Performance Measurement and Management Summer Business Institute Villanova School of Business

Overview  Importance of performance measurement and management –Levels of analysis  Focus: organization level  Focus: individual level

Importance of Performance Measurement and Management  “What you measure is what you get”  What might companies be interested in measuring?  Levels of analysis –Individual/employee –Work team –Organization –Industry –National economy

Focus: Organization Level  Kaplan & Norton’s Balanced Scorecard  Four perspectives: –Customer –Internal business –Innovation and learning –Financial  Application: Villanova University

Focus: Individual Level  Purpose: –Feedback –Development –Documentation  Ever been in a situation with really good or bad performance management?

The Appraisal Process 1. Establish performance standards 2. Mutually set measurable goals 3. Measure actual performance 4. Compare actual performance with standards 5. Discuss the appraisal with the employee 6. If necessary, initiate corrective action

Methods of Appraisal  Family 1: Use of absolute standards –Critical incident appraisal (specific observed behaviors) –Checklist appraisal –Adjective rating scale appraisal (quality of work, job knowledge, dependability) –Forced-choice appraisal (occupational survey) –BARS (Behaviorally Anchored Rating Scales) – combines 1 and 3, more specific incidents are rated  Family 2: Use of relative standards –Group order ranking –Individual ranking –Paired comparison  Family 3: Use of achieved outcomes –Management by objectives (MBO)

Difficulties in Appraisal  We are human… so therefore we err! –Leniency error –Halo error –Similarity error –Low appraiser motivation – appraisal could harm employee, evaluator may not give a realistic evaluation –Central tendency –Inflationary pressures

Creating More Effective Systems Emphasize BEHAVIOR, not traits Use both absolute and relative standards Provide ongoing feedback Have multiple raters Use peer evaluations and 360 appraisals Rate selectively Train appraisers

International Issues in Appraisal  Cultural differences are important to consider! –Language –Customs –Basic cultural differences e.g., differing emphasis on individualism –Evaluation formats Universal or country specific?

Learning Points  Why performance measurement and management are important  The balanced scorecard– organization level performance measurement  Methods of appraisal at the individual level  What individual pitfalls to avoid and how to create a better overall system