copyright © 2010 pearson education, inc. publishing as prentice hall9-1 human resource management...
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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-1
Human Resource Management
Chapter NinePerformance Management
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-2
Basic Concepts in PerformanceManagement 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.
ComparingPerformance Appraisal
and Performance Management
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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.
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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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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
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Basic Building Blocks of Basic Building Blocks of Performance ManagementPerformance Management
Direction sharing
Goal alignment
Ongoing performance monitoring
Rewards, recognition,
and compensation
Coaching and development
support
Ongoingfeedback
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Steps in the Performance Management Process
1. Identify performance dimensions2. Develop performance measures3. Evaluate employee performance4. Providing Feedback5. Develop Action Plans to improve performance
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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)Work output (quality and quantity)
Personal competenciesPersonal competencies
Goal (objective) achievementGoal (objective) achievement
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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
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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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Owns and supports the system
Responsible from monitoring the system to make sure everything goes as planned. Provides advice and assistance.
Train supervisers
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
Responsible from determining own personal goals, following up, and making sure the performance interviews are madeEmployee
Human Resources
Manager
Top Management
Roles in Performance Management
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Performance Appraisal Process
*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
Monitoring Evaluating
Compensation
Succession Planningand
Career Planning
PersonalDevelopment
Plans
Planning
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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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Scale for Alternate Ranking of Appraisees
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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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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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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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Behaviorally Anchored Rating Scales (BARS)
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Contemporary Performance Appraisal Systems
Management by Objectives (MBO)
Competency Based Performance Evaluation
Balanced Scorecard (BS)
360-Degree Approach
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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:
1. Setting of organization’s goals.
2. Setting of departmental goals.
3. Discussion of departmental goals.
4. Defining expected results (setting individual goals).
5. Conducting periodic performance reviews.
6. Providing performance feedback.
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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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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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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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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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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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MISSION
STRATEGICOBJECTIVES
KEY PERFORMANCE
INDICATORS
ANNUAL GOALS
DEPARTMENT/ TEAM
PERSONAL GOALS
KEY PERFORMANCE INDICATORS
OPERATIONS
STRATEGICOBJECTIVES
KEY PERFORMANCE INDICATORS
ANNUAL GOALS
ANNUAL GOALS
INDIVIDUAL
COMPANY
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Five Dimensions of a Strategy Map(adapted from BCS Collaborative, Inc., 2001)
Human Capital Effectiveness
Human Resource Efficiency
Shareholder Value
Financial Perspective
Customer Perspective
Internal Process Perspective
Learning & Growth Perspective
Customer Satisfaction Employee Satisfaction
Manage Operating Efficiency
Two Tiers of Learning and Growth
CompetenciesStrategic
Alignment / Motivation
Cultural Climate Team Integration
Leadership
Deliver World Class services
Manage Customer Relationships
WORK CAPABILITYCopyright © Laske and Associates, LLC, 2002
Enablers
“Meta-Enablers”
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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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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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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
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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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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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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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Disciplining EmployeesProgressive 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 Termination
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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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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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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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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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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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