fundamentals ofHuman Resource Management

Unit06

Managing Employees’ Performance

What Do I Need to Know?

1. Identify the activities involved in performancemanagement.

2. Discuss the purposes of performancemanagement systems.

2. Discuss the purposes of performancemanagement systems.

3. Define five criteria for measuring theeffectiveness of a performance managementsystem.

4. Compare the major methods for measuringperformance.

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What Do I Need to Know? (continued)

5. Describe major sources of performanceinformation in terms of their advantages anddisadvantages.

6. Define types of rating errors and explain howto minimize them.

6. Define types of rating errors and explain howto minimize them.

7. Explain how to provide performance feedbackeffectively.

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Introduction

• Performance management: the processthrough which managers ensure thatemployees’ activities and outputs contributeto the organization’s goals.employees’ activities and outputs contributeto the organization’s goals.

• This process requires:- Knowing what activities and outputs are desired- Observing whether they occur- Providing feedback to help employees meetexpectations

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Figure 8.1: Stages of the PerformanceManagement Process

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Purposes of Performance Management

• Strategic Purpose - means effective performancemanagement helps the organization achieve itsbusiness objectives.• Administrative Purpose - refers to the ways in whichorganizations use the system to provide informationfor day‐to‐day decisions about salary, benefits, andrecognition programs.

• Administrative Purpose - refers to the ways in whichorganizations use the system to provide informationfor day‐to‐day decisions about salary, benefits, andrecognition programs.

• Developmental Purpose - means that it serves as abasis for developing employees’ knowledge andskills

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Criteria for EffectivePerformance Management

Fit with strategy

Validity

Reliability

Acceptability

Specific feedback

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Methods for Measuring Performance

Comparative

Quality AttributeQuality Attribute

METHOD

Results Behavior

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Measuring Performance:Making Comparisons

Simple Ranking

• Requiresmanagers torank

ForcedDistribution

• Assigns acertainpercentage ofemployees toeach categoryin a set of

PairedComparison

• Compareseach employeewith eachother

rankemployees intheir groupfrom thehighestperformer tothe poorestperformer.

percentage ofemployees toeach categoryin a set ofcategories

with eachotheremployee toestablishrankings

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Measuring Performance:Rating Individuals ‐ Attributes

Graphic Rating Scale

• Lists traits and provides arating scale for each trait.

• The employer uses the scaleto indicate the extent towhich an employee displayseach trait.

Mixed‐Standard Scale

• Uses several statementsdescribing each trait toproduce a final score forthat trait.to indicate the extent to

which an employee displayseach trait.

describing each trait toproduce a final score forthat trait.

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Figure 8.3:Example of a Graphic Rating Scale

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Figure 8.4:Example of aMixed‐StandardScale

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Measuring Performance:Rating Individuals ‐ Behaviors

Critical‐Incident Method• Based on managers’ records

of specific examples of theemployee acting in ways thatare either effective orineffective..

Behaviorally Anchored RatingScale (BARS)

• Rates behavior in terms of ascale showing specificstatements of behavior thatdescribe different levels ofperformance.

employee acting in ways thatare either effective orineffective..

• Employees receive feedbackabout what they do well andwhat they do poorly and howthey are helping theorganization achieve itsgoals.

statements of behavior thatdescribe different levels ofperformance.

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Figure 8.5:Example ofTask‐ BARSRatingDimension fora Patrol Officer

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Measuring Performance:Rating Individuals - Behaviors (continued)

Behavioral Observation Scale(BOS)• A variation of a BARS which

uses all behaviors necessaryfor effective performance torate performance at a task.

Organizational BehaviorModification (OBM)• A plan for managing the

behavior of employeesthrough a formal system offeedback and

for effective performance torate performance at a task.

• A BOS also asks themanager to rate thefrequency with which theemployee has exhibited thebehavior during the ratingperiod.

through a formal system offeedback andreinforcement.

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Figure 8.6: Example of a BehavioralObservation Scale (BOS)

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Measuring Performance:Measuring Results

Management by Objectives (MBO):• People at each level of the organization set goals in aprocess that flows from top to bottom, so that all levelsare contributing to the organization’s overall goals.(Employees can be involved in decision-making).

Management by Objectives (MBO):• People at each level of the organization set goals in aprocess that flows from top to bottom, so that all levelsare contributing to the organization’s overall goals.(Employees can be involved in decision-making).

• These goals become the standards forevaluating each employee’s performance.

