1. CHAPTER 8 Managing Employees’ Performance
fundamentals of Human Resource Management 4th edition by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright
CHAPTER 8
Managing Employees’ Performance
This chapter examines a variety of approaches to performance management.

2. What Do I Need to Know?
Identify the activities involved in performance management.
Discuss the purposes of performance management systems.
Define five criteria for measuring the effectiveness of a performance management system.
Compare the major methods for measuring performance.
After reading and discussing this chapter, you should be able to:

3. What Do I Need to Know? (continued)
Describe major sources of performance information in terms of their advantages and disadvantages.
Define types of rating errors and explain how to minimize them.
Explain how to provide performance feedback effectively.
After reading and discussing this chapter, you should be able to:

4. What Do I Need to Know? (continued)
Summarize ways to produce improvement in unsatisfactory performance.
Discuss legal and ethical issues that affect performance management.
After reading and discussing this chapter, you should be able to:

5. Introduction
Performance management: the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.
This process requires:
Knowing what activities and outputs are desired
Observing whether they occur
Providing feedback to help employees meet expectations
In this chapter we examine a variety of approaches to performance management.

6. Test Your Knowledge
If the performance management system created competition among team members, I would
Make collaboration a criterion to be evaluated.
Nothing, competition is good.
Increase the specificity of the feedback.
Focus on personal traits rather than behaviors.
If the performance management system created competition among team members, I would.
Make collaboration a criterion to be evaluated.
Nothing, competition is good.
Increase the specificity of the feedback.
Focus on personal traits rather than behaviors.
Answer: A

7. Figure 8.1: Stages of the Performance Management Process
Performance management includes several activities. These are shown in Figure 8.1.
Using this performance management process helps managers and employees focus on the organization’s goals.

8. Purposes of Performance Management
Strategic Purpose – means effective performance management helps the organization achieve its business objectives.
Administrative Purpose – refers to the ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs.
Developmental Purpose – means that it serves as a basis for developing employees’ knowledge and skills.
Organizations establish performance management systems to meet three broad purposes:
Strategic
Administrative
Developmental

9. Employees Want More Feedback
A recent survey of employees indicate that the quality of feedback they receive could be improved.

10. Criteria for Effective Performance Management
Fit with strategy
Validity
Reliability
Acceptability
Specific feedback
For performance management to achieve its goals, its methods for measuring performance must be good. Selecting these measures is a critical part of planning a performance manage system.
Several criteria determine the effectiveness of performance measures:
Fit with strategy
Validity
Reliability
Acceptability
Specific feedback

11. Figure 8.2: Contamination and Deficiency of a Job Performance Measure
Figure 8.2 shows two sets of information. The circle on the left represents all the information in a performance appraisal; the circle on the right represents all relevant measures of job performance. The overlap of the circles contains the valid information. Information that is gathered but irrelevant is “contamination.”

12. Test Your Knowledge
Sarah is a computer programmer whose job mainly consists of independently coding software. Interpersonal and teamwork skills are included on performance appraisal. Measuring these skills most closely represents:
Criterion contamination
Criterion deficiency
Unreliability
Sarah is a computer programmer whose job mainly consists of independently coding software. If interpersonal and teamwork skills were weighted heavily on his job performance measure it would suffer from
Criterion contamination
Criterion deficiency
Unreliability
Answer: A

13. Methods for Measuring Performance
Comparative
Attribute
Behavior
Results
Quality
Organizations have developed a wide variety of methods for measuring performance. These are listed on this slide, compared and discussed on the slides which follow.
Many organizations use a measurement system that includes a variety of these measures.

14. Table 8.1: Basic Approaches to Performance Measurement
Organizations have developed a wide variety of methods of measuring performance.
Table 8.1 compares the methods/approaches to measuring performance in terms of our criteria for effective performance management.

15. Measuring Performance: Making Comparisons
Simple Ranking
Requires managers to rank employees in their group from the highest performer to the poorest performer.
Forced Distribution
Assigns a certain percentage of employees to each category in a set of categories.
Paired Comparison
Compares each employee with each other employee to establish rankings.
The performance appraisal method may require the rater to compare one individual’s performance with that of others. This method involves some sort of ranking, in which some employees are best, some are average, and others are worst.
The usual techniques for making comparisons are:
Simple ranking
Forced distribution
Paired comparison

16. Measuring Performance: Rating Individuals - Attributes
Graphic Rating Scale
Mixed-Standard Scale
Lists traits and provides a rating scale for each trait.
The employer uses the scale to indicate the extent to which an employee displays each trait.
Uses several statements describing each trait to produce a final score for that trait.
Instead of focusing on arranging a group of employees from best to worst, performance measurement can look at each employee’s performance relative to a uniform set of standards.
The measurement may evaluate employees in terms of:
Attributes (characteristics or traits) believed desirable
Behaviors measurements that identify whether the employee behaved in desirable ways

17. Figure 8.3: Example of a Graphic Rating Scale
Figure 8.3 shows an example of a graphic rating scale that uses a set of ratings from 1 to 5.
A drawback of this approach is that it leaves to the particular manager the decisions about what is “excellent knowledge” or “commendable judgment” or “poor interpersonal skills.” The result is low reliability, because managers are likely to arrive at different judgments.

