performance feedback.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

24. Competency Based Performance Evaluation
Goal: Raising the present competency levels of the employees to the expected levels
Result based performance appraisal focuses only on “what” they have accomplished (i.e., performance goals),
Competency based performance appraisal focuses on “how” the work was performed, using competencies for providing feedback.
Performance is viewed in terms of the process employees use to achieve their job results
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25. Competency Based Performance Evaluation
Aims at minimizing the gap between performance expectations and actual performance
Focuses on the future, rather than the past
Used mostly in jobs where:
quality and service is very important
the results can not be measured objectively
the employees can not control the work output
the environment changes very often
an essential change is expected in the organization
the organization gets into new sector
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26. Balanced ScoreCard (BS)
It is an integrated performance management system that directs and evalutes a company’s performance through “key performance indicators” set in the four areas
Balanced scorecard is an effective tool for creating organizational alignment
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27. Key Performance Indicator (KPI)
A key performance indicator (KPI) is a measure of performance.
KPI’s should be tied to an organization's strategy
They help to evaluate the progress of an organization towards its vision and long-term goals.
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28. Four Areas in Balanced Scorecards
The “financial perspective" encourages the identification of a few relevant high-level financial measures. Choose measures to answer to the question "How do we look to shareholders?"
The "customer perspective" encourages the identification of measures that answer the question "How do customers see us?"
The "internal business (operations) perspective" encourages the identification of measures that answer the question "What must we excel at?"
The "innovation and learning perspective" encourages the identification of measures that answer the question "Can we continue to improve and create value?".
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29. KEY PERFORMANCE INDICATORS
COMPANY
MISSION
STRATEGIC
OBJECTIVES
KEY PERFORMANCE INDICATORS
ANNUAL GOALS
DEPARTMENT/ TEAM
PERSONAL GOALS
OPERATIONS
INDIVIDUAL
STRATEGIC
OBJECTIVES
KEY PERFORMANCE INDICATORS
ANNUAL GOALS
ANNUAL GOALS
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30. Two Tiers of Learning and Growth Strategic Alignment / Motivation
Five Dimensions of a Strategy Map
(adapted from BCS Collaborative, Inc., 2001)
Shareholder Value
Financial Perspective
Human Capital Effectiveness
Human Resource Efficiency
Customer Perspective
Customer Satisfaction
Employee Satisfaction
Internal Process Perspective
Deliver World Class services
Manage Customer Relationships
Manage Operating Efficiency
Two Tiers of Learning and Growth
Enablers
Competencies
Leadership
Cultural Climate
Strategic Alignment / Motivation
Team Integration
Learning & Growth Perspective
WORK CAPABILITY
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“Meta-Enablers”
Copyright © Laske and Associates, LLC, 2002

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360-Degree Approach
Involves gathering performance data from as many sources as possible—supervisors, peers, subordinates, and customers
Can be cumbersome and takes time to sift through all the feedback
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32. Sources of Performance Data
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
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33. Performance Measurement Errors
Halo/horn error —overall positive or negative view of employee’s performance biases the ratings given on individual criteria
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 bias later evaluations of the person
Recency error —rater focuses on employee’s performance near the time of the evaluation
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

34. Performance Measurement Errors (cont’d)
Similar-to-me error —when managers more highly rate employees who resemble them in some way
Leniency error —rating employees on high end of the scale
Strictness error —rating employees on low end of the scale
Error of central tendency —rating everyone “average”
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Providing Feedback
Most firms require appraisals 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
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36. Developing Action Plans to Improve Performance
Seek to understand 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
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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
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38. Taking Action to Improve Employee Performance
Ensure they know what is expected of them
Ensure they know how to be successful
Ensure performance measures are accurate
Evaluate potential role overload or ambiguity
Reach agreements on targets for improved performance and timelines
Ensure manager’s support
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39. Disciplining Employees
Progressive discipline
Verbal warning
Written warning (copy to employee and file)
Suspension
Termination
Positive discipline
Meeting to focus on constructive feedback—how to improve the performance
Meet to arrive at new action plan (documented)
Final termination warning if problem not corrected
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40. Which Performance Dimensions Are Emphasized
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Which Performance Dimensions Are Emphasized
Impacted by company’s strategy and how jobs add value
Low cost strategy will emphasize number of transactions performed
High customer service strategy will emphasize quality of interactions and relationships
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41. Performance Evaluation Method Used
Comparative approach will foster a competitive climate and is more manageable in small companies
Absolute approach will enable each person to be evaluated on attributes and behaviors —more likely used in larger companies, but is time-consuming and expensive
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42. Objectives of Performance Management Systems
In a competitive culture, an administrative approach to performance management might be used (comparative, attribute, results)
In cultures that focus on well-being of employees, a developmental approach might be used (how employees perform their jobs)
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43. Perceptions of Procedural and Distributive Justice
When employees perceive performance evaluations reflect their true performance they are more likely to accept them (distributive justice)
When employees perceive evaluations included dimensions beyond their control, standards were too hard to achieve, or they were not given sufficient guidance (procedural justice) the evaluation process is less likely to motivate
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44. Performance Management is Essential for Successful Organizatons
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Performance Management is Essential for Successful Organizatons
4857 Turkish Labor Law
Maximizes the performance of the organizations
Encourages employees to be more productive and perform better
Motivates employees by rewarding high performance
Provides groundwork for a fair compensation system
Provides data for personal development programs
Increase employee satisfaction
Provides sustainable improvement both for the organization and the employee
Provides a chance for both the manager and the employee to come together to discuss their expectations from each other
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