Attract – Acquire –

Retain – Develop -
Deploy
Performance
Management
Module 6
 Leaders are Readers

• How to be a Star at Work 1999 Robert E Kelley

• “What average performers think it is: The talent for
brownnosing and schmoozing in the workplace to
help me get noticed by the right people. What star
performers know it to be: A work strategy that
enables me to navigate the competing interests in
an organization to promote cooperation, address
conflicts and get things done.”
 Performance Management and
Execution
• Who Says Elephants Can’t Dance? (2003)
• Louis Gerstner
• “Fixing IBM was all about execution. We had to
stop looking for people to blame, stop tweaking the
internal structure and systems. I wanted no
excuses.”
Measuring Individual Employee Performance
• Individual Performance Factors
• Individual ability to do the work
• Effort level expended
• Organizational support

Performance (P) = Ability (A) x

Effort (E) x Support (S)
Components of Individual Performance
 Individual Motivation
• Motivation
• The desire within a person causing that person to act to reach a goal. (Greek
“mohere” which means “to move”)

• Challenges in diagnosing a “motivation problem”

• Inconsistency in organizational rewards
• Organizational support for employee efforts
• Accurate measurement of employee performance
• Desirability of organizational rewards by employees
• Equipment, training, product-market fit

• Need broad-based strategies and tactics to address all individuals.

 Preface: Global Cultural Differences
in Performance Management
• Uncommon for managers in other cultures to rate employees
or to give direct feedback.
• Younger subordinates do not engage in joint discussions with
their managers due their high respect for authority and age.
• Criticism from superiors is viewed as personally devastating
rather than as useful feedback.
 Jack Welch (Winning)
• Be a meritocracy through differentiation of people.
• “Categorize your people as the top 20, middle 70 and bottom
10 percent who turn over in 1 year or less. You manage the 70
by identifying people who have the potential to move up and
cultivating them. You manage the top 20 by rewarding them
like crazy.”
• “Use a rigorous non-bureaucratic evaluation system,
monitored for integrity with the same intensity of Sarbanes-
Oxley Act compliance.”
 Top Issues in Performance
Management
• 1. Bommer et al meta analysis results- Manager
performance ratings are TERRIBLE
• 2. Procedural Justice- need to know HOW decision
was made (examples of good and bad performance)
• 3. Standards are clear and communicated in advance
• 4. Rating instruments must be simple and easy for the
rater and ratee to understand
• 5. Ratees (employees) must have input into the process
Components of Effective
Performance
Management
 What is Performance Management
• Performance Management
• Processes used to identify, encourage, measure, evaluate, improve, and
reward employee performance
• Provide information to employees about their performance.
• Clarify organizational performance expectations.
• Identify the development steps that are needed to enhance employee
performance.
• Document performance for personnel actions.
• E.g., promotions (more appropriate than the promotion pit)
• Provide rewards for achieving performance objectives.
 Performance appraisal

• The process of determining how well employees do

their jobs relative to a standard and communicating
that information to the employee.
 What is Employee Performance
• Performance
• What an employee does and does not do.
• Quantity of output • Quality of output
• Timeliness of output • Presence at work
• Cooperativeness

• Not usually ethics- why?

 An effective performance
management system must

• Link organizational strategy to ultimate

results.
• Translate organizational strategies into
unit-level actions.
• Assign unit-level actions to individual
employees.
Types of Performance Information
 Performance Standards
What are Performance Standards
 Expected levels of performance
 Benchmarks, goals, and targets
What are characteristics of well-defined standards
 Realistic
 Measurable
 Clearly understood
How do we ensure our system is legally defensible

 Legally Defensible PA System:

 Appraisal criteria based on job analysis
 Absence of disparate impact and evidence of validity
 Formal evaluation criterion that limit managerial discretion
 Formal rating instrument linked to job duties and
responsibilities
 Personal knowledge of and contact with ratee
 Training of supervisors in conducting appraisals
 Review process to prevent undue control of careers
 Counseling to help poor performers improve
Philosophical Challenges to Performance Appraisal
 Who Conducts Appraisals

• Supervisors who rate their subordinates

• Employees who rate their supervisors
• Team members who rate each other
• Employees’ self-appraisal
• Outside sources rating employees
• Multisource (360° feedback) appraisal
 Employee Rating of Managers

• Advantages • Disadvantages
• Helps in identifying • Negative reactions by
competent managers managers to employee
• Serves to make ratings
managers more • Subordinates’ fear of
responsive to reprisals may inhibit
employees them from giving
• Can contribute to the realistic (negative)
career development of ratings
managers
 Team/Peer Rating

• Advantages • Disadvantages
• Helps improve the • Can negatively affect
performance of lower- working relationships.
rated individuals • Can create difficulties for
• Peers have opportunity managers in determining
to observe other peers. individual performance.

