Human Resource Management: Gaining a Competitive Advantage

Chapter 8 Performance Management

McGraw-Hill/Irwin

Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Identify the major determinants of individual performance. Discuss three purposes of performance management. Identify five criteria for effective performance management systems (pms) . Discuss four approaches to performance management, specific techniques used in each approach, and the way these approaches compare with criteria for effective performance management systems.

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Learning Objectives
Choose the most effective approach to performance measurement for a given situation.

Discuss advantages and disadvantages of different sources of performance information.

Choose the most effective sources for performance information. Distinguish types of rating errors and explain how to minimize each in a performance evaluation. Conduct an effective performance feedback session. Identify the cause of a performance problem.

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Introduction
Performance management is the process through which managers ensure that employees activities and outputs are congruent with the organization's goals. Performance Appraisal is the process through which an organization gets information on how well an employee is doing his or her job.

Performance Feedback is the process of providing employees information regarding their performance effectiveness.
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Performance Management Model

Organizational Strategy
long & short term goals&values

Individual Attributes
(skills, abilities)

Individual Behaviors

Objective Results

Situational Constraints
culture & economic conditions
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3 Purposes of Performance Management

Strategic Administrative Developmental

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Recommendations - Developing an Effective Performance Management System

Mirror the corporate culture and values Have visible CEO and senior management support. Focus on the right company performance measures. Link job descriptions to the performance management system. Differentiate performance fairly and effectively. Train managers in performance management. Communicate the total rewards system. Require managers to search, offer and acquire regular performance feedback. Set clear expectations for employee development. Track effectiveness of the performance management system. Adjust the system as required.
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5 Performance Measures Criteria

Strategic Congruence

Specificity

Validity

Acceptability

Reliability
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Comparative Approach
Ranking
Simple ranking ranks employees from highest to lowest performer. Alternation ranking - crossing off the best and worst employees.

Forced distribution
Employees are ranked in groups.

Paired comparison
Managers compare every employee with every other employee in the work group.
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Attribute Approach
Graphic rating scales
alist of traits is evaluated by a 5-point rating scale. legally questionable.

Mixed-standard scales
define relevant performance dimensions develop statements representing good, average, and poor performance along each dimension.

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Behavioral Approach
Critical incidents approach - requires managers to keep record of specific examples of effective and ineffective performance. Behaviorally anchored rating scales (BARS) Behavioral observation scales (BOS) Organizational behavior modification - a formal system of behavioral feedback and reinforcement. Assessment centers - multiple raters evaluate employees performance on a number of exercises.

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Results Approach
Management by Objectives
top management passes down companys strategic goals to managers to define the goals.

Goals

Productivity Measurement and Evaluation System (ProMES)

goal is to motivate employees to higher levels of productivity.

Hierarchy

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Quality Approach
A performance management system designed with a strong quality orientation can:
1. Assess both person and system factors in the measurement system.
2. Emphasize managers and employees work together to solve performance problems. 3. Involve both internal and external customers in setting standards and measuring performance. 4. Use multiple sources to evaluate person and system factors.
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6 Statistical Process
Quality Control Techniques
1. Process-flow analysis 2. Cause-and-effect diagrams 3. Pareto chart 4. Control chart 5. Histogram 6. Scattergram

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5 Performance Information Sources

Managers

Customers

Peers

Self

Subordinates
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5 Performance Measurement Rater Errors

1. Similar to Me 2. Contrast 3. Distributional Errors 4. Halo and Horns

5. Appraisal Politics

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Reducing Rater Errors and Politics

Approaches to Reducing Rater Error: Rater error training Rater accuracy training Calibration Meetings- attended by managers to discuss employee performance ratings.

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Improve Performance Feedback

1. Give feedback frequently, not once a year.

2. Create the right context for discussion. 3. Ask employees to rate performance before thesession. 4. Encourage the employee to participate. 5. Recognize effective performance through praise. 6. Focus on solving problems. 7. Focus feedback on behavior or results, not on the person. 8. Minimize criticism. 9. Agree to specific goals and set progress review date.

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Input

Employee Characteristics

5 Factors to Consider When Analyzing Poor Performance

Feedback

Performance Standards/ Goals

Consequences

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Managing Performance of Marginal Performers

Solid performers
High ability and motivation; provide development

Misdirected effort
Lack of ability but high motivation; focus on training

Underutilizers
High ability but lack motivation; focus on interpersonal abilities

Deadwood
Low ability and motivation; managerial action, outplacement, demotion, firing.

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Withstand Legal Scrutiny

1. Conduct a valid job analysis related to performance. 2. Base system on specific behaviors or results. 3. Train raters to use system correctly. 4. Review performance ratings and allow for employee appeal. 5. Provide guidance/support for poor performers. 6. Use multiple raters.
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Performance Management:
Electronic Monitoring

Electronic tracking systems include:

Hand and fingerprint recognition systems Global positioning systems (GPS) Systems thattrack employees using handheld computers and cell phones

Potential increased efficiency and productivity benefits These systems present privacy concerns.
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Summary
Measuring and managing performance are key to gaining competitive edge. Performance management systems (PMS) serve strategic, administrative, and developmental purposes. PMS should be evaluated against the criteria of strategic congruence, validity, reliability, acceptability and specificity.

Effective managers need to be aware of the issues involved in determining best methods. feed performance information back to employees take action based on causes for poor performance: ability, motivation or both. be sure that PMS can meet legal scrutiny

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