PERFORMANCE MANAGEMENT

Advanced Human Resource Management

Vildan ESENYEL
Contents
Performance Management
Performance Appraisal
Differences of Performance Management and Appraisal
Who should do the appraising
Methods of Performance Appraisal
Appraisal Period
Purposes of Performance Management
Reward Systems
Problems in Performance Management
Evaluating Performance
Talent Management
Appraisal Interview

Disadvantages/Dangers of Poorly Implemented PM Systems

Suggestions and Conclusion

 Teams of highly skilled, trained and
motivated employees will nearly
always overcome most of the
difficulties created by external forces
while a poorly motivated, untrained
and unskilled labor force will nearly
always fail to take advantage of
favorable external opportunities.
What is Performance?

Performance is the sum of behavior plus results:

Performance = Behavior + Results

If you only focus on behaviors, you won’t notice if you did not get
desired results

If you only focus on results, you won’t notice if your employees
don’t behave correctly
 What Influences Performance?
1

1. Career goals are not being met with the

job.
2. There is conflict with other employees or
the manager.
3. The goals or expectations are not in line
with the employee’s abilities.
4. The employee views unfairness in the
workplace.
5. The employee manages time poorly.
6. The employee is dissatisfied with the job
 What Influences Performance?
2

1. The employee doesn’t have

correct equipment or tools to
perform the job.
2. The job design is incorrect.
3. External motivation factors are
absent.
4. There is a lack of management
support.
5. The employee’s skills and job are
mismatched
Types of Performance Issues

1. Constantly late or leaves early

2. Too much time spent doing
personal things at work
3. Inability to handle proprietary
information
4. Family issues
5. Drug and alcohol abuse
6. Nonperforming
7. Conflicts with management or
other employees
8. Theft
9. Ethical breaches
10. Harassment
11. Employee conduct outside the
workplace
What do we mean by performance management?

‘The policies, procedures

and practices that focus on
employee performance as a
means of fulfilling
organisational goals and
objectives’
(Lowry (2002) in Marchington
and Wilkinson (2005: 187-8))

‘
What is Performance Management?
The process of setting expectations, aligning goals, assessing results, and focusing on staff development through
ongoing conversations between managers and their direct report(s).
Performance Management

Setting Expectations Goals and Objectives Goal Alignment

The process of discussing what is Desired results each employee aims to Process of ensuring individual
expected from an employee in terms achieve, determined based on goals support the achievement of
of job roles and responsibilities conversations between managers and department goals and department
employees goals support the achievement of
In Action

University goals

Assessment Feedback and

Performance Calibration Feedback and Development
Development
Review of goals, objectives, Process in which supervisors and Focus of the conversations
and other factors, and the managers at the same level in between managers and
determination of the level of an organization discuss staff employees in determining
successful achievement performance ratings and outcomes to strengths, opportunities for
ensure ratings and development improvement, and how
messages are applied consistently
to grow and develop

Performance Management is what you do with the information you’ve

developed from measuring performance.
According to Armstong and Baron:
performance management is a tool to ensure that
managers manage effectively; that they ensure the
people or teams they manage:

• know and understand what is

expected of them.
• have the skills and ability to deliver on
these expectations.
• are supported by the organization to
develop the capacity to meet these
expectations are given feedback on
their performance.
• have the opportunity to discuss and
contribute to individual and team
aims and objectives.
 Performance management

performance management should be:

Strategic
Integrated

It should incorporate:
Performance improvement
Development
Managing behaviour
The Performance Management Cycle

Performance management is a
process, not an event.
It operates as a continuous cycle.
 PM provides information for:

Development of Recruitment Development

training to meet Workforce of
and hiring
organizational planning compensation
decisions
needs systems
 An effective performance management system should do the
following:

Provide performance Make clear what

information to the organization
employees expects

Document
Identify areas of
performance for
success and needed
personnel records
development
Performance Management and Organizational
Development

Organizational development
can be defined as a complex educational The output from
strategy intended to change the beliefs, performance
attitudes, values and structure of management can be
organizations so that they can better adapt used as an input to
to new technologies, markets and Organizational
challenges, and the rate of change itself. Development.

Continuous and Continual improvement

The keys to the successful introduction and
application of performance management are:
Main purposes of performance management

The
organizational
level

The individual
and team
level
 Purposes of Performance Management Systems:

Strategic

Administrative

Informational

Developmental

Let’s look at each in detail.