18. Figure 8.4: Example of a Mixed-Standard Scale
To get around the reliability problem of the graphic rating scale, some organizations use mixed-standard scales, which use several statements describing each trait to produce a final score for that trait. The manager scores the employee in terms of how the employee compares to each statement.
Figure 8.4 is an example of a mixed-standard scale.

19. Ask students: “How would the performance measurements of a car dealer differ from those of a company CEO?”
An employee’s performance measurement differs from job to job. For example, a car dealer’s performance is measured by the dollar amount of sales, the number of new customers, and customer satisfaction surveys.

20. Measuring Performance: Rating Individuals - Behaviors
Critical-Incident Method
Behaviorally Anchored Rating Scale (BARS)
Based on managers’ records of specific examples of the employee acting in ways that are either effective or ineffective.
Employees receive feedback about what they do well and what they do poorly and how they are helping the organization achieve its goals.
Rates behavior in terms of a scale showing specific statements of behavior that describe different levels of performance.
One way to overcome the drawbacks of rating attributes is to measure employees’ behavior.
To rate behaviors, the organization begins by defining which behaviors are associated with success on the job. Which kinds of behavior help the organization achieve its goals? The appraisal for asks the manager to rate an employee in terms of each of the identified behaviors.
Techniques used include:
Critical incident method
Behaviorally anchored rating scale (BARS)
Behavioral observation scale (BOS)
Organizational Behavior modification (OBM)

21. Figure 8.5: Example of Task- BARS Rating Dimension for a Patrol Officer
The scale in Figure 8.5 shows various performance levels for the behavior of “preparing for duty” for a patrol officer.

22. Measuring Performance: Rating Individuals – Behaviors (continued)
Behavioral Observation Scale (BOS)
Organizational Behavior Modification (OBM)
A variation of a BARS which uses all behaviors necessary for effective performance to rate performance at a task.
A BOS also asks the manager to rate the frequency with which the employee has exhibited the behavior during the rating period.
A plan for managing the behavior of employees through a formal system of feedback and reinforcement.

23. Figure 8.6: Example of a Behavioral Observation Scale (BOS)
Figure 8.6 provides a simplified example of a BOS for measuring the behavior “overcoming resistance to change.”

24. Measuring Performance: Measuring Results
Management by Objectives (MBO): people at each level of the organization set goals in a process that flows from top to bottom, so that all levels are contributing to the organization’s overall goals.
These goals become the standards for evaluating each employee’s performance.
Performance measurement can focus on managing the objective, measurable results of a job or work group.

25. Table 8.2: Management by Objectives – Two Objectives for a Bank
In Table 8.2 the goals listed in the second column provide two examples for a bank. The two right-hand columns are examples of feedback given after one year.

26. Test Your Knowledge
The performance management system at XYZ company currently is perceived as unfair and is time-consuming for managers. Which of the following systems is the most likely and least likely used, respectively.
Paired comparisons; Results
Results; Forced distribution
Behavioral; Attributes
Attributes; Comparative
The performance management system at XYZ company currently is perceived as unfair and is time consuming for managers. Which of the following systems is the most likely and least likely used, respectively.
Paired comparisons, Results
Results, Forced distribution
Behavioral, Attributes
Attributes, Comparative
Answer: A

27. Measuring Performance: Measuring Quality
The principles of total quality management (TQM), provide methods for performance measurement and management.
With TQM, performance measurement combines measurements of attributes and results.
Subjective feedback
Statistical quality control

28. Coaches provide feedback to their team just as managers provide feedback to their employees.
Feedback is important so that individuals know what they are doing well and what areas they may need to work on.

29. Sources of Performance Information
360-Degree Performance Appraisal: performance measurement that combines information from the employees’:
Managers
Peers
Subordinates
Self
Customers

30. Performance management is critical for executing a talent management system and involves one-on-one contact with managers to ensure that proper training and development are taking place.

31. Types of Performance Measurement Rating Errors
Contrast errors: the rater compares an individual, not against an objective standard, but against other employees.
Distributional errors: the rater tends to use only one part of a rating scale.
Leniency: the reviewer rates everyone near the top
Strictness: the rater favors lower rankings
Central tendency: the rater puts everyone near the middle of the scale
Several kinds of errors and biases commonly influence performance measurements.

32. Types of Performance Measurement Rating Errors (continued)
Rater bias: raters often let their opinion of one quality color their opinion of others.
Halo error: when the bias is in a favorable direction. This can mistakenly tell employees they don’t need to improve in any area.
Horns error: when the bias involves negative ratings. This can cause employees to feel frustrated and defensive.

