Introduction to Performance Managemen

Lecture # 1

Wonders are many, and none is more wonderful than man

Performance Management in Context: Overview

Definitions related with Performance Management (PM)

The PM Contribution Disadvantages/Dangers of Poorly-implemented

PM systems Definition of Reward Systems Aims and role of PM Systems Characteristics of an Ideal PM system Integration with Other Human Resources and

Development Activities

What is performance?• Performance is the sum of behavior and

results, and cannot be viewed as independent of either component. It is an outcome of effective management.

• Bernadin et al (1995) are concerned that performance should be defined as the outcomes of work because they provide the strongest linkage to the strategic goals of the organization, customer satisfaction, and economic contributions

• Brumbrach (1988):– Performance means both behaviours and

results. Behaviours emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviours are also outcomes in their own right the product of mental and physical effort applied to tasks and can be judged apart from results.

Factors That Influence Performance

What is performance appraisal?

• A system that involves employee evaluations once a year without an ongoing effort to provide feedback and coaching so that performance can be improved

Objectives of Performance Appraisal

• Provide information to assist in the HR decisions like promotions, transfers etc.

• Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.

• To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.

• To reduce the grievances of the employees.

• Helps to strengthen the relationship and communication between superior – subordinates and management – employees.

Uses of Performance Appraisal

• Counselling performance deficiency • Identifying individual training and development

options • Decisions on changing rewards and/or

remuneration levels • Succession and career planning • Work unit planning and job design/work

allocation • Sessions to gain commitment for new work unit

or corporate objectives

Handbooks / Guidelines

Performance Appraisal Handbook. U.S. Department of the Interior

http://www.doi.gov/hrm/guidance/370dm430hndbk.pdf

• Rating Level Points Assigned

• Exceptional 5 points

• Superior 4 points

• Fully Successful 3 points

• Minimally Successful 2 points

• Unsatisfactory 0 point

Why Appraise Performance?

• Why appraise performance?– Appraisals play an integral role in the employer’s

performance management process.– Appraisals help in planning for correcting deficiencies

and reinforce things done correctly.– Appraisals, in identifying employee strengths and

weaknesses, are useful for career planning– Appraisals affect the employer’s salary raise

decisions.

Performance Management (PM)

• Performance Management (PM) as described here refers to a term coined by Dr. Aubrey C. Daniels in the late 1970s to describe a technology (i.e., science imbedded in applications methods) for managing both behavior and results, the two critical elements of what is known as performance.

Michael Armstrong (2000)

• Performance management is a strategic and integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams.

Michael Armstrong (2000). Performance Management. London: Kogan Page Limited

Aguinis (2009) defines:

PM is a continuous process of identifying, measuring and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization

So PM is Continuous Process ofIdentifying performance of individuals and teamsMeasuring performance of individuals and teamsDeveloping performance of individuals and

teams

andAligning performance with the strategic goals of

the organization

An iterative process of goal-setting, communication,

observation and evaluation to support, retain and develop

exceptional employees for organizational success.

Performance Management

CommunicateCommunicate

ObserveObserveEvaluateEvaluate

Set GoalsSet Goals

The Performance Management Cycle

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Focus of Performance Management

Progress and success

toward goal achievement

PM is NOT performance appraisal

PMStrategic business

considerationsOngoing feedbackSo employee can

improve performanceDriven by line manager

Performance appraisalAssesses employee

Strengths & Weaknesses

Once a yearLacks ongoing feedbackDriven by HR

Comparing Performance Appraisal and Performance Management

• Performance appraisal (PA)– Evaluating an employee’s current and/or past

performance relative to his or her performance standards.

• Performance management (PM)– The process employers use to make sure

employees are working toward organizational goals.

– PA is an important component of PM

Case Study: Merrill Lynch

• Merrill Lynch started the transition from giving employees one PA per year to focusing on one of the important principles of PM.

• Conversation b/w managers and employees in which feedback is exchanged and coaching is given if needed

• In January, managers and employees set employee objectives

• Mid-year reviews assess progress and personal development plans

• End-of-the-year reviews incorporates feedback from several sources, evaluates progress and identifies areas for improvement

Case Study: Siemens

• At Siemens, the PM System is based on three pillars:– Setting clear and measurable goals– Implementing concrete actions– Imposing rigorous consequences

History of PM

• The phrase was first coined by Beer and

• Ruh in 1976.

• But it did not become recognized as a distinctive approach until the mid-1980s

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Why Do Performance Management?

