AC

Chapter 7: Performance Management Notes (copy)

Learning Outcomes (Overview)

  • Explain the five steps in the performance management process.
  • Describe five performance appraisal methods and the pros and cons of each.
  • Discuss the major problems inhibiting effective performance appraisals.
  • Discuss 360-degree appraisal from multiple sources.
  • Describe the three types of appraisal interviews.
  • Discuss the future of performance management.

Performance Management: Definition and Scope

  • Performance management: the process encompassing all activities related to improving employee performance, productivity, and effectiveness.
    • Includes: goal setting, pay for performance, training and development, career management, and disciplinary action.

The Performance Management Process (Overview)

  • Five-step process (from the text):
    • Step 1: Define performance expectations
    • Step 2: Provide ongoing feedback and coaching
    • Step 3: Conduct performance appraisal and evaluation discussions
    • Step 4: Determine performance rewards/consequences
    • Step 5: Conduct development and career opportunity discussions
  • Visual reference: Figure 7.1 (Performance Management Process) shows the sequential flow from defining expectations to development opportunities.

Step 1: Defining Performance Expectations

  • Task performance: direct contribution to job-related processes.
  • Contextual performance: indirect contribution to the organization’s social responsibility values.
  • Legal considerations: correlate performance expectations to job activities.
  • Key idea: align expectations with actual job activities and organizational values; ensure clarity for both task and contextual performance.

Step 2: Providing Ongoing Coaching and Feedback

  • Tools and concepts:
    • Performance Improvement Plan (PIP): outlines expectations, with a timeline (often 30 ext{-}90 days) to reach acceptable performance levels.
    • Two-way communication is crucial for effectiveness.
  • Purpose: correct performance gaps while maintaining open dialogue between employee and supervisor.

Step 3: Performance Appraisal and Evaluation Discussion

  • Formal appraisal methods (list of common approaches):
    • Graphic Rating Scale (GRS)
    • Alternation Ranking
    • Paired Comparison
    • Forced Distribution
    • Critical Incident
    • Narrative Forms
    • Behaviourally Anchored Rating Scales (BARS)
    • Management by Objectives (MBO)
  • Note: These methods are used to appraise and evaluate employee performance and inform subsequent decisions (rewards, development, improvement plans).

Graphic Rating Scale (GRS)

  • Definition: a scale that lists a number of traits and a range of performance for each trait.
  • Process: the employee is given a rating that best describes the level of performance for each trait.

Alternation Ranking Method

  • Definition: rank employees from best to worst on a trait.
  • Steps:
    • List all employees to be rated.
    • Cross out names of those not known well enough to rank.
    • Identify the highest and the lowest on the trait, then alternate between next highest and next lowest until all are ranked.

Paired Comparison Method

  • Definition: for each trait, list all possible pairs of employees.
  • Scoring: for each pair, indicate “+” for the higher ranked employee and “-” for the lower ranked.
  • Ranking: employees are ranked by trait based on the number of “+” scores.
  • Example visualization: a Paired Comparison Sample (Figure 7.2) demonstrates how to compare employees across traits such as QUALITY OF WORK and CREATIVITY; the method tallies + signs to determine overall rankings.

Forced Distribution Method

  • Definition: predetermined percentages of ratees placed into performance categories (e.g., top 10%, middle 70%, bottom 20%).
  • Criticism: can be demotivating because the majority of employees end up in middle or below-average groups.

Critical Incident Method

  • Definition: keep a record of uncommonly good or undesirable examples of an employee’s work-related behaviour.
  • Application: review the list with the employee at predetermined times to discuss performance.

Behaviourally Anchored Rating Scales (BARS)

  • Definition: combines benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified scale with specific narrative examples of good and poor performance.
  • Advantages: more accurate measures, clearer standards, improved feedback, independent dimensions, and greater consistency.
  • Disadvantages: time-consuming to develop.

BARS Example (Sales Skills)

  • Anchors describe progressively skilled behaviours in sales contexts (e.g., persuading customers, handling objections, closing skills, adapting to customers, overcoming objections).
  • Visual representation (Figure 7.3) shows narrative anchors tied to a numeric scale (e.g., 1–5) for each sales skill.

Management by Objectives (MBO)

  • Definition: jointly agreed-upon performance objectives tied to organizational goals.
  • Step sequence (as per the text):
    • Step 1: Set the organization’s goals
    • Step 2: Set departmental goals
    • Step 3: Discuss departmental goals
    • Step 4: Define expected results (individual goals)
    • Step 5: Performance reviews: measure results
    • Step 6: Provide feedback
  • Think Pair Share prompt (related to MBO):
    • What are some potential problems using MBO?
    • Why is it important to know the job and the person’s ability?

Step 4: Determine Performance Rewards/Consequences

  • Types of rewards:
    • Merit pay
    • Extra pay
  • Key determinants for rewards/consequences:
    • Achievement of goals
    • How the employee meets the defined standards

Step 5: Career Development Discussion

  • Focus: opportunities for development for the employee.
  • Basis: current job requirements or future development needs.
  • Considerations: balance business needs with employee preferences.

