PERFORMANCE
MANAGEMENT
Performance Management
Todays Contents
Definition of Performance Management (PM) - CS
The Performance Management Contribution
Disadvantages/Dangers of Poorly-implemented PM
systems
Definition of Reward Systems
Aims and role of PM Systems
Characteristics of an Ideal PM system
Integration with Other Human Resources and
Development Activities
Performance Management: Definition
Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
and
Aligning performance with the strategic goals of the
organization
PM is NOT performance appraisal
Performance Management Performance appraisal
– Strategic business – Assesses employee
considerations • Strengths &
• Weaknesses
– Ongoing feedback – Once a year
– So employee can improve – Lacks ongoing
performance feedback
– Driven by line manager – Driven by HR Dept
Contributions of PM
For Employees
The definitions of job and success are clarified
Motivation to perform is increased
Self-esteem is increased
Self-insight and development are enhanced
Contributions of PM
For Managers
Supervisors’ views of performance are
communicated more clearly
Managers gain insight about subordinates
There is better and more timely differentiation
between good and poor performers
Employees become more competent
Contributions of PM
For Organization/HR Function
Organizational goals are made clear
Organizational change is facilitated
Administrative actions are more fair and
appropriate
There is better protection from lawsuits
Disadvantages/Dangers of
Poorly-implemented PM Systems
for Employees
• Lowered self-esteem
• Employee burnout and job dissatisfaction
• Damaged relationships
• Use of false or misleading information
Disadvantages/Dangers of
Poorly-implemented PM Systems
for Managers
• Increased turnover
• Decreased motivation to perform
• Unjustified demands on managers’ resources
• Varying and unfair standards and ratings
Disadvantages/Dangers of
Poorly-implemented PM Systems
for Organization
• Wasted time and money
• Unclear ratings system
• Emerging biases
• Increased risk of litigation
Reward Systems: Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment relationship
Tangible returns
Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-term)
Benefits, such as
Income Protection
Allowances
Work/life focus
Intangible returns
Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities
Returns and Their Degree of Dependency
on the Performance Management System
Return Degree of Dependency
Cost of Living Adjustment • Low
Income Protection • Low
Work/life Focus • Moderate
Allowances • Moderate
Relational Returns • Moderate
Base Pay • Moderate
Contingent Pay • High
Short-term Incentives • High
Long-term Incentives • High
Purposes of PM Systems:
Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentation
Strategic Purpose
Link employee behavior with organization’s
goals
Communicate most crucial business strategic
initiatives
Administrative Purpose
Provide information for making decisions related to:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs
Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve
Developmental Purpose
Performance feedback / coaching
Identification of individual strengths and
weaknesses
Causes of performance deficiencies
Tailor development of individual career
path
Organizational Maintenance Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at organizational
level
Evaluate effectiveness of HR interventions
Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements
Characteristics of an Ideal PM System
Congruent with organizational strategy
• Consistent with organization’s strategy
• Aligned with unit and organizational goals
Thorough
• All employees are evaluated
• All major job responsibilities are evaluated
• Evaluations cover performance for entire
review period
• Feedback is given on both positive and
negative performance
Practical
• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs
Meaningful
• Standards are important and relevant
• System measures ONLY what employee can
control
• Results have consequences Evaluations
occur regularly and at appropriate times
• System provides for continuing skill
development of evaluators
Specific
Concrete and detailed guidance to employees
• What’s expected
• How to meet the expectations
Identifies effective and ineffective performance
• Distinguish between effective and ineffective
– Behaviors
– Results
• Provide ability to identify employees with
various levels of performance
Reliable
• Consistent
• Free of error
• Inter-rater reliability
Valid
• Relevant (measures what is important)
• Not deficient (doesn’t measure
unimportant facets of job)
• Not contaminated (only measures what
the employee can control)
Acceptable and Fair
• Perception of Distributive Justice
– Work performed evaluation received reward
• Perception of Procedural Justice
– Fairness of procedures used to:
• Determine ratings
• Link ratings to rewards
Inclusive
• Represents concerns of all involved
– When system is created, employees should help
with deciding
• What should be measured
• How it should be measured
– Employee should provide input on performance
prior to evaluation meeting
Open (No Secrets)
• Frequent, ongoing evaluations and feedback
• 2-way communications in appraisal meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest
Correctable
• Recognizes that human judgment is fallible
• Appeals process provided
Standardized
• Ongoing training of managers to provide
• Consistent evaluations across
– People
– Time
Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where he/she has
sufficient information about the performance
dimension
• Supervisor respects employee privacy
Integration with other Human Resources
and Development activities
PM provides information for:
Development of training to meet organizational
needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems
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