PERFORMANCE MANAGEMENT
Advanced Human Resource Management
Vildan ESENYEL
Contents
Performance Management
Performance Appraisal
Differences of Performance Management and Appraisal
Who should do the appraising
Methods of Performance Appraisal
Appraisal Period
Purposes of Performance Management
Reward Systems
Problems in Performance Management
Evaluating Performance
Talent Management
Appraisal Interview
Disadvantages/Dangers of Poorly Implemented PM Systems
Suggestions and Conclusion
Teams of highly skilled, trained and
motivated employees will nearly
always overcome most of the
difficulties created by external forces
while a poorly motivated, untrained
and unskilled labor force will nearly
always fail to take advantage of
favorable external opportunities.
What is Performance?
Performance is the sum of behavior plus results:
Performance = Behavior + Results
If you only focus on behaviors, you won’t notice if you did not get
desired results
If you only focus on results, you won’t notice if your employees
don’t behave correctly
What Influences Performance?
1
1. Career goals are not being met with the
job.
2. There is conflict with other employees or
the manager.
3. The goals or expectations are not in line
with the employee’s abilities.
4. The employee views unfairness in the
workplace.
5. The employee manages time poorly.
6. The employee is dissatisfied with the job
What Influences Performance?
2
1. The employee doesn’t have
correct equipment or tools to
perform the job.
2. The job design is incorrect.
3. External motivation factors are
absent.
4. There is a lack of management
support.
5. The employee’s skills and job are
mismatched
Types of Performance Issues
1. Constantly late or leaves early
2. Too much time spent doing
personal things at work
3. Inability to handle proprietary
information
4. Family issues
5. Drug and alcohol abuse
6. Nonperforming
7. Conflicts with management or
other employees
8. Theft
9. Ethical breaches
10. Harassment
11. Employee conduct outside the
workplace
What do we mean by performance management?
‘The policies, procedures
and practices that focus on
employee performance as a
means of fulfilling
organisational goals and
objectives’
(Lowry (2002) in Marchington
and Wilkinson (2005: 187-8))
‘
What is Performance Management?
The process of setting expectations, aligning goals, assessing results, and focusing on staff development through
ongoing conversations between managers and their direct report(s).
Performance Management
Setting Expectations Goals and Objectives Goal Alignment
The process of discussing what is Desired results each employee aims to Process of ensuring individual
expected from an employee in terms achieve, determined based on goals support the achievement of
of job roles and responsibilities conversations between managers and department goals and department
employees goals support the achievement of
In Action
University goals
Assessment Feedback and
Performance Calibration Feedback and Development
Development
Review of goals, objectives, Process in which supervisors and Focus of the conversations
and other factors, and the managers at the same level in between managers and
determination of the level of an organization discuss staff employees in determining
successful achievement performance ratings and outcomes to strengths, opportunities for
ensure ratings and development improvement, and how
messages are applied consistently
to grow and develop
Performance Management is what you do with the information you’ve
developed from measuring performance.
According to Armstong and Baron:
performance management is a tool to ensure that
managers manage effectively; that they ensure the
people or teams they manage:
• know and understand what is
expected of them.
• have the skills and ability to deliver on
these expectations.
• are supported by the organization to
develop the capacity to meet these
expectations are given feedback on
their performance.
• have the opportunity to discuss and
contribute to individual and team
aims and objectives.
Performance management
performance management should be:
Strategic
Integrated
It should incorporate:
Performance improvement
Development
Managing behaviour
The Performance Management Cycle
Performance management is a
process, not an event.
It operates as a continuous cycle.
PM provides information for:
Development of Recruitment Development
training to meet Workforce of
and hiring
organizational planning compensation
decisions
needs systems
An effective performance management system should do the
following:
Provide performance Make clear what
information to the organization
employees expects
Document
Identify areas of
performance for
success and needed
personnel records
development
Performance Management and Organizational
Development
Organizational development
can be defined as a complex educational The output from
strategy intended to change the beliefs, performance
attitudes, values and structure of management can be
organizations so that they can better adapt used as an input to
to new technologies, markets and Organizational
challenges, and the rate of change itself. Development.
Continuous and Continual improvement
The keys to the successful introduction and
application of performance management are:
Main purposes of performance management
The
organizational
level
The individual
and team
level
Purposes of Performance Management Systems:
Strategic
Administrative
Informational
Developmental
Let’s look at each in detail.
