Performance Performance ManagementManagement

22ndnd Edition Edition

Performance Management Performance Management and Reward Systemsand Reward Systems

in Contextin Context

OverviewOverview Definition of Performance Management (PM)Definition of Performance Management (PM) The Performance Management Contribution The Performance Management Contribution Disadvantages/Dangers of Poorly Disadvantages/Dangers of Poorly

Implemented PM SystemsImplemented PM Systems Definition of Reward SystemsDefinition of Reward Systems Aims and Role of PM SystemsAims and Role of PM Systems Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System Integration with Other Human Resources Integration with Other Human Resources

and Development Activitiesand Development Activities

Definition of Definition of Performance Management Performance Management

(PM)(PM)

Definition of PMDefinition of PM

1.1. Continuous Process ofContinuous Process of IdentifyingIdentifying MeasuringMeasuring DevelopingDeveloping

The performance of individuals The performance of individuals and teamsand teams

Definition of PM (continued)Definition of PM (continued)

andand

2.2. AligningAligning performance performance

with with

Strategic Goals of the Strategic Goals of the organizationorganization

Performance Management Performance Management is NOT is NOT

performance performance appraisalappraisal

PM is NOT performance PM is NOT performance appraisalappraisal

Performance ManagementPerformance Management• Strategic business considerationsStrategic business considerations• Driven by line managerDriven by line manager• OngoingOngoing feedback feedback

So employee can improve So employee can improve performanceperformance

PM is NOT performance PM is NOT performance appraisalappraisal

Performance AppraisalPerformance Appraisal• Driven by HRDriven by HR• Assesses employeeAssesses employee

Strengths & Strengths & WeaknessesWeaknesses

• Once a yearOnce a year• Lacks ongoing feedbackLacks ongoing feedback

Contributions of Contributions of Performance ManagementPerformance Management

Contributions of Performance ManagementContributions of Performance Management For EmployeesFor Employees

Clarify definitions of Clarify definitions of jobjobsuccess criteriasuccess criteria

Increase motivation to perform Increase motivation to perform Increase self-esteemIncrease self-esteem Enhance self-insight and developmentEnhance self-insight and development

Contributions of Performance Management Contributions of Performance Management

For ManagersFor Managers Communicate supervisors’ views of Communicate supervisors’ views of

performance more clearlyperformance more clearly Managers gain insight about Managers gain insight about

subordinatessubordinates Better and more timely differentiation Better and more timely differentiation

between good and poor performersbetween good and poor performers Employees become more competentEmployees become more competent

Contributions of Performance ManagementContributions of Performance Management For Organization/HR FunctionFor Organization/HR Function

Clarify organizational goals Clarify organizational goals Facilitate organizational changeFacilitate organizational change Fairer, more appropriate Fairer, more appropriate

administrative actionsadministrative actions Better protection from lawsuitsBetter protection from lawsuits

Disadvantages/Dangers of Disadvantages/Dangers of Poorly-implemented Poorly-implemented

PM SystemsPM Systems

Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems

For EmployeesFor Employees Lowered self-esteemLowered self-esteem Employee burnout and job Employee burnout and job

dissatisfactiondissatisfaction Damaged relationshipsDamaged relationships Use of false or misleading Use of false or misleading

informationinformation

Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems

For ManagersFor Managers Increased turnoverIncreased turnover Decreased motivation to performDecreased motivation to perform Unjustified demands on managers’ Unjustified demands on managers’

resourcesresources Varying and unfair standards and Varying and unfair standards and

ratingsratings

Disadvantages/Dangers of Poorly-implemented Disadvantages/Dangers of Poorly-implemented PM SystemsPM Systems

For OrganizationFor Organization

Wasted time and moneyWasted time and money Unclear ratings systemUnclear ratings system Emerging biasesEmerging biases Increased risk of litigationIncreased risk of litigation

Reward SystemsReward Systems

Reward SystemsReward Systems

DefinitionDefinition

Set of mechanisms for distributingSet of mechanisms for distributing Tangible returnsTangible returns

andand Intangible or relational returnsIntangible or relational returns

As part of an employment As part of an employment relationshiprelationship

Reward SystemsReward Systems Tangible returnsTangible returns

Cash compensationCash compensationBase payBase payCost-of-Living & Contingent PayCost-of-Living & Contingent PayIncentives (short- and long-term)Incentives (short- and long-term)

