Chapter 10 Performance Management and appraisal

Performance Management

series of activities designed to ensure that the organization gets the performance it needs from its employees.

Adopting a "Big Picture" quantity approach

managers can successfully combine individual efforts in a manner that provides practical measures of organizational effectiveness.

Performance appraisal

process of determining how well employees do their jobs relative to a standard and communicating that information to them.

Effective performance Management system

-Make clear what the organization expects
-Provide performance information to employees
-Identify areas of success and needed development
-Document performance for personnel records

Successful performance management

circular process that requires a system of administrative tools that effectively structures the dialogue between managers and their employees, and the motivation to utilize the system in a productive way.

Organizational cultures can be based on

-Entitlement approach
-Performance-driven organizational culture
-Pay-for-pay performance approach

Entitlement approach

adequate performance and stability dominate the organization (employee rewards vary from person to person and do not depend on individual performance differences; performance appraisal is not linked at all with performance,"bureaucreatic exercise")

Performance-driven organizational culture

focused on results and contributions( performance appraisals link results to employee compensation and development)

Pay-for-performance approach

people end up getting bonusses and others receiving no extra compensation based on their performance.

Common employee performance measure

-Quantity of output
-Quality of output
-Timeliness of output
-Presence/attendance on the job
-Efficiency of work completed
-Effectiveness of work completed

job duties

important elements in a given job

Types of performance information

trait-based information, behavior-based information and results-based information

Trait-based information

identifies a character trait of the employee (e.g. attitude, initiative, or creativity) and may or may not be job related

Behaviour-based information

focuses on specific behaviours that lead to job success.

Results-based information

considers employee accomplishment.

Performance measures that leave out come important job duties are considered...

...deficient.

Including irrelevant criteria in performance measures...

...contaminates the measures.

Overemphasis on one or two criteria also...

can lead to problems.

Performance Standards define...

the expected levels of employee performance

Performance standards that benefit both organizations and employees are...

realistic, measurable, clearly understood

Standards can be

-numerical
-nonnumerical

Useful sources of performance differences among managers in service businesses are:

-Regional differences in labor costs
-Service agreement differences
-Equipment/infrastructure differences
-Work volume

Useful sources of performance differences among employees in service businesses are:

- Cost per employee
-Incidents per employee per day
-Number of calls per product
-Cost per call
-Sources of demand for services
-Service calls per day

Uses of performance appraisals

-Provide a measure of performance for consideration in making pay or other administrative decisions about employees.

-Development of individuals.

Administratives uses of appraisals

-Determining pay adjustments
-Making job decisions on promotions,transfers, and demotions
-Choosing employee disciplinary actions up to and including termination of employment.

The idea "Performance appraisals and pay discussions should be done separately" is supported by

- Employees often focus more on the pay received tha on the developmental appraisal feedback.}

-Managers sometimes manipulate ratings to justify the pay they wish to give individuals or the amount the market or budget situation suggests should be given.

informal appraisals

conducted on an unscheduled basis and consists of less rigorous indications of employee performance ( conversation on the job, over coffe or by on-the-spot discussion of a specific ocurrence)

systematic appraisals

Occurs when the contact between manager and employee is more formal and a system is in place to report managerial impressions and observations on employee performance

Appraisal schedule to separate administrative and developmental uses of appraisals

1. Hold a performance review and discussion
2. Holds a separate training, development, and objective-setting session.
3. Within two weeks, have a compensation adjustment discussion.

Rating situations

-Supervisory rating their employees
-Employees rating thier superiors
-Team members rating each other
-Employees rating themselves
-Outside sources rating employees
-A variety of parties providing multisource, or 360-degree, feedback

Supervisory rating of subordinates

based on the assumption that immediate supervisor is the person most qualified to evaluate an employee´s performance realistically and fairly

Employee rating of managers

Advantages
-In critical manager-employee relationships, employee ratings can be quite useful for identifying competent managers.
-Can help make a manager more responsive to employees.
-Contribute to career development efforts for managers by identifying areas for growth.

Disadvantages
-Negative reaction many superior have to being evaluated by their employees.
-Fear of reprisals may be too grat for employees to give realistic ratings.

Team/Peer Rating

-Useful when supervidors do not have the opportunity to observe each employee's performance but other work group memebers do.

