Conducting Performance Management—An Overview

1. Conducting Performance Management—An Overview John D. Blair, PhD Snyder Professor in Management PowerPoint 17

2. The Strategic Importance of Performance Management • Performance Management System • A formal, structured process used to measure, evaluate, and influence employees’ job-related attitudes, behaviors, and performance results. • Purposes of Performance Management • To enhance employee motivation and productivity • To support the achievement of the organization’s strategic goals • To facilitate strategic planning and change

3. Effective Performance Management • Helps to direct and motivate employees to maximize their efforts on behalf of the organization by: • Defining clear performance goals and measures • Conducting performance appraisals • Providing ongoing performance feedback • Linking performance results to rewards and consequences • Providing career planning and development opportunities

4. EXHIBIT 9.1 Concerns about Ineffective Performance Management Practices

5. Detection of Performance Problems • Responsibility for managing the performance of a company’s CEO rests with the board of directors. • Monitoring the performance of employees at lower levels in the organization is useful for detecting organizational shortcomings. • Evaluating Change • First, identify objectives and subsequently assess change results (employee performance) in light of those objectives. • Not all organizational change efforts target performance improvement as an objective.

6. EXHIBIT 9.5 Prescriptions for Legally Defensible Appraisal and Feedback • Job analysis to identify important duties and tasks should precede development of a performance appraisal system. • The performance appraisal system should be standardized and formal. • Specific performance standards should be communicated to employees in advance of the appraisal period. • Objective and uncontaminated data should be used whenever possible. • Ratings on traits such as dependability, drive, or attitude should be avoided or operationalized in behavioral terms. • Employees should be evaluated on specific work dimensions rather than on a single global or overall measure. • If work behaviors rather than outcomes are to be evaluated, evaluators should have ample opportunity to observe ratee performance. • To increase the reliability of ratings, more than one independent evaluator should perform appraisals whenever possible. • Behavioral documentation should be prepared for extreme ratings. • Employees should be given an opportunity to review their appraisals. • A formal system of appeal should be available for appraisal disagreements. • Raters should be trained to prevent discrimination and to evaluate performance consistently. • Appraisals should be frequent, offered at least annually.

7. What to Measure • Performance Criteria • The dimensions against which the performance of an incumbent, a team, or a work unit is evaluated. • Personal Traits • Criteria that focus on personal characteristics such as “loyalty” and “dependability” • Not reliable and difficult to defend as measurable performance criteria

8. What to Measure (cont’d) • Behaviors • Focus on how work is performed • Easier to observe and defend than traits • “Has not been late to work during past 6 months.” • Types • Task-related Behaviors • General Counter-Productive Behaviors • Organizational Citizenship • May want to include in evaluation as part of overall performance: • Volunteering for tasks not formally part of the job • Helping others • Endorsing, supporting, and defending organizational objectives

9. What to Measure (cont’d) • Objective Results • Focus on what was accomplished or produced • May miss critical aspects of job that are difficult to quantify • For example: number of traffic tickets written. • Multiple Criteria • Performance appraisal should capture all aspects of the job • Weighting the Criteria • Adding values to specific criteria based on their importance relative to other criteria

10. Timing • Focal-Point Approach • All employees evaluated at the same time • Easier to standardize across employees • May create burdensome workload on managers • May create artificial performance cycles • Anniversary Approach • On employee’s anniversary with the organization • Does not tie individual performance to overall organizational performance • Ratings earlier in year may be more lenient • Difficult make comparisons to other employees

11. Timing of Evaluations (cont’d) • Natural Time Span of the Job • Ensures feedback is given when it is most useful. • Not suited for short-cycle simple jobs. • Possible time spans: • For teams: feedback on progress at the mid-point of a project and again at project completion to assess goal achievements.

12. EXHIBIT 9.8 Frequency of Performance Reviews

13. Participants in Performance Measurement and Feedback Supervisors Sources for EmployeeAppraisals 360-DegreeAppraisals Self- Appraisal Customers Peers Subordinates

14. Participants • Issues • Consider the amount and type of information each source has available. • Supervisors • may make the most reliable judgments • Self-Appraisals • Accuracy • Increase satisfaction with appraisal but are subject to inflation and leniency bias by the employee. • Cultural Differences • Employees from collectivist cultures approach self-appraisals differently.

15. Participants (cont’d) • Peers • Often have best opportunity to observe behavior. • Are useful predictors of future performance. • Subordinates • Useful if anonymity guaranteed and contains specific improvement suggestions. • Managers should discuss results with direct reports. • Customers • Most useful when a large number of customers respond and results are not biased by few customers with bad experiences.

