Conducting Performance Management—An Overview

John D. Blair, PhDSnyder Professor in Management

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The Strategic Importance of Performance Management

Performance Management System A formal, structured process used to

measure, evaluate, and influence employees’ job-related attitudes, behaviors, and performance results.

Purposes of Performance Management To enhance employee motivation and

productivity To support the achievement of the

organization’s strategic goals To facilitate strategic planning and change

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Effective Performance Management

Helps to direct and motivate employees to maximize their efforts on behalf of the organization by: Defining clear performance goals and measures Conducting performance appraisals Providing ongoing performance feedback Linking performance results to rewards and

consequences Providing career planning and development

opportunities

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EXHIBIT 9.1 Concerns about Ineffective Performance Management Practices

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Detection of Performance Problems

Responsibility for managing the performance of a company’s CEO rests with the board of directors.

Monitoring the performance of employees at lower levels in the organization is useful for detecting organizational shortcomings.

Evaluating Change First, identify objectives and subsequently assess

change results (employee performance) in light of those objectives.

Not all organizational change efforts target performance improvement as an objective.

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EXHIBIT 9.5 Prescriptions for Legally Defensible Appraisal and Feedback

1. Job analysis to identify important duties and tasks should precede development of a performance appraisal system.

2. The performance appraisal system should be standardized and formal.

3. Specific performance standards should be communicated to employees in advance of the appraisal period.

4. Objective and uncontaminated data should be used whenever possible.

5. Ratings on traits such as dependability, drive, or attitude should be avoided or operationalized in behavioral terms.

6. Employees should be evaluated on specific work dimensions rather than on a single global or overall measure.

7. If work behaviors rather than outcomes are to be evaluated, evaluators should have ample opportunity to observe ratee performance.

8. To increase the reliability of ratings, more than one independent evaluator should perform appraisals whenever possible.

9. Behavioral documentation should be prepared for extreme ratings.

10. Employees should be given an opportunity to review their appraisals.

11. A formal system of appeal should be available for appraisal disagreements.

12. Raters should be trained to prevent discrimination and to evaluate performance consistently.

13. Appraisals should be frequent, offered at least annually.

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What to Measure Performance Criteria

The dimensions against which the performance of an incumbent, a team, or a work unit is evaluated.

Personal Traits Criteria that focus on personal characteristics

such as “loyalty” and “dependability” Not reliable and difficult to defend as

measurable performance criteria

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What to Measure (cont’d) Behaviors

Focus on how work is performed Easier to observe and defend than traits

“Has not been late to work during past 6 months.”

Types Task-related Behaviors General Counter-Productive Behaviors Organizational Citizenship

May want to include in evaluation as part of overall performance:

Volunteering for tasks not formally part of the jobHelping othersEndorsing, supporting, and defending organizational objectives

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What to Measure (cont’d)

Objective Results Focus on what was accomplished or produced May miss critical aspects of job that are difficult to

quantify For example: number of traffic tickets written.

Multiple Criteria Performance appraisal should capture all aspects of the

job Weighting the Criteria

Adding values to specific criteria based on their importance relative to other criteria

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Timing Focal-Point Approach

All employees evaluated at the same time Easier to standardize across employees May create burdensome workload on managers May create artificial performance cycles

Anniversary Approach On employee’s anniversary with the organization

Does not tie individual performance to overall organizational performance

Ratings earlier in year may be more lenient Difficult make comparisons to other employees

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Timing of Evaluations (cont’d)

Natural Time Span of the Job Ensures feedback is given when it is most

useful. Not suited for short-cycle simple jobs. Possible time spans:

For teams: feedback on progress at the mid-point of a project and again at project completion to assess goal achievements.

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EXHIBIT 9.8 Frequency of Performance Reviews

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Participants in Performance Measurement and Feedback

Sources for EmployeeAppraisals

Sources for EmployeeAppraisals

Supervisors

Self-Appraisal

Peers

Subordinates

Customers

360-DegreeAppraisals

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Participants

Issues Consider the amount and type of information each

source has available. Supervisors

may make the most reliable judgments Self-Appraisals

Accuracy Increase satisfaction with appraisal but are subject to

inflation and leniency bias by the employee. Cultural Differences

Employees from collectivist cultures approach self-appraisals differently.

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Participants (cont’d) Peers

Often have best opportunity to observe behavior. Are useful predictors of future performance.

Subordinates Useful if anonymity guaranteed and contains specific

improvement suggestions. Managers should discuss results with direct reports.

Customers Most useful when a large number of customers respond

and results are not biased by few customers with bad experiences.

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Participants (cont’d)

360-Degree Appraisals Evaluations collected from colleagues,

supervisors, subordinates, peers, and employees

Less susceptible to gender/ethnicity biases

Research support for anonymity of raters and the use of a full circle of raters

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Performance Appraisal Formats

Comparative

Results-Based

Formats

AbsoluteStandards

• Straight ranking• Forced distribution

• Graphic rating scales• Behaviorally-anchored rating

scales• Behavioral observation scales

• Direct index• Management by objectives (MBO)

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Performance Appraisal FormatsForced

Distribution

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EXHIBIT 9.9 Sample Graphic Rating Scales for Work Quantity

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EXHIBIT 9.10 Sample Behaviorally Anchored Rating Scale for One Dimension of the Work Performance of a Corporate Loan Assistant