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Table 8.2: Management by Objectives -Two Objectives for a Bank

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Test Your Knowledge

• The performance management system at XYZcompany currently is perceived as unfair andis time consuming for managers. Which of thefollowing systems is the most likely and leastlikely used, respectively.

• The performance management system at XYZcompany currently is perceived as unfair andis time consuming for managers. Which of thefollowing systems is the most likely and leastlikely used, respectively.

A. Paired comparisons; ResultsB. Results; Forced distributionC. Behavioral; AttributesD. Attributes; Comparative

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Sources of Performance Information

• 360‐Degree Performance Appraisal:performance measurement that combinesinformation from the employees’:- Managers- Managers- Peers- Subordinates

- Self- Customers

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Types of Performance MeasurementRating Errors

• Contrast errors: the rater compares anindividual, not against an objective standard,but against other employees.

• Distributional errors: the rater tends to useonly one part of a rating scale.• Distributional errors: the rater tends to useonly one part of a rating scale.

- Leniency: the reviewer rates everyone near the top- Strictness: the rater favors lower rankings- Central tendency: the rater puts everyone near themiddle of the scale

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Types of Performance MeasurementRating Errors (continued)

• Rater bias: raters often let their opinion ofone quality color their opinion of others.

- Halo error: when the bias is in a favorable direction.This can mistakenly tell employees they don’t need toimprove in any area.

- Halo error: when the bias is in a favorable direction.This can mistakenly tell employees they don’t need toimprove in any area.- Horns error: when the bias involves negative ratings.This can cause employees to feel frustrated anddefensive.

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Test Your Knowledge

• Bill rates all of his employees very low exceptfor Jan. Jan gets above average ratingsbecause she consistently comes to work ontime. The rating errors Bill makes are _______and _______, respectively.

• Bill rates all of his employees very low exceptfor Jan. Jan gets above average ratingsbecause she consistently comes to work ontime. The rating errors Bill makes are _______and _______, respectively.

A. Leniency; Horn

B. Strictness; HaloC. Similar‐to‐me; Central TendencyD. Horn; Strictness

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Giving Performance Feedback

• Scheduling Performance Feedback- Performance feedback should be a regular, expectedmanagement activity.- Annual feedback is not enough.- Annual feedback is not enough.- Employees should receive feedback so often that theyknow what the manager will say during their annualperformance review.

• Preparing for a Feedback Session- Managers should be prepared for each formal feedbacksession.

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Giving Performance Feedback(continued)

• Conducting the Feedback Session- During the feedback session, managers can take any ofthree approaches:1. “Tell-and-Sell” - managers tell employees their ratingsand then justify those ratings.1. “Tell-and-Sell” - managers tell employees their ratingsand then justify those ratings.2. “Tell-and-Listen” - managers tell employees their ratingsand then let the employees explain their side of thestory.3. “Problem-Solving” - managers and employees worktogether to solve performance problems.

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Summary

• Performance management is the process throughwhich managers ensure that employees’ activitiesand outputs contribute to the organization’s goals.• Organizations establish performance managementsystems to meet three broad purposes:• Organizations establish performance managementsystems to meet three broad purposes:

- Strategic purpose- Administrative purpose- Developmental purpose

• Performance measures should fit with theorganization’s strategy by supporting its goals andculture.

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Summary (continued)

• Performance information may come from anemployee’s self‐appraisal and from appraisals by theemployee’s supervisor, employees, peers, andcustomers.

• Using only one source makes the appraisal moresubjective.• Using only one source makes the appraisal moresubjective.• Organizations may combine many sources into a 360‐degree performance appraisal.

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Summary (continued)

• Organizations can minimize appraisal politics byestablishing a fair appraisal system, involvingmanagers and employees in developing the system,allowing employees to challenge evaluations,communicating expectations, and having opendiscussion.

managers and employees in developing the system,allowing employees to challenge evaluations,communicating expectations, and having opendiscussion.

• Performance feedback should be a regular,scheduled management activity, so that employeescan correct problems as soon as they occur.

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Summary (continued)

• The performance feedback discussion should focuson behavior and results rather than on personalities.• Managers must make sure that performance

management systems and decisions treat employeesequally, without regard to their race, sex, or otherprotected status.

management systems and decisions treat employeesequally, without regard to their race, sex, or otherprotected status.

• A system is more likely to be legally defensible if it isbased on behaviors and results, rather than on traits,and if multiple raters evaluate each person’sperformance.

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