1 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition. 8 eight PERFORMANCE MANAGEMENT chapter Ryerson University

2 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Performance Management Performance management involves much more than just performance appraisal Individual employees need to meet their performance goals –Collectively, helps the organization to meet its goals

3 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Uses of Performance Data – Informs: Corporate culture Organizational benchmarks Human capital potential Systems and processes Resources Current policies Program directions Sharing results with stakeholders Asking for shareholder input

4 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Characteristics of Effective Performance Management Performance objectives Performance goals Performance measurement Output measures Outcome measures

5 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Performance Management System Goals Organizations try to achieve the following: –Transform organizational objectives into understood, measurable outcomes –Provide instruments for measuring, managing, and improving organizational success –Include measures of quality, cost, speed to provide an in-depth, predictive system –Shift to an ongoing, forward-looking strategic partnership between management and employees

6 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Performance Management as part of managerial strategy Performance appraisal –The process by which organizations evaluate employee job performance –Provides data to assess every employee more

7 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Performance Management as part of managerial strategy – Cont’d Balanced scorecard –Very popular approach –Combines the performance measures of the total organization—integrates customer satisfaction, internal processes, learning, and innovation

8 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Uses of Performance Appraisal

9 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Key Elements The HR department usually develops performance appraisals for employees in all departments –Centralization is meant to ensure uniformity in order to provide for useful results –Employee’s immediate supervisor usually performs the actual evaluation

10 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Appraisal Systems Job-related Practical Have performance standards Have performance measures

11 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Performance Measures Indirect Objective Rater has only substitutes for performance (constructs) Verifiable by others Usually quantitative Direct Not verifiable by others Based on rater’s opinions Rater actually see the employee’s performance Subjective

12 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Characteristics for Effectiveness EffectivePerformanceAppraisalSystem Validity Reliability Input into development Acceptable standards Acceptable goals Control of standards more

13 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Characteristics for Effectiveness (cont’d) EffectivePerformanceAppraisalSystem Frequency of feedback Rater training Ratee training Input into interview process Appraisal consequences Different sources (raters)

14 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Past Performance: Noncomparative BARS Tests & Observations Descriptions of effective/ineffective performance—examples placed along a scale Job-related, practical, and standardized May include paper-and-pencil tests or an actual demonstration of skills Rating scale Multiple sources of ratings e.g. self, peer, supervisor, subordinate, customer Oldest and most widely used method Subjective i.e. based on the rater’s opinion Responses may be given numerical values 360-Degree more

15 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Past Performance: Comparative Forceddistributions Employees sorted into categories Usually a certain proportion must be put into each category Rankingmethod Employees ranked from best to worst Subject to halo and recency effects

16 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Future Performance Methods Management-by-Objectives Approach –Employee and supervisor jointly establish performance goals for the future –Goals should be mutually agreed upon and objectively measurable –Potential increase in employee motivation more

17 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Future Performance Methods Assessment Centre Technique –Relies on multiple types of evaluation and multiple raters –Usually used for middle-level managers –Candidate is evaluated at a location removed from the job-site

18 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Other Developments Web-based performance appraisal –Has become the standard for all sizes of firms –Ideally performance appraisal software is part of an enterprise-wide software system Competencies –Focus more on skills vs job performance Talent Management

19 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Implications of Appraisal Training Training raters –Raters need knowledge of system and its purpose –Rater training on rater errors –Now focus on cognitive aspect of the rating process –To make valid judgments using complex information

20 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Implications of Appraisal Training Focus on reducing/eliminating rating errors: –Halo Effect –Error of Central Tendency –Leniency and Strictness Bias –Personal Prejudice –Recency Effect –Contrast Errors

21 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Implications of Appraisal Evaluation Interviews Evaluation interviews are performance review sessions that give employees feedback –Tell-and-sell –Tell-and-listen –Problem-solving The interview should be a positive, performance-improving dialogue

22 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Effective Evaluation Interviews Emphasize positive aspects of employee performanceEmphasize positive aspects of employee performance Tell each employee the evaluation session is to improve performance not to disciplineTell each employee the evaluation session is to improve performance not to discipline Provide immediate positive and developmental feedback in a private locationProvide immediate positive and developmental feedback in a private location more

23 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Effective Evaluation Interviews (cont’d) Review performance formally at least annuallyReview performance formally at least annually Make criticisms specific, not general and vagueMake criticisms specific, not general and vague Focus criticisms on performance, not personalityFocus criticisms on performance, not personality Stay calm and do not argueStay calm and do not argue more

24 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Effective Evaluation Interviews (cont’d) Identify specific actions the employee can takeIdentify specific actions the employee can take Emphasize the evaluator’s willingness to assistEmphasize the evaluator’s willingness to assist End the evaluation session by stressing the positive aspects of performance and reviewing plans to improve performanceEnd the evaluation session by stressing the positive aspects of performance and reviewing plans to improve performance

25 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Human Resource Management Feedback Performance management process also provides insight into effectiveness of HRMPerformance management process also provides insight into effectiveness of HRM If poor performance is widespread, many employees are excluded from promotions and transfersIf poor performance is widespread, many employees are excluded from promotions and transfers Unacceptably high numbers of poor performance may indicate errors in the HRM functionUnacceptably high numbers of poor performance may indicate errors in the HRM function

26 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Legal Aspects of Performance Appraisal A performance appraisal form is a legal documentA performance appraisal form is a legal document Raters must use only performance criteria that are relevant to the jobRaters must use only performance criteria that are relevant to the job Avoid non-relevant criteriaAvoid non-relevant criteria more

27 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition Legal Aspects of Performance Appraisal A reasonable time must be set for performance improvementA reasonable time must be set for performance improvement Well-documented performance shortcomings and use of feedback interviews have been viewed favourably in court and with arbitratorsWell-documented performance shortcomings and use of feedback interviews have been viewed favourably in court and with arbitrators

28 Copyright © 2013 by McGraw-Hill RyersonSchwind 10th Canadian Edition. 8 eight PERFORMANCE MANAGEMENT chapter Ryerson University