Performance Management

Attract Acquire Retain Develop - DeployPerformance ManagementModule 6

Leaders are ReadersHow to be a Star at Work 1999 Robert E KelleyWhat average performers think it is: The talent for brownnosing and schmoozing in the workplace to help me get noticed by the right people. What star performers know it to be: A work strategy that enables me to navigate the competing interests in an organization to promote cooperation, address conflicts and get things done.

Performance Management and ExecutionWho Says Elephants Cant Dance? (2003)Louis GerstnerFixing IBM was all about execution. We had to stop looking for people to blame, stop tweaking the internal structure and systems. I wanted no excuses.Measuring Individual Employee PerformanceIndividual Performance FactorsIndividual ability to do the workEffort level expendedOrganizational supportPerformance (P) = Ability (A) x Effort (E) x Support (S)

Components of Individual PerformanceIndividual MotivationMotivationThe desire within a person causing that person to act to reach a goal. (Greek mohere which means to move)

Challenges in diagnosing a motivation problemInconsistency in organizational rewardsOrganizational support for employee effortsAccurate measurement of employee performanceDesirability of organizational rewards by employeesEquipment, training, product-market fit

Need broad-based strategies and tactics to address all individuals.Preface: Global Cultural Differences in Performance ManagementUncommon for managers in other cultures to rate employees or to give direct feedback.Younger subordinates do not engage in joint discussions with their managers due their high respect for authority and age.Criticism from superiors is viewed as personally devastating rather than as useful feedback.

8Jack Welch (Winning)Be a meritocracy through differentiation of people.Categorize your people as the top 20, middle 70 and bottom 10 percent who turn over in 1 year or less. You manage the 70 by identifying people who have the potential to move up and cultivating them. You manage the top 20 by rewarding them like crazy.Use a rigorous non-bureaucratic evaluation system, monitored for integrity with the same intensity of Sarbanes-Oxley Act compliance.

Top Issues in Performance Management1. Bommer et al meta analysis results- Manager performance ratings are TERRIBLE2. Procedural Justice- need to know HOW decision was made (examples of good and bad performance)3. Standards are clear and communicated in advance4. Rating instruments must be simple and easy for the rater and ratee to understand5. Ratees (employees) must have input into the process

Components of Effective Performance ManagementWhat is Performance ManagementPerformance Management Processes used to identify, encourage, measure, evaluate, improve, and reward employee performanceProvide information to employees about their performance.Clarify organizational performance expectations.Identify the development steps that are needed to enhance employee performance.Document performance for personnel actions.E.g., promotions (more appropriate than the promotion pit)Provide rewards for achieving performance objectives.

Performance appraisalThe process of determining how well employees do their jobs relative to a standard and communicating that information to the employee.

What is Employee PerformancePerformanceWhat an employee does and does not do.Quantity of output Quality of outputTimeliness of output Presence at workCooperativeness

Not usually ethics- why?

An effective performance management system mustLink organizational strategy to ultimate results.Translate organizational strategies into unit-level actions.Assign unit-level actions to individual employees.

Types of Performance Information

Performance StandardsWhat are Performance StandardsExpected levels of performanceBenchmarks, goals, and targetsWhat are characteristics of well-defined standardsRealisticMeasurableClearly understood

How do we ensure our system is legally defensibleLegally Defensible PA System:Appraisal criteria based on job analysisAbsence of disparate impact and evidence of validityFormal evaluation criterion that limit managerial discretionFormal rating instrument linked to job duties and responsibilitiesPersonal knowledge of and contact with rateeTraining of supervisors in conducting appraisalsReview process to prevent undue control of careersCounseling to help poor performers improve

Philosophical Challenges to Performance Appraisal

19Who Conducts AppraisalsSupervisors who rate their subordinatesEmployees who rate their supervisorsTeam members who rate each otherEmployees self-appraisalOutside sources rating employeesMultisource (360 feedback) appraisal

Employee Rating of ManagersAdvantagesHelps in identifying competent managersServes to make managers more responsive to employeesCan contribute to the career development of managersDisadvantagesNegative reactions by managers to employee ratingsSubordinates fear of reprisals may inhibit them from giving realistic (negative) ratingsTeam/Peer RatingAdvantagesHelps improve the performance of lower-rated individualsPeers have opportunity to observe other peers.Peer appraisals focus on individual contributions to teamwork and team performance.

