Performance Management

Professor Lucia Miree American University in Bulgaria

Performance Management
Management = getting work done through others Managers performance is only as good as his/her employees performance Managers job = performance management of others

Performance Management
Organizational system Focusing on employee performance Consistently applied throughout organization With a supporting structure

Names of Systems
Performance Management Performance Appraisals Evaluation Systems Job Review Systems Feedback Systems

Performance Management
Ensuring appropriate performance by all employees through: -Reinforcement -Rewards -Modeling -Coaching -Training -Development Using a consistent feedback system

Working of Performance Management

Managers Speaks with Employee re: performance Continuously Once per Year Formal goals Organizational Reporting System Tied to Organizational Outcomes

Examples of System Output

Words and What They Mean
Exceptionally well qualified Made no major errors yet Active socially Parties & drinks too much Family is active socially Family drinks too much Plans for advancement Buys drinks for all of the boys Aggressive Obnoxious Uses logic on difficult jobs Gets someone else to do it Expresses himself well Speaks the local language Has Leadership qualities Is tall or has a loud voice Keen sense of humour Knows lots of dirty jokes Career-minded Back-stabber Relaxed attitude Sleeps at work Work is first priority Too ugly to get a date Independent worker Nobody knows what he does Good communication skills Talks on phone lots Loyal Cant get another job

PERFORMANCE = Doing present job at a certain level (high or low) as measured by a formal system POTENTIAL = Includes future service, learning interest, motivation level

PROBLEM =
Deviation from expectations Do something in different way Not do something Do something not expected/needed

Opportunity
Reinforce/Reward Behavior Change Behavior Model Behavior Establish Culture

PERFORMANCE MANAGEMENT
-Based on Scientific Management concepts -Focus on observable performance -Goal directed -Planning required and formalized -Consistent, continuous collection, analysis, and collection of data -Value of feedback reinforced -Facilitates benchmarking

Performance Management Trends

Shift from viewing financial figures as main criteria to one of multiple indicators More weight on indicators of efficiency and effectiveness Change to viewing PM as on-going, evolving process

Principles of Performance Management

Supports business-oriented strategy Is values based Communicates organizational mission Fulfills responsibilities to organizational members Enables employees to manage own performance Manages expectations (clarifies roles and responsibilities) Creates partnership between management and employee Emphasizes importance of measurement, feedback, and reinforcement Empowers employees Natural extension of management

Associated Costs
Staff Costs Production and Processing Costs Training Costs Action Costs Opportunity Costs

Key PM Questions
1. 2. 3. 4. 5. 6. Why assess performance What performance to asses How to assess performance Who do assess performance When to assess performance How to communicate performance assessment

The WHY of Performance Management Systems

-Administer Salary & Wages -Correct Performance/Behavior -Plan for Future (promotion, transfer, career dev) -Facilitate Decision-Making (counseling, terminations) -Facilitate Human Resource Planning -Create Culture -Building Good Relationships -Increase Organizational Loyalty -Determine Effectiveness of Selection and Placement Methods

WHAT to Assess
Skills/Abilities/Needs/Traits of Individuals

That Interact with the Organization to Produce Behaviors Which

Result in Outcomes

Skills/Abilities/ Needs/Traits
Job Knowledge Strength Coordination

Behaviors
Perform Tasks Obey Instructions Report Problems

Results
Sales Production Levels Production Quality Scrap/Waste Accidents Equipment Repairs Customers Served Customer Satisfaction Feedback

Business Knowledge Maintain Equipment Desire to Achieve Dependability Creativity Leadership Honesty Follow Rules Submit Suggestions Follow-up Write Reports Completes Reviews

Measures Focus
Consistent indicators across industry or similar organizations Comparison of indicators over time in organization Comparisons with pre-determined standard

Approaches to PM
Comparative Attribute Behavioral

HOW to Assess Performance

Traditional Management-by-Objective Assessment Center Peer Review Panel Critical Events Upward Feedback 360 Degree

Techniques of PM
Essay (open-ended) Management by Objective Ranking Paired Comparisons Forced Choice Forced Distribution Ratings: -Checklist -Scales -Behaviorally Anchored Ratings (BARS) Critical Incidents

Essay Technique
Describe in detail the quantity and quality of the employee s performance during the past twelve months. Describe the employee s strength and weakness. How do you describe the employee s potential within the company? What leadership skills does the employee bring to the job? What future development activities do you recommend for the employee?