• Communicate goals, mission, values, purpose

• Improve working relationships• Improve management• Identify and communicate strengths and

areas for improvement• Provide feedback• Develop• Monitor• Support

Why Performance Management?

• Increasing use by employers of performance management reflects:– The popularity of the total quality management

(TQM) concepts.– The belief that traditional performance appraisals

are often not just useless but counterproductive.– The necessity in today’s globally competitive

industrial environment for every employee’s efforts to focus on helping the company to achieve its strategic goals.

Continuous improvement

• A management philosophy that requires employers to continuously set and relentlessly meet ever-higher quality, cost, delivery, and availability goals by:– Eradicating the seven wastes:

• overproduction, defective products, and unnecessary downtime, transportation, processing costs, motion, and inventory.

– Requiring each employee to continuously improve his or her own personal performance, from one appraisal period to the next.

PM Contribution

• Motivation to performance is increased• Self-esteem is increased• Managers gain insight about subordinates• The definitions of job and criteria are clarified• Self-insight and development are enhanced• Administrative actions are more fair and

appropriate• Organization goals are made clear• Employees become more competent

• There is better protection from lawsuits• There is better and more timely differentiation b/w

good and poor performers• Supervisors’ views of performance are

communicated more clearly• Organizational change is facilitated• Motivation, commitment, and intentions to stay in

the organization are enhanced• Management behaviours beat the political

behaviours

Components of an Effective Performance Management

Process• Direction sharing

• Role clarification

• Goal alignment

• Developmental goal setting

• Ongoing performance monitoring

• Ongoing feedback

• Coaching and support

• Performance assessment (appraisal)

• Rewards, recognition, and compensation

• Workflow and process control and return

Disadvantages of poorly implemented PM System

• Increased turnover

• Use of misleading information

• Lowered self-esteem

• Wasted time and money

• Damaged relationships

• Decreased motivation to perform

• Employee burnout and job dissatisfaction

• Increased risk of litigation

• Unjustified demands on managers’ and employees’ resources

• Varying and unfair standards and ratings

• Emerging biases

• Unclear rating systems

• Political behaviours beat the management behaviours

Reward Systems

Reward Systems: Definition

A reward system is a set of mechanisms for distributing both tangible and intangible returns as part of emplacement relationship

Set of mechanisms for distributingTangible returns Intangible or relational returns

Not all types of returns are directly related to PM system, e.g. allocations are based on seniority as opposed to performance

Tangible returns

Cash compensationBase payCost-of-Living & Contingent PayIncentives (short- and long-term)

Benefits, such as Income ProtectionAllowancesWork/life focus

Intangible returns

Relational returns, such asRecognition and statusEmployment securityChallenging workLearning opportunities

Returns and Their Degree of Dependencyon the Performance Management System

Return Cost of Living Adjustment Income Protection Work/life Focus Allowances Relational Returns Base Pay Contingent Pay Short-term Incentives Long-term Incentives

Degree of Dependency• Low• Low• Moderate• Moderate• Moderate• Moderate• High• High• High

Purposes of PM Systems:Overview

StrategicAdministrativeInformationalDevelopmentalOrganizational maintenanceDocumentation

Strategic Purpose

Link employee behavior with organization’s goals

Communicate most crucial business strategic initiatives

Administrative Purpose

Provide information for making decisions re:Salary adjustmentsPromotionsRetention or terminationRecognition of individual performanceLayoffs

Informational Purpose

Communicate to Employees:ExpectationsWhat is importantHow they are doingHow to improve

Developmental Purpose

Performance feedback/coachingIdentification of individual strengths

and weaknessesCauses of performance deficienciesTailor development of individual

career path

Organizational Maintenance Purpose

Plan effective workforceAssess future training needsEvaluate performance at

organizational levelEvaluate effectiveness of HR

interventions

Documentational Purpose

Validate selection instrumentsDocument administrative decisionsHelp meet legal requirements

Characteristics of an Ideal PM System

Congruent with organizational strategy

• Consistent with organization’s strategy

• Aligned with unit and organizational goals

Thorough

• All employees are evaluated

• All major job responsibilities are evaluated

• Evaluations cover performance for entire review period

• Feedback is given on both positive and negative performance

Practical

• Available

• Easy to use

• Acceptable to decision makers

• Benefits outweigh costs

Meaningful

• Standards are important and relevant• System measures ONLY what

employee can control• Results have consequences

Evaluations occur regularly and at appropriate times

• System provides for continuing skill development of evaluators

Specific

Concrete and detailed guidance to employees

• what’s expected

• how to meet the expectations

Identifies effective and ineffective performance

• Distinguish between effective and ineffective– Behaviors– Results

• Provide ability to identify employees with various levels of performance

Reliable

• Consistent

• Free of error

• Inter-rater reliability

Valid

• Relevant (measures what is important)