Purposes of Performance Management
Systems:
The following are the key principles of influencing people:
Strategic Commitment
& Consistency
Purpose
Link individual goals
Reciprocation
with organization’s goals
Communicate most
crucial business strategic
Scarcity
initiatives
Authority
Let’s look at each in detail.
Purposes of Performance Management
Systems:
Provide information for
making decisions:
Administrative Salary adjustments
Purpose Promotions
Retention or
termination
Recognition of
individual performance
Layoffs
Purposes of Performance Management
Systems:
Communicate to Employees:
Expectations
What is important
How they are doing
Informational How to improve
Purpose
Purposes of Performance Management
Systems:
Performance
feedback/coaching
Identification of individual
strengths and weaknesses
Causes of performance
deficiencies
Tailor development of
individual career path
Developmental
Purpose
Purposes of Performance Management
Systems:
Plan effective workforce
Assess future training
needs
Evaluate performance at
organizational level
Evaluate effectiveness of
HR interventions
Purposes of Performance Management
Systems:
Validate selection
instruments
Document administrative
decisions
Help meet legal
requirements
Contributions of Performance Management
For Employees For Managers For Organization/HR
Clarify definitions of Communicate supervisors’ Function
job views of performance more
success criteria clearly Clarify organizational goals
Managers gain insight
Increase motivation to Facilitate organizational
about subordinates
perform Better and more timely change
Increase self-esteem differentiation between good Fairer, more appropriate
Enhance self-insight and and poor performers administrative actions
development Employees become more Better protection from
competent lawsuits
Disadvantages/Dangers of Poorly-implemented PM Systems
For Employees For Managers For Organization/HR
Function
• Lowered self-esteem • Increased turnover
• Employee burnout and • Decreased motivation • Wasted time and
to perform money
job dissatisfaction
• Unjustified demands on
• Damaged relationships • Unclear ratings system
managers’ resources
• Use of false or • Varying and unfair • Emerging biases
misleading information standards and ratings • Increased risk of
litigation
Performance
Management
is NOT
performance appraisal
Performance Appraisal vs Performance Management
Performance management Performance appraisal is the
is a series of activities process of determining how
designed to ensure that the well employees do their jobs
organization gets the relative to a standard and
performance it needs from communicating that
its employees. information to them.
• Strategic business • Driven by HR
considerations • Assesses employee
• Driven by line manager • Strengths &
• Ongoing feedback • Weaknesses
• So employee can • Once a year
improve performance • Lacks ongoing feedback
Performance appraisal
means evaluating an
employee’s current
and/or past performance
relative to his or her
performance standards.
Uses of Performance Appraisal
ADMINISTRATIVE and DEVELOPMENTAL ACTIONS
Human resource planning
Recruitment and selection
Training and development
Career planning and development
Compensation programs
Internal employee relations
Assessment of employee potential
Why Performance Appraisal?
Performance appraisal is a vehicle to:
validate and refine organizational
actions (e.g., selection,
training);
provide feedback to employees
with an eye on improving
future performance
Effective Performance Management
• Viewed as generally
STANDARDIZATION
fair by employees Continuous
• Trained appraisers open
• Standardization communication
DEVELOPMENT
• Beneficial as a
• Consistent with the
development tool
strategic mission of
• Useful as an
the organization
administrative tool
• Performance
• Effective in documenting
expectations CONSISTENT employee performance
• Legal and job related
Establish Performance Criteria (Standards)
Improvement potential
Goal achievement
Competencies
Behaviors
Traits
How to Set Effective Goals
Assign
Assign Specific Measurable
Goals Goals
Encourage
Participation
Assign Challenging but Doable Goals
The Appraisal Period
WHO SHOULD DO THE APPRAISING?
Let us look at each in detail.
WHO SHOULD DO THE APPRAISING?
1
• Traditionally most
common choice.
• Usually in excellent
position to observe
employee’s job
performance
• Has responsibility for
managing particular
unit.
WHO SHOULD DO THE APPRAISING?
2
Our culture has viewed
evaluation by subordinates
negatively.
Some firms find that evaluation
of managers by subordinates is
both feasible and needed.
Issues:
• Could be seen as a
popularity contest
• Possible reprisal against
employees
WHO SHOULD DO THE APPRAISING?
3
Work closely with evaluated
employee and probably have
undistorted perspective on
typical performance.
