McGraw-Hill/Irwin
Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.
Need to Know
1.
2.
3.
4.
Activities involved in performance
management.
Purposes and criteria and methods for
measuring effectiveness of performance
management systems.
Sources of performance information in terms
of their advantages and disadvantages.
Types of rating errors and how to minimize
them.
8-2
Need to Know
5. How to provide performance feedback effectively.
6. Ways to produce improvement in unsatisfactory
performance.
7. Legal and ethical issues that affect performance
management.
8-3
Introduction


Performance management: process through which
managers ensure that employees’ activities and
outputs contribute to the organization’s goals.
This process requires:
 Knowing
what activities and outputs are desired
 Observing whether they occur
 Providing feedback to help employees meet expectations
8-4
Test Your Knowledge
If the performance management system created
competition among team members, I would
A.
B.
C.
D.
Make collaboration a criterion to be evaluated.
Nothing, competition is good.
Increase the specificity of the feedback.
Focus on personal traits rather than behaviors.
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Figure 8.1: Steps in the Performance
Management Process
8-6
Purposes of Performance
Management



Strategic Purpose - effective performance
management helps the organization achieve its
business objectives.
Administrative Purpose - ways in which
organizations use the system to provide
information for day-to-day decisions about salary,
benefits, and recognition programs.
Developmental Purpose - serves as a basis for
developing employees’ knowledge and skills.
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Criteria for Effective Performance
Management
8-8
Figure 8.2: Contamination and Deficiency of a
Job Performance Measure
8-9
Test Your Knowledge
Sarah is a computer programmer whose job mainly
consists of independently coding software.
Interpersonal and teamwork skills are included on
performance appraisal. Measuring these skills most
closely represents:
A.
B.
C.
Criterion contamination
Criterion deficiency
Unreliability
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Methods for Measuring Performance
8-11
Table 8.1:
Basic Approaches to Performance Measurement
8-12
Measuring Performance:
Making Comparisons
• Requires
managers to
rank
employees in
their group
from the
highest
performer to
the poorest
performer.
• Assigns a
certain
percentage
of employees
to each
category in a
set of
categories.
• Compares
each
employee
with each
other
employee to
establish
rankings.
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Measuring Performance:
Rating Individuals - Attributes
Graphic Rating Scale
Mixed-Standard Scale
Lists traits and provides a
rating scale for each trait.
Uses several statements
describing each trait to
produce a final score for
that trait.
Employer uses the scale to
indicate extent to which
an employee displays
each trait.
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Figure 8.3:
Example of a Graphic Rating Scale
8-15
Figure 8.4:
Example of a
Mixed-Standard
Scale
8-16
An employee’s performance measurement differs
from job to job. For example, a car dealer’s
performance is measured by the dollar amount of
sales, the number of new customers, and customer
satisfaction surveys.
8-17
Measuring Performance:
Rating Individuals - Behaviors
Critical-Incident Method
Based on managers’
records of specific examples
of employees acting in ways
that are either effective or
ineffective.
Employees receive
feedback about what they do
well and what they do poorly
and how they are helping
the organization achieve its
goals.

Behaviorally Anchored Rating Scale
(BARS)
Rates behavior in terms of a
scale showing specific
statements of behavior that
describe different levels of
performance.

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Figure 8.5: TaskBARS Rating
Dimension for a
Patrol Officer
8-19
Measuring Performance:
Rating Individuals – Behaviors
Behavioral Observation Scale (BOS)
A variation of a BARS which
uses all behaviors necessary for
effective performance to rate
performance at a task.
A BOS also asks the manager
to rate frequency with which
the employee has exhibited the
behavior during rating period.
Organizational Behavior Modification
(OBM)
A plan for managing behavior
of employees through a formal
system of feedback and
reinforcement.
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Figure 8.6: Example of a Behavioral
Observation Scale (BOS)
8-21
Measuring Performance:
Measuring Results


Management by Objectives (MBO): people at each
level of the organization set goals in a process
that flows from top to bottom, so that all levels
are contributing to the organization’s overall
goals.
These goals become the standards for evaluating
each employee’s performance.
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Table 8.2: Management by Objectives:
Two Objectives for a Bank
8-23
Test Your Knowledge
The performance management system at XYZ
company currently is perceived as unfair and is
time-consuming for managers. Which of the
following systems is the most likely and least
likely used, respectively.
A.
B.
C.
D.
Paired comparisons; Results
Results; Forced distribution
Behavioral; Attributes
Attributes; Comparative
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Measuring Performance:
Measuring Quality
The principles of total quality management
(TQM), provide methods for performance
measurement and management.
With TQM, performance measurement combines
measurements of attributes and results.