• Not deficient (doesn’t measure unimportant facets of job)

• Not contaminated (only measures what the employee can control)

Acceptable and Fair

• Perception of Distributive Justice– Work performed evaluation received

reward

• Perception of Procedural Justice– Fairness of procedures used to:

• Determine ratings

• Link ratings to rewards

Inclusive

• Represents concerns of all involved– When system is created, employees

should help with deciding• What should be measured• How it should be measured

– Employee should provide input on performance prior to evaluation meeting

Open (No Secrets)

• Frequent, ongoing evaluations and feedback

• 2-way communications in appraisal meeting

• Clear standards, ongoing communication

• Communications are factual, open, honest

Correctable

• Recognizes that human judgment is fallible

• Appeals process provided

Standardized

• Ongoing training of managers to provide

• Consistent evaluations across– People– Time

Ethical

• Supervisor suppresses self-interest

• Supervisor rates only where she has sufficient information about the performance dimension

• Supervisor respects employee privacy

Integration with other Human Resources and Development activities

PM provides information for:Development of training to meet

organizational needsWorkforce planningRecruitment and hiring decisionsDevelopment of compensation systems

Challenges

• A survey conducted by the consulting firm Watson Wyatt showed that only 3 in 10 employees believe their company’s performance review system actually helped them improve their performance

• A recent survey of almost 1000 HRM professionals in Australia revealed that 96% of companies are currently implementing PMS.

Leading Contributors

• Chris Argyris:Action Science• Benjamin Bloom: Educational Technology• Edward Deming: TQM• Peter Drucker: Management Sciences• Robert Gagne: Instructional System Design• Thomas Gilbert: Behavioural Engineering• Joe Harless: Front-End Analysis• Roger Kaufman: Strategic Planning• Donald kirkpatrick: Evaluation• Malcolm Knowles: Androgogy

• Kurt Lewin: Force Field Analysis• Robert Mager: Instructional Objectives• Douglas McGregor: Theory X & Y• Susan Markle: Programmed Instruction• Geary Rummler: Three levels of Org. Performance• Pater Senge: Learning Orgs• B. F. Skinner: Behaviourism• Fredrick Taylor: Scientific Management• Sivasailam (Thiagi) Thiagarajan: Games and Playfulness• Donald Totsi: Feedback• Marvin Weisbored: Six Boxes for org diagnostic framework

Our Roadmap

Part – I: Strategic and General Considerations

PM and Reward Systems in ContextPM ProcessPM and Strategic Planning

Part – II: System Implementation

Defining performance and choosing a measurement approach

Measuring results and behavioursGathering performance informationImplementing a PM System

Part – III: Employee Development

PM and Employee DevelopmentPM Skills

Part – IV: Reward Systems, Legal Issues, and Team PM

Reward Systems and Legal IssuesManaging Team Performance

References

Text Books

• Aguinis, Herman (2009). Performance Management (2nd ed). New Delhi: Pearson.

• Kirkpatrick, Donald L. (2006). Improving Employee Performance through Appraisal and Coaching (2nd Edition). New York: AMACOM

•  Adkins, Tony (2006). Case Studies in Performance Management: A Guide from the Experts. New Jersey: John Wiley & Sons, Inc.

•  Carton, Robert B., and Hofer, Charles W. (2006). Measuring Organizational Performance: Metrics for Entrepreneurship and Strategic Management Research. Cheltenham, UK: Edward Elgar Publishing Limited.

• Cokins, Gary (2004). Performance Management. New Jersey: John Wiley & Sons, Inc.

•  Muddux, Robert. B. (2004). Performance Appraisal (4th edition). New Delhi: Viva Books Private Limited

•  Bacal, Robert (2004). Manager’s Guide to Performance Reviews. New York: McGraw-Hill.

• Hale, Judith (2004). Performance-Based Management: What Every Manager Should Do to Get Results. USA: John Wiley & Sons.

•  Rummler, Geary A. (2004). Serious Performance Consulting: According to Rummler. USA: International Society for Performance Improvement.  

• Willmore, Joe (2004). Performance Basics. USA: ASTD.•  Grote, Dick (2002). The Performance Appraisal

Question and Answer Book: A Survival Guide for Managers. New York: AMACOM.

