1. Prentice Hall, Inc. © 2006

2. Performance Management in Context: Overview
Definition of Performance Management (PM)
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
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3. 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
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4. PM is NOT performance appraisal
Strategic business considerations
Ongoing feedback
So employee can improve performance
Driven by line manager
Performance appraisal
Assesses employee
Strengths &
Weaknesses
Once a year
Lacks ongoing feedback
Driven by HR
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5. 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 and enhanced
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6. 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
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7. 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
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8. 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
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9. 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
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10. Disadvantages/Dangers of Poorly-implemented PM Systems for Organization
Wasted time and money
Unclear ratings system
Emerging biases
Increased risk of litigation
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11. Reward Systems: Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment relationship
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12. Tangible returns Cash compensation Benefits, such as Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-term)
Benefits, such as
Income Protection
Allowances
Work/life focus
Base pay
Hourly wages
Salary
Cost-of-Living & Contingent Pay
Usually permanent increases in pay based on either cost of living or performance
Covered in more detail in Module 11
Incentives (short- and long-term)
Used to increase performance
E.g., bonuses (short term) or stock options/ownership (long term)
Income Protection
Sometimes required under law, such as
Social Security (what about unemployment insurance in the USA?) Disability pay,
medical insurance,
pension plans,
savings plans
Allowances
E.g., housing
transportation (e.g., company provides car)
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13. Intangible returns Relational returns, such as Recognition and status
Employment security
Challenging work
Learning opportunities
Work/life focus (to help employee balance work/home life)
Such as vacation time,
flextime and telecommuting,
services (e.g., counseling, financial planning, fitness activities)
Relational Returns
Such as recognition,
status,
employment security,
challenging work,
opportunities to learn,
opportunities to form personal relationships
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14. Returns and Their Degree of Dependency on the Performance Management System
Cost of Living Adjustment
Income Protection
Work/life Focus
Allowances
Relational Returns
Base Pay
Contingent Pay
Short-term Incentives
Long-term Incentives
Degree of Dependency
Low
Moderate
High
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15. Purposes of PM Systems: Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentation
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16. Strategic Purpose Link employee behavior with organization’s goals
Communicate most crucial business strategic initiatives
Note: the following is slide used before (some of this is not in Module 1)
Links employee activities with organization’s mission and goals
Identifies results and behaviors needed to carry out strategy
Maximizes extent employees exhibit those behaviors and results
Only 13% of organizations use PM to communicate organizational purpose and goals
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17. Administrative Purpose
Provide information for making decisions re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs
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18. Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve
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19. Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and weaknesses
Causes of performance deficiencies
Tailor development of individual career path
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20. Organizational Maintenance Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions
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21. Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements
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22. Characteristics of an Ideal PM System
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23. Congruent with organizational strategy
Consistent with organization’s strategy
Aligned with unit and organizational goals
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24. 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
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25. Practical Available Easy to use Acceptable to decision makers
Benefits outweigh costs
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26. 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
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27. Specific Concrete and detailed guidance to employees what’s expected
how to meet the expectations
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28. Identifies effective and ineffective performance
Distinguish between effective and ineffective
Behaviors
Results
Provide ability to identify employees with various levels of performance
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29. Reliable Consistent Free of error Inter-rater reliability
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30. Valid Relevant (measures what is important)
Not deficient (doesn’t measure unimportant facets of job)
Not contaminated (only measures what the employee can control)
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31. 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
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32. 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
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33. Open (No Secrets) Frequent, ongoing evaluations and feedback
2-way communications in appraisal meeting
Clear standards, ongoing communication
Communications are factual, open, honest
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34. Correctable Recognizes that human judgment is fallible
Appeals process provided
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35. Standardized Ongoing training of managers to provide
Consistent evaluations across
People
Time
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36. Ethical Supervisor suppresses self-interest
Supervisor rates only where she has sufficient information about the performance dimension
Supervisor respects employee privacy
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37. 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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