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EXHIBIT 9.11Sample Behavioral Observation Scale Items for a Maintenance Mechanic

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The Rating Process

The Rating Process

The Rating Process

(4) Make performance

judgment

(4) Make performance

judgment

(5) Record official

performance judgment

(5) Record official

performance judgment

(1) Recognize relevant

information

(1) Recognize relevant

information

(2) Store information in

memory

(2) Store information in

memory

(3) Revise information

based on new rater

perception

(3) Revise information

based on new rater

perception

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EXHIBIT 9.12 Common Performance Rating Errors

Halo and Horn A tendency to think of an employee as more or less good or bad is carried over into specific performance ratings. Or stereotypes based on the employee’s sex, race, or age affect performance ratings. In either case, the rater doesn’t make meaningful distinctions when evaluating specific dimensions of performance. All dimensions of performance are rated either low (horn) or high (halo).

Leniency All employees are rated higher than they should be rated. This happens when managers aren’t penalized for giving high ratings to everyone, when rewards aren’t part of a fixed and limited pot, and when dimensional ratings aren’t required.

Strictness All employees are rated lower than they should be. Inexperienced raters who are unfamiliar with environmental constraints on performance, raters with low self-esteem, and raters who have themselves received a low rating are most likely to rate strictly. Rater training that includes a reversal of supervisor-incumbent roles and confidence building can reduce this error.

Central Tendency

All employees are rated as average, when performance actually varies. Raters with large spans of control and little opportunity to observe behavior are likely to use this “play-it-safe” strategy. A forced distribution format requiring that most employees be rated average also may create this error.

Primacy As a cognitive shortcut, raters may use initial information to categorize a person as either a good or a bad performer. Information that supports the initial judgment is amassed, and unconfirming information is ignored.

Recency A rater may ignore employee performance until the appraisal date draws near. When the rater searches for cues about performance, recent behaviors or results are most salient, so recent events receive more weight than they should.

Contrast Effects When compared with weak employees, an average employee will appear outstanding; when evaluated against outstanding employees, an average employee will be perceived as a low performer.

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Common Rating Errors

Halo/Horn Overly focusing on specific performance ratings or

stereotyping employee by a single personal characteristic.

Leniency Rating all employees higher than they should be.

Strictness Rating all employees lower that they should be.

Central Tendency Rating all employees as average when individual

employee performance actually varies.

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Common Rating Errors Primacy

Using initial information that supports the rating decision while ignoring later information does not.

Recency Basing the rating decision primarily on the most recent

performance information while placing much less emphasis on past performance.

Contrast Effects Comparing one employee to another rather than

applying a common standard to all employees

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Improving Rater Accuracy Precise Rating Scale Format

Each dimension addresses a single job activity

Each performance dimension is rated separately; scores are summed to determine overall rating

Ambiguous terms (e.g. “average”) should not to be used.

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Improving Rater Accuracy (cont’d)

Provide Memory Aids Behavioral diaries and critical incident files Electronic diary-keeping software

Provide Rater Training Frame-of-reference training

especially useful

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Improving Rater Accuracy Reward Accurate and Timely Appraisals

Salary increases, promotions, assignments to key positions can be partly based on performance as a rater.

Use Multiple Raters To increase evaluation accuracy by diffusing

responsibility for negative results. To increase employee acceptance of

evaluation results To allow for group discussion which can help

alleviate individual rater biases

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Providing Feedback Sources of Conflict Associated with

Providing Performance Feedback: Understanding Attributions Timing Preparation Content of the Discussion Follow-Up When Nothing Else Works

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Providing Feedback (cont’d) Understanding Attributions

Combining evaluative and developmental goals Need to be candid and protect employee’s self-

esteem

Self-serving employee attributions that interfere with performance improvement Discounting role of external

forces in good performance Over-emphasizing external

effects in poor performance

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Providing Feedback (cont’d) Timing:

Providing immediate feedback is most useful.

Giving only as much information as the receiver can use.

Preparation Scheduling feedback sessions in advance Clarifying purpose and content of meeting Giving both participants time to prepare

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Providing Feedback (cont’d)

Content of the Discussion: the Problem-Solving Approach Diagnosis: seek to understand the factors that affect

performance. Removing Roadblocks: seek agreement with the

employee on an action plan to address issues such as: Lack of resources Need for additional information and training Improving ongoing communications and feedback

Mutual goal setting: employee participation increases employee acceptance of goals.

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EXHIBIT 9.13 Sample Checklist for Diagnosing the Causes of Performance Deficiencies

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Follow-Up to the Feedback Session

Positive Reinforcement Use of positive rewards to increase occurrence of

desired performance Principles:

People perform in ways that they find most rewarding By providing proper rewards, it is possible to improve

performance

Punishment Decreases frequency of undesired behavior Gets immediate results and has vicarious power Can have undesirable side effects—employee anger

and contingent bad behavior

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When Nothing Else Works

Transfer When employee and job are not well

matched Neutralize

Assign noncritical tasks to minimize the impact of deficiencies

Terminate For dishonesty, habitual absenteeism,

substance abuse, insubordination, and low productivity that cannot be corrected

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Current Issues

Automated Performance Management Uses

Tracking progress on goals Scoring and approving appraisals Processing, storing, and retrieving data

Benefits Improved efficiency and time savings Increased accuracy of appraisals Better communication of standards

Monitoring through Technology Balancing the legal necessity to monitor employees

with their expectation of privacy.