Promotions and firing policy

Group 2 ;

George Papakyriakopoulos

Selim Kozbe

Chris Haigh

Hazem Aljehairan

Haizhen Wang

Perizat Zholdybekova

April 28, 2009

Jack Welch, CEO of GE Corporation and Six Sigma Guru, 2001: “A company that bets its future on its people must remove

the lower 10%...and keep removing it every year”.

How to interpret this policy in light of

DEMING’S SYSTEM OF PROFOUND KNOWLEDGE (DSPK)? (Ho, S.K. and Galloway, L., 1996)

DSPK has 4 elements: 1st element

1. Appreciation for a system

Behaviours of employees, shareholders, customers, and suppliers impact on company’s objectives.

DSPK has 4 elements: 2nd element

2. Knowledge of variations.

Causes of variations: -special: e,g,, change of operator, procedure-common: e.g., poor design, inadequate equipment and procedure

DSPK has 4 elements: 3rd element

3. Theory of knowledge

Interpretation of data from experiment is prediction. Examples and experience can teach to something only with prediction.

DSPK has 4 elements: 4th element

4. Psychology

Psychological aspect of human interaction: intrinsic and extrinsic motivations.

PERFORMANCE MANAGEMENT

HOW TO EVALUATE?

Compare Employees to Absolute Standards Performance compared to set goals Avoids conflict among workers May decrease differentiation

Compare Employees Relative to Each Other Ranking allows for comparison of employees but

does not shed light on the distribution of employee performance.

Forces a distribution among workers May create false distinctions and competition

WHAT TO EVALUATE?

Traits Measures Are an assessment of how the employee fits with

the organization’s culture, not what the employee actually does.

Behavior-based measures Focus on what an employee does correctly and

what the employee should do differently. Results-based measures

Focus is on accomplishments or outcomes that can be measured objectively.

Problems occur when results measures are difficult to obtain, outside employee control, or ignore the means by which the results were obtained.

TRAIT-BASED APPRAISALS Characteristics that are enduring and general

e.g. “Leadership” “Communication” “Decisiveness”

Competency models vs. Trait-based appraisal Are the characteristics really related to

performance?

Potential Problems Focus on person rather than performance May be ambiguous or arbitrary Poor feedback and goal setting Poor reliability and validity

“An employer has no business with a man’s personality. Employment is a specific contract calling for specific performance and nothing else. Any attempt of an employer to go beyond this is usurpation. It is an abuse of power. An employee owes no “loyalty,” he owes no “love,” and no “attitudes” – he owes performance and nothing else.”

Peter DruckerManagement Tasks, Responsibilities, Practices (1974)

BEHAVIOR-BASED APPRAISAL Focus on specific behaviors with examples

Simple Behavioral Scale Behavioral Frequency / Observation Scale (BOS) Behaviorally Anchored Rating Scales (BARS)

Positives More valid and reliable Acceptable to employees Better for development and improvement

Potential Problems Difficult and expensive to develop Needs to match jobs closely to be effective Emphasizes behaviors (at the expense of others?) Focuses on behavior rather than results

RESULTS-BASED APPRAISAL Focus on results compared to specific goals

Should be clear and unambiguous Requires alignment of expectations May promote gaming of the system Beware of results at any cost and excessive results

orientation Time consuming and needs constant updating

“Management by Objectives” or MBO Linking individual goals with business strategy Organizational goals flow down to depts. and

employees Focus on planning, action items, and interim

reviews Objectives negotiated and agreed upon by

employees

BALANCED SCORECARD

“What you measure is what you get” Financial vs. operational measures Short term vs. long-term effectiveness

Specific goals and measures for: Shareholder satisfaction Customer satisfaction Operational Excellence Innovation and Learning Others?

FORCED RANKING SYSTEMS

FORCED RANKING SYSTEMS Gained popularity following GE Up to 20% of companies Used by:

Conoco Capital One Sun Microsystems Cisco EDS Hallmark Cards

Used and abandoned by: Ford Goodyear

Microsoft Hewlett-Packard Intel Texas Instruments Enron

WHEN MANAGERS HAVE DISCRETION:

1. They tend to give “Above average” ratings.

2. They prefer to give uniform ratings regardless of performance.

3. They tend not to use the ends of the rating scale.

“A company that bets its future on its people must remove the lower 10% and keep removing every year – always raising the bar of performance and increasing the quality of leadership.”