DisadvantagesCan negatively affect working relationships.Can create difficulties for managers in determining individual performance.Organizational use of individual performance appraisals can hinder the development of teamworkHas anyone evaluated a team member?Multisource Appraisal

Category Scaling MethodsGraphic Rating ScaleA scale that allows the rater to indicate an employees performance on a continuum of job behaviors.John has good customer service skills. 1 (Disagree), 3 (Neutral), 5 (Agree)DrawbacksRestrictions on the range of possible rater responsesDifferences in the interpretations of the meanings of scale items and scale ranges by ratersBehavioral/Objective MethodsBehavioral Rating ApproachAssesses employees behaviors instead of other characteristicsConsists of a series of scales created by:Identifying important job dimensionsCreating statements describing a range of desired and undesirable behaviors (anchors)Example- Next SlideBehaviorally-Anchored Rating Scale for Customer Service Skills

Category Rating MethodsChecklistsA performance appraisal tool that uses a list of statements or work behaviors that are checked by raters.Can be quantified by applying weights to individual checklist items.RankingA listing of all employees from highest to lowest in performance.DrawbacksDoes not show size of differences in performance between employeesImplies that lowest-ranked employees are unsatisfactory performers.Becomes an unwieldy process if the group to be ranked is large.

Comparative Methods (contd)Forced DistributionPerformance appraisal method in which ratings of employees are distributed along a bell-shaped curve.DrawbacksAssumes a normal distribution of performance.Resistance by managers to placing individuals in the lowest or highest groups.Providing explanation for placement in a higher or lower grouping can be difficult.Is not readily applicable to small groups of employees.

Forced Distribution on a Bell-Shaped CurveNarrative MethodsCritical IncidentManager keeps a written record of highly favorable and unfavorable employee actions.DrawbacksVariations in how managers define a critical incidentTime involved in documenting employee actionsMost employee actions are not observed and may become different if observedEmployee concerns about managers black booksEssayManager writes a short essay describing an employees performance.Drawback- Depends on the managers writing skills and their ability to express themselves.Teachers, BECU CorporateCriticisms of Performance AppraisalFocus is too much on the individual contribution and does little to develop employees.

Employees and supervisors believe the appraisal process is seriously flawed.

Appraisals are inconsistent, short-term oriented, subjective, and useful only at the extremes of performance.

Management by Objectives (MBO)Management by ObjectivesSpecifying the performance goals that an individual and his or her manager agree the employee will to try to attain within an appropriate length of time.Key MBO IdeasEmployee involvement creates higher levels of commitment and performance.Encourages employees to work effectively toward achieving desired results.Performance measures should be measurable and should define results.

What MBO Tries to AccomplishThe 7 Habits of Highly Effective People Stephen R Covey (2004)#2 Begin with the End in MindThe HP Way, David Packard (2005)We thought if we could get everyone to agree on what our objectives were and to understand what we were trying to so, then we could turn them loose and they would move in a common direction.This is MBO

The MBO ProcessJob Review and AgreementDevelopment of Performance StandardsObjective SettingContinuing Performance DiscussionsThis is transactional leadership- contingent rewardTraining of Managers and EmployeesAppraisal Training Topics:Performance criteria and job standards that should be consideredHow to communicate positive and negative feedbackHow to avoid common rating errors (Next Slide)

Common Rater Errors

Appraisal Interview Hints

WSJ 12/2009 Article