Performance Appraisal Problems and Challenges

  • Core issues: validity and reliability of appraisals; rating scale problems.
  • Common rating scale problems include:
    • Unclear performance standards
    • Halo effect
    • Central tendency
    • Strictness/leniency
    • Appraisal bias
    • Recency effect
    • Similar-to-me bias

Rating Scale Problems (Table 7.1, Conceptual Overview)

  • Example items: Quality of work, Quantity of work, Creativity, Integrity.
  • Note: Unclear definitions for terms like “good,” “excellent,” etc., can undermine validity.

Advantages and Disadvantages of Appraisal Methods (Overview)

  • Graphic rating scale
    • Advantages: simple to use; provides quantitative ratings.
    • Disadvantages: standards may be unclear; susceptible to halo effect, central tendency, leniency, bias.
  • Alternation ranking
    • Advantages: avoids central tendency and some scale problems; simple to use (though not as simple as GRS).
    • Disadvantages: can cause disagreements among employees and may be unfair if all are excellent.
  • Paired comparison
    • Advantages: more precise ranking across multiple traits.
    • Disadvantages: becomes unwieldy with large numbers of employees; differences may not be easily noticeable.
  • Forced distribution
    • Advantages/Use: forces differentiations across employees.
    • Disadvantages: results depend on the quality of cutoff points; may be unfair.
  • Critical incident
    • Advantages: clarifies what constitutes right and wrong behaviour; supports ongoing evaluation.
    • Disadvantages: difficult to rank relatively; not ideal for salary decisions.
  • Narrative form
    • Advantages: explicitly states improvement goals and outcomes.
    • Disadvantages: can be taken personally by employees.
  • Behaviourally Anchored Rating Scale (BARS)
    • Advantages: anchors are behavioral; high inter-rater reliability; precise.
    • Disadvantages: time-consuming to develop.
  • Management by Objectives (MBO)
    • Advantages: goals are joint; aligned with business results.
    • Disadvantages: risk of unclear performance measures; time-consuming; goals can be inflated/deflated due to negotiation dynamics.

Who Should Do the Appraising?

  • Possible evaluators include: supervisors, self, peers, committees, subordinates, and 360-degree appraisal (all of the above).

360-Degree Appraisal

  • Concept: feedback from multiple sources (manager, peers, subordinates, customers, self, etc.).
  • Figure 7.4 illustrates a broad set of sources: Manager/Supervisor, Additional Superiors, Internal Clients, Co-workers/Colleagues, SELF, External Clients, Skip-Level Reports, Suppliers, Subordinates.
  • Practical advice (Figure 7.5/7.4 Guidance):
    • Have performance criteria developed by people familiar with the job.
    • Be clear about who will have access to reports.
    • Provide training for all participants.
    • Ensure confidentiality.
    • Evaluate the 360-degree system for fine-tuning.

Formal Appraisal Discussions

  • Participants: supervisor and employee.
  • Objectives: review appraisal and plan to remedy deficiencies and reinforce strengths.
  • Three types of interviews:
    • Satisfactory—Promotable: development plans.
    • Satisfactory—not promotable: maintain performance.
    • Unsatisfactory—Correctable: action plan to correct performance.

How to Conduct the Interview

  • Be direct and specific: use objective work data.
  • Do not get personal: compare against standards.
  • Encourage the employee to talk: use open-ended questions; listen.
  • Develop an action plan: agree on future steps.

Handling Criticism and Defensive Employees

  • Defensive behaviour is normal; recognize it.
  • Never attack a person’s defenses.
  • Postpone action when needed.
  • Recognize human limitations.

Ensuring the Discussion Leads to Improved Performance

  • Notify of unacceptable performance and explain minimum expectations.
  • Ensure expectations are reasonable.
  • Explain the role of warnings in the process of establishing just cause.
  • Take prompt corrective measures.
  • Avoid sending mixed messages.
  • Provide a reasonable amount of time for improvement.
  • Provide support to facilitate improvement.

Legal and Ethical Issues in Performance Appraisal

  • Use job analysis to determine required characteristics.
  • Use characteristics in the rating system.
  • Ensure ratees and raters know performance standards.
  • Use clearly defined dimensions of performance; avoid abstract trait names.
  • Use subjective ratings as only one component of evaluation.
  • Additional practices:
    • Train supervisors.
    • Allow raters regular contact with ratee.
    • Use more than one rater, if possible.
    • Have a formal appeal mechanism.
    • Document evaluations and reasons for termination.
    • Provide corrective guidance to lower performers.

The Think Pair Share Updates and The Future of Performance Management

  • Think Pair Share prompts emphasize reflection on effective performance management practices and potential improvements.
  • The Future of Performance Management involves:
    • Linking individual goals to business strategy.
    • Demonstrating leadership and accountability.
    • Tight integration between appraisal results, rewards, and recognition.
    • Investing in employee development planning.
    • Maintaining an administratively efficient system with robust communication support.