Jack Welch, former GE CEO

“The bottom 10” “The top

20”“The Vital 70”

The “Vitality Curve”

Jack Welch “Jack: Straight From the Gut” 2001

WHY CONDUCT FORCED RAKINGS?

WHY NOT CONDUCT FORCED RANKINGS?

EVOLUTION OF FORD’S POLICYJanuary, 2000: Ford begins new performance evaluation policy

Top 20,000 managers 10% of the executives will get A's, 80% will get B's, and 10% will

get C's. C’s are not eligible for bonuses. Two C's in a row are grounds for

dismissal. Quota for C’s later reduced to 5%

July, 2001: Ford eliminates the "A," "B," and "C" ratings in favor of "top achiever," "achiever," or "improvement required.” Quotas dropped for employees to be ranked as "achiever" and "needs improvement."

April, 2002: Ford revises its performance review system to “focus on creating bonds between managers and employees”, and will have no ranking quotas.

THE APPRAISAL INTERVIEW

WHO EVALUATES?

Problems with immediate supervisors conducting performance evaluations: Lacking appropriate information to provide

informed feedback on employee performance. Insufficient observation of the employee’s day-

to-day work to validly assess performance. Lack of knowledge about the technical

dimensions of a subordinate’s work. Lack of training or appreciation for the

evaluation process. Perceptual errors by supervisors that create bias

or lack of subjectivity in evaluations.

PERCEPTUAL ERRORS OF RATERS

Halo Effect

Stereotyping

Recency Error

PERCEPTUAL ERRORS OF RATERS

Halo Effect Rater allows a single trait, outcome or

consideration to influence other measures of performance.

Stereotyping Rater makes performance judgments based on

employee’s personal characteristics rather than the employee’s actual performance.

Recency Error Recent events and behaviors of the employee

bias the rater’s evaluation of the employee’s overall performance.

PERCEPTUAL ERRORS OF RATERS

Central Tendency Error

Leniency or Strictness Errors

Personal Biases and Organizational Politics

PERCEPTUAL ERRORS OF RATERS

Central Tendency Error Evaluator avoids higher and lower ends of

performance assessment rating in favor of placing all employees at or near the middle of the scales.

Leniency or Strictness Errors Evaluator’s tendency is to rate all employees

either above (leniency) or below (strictness) their actual performance level.

Personal Biases and Organizational Politics Have a significant impact on the ratings

employees receive from their supervisors.

PERFORMANCE APPRAISAL CHALLENGES

Gender Bias Managers tend to give women evaluations that

are less critical and less straightforward.

Attribution Theory People tend to overestimate the influence of

individual factors (such as motivation) and underestimate the influence of environmental factors when assessing others behavior.

Frame of Reference

CONDUCTING A FAIR APPRAISAL

1. Collect appraisal data Objective data on job performance Critical incidents (good and bad) Behavioral observation

2. Evaluate performance Before completing form – think about intended

result Avoid biases Consider how the message will be viewed by

employee Consider circumstances beyond employee’s control Consider past evaluations

CONDUCTING A FAIR APPRAISAL

3. Write the appraisal Have courage to address poor performers Be specific and use examples Avoid nitpicking Additional evidence needed for high/low performers Tied to specific goals Prioritize development needs

PROVIDING PERFORMANCE FEEDBACK Choose a quiet private location. Describe performance, not personality. Providing specific examples and quantify whenever

possible. Be honest. Avoid vague statements or unsubstantiated claims. Limit plans for change, growth, and development to a

few important items that are achievable. Keep career discussions separate from performance

feedback. Create a development plan. Give the employee a chance to respond.

DEALING WITH POOR PERFORMERS

Avoiding problems usually makes them worse. “Why didn’t you tell me this before?”

Approach the employee for mutual benefit – to solve the problem and maintain the relationship. Threats and punishment increase compliance but....

Good intentions matter.

IDENTIFYING PERFORMANCE GAP

1. Identify a specific gap between performance and expectations.

Assume an employee says:“I know you are not happy with something, but I am not sure

what I am doing wrong. What exactly is it that concerns you?”

OR“I want to make sure that I’m doing the job the way you want it

done. What exactly should I do so that you will say I am doing a good job?”

THANK YOU!

Questions?