Performance Management

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Performance Management

• 2nd Edition

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Performance Management and Reward Systemsin
Context
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Overview

• Definition of Performance Management (PM)
• The Performance Management 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

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Definition of Performance Management (PM)
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Definition of PM

• Continuous Process of
• Identifying
• Measuring
• Developing
• The performance of individuals and teams

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Definition of PM (continued)

• and
• Aligning performance
• with
• Strategic Goals of the organization

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Performance Management is NOT performance
appraisal
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PM is NOT performance appraisal

• Performance Management
• Strategic business considerations
• Driven by line manager
• Ongoing feedback
• So employee can improve performance

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PM is NOT performance appraisal

• Performance Appraisal
• Driven by HR
• Assesses employee
• Strengths
• Weaknesses
• Once a year
• Lacks ongoing feedback

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Contributions of Performance Management
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Contributions of Performance Management For
Employees

• Clarify definitions of
• job
• success criteria
• Increase motivation to perform
• Increase self-esteem
• Enhance self-insight and development

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Contributions of Performance Management For
Managers

• Communicate supervisors views of performance
  more clearly
• Managers gain insight about subordinates
• Better and more timely differentiation between
  good and poor performers
• Employees become more competent

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Contributions of Performance Management For
Organization/HR Function

• Clarify organizational goals
• Facilitate organizational change
• Fairer, more appropriate administrative actions
• Better protection from lawsuits

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Disadvantages/Dangers of Poorly-implemented
PM Systems
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Disadvantages/Dangers of Poorly-implemented PM
SystemsFor Employees

• Lowered self-esteem
• Employee burnout and job dissatisfaction
• Damaged relationships
• Use of false or misleading information

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Disadvantages/Dangers of Poorly-implemented PM
SystemsFor Managers

• Increased turnover
• Decreased motivation to perform
• Unjustified demands on managers resources
• Varying and unfair standards and ratings

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Disadvantages/Dangers of Poorly-implemented
PM SystemsFor Organization

• Wasted time and money
• Unclear ratings system
• Emerging biases
• Increased risk of litigation

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Reward Systems
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Reward SystemsDefinition

• Set of mechanisms for distributing
• Tangible returns
• and
• Intangible or relational returns
• As part of an employment relationship

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Reward Systems Tangible returns

• Cash compensation
• Base pay
• Cost-of-Living Contingent Pay
• Incentives (short- and long-term)

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Reward Systems Tangible returns (continued)

• Benefits, such as
• Income Protection
• Allowances
• Work/life focus

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Reward Systems Intangible returns

• Relational returns, such as
• Recognition and status
• Employment security
• Challenging work
• Learning opportunities

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Returns and Their Degrees of Dependencyon the
Performance Management System
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Returns with Low Dependencyon the Performance
Management System

• Cost of Living Adjustment
• Income Protection

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Returns with Moderate Dependencyon the
Performance Management System

• Work/Life Focus
• Allowances
• Relational Returns
• Base Pay

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Returns with High Dependencyon the Performance
Management System

• Contingent Pay
• Short-term Incentives
• Long-term Incentives

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Purposes of PM Systems
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Purposes of PM Systems Overview

• Strategic
• Administrative
• Informational
• Developmental
• Organizational maintenance
• Documentational

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Strategic Purpose

• Link individual goals with organizations goals
• Communicate most crucial business strategic
  initiatives

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Administrative Purpose

• Provide information for making decisions re
• Salary adjustments
• Promotions
• Retention or termination
• Recognition of individual performance
• Layoffs

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Informational Purpose

• Communicate to Employees
• Expectations
• What is important
• How they are doing
• How to improve

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Developmental Purpose

• Performance feedback/coaching
• Identification of individual strengths and
  weaknesses
• Causes of performance deficiencies
• Tailor development of individual career path

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Organizational Maintenance Purpose

• Plan effective workforce
• Assess future training needs
• Evaluate performance at organizational level
• Evaluate effectiveness of HR interventions

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Documentational Purpose

• Validate selection instruments
• Document administrative decisions
• Help meet legal requirements

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An Ideal PM System 14 Characteristics

1. Congruent with organizational strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective performance
7. Reliable

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An Ideal PM System 14 Characteristics
(continued)

• Valid
• Acceptable and Fair
• Inclusive
• Open (No Secrets)
• Correctable
• Standardized
• Ethical

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Congruent with organizational strategy

• Consistent with organizations strategy
• Aligned with unit and organizational goals

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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

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Practical

• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs

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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

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Specific

• Concrete and detailed guidance to employees
• Whats expected
• How to meet the expectations

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Identifies effective and ineffective performance

• Distinguish between effective and ineffective
• Behaviors
• Results
• Provide ability to identify employees with
  various levels of performance

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Reliable

• Consistent
• Free of error
• Inter-rater reliability

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Valid

• Relevant (measures what is important)
• Not deficient (doesnt measure unimportant facets
  of job)
• Not contaminated (only measures what the employee
  can control)

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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

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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

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Open (No Secrets)

• Frequent, ongoing evaluations and feedback
• 2-way communications in appraisal meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest

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Correctable

• Recognizes that human judgment is fallible
• Appeals process provided

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Standardized

• Ongoing training of managers to provide
• Consistent evaluations across
• People
• Time

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Ethical

• Supervisor suppresses self-interest
• Supervisor rates only where she has sufficient
  information about the performance dimension
• Supervisor respects employee privacy

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Integration with other Human Resources and
Development Activities
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• PM provides information for
• Development of training to meet organizational
  needs
• Workforce planning
• Recruitment and hiring decisions
• Development of compensation systems

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Quick Review

• Definition of Performance Management (PM)
• The Performance Management 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