Reward Systems Reward Systems

Tangible returns Tangible returns ((continuedcontinued))

Benefits, such asBenefits, such asIncome ProtectionIncome ProtectionAllowancesAllowancesWork/life focusWork/life focus

Reward SystemsReward Systems Intangible returnsIntangible returns

Relational returnsRelational returns, , such assuch asRecognition and statusRecognition and statusEmployment securityEmployment securityChallenging workChallenging workLearning opportunitiesLearning opportunities

Returns and Returns and Their Degrees of DependencyTheir Degrees of Dependency

on the on the Performance Management SystemPerformance Management System

Returns with Low DependencyReturns with Low Dependencyon the on the

Performance Management SystemPerformance Management System

Cost of Living AdjustmentCost of Living Adjustment Income ProtectionIncome Protection

Returns with Moderate DependencyReturns with Moderate Dependencyon the on the

Performance Management SystemPerformance Management System

Work/Life FocusWork/Life Focus AllowancesAllowances Relational ReturnsRelational Returns Base PayBase Pay

Returns with High DependencyReturns with High Dependencyon the on the

Performance Management SystemPerformance Management System

Contingent PayContingent Pay Short-term IncentivesShort-term Incentives Long-term IncentivesLong-term Incentives

Purposes of PM SystemsPurposes of PM Systems

Purposes of PM Systems: Purposes of PM Systems:

OverviewOverview

StrategicStrategic AdministrativeAdministrative InformationalInformational DevelopmentalDevelopmental Organizational maintenanceOrganizational maintenance DocumentationalDocumentational

Strategic PurposeStrategic Purpose

Link individual goals with Link individual goals with organization’s goalsorganization’s goals

Communicate most crucial Communicate most crucial business strategic initiativesbusiness strategic initiatives

Administrative PurposeAdministrative Purpose

Provide information for making Provide information for making decisions re:decisions re:Salary adjustmentsSalary adjustmentsPromotionsPromotionsRetention or terminationRetention or terminationRecognition of individual performanceRecognition of individual performanceLayoffsLayoffs

Informational PurposeInformational Purpose

Communicate to Employees:Communicate to Employees: ExpectationsExpectations What is importantWhat is important How they are doingHow they are doing How to improveHow to improve

Developmental PurposeDevelopmental Purpose

Performance feedback/coachingPerformance feedback/coaching Identification of individual Identification of individual

strengths and weaknessesstrengths and weaknesses Causes of performance Causes of performance

deficienciesdeficiencies Tailor development of individual Tailor development of individual

career pathcareer path

Organizational Maintenance Organizational Maintenance PurposePurpose

Plan effective workforcePlan effective workforce Assess future training needsAssess future training needs Evaluate performance at Evaluate performance at

organizational levelorganizational level Evaluate effectiveness of HR Evaluate effectiveness of HR

interventionsinterventions

Documentational PurposeDocumentational Purpose

Validate selection instrumentsValidate selection instruments Document administrative Document administrative

decisionsdecisions Help meet legal requirementsHelp meet legal requirements

An Ideal PM System: An Ideal PM System: 14 Characteristics14 Characteristics

1.1. Congruent with organizational Congruent with organizational strategystrategy

2.2. ThoroughThorough3.3. PracticalPractical4.4. MeaningfulMeaningful5.5. SpecificSpecific6.6. Identifies effective/ ineffective Identifies effective/ ineffective

performanceperformance7.7. ReliableReliable

An Ideal PM System: An Ideal PM System: 14 Characteristics 14 Characteristics (continued)(continued)

8.8. ValidValid

9.9. Acceptable and FairAcceptable and Fair

10.10. InclusiveInclusive

11.11. Open (Open (NoNo Secrets) Secrets)

12.12. CorrectableCorrectable

13.13. StandardizedStandardized

14.14. EthicalEthical

Congruent with organizational Congruent with organizational strategystrategy

Consistent with organization’s Consistent with organization’s strategystrategy

Aligned with unit and Aligned with unit and organizational goalsorganizational goals