Problems include reluctance of
some people who work closely
together, especially on teams, to
criticize each other.
WHO SHOULD DO THE APPRAISING?
4
• If employees understand
their objectives and the
criteria used for evaluation,
they are in a good position to
appraise own performance.
• Employee development is
self-development
• Self-appraisal may make
employees more highly
motivated
WHO SHOULD DO THE APPRAISING?
5
• Customer behavior
determines firm’s degree of
success
• Demonstrates commitment
to customer
• Holds employees accountable
• Fosters change
RATING COMMITTEES
Using multiple raters is
advantageous.
It can help cancel out problems A rating committee is
such as bias on the part of
individual raters. It can also usually composed of the
provide a way to include in the employee’s immediate
appraisal the different facets of an supervisor and three or
employee’s performance observed four other supervisors.
by different appraisers. Multiple
raters often see different facets of
an employee’s performance.
360-Degree Evaluation
Multi-rater evaluation
Input from multiple sources
Focuses on skills needed across
organizational boundaries
More objective measure of
performance
Process more legally defensible
Choosing a Performance Appraisal Method
Rating scales
Critical incidents
Essay
Work standards
Ranking
Paired comparisons
Forced distribution
Behaviorally anchored
rating scales (BARS)
Result-based systems
Written Essays
Probably the simplest
method of evaluation is
to write a narrative
describing an employee’s
strengths, weaknesses,
past performance,
potential, and
suggestions for
improvement.
Critical Incident Method
The critical incident
method entails keeping
an anecdotal record of
good or undesirable
examples of an
employee’s work-related
behavior and reviewing it
with the employee at
predetermined times.
Behaviorally Anchored Rating Scales (BARS)
BARS specify definite,
observable, and
measurable job behavior.
Examples of job-related
behavior and
performance dimensions
are found by asking
participants to give
specific illustrations of
effective and ineffective
behaviour regarding each
performance dimension.
Multi-person Comparisons
The three most popular comparisons are:
• group order ranking,
• individual ranking,
• paired comparisons
Multi-person
Comparisons evaluate
one individual’s
performance against the
performance of one or
more others. It is a
relative rather than an
absolute measuring
device.
Alternation Ranking Method
Ranking employees from
best to worst on a trait or
traits is another popular
appraisal method.
Because it is usually
easier to distinguish
between the worst and
best employees than to
rank them, an alternation
ranking method is useful.
Graphic Rating Scale Method
A graphic rating scale lists
a number of traits and a
range of performance for
each.
The supervisor rates each
subordinate by circling or
checking the score that
best describes the
subordinate’s
performance for each
trait, and then totals the
scores for all traits.
Forced Distribution
Rater assigns individual in
workgroup to limited
number of categories
Assumes all groups of
employees have same
distribution
Result-Based Systems
Management by objectives (MBO)
Manager and
subordinate agree on
objectives for next
appraisal
Evaluation based on
how well objectives
are accomplished
Work Standards
Compares
performance to
predetermined
standard
Competency-based appraisal
A consequence of the
development of
organizational
competency models
has been that
employers have
increasingly extended
their use from training
and development,
selection and reward
into the area of
appraisal.
Team-based appraisal
In individual appraisals, the focus is often on evaluating the achievement of the tasks set out for the job.
For teams, some commentators (Scott and Einstein, 2001) argue that the best way to appraise
performance is by focusing on the outcomes of the team (e.g. productivity, sales volume and customer
complaints).
Using Information Technology to Support Performance Management
Electronic performance
monitoring (EPM) systems
use computer technology to
allow managers to monitor
their employees’ rate,
accuracy, and time spent
working online or just on
their computers.
