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Performance Management Performance Management and Reward Systemsand Reward Systems
in Contextin Context
OverviewOverview Definition of Performance Management (PM)Definition of Performance Management (PM) The Performance Management Contribution The Performance Management Contribution Disadvantages/Dangers of Poorly Disadvantages/Dangers of Poorly
Implemented PM SystemsImplemented PM Systems Definition of Reward SystemsDefinition of Reward Systems Aims and Role of PM SystemsAims and Role of PM Systems Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System Integration with Other Human Resources Integration with Other Human Resources
and Development Activitiesand Development Activities
Definition of PMDefinition of PM
1.1. Continuous Process ofContinuous Process of IdentifyingIdentifying MeasuringMeasuring DevelopingDeveloping
The performance of individuals The performance of individuals and teamsand teams
Definition of PM (continued)Definition of PM (continued)
andand
2.2. AligningAligning performance performance
with with
Strategic Goals of the Strategic Goals of the organizationorganization
Performance Management Performance Management is NOT is NOT
performance performance appraisalappraisal
PM is NOT performance PM is NOT performance appraisalappraisal
Performance ManagementPerformance Management• Strategic business considerationsStrategic business considerations• Driven by line managerDriven by line manager• OngoingOngoing feedback feedback
So employee can improve So employee can improve performanceperformance
PM is NOT performance PM is NOT performance appraisalappraisal
Performance AppraisalPerformance Appraisal• Driven by HRDriven by HR• Assesses employeeAssesses employee
Strengths & Strengths & WeaknessesWeaknesses
• Once a yearOnce a year• Lacks ongoing feedbackLacks ongoing feedback
Contributions of Performance ManagementContributions of Performance Management For EmployeesFor Employees
Clarify definitions of Clarify definitions of jobjobsuccess criteriasuccess criteria
Increase motivation to perform Increase motivation to perform Increase self-esteemIncrease self-esteem Enhance self-insight and developmentEnhance self-insight and development
Contributions of Performance Management Contributions of Performance Management
For ManagersFor Managers Communicate supervisors’ views of Communicate supervisors’ views of
performance more clearlyperformance more clearly Managers gain insight about Managers gain insight about
subordinatessubordinates Better and more timely differentiation Better and more timely differentiation
between good and poor performersbetween good and poor performers Employees become more competentEmployees become more competent
Contributions of Performance ManagementContributions of Performance Management For Organization/HR FunctionFor Organization/HR Function
Clarify organizational goals Clarify organizational goals Facilitate organizational changeFacilitate organizational change Fairer, more appropriate Fairer, more appropriate
administrative actionsadministrative actions Better protection from lawsuitsBetter protection from lawsuits
Disadvantages/Dangers of Disadvantages/Dangers of Poorly-implemented Poorly-implemented
PM SystemsPM Systems
Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems
For EmployeesFor Employees Lowered self-esteemLowered self-esteem Employee burnout and job Employee burnout and job
dissatisfactiondissatisfaction Damaged relationshipsDamaged relationships Use of false or misleading Use of false or misleading
informationinformation
Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems
For ManagersFor Managers Increased turnoverIncreased turnover Decreased motivation to performDecreased motivation to perform Unjustified demands on managers’ Unjustified demands on managers’
resourcesresources Varying and unfair standards and Varying and unfair standards and
ratingsratings
Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems
For OrganizationFor Organization
Wasted time and moneyWasted time and money Unclear ratings systemUnclear ratings system Emerging biasesEmerging biases Increased risk of litigationIncreased risk of litigation
Reward SystemsReward Systems
DefinitionDefinition
Set of mechanisms for distributingSet of mechanisms for distributing Tangible returnsTangible returns
andand Intangible or relational returnsIntangible or relational returns
As part of an employment As part of an employment relationshiprelationship
Reward SystemsReward Systems Tangible returnsTangible returns
Cash compensationCash compensationBase payBase payCost-of-Living & Contingent PayCost-of-Living & Contingent PayIncentives (short- and long-term)Incentives (short- and long-term)