33. Test Your Knowledge
Bill rates all of his employees very low except for Jan. Jan gets above average ratings because she consistently comes to work on time. The rating errors Bill makes are _______ and _______, respectively.
Leniency; Horn
Strictness; Halo
Similar-to-me; Central Tendency
Horn; Strictness
Bill rates all of his employees very low except for Jan. Jan gets above average ratings because she consistently comes to work on time. The rating errors Bill makes are _______ and _______, respectively.
Leniency; Horn
Strictness; Halo
Similar-to-me; Central Tendency
Horn; Strictness
Answer: B

34. Political Behavior in Performance Appraisals
Distorting a performance evaluation to advance one’s personal goals
A technique to minimize appraisal politics is a calibration meeting:
Meeting at which managers discuss employee performance ratings and provide evidence supporting their ratings with the goal of eliminating the influence of rating errors
Sometime raters intentional distort their ratings for personal gain. One technique to minimize appraisal politics is to hold calibration meetings.

35. Giving Performance Feedback
Scheduling Performance Feedback
Performance feedback should be a regular, expected management activity.
Annual feedback is not enough.
Employees should receive feedback so often that they know what the manager will say during their annual performance review.
Preparing for a Feedback Session
Managers should be prepared for each formal feedback session.
Once the manager and others have measured an employee’s performance, this information must be given to the employee.
Only after the employee has received feedback can he or she begin to plan how to correct any shortcomings.

36. When giving performance feedback, do it in an appropriate meeting place.
Meet in a setting that is neutral and free of distractions.
What other factors are important for a feedback session?

37. Giving Performance Feedback (continued)
Conducting the Feedback Session
During the feedback session, managers can take any of three approaches:
“Tell-and-Sell” – managers tell employees their ratings and then justify those ratings.
“Tell-and-Listen” – managers tell employees their ratings and then let the employees explain their side of the story.
“Problem-Solving” – managers and employees work together to solve performance problems.

38. Figure 8.7: Improving Performance
When performance evaluation indicates that an employee’s performance is below standard, the feedback process should launch an effort to correct the problem.
As shown in Figure 8.7, the most effective way to improve performance varies according to the employee’s ability and motivation. In general, when employees have high levels of ability and motivation, they perform at or above standards. But when they lack ability, motivation, or both, corrective action is needed. The type of action called for depends on what the employee lacks.

39. Legal and Ethical Issues in Performance Management
Performance management processes are often scrutinized in cases of discrimination or dismissal.
Ethical
Employee monitoring via electronic devices and computers may raise concerns over employee privacy.
Legal
Performance management processes are often scrutinized in cases of discrimination or dismissal.
Because performance measures play a central role in decisions about pay, promotions, and discipline, employment-related lawsuits often challenge an organization’s performance management system.
Lawsuits related to performance management usually involve the charges of discrimination or unjust dismissal.
To protect against both kinds of lawsuits, it is important to have a legally defensible performance management system.
Ethical
Employee monitoring via electronic devices and computers may raise concerns over employee privacy.
Computer technology now supports many performance management systems.
Congress has considered laws to regulate computer monitoring.
Electronic monitoring provides detailed, accurate information, but employees may find it demoralizing, degrading, and stressful.
It is essential that organizations protect the privacy of performance measurements, as they must do with other employee records.

40. Legal Requirements for Performance Management
Lawsuits related to performance management usually involve charges of:
Discrimination
Unjust dismissal
To protect against both kinds of lawsuits, it is important to have a legally defensible performance management system.
In developing and using performance management systems, HR professionals need to ensure that these systems meet legal requirements, such as the avoidance of discrimination. In addition, performance management systems should meet ethical standards, such as protection of employees’ privacy.

41. Legal Requirements for Performance Management (continued)
A legally defensible performance management system includes:
Based on valid job analyses, with requirements for job success clearly communicated to employees.
Performance measurement should evaluate behaviors or results, rather than traits.
Multiple raters (including self-appraisals) should be used.
All performance ratings should be reviewed by upper-level managers.
There should be an appeals mechanism for employees.

42. Summary
Performance management is the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.
Organizations establish performance management systems to meet three broad purposes:
Strategic purpose
Administrative purpose
Developmental purpose
Performance measures should fit with the organization’s strategy by supporting its goals and culture.

43. Summary (continued)
Performance information may come from an employee’s self-appraisal and from appraisals by the employee’s supervisor, employees, peers, and customers.
Using only one source makes the appraisal more subjective.
Organizations may combine many sources into a 360- degree performance appraisal.

44. Summary (continued)
Organizations can minimize appraisal politics by establishing a fair appraisal system, involving managers and employees in developing the system, allowing employees to challenge evaluations, communicating expectations, and having open discussion.
Performance feedback should be a regular, scheduled management activity, so that employees can correct problems as soon as they occur.

45. Summary (continued)
The performance feedback discussion should focus on behavior and results rather than on personalities.
Managers must make sure that performance management systems and decisions treat employees equally, without regard to their race, sex, or other protected status.
A system is more likely to be legally defensible if it is based on behaviors and results, rather than on traits, and if multiple raters evaluate each person’s performance.