Performance Management. Performance Management and Reward Systems in Context.
Performance Management
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Performance Management Overview Definition Expectancy theory Why do it? The process Agreeing objectives Appraisal Reward management
Transcript of Performance Management
Performance ManagementOverview Definition
Expectancy theory Why do it?
The process Agreeing objectives
Appraisal Reward management
Performance Management
…Strategic management technique that links business objectives to individual goals, performance
appraisal and rewards through a defined process.
(Sparrow & Hilltrop, 1994)
Performance Management
1. Agree goals
2. Appraise performance
3. Reward
EXPECTANCY THEORY
Skills clear objectives
Effort Performance
Resources
Perceived Reward
Fairness
EXPECTANCY THEORY - IMPLICATIONS
• Tailor rewards to the individual• Establish clear relationship between effort -
performance - reward• Establish clear procedures for evaluating
performance• Pay attention to intervening variables• Minimise undesirable outcomes which may
be perceived to result from high level of performance
The Performance Management Loop
Establish objectives& standards
Communicate EvaluateResults performance
Take corrective CompareAction performance
with objectives
Decide on appropriate action
Why do it?
Motherhood & AP
Competitive advantage
Win-win
Underlying Principles
1. Clear objectives effective performance
2. Communication is good (2-way)3. Involvement commitment4. Everyone’s work should relate to the
organisation’s work5. People need feedback6. Responsibility and autonomy enrich
jobs
‘Good’ Performance Management
• Tailor-made - culture/mission compatible
• Defines performance success• Clarifies accountabilities• Systematic reviews against criteria• PRP system• Integrated approach to motivation &
commitment
Mission & Value Statements
Objectives
Performance Agreement
Continuous Performance Management
Performance Review
Development Performance rating& training
Performance related pay
The Process
- Consult in design
- Commitment of top
- Top-down, bottom-up
- Separate pay from performance review
Performance Management
…an integrated process of defining, assessing, and reinforcing employee
work behaviours and outcomes.
Agree goalsReward
Appraise performance
Contextual Factors
• Business Strategy• Workplace Technology• Employee Involvement
Individual Objectives
• Not too many• Jointly agreed• Related to personal objectives• Revisable• Clear & challenging• Identify time scales, milestones,
constraints & review dates
Purposes of Appraisal
- Performance measurement- Feedback
- Performance improvement- Identification of potential
- Succession planning- H.R. planning
- Communication
Objectives of Performance Appraisal
EvaluativeDevelopmental
* Compensation * Feedback* Staffing decisions * Direction for
future* Evaluate selection * Identify
T&D needs
Performance Appraisal
- Analyse the job- Decide on criteria- Choose method- Convey expectations & criteria in
advance- Establish feed-back system- Review
Performance Appraisal
…systematic approach to evaluating performance with a view to pay, promotion, development, and motivation.
* Informal – daily* Formal – dedicated period
Objectives of Performance Appraisal in Ireland
Improve future performance 98%Provide feedback 96%Agree key objectives 95%Identify training needs 95%Strength motivation 89%Improve communication 84%Assess promotion potential 82%
Appraisal
Benefits to Managers:• Opportunity to hear employees hopes, fears
etc.• Chance to clarify and reinforce priorities• Mechanism for measuring change in
employees Performance• Recognise achievement motivation• Overlap/ambiguities
Benefits to Company:• Improved performance• Succession planning• HRP – competence analysis• Link employee performance to
business objectives• Communication
Benefits to Employee:• Feedback give/take• Discuss career options• Training & development• See “ big picture”
The Appraisal Interview
* Adequate notice * Constructive* Focus on behaviour * Clarify
action* 2-way communication
1. Tell & sell2. Tell & listen
3. Problem solving
Common ‘Rater’ Errors
• Supervisory bias• ‘Halo’ effect• Central tendency• Leniency• Strictness• Recency effect• Overall ratings - consistency
Performance Appraisal Techniques
Rating (2)Ranking
Paired-comparisonCritical IncidentFree-form (3)
Objectives – oriented (1)Development Centre
Self-assessment
Common Pitfalls
Failure to collect evidenceHalo/Horn effect
Leniency/StrictnessCentral tendencyPrimacy/RecencyContrast effects
Straying from the facts
Reward Systems
Intrinsic ExtrinsicChallenge, job satisfaction pay,
incentives,Feedback benefits
Enhance performance& satisfaction
Factors
• Availability • Timeliness• Performance contingency• Durability • Equity• Visibility
PRP Schemes
1. Individual payment related to performance
2. Merit pay
3. Team or group performance payment
4. Financial participation
Performance Related Pay
The principle of paying people according totheir contribution appeals to a sense of fairness in all of us however…
…there is an absence of evidence that PRPschemes improve productivity despite
absorbing significant amounts of management time and creating employee discontent.
Pfeffer (1999)HBR
There is no such thing as a good pay system, there is only a series of bad ones. The trick is to choose the
least bad one.
Reward PackageEmployee Objectives: Purchasing power Felt fair Rights Relativities Recognition
Employer Objectives Prestige/P.R. Competition Control Motivation & performance Cost