Reward Systems Reward Systems
Tangible returns Tangible returns ((continuedcontinued))
Benefits, such asBenefits, such asIncome ProtectionIncome ProtectionAllowancesAllowancesWork/life focusWork/life focus
Reward SystemsReward Systems Intangible returnsIntangible returns
Relational returnsRelational returns, , such assuch asRecognition and statusRecognition and statusEmployment securityEmployment securityChallenging workChallenging workLearning opportunitiesLearning opportunities
Returns and Returns and Their Degrees of DependencyTheir Degrees of Dependency
on the on the Performance Management SystemPerformance Management System
Returns with Low DependencyReturns with Low Dependencyon the on the
Performance Management SystemPerformance Management System
Cost of Living AdjustmentCost of Living Adjustment Income ProtectionIncome Protection
Returns with Moderate DependencyReturns with Moderate Dependencyon the on the
Performance Management SystemPerformance Management System
Work/Life FocusWork/Life Focus AllowancesAllowances Relational ReturnsRelational Returns Base PayBase Pay
Returns with High DependencyReturns with High Dependencyon the on the
Performance Management SystemPerformance Management System
Contingent PayContingent Pay Short-term IncentivesShort-term Incentives Long-term IncentivesLong-term Incentives
Purposes of PM Systems: Purposes of PM Systems:
OverviewOverview
StrategicStrategic AdministrativeAdministrative InformationalInformational DevelopmentalDevelopmental Organizational maintenanceOrganizational maintenance DocumentationalDocumentational
Strategic PurposeStrategic Purpose
Link individual goals with Link individual goals with organization’s goalsorganization’s goals
Communicate most crucial Communicate most crucial business strategic initiativesbusiness strategic initiatives
Administrative PurposeAdministrative Purpose
Provide information for making Provide information for making decisions re:decisions re:Salary adjustmentsSalary adjustmentsPromotionsPromotionsRetention or terminationRetention or terminationRecognition of individual performanceRecognition of individual performanceLayoffsLayoffs
Informational PurposeInformational Purpose
Communicate to Employees:Communicate to Employees: ExpectationsExpectations What is importantWhat is important How they are doingHow they are doing How to improveHow to improve
Developmental PurposeDevelopmental Purpose
Performance feedback/coachingPerformance feedback/coaching Identification of individual Identification of individual
strengths and weaknessesstrengths and weaknesses Causes of performance Causes of performance
deficienciesdeficiencies Tailor development of individual Tailor development of individual
career pathcareer path
Organizational Maintenance Organizational Maintenance PurposePurpose
Plan effective workforcePlan effective workforce Assess future training needsAssess future training needs Evaluate performance at Evaluate performance at
organizational levelorganizational level Evaluate effectiveness of HR Evaluate effectiveness of HR
interventionsinterventions
Documentational PurposeDocumentational Purpose
Validate selection instrumentsValidate selection instruments Document administrative Document administrative
decisionsdecisions Help meet legal requirementsHelp meet legal requirements
An Ideal PM System: An Ideal PM System: 14 Characteristics14 Characteristics
1.1. Congruent with organizational Congruent with organizational strategystrategy
2.2. ThoroughThorough3.3. PracticalPractical4.4. MeaningfulMeaningful5.5. SpecificSpecific6.6. Identifies effective/ ineffective Identifies effective/ ineffective
performanceperformance7.7. ReliableReliable
An Ideal PM System: An Ideal PM System: 14 Characteristics 14 Characteristics (continued)(continued)
8.8. ValidValid
9.9. Acceptable and FairAcceptable and Fair
10.10. InclusiveInclusive
11.11. Open (Open (NoNo Secrets) Secrets)
12.12. CorrectableCorrectable
13.13. StandardizedStandardized
14.14. EthicalEthical
Congruent with organizational Congruent with organizational strategystrategy
Consistent with organization’s Consistent with organization’s strategystrategy
Aligned with unit and Aligned with unit and organizational goalsorganizational goals
ThoroughThorough All employees are evaluatedAll employees are evaluated All major job responsibilities are All major job responsibilities are
evaluatedevaluated Evaluations cover performance for Evaluations cover performance for
entire review periodentire review period Feedback is given on Feedback is given on bothboth positive positive
