Human Resources Management in
Canada
Fourteenth Canadian Edition
Chapter 10
Performance
Management
Copyright © 2020 Pearson Canada Inc.
10 - 1
Learning Objectives (1 of 2)
10.1 Explain the strategic value and importance
of performance management.
10.2 Differentiate between performance
management and performance appraisals.
10.3 Discuss the five steps in the performance
management process.
10.4 Define contextual and task-based
performance and how they differ.
Copyright © 2020 Pearson Canada Inc.
10 - 2
Learning Objectives (2 of 2)
10.5 Describe five performance appraisal methods
and the pros and cons of each.
10.6 Discuss the major problems inhibiting effective
performance appraisals.
10.7 Discuss the various sources of performance
appraisal including the 360-degree appraisal.
10.8 Describe guidelines for legal and ethical
performance management.
Copyright © 2020 Pearson Canada Inc.
10 - 3
The Strategic Importance of
Performance Management (1 of 2)
Performance Appraisal:
• Evaluating an employee’s current and/or past
performance, relative to standards.
Performance Management:
• The process of all activities related to improving employee
•
performance, productivity, and effectiveness.
Involves:
–
–
–
–
–
Linking individual goals and business strategy.
Showing leadership and accountability.
Relate appraisal results, rewards, and recognition.
Invest in employee development planning.
Establish an administratively efficient system.
Copyright © 2020 Pearson Canada Inc.
10 - 4
The Strategic Importance of
Performance Management (2 of 2)
Table 10.1 Elements of Performance Appraisals (Used by 337
Canadian Organizations)
Individual objectives and goals
97%
Training and professional development
70%
Competencies
69%
Behaviours
61%
Organizational objectives and goals
53%
Team objectives and goals
53%
Skills enhancement plan
41%
Values
35%
Other (e.g., self-appraisal, results)
4%
SOURCE: The Conference Board of Canada. “Performance Management: Turning Individual Stress to
Organizational Strategy,” June 2012, p. 2., © 2012, Reprinted with permission from The Conference
Board of Canada.
Copyright © 2020 Pearson Canada Inc.
10 - 5
The Performance Management Process
(1 of 13)
Performance Appraisals:
• Considered to be legal documents in Canada.
– Required by courts in assessing wrongful termination
cases.
• Failure to measure and use appraisal results
invalidates the primary purpose of performance
evaluations.
Copyright © 2020 Pearson Canada Inc.
10 - 6
The Performance Management Process
(2 of 13)
Copyright © 2020 Pearson Canada Inc.
10 - 7
The Performance Management Process
(3 of 13)
Why Appraise Performance?
• Pay, promotions and retention decisions are based on
•
•
•
•
employee’s appraisal results.
Links performance of each employee to the company’s
overall goals.
Allows manager and employee develop a plan for
correcting deficiencies and reinforce strengths.
Provides an opportunity to review career plans.
Enable identification of training needs and/or remedial
action.
Copyright © 2020 Pearson Canada Inc.
10 - 8
The Performance Management Process
(4 of 13)
Step 1: Define Performance Expectations:
• Task performance shows direct contribution to
•
•
job-related processes.
Contextual performance shows indirect contributions
by improving organizational, social, and psychological
behaviours that contribute to organizational
effectiveness.
Performance management process is linked to
performance measurement.
– Expectations need to be legally defensible, clear, and
measurable, and communicated to employees.
Copyright © 2020 Pearson Canada Inc.
10 - 9
The Performance Management Process
(5 of 13)
Step 1: Define Performance Expectations:
• In global companies performance appraisal criteria may
•
need to be modified to cultural norms and values.
Current performance management changes:
– Ongoing feedback – progress discussions, open two-way
communication.
– Balance between individual and team assessment.
– Decreased focus on ratings and rankings – use objective
criteria.
– Documentation – identify and deal with poor performers.
Copyright © 2020 Pearson Canada Inc.
10 - 10
The Performance Management Process
(6 of 13)
Performance Appraisal/Evaluation Discussion:
• Web-based performance management is becoming
•
•
•
industry standard.
