MANAGING & EVALUATING PERFORMANCE Week 9 2BC3 ________________________ Dr. Teal McAteer

1. MANAGING & EVALUATING PERFORMANCEWeek 92BC3________________________Dr. Teal McAteer

2. Performance Management • HR system that includes processes used to identify, encourage, measure, evaluate, improve, and reward employee performance • Related to terms such as performance appraisal, performance evaluation, etc. • Although Performance Management is often considered to be a broader term

3. Common Purposes of Performance Appraisal • Administrative – to make employment decisions • Promotion, termination • Training—who to train; training needs in general • Compensation—merit increases • Legal justification for these decisions • Feedback and Development • Point out strengths and weaknesses • Identify corrective action to address weaknesses • Motivation

4. The Criterion Problem • Difficulties involved in determining what performance is and how to measure it • Ultimate Criterion • Includes everything that ultimately defines success on the job • Is a construct – conceptual in nature • Operational Criterion • The aspects of performance that are actually measured

5. The Criterion Problem • Criterion Deficiency • When performance standards fail to capture the full range of employees’ responsibilities • E.g., focus on sale revenue but ignore customer service • Criterion Contamination • When factors outside of employee’s control influence his/her performance • E.g., machine breakdowns; differences in sales regions

6. Potential Performance Criteria • Output • Units produced, items sold, $ sales, commission earnings, etc. • Quality measures • # of errors, # of errors detected, # complaints/grievances, # commendations, rates of scrap/breakage • Lost time • Absences (unexcused), Lateness/tardiness, • Turnover (withdrawal) from training or job, transfers due to inadequate performance

7. Potential Performance Criteria • Ratings • Performance appraisals by trainers, supervisors, peers, self • Performance in work samples, simulations, etc. • Others • Counterproductive behaviours • Safety records, accidents • Citizenship (voluntary) behaviours

8. The Appraisal Process

9. Legal Considerations in PA • Performance standards should be job-related • Based on job analysis (content validity) • Employees must be aware of performance standards • Managers must be able to observe the behaviour they are rating • Raters should be trained • Ratings should be valid / bias-free • Reasonable time frame for performance improvement

10. Factors Affecting Legal DecisionsMcShane (1989) • In cases involving dismissal due to poor performance, Canadian courts may consider the following: • Cause of poor performance • Within or outside of employee control • Effect of poor performance on employer • Organizations may be required to show adverse effect of poor performance • If found, opportunity must be provided to improve performance

11. Factors Affecting Legal DecisionsMcShane (1989) • Link between job duties and performance standards must exist • Manager was fired for poor interpersonal skills – court ruled in her favour because job description did not include interpersonal skills as requirement • Feedback / warnings must be provided before employee can be dismissed for poor performance

12. Factors Affecting Legal DecisionsMcShane (1989) • Credibility of appraisal source • Source of appraisal must be considered “balanced and detached” – i.e., fair and unbiased • Contrived appraisals • Courts tend to rule against appraisals that are done just to document poor performance • E.g., court ruled in favour of fired TD Bank employee because a management memo requested that the next appraisal contain negative comments

13. Importance Elements of PA • In general, Performance Appraisal systems – like selection systems – should be: • Valid • Reliable • Free from bias • Practical • Fairness is also critical

14. 3 Dimensions of Fairness / Justice • Distributive justice • Perceived fairness of the distribution of the rewards • Procedural justice • Perceived fairness of the procedure/system used • “Voice” • Interactional justice • Perceived fairness of the relationship with the rater(s); sincerity, etc.

15. Now some considerations about choosing the right instrument to increase the likelihood of the PA being valid, reliable, and free from bias

16. Considerations re: PA Methods • Absolute judgments vs Relative judgments • Absolute • Compare employee to pre-established criteria / dimensions • Relative • Compare employee to other employees - ranking

17. Considerations re: PA Methods • What do we want to measure: traits, outcomes, or behaviours?? • Traits (personality) • E.g., loyalty, dependability, initiative • Problems • too ambiguous • susceptible to bias • not legally defensible • focuses on person rather than performance

18. Considerations re: PA Methods • Outcomes – objective criteria • E.g., sales revenue, # of calls taken, # of complaints • Problems – influenced by factors beyond employee control • Behaviours • E.g., works well with others • Focuses on what employees do – what they should start, stop, and continue doing • 2 common instrument types: BARS, BOS

19. BARS: Behaviourally Anchored Rating Scales • Format was developed to due lack of standardization (and reliability) across raters • Goal was to help the rater rate • Performance standards are concrete • Each standard consists of a number of specific, behavioural anchors on the rating form itself • The behavioural anchors cover the range of performance – from excellent to poor behaviour • Anchors are worded in the form of expectations – see e.g.

