Chapter 04

Performance
Management
Definition of Performance:

The degree to which individuals and organizations
achieve the organizations goals with effectiveness
and efficiency.


Performance = Results +
Behavior

Performance Standards:

It makes explicit the quantity and/or quality of
performance expected in the basic tasks set forth in the
job description.

Standards should be SMART
Specific -- clearly state the desired results.
Measurable -- answering how much.
Attainable -- not too tough or too easy.
Relevant-- whats to be achieved.
Timely--reflecting deadlines and milestones

Performance Management:

Performance Management is a continuous
process of identifying, measuring, and
developing the performance of individuals and
teams and aligning performance with the
strategic goals of the organization.

By: Herman Aguinis


Strategic goals


AIMS AND OBJECTIVES OF PERFORMANCE
MANAGEMENT

Strategic Purpose
Administrative and HR Purpose
- Salary adjustment
- Promotions
- Employee Retention and termination
- Identification of poor performance
- Layoffs

Informational Purpose
- Specific areas which need improvement





AIMS AND OBJECTIVES OF PERFORMANCE
MANAGEMENT

Developmental Purpose
- Managers can use feedback.

Organizational Maintenance Purpose
- Talent inventories management

Documentation Purpose.
- It helps to find the skilled labor.

CHARACTERISTICS OF AN IDEAL PM SYSTEM

Strategic Congruence
Thoroughness
Practicality
Meaningfulness
Specificity
Identification of effective and ineffective performance
Reliability (Consistent and free of error)
Validity (Include valid contents for the evaluation)
Acceptability and fairness
Openness
Correctability
Standardization
Ethical




Impact of Performance Management

Impact on the individual

Impact on the organization




Performance Appraisal Methods

Graphic rating scale
Alternation ranking method
Paired comparison method
Forced distribution method
Check list
Essay Method
Critical Incidents
360- degree feedback

Scales that list a number of factors, including general
behaviors and characteristics, on which an employee is
rated by the supervisor.
Unsatisfactory
Satisfactory Conditional Above Satisfactory Outstanding
LEVEL OF PERFORMANCE
ATTENDANCE
APPEARANCE
DEPENDABILITY
QUALITY OF WORK
QUANTITY OF WORK
RELATIONSHIP
JOB KNOWLEDGE
Graphic Rating Scale
Figure 93
Note: For example, what exactly is meant by
good, quantity of work, and so forth?


Ranking employees from best to worst on a particular
trait, choosing highest, then lowest, until all are
ranked.

Alternation Ranking Method



Under this approach, the rater is presented with a list of
positive or negative adjectives and is asked to check off
all those that apply to the person being rated.
- Cooperation with Coworkers
- Keeps workstation neat & Clean
- Can be expected to complete work
on time
- Maintains detailed records
- Reluctant to ever work overtime
- Can not accept constructive criticism
Check List Method
Similar to grading on a curve; predetermined percentages of
ratees are placed in various performance categories.

Grading the curve
The employee force is ranked into a 20-70-10 bucket.

Where 20 percent are rated as 'excellent

70 percent as the vital - back bone of the company

10 percent as bottom-feeders



Bell Curve/Forced Distribution Method
It seems rigid and impractical, especially for small/medium.
It may reduce organizational flexibility.

It does not promote 'performance adjustments'

It makes 'extreme raters" skeptical since it does not allow
them to rate as they wish causing anxiety or
discontentment.

It may be difficult to simulate/follow since outstanding
performers or weak performers may not essentially be
10%-20% , year-on- year.

Unethical: Forcing a certain section of employees every
year is unethical says Praneet Mehrish, Country Human
Resource Director, ST Microelectronics Ltd.

Subjective: Since the bell curve is applied, not across all the
employees, but to individual department / team / function,
there is a good chance that the worst in the high performing
group may be better than the best in an average performing
group. Finally, the company may be left with low
performers, while losing some good ones, says Hari
Mohan Jha, VP (HR), ITC Welcome Group Hotels
Not compatible for small teams: Logically too, such a
model cannot work for a very small group of extremely
high or low performers for the simple reason that it force-
fits them into predefined compartments. If it works, it can
work only for a large, randomly selected sample, says
Madhukar Shukla, Professor, XLRI

Dysfunctional work environment: Bell curve method
may increase productivity and pave growth opportunities
for good performers, it also creates a sense of fear
among those who remain behind says Ed Lawler of
Enron




The appraiser writes a free-form essay describing the
subordinates performance in a number of broad
categories.

