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Human Resource ManagementGaining a Competitive Advantage

Chapter 8

Performance Management

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, All Rights Reserved.

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Learning Objectives

After reading this chapter, you should be able to:• Identify the major determinants of individual performance.• Discuss the three general purposes of performance

management.• Identify the five criteria for effective performance

management systems.• Discuss the four approaches to performance

management, the specific techniques used in each approach, and the way these approaches compare with the criteria for effective performance management systems.

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Learning Objectives

After reading this chapter, you should be able to:• Choose the most effective approach to performance

measurement for a given situation.• Discuss the advantages and disadvantages of the

different sources of performance information.• Choose the most effective source(s) for performance

information for any situation.• 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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An Organizational Model of Performance Management

IndividualBehaviors

SituationalConstraintsCulture and

economicconditions

IndividualAttributes

(skills, abilities)

OrganizationalStrategy

Long and shortterm goals and values

ObjectiveResults

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Purposes of Performance Management

Strategic

DevelopmentalAdministrative

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Performance Measures Criteria

Five performance criteria stand out:

Strategic congruence

Validity

ReliabilityAcceptability

Specificity

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The 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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The Attribute Approach

• Graphic rating scales– A list of traits is evaluated by

a five-point rating scale.– Legally questionable.

• Mixed-standard scales– Define relevant performance

dimensions and then 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 company’s strategic goals to next layer of management, and these managers define the goals they must achieve.

• Productivity Measurement and Evaluation System (ProMES) – goal is to motivate employees

to higher levels of productivity.

Goals

Hierarchy

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Quality Approach

• A performance management system designed with a strong quality orientation can be expected to:– Emphasize an assessment of both person and

system factors in the measurement system.

– Emphasize that managers and employees work together to solve performance problems.

– Involve both internal and external customers in setting standards and measuring performance.

– Use multiple sources to evaluate person and system factors.

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Quality Approach (cont.)

• Statistical process quality control techniques used:– Process-flow analysis– Cause-and-effect diagrams– Pareto chart– Control chart– Histogram– Scattergram

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Sources for Performance Information

Customers Peers

Self Subordinates

Managers

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Rater Errors in Performance Measurement

• Similar to me• Contrast• Distributional

errors• Halo and horns

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Reducing Rater Errors and Appraisal Politics

• Two Approaches to reducing rater error:– Rater error training– Rater accuracy training

• Appraisal politics - a situation in which evaluators purposefully distort ratings to achieve personal or company goals.

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Improving Performance Feedback

• Feedback should be given frequently, not once a year.

• Create the right context for the discussion.

• Ask employee to rate his or her performance before the session.

• Encourage the subordinate to participate in the session.

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Improving Performance Feedback

• Recognize effective performance through praise.

• Focus on solving problems.• Focus feedback on behavior or results,

not on the person.• Minimize criticism.• Agree to specific goals and set a date

to review progress.

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Factors to Consider in Analyzing Poor Performance

• Input

• Employee characteristics

• Feedback

• Performance standards/Goals

• Consequences

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Managing Performance of Marginal Performers

• Solid performers– High ability and motivation; managers should

provide development opportunities

• Misdirected effort– Lack of ability but high motivation; managers

should focus on training

• Underutilizers– High ability but lack motivation; managers

should focus on interpersonal abilities

• Deadwood– Low ability and motivation; managerial action,

outplacement, demotion, firing.

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Following Legal Guidelines

• Conduct a valid job analysis related to performance.

• Base system on specific behaviors or results.

• Train raters to use system correctly.• Review performance ratings and allow for

employee appeal.• Provide guidance/support for poor

performers.• Use multiple raters.

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Use of Technology for Performance Management

• Electronic tracking systems includes:– Hand and fingerprint recognition systems– Global positioning systems (GPS)– Systems that can track employees using

handheld computers and cell phones

• Increased productivity can be a benefit from these systems.

• These systems present privacy concerns.