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Chapter 08 Performance Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Human Resource Management:

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Presentation on theme: "Chapter 08 Performance Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Human Resource Management:"— Presentation transcript:

1 Chapter 08 Performance Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Human Resource Management: Gaining a Competitive Advantage

2 Learning Objectives  Identify major determinants of individual performance.  Discuss three purposes of performance management.  Identify five criteria for effective performance management systems (PMS).  Discuss four approaches to performance management, specific techniques used in each approach and ways these approaches compare with criteria for effective PMS. 8-2

3 Learning Objectives, cont.  Choose the most effective approach to performance measurement for a given situation.  Discuss advantages and disadvantages of different sources of performance information.  Choose the most effective sources for performance information.  Distinguish types of rating errors and explain how to minimize each in a performance evaluation.  Conduct an effective performance feedback session.  Identify the cause of a performance problem. 8-3

4 Introduction  Performance Management is the process through which managers ensure that employees’ activities and outputs are congruent with organizational goals.  Performance Appraisal is the process through which an organization gets information on how well an employee is doing his or her job.  Performance Feedback provides employees information regarding their performance effectiveness. 8-4

5 Process of Performance Management 8-5

6 3 Purposes of Performance Management Strategic Developmental Administrative 8-6

7 5 Criteria of Performance Measures Strategic Congruence Validity Reliability Acceptability Specificity 8-7

8 Reliability Defined as the consistency of a performance measure Interrater reliability – consistency among the individuals who evaluate an employee’s performanc Internal consistency reliability – whether questions designed to measure the same facet of performance deliver the same results Test-retest reliability – the ability to deliver the same results when a performance measure is administered at different times McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

9 Acceptability McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved


11 Measuring Performance  Comparative approach compares performance with that of others.  Ranking Simple ranking ranks employees from highest to lowest performer. Alternation ranking is crossing off the best and worst employees.  Forced distribution is employees ranked in groups.  Paired comparison Managers compare every employee with every other employee in work group. 8-11

12 Forced Distribution & Ranking McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

13 Attribute Approach  Graphic rating scales list of traits evaluated by 5-point rating scale. legally questionable.  Mixed-standard scales define relevant performance dimensions develop statements representing good, average, and poor performance along each dimension. 8-13

14 Graphic Rating Scale McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved The Graphic Rating Scale is the most common form of the attribute approach used in performance management – however, graphic rating scores have been criticized as subjective

15 Mixed Standard Scale McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

16 Behavioral Approach  Critical incidents approach requires managers to keep record of specific examples of effective and ineffective performance.  Behaviorally anchored rating scales (BARS)  Behavioral observation scales (BOS)  Organizational behavior modification is a formal system of behavioral feedback and reinforcement.  Assessment centers are multiple raters who evaluate employees’ performance on a number of exercises. 8-16

17 BARS for a Patrol Officer McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

18 Sample BOS It is generally agreed that a BOS provides the best means for differentiating employee performance

19 Competency Model Competencies are sets of skills, knowledge, abilities and personal characteristics that enable employees to successfully perform their jobs. A competency model identifies competencies necessary for each model and provides descriptions common for an entire occupation, organization, job family or specific job. Also useful for recruiting, selection, training and development. 8-19

20 Competency Assessment for a Managerial Position McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

21 Strengths and Weaknesses of the Behavioral Approach Strengths include effectiveness, the ability to link business strategy with employee behaviors, can have high validity when linked to job analysis, are generally highly accepted, and can be very reliable when used properly Weaknesses include difficulty in insuring that behaviors are linked with the organization’s strategy, assumes that favored behaviors are the best way to perform the job, and can be less suited to complex jobs McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

22 Results Approach  Management by Objectives top management passes down company’s strategic goals to managers to define goals.  Productivity Measurement and Evaluation System (ProMES ) Productivity Measurement and Evaluation System (ProMES ) goal is to motivate employees to higher levels of productivity. Goals Hierarchy 8-22

23 Balanced Scorecard Approach financialcustomer internal or operations learning and growth 4 Perspectives of Performance 8-23