and negative performanceand negative performance
PracticalPractical
AvailableAvailable Easy to useEasy to use Acceptable to decision makersAcceptable to decision makers Benefits outweigh costsBenefits outweigh costs
MeaningfulMeaningful
Standards are important and relevantStandards are important and relevant System measures ONLY what employee System measures ONLY what employee
can controlcan control Results have consequences Results have consequences Evaluations occur regularly and at Evaluations occur regularly and at
appropriate timesappropriate times System provides for continuing skill System provides for continuing skill
development of evaluatorsdevelopment of evaluators
SpecificSpecific
Concrete and detailed guidance to Concrete and detailed guidance to employees employees • What’s expected What’s expected • How to meet the expectationsHow to meet the expectations
Identifies Identifies effective and ineffective effective and ineffective
performanceperformance
Distinguish between effective and Distinguish between effective and ineffectiveineffective• BehaviorsBehaviors• ResultsResults
Provide ability to identify Provide ability to identify employees with various levels of employees with various levels of performanceperformance
ReliableReliable
ConsistentConsistent Free of errorFree of error Inter-rater reliabilityInter-rater reliability
ValidValid
Relevant (measures what is Relevant (measures what is important)important)
Not deficient (doesn’t measure Not deficient (doesn’t measure unimportant facets of job)unimportant facets of job)
Not contaminated (only measures Not contaminated (only measures what the employee can control)what the employee can control)
Acceptable and FairAcceptable and Fair
Perception of Perception of DistributiveDistributive Justice Justice• Work performed Work performed Evaluation received Evaluation received
Reward Reward
Perception of Perception of Procedural Procedural JusticeJustice• Fairness of procedures used to:Fairness of procedures used to:
Determine ratingsDetermine ratings Link ratings to rewardsLink ratings to rewards
InclusiveInclusive Represents concerns of all Represents concerns of all
involvedinvolved• When system is created, When system is created,
employees should help with employees should help with decidingdeciding What should be measuredWhat should be measured How it should be measuredHow it should be measured
• Employee should provide input on Employee should provide input on performance prior to evaluation performance prior to evaluation meetingmeeting
Open (Open (NoNo Secrets) Secrets)
Frequent, ongoing evaluations and Frequent, ongoing evaluations and feedbackfeedback
2-way communications in appraisal 2-way communications in appraisal meetingmeeting
Clear standards, ongoing Clear standards, ongoing communicationcommunication
Communications are factual, open, Communications are factual, open, honesthonest
CorrectableCorrectable
Recognizes that human judgment Recognizes that human judgment is fallibleis fallible
Appeals process providedAppeals process provided
StandardizedStandardized
Ongoing training of managers to Ongoing training of managers to provideprovide
Consistent evaluations acrossConsistent evaluations across• PeoplePeople• TimeTime
EthicalEthical
Supervisor suppresses self-interestSupervisor suppresses self-interest Supervisor rates only where she Supervisor rates only where she
has sufficient information about has sufficient information about the performance dimension the performance dimension
Supervisor respects employee Supervisor respects employee privacyprivacy
Integration with other Integration with other Human Resources Human Resources
and Development Activitiesand Development Activities
PM provides information for:PM provides information for:• Development of training to meet Development of training to meet
organizational needsorganizational needs• Workforce planningWorkforce planning• Recruitment and hiring decisionsRecruitment and hiring decisions• Development of compensation Development of compensation
systemssystems
Definition of Performance Management (PM)Definition of Performance Management (PM) The Performance Management Contribution The Performance Management Contribution Disadvantages/Dangers of Poorly Implemented PM Disadvantages/Dangers of Poorly Implemented PM
SystemsSystems Definition of Reward SystemsDefinition of Reward Systems Aims and Role of PM SystemsAims and Role of PM Systems Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System Integration with Other Human Resources and Integration with Other Human Resources and
Development ActivitiesDevelopment Activities
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