Performance Management
HERMAN AGUINIS
PREPARED BY ASHRAF AL BEHERY
UPDATED SEP 2019
Session Roles
UPDATED SEP 2019
Please, Share us who you are and why
your are here today?
S
List your Objectives
1
2
3
4
5
6
UPDATED SEP 2019
Objectives
1. Understanding the performance management process.
2. Recognizing the performance management role in management functions.
3. Building performance management system.
4. Designing objectives and measuring results.
5. Using the performance management system as a development tool.
6. Linking performance to rewarding system.
UPDATED SEP 2019
Course outlines:
Part 1. Strategic and General Considerations (2 sessions -Quiz)
1. Performance Management and Reward Systems in Context.
2. Performance Management Process.
3. Performance Management and Strategic Planning.
Part 2. System Implementation (2 session - Quiz)
1. Defining Performance and Choosing a Measurement Approach.
2. Measuring Results and Behaviors.
3. Gathering Performance Information.
4. Implementing a Performance Management System.
UPDATED SEP 2019
Course outlines: Cont.
Part 3. Employee Development (2sessions - Quiz)
1. Performance Management and Employee Development.
2. Performance Management Skills.
Part 4. Reward Systems, Legal Issues, and Team Performance Management (1session)
1. Reward Systems and Legal Issues.
2. Managing Team Performance
Part 5. Exam – Final Day.
UPDATED SEP 2019
Score distribution:
1. Attendance and Active participation 20%
2. Group & Individual assignments 40%
3. Final Evaluation 40%
UPDATED SEP 2019
Lets Agree on some points.
Organization: is a group of people who work together, like a neighborhood association, a
charity, a union, or a corporation for the purpose of achieving specific objective.
Organization Structure: is a system that outlines how certain activities are directed in order to
achieve the goals of an organization. These activities can include rules, roles, and
responsibilities. The organizational structure also determines how information flows between
levels within the company.
UPDATED SEP 2019
Lets Agree on some points.
Vision: is a company's road map, indicating what the company wants to become by setting a
defined direction for the company's growth.
Mission: is a short statement of why an organization exists, what its overall goal is, identifying
the goal of its operations: what kind of product or service it provides, its primary customers or
market, and its geographical region of operation
Strategic Goal: goals created to identify the intended accomplishment of a business strategy.
When companies create strategic goals, they directly identify what they see as the outcome of
their business efforts. Strategic goals are most commonly created when a company is mounting
a new strategy.
Objective: A specific result that a person or system aims to achieve within a time frame and
with available resources.
UPDATED SEP 2019
Lets Agree on some points.
UPDATED SEP 2019
Lets Agree on some points.
Vision
,Mission &
value
Strategic Planning
Individual
Strategies
Functional
Strategies
UPDATED SEP 2019
Corporate
Strategies
BU
Strategies
Lets Agree on some points.
Job
specification
Job
Description
Job
Requirements
UPDATED SEP 2019
Strategic and General Considerations
Case Study:
Sally the a sales manager
UPDATED SEP 2019
“In business, words are words,
explanations are explanations,
promises are promises, but only
performance is reality.”
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Overview
■Definition of Performance Management (PM)
■The PM Contribution
■Disadvantages/Dangers of Poorly Implemented PM Systems
■Definition of Reward Systems
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Overview (continued)
■Purposes of PM Systems
■Characteristics of an Ideal PM System
■Integration with Other Human Resources and Development Activities
■PM Around the World
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Definition of PM
1. Continuous process of Identifying, Measuring, and
Developing the performance of individuals and teams
2. Aligning performance with the strategic goals
of the organization
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Definition of PM (continued)
Performance management (PM)
is NOT
performance appraisal (PA)
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Definition of PM (continued)
PM
PA
■Driven by HR
■Strategic business
considerations
■Assesses employee
■Driven by line manager
◦ Strengths
◦ Weaknesses
■Ongoing feedback
◦ So employee can improve performance
■Once a year
■Lacks ongoing feedback
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Contributions of Performance Management
■For Employees
■For Managers
■For Organization/HR Function
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Contributions of Performance Management for Employees
■Clarify definitions of Job and Success criteria
■Increase motivation to perform
■Increase self-esteem
■Enhance self-insight and development
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Contributions of Performance Management for
Managers
■Communicate supervisors’ views of performance more clearly
■Managers gain insight about subordinates
■Better and more timely differentiation between good and poor
performers
■Employees become more competent
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Contributions of Performance Management for Organization/HR
Function
■Clarify organizational goals
■Facilitate organizational change
■Fairer, more appropriate administrative actions
■Better protection from lawsuits
Example: PM helps IBM switch to a customer service focus in
the 1980s?
