Performance Management

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Presentation transcript:

Performance Management Dennis C. Veit dveit@uta.edu 1

Why Conduct Performance Appraisals?

Why Conduct Performance Appraisals? Employee Motivation Feedback is important for continuous improvement. Assessment and recognition can help motivate workers. Implement strategic goals and clarify performance expectations. Employee Development Individual performance makes a difference to company performance. Identify training and development needs. Improve focus on teams and teamwork Administrative Documentation may be needed for legal defense. Provide a rational basis giving bonuses or merit pay

Legal Issues Appraisal systems are more defensible if they: Are based on job analysis (Validity) Are consistent among multiple raters (Reliability) Provide written instructions Allow employees to review appraisal results Train appraisers in the use of the system

USES OF PERFROMANCE APPRASIALS Appraisal systems are set up to improve individual and organizational performance through: Human Resource Planning Recruitment and Selection Training and Development Career Planning and Development Compensation Programs Internal Employee Relations and Potential

Results Based Appraisal Focus on results compared to specific goals Should be clear and unambiguous Requires alignment of expectations May promote gaming of the system Results at any cost syndrome Time consuming and needs constant updating

Criteria within a Good PA: Traits Behaviors Comptetencies

Characteristics of an Effective Appraisal System Job – Related Criteria Performance expectations (Must agree on before) Standardization Trained Appraisers Continuous Open Communications Conduct Performance Reviews (Formal) Due Process

Appraisal Interview How to perform an effective Appraisal: Scheduling the interview Interview Structure Use of Praise and Criticism Setting Employee’s role *Remember you cannot change the past! *Future performance is another matter!

Challenges for Performance Measurement Problems in Performance Appraisals: Appraiser Discomfort Contrast effects/Halo Range restriction / Central tendency Leniency/strictness Personal Bias Organizational politics Rater errors can be addressed by training

Acceptability Performance management systems need to be perceived as fair Procedural fairness Interpersonal fairness Outcome (distributive) fairness Valid – evaluated based on job related metrics. Reliable – evaluations should not depend on which manager are conducting the evaluations.

How to Evaluate? Absolute Measurement Employees are all measured strictly by absolute performance requirements or standards of their jobs. Performance compared to set goals Avoids conflict among workers May decrease differentiation Relative (Comparative) Assessment Employees are measured against other employees . Ranking allows for comparison of employees but does not shed light on the distribution of employee performance. “Forced distribution” among workers May create false distinctions and competition

Forced Ranking Systems Gained popularity following GE Up to 20% of companies Used by: Conoco Capital One Sun Microsystems Cisco EDS Hallmark Cards Used and abandoned by: Ford Goodyear Microsoft Hewlett-Packard Intel Texas Instruments Enron

When managers have discretion: They tend to give “Above average” ratings. They prefer to give uniform ratings regardless of performance. They tend not to use the ends of the rating scale.

MBO and 360* MANAGEMENT BY OBJECTIVES Requires the manager to set specific measurable goals with each employee Periodically discussed his or her progress toward these goals Refers to comprehensive, organization wide goal-setting and appraisal program consisting of six main steps: Set the organization's goal 5) Set department goals Discuss departmental goals 6) Define expected results Performance reviews measured by results Provide feedback

Comments from Jack Welch “A company that bets its future on its people must remove the lower 10% and keep removing every year – always raising the bar of performance and increasing the quality of leadership.” Jack Welch, former GE CEO

The “Vitality Curve” “The bottom 10” “The top 20” “The Vital 70” Jack Welch “Jack: Straight From the Gut” 2001

Why Conduct Forced Rakings? Replacing worst employees improves performance. Sends a message that poor performance is not tolerated. Creates a competitive, high performance culture. Constant improvement of the workforce. Force managers and supervisors to make the tough decisions. Creates a compensation distribution that rewards top-performers. Legal employment practice that may be used as a grounds for promotion, demotion or layoff.

Why NOT Conduct Forced Rankings? Turnover and replacement costs Creates competition among employees Managers may disown the system and responsibility to develop employees. Gaming the system Only fire people after performance appraisals. Set up people for political reasons. Horse trading among managers. Overstaffing for cannon fodder. Low morale

“An employer has no business with a man’s personality “An employer has no business with a man’s personality. Employment is a specific contract calling for specific performance and nothing else. Any attempt of an employer to go beyond this is usurpation. It is an abuse of power. An employee owes no “loyalty,” he owes no “love,” and no “attitudes” – he owes performance and nothing else.” Peter Drucker Management Tasks, Responsibilities, Practices (1974)

How to Judge Appraisal Types Leads to desired behaviors Minimizes negative behaviors Reliability and validity Perceived fairness (rater and employee) Performance improvement and employee development Flexibility and administrative cost