24 Strengths and Weaknesses of the Results Approach The results approach relies upon objective, quantifiable measures of performance Results measured can be contaminated (affected by matters not under the employee’s control) and deficient (not all important aspects of the job can be measured), can also lead to inter-employee competition instead of cooperation McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

25 Quality Approach  A performance management system (PMS) designed with a strong quality orientation can: Assess both person and system factors in the measurement system. Emphasize managers and employees working together to solve performance problems. Involve both internal and external customers in setting standards and measuring performance. Use multiple sources to evaluate person and system factors. Sustainability is key element of quality approach. 8-25

26 Quality Approach  The quality approach assumes that the best measurement of an individual’s performance is the employee’s contribution to improving quality outcomes for the organization  Kaizen – focuses on continuous improvements in business processes and results 8-26

27 6 Statistical Process Quality Control Techniques 1. Process-flow analysis Process-flow analysis 2. Cause-and-effect diagrams Cause-and-effect diagrams 3. Pareto chart Pareto chart 4. Control chart Control chart 5. Histogram Histogram 6. Scattergram Scattergram 8-27

28 5 Performance Information Sources Peers Self Managers 8-28

29 Reducing Rater Errors and Politics  Appraisal Politics – where evaluators purposefully distort a rating to acheive personal or organizational goals  Approaches to Reducing Rater Error:  Rater error training – increase awareness of rater errors  Rater accuracy training (frame of reference training) – provides raters with idea of what is high, medium, and low performance  Calibration Meetings- attended by managers to discuss employee performance ratings. 8-29

30 McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

31 3 Ways Technology Influences PMS Web-based Online paperless PMS Technology -Social networking, etc. Aligns performance goals across all levels Access to performance information, data and tools Improves efficiency of PMS 8-31

32 Technology - Electronic Monitoring  Electronic tracking systems include:  Hand and fingerprint recognition systems  Global positioning systems (GPS)  Systems that track employees using handheld computers and cell phones  Potential increased efficiency and productivity benefits  Systems present privacy concerns. 8-32

33 Typical Rater Errors 1. Similar to Me 2. Contrast – compare with others 3. Leniency – rate too highly 4. Strictness – rate too harshly 5. Central Tendency – rate all as mediocre 6. Halo – personal endorsement 7. Horns – personal animosity Appraisal Politics- evaluations distort ratings to achieve goals. 8-33

34 McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

35 Improve Performance Feedback 1. Give feedback frequently, not once a year. 2. Create right context for discussion. 3. Ask employees to rate performance before the session. 4. Encourage employee to participate. 5. Recognize effective performance through praise. 6. Focus on solving problems. 7. Focus feedback on behavior or results, not on the person. 8. Minimize criticism. 9. Agree to specific goals and set progress review date. 8-35

36 Employee Characteristics Performance Standards/ Goals Feedback Consequences Input 5 Factors to Consider When Analyzing Poor Performance 8-36

37 Ways to Manage Performance  Solid performers  High ability and motivation; provide development  Misdirected effort  Lack of ability but high motivation; focus on training  Underutilizers  High ability but lack motivation; focus on interpersonal abilities Deadwood  Low ability and motivation; managerial action, outplacement, demotion, firing 8-37

38 Withstand Legal Scrutiny 1. Conduct a valid job analysis related to performance. 2. Base system on specific behaviors or results. 3. Train raters to use system correctly. 4. Review performance ratings and allow for employee appeal. 5. Provide guidance/support for poor performers. 6. Use multiple raters. 7. Document performance evaluations. 8-38

39 Summary Measuring and managing performance are key to gaining competitive edge.  Performance management systems (PMS) serve strategic, administrative and developmental purposes.  PMS should be evaluated against criteria of strategic congruence, validity, reliability, acceptability and specificity.  Effective managers need to  be aware of the issues involved in determining best methods.  feed performance information back to employees  take action based on causes for poor performance: ability, motivation or both  be sure that PMS can meet legal scrutiny 8-39

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