Chapter 09

Performance Management

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

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Questions This Chapter Will Help Managers Answer

• What steps can I, as a manager, take to make the performance management process more relevant and acceptable to those who will be affected by it?

• How can we best fit our approach to performance management with the strategic direction of our dept. and business?

• Should managers and nonmanagers be appraised from multiple perspectives – for example, by those above, by those below, by coequals, and by customers?

• What strategy should we use to train raters at all levels in the mechanics of performance management and in the art of giving feedback?

• What would an effective performance management process look like?

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Managing For Maximum Performance

• Performance management is a kind of compass—one that indicates actual direction as well as desired direction

• Many managers incorrectly equate it with performance appraisal—an exercise they typically do once a year to identify and discuss job-relevant strengths and weaknesses of individuals or work teams

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The Process of Performance Management

1.Define performance

2.Facilitate performance

3.Encourage performance

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Defining PerformanceKey Elements

GoalsMeasures

Assessment

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Encouraging Performance

1. Provide a sufficient amount of rewards that employees really value

2. In a timely

3. Fair manner

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What is Fairness?Important Practices

Voice• Collect employee input through surveys or interviews

Consistency• Ensure that all employees are treated consistently

when seeking input and communicating about the process for administering rewards

Relevance• Include rewards that employees really care about

Communication• Explain clearly the rules and logic of the rewards

process

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Figure 9-1 Elements of a Performance Management System

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Figure 9-2 Purposes of Performance Appraisal Systems

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Requirements of Effective Appraisal Systems

• Legally and scientifically, the key requirements of any appraisal system are• Relevance• Sensitivity• Reliability

• In the context of ongoing operations, the key requirements are• Acceptability• Practicality

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Relevance

Implies that there are

1. Clear links between the performance standards for a particular job and organizational objectives, and

2. Clear links between the critical job elements identified through a job analysis and the dimensions to be rated on an appraisal form

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Performance Standards

… translate job requirements into levels of acceptable or unacceptable employee behavior. They play a critical role in the job analysis-performance appraisal linkage.

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Figure 9-3 Relationship of Performance Standards to Job Analysis and Performance Appraisal

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Rating Methods or Formats

Relative Rating Systems• Comparing the performance of employees to that of

other employees

Absolute Rating Systems• Evaluating each employee in terms of performance

standards without reference to others

Results-Oriented Systems• Emphasis is on what employee produces

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Ranking

Simple ranking requires only that a rater order all employees from highest to lowest, from “best” employee to “worst” employee.

Alternation ranking requires that a rater initially list all employees on a sheet of paper. From this list he/she chooses the best employee (No. 1), then the worst employee (No. n), then the second best (no. 2), then the second worst (No. n -1), and so forth, alternating from the top to the bottom of the list until all employees have been ranked.

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Behaviorally Anchored Rating Scales

• The major advantage of BARS is that they define the dimensions to be rated in behavioral terms and use critical incidents to describe various levels of performance

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Management By Objectives (MBO)

A process of managing that relies on goal-setting to establish objectives for the organization as a whole, for each department, for each manager within each department, and for each employee

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Establishing Objectives in MBOWhat the Key People Involved Should Do

• Meet to agree on the major objectives for a given period of time

• Develop plans for how and when the objectives will be accomplished

• Agree on the “measurement tools” for determining whether the objectives have been met

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Table 9–1: Advantages and Disadvantages of Alternative Appraisal Methods

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Work Planning and Review

• Work planning and review is similar to MBO; however, it places greater emphasis on the periodic review of work plans by both supervisor and subordinate in order to identify goals attained, problems encountered, and the need for training

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Who Should Evaluate Performance?Possible Raters

• The immediate supervisor• Peers• Subordinates• Self-appraisal• Customers served• Computers

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Multi-Rater or 360-Degree Feedback

Using input from managers, subordinates, peers, and customers to provide a perspective on performance from all angles

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Types of Teams

• Work or Service Teams• Intact teams engaged on routine tasks

• Project Teams• Teams assembled for a specific purpose and

expected to disband once their task is completed

• Network Teams• Teams that include membership not constrained

by time/space and membership is not limited by organizational boundaries

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Types of Appraisal Errors

Halo error – raters assign their ratings on the basis of global (good or bad) impressions of ratees

Contrast error – rater compares several employees to one another rather than to an objective standard of performance

Recency error – rater assigns his/her ratings on the basis of the employee’s most recent performance

Halo error – raters assign their ratings on the basis of global (good or bad) impressions of ratees

Contrast error – rater compares several employees to one another rather than to an objective standard of performance

Recency error – rater assigns his/her ratings on the basis of the employee’s most recent performance

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Frame-of-reference training

• Of the many types of rater training programs available today, frame-of-reference training (FOR) is the most effective at improving the accuracy of performance appraisals

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Table 9-3 Supervisory Activities Before, During, and After Performance Feedback Interviews

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Key Terms Discussed in the Chapter

• Performance management• Performance appraisal• Performance facilitation• Performance encouragement• Relevance• Performance standards• Sensitivity• Reliability• Acceptability• Practicality

• Applicant group• Behavior-oriented rating methods• Relative rating systems• Absolute rating systems• Results-oriented rating systems• Simple ranking• Alternation ranking• Paired comparisons• Forced distribution

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Key Terms (contd.)

• Severity• Central tendency• Likert method of summed ratings• Critical incidents• Graphic rating scales• Behaviorally anchored rating scales (BARS)• Management by objectives (MBO)• Leniency

• Work planning and review• 360-degree feedback• Halo error• Contrast error• Recency error• Active listening• Destructive criticism• Frame-of-reference training• Narrative essay