Morgan Stanleys Essay System

Consider objectives identified in prior years Summary as well as this years objectives. Evaluation: Strengths 1. 2. 3. Development Areas 1. 2. 3.

Comments

Comments

Examples of essays on PMs.

His men would follow him anywhere, but only out of curiosity. I would not suggest breeding for this person. When she opens her mouth, it seems that it is only to change the foot that was previously there. He has carried out each of his duties to his entire satisfaction. He would be out of his depth in a car park puddle. This person is like a gyroscope: always spinning at a fast pace, but not really going anywhere. This person has delusions of adequacy.

Continued examples.

Since my last report, he has reached rock bottom and is digging. She sets low personal standards and then consistently fails to meet them. He has the wisdom of youth & the energy of old age. This person should go far. And, the sooner he starts, the better. In my opinion, this pilot should not be authorized to fly below 250 meters. This person works well under constant supervision and when cornered. This man is depriving a village somewhere of its idiot.

Management-by-Objective Examples
Employee will contribute to organizational profit margin by lower costs in department by 3.5percent. To implement new recruitment system, the employee will evaluate the effectiveness of the advertisements placed during the year.

Ranking Example
Manager ranks all employees from best to worst: Overall performance On specific criteria (communication, customer relations skills, etc.)

Paired Comparisons Example

Rank each employee grouping overall or on a characteristic: Employee A and Employee B Employee B and Employee C Employee A and Employee C Employee C and Employee D Employee D and Employee A Employee D and Employee B etc.

Forced Distribution Example

Pace each of the employees in your department in the following categories based upon overall or specific category performance: Top 10 percent: 50 89 percent: 10-49 percent: Bottom 10 percent:

Outstanding: Average: Good: Below Average: Unacceptable:

General Electrics Distribution The Vitality Curve

High Top Performers 10% Highly Valued 70% Least Effective 20% Promotability Medium Limited

Ratings Example: Checklists

Program Auditor: _____ 1. Unable to separate important from irrelevant data. _____ 2. Omits important info from summaries. _____ 3. Cross-references to improve reporting. _____ 4. Produces summaries which lead to good reports. _____ 5. Requires excessive instruction to produce work. _____ 6. Unable to reduce data to manageable form. _____ 7. Communicates well with peers on reports. _____ 8. Fails to meet deadlines. _____ 9. Provides detailed, professional work. _____ 10. Protects confidentiality of information.

Ratings Example: Scales

Rate the employees behavior on the scale provided. Excellent Good Fair Poor N/A 4 3 2 1 ___ Reasoning ability Decisiveness in Decision-making Imagination & originality Ability to plan and control Cooperation with peers Cooperation with management Professionalism Interpersonal skills 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 ___ ___ ___ ___ ___ ___ ___ ___

Citibanks Performance Scorecard

Measurements Standards Leadership, Ethics/Integrity Customer Interaction Community Involvement Contribution to Overall Business People Performance Teamwork Training & Development Employee Satisfaction Control Audit Legal Regulatory Auditors standards Managers assessment Managers assessment Below Par Par Above Par

Citibanks Performance Scorecard..

Measurements Customer Satisfaction Strategy Implementation Households Cross-sell, splits, mergers Retail asset balances Market share Financial Revenue Expense Margin Objective stadards External company survey Goal of 80% Objective standards Below Par Par Above Par

Citibanks Link to Compensation

Ratings Above Par Par Below Par Bonus 30% 15% 0%

Microsofts PA System
Overall Employee Rating:
= Exceptional performance rarely achieved; precedent setting results 4.5 =Consistently exceeds all requirements & expectations work highly valued 4 =Consistently exceeds position requirements and expectations; work often noteworthy 3.5 =Exceeds position requirements; successful in all objectives 3 =Meets position requirements and expectations; meets most or all objectives; needs some development for quality 2.5 =Falls below performance standards and expectations; has performance deficiencies 1.0-2.0 =Does not meet minimum requirements in critical aspects of job 5

Microsoft: Adding Distribution to Rankings

4.0 + = 3.5 = 3.0 or lower = 35% of employees 40% of employees 25% of employees

Ratings Example: BARS

Indicate the appropriate level of performance on each factor: Quantity of work
Volume low & erratic Satisfactory steady volume Volume above expectations