16. Participants (cont’d) • 360-Degree Appraisals • Evaluations collected from colleagues, supervisors, subordinates, peers, and employees • Less susceptible to gender/ethnicity biases • Research support for anonymity of raters and the use of a full circle of raters

17. Performance Appraisal Formats Comparative • Straight ranking • Forced distribution Absolute Standards • Graphic rating scales • Behaviorally-anchored rating scales • Behavioral observation scales Results-Based Formats • Direct index • Management by objectives (MBO)

18. Performance Appraisal Formats Forced Distribution

19. EXHIBIT 9.9 Sample Graphic Rating Scales for Work Quantity

20. EXHIBIT 9.10 Sample Behaviorally Anchored Rating Scale for One Dimension of the Work Performance of a Corporate Loan Assistant

21. EXHIBIT 9.11 Sample Behavioral Observation Scale Items for a Maintenance Mechanic

22. The Rating Process (3) Revise information based on new rater perception (2) Store information in memory (4) Make performance judgment The Rating Process (1) Recognize relevant information (5) Record official performance judgment

23. EXHIBIT 9.12 Common Performance Rating Errors

24. Common Rating Errors • Halo/Horn • Overly focusing on specific performance ratings or stereotyping employee by a single personal characteristic. • Leniency • Rating all employees higher than they should be. • Strictness • Rating all employees lower that they should be. • Central Tendency • Rating all employees as average when individual employee performance actually varies.

25. Common Rating Errors • Primacy • Using initial information that supports the rating decision while ignoring later information does not. • Recency • Basing the rating decision primarily on the most recent performance information while placing much less emphasis on past performance. • Contrast Effects • Comparing one employee to another rather than applying a common standard to all employees

26. Improving Rater Accuracy • Precise Rating Scale Format • Each dimension addresses a single job activity • Each performance dimension is rated separately; scores are summed to determine overall rating • Ambiguous terms (e.g. “average”) should not to be used.

27. Improving Rater Accuracy (cont’d) • Provide Memory Aids • Behavioral diaries and critical incident files • Electronic diary-keeping software • Provide Rater Training • Frame-of-reference training especially useful

28. Improving Rater Accuracy • Reward Accurate and Timely Appraisals • Salary increases, promotions, assignments to key positions can be partly based on performance as a rater. • Use Multiple Raters • To increase evaluation accuracy by diffusing responsibility for negative results. • To increase employee acceptance of evaluation results • To allow for group discussion which can help alleviate individual rater biases

29. Providing Feedback • Sources of Conflict Associated with Providing Performance Feedback: • Understanding Attributions • Timing • Preparation • Content of the Discussion • Follow-Up • When Nothing Else Works

30. Providing Feedback (cont’d) • Understanding Attributions • Combining evaluative and developmental goals • Need to be candid and protect employee’s self-esteem • Self-serving employee attributions that interfere with performance improvement • Discounting role of external forces in good performance • Over-emphasizing external effects in poor performance

31. Providing Feedback (cont’d) • Timing: • Providing immediate feedback is most useful. • Giving only as much information as the receiver can use. • Preparation • Scheduling feedback sessions in advance • Clarifying purpose and content of meeting • Giving both participants time to prepare

32. Providing Feedback (cont’d) • Content of the Discussion: the Problem-Solving Approach • Diagnosis: seek to understand the factors that affect performance. • Removing Roadblocks: seek agreement with the employee on an action plan to address issues such as: • Lack of resources • Need for additional information and training • Improving ongoing communications and feedback • Mutual goal setting: employee participation increases employee acceptance of goals.

33. EXHIBIT 9.13 Sample Checklist for Diagnosing the Causes of Performance Deficiencies

34. Follow-Up to the Feedback Session • Positive Reinforcement • Use of positive rewards to increase occurrence of desired performance • Principles: • People perform in ways that they find most rewarding • By providing proper rewards, it is possible to improve performance • Punishment • Decreases frequency of undesired behavior • Gets immediate results and has vicarious power • Can have undesirable side effects—employee anger and contingent bad behavior

35. When Nothing Else Works • Transfer • When employee and job are not well matched • Neutralize • Assign noncritical tasks to minimize the impact of deficiencies • Terminate • For dishonesty, habitual absenteeism, substance abuse, insubordination, and low productivity that cannot be corrected

36. Current Issues • Automated Performance Management • Uses • Tracking progress on goals • Scoring and approving appraisals • Processing, storing, and retrieving data • Benefits • Improved efficiency and time savings • Increased accuracy of appraisals • Better communication of standards • Monitoring through Technology • Balancing the legal necessity to monitor employees with their expectation of privacy.