Performance management systems provide employees
with clear development path.
Electronic performance monitoring (EPM) has
supervisors monitor the employees performance.
Formal appraisal discussions allow review of appraisal
and make plans to remedy deficiencies and reinforce
strengths.
Copyright © 2020 Pearson Canada Inc.
10 - 11
The Performance Management Process
(7 of 13)
Performance Appraisal/Evaluation Discussion:
• Types of appraisal outcomes:
– Satisfactory – promotable.
– Satisfactory – not promotable.
– Unsatisfactory – correctable or uncorrectable.
Copyright © 2020 Pearson Canada Inc.
10 - 12
The Performance Management Process
(8 of 13)
Preparing for Appraisal Discussion:
• Assemble data – job descriptions, performance standards.
• Prepare employee – give notice of discussion.
• How to conduct the interview:
– Be direct and specific – use objective work data and specific
examples.
– Do not get personal; encourage employee to talk.
– Develop an action plan:
§ Be specific about performance that needs attention.
§ Ensure employee understands reasons for appraisal and how
to improve.
§ Develop specific goals, expected results, and timeline.
Copyright © 2020 Pearson Canada Inc.
10 - 13
The Performance Management Process
(9 of 13)
Preparing for Appraisal Discussion:
• How to handle criticism and defensive employees:
– Recognize that such behaviour is normal.
– Concentrate on the act/behaviour/performance rather than
the person.
– Postpone action – give time for rational reaction by
employees.
– Recognize human limitations – do not expect to be able to
solve every problem.
Copyright © 2020 Pearson Canada Inc.
10 - 14
The Performance Management Process
(10 of 13)
Step 4: Determine Performance Rewards and/or
Consequences:
• Employee satisfaction with appraisal discussion
depends on:
– Not feeling threatened during the interview.
– Having opportunity to present their ideas.
– Having helpful and constructive supervisor conduct the
interview.
Copyright © 2020 Pearson Canada Inc.
10 - 15
The Performance Management Process
(11 of 13)
Step 4: Determine Performance Rewards and/or
Consequences:
• Ensure desired effect and legally defensive appraisal:
– Let employee know when performance is unacceptable.
– Ensure minimum expectations are reasonable.
– Warn employees about consequences of failure to meet
minimum standards.
– Avoid mixed messages.
– Provide reasonable time to improve performance.
– Provide support to facilitate improvement.
Copyright © 2020 Pearson Canada Inc.
10 - 16
The Performance Management Process
(12 of 13)
Step 4: Determine Performance Rewards and/or
Consequences:
• Formal written warning:
– Identify standards.
– Ensure employee is aware of standards.
– Specify violation of standard.
– Indicate opportunity to correct behaviour.
– Specify behaviour that must be corrected.
• Purpose of warning:
– Shake employee out of bad habits.
– Help manager defend rating of employee.
Copyright © 2020 Pearson Canada Inc.
10 - 17
The Performance Management Process
(13 of 13)
Step 5: Career Development Discussion:
• Manager and employee discuss opportunities for
•
•
•
development.
Strengthen or improve employee’s knowledge, skills
and abilities.
Business needs must be balanced with employee’s
preferences.
Focus on actions to boost performance for current
goals or develop new knowledge aimed at future
career plan.
Copyright © 2020 Pearson Canada Inc.
10 - 18
Formal Appraisal Methods (1 of 7)
Comparative Methods:
• Graphic rating scale:
– Simplest and most popular technique.
– Lists traits and a range of performance values.
• Alternation ranking scale:
– Ranks employees from best to worst for each trait.
• Paired comparison method:
– Make chart of all possible pairs of employees and indicate
the better employee of the pair.
• Forced distribution method:
– Place predetermined percentage of employees in
performance categories. Criticized and little used.
Copyright © 2020 Pearson Canada Inc.
10 - 19
Formal Appraisal Methods (2 of 7)
Qualitative Methods:
• Critical incident method:
– Record desirable and undesirable examples of incidents.
– Advantages:
§ Provides specific hard facts for appraisal.
§ Manager thinks about appraisal throughout the year.