 Purposes of Performance Management
Systems:
The following are the key principles of influencing people:

Strategic Commitment
& Consistency
Purpose
Link individual goals
Reciprocation
with organization’s goals
Communicate most
crucial business strategic
Scarcity
initiatives

Authority

Let’s look at each in detail.

Purposes of Performance Management
Systems:

Provide information for

making decisions:
Administrative Salary adjustments
Purpose Promotions
Retention or
termination
Recognition of
individual performance
Layoffs
Purposes of Performance Management
Systems:

Communicate to Employees:
Expectations
What is important
How they are doing
Informational How to improve
Purpose
Purposes of Performance Management
Systems:

Performance
feedback/coaching
Identification of individual
strengths and weaknesses
Causes of performance
deficiencies
Tailor development of
individual career path
Developmental
Purpose
Purposes of Performance Management
Systems:

Plan effective workforce

Assess future training
needs
Evaluate performance at
organizational level
Evaluate effectiveness of
HR interventions
Purposes of Performance Management
Systems:

Validate selection
instruments
Document administrative
decisions
Help meet legal
requirements
 Contributions of Performance Management

For Employees For Managers For Organization/HR

Clarify definitions of Communicate supervisors’ Function
job views of performance more
success criteria clearly Clarify organizational goals
Managers gain insight
Increase motivation to Facilitate organizational
about subordinates
perform Better and more timely change
Increase self-esteem differentiation between good Fairer, more appropriate
Enhance self-insight and and poor performers administrative actions
development Employees become more Better protection from
competent lawsuits
Disadvantages/Dangers of Poorly-implemented PM Systems

For Employees For Managers For Organization/HR

Function
• Lowered self-esteem • Increased turnover
• Employee burnout and • Decreased motivation • Wasted time and
to perform money
job dissatisfaction
• Unjustified demands on
• Damaged relationships • Unclear ratings system
managers’ resources
• Use of false or • Varying and unfair • Emerging biases
misleading information standards and ratings • Increased risk of
litigation
 Performance
Management
is NOT
performance appraisal
 Performance Appraisal vs Performance Management

Performance management Performance appraisal is the

is a series of activities process of determining how
designed to ensure that the well employees do their jobs
organization gets the relative to a standard and
performance it needs from communicating that
its employees. information to them.
• Strategic business • Driven by HR
considerations • Assesses employee
• Driven by line manager • Strengths &
• Ongoing feedback • Weaknesses
• So employee can • Once a year
improve performance • Lacks ongoing feedback
 Performance appraisal
means evaluating an
employee’s current
and/or past performance
relative to his or her
performance standards.
 Uses of Performance Appraisal
ADMINISTRATIVE and DEVELOPMENTAL ACTIONS
Human resource planning
Recruitment and selection
Training and development

Career planning and development

Compensation programs
Internal employee relations
Assessment of employee potential
Why Performance Appraisal?
Performance appraisal is a vehicle to:

validate and refine organizational

actions (e.g., selection,
training);

provide feedback to employees

with an eye on improving
future performance
 Effective Performance Management

• Viewed as generally
STANDARDIZATION
fair by employees Continuous
• Trained appraisers open
• Standardization communication

DEVELOPMENT
• Beneficial as a
• Consistent with the
development tool
strategic mission of
• Useful as an
the organization
administrative tool
• Performance
• Effective in documenting
expectations CONSISTENT employee performance
• Legal and job related
 Establish Performance Criteria (Standards)

Improvement potential

Goal achievement

Competencies

Behaviors

Traits
 How to Set Effective Goals
Assign
Assign Specific Measurable
Goals Goals

Encourage
Participation
Assign Challenging but Doable Goals
The Appraisal Period
 WHO SHOULD DO THE APPRAISING?

Let us look at each in detail.

 WHO SHOULD DO THE APPRAISING?
1

• Traditionally most
common choice.
• Usually in excellent
position to observe
employee’s job
performance
• Has responsibility for
managing particular
unit.
 WHO SHOULD DO THE APPRAISING?
2

Our culture has viewed

evaluation by subordinates
negatively.
Some firms find that evaluation
of managers by subordinates is
both feasible and needed.
Issues:
• Could be seen as a
popularity contest
• Possible reprisal against
employees
 WHO SHOULD DO THE APPRAISING?
3

Work closely with evaluated

employee and probably have
undistorted perspective on
typical performance.
Problems include reluctance of
some people who work closely
together, especially on teams, to
criticize each other.
 WHO SHOULD DO THE APPRAISING?
4

