Lecture 8: Performance Management

Basics of Performance Management + What Managers need to know and do

• Process through which managers ensure -> Employees’ activities + outputs contribute to organizational goals

  • Need to know what activities/outputs are desired and Whether they occur

    • Then we give feedback to employees -> Help them meet expectations

5 Stages of Performance Management Process

1. Define Performance Outcomes for the Company, Division and Department

2. Develop Employee Goals, Behavior, Actions to achieve outcomes

3. Provide support and ongoing performance discussions

4. Evaluate Performance

5. Or Step 6: Identify improvement needs or provide consequences for results

3 Purposes of Performance Management

• Strategic: Effective Performance Managements helps Organization achieve business objectives

• Administrative: Organization use system for info on daily decisions about salary/benefits and recognition programs

• Developmental Purpose: Basis for developing employees’ knowledge and skills

5 Criteria for performance management

1. It must fit with strategy, measures should align with what organization wants to achieve

2. Validity: System measures what it intends to 

   1. (No contamination -> Measuring things it shouldn’t e.g Looks)

   2. (No Deficiency -> Measure fails to capture all relevant aspects of job performance -> AKA measuring too little)

3. Reliability: Consistent results across time and raters

4. Acceptability: Seen as fair and appropriate by employees/managers

5. Specific Feedback: Enough information so employees know what to improve

Trait Approach (3 Means of measuring performance)

• Focus on who the Employee is -> Individual Traits and Attributes

  • Graphic Rating Scale: We list traits and assign a rating to each depending on extent that employee displays it (1-5 with 5 being best)

  • Mixed Standard Scale: We have several trait related statements -> They produce final score for the trai

    • Is easy to use, Captures broad personality → But doesn’t tell you what someone does and is open to bias

    • Potentially Illegal

Behavior Rating + Critical Incident Method + Pros and Cons

• We look at how employee does the actual job

  • Critical Incident Method: Managers have records of employee acting effectively/ineffectively -> Employees receive feedback on it (Pros and Cons)

  • Allows for Strong and Specific feedback, Legally Defensible → Time consuming, Careful behavioral anchoring per job

Behavior Rating BARS/BOS

• BARS: Behaviorally Anchored Rating Scale

  • Rates behavior on a scale -> Each level of the scale comes with certain statements to behavior at that level

  • E.g Level 1: Always Late, Unprepared -> Level 3: On time, Not in Uniform -> Level 5: Always Early, In Uniform, Reviewing reports

• BOS: Behavioral Observation Scale

  • Lists all behaviors needed for effective task performance

    • Manager then ranks frequency on which they occur

Results Rating + MBO

• We look at employee outputs

  • MBO: Managing by objectives

    • People at each Organizational level set goals for levels below (Top to Bottom)

    • Goals are standards that employees are evaluated on

    • This approach has all levels contributing to organizational goals

Absolute Measures (Absolute vs. Relative)

• Absolute Measures:

  • Predefined Standard -> Each Employee compared to fix standard

    • Colleague performance doesn’t affect individual score

    • Examples: BARS, BOS, MBO

Relative Measures

• Simple Ranking: Employees ranked in their group -> Highest to lowest

• Forced Distribution: Employees assigned to a percentile in each category (Top 10% in effort)

  • Microsoft Stack, abolished 2013 (Caused internal competition and demotivation)

    • Replaced with system emphasizing Growth Mindset, Collaboration → Shift from ranking to developing

• Paired Comparison: Every employee compared to every other employee (To establish a ranking) -> Insanely impractical at scale

360 Degree Performance Appraisal

• Information combined from peers, managers, subordinates, customers and employee themselves

• Gives balanced and complete picture → Useful for developmental purposes

  • Developmental Purpose → Help person understand themselves better and improve

Errors/Biases in Performance Management

• Similar-to-me Error: We overrate people who seem similar to us

• Contrast Error: Underrate people who seem different

• Distribution Errors (Being too lenient or strict) or Forcing curve to the middle

• Halo Effect: Overrating someone based on one good quality

• Horns Error: Underrating someone based on one poor quality

Ability and Motivation Cube

• Deadwood (Low Motivation and Ability)

  • Demote, Fire, Withhold Pay increases, Give specific and direct feedback

• Underutilizers (Low Motivation, High Ability)

  • Give honest and direct feedback, Link Rewards and Performance outcomes, Manage their stress level, Use team building

• Misdirected Effort (High Motivation, Low Ability)

  • Coaching, Frequent performance feedback, Goal Setting, Restructuring their job Environment

• Solid Performers (High Motivation, High Ability)

  • Reward their good performance, Find them development opportunities, Give honest and direct feedback

Diagnostic Framework

• Framework for figuring out why employees are underperforming

• Inputs: Does employee know what’s expected of them -> Have the resources for it

• Feedback: Do they get good feedback enough

• Goals/Objectives: Are goals achievable, fair and specified

• Reward/Consequences: Are there rewards for superior performance that employees value