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Disadvantages/Dangers of Poorly Implemented PM
Systems
■
For Employees
■
For Managers
■
For Organization/HR Function
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Disadvantages/Dangers of Poorly
Implemented PM Systems for Employees
■Lowered self-esteem
■Employee burnout/ stress and job dissatisfaction
■Damaged relationships
■Use of false or misleading information
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Disadvantages/Dangers of Poorly
Implemented PM Systems for Managers
■Increased turnover
■Decreased motivation to perform
■Unjustified demands on managers’ resources
■Varying and unfair standards and ratings
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Disadvantages/Dangers of Poorly Implemented
PM Systems for Organization/HR Function
■Wasted time and money
■Unclear ratings system
■Emerging biases
■Increased risk of litigation/legal action
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Assignment
From the reading so far, give at least two examples of ways in which poorlyimplemented PM systems can hurt the organization.
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Reward Systems
■
Definition
■
Tangible Returns
■
Intangible Returns
■
■
Returns and their Degrees of
Dependency on PM
For Organization/HR Function
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Reward Systems Definition
■Set of mechanisms for distributing…
◦ Tangible returns
◦ Intangible or relational returns
… as part of an employment relationship
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Reward Systems - Tangible Returns
■Cash compensation
■Benefits such as
◦ Base pay
◦ Income Protection
◦ Cost-of-Living and
Contingent Pay
◦ Allowances
◦ Work/life focus
◦ Incentives (short- and
long-term)
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Reward Systems - Tangible Returns
Base pay
Hourly wages
Salary
Cost-of-Living & Contingent Pay
Usually permanent increases in pay based on either cost of living or performance
Covered in more detail later
Incentives (short- and long-term)
Used to increase performance
E.g., bonuses (short term) or stock options/ownership (long term)
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Reward Systems - Tangible Returns
Income Protection
Sometimes required under law, such as
Social Security (what about unemployment insurance in the USA?)
Disability pay,
medical insurance,
pension plans,
savings plans
Allowances
E.g., housing
transportation (e.g., company provides car)
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Discussion:
Which of these reward systems are more likely to be based on
seniority than on performance?
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Reward Systems Intangible Returns
■Relational returns such as
◦ Recognition and status
◦ Employment security
◦ Challenging work
◦ Learning opportunities
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Reward Systems Intangible Returns
Work/life focus (to help employee balance work/home life)
Such as vacation time,
flextime and telecommuting or teleworking,
services (e.g., counseling, financial planning, fitness activities)
Relational Returns
Such as recognition, status, employment security, challenging work, opportunities to learn,
opportunities to form personal relationships
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Returns and Their Degrees of Dependency on
the Performance Management System
Low Dependency
Moderate Dependency
Cost of Living Adjustment
Income Protection
Work/Life Focus
Allowances
Relational Returns
Base Pay
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High Dependency
Contingent Pay
Short-Term Incentives
Long-Term Incentives
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Purposes of PM Systems
■Strategic
■Administrative
■Informational
■Developmental
■Organizational maintenance
■Documentation
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Purposes of PM Systems - Strategic
Purpose
■Link individual goals with organization’s goals
■Communicate most crucial business strategic initiatives
Links employee activities with organization’s mission and goals
Identifies results and behaviors needed to carry out strategy
Maximizes extent employees exhibit those behaviors and results
Only 13% of organizations use PM to communicate organizational purpose and goals
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Purposes of PM Systems - Administrative Purpose
■Provide information for making decisions regarding:
◦ Salary adjustments
◦ Promotions
◦ Retention or termination
◦ Recognition of individual performance
◦ Layoffs
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Purposes of PM Systems - Informational
Purpose
■Communicate to employees:
◦ Expectations
◦ What is important
◦ How they are doing
◦ How to improve
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Purposes of PM Systems - Developmental
Purpose
■Identification of individual strengths and weaknesses
■Identification of causes of performance deficiencies
■Tailor development of individual career path
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Purposes of PM Systems - Organizational
Maintenance Purpose
■Plan effective workforce
■Assess future training needs
■Evaluate performance at organizational level
■Evaluate effectiveness of HR interventions
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Purposes of PM Systems - Documentation
Purpose
■Validate selection instruments
■Document administrative decisions