• If employees understand
their objectives and the
criteria used for evaluation,
they are in a good position to
appraise own performance.
• Employee development is
self-development
• Self-appraisal may make
employees more highly
motivated
 WHO SHOULD DO THE APPRAISING?
5

• Customer behavior
determines firm’s degree of
success
• Demonstrates commitment
to customer
• Holds employees accountable
• Fosters change
RATING COMMITTEES
Using multiple raters is
advantageous.
It can help cancel out problems A rating committee is
such as bias on the part of
individual raters. It can also usually composed of the
provide a way to include in the employee’s immediate
appraisal the different facets of an supervisor and three or
employee’s performance observed four other supervisors.
by different appraisers. Multiple
raters often see different facets of
an employee’s performance.
360-Degree Evaluation

Multi-rater evaluation

Input from multiple sources

Focuses on skills needed across

organizational boundaries

More objective measure of

performance

Process more legally defensible

Choosing a Performance Appraisal Method

 Rating scales
 Critical incidents
 Essay
 Work standards
 Ranking
 Paired comparisons
 Forced distribution
 Behaviorally anchored
rating scales (BARS)
 Result-based systems
 Written Essays

Probably the simplest

method of evaluation is
to write a narrative
describing an employee’s
strengths, weaknesses,
past performance,
potential, and
suggestions for
improvement.
 Critical Incident Method

The critical incident

method entails keeping
an anecdotal record of
good or undesirable
examples of an
employee’s work-related
behavior and reviewing it
with the employee at
predetermined times.
 Behaviorally Anchored Rating Scales (BARS)

BARS specify definite,

observable, and
measurable job behavior.
Examples of job-related
behavior and
performance dimensions
are found by asking
participants to give
specific illustrations of
effective and ineffective
behaviour regarding each
performance dimension.
 Multi-person Comparisons
The three most popular comparisons are:
• group order ranking,
• individual ranking,
• paired comparisons
Multi-person
Comparisons evaluate
one individual’s
performance against the
performance of one or
more others. It is a
relative rather than an
absolute measuring
device.
 Alternation Ranking Method

Ranking employees from

best to worst on a trait or
traits is another popular
appraisal method.
Because it is usually
easier to distinguish
between the worst and
best employees than to
rank them, an alternation
ranking method is useful.
 Graphic Rating Scale Method

A graphic rating scale lists

a number of traits and a
range of performance for
each.
The supervisor rates each
subordinate by circling or
checking the score that
best describes the
subordinate’s
performance for each
trait, and then totals the
scores for all traits.
 Forced Distribution

Rater assigns individual in

workgroup to limited
number of categories
Assumes all groups of
employees have same
distribution
Result-Based Systems

Management by objectives (MBO)

Manager and
subordinate agree on
objectives for next
appraisal
Evaluation based on
how well objectives
are accomplished
 Work Standards

Compares
performance to
predetermined
standard
 Competency-based appraisal

A consequence of the
development of
organizational
competency models
has been that
employers have
increasingly extended
their use from training
and development,
selection and reward
into the area of
appraisal.
 Team-based appraisal
In individual appraisals, the focus is often on evaluating the achievement of the tasks set out for the job.
For teams, some commentators (Scott and Einstein, 2001) argue that the best way to appraise
performance is by focusing on the outcomes of the team (e.g. productivity, sales volume and customer
complaints).
 Using Information Technology to Support Performance Management

Electronic performance
monitoring (EPM) systems
use computer technology to
allow managers to monitor
their employees’ rate,
accuracy, and time spent
working online or just on
their computers.

Electronic Performance Monitoring

Evaluations fulfill the purpose of providing feedback to
employees on how the organization views their
performance
Problems in Performance Appraisal

• Performance appraisal process cuts into

manager’s time
• Experience can be unpleasant when
employee has not performed well
Problems in Performance Appraisal

• Factors such as attitude, appearance, and

personality are difficult to measure
• Factors may have little to do with employee’s job
performance
• May place evaluator and company in untenable
positions
Problems in Performance Appraisal

Halo error: Manager generalizes one positive performance feature

or incident to all aspects of employee performance, resulting in
higher rating
Horn error: Manager generalizes one negative performance
feature or incident to all aspects of employee performance,
resulting in lower rating
Problems in Performance Appraisal

Leniency: Giving undeserved high ratings

Strictness: Being unduly critical of employee’s work
performance
Worst situation is when firm has both lenient and strict
managers and does nothing to level inequities
Problems in Performance Appraisal