• Peer appraisals focus on • Organizational use of

individual performance
individual contributions
appraisals can hinder the
to teamwork and team
development of
performance.
Has anyone evaluated a team member? teamwork
Multisource Appraisal
 Category Scaling Methods

• Graphic Rating Scale

• A scale that allows the rater to indicate an employee’s
performance on a continuum of job behaviors.
John has good customer service skills.
1 (Disagree), 3 (Neutral), 5 (Agree)
• Drawbacks
• Restrictions on the range of possible rater responses
• Differences in the interpretations of the meanings of scale
items and scale ranges by raters
 Behavioral/Objective Methods

• Behavioral Rating Approach

• Assesses employees’ behaviors instead of other
characteristics
• Consists of a series of scales created by:
• Identifying important job dimensions
• Creating statements describing a range of desired and
undesirable behaviors (anchors)
• Example- Next Slide
Behaviorally-Anchored Rating Scale
for Customer Service Skills
 Category Rating Methods
 Checklists
 A performance appraisal tool that uses a list of statements or work
behaviors that are checked by raters.
 Can be quantified by applying weights to individual checklist items.
 Ranking
 A listing of all employees from highest to lowest in performance.
 Drawbacks
 Does not show size of differences in performance between employees
 Implies that lowest-ranked employees are unsatisfactory performers.
 Becomes an unwieldy process if the group to be ranked is large.
 Comparative Methods (cont’d)

Forced Distribution
 Performance appraisal method in which ratings of
employees are distributed along a bell-shaped curve.
 Drawbacks
 Assumes a normal distribution of performance.
 Resistance by managers to placing individuals in the
lowest or highest groups.
 Providing explanation for placement in a higher or lower
grouping can be difficult.
 Is not readily applicable to small groups of employees.
Forced Distribution on a Bell-Shaped Curve
 Narrative Methods
 Critical Incident
 Manager keeps a written record of highly favorable and unfavorable
employee actions.
 Drawbacks
 Variations in how managers define a “critical incident”
 Time involved in documenting employee actions
 Most employee actions are not observed and may become different if observed
 Employee concerns about manager’s “black books”
 Essay
 Manager writes a short essay describing an employee’s performance.
 Drawback- Depends on the managers’ writing skills and their ability to
express themselves.
 Teachers, BECU Corporate
 Criticisms of Performance
Appraisal
• Focus is too much on the individual contribution and
does little to develop employees.

• Employees and supervisors believe the appraisal process

is seriously flawed.

• Appraisals are inconsistent, short-term oriented,

subjective, and useful only at the extremes of
performance.
 Management by Objectives
(MBO)
 Management by Objectives
 Specifying the performance goals that an individual and his or
her manager agree the employee will to try to attain within an
appropriate length of time.
 Key MBO Ideas
 Employee involvement creates higher levels of commitment
and performance.
 Encourages employees to work effectively toward achieving
desired results.
 Performance measures should be measurable and should define
results.
What MBO Tries to Accomplish

• The 7 Habits of Highly Effective People Stephen R

Covey (2004)
• “#2 Begin with the End in Mind”
• The HP Way, David Packard (2005)
• “We thought if we could get everyone to agree on what our
objectives were and to understand what we were trying to
so, then we could turn them loose and they would move in
a common direction.“
• This is MBO
 The MBO Process
This is transactional leadership- contingent reward

Job
JobReview
Reviewand
andAgreement
Agreement

Development
Developmentof
ofPerformance
PerformanceStandards
Standards

Objective
ObjectiveSetting
Setting

Continuing
ContinuingPerformance
PerformanceDiscussions
Discussions
 Training of Managers and
Employees
• Appraisal Training Topics:
• Performance criteria and job standards that should be
considered
• How to communicate positive and negative feedback
• How to avoid common rating errors (Next Slide)
Common Rater Errors
Appraisal Interview Hints
WSJ 12/2009 Article

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