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Sminar1

Performance Management
and Reward Systems in Context
Aguinis, Herman (2013-08-29). Performance
Management, Chapter 1

Agenda
Case Study
2: Performance Management at
Network Solutions, Inc.
Articles
Performance Management: Impact
and Trend DDI, Roger Sumlin

Case Study2: PM at Network


Solutions, Inc.
Prior state
Inefficiency

50 different
systems:
- Wasted time and money
- Unrealistic demands on
managers & employees
- Varying and unfair standards
and ratings.
- Unclear ratings system

Misleading

<5% of all
employees
received the lowest
category of rating:
- Use of misleading information.
- Emerging biases

Demotivati
on
Tha
nk
you!

No recognition
program:
- Decreased motivation to
perform
- Job burnout and
dissatisfaction

Case Study2: PM at Network


Solutions, Inc.
Change
Goal Alignment
PM System

Comparative Rating Models


(forced ranking)

70

20%

70%
10%
1: Top 20% among all
employees
2: between Top 20% and
bottom 10% among all
employees
3: Bottom 10% among all

PM Setup_1
Management
Commitment

- Committed to the
plan.
- Stop using any other
systems
- Top leaders
understood and
accepted it
- Feedback
deficiencies

Training&
Process
Development

- Joint year round


responsibility of
employees and
managers
- Regular meetings

PM Cycle

PM Setup_2
Reward
System
Rate 1 and 2

Carrier
Developm
ent
Rate 1

Improveme
nt
Opportunity
Rate 3

Carrier
Developm
ent
Rate 1

Ideal vs. PM at Network Solutions


PM System
Standar
dization

Correctability

Identification
of effective
and ineffective
performance
Reliabilit
y

Context
congruenc
e

Meaning
fulness

Strategic
Congruence

Practicality

Acceptability
and fairness
Inclusiv
eness

Potential Negative
Outcomes
1. Unconstructive competition
Damages the relationships

2. Fairness, self-steam and


employee turnover
Comparative rating method
Power inconsistency

3. Practicality

Notable time and money


investment
According to DDI between
1993-1997

Forced rankings

Articles: Performance Management: Impact and Trend


DDI, Roger Sumlin

Development Dimensions International


(DDI)
Review 6 recent PM studies
Key findings are categorized into 2 groups:
1. PM Impact on Organizational Success
2. Performance Management Trends/Best
Practices

1. PM Impact on Organizational
Success
ra
St

5 Organizational Impact (1997, 88


organization):

PM drives the key factors


associated with business
strategy

PM drives the
cultural
strategies that
maximize human

Senior-level support

s
al

CEO Ratings

go

Goal alignment -> more improvement

financial performance
Productivity
Product or service quality
Customer satisfaction
Employee job satisfaction

gi
te

i.
ii.
iii.
iv.
v.

1. PM Impact on Organizational
Success

Measurement-managed companies outperform those


that downplay measurement (1996, 122
organization):
4 mechanisms that
contribute to success:

6 strategic performance
areas:

i.
ii.

i. Financial performance
ii.Operating efficiency
iii.Customer satisfaction
iv.Employee performance
v.Innovation/Change
vi.Community/Environment

Agreement on strategy
Clarity of
communication
iii. Focus and alignment of
efforts
iv. Organizational culture

1. PM Impact on Organizational
Success
The 1,200 workers surveyed (1995):
i. They could improve their output by 26%
ii. 1/4 said they could raise productivity by 50%
if they weren't hindered by lack of direction,
support, training, and equipment.

An effective PM system delivers the


direction and support workers need.

1. PM Impact on Organizational
Success

PM penetration%

437 public firms in U.S (1990-1992)


Companies with performance
management
1. Stranger financial performance
2. Productivity is on par with the
industry average
3. Improved their financial performance
and productivity after implementing
PM

2. Performance Management Trends/Best Practices

1993 vs 1997 (by DDI)


i. Most frequent practices:

Mgmt.
Training

frequently use
competencies from
PM

Non-Mgmt. Training include team-based


objectives in individual
plan

frequently use peer


input

2. Performance Management Trends/Best Practices

1993 vs 1997 (by DDI)


ii. Changes in use: Shows the direction

PM Training

Forced
rankings

Frequently
Nonuse
Mgmt.
competencie Training

Include
teambased
objectives
in
individual
plan

Common
rating
tools

Teambased
objectives

Different
PM
input

Team
apprais
al

2. Performance Management Trends/Best Practices

1993 vs 1997 (by DDI)


iii. Quality factors of effective PM
systems :

Alignmen
t

Accounta
bility and
training

2. Performance Management Trends/Best


Practices
Best Practice: 37 successful firms (1994)
Common Traits:
i. Full alignment with other parts of the organization
(business objectives, strategy, customer needs)
ii. Simplicity
iii. Flexibility
iv. Decentralized control
v. A measurement process (different sources,
feedback)
vi. Employee development (pay and performance,
carrier development)

2. Performance Management Trends/Best


Practices

18 firms with satisfied Mgmt.& HR


Shared Characteristics:
i. Implementation at the top
ii. Simple process
iii. Reasonable number of goals
iv. Additional feedback (informal)

2. Performance Management Trends/Best


Practices

1,149 managers and employees 79


companies (1993 DDI and Society for
HRM)
Satisfaction Factors:
i. Feedback and Coaching
ii. Performance Planning
iii. Performance Review
iv. Outcomes

Dramatic message of 6
studies
i. PM is an important Business System
ii. PM makes difference in organizational
performance
iii. Approaches to PM are changing
iv. Senior managers must be attentive to
the PM systems in their organizations.

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