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

Process of Performance Management 8-2

5 Criteria- Performance Measures Strategic Congruence Validity Reliability Acceptability Specificity 8-3

Measuring Performance  Comparative approach- compares performance with others.  Ranking Simple ranking ranks employees from highest to lowest performer. Alternation ranking - crossing off the best and worst employees.  Forced distribution- employees ranked in groups.  Paired comparison- managers compare every employee with every other employee in work group. 8-4

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 - formal system of behavioral feedback and reinforcement.  Assessment centers - multiple raters evaluate employees’ performance on a number of exercises. 8-5

Results Approach  Management by Objectives top management passes down company’s strategic goals to managers to define goals.  Productivity Measurement and Evaluation System (ProMES ) goal is to motivate employees to higher levels of productivity. Goals Hierarchy 8-6

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. 8-7

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

5 Performance Information Sources Peers Self Managers P Info S 8-9

Reducing Rater Errors and Politics  Approaches to Reducing Rater Error:  Rater error training  Rater accuracy training  Calibration Meetings- attended by managers to discuss employee performance ratings. 8-10

3 Ways Technology Influences PMS Web-based On-line paperless PMS Technology -Social networking, etc. Aligns performance goals across all levels Access to performance information, data and tools Improves efficiency of PMS 8-11

Typical Rater Errors 1. Similar to Me 2. Contrast 3. Leniency 4. Strictness 5. Central Tendency 6. Halo 7. Horns Appraisal Politics- evaluations distort ratings to achieve goals. 8-12

Ways to Manage Performance  Solid performers- High ability and motivation; provide development  Misdirected effort- Lack of ability but high motivation; focus on training  Under-utilizers- High ability but lack motivation; focus on interpersonal abilities Deadwood- Low ability and motivation; managerial action, outplacement, demotion, firing. 8-13

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. 8-14

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 8-15