Electronic Performance Monitoring
Evaluations fulfill the purpose of providing feedback to
employees on how the organization views their
performance
Problems in Performance Appraisal
• Performance appraisal process cuts into
manager’s time
• Experience can be unpleasant when
employee has not performed well
Problems in Performance Appraisal
• Factors such as attitude, appearance, and
personality are difficult to measure
• Factors may have little to do with employee’s job
performance
• May place evaluator and company in untenable
positions
Problems in Performance Appraisal
Halo error: Manager generalizes one positive performance feature
or incident to all aspects of employee performance, resulting in
higher rating
Horn error: Manager generalizes one negative performance
feature or incident to all aspects of employee performance,
resulting in lower rating
Problems in Performance Appraisal
Leniency: Giving undeserved high ratings
Strictness: Being unduly critical of employee’s work
performance
Worst situation is when firm has both lenient and strict
managers and does nothing to level inequities
Problems in Performance Appraisal
• Error occurs when employees are incorrectly
rated near average or middle of scale
• May be encouraged by some rating scale systems
requiring evaluator to justify extremely high or
extremely low ratings
Problems in Performance Appraisal
• Employee’s behavior often improves and
productivity rises several days or weeks before
scheduled evaluation
• Natural for rater to remember recent behavior
more clearly than past actions
• Necessary to maintain records of performance
Problems in Performance Appraisal
• Managers allow individual differences such as gender,
race, or age to affect ratings
• Effects of cultural bias, or stereotyping, can influence
appraisals
• Other factors
Example: Mild-mannered employees may be
appraised more harshly, simply because they do not
seriously object to appraisal results
Problems in Performance Appraisal
Sometimes, managers control every aspect of appraisal
process and manipulate the system
Example:
A supervisor wants to give pay raise to certain
employee, so supervisor may give employee an
undeserved high performance evaluation.
Problems in Performance Appraisal
• Evaluation process may create anxiety for
appraised employee
• Opportunities for promotion, better work
assignments, and increased compensation may
hinge on results
Reactions
Reactions of
Reactions of
Appraised
Managers
Employees
A manager owes an employee a welldone appraisal, no matter how difficult an
employee is, or how difficult the conversation about performance might be.
Feedback as a System
Feedback has a direct impact on our work:
Gives us specific information to help us improve
Makes performance expectations clear from the start
Heightens efficiency by reducing resentment, buildup, etc.
Strengthens relationships
There are different types of feedback that should be
used according to the situation:
Motivational feedback Development feedback
Preparing for the Performance Review Session
Experts recommend a five-step
process:
1. Review the objectives of the
session
2. Dual preparation
3. Plan your approach
4. Check your attitude
5. Select the right time and place
Learning and development
Performance reviews can be
regarded as learning events, in
which individuals can be
encouraged to think about how
and in which ways they want to
develop.
This can lead to the drawing up
of a Personal Development
Plan (PDP) setting out the
actions they propose to take
(with the help of others, not
least their managers) to
develop themselves.
Organizational Processes of Talent and Performance
Management
Talent management is the goal-oriented and integrated process of planning,
recruiting, developing, appraising, and compensating employees.
PAY SYSTEM
Reward Systems
Tangible returns Intangible returns
Cash compensation Relational returns, such as
Base pay
Cost-of-Living & Contingent Recognition and status
Pay Employment security
Incentives (short- and long-
term) Challenging work
Benefits, such as Learning opportunities
Income Protection
Allowances
Work/life focus
The Manager, Employee Development
and Performance
Employees of managers who are very effective at development can outperform their
peers by up to 25 percent
Impact of Manager-Led Development on Employee Performance
Employees Reporting to Employees Reporting to
Manager A Manager B
Manager A is very ineffective Manager B is very
at developing employees effective at developing
employees
125
25%
}
100
Performance Improvement
directly attributable to
Manager B’s effectiveness at
employee development
Performance of Employees Reporting to Manager A Performance of Employees Reporting to Manager B
Source: Learning and Development Roundtable 2003 Employee Development Survey
SUGGESTIONS FOR IMPROVING
PERFORMANCE EVALUATIONS
Use Multiple
Evaluators Evaluate
Selectively
Train Evaluators
Document
Performance
Emphasize Behaviours in a Diary
Behaviours Rather
Than Traits
REFERENCES
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London: Kogan Page.
Armstrong, M. and Murlis, H. (2004) Reward Management: A Handbook of
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Beardwell, I. and Holden, L. (2001) Human Resource Management: A
Contemporary Approach, Harlow, UK: Pearson Education.
Bechet, T, P. (2008) Strategic Staffing: A Comprehensive System for Effective
Workforce Planning, New York: American Management Association.
Sims, R. S. (2006) Human Resource Development: Today and Tomorrow,
Greenwich, CT: Information Age Publishing
Taylor, S. (2002) People Resourcing, London: Chartered Institute of Personnel and
Development
Torrington, D., Taylor, S. and Hall, L. (2008) Human Resource Management,
London: Prentice Hall
Wright, P., Dunford, B. and Snell, S. (2001) ‘Human Resources and the Resource-
Based View of the Firm’, Journal of Management, 27: 701–21