•  Armstrong, Michael (2000). Performance Management Key strategies and practical guidelines (2nd edition). London: Kogan Page Limited.

•  Clemmer, J. (1995). Pathways to Performance: A Guide to Transforming Yourself, Your Team, and Your Organization. New Delhi: Prentice Hall.

Handbooks

• Handbook of Applied Behavior Analysis, John Austin & James E. Carr. Context Press. 2000.

• Handbook of Organizational Performance, Thomas C. Mawhinney, William K. Redmon & Carl Merle Johnson. Routledge. 2001.

Journals

• Organizational Behavior Management Network, Dr. John Austin, Dr. Dale Brethower, Dr. Alyce Dickinson. www.obmnetwork.com. 2009.

• Journal of Organizational Behavior Management, Routledge Taylor & Francis Group. Published quarterly. 2009.

1963

• Farson, R. E. (1963). Praise Re-appraised. Harvard Business Review, September – October, p. 61.

1965

• Meyer, H. H., Kay, E., and French, J. R. P. (1965). Split Roles in Performance Appraisal. Harvard Business Review.

1981

• Feldman, J.M. (1981). Beyond Attribution Theory: Cognitive Processes in Performance Appraisal. Journal of Applied Psychology, 66(2), 127-148.

1984

• Shrader, C.B., Taylor, L. and Dalton, D. R. (1984). Strategic Planning and Organizational Performance: A Critical Appraisal. Journal of Management, Vol. 10, No. 2, 149-171 (1984)

1986

• Pearce, J.L., and Porter, L.W. (1986). Employee Responses to Formal Performance Appraisal Feedback. Journal of Applied Psychology, 71(2), 211-218.

1989

• Cleveland, J.N., Murphy, K.R. and Williums, R. E. (1989). Multiple Uses of Performance Appraisal: Prevalence and Correlates. Journal of Applied Psychology, 74(1), 130-135.

1991

• Greenberg, J. (1991). Using explanations to manage impressions of performance appraisal fairness. Employee Responsibilities and Rights Journal, 4(1), 51-60.

1992

• Bretz, R. D., Milkovich, G .T. and Read, W. (1992). The Current State of Performance Appraisal Research and Practice: Concerns, Directions, and Implications. Journal of Management, 18(2), 321-352.

• Folger, R., Konovsky, M.A. and Cropanzano, R. (1992). A Due Process Metaphor for Performance Appraisal. Research in Organizational Behaviour. 14, pp. 129-177

1993

• Ilgen, D.R., Barness-Farrell, and Mckellin, D.B. (1993). Performance Appraisal Process Research in the 1980s: What has it Contributed to Appraisals in Use. Organizational Behaviour and Human Resource Processes, 54, pp. 321-368.

1994

• Rater motivation in the performance appraisal context: a theoretical framework

• Journal of Management,  Winter, 1994  by Michael M. Harris

• Woehr, D. J. (1994). Rater training for performance appraisal: a quantitative review. Journal of occupational and organizational psychology, 67(3), pp. 189-205

1995

• Improving Performance: How to Manage the White Space in the Organization Chart, Geary A. Rummler & Alan P. Brache. Jossey-Bass; 2nd edition. 1995.

• The Values-Based Safety Process: Improving Your Safety Culture with Behavior-Based Safety, Terry E. McSween. John Wiley & Sons. 1995.

• Clarkson, M. B. E. (1995). A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. Academy of Management Review, 20(1), 92-117.

1996

• Human Competence: Engineering Worthy Performance, Thomas F. Gilbert. Pfeiffer. 1996.

1998

• Performance-based Instruction: Linking Training to Business Results, Dale Brethower & Karolyn Smalley. Pfeiffer; Har/Dis edition. 1998.

1998

• Wiese, D, S., and Buckley, M. R. (1998). The evolution of the performance appraisal process. Journal of Management History, 4(3), 233 - 249

1999

• Mayer R. C.; Davis J. H. (1999). The effect of the performance appraisal system on trust for management : A field quasi-experiment. Journal of applied psychology. 84(1), pp. 123-136

• Bringing out the Best in People, Aubrey C. Daniels. McGraw-Hill; 2nd edition. 1999.

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2001

• Abraham, S.E., Karns, L.A., Shaw, K. and Mena, M . A. (2001). Managerial competencies and the managerial performance appraisal process. Journal of Management, 20(10), 842-852.