• Error occurs when employees are incorrectly

rated near average or middle of scale
• May be encouraged by some rating scale systems
requiring evaluator to justify extremely high or
extremely low ratings
Problems in Performance Appraisal

• Employee’s behavior often improves and

productivity rises several days or weeks before
scheduled evaluation
• Natural for rater to remember recent behavior
more clearly than past actions
• Necessary to maintain records of performance
Problems in Performance Appraisal

• Managers allow individual differences such as gender,

race, or age to affect ratings
• Effects of cultural bias, or stereotyping, can influence
appraisals
• Other factors
Example: Mild-mannered employees may be
appraised more harshly, simply because they do not
seriously object to appraisal results
Problems in Performance Appraisal

Sometimes, managers control every aspect of appraisal

process and manipulate the system
Example:
A supervisor wants to give pay raise to certain
employee, so supervisor may give employee an
undeserved high performance evaluation.
Problems in Performance Appraisal

• Evaluation process may create anxiety for

appraised employee
• Opportunities for promotion, better work
assignments, and increased compensation may
hinge on results
 Reactions

Reactions of
Reactions of
Appraised
Managers
Employees

A manager owes an employee a welldone appraisal, no matter how difficult an

employee is, or how difficult the conversation about performance might be.
Feedback as a System
Feedback has a direct impact on our work:
Gives us specific information to help us improve
Makes performance expectations clear from the start
Heightens efficiency by reducing resentment, buildup, etc.
Strengthens relationships

There are different types of feedback that should be

used according to the situation:

Motivational feedback Development feedback

 Preparing for the Performance Review Session

Experts recommend a five-step

process:
1. Review the objectives of the
session
2. Dual preparation
3. Plan your approach
4. Check your attitude
5. Select the right time and place
Learning and development

Performance reviews can be

regarded as learning events, in
which individuals can be
encouraged to think about how
and in which ways they want to
develop.
This can lead to the drawing up
of a Personal Development
Plan (PDP) setting out the
actions they propose to take
(with the help of others, not
least their managers) to
develop themselves.
Organizational Processes of Talent and Performance
Management

Talent management is the goal-oriented and integrated process of planning,

recruiting, developing, appraising, and compensating employees.
PAY SYSTEM
Reward Systems

Tangible returns Intangible returns

Cash compensation Relational returns, such as
Base pay
Cost-of-Living & Contingent Recognition and status
Pay Employment security
Incentives (short- and long-
term) Challenging work
Benefits, such as Learning opportunities
Income Protection
Allowances
Work/life focus
 The Manager, Employee Development
and Performance
Employees of managers who are very effective at development can outperform their
peers by up to 25 percent
Impact of Manager-Led Development on Employee Performance

Employees Reporting to Employees Reporting to

Manager A Manager B
Manager A is very ineffective Manager B is very
at developing employees effective at developing
employees

125

25%
}
100
Performance Improvement
directly attributable to
Manager B’s effectiveness at
employee development

Performance of Employees Reporting to Manager A Performance of Employees Reporting to Manager B

Source: Learning and Development Roundtable 2003 Employee Development Survey

 SUGGESTIONS FOR IMPROVING
PERFORMANCE EVALUATIONS

Use Multiple
Evaluators Evaluate
Selectively
Train Evaluators
Document
Performance
Emphasize Behaviours in a Diary
Behaviours Rather
Than Traits
REFERENCES
Armstrong, M. (2006) A Handbook of Human Resource Management Practice,
London: Kogan Page.
Armstrong, M. and Murlis, H. (2004) Reward Management: A Handbook of
Remuneration Strategy and Practice, 5th edition, London: Kogan Page.
Beardwell, I. and Holden, L. (2001) Human Resource Management: A
Contemporary Approach, Harlow, UK: Pearson Education.
Bechet, T, P. (2008) Strategic Staffing: A Comprehensive System for Effective
Workforce Planning, New York: American Management Association.
Sims, R. S. (2006) Human Resource Development: Today and Tomorrow,
Greenwich, CT: Information Age Publishing
Taylor, S. (2002) People Resourcing, London: Chartered Institute of Personnel and
Development
Torrington, D., Taylor, S. and Hall, L. (2008) Human Resource Management,
London: Prentice Hall
Wright, P., Dunford, B. and Snell, S. (2001) ‘Human Resources and the Resource-
Based View of the Firm’, Journal of Management, 27: 701–21