The employees promotability
Jobs the employee can currently perform
The employees strength and limitations
Additional training needs


Essay Method

In this method the appraiser keeps the record of
favorable and unfavorable occurrences of an employees
work.

Examples:
Employee stayed late at work plant.
Employee did not follow the safety measures.

Critical Incidents:


In this method performance is evaluated by peers, direct
reports and supervisors, as well as including self
assessment and appraisal by customers and suppliers.
90
360- Degree Feedback



360- Degree Feedback
The Feedback Comes From
Subordinates
Peers
Managers
Self
Other Colleagues
Supervisors
720o Performance Evaluation
The 720 degree review starts with a review of the leaders
contributions to the business, competences and other factors
Next, major customers are identified and their representatives asked
to be part of the review.
After program training, the 720 degree service provider, an objective
third party, interviews the customer to determine the quality of the
relationship with the executive
All internal and external input is compiled, analyzed and presented to
the executive.
The executive, with support from the 720 degree service provider,
develops measurable goals and a detailed action plan to make
changes.
Both 360 and 720 appraisal system provides alternatives
to the traditional appraisal system.
They are both useful in Learning Organization.
Both systems involve more than one evaluator,
The 360 and 720 appraisal mechanisms are more
reliable.
They are capable of re-assessment which is the opposite
of what happens with the traditional system.
Both systems have confidentiality, unlike the traditional
appraisal system.
The 720 appraisal system is more focused on the
customers feedback on specific position in the organization
such as directors, managers and other higher or mid level
managers and is therefore reliant on the Voice of the
external customers while the 360 appraisal system is
focused on the internal customers feedback on employee
performance.

The 720 appraisal system is more focused on
Management/ Higher level staffs while the 360 appraisal
system is general.

The 360 has a Single evaluation cycle while the 720 has
dual evaluation cycles.


Provides improved collaboration
on employee commitments and
the review of those commitments
without requiring face-to-face
meetings.
Reduces the amount of time
required to complete employee
reviews.

Specific performance goals are jointly determined by
employees and managers.
Progress toward accomplishing goals is periodically
reviewed.
Rewards are allocated on the basis of progress towards
the goals.

Key elements of MBO:
Goal specificity, participative decision making, an
explicit performance/evaluation period, feedback
MANAGEMENT BY OBJECTIVES (MBO)
1. The organizations overall objectives and strategies are
formulated.
2. Major objectives are allocated among divisional and
departmental units.
3. Unit managers collaboratively set specific objectives for their
units with their managers.
4. Specific objectives are collaboratively set with all department
members.
5. Action plans, defining how objectives are to be achieved, are
specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and
feedback is provided.
8. Successful achievement of objectives is reinforced by
performance-based rewards.
Not as effective in dynamic environments that require
constant resetting of goals.
Overemphasis on individual accomplishment may
create problems with teamwork.
Allowing the MBO program to become an annual
paperwork shuffle.
An appraisal method that uses quantified scale with
specific narrative examples of good and poor
performance.

Developing a BARS:
Generate critical incidents
Develop performance dimensions
Reallocate incidents
Scale the incidents
Develop a final instrument
Behaviorally Anchored Rating Scale
Contemporary Performance Management
Methods

Online performance Management

SAP (Systems Applications and products)
ERP ( Enterprise Resource Planning)
Oracle based Softwares
Visual Basic and C++
HRIS
Similar to Me (Projection)
Halo and Horn Effect
Primacy: PA is influenced by initial phase of review period.
First Impression
Contrast
Stereotype
Negativity
Recency: Information gathered during the last portion of
review period.
Spillover: Score of previous review period influence of
current PE.





Unintentional Rating Errors
Leniency (Inflation)
Severity (Deflation)
Central tendency


Common Errors in Performance Management
Increased Turnover
Use of Misleading Information
Lowered Self-Esteem
Wasted Time and Money
Damaged Relationships
Decreased motivation to perform
Employee burnout and job dissatisfaction
Increased risk and litigation
Emerging biases