Performance Management

Measuring and managing performance is a

challenging enterprise and one of the keys to
gaining competitive advantage.

Purposes of Performance
Management

Introduction
Performance

management is the process through

which managers ensure that employee activities
and outputs are congruent with the organization's
goals.
Performance Appraisal is the process through
which an organization gets information on how
well an employee is doing his or her job.
Performance Feedback is the process of
providing employees information regarding their
performance effectiveness.

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Competing Through Globalization

The Transition from Expatriates to Local Talent
Western business techniques, the goal of many foreign
operations is to turn over control to local managers.
Performance management plays an important role in
keeping expatriate performance expectations realistic and
providing goals against which their performance can be
evaluated.
Performance management is also important for determining
whether the expatriate has successfully developed and
prepared local staff members to take over the operations.

Performance Management Systems serve three (3) objectives:

Strategic
Administrative

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Developmental

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Performance Measures Criteria

A performance measurement system should be
evaluated against the criteria of:

In

Strategic congruence

Specificity

Acceptability
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Validity

Reliability
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Strategic congruence
is the extent to which the
performance-management system elicits
job performance that is congruent with
the organization's strategy, goals, and
culture.
Example: If a regional bank decides
to become known as the hallmark of
customer service, then the branch
managers and tellers should have
performance measurements focused
on customer relations.

Validity

This

Strategic
congruence

Validity is the extent to which the

performance measure assesses all
the relevant, and only the relevant,
aspects of performance. It is also
called "content validity."

1. Validity is concerned with maximizing the overlap

between actual job performance and the measure of job
performance (Figure 8.2).
2. A performance measure is deficient if it does not
measure all aspects of performance.

Validity
Example:
A company's performance
measure for managers is
deficient because it does not
measure such aspects of
managerial performance as
developing others or social
responsibility.

Validity
Validity

3. A contaminated measure evaluates

irrelevant aspects of performance
or aspects that are not job related.
Example:
A company's performance
measure would be contaminated
if it evaluated its managerial
employees based on how
physically attractive they were.

Reliability

Interrater reliability is the consistency among

the individuals who evaluate the employee's
performance. Example: 360 degree feedback
With some measures, internal consistency
reliability is important. This is the extent to
which all of the items rated are internally
consistent.
The measure should be reliable over time
(test-retest reliability).

Validity

Acceptability

Reliability refers to the consistency of

the performance measure.

Validity

Reliability

Acceptability

Acceptability refers to whether

the people who use the
performance measure accept it.
It is affected by the extent to
which employees believe the
performance management
system is fair. (Table 8.3)

Specificity

Reliability

Specificity is the extent to which the

performance measure gives specific
guidance to employees about what is
expected of them and how they can meet
these expectations.
Example:
Paula, a sales representative for a brokerage firm,
is expected to record 25 cold calls per day and
call each client on her books every two weeks.
She is also expected to make sales of at least
$30,000 per month to remain in her position.

Criteria for Evaluation

A performance measurement system should
be evaluated against the criteria of:
strategic congruence,
validity,
reliability,
acceptability, and
specificity.

Approaches
Measured against the criteria, the
comparative,
attribute,
behavioral,
results, and
quality approaches