Challenges
-How to obtain ratings with virtual or global teams
-Obtaining ratings from and for individuals who are on different special project teams throughout

Self-rating

-employee rates self and bring to evaluation plus supervisor
-employees may inflate their response (problem)

Outsider rating

-Typically from the HR department or an outside expert in the functional area
-Outsiders may not know the important demands within the work group or organization (disadvantage)

multisource (360-degree) feedback

-Information about an employee's performance collected from a full circle of people, including subordinates, peers, supervisors, and customers.
-Get richer feedback during an evaluation (major purpose)

Tools for Appraising Performance

-Category scaling methods
-Graphic rating scales
-Behavioral rating scales
-Ranking
-Forced Distribution

category scaling methods

Require a manager to mark an employee's level of performance on a specific form divided into categories of performance.

graphic rating scale

-Method of performance measurement that 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
-Descriptive categories, job duties, behavioral dimendions (aspects of performance that are appraised)

Concerns with Graphic rating scales

-Form might not accurately reflect the importance of certain job characteristics
-Factors may need to be added or removed depending on employee
-Focus should be on job duties/responsibilities
-Grouped traits can be rated differently by different supervisors
-Descriptive words have different interpretations

behavioral rating scale

-a checklist that provides information about the frequency, intensity, and range of problem behaviors
most
-Requires extensive time and effort (disadvantage)
-Various appraisals forms are needed to accommodate different types of jobs in an organization (disadvantage)

Comparative methods to compare performance levels

-Ranking
-Forced distribution

Ranking

-Listing of employees from highest to lowest in performance levels and relative contributions
-sizes of performance differences between employees are often not fully investigated or clearly indicated (disadvantage)
-Becomes unwieldy if the group to be ranked is large (disadvantage)

Forced distribution

-Performance appraisal method in which ratings of employees' performance levels are distributed along a bell-shaped curve.

Advantages of forced distribution

-Helps deal with "rater inflation"
-Makes managers identify high, average, and low performers
-Ensures that compensation increases reflect performance differences among individuals

Disadvantages of forced distribution

-supervisor may resist putting someone in the lowest or highest group
-difficulty when rater has to explain to an employee why he was placed in a particular group
-causes anxiety in employees, promotes conformity and encourages gaming of the system

Narrative methods

-critical incident
-essay

Critical incident

Manager keeps a written record of highly favorable and unfavorable employee actions

Essay

requires a manager to write a short essay describing each employee's performance durin the rating period.

Management by Objectives (MBO)

performance appraisal method that specifies the performance goals that an individual and manager identify together

MBO process

1. job review and agreement
2. development of performance standards
3. setting of objectives
4. continuing performance discussions

Combination of methods

using combinations may offset some of the advantages and disadvantages of individual methods.

Rater errors

-Varying standards
-Recency and Primacy Effect
-Central Tendency, Leniency and Strictness Errors
-Rater Bias
-Halo and Horns Effects
-Contrast Error
-Similar-to-me/Different-from-me Errors
-Sampling Error

Varying Standards

applying different standards and expectations to employees performing the same or similar jobs

Recency and Primacy Effect

-Recency effect: gives greater weight to recent events when appraising an individual's performance
-Primacy effect: gives greater weight to information received first when appraising an individual's performance.

Central Tendency, Leniency and Strictness Errors

-Central tendency error: occurs when a rater gives all employees a score within a narrow range in the middle of the scale.
-Leniency error: occurs when rating of all employees fall at the high end of the scale.
-Strictness error: occurs when a manager uses only the lower part of the scale to rate employees.

Rater bias

Occurs when a rater's values or prejudices distort the rating.

Halo effect

occurs when a rater scores an employee high on all job criteria because of performance in one sea.

Contrast error

tendency to rate people relative to others rather than against performance standards

Similar-to-me/Different-from-me Errors

raters are influenced by whether people possess characteristics that are the same as or different from their own qualities

Sampling error

the rater has seen only a small sample of the person's work so use this information to rating the employee's performance.

Components of feedback system

-Data: factual pieces of information regarding observed actions or consequences.
-Evaluation: the way feedback system reacts to the facts, and it requires perdormance standards.
-Subsequent action: make specific suggestions regarding future actions the employee might take

Reactions of managers

-Internal conflict and confusion
-Altering the employee's rating to avoid unpleasantness in an interpersonal situation

Reaction of employees

-Threat and feel that the only way to get a higher rating is for someone else to receive a low rating.
-May not necessarily agree with the manager doing the appraising.

To be effective, performance management system should be

-Consistent with the strategic mission of the organization
-Beneficial as a development tool
-Useful as an administrative tool
-Legal and job related
-Viewed as generally fair by employees
Effective in documenting employee performance