Quality of work
Results always accurate; model work Results accurate and thorough Results generally inaccurate and not thorough

Judgment
Systematic, analytical, good with complex problems Practical judgment, solves problems, difficulty with assessing relative value of factors Does not always show good judgment; problem analysis not always adequate

Microsoft Competency Toolkit

FACTOR: COMPETENCY: Individual Excellence Intellectual Horsepower (is bright, intellectual sharp, learns quickly)

Level 1
Structures basic info accurately; draws informed conclusions

Level 2
Analyzes & organizes complex info from specific content area, identifying key issues, assessing impact, drawing reasonable conclusions Learns new skills & ideas rapidly

Level 3
Analyzes, explains & draws logical conclusions based upon complex data from multiple content areas

Level 4
Rapidly identifies the significance of info & insightfully determines strategic action.

With guidance, learns quickly on the job

Rapidly learns & assimilates complex info involving unfamiliar situations & circumstances

Rapidly learns new concepts & ideas; integrates & assimilates highly complex info across broad, multi-functional content areas

Picks up new skills & understands ideas when structured Learns effectively from experience

Quickly adjusts thinking for new info or ideas Is able to apply & explain logic related to problems

Microsoft Competency Toolkit

FACTOR: COMPETENCY: Long-term Approach Developing people (provides job-relevant learning, developmental
exercises, and feedback to enhance individual performance)

Level 1
Assigns challenging tasks and assignments that will help people develop their skills Provides direction in correct performance of tasks and assignments

Level 2
Takes time to learn about and understand direct reports; career goals Provides stretch jobs and assignments for direct reports to help them develop their skills

Level 3
Actively coaches direct reports how to get the most learning from their current assignments Gives direct reports candid, thoughtful feedback on their strengths and weaknesses

Level 4
Holds managers accountable for developing people in their group/ organization Identifies key people in his/her organization to assume high-level management responsibilities, and is an advocate for them when opportunities for advancement occur

Critical Incident Example

Employee Name:___________________________________ Date of Incident:__________________ Type of Incident:___________________________________ Individuals Involved: Description of Incident:

Outcome of Incident:

Recommendations:

Date Discussed with Employee:____________ Supervisor Signature:______________________________ Employee Signature: ______________________________

Focus
Time orientation Method

Judgmental
Past performance Improving performance by changing behavior through rewards Judge who appraises

Developmental
Preparation for future performance Improving performance by selflearning & personal growth Counselor who listens, helps, encourages & guides Actively involved in charting future plans

Supervisors Role Subordinates Role

Listener, reactor to, defender of past performance

Criteria for Performance Measures

Relevant Reliable Discriminating Practical

Problems with Performance Measures

Controllability Motivational impact Fallout Role Modeling Impact Reliability Relevance Control

WHO Should Assess Performance

Superior Only Subordinate(s) Peers/Coworkers Self Customers Others

WHEN to Assess Performance

Probation Period Annually (anniversary date, assigned date, set date for all) Semi-annually For Cause On-going As needed

How to Communicate PM Info

Orally In Writing Formally Informally Public Private Moderated

Handling Performance Issues

What to do Where to start How to do it

PROBLEM =
Deviation from expectations Do something differently Not do something Do something not expected/needed

Performance Problems
Research shows that there is a huge performance gap between high and low performers in any organisation between 30%-50% for unskilled jobs and up to 100% for highly technical ones.
From : Why people do not get fired: the psychology of discipline avoidance - http://www.workrelationships.com/site/articles/performance_management.htm

PROBLEM ID
PRELIMINARY SCAN
What shouldnt be happening? Impact of this? Worth pursuing?

ORGANIZATIONAL SCAN
Match strategic plan? Critical functions missing? Culture and performance gaps?

FUNCTIONAL JOB ANALYSIS

Specific job deficiencies? Job knowledge and training?

CAUSAL ANALYSIS
ID: When problem began What else has changed PARETOS LAW: Rule of 20/80 80% of any problem is caused by 20% of possible causes.

