Chapter 10 Establishing the Performance Management System

Fundamentals of Human Resource Management Eighth Edition DeCenzo and Robbins Chapter 10 Establishing the Performance Management System Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Introduction • Employees generally see performance evaluations as having a direct effect on their work lives. • The performance management systems need to include: • decisions about who should evaluate performance • what format should be used • how the results should be utilized Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Performance Management Systems Purposes of a Performance Management System • Feedback - let employees know how well they have done and allow for employee input. • Development – identify areas in which employees have deficiencies or weaknesses. • Documentation - to meet legal requirements. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Performance Management Systems Difficulties in Performance Management Systems • Focus on the individual: Discussions of performance may elicit strong emotions and may generate conflicts when subordinates and supervisors do not agree. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Performance Management Systems Difficulties in Performance Management Systems • Focus on the process: Company policies and procedures may present barriers to a properly functioning appraisal process. • Additionally, appraisers may be poorly trained. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Performance Management and EEO • HRM practices must be bias free, objective and job-related. • Valid performance appraisals are conducted at established intervals and are done by trained appraisers. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

The Appraisal Process Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

The Appraisal Process • Establishment of performance standards • Derived from company’s strategic goals. • Based on job analysis and job description. • Communication of performance standards to employee. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

The Appraisal Process • Measurement of performance using information from: • personal observation • statistical reports • oral reports • written reports • Comparison of actual performance with standards. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

The Appraisal Process • Discussion of appraisal with employee. • Identification of corrective action where necessary. • Immediate action deals with symptoms. • Basic corrective action deals with causes. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Three approaches: • Absolute standards • Relative standards • Objectives Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Evaluating absolute standards: • An employee’s performance is measured against established standards. • Evaluation is independent of any other employee. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Evaluating absolute standards: • Essay Appraisal: Appraiser writes narrative describing employee performance & suggestions. • Critical Incident Appraisal: Based on key behavior anecdotes illustrating effective or ineffective job performance. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Evaluating absolute standards: • Checklist Appraisal: Appraiser checks off behaviors that apply to the employee. • Adjective Rating Scale Appraisal: Appraiser rates employee on a number of job-related factors. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Evaluating absolute standards: • Forced-Choice Appraisal:Appraisers choose from sets of statements which appear to be equally favorable, the statement which best describes the employee. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Evaluating absolute standards: • Behaviorally Anchored Rating Scales (BARS):Appraiser rates employee on factors which are defined by behavioral descriptions illustrating various dimensions along each rating scale. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Relative standards: • Employees are evaluated by comparing their performance to the performance of other employees. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Relative standards: • Group Order Ranking: Employees are placed in a classification reflecting their relative performance, such as “top one-fifth.” Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Relative standards: • Individual Ranking: Employees are ranked from highest to lowest. • Paired Comparison: • Each individual is compared to every other. • Final ranking is based on number of times the individual is preferred member in a pair. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Using Achieved Outcomes to Evaluate Employees Management by Objectives (MBO) • includes mutual objective setting and evaluation based on the attainment of the specific objectives Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Appraisal Methods Using Achieved Outcomes to Evaluate Employees • Common elements in an MBO program are: • goal specificity • participative decision making • an explicit time period • performance feedback • Effectively increases employee performance and organizational productivity. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals • Leniency error • Each evaluator has his/her own value system. • Some evaluate high (positive leniency) and others, low (negative leniency). • Halo error: Evaluator lets an assessment of an individual on one trait influence evaluation on all traits. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals • Similarity error: Evaluator rates others in the same way that the evaluator perceives him or herself. • Low appraiser motivation:Evaluators may be reluctant to be accurate if important rewards for the employee depend on the results. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals • Central tendency: The reluctance to use the extremes of a rating scale and to adequately distinguish among employees being rated. • Inflationary pressures: Pressures for equality and fear of retribution for low ratings leads to less differentiation among rated employees. • Inappropriate substitutes for performance: Effort, enthusiasm, appearance, etc. are less relevant for some jobs than others. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals Attribution Theory • Evaluations are affected based on whether someone’s performance is due to • internal factors they can control • external factors which they cannot • If poor performance is attributed to internal control, the judgment is harsher than when it is attributed to external control. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Factors that can Distort Appraisals • Impression management: • If employee positively influences the relationship with the supervisor, he/she is likely to receive a higher rating. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Use Behavior-Based Measures: • Measures based on specific descriptions of behavior are more job-related and elicit more inter-rater agreement than traits, such as “loyalty” or “friendliness”. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Combine Absolute and Relative Standards: • Absolute standards tend to be positively lenient; relative standards suffer when there is little variability. • Combining the standards tends to offset the weaknesses of each. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Provide Ongoing Feedback: • Expectations and disappointments should be shared with employees on a frequent basis. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Use Multiple Raters: • Increasing the number of raters leads to more reliable and valid ratings. • Use peer evaluations: Coworkers offer constructive insights and more specific evaluations. • Upward appraisals allow employees to give their managers feedback. • 360-Degree appraisals: Supervisors, peers, employees, team members, customers and others with relevant information evaluate the employee. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Rate Selectively • Appraisers only evaluate in those areas about which they have sufficient knowledge. • Appraisers should be organizationally as close as possible to the individual being evaluated. • More effective raters are asked to do the appraisals. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Train Appraisers: • Untrained appraisers who do poor appraisals can demoralize employees and increase legal liabilities. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Creating More Effective Performance Management Systems Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

International Performance Appraisal • Who performs the evaluation? • Different cultural perspectives and expectations between the parent and local country may make evaluation difficult. • Evaluation forms may not be translated accurately. • Quantitative measures may be misleading. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

International Performance Appraisal • Evaluation Formats • May make sense to use different forms for parent-country nationals and host-country nationals. • Performance criteria for a particular position should be modified to fit the overseas position and site. • Include a current expatriate’s insights as part of the evaluation. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

Chapter 10 Establishing the Performance Management System