Class 11 - Chapter 9
Performance Management
MGT 430 – Spring 2016
LEPAK / GOWAN
Performance Appraisals
WHY???
Corporate Purposes of Performance Management
• Used for personnel decisions, e.g. promotions, transfers, assignments and terminations;
• Provide a legal paper trail to justify the above
• Used to identify training and development needs;
• Used as a criterion against which selection and development programs are validated;
• Used as a basis for reward allocation, i.e. salary increases;
• Uses to keep our companies in compliance with, and in the spirit of, our labor laws.
Personal Reasons for Performance Evaluations
• Compare yourself with others
• Identify strengths & weaknesses that you can exploit for personal gain
Performance Management
Where was I then
Where am I now
Where do I need to be
Step 1: Identify the Performance Dimensions
1. What am I to deliver in this job
2. How will I be evaluated
3. What criteria will I be measured against
Ideally and rationally, these criteria will be articulated in a job description and
jointly modified during the rating period
Step 2: Developing Performance Dimensions
Developing measureable and meaningful performance criteria
1. Quantitative, i.e.:
That which can be objectively measured, e.g.
# new hires, turnover, payroll costs, benefit costs, disciplinary
measures, tardiness, etc.
2. Qualitative, i.e.
Harder to measure and justify, e.g. morale, job satisfaction, satisfied
customer service, etc.
PERFORMANCE MANAGEMENT EXAMPLE
You have just hired a bus driver for Mega-Bus. What are some of the
quantitative and qualitative performance dimensions for this job?
QUANTITATIVE
QUALITATIVE
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
Step 3: Evaluating Employee Performance
(1) Individual Comparisons
• Ranking approach — comparing employees to each other (e.g. best to worst). Easiest
to do if quantitative data is available (e.g. sales volume);
• Paired comparison — each employee is compared to every other employee and points
are assigned to the “better” individual, points are totaled and compared
• Forced distribution — managers are forced to distribute employees into predetermined
categories and prevented from rating everyone as outstanding, or average.
RANKING APPROACH
1. Superior
2. Above average
3. Average
4. Below average
5. Marginal/unacceptable
FORCED DISTRIBUTION
Top 20%
________________________
Middle 70%
___________________________________________
Bottom 10%
_________________________________________________________
Absolute Approaches to
Performance Management
Employees are compared to a pre-determined standard. The evaluation is independent of
any other employee in a work group
Attribute –
Designed to measure the extent to which an employee possess certain desirable
characteristics - such as loyalty, dependability, creativity, initiative, and leadership –
that are viewed as important for the job and the organization in general
Examples:
 Graphic Rating Scale
Absolute Approaches to
Performance Management
Behavioral
Attempts to define the behaviors an employee must exhibit to be effective in the job.
Examples:
• Critical Incidents,
• Behavior Observation Scales,
• Behaviorally Anchored Rating Scales
Other Concepts of Performance Management
Management By Objectives (MBO)
Results based evaluation approach where managers meet with their employees to jointly
set goals for them to accomplish during a rating period.
Commentary
1. Employees participate in the setting of goals
2. Evaluation is based upon quantifiable data
3. Objectives may change frequently and significantly during the rating period
4. Not all employees are capable to setting corporate goals or aligning these goals to the
company’s business plan.
360 Degree Appraisals
• A comprehensive measurement approach that involves gathering performance
data from as many sources as possible, e.g.
• Supervisors — a key source but may not have time to monitor and observe
employees every day
• Co-Workers — may be able to comment on cooperation and support, but may
intentionally skew rating
• Self-Appraisal — can be useful starting point and developmental tool to help
employee improve performance
• Subordinates — may be hard to separate skill from “likeability”
• Customers — satisfaction levels may only report extremely good or bad
experiences
Pros & Cons With 360-Degree Ratings
• Pro –
Employee performance as seen from multiple perspectives
Studies indicate that 360 degree feedback may be an indicator
of future performance
Cons -
Raters may be unqualified to rate objectively
May not elicit accurate data
Inconclusive empirical studies – the jury is still out
Some can use this system for revenge
Evaluating Employee Performance
(5) Weighting Performance Criteria
• Each job differs in terms of how it adds value to the organization
• Some forms of contributions may be more important than others for
particular jobs
• Weights are used to adjust the relative importance of different performance
dimensions
COMMON PERFORMANCE MEASUREMENT ERRORS
• Halo error — A bias that occurs when a positive characteristic of an employee
affects the evaluation of that persons other attributes;
• Horn Error - A bias that occurs when a negative characteristic of an employee
affects the evaluation of that persons other attributes;
• Contrast effect — manager artificially inflates or deflates an employee’s rating
after comparing employee to another individual
• Primacy error — rater’s earlier impressions of individual biases later evaluations
of the person
• Recency error — rater focuses on employee’s performance near the time of the
evaluation
Performance Measurement Errors
• Similar-to-me error — when managers rate more highly employees who
resemble them in some way
• Leniency error — constantly rating employees on the high end of the
scale
• Strictness error — constantly rating employees on the low end of
the scale
• Error of central tendency — rating everyone “average”
Step 4: Providing Feedback
• Most managers are required to appraise employees
every six months to a year
• Feedback meeting on performance could be
separate from meeting on salary decisions
• Focus on behaviors rather than employee
• Balance approach — positive and improvement
areas
• Involve/engage employee in discussion
Developing Action Plans to Improve Performance
Understanding the causes of poor performance which could
stem from
• Work environment
• Design of jobs
• Technology
• Support or performance of co-workers
• Employee’s competencies, attitudes and behaviors
NOTE: This assumes that the manager knows well what excellent
performance looks like.
Developing Action Plans to Improve Performance
Taking action
• Removing barriers to employee success
• Training and development activities
• Coaching and mentoring
• Work design and technology solutions
• Addressing quality of employee’s performance
HRM CHALLENGE QUESTION
Should Performance Evaluations be abolished?
Yes – Why
No – Why