CAUSES OF PERFORMANCE PROBLEMS

-Lack of ability -Low motivation -Poor work ethic -Substance abuse -Personal problems -Lack of time -Poor peer relationships -Unfamiliarity with equipment or process

PERFORMANCE OPPORTUNITIES

No/Low Knowledge

High Knowledge

PERFORMANCE OPPORTUNITIES
--OK

Training

Org Development

No/Low Knowledge

High Knowledge

ALTERNATIVE SOLUTIONS
1. Return to old system 2. Fire, transfer, hire new 3. Train 4. Reassign or isolate RATE EACH BY:
-Contribution to Objectives (high, medium, low) -Cost to fix and to ignore (high, medium, low)

RANK IN ORDER

Training & Development

Definition: planned, continuous effort by management to improve employee competency levels and org performance. TRAINING: provide learners with knowledge & skills for job DEVELOPMENT: prepare organization and employees to keep pace with industry and fields of expertise

Skill requirements change with more work complexity Workers more educated Workers more diverse Org restructuring continues Training often outsourced More technology use in Training Training Departments = Brokers J-I-T and J-W-I-N Training Grow Increase on human performance

T & D TRENDS

Factors Influencing T & D

Top management support Commitments from Specialists and Generalists Technological Advances Organizational Complexity Behavioral Science Knowledge Learning Principles Performance of Other Human Resource Functions

TRAINING & DEVELOPMENT METHODS

Coaching Business Games Role Playing In-Basket Training Job Rotation Mentoring Case Studies Videotapes Internships Computer-based

Methods (continued)

Cyberlearning: -Internet/Intranet -Virtual Reality -Distance Learning -Video Conferencing Classroom Programs Corporate Universities Colleges & Universities On-the-Job Training Apprenticeship Training Simulators Vestibule Training

DEVELOPMENT
1. HARDWARE -equipment -people -space -money -transportation

2. SOFTWARE -policies & procedures -reward systems -communication systems -structure 3. BEHAVIORAL -supervision -peer relationships -values & attitudes -personality -individual goals & priorities

EMPLOYEES PERFORMANCE : CATEGORIES AND STRATEGIES

DEADWOOD: No training; demotions or removal; remedial work; training to prevent loss; orientation to lower job; divest WORKHORSES: Training stressing improvement, orientation or maintaining skills; career counseling on limits PROBLEM CHILDREN: Remedial, therapeutic or corrective dev plan; divest STARS: Special effort, programs and funds to maximize value; invest

IMPLEMENTATION PLAN
Priorities Options Budget Development Selection of Methods Plan with Benchmarks Pilot Program Evaluation Adjustments and New Plan Full Implementation On-Going & Periodic Evaluations (Is it working? If no, why not?)

Why PM Is Difficult
Job/Outcomes not quantified Personal relationships with employees Unable to give criticism Personality biases Poor communication Conflicting Goals Playing God

Errors in Performance Measurement

Strictness or Leniency Central Tendency Halo Error Recency Error Supervisor Bias Overall Ratings

Correcting PM Errors
Isolate Job Areas Observe Regularly Minimize Number of Ratings Completed Train Raters Define Dimensions Better Give Feedback Use Continual Feedback Include Other Sources Decrease Generalities, Include Specifics

Effective PM Systems
System acceptable to employees Managers use system regularly & correctly Perception of being treated fairly by system Useful feedback provided Focus on problem solving, not blame Serve to increase productivity & satisfaction System used by organization

Training for PM Interviews

Have documentation Be objective judge job, not individual Use specific examples Share control Make it a year-round process

Training.continued

Solicit & give feedback

-Clear -Constructive -Descriptive, not judgmental

Avoid arguments Strive for consistency Get it down in black and white By-the-book Listen

PRIOR TO PM INTERVIEW
Decide on best time Decide on best place Prepare facilities Gather info and materials Prepare employee Plan the opening Plan the approach Plan the conclusion

After PM Interview
Meet deadlines Solicit input Reinforce, reward, punish (follow through) Review regularly

How to Destroy PM System

Do not follow policies Be inconsistent in application Treat it as unimportant Do not follow-up Reprimand in public; Reward in private Conduct when angry Be late

The WHY of Performance Management Systems

-Administer Salary & Wages -Correct Performance/Behavior -Plan for Future (promotion, transfer, career dev) -Facilitate Decision-Making (counseling, terminations) -Facilitate Human Resource Planning -Create Culture -Building Good Relationships -Increase Organizational Loyalty -Determine Effectiveness of Selection and Placement Methods