21. BOS: Behavioural Observation Scales • Focus on behaviour • Based on job analysis – often critical incident technique • Performance ratings are based on the “frequency of use” criterion • How often employee engages in behaviour • Using a 5-point frequency scale

22. Example of a BOS Criterion • Overcoming Resistance to Change • Provides employees with information about organizational change Almost never 1 2 3 4 5 Almost always • Addresses/responds to employee concerns and input regarding change Almost never 1 2 3 4 5 Almost always

23. Developing Behavioural Observation Scales (BOS) • Collect critical incidents • Group similar incidents into a behavioural item • E.g., 2 critical incidents • Describes details of organizational change to subordinates • Explains why the change is necessary • Could be grouped into a behavioural item Provides employees with information about organizational change • 2 more critical incidents (1) Listens to employee concerns (2) Asks employee for help in making the change work • Could be grouped into a behavioural item Addresses employee concerns and input regarding change

24. Developing Behavioural Observation Scales (BOS) • Similar behavioural items are grouped into a meaningful behavioural criterion • 2 behavioural items • Provides employees with information about organizational change • Addresses/responds to employee concerns and input regarding change • Combine to form the behavioural (BOS) criterionOVERCOMING RESISTANCE TO CHANGE • The PA instrument is created by attaching a 5-point rating scale to each behavioural item

25. Example of a BOS Criterion • Overcoming Resistance to Change • Provides employees with information about organizational change Almost never 1 2 3 4 5 Almost always • Addresses/responds to employee concerns and input regarding change Almost never 1 2 3 4 5 Almost always

26. 360-degree PA

27. 360-degree PA • Benefits • More complete picture of job performance • Different stakeholders may observe different behaviours • Target may behave differently with different stakeholders • Reduced bias because feedback comes from more than 1 person • Feedback from peers and subordinates useful for development purposes

28. 360-degree PA • Limitations • Complex and time consuming • Potential for conflicting opinions • Same behaviours may be seen as positive by one group and negative by another group • E.g., manager who encourages participative decision-making • Peer, subordinate, and self evaluations not useful for administrative decisions (e.g., raises) • Peer and subordinate evaluations may jeopardize coworker relations

29. Factors Distorting PA Ratings • Halo effect / error • Leniency / Strictness error • Central tendency • Similarity error • Recency effect • Contrast effect • Matthew effect

30. Factors Distorting PA Ratings • Halo effect • Tendency to provide similar ratings across different PA dimensions • Leniency / Strictness error • Leniency –when ratings are restricted to high part of scale • Strictness – when ratings are restricted to low part of scale • Central tendency • When raters avoid extreme ratings and restrict ratings to middle of scale

31. Factors Distorting PA Ratings • Similarity (“similar-to-me”) error • Tendency of rater to inflate ratings when they have something in common with the target • Recency effect • Ratings are based largely on employee’s most recent behaviour • Contrast effect • When an employee’s evaluation is biased upward or downward because of a comparison with another employee who was recently evaluated

32. Factors Distorting PA Ratings • Matthew effect • Tendency of raters to use previous evaluations as an anchor for subsequent evaluations • i.e., Employees receive the same appraisal results, year in and year out • Like a self-fulfilling prophecy -- if they have done well, they will continue to do well; if they have done poorly, they will continue to do poorly

33. Reasons PA can fail • Rater lacks information re: an employee’s actual performance • Performance standards are unclear • Employee does not receive on-going feedback • Rater does not take PA seriously; not prepared for PA review; lacks PA skills • Review meeting is ineffective – feedback poorly delivered and/or received • Insufficient resources to reward performance • Lack of attention to employee development

34. Summary of Recommendations • Based on job analysis • Focus on behaviour (use BOS) • Top management must prioritize PA • Use multiple raters • Provide raters with extensive training • Ensure system is fair • Make sure performance management is on-going

35. Comments / Questions