Subjective feedback
Statistical quality control
8-25
•
•
Coaches provide feedback to their team just as
managers provide feedback to their employees.
Feedback is important so that individuals know what
they are doing well and what areas they may need to
work on.
8-26
Sources of Performance Information

360-Degree Performance Appraisal: performance
measurement that combines information from
the employees’:





Managers
Peers
Subordinates
Self
Customers
8-27
Performance management is critical for
executing a talent management system and
involves one-on-one contact with managers
to ensure that proper training and
development are taking place.
8-28
Types of Performance Measurement
Rating Errors
Contrast errors: rater compares an individual, not
against an objective standard, but against other
employees.
Distributional errors: rater tends to use only one part
of a rating scale.



Leniency: the reviewer rates everyone near the top
Strictness: the rater favors lower rankings
Central tendency: the rater puts everyone near the middle of
the scale
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Types of Performance Measurement
Rating Errors

Rater bias: raters often let their opinion of one
quality color their opinion of others.
 Halo error:
when bias is in a favorable direction. This can
mistakenly tell employees they don’t need to improve in any area.
 Horns error: when bias involves negative ratings. This can cause
employees to feel frustrated and defensive.
8-30
Test Your Knowledge
Bill rates all of his employees very low except for Jan.
Jan gets above average ratings because she
consistently comes to work on time. The rating errors
Bill makes are _______ and _______, respectively.
A.
B.
C.
D.
Leniency; Horn
Strictness; Halo
Similar-to-me; Central Tendency
Horn; Strictness
8-31
Political Behavior in Performance
Appraisals


Distorting a performance evaluation to advance
one’s personal goals
A technique to minimize appraisal politics is a
calibration meeting:
 Meeting
at which managers discuss employee
performance ratings and provide evidence supporting
their ratings with the goal of eliminating influence of
rating errors
8-32
Giving Performance Feedback
Scheduling Performance Feedback



Performance feedback should be a regular, expected
management activity.
Annual feedback is not enough.
Employees should receive feedback so often that they know
what the manager will say during their annual performance
review.
Preparing for a Feedback Session

Managers should be prepared for each formal feedback session.
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When giving
performance
feedback, do it in an
appropriate
meeting place.
Meet in a setting
that is neutral and
free of distractions.
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Giving Performance Feedback

Conducting the Feedback Session
 During
feedback sessions, managers can take any of
three approaches:
1. “Tell-and-Sell” – managers tell employees their ratings
and then justify those ratings.
2. “Tell-and-Listen” – managers tell employees their ratings
and then let employees explain view.
3. “Problem-Solving” – managers and employees work
together to solve performance problems.
8-35
6 Ways to Structure communication
Listen as well
as talk.
Be honest.
Prevent surprises.
8-36
Figure 8.7: Improving Performance
8-37
Legal and Ethical Issues in
Performance Management
Legal

Performance management processes are often scrutinized in
cases of discrimination or dismissal.
Ethical

Employee monitoring via electronic devices and computers
may raise concerns over employee privacy.
8-38
Legal Requirements for
Performance Management
Lawsuits related to performance management usually
involve charges of:


Discrimination
Unjust dismissal
To protect against both kinds of lawsuits, it is important
to have a legally defensible performance management
system.
8-39
Legal Requirements for
Performance Management
A legally defensible performance management system:





Based on valid job analyses, with requirements for job success
clearly communicated to employees.
Evaluates behaviors or results, rather than traits.
Multiple raters (including self-appraisals) used.
All performance ratings reviewed by upper-level managers.
Appeals mechanism for employees.
8-40
Summary


Performance management is the process through
which managers ensure that employees’ activities
and outputs contribute to the organization’s goals.
Organizations establish performance management
systems to meet three broad purposes:
1.
2.
3.

Strategic purpose
Administrative purpose
Developmental purpose
Performance measures should fit with the
organization’s strategy by supporting its goals and
culture.
8-41
Summary
•
•
•
Performance information may come from an
employee’s self-appraisal and from appraisals
by the employee’s supervisor, employees, peers,
and customers.
Using only one source makes the appraisal more
subjective.
Organizations may combine many sources into a
360- degree performance appraisal.
8-42
Summary
•
•
Organizations can minimize appraisal politics by
establishing a fair appraisal system, involving
managers and employees in developing the system,
allowing employees to challenge evaluations,
communicating expectations, and having open
discussion.
Performance feedback should be a regular,
scheduled management activity, so that employees
can correct problems as soon as they occur.
8-43
Summary
•
•
•
Performance feedback discussions should focus on
behavior and results rather than on personalities.
Managers must make sure that performance
management systems and decisions treat
employees equally, without regard to race, sex, or
other protected status.
A system is more likely to be legally defensible if it
is based on behaviors and results, rather than on
traits, and if multiple raters evaluate each
person’s performance.
8-44