ThoroughThorough All employees are evaluatedAll employees are evaluated All major job responsibilities are All major job responsibilities are

evaluatedevaluated Evaluations cover performance for Evaluations cover performance for

entire review periodentire review period Feedback is given on Feedback is given on bothboth positive positive

and negative performanceand negative performance

PracticalPractical

AvailableAvailable Easy to useEasy to use Acceptable to decision makersAcceptable to decision makers Benefits outweigh costsBenefits outweigh costs

MeaningfulMeaningful

Standards are important and relevantStandards are important and relevant System measures ONLY what employee System measures ONLY what employee

can controlcan control Results have consequences Results have consequences Evaluations occur regularly and at Evaluations occur regularly and at

appropriate timesappropriate times System provides for continuing skill System provides for continuing skill

development of evaluatorsdevelopment of evaluators

SpecificSpecific

Concrete and detailed guidance to Concrete and detailed guidance to employees employees • What’s expected What’s expected • How to meet the expectationsHow to meet the expectations

Identifies Identifies effective and ineffective effective and ineffective

performanceperformance

Distinguish between effective and Distinguish between effective and ineffectiveineffective• BehaviorsBehaviors• ResultsResults

Provide ability to identify Provide ability to identify employees with various levels of employees with various levels of performanceperformance

ReliableReliable

ConsistentConsistent Free of errorFree of error Inter-rater reliabilityInter-rater reliability

ValidValid

Relevant (measures what is Relevant (measures what is important)important)

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

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

Acceptable and FairAcceptable and Fair

Perception of Perception of DistributiveDistributive Justice Justice• Work performed Work performed Evaluation received Evaluation received

Reward Reward

Perception of Perception of Procedural Procedural JusticeJustice• Fairness of procedures used to:Fairness of procedures used to:

Determine ratingsDetermine ratings Link ratings to rewardsLink ratings to rewards

InclusiveInclusive Represents concerns of all Represents concerns of all

involvedinvolved• When system is created, When system is created,

employees should help with employees should help with decidingdeciding What should be measuredWhat should be measured How it should be measuredHow it should be measured

• Employee should provide input on Employee should provide input on performance prior to evaluation performance prior to evaluation meetingmeeting

Open (Open (NoNo Secrets) Secrets)

Frequent, ongoing evaluations and Frequent, ongoing evaluations and feedbackfeedback

2-way communications in appraisal 2-way communications in appraisal meetingmeeting

Clear standards, ongoing Clear standards, ongoing communicationcommunication

Communications are factual, open, Communications are factual, open, honesthonest

CorrectableCorrectable

Recognizes that human judgment Recognizes that human judgment is fallibleis fallible

Appeals process providedAppeals process provided

StandardizedStandardized

Ongoing training of managers to Ongoing training of managers to provideprovide

Consistent evaluations acrossConsistent evaluations across• PeoplePeople• TimeTime

EthicalEthical

Supervisor suppresses self-interestSupervisor suppresses self-interest Supervisor rates only where she Supervisor rates only where she

has sufficient information about has sufficient information about the performance dimension the performance dimension

Supervisor respects employee Supervisor respects employee privacyprivacy

Integration with other Integration with other Human Resources Human Resources

and Development Activitiesand Development Activities

PM provides information for:PM provides information for:• Development of training to meet Development of training to meet

organizational needsorganizational needs• Workforce planningWorkforce planning• Recruitment and hiring decisionsRecruitment and hiring decisions• Development of compensation Development of compensation

systemssystems

Definition of Performance Management (PM)Definition of Performance Management (PM) The Performance Management Contribution The Performance Management Contribution Disadvantages/Dangers of Poorly Implemented PM Disadvantages/Dangers of Poorly Implemented PM

SystemsSystems Definition of Reward SystemsDefinition of Reward Systems Aims and Role of PM SystemsAims and Role of PM Systems Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System Integration with Other Human Resources and Integration with Other Human Resources and

Development ActivitiesDevelopment Activities

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