■Help meet legal requirements
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An Ideal PM System: 15 Characteristics
1. Strategically congruent/matching
2. Contextually congruent
3. Thorough / comprehensive
4. Practical
5. Meaningful
6. Specific
7. Identifies effective and ineffective performance
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An Ideal PM System: 15 Characteristics
(continued)
8. Reliable
9. Valid
10. Acceptable and fair
11. Inclusive/complete
12. Open (No Secrets)
13. Correctable
14. Standardized
15. Ethical
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An Ideal PM System:
Strategically Congruent
■Consistent with organization’s strategy
■Aligned with unit and organizational goals
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An Ideal PM System:
15 Characteristics - Contextually Congruent
■Congruent with the organization’s culture as well as the broader
cultural context of the region or country
◦ Example: A 360-degree feedback is not effective where communication is not
fluid and hierarchies are rigid
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An Ideal PM System:
15 Characteristics - Thorough/ comprehensive
■All employees are evaluated
■All major job responsibilities are evaluated
■Evaluations cover performance for entire review period
■Feedback is given on both positive and negative performance
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An Ideal PM System:
15 Characteristics - Practical
■Available
■Easy to use
■Acceptable to decision makers
■Benefits are greater than costs
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An Ideal PM System:
15 Characteristics - Meaningful
■Standards are important and relevant
■System measures ONLY what employee can control
■Results have consequences
■Evaluations occur regularly and at appropriate times
■System provides for continuing skill development of evaluators
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An Ideal PM System:
15 Characteristics - Specific
▪ Concrete and detailed guidance to employees
•What’s expected
•How to meet the expectations
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An Ideal PM System:
15 Characteristics - Identifies effective and ineffective
performance
■Distinguish between effective and ineffective:
◦ Behaviors
◦ Results
■Provide ability to identify employees with various levels of performance.
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An Ideal PM System:
15 Characteristics - Reliable
■Consistent
■Free of error
■Inter-rater reliability
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An Ideal PM System:
15 Characteristics - Valid
■Relevant (i.e., measures what is important)
■Not deficient (i.e., doesn’t measure unimportant facets of job)
■Not contaminated (i.e., only measures what the employee can control)
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An Ideal PM System:
15 Characteristics - Acceptable and
Fair
■Perception of Distributive Justice
◦ Work performed 🡪 Evaluation received 🡪 Reward
■Perception of Procedural Justice
◦ Fairness of procedures used to:
■ Determine ratings
■ Link ratings to rewards
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An Ideal PM System:
15 Characteristics - Inclusive
■Represents concerns of all involved
◦ When system is created, employees should help with
deciding:
■ What should be measured
■ How it should be measured
◦ Employee should provide input on performance prior to
evaluation meeting.
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An Ideal PM System:
15 Characteristics - Open (No Secrets)
■Frequent, ongoing evaluations and feedback
■Two-way communications in appraisal meeting
■Clear standards and ongoing communication
■Communications are factual, open, and honest
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An Ideal PM System:
15 Characteristics - Correctable
■Recognizes that human judgment is imperfect
■Appeals process provided
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An Ideal PM System:
15 Characteristics - Standardized
■Ongoing training of managers to provide consistent evaluations across:
◦ People
◦ Time
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An Ideal PM System:
15 Characteristics - Ethical
■Supervisor suppresses /overwhelms self-interest
■Supervisor rates only where (s)he has sufficient information about the
performance dimension
■Supervisor respects employee privacy
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Integration with other Human
Resources and Development Activities
■PM provides information for:
◦ Development of training to meet organizational needs
◦ Workforce planning
◦ Recruitment and hiring decisions
◦ Development of compensation systems
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PM Around the World
■PM used in United States, Mexico, Turkey, India, Australia, China, and so on
■Common across countries: Need to align individual and organizational goals
to enhance the performance of individuals and groups
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PM Around the World (continued)
■
Yet, different countries emphasize different
components of PM
• EX 1: PMs in Japan tend to emphasize behaviors to the
detriment of results
• EX 2: The current challenge among many organizations in
South Korea is how to reconcile/bring together a meritbased approach with more traditional cultural values
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Questions
Thank you,
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