§ Can be adapted to specific job expectations.
§ Useful for identifying good and poof performance.
Copyright © 2020 Pearson Canada Inc.
10 - 20
Formal Appraisal Methods (3 of 7)
Qualitative Methods:
• Narrative forms:
– Provide feedback with specific detail.
– Performance problem is described in detail.
– Improvement plan identifies measurable goals, direction for
improvement.
– Encourages employee to add ideas.
– Constructive discussion between employee and manager.
– Provides clarity on how to improve performance.
Copyright © 2020 Pearson Canada Inc.
10 - 21
Formal Appraisal Methods (4 of 7)
Advanced Quantitative Methods:
• Behaviourally anchored rating scales (BARS):
– Combines benefits of narratives, critical incidents, and
quantified ratings.
– Advantages:
§ More accurate measure of performance.
§ Clearer standards.
§ Feedback.
§ Independent dimensions.
§ Consistency.
Copyright © 2020 Pearson Canada Inc.
10 - 22
Formal Appraisal Methods (5 of 7)
Advanced Quantitative Methods:
• Management by objectives (MBO).
– Manager and employee jointly set specific measurable goals
and discuss progress.
– Goals must not be too easy or too difficult.
– Motivate performance with fair and attainable goals:
§ Set organization’s and department’s goals.
§ Define expected results with individual goals.
§ Measure results in performance reviews.
§ Provide feedback on progress.
Copyright © 2020 Pearson Canada Inc.
10 - 23
Formal Appraisal Methods (6 of 7)
Management by Objectives (MBO)
Step 6: Provide feedback
Step 5: Performance reviews: measure results
Step 4: Define expected results (individual goals)
Step 3: Discuss departmental goals
Step 2: Set departmental goals
Step 1: Set the organization’s goals
Copyright © 2020 Pearson Canada Inc.
10 - 24
Formal Appraisal Methods (7 of 7)
Advanced Quantitative Methods:
• Potential problems with MBO:
– Setting unclear, unmeasurable objectives.
– Time consuming.
– Employee may push for lower goals; manager pushes for
higher goals.
• Mixing the methods:
– Most firms combine several appraisal techniques.
– Determining factors include resource constraints (time,
money, people) and organizational factors (budget,
turnover, strategy).
Copyright © 2020 Pearson Canada Inc.
10 - 25
Performance Appraisal Problems and
Solutions (1 of 6)
Appraisal Problems:
• Employees tend to be overly optimistic about their own
•
ratings.
Honest appraisal involves emotions that can cause
difficulties when managers are not trained properly.
– Results in dishonest appraisals or avoidance.
• Acceptable system can increase employee trust in
management.
Copyright © 2020 Pearson Canada Inc.
10 - 26
Performance Appraisal Problems and
Solutions (2 of 6)
Validity and Reliability:
• Appraisal must be based on performance criteria that are
•
•
valid for the specific position.
System must produce consistent ratings.
Criteria used must be:
– Relevant to the job being appraised.
– Broad enough to cover all aspects of the job requirements.
– Specific and precise to result in consistent measure of
performance.
Copyright © 2020 Pearson Canada Inc.
10 - 27
Performance Appraisal Problems and
Solutions (3 of 6)
Rating Scale Problems:
• Unclear performance standards – open to interpretation.
• Halo effect – influenced by rating on one specific trait.
• Central tendency – overusing “average” rating.
• Strictness/leniency – only using top or bottom of scale.
• Appraisal bias – allow influence of individual differences
•
•
not actual performance.
Recency effect – only use recent performance as basis.
Similar-to-me bias – higher ratings based on rater-ratee
similarity or common interest.
Copyright © 2020 Pearson Canada Inc.
10 - 28
Performance Appraisal Problems and
Solutions (4 of 6)
How to Avoid Appraisal Problems:
• Make appraisers aware of common problems.
• Provide training on how to eliminate rating errors;
– Be aware of external factors such as union pressure or
time constraints.
• Choose the right appraisal tool.
• Use multiple raters to offset individual biases or
idiosyncrasies.
Copyright © 2020 Pearson Canada Inc.
10 - 29
Performance Appraisal Problems and
Solutions (5 of 6)
Table 10.3 Important Advantages and Disadvantages of Appraisal Tools
Advantages
Disadvantages
Graphic rating scale
Simple to use; provides a
quantitative rating for each
employee.
Standards may be unclear,
halo effect, central
tendency, leniency, and bias
can also be problems.
Alternation ranking
Simple to use (but not as
simple as graphic rating
scale); avoids central tendency
and other problems of
rating scales.
Can cause disagreements
among employees and may
be unfair if all employees are,
in fact, excellent.
Paired comparison method
A more precise ranking method
that involves multiple
traits.
Difficult to use as employee
numbers increase;
differences may not be
noticeable enough to rank.
Forced distribution method
End up with a predetermined
number of people in each
group.
Appraisal results depend on
the adequacy of the original
choice of cut-off points.
Copyright © 2020 Pearson Canada Inc.
10 - 30
Performance Appraisal Problems and
Solutions (6 of 6)
Advantages
Disadvantages
Critical incident method
Helps specify what is “right”
and “wrong” about the
employee’s performance;
forces the supervisor to
evaluate employees on an
ongoing basis.
Difficult to rate or rank
employees relative to one
another; cannot be used to
defend salary decisions.
Narrative form
Explicitly states improvement
goals and associated
outcomes
or consequences.
Employees may take these
too personally.
Behaviourally anchored rating
scale (BARS)
Provides behavioural
“anchors”; very accurate; high
inter-rater reliability.
Difficult to develop.
Management by objectives
Tied to jointly agreed-upon
performance objectives.
Risk of unclear performance
measures, time-consuming,
and inflated/deflated goals
due to tug of war.
Copyright © 2020 Pearson Canada Inc.
10 - 31
Who Should Do the Appraising (1 of 5)
Options for Rating Employee Performance:
• Supervisors:
– Best and most often used.
• Self:
– Used generally along with supervisors’ ratings.
– Employees value to be heard.
– Problem – employees usually rate themselves higher.
• Committees:
– Immediate and other supervisors.
– Composite ratings tend to be more reliable, and valid.
Copyright © 2020 Pearson Canada Inc.
10 - 32
Who Should Do the Appraising (2 of 5)
Options for Rating Employee Performance:
• Peers:
– Can be effective in predicting future management success.
– Have more opportunity to observe each other.
– Problem: logrolling where all peers agree to rate each other
highly.
– Used more in self-managing teams.
– Gives perception of open communication, and motivation.
Copyright © 2020 Pearson Canada Inc.
10 - 33
Who Should Do the Appraising (3 of 5)
Options for Rating Employee Performance:
• Subordinates:
– Useful in flat organizations and with empowered workers.
– May be anonymous.
– Diagnoses management styles.
– Valuable if used for development rather than evaluation.
– Effective in improving supervisor behaviour.
Copyright © 2020 Pearson Canada Inc.
10 - 34
Who Should Do the Appraising (4 of 5)
360 Degree Appraisal:
• Multisource feedback.
• Features:
– Confidential and anonymous.
– Completed by those with knowledge of performance.
– Custom-designed questionnaires linked to strategy, vision,
and values.
– Compiled into individualized reports for self-development
purposes.
– Shared with supervisor; used for career development and
compensation management.
Copyright © 2020 Pearson Canada Inc.
10 - 35
Who Should Do the Appraising (5 of 5)
Copyright © 2020 Pearson Canada Inc.
10 - 36
Legal and Ethical Issues in performance
Management
Guidelines for Legally Defensible Process:
• Use job analysis.
• Incorporate job characteristics into rating instrument.
• Provide definite performance standards.
• Use clear dimensions of job performance.
• Avoid abstract trait names.
• Use subjective ratings as only one component.
• Train supervisors to use the rating instrument correctly.
• Allow appraisers regular contact with employees.
• Have more than one appraiser.
• Document evaluations and reasons for terminations.
• Provide corrective guidance to poor performers.
Copyright © 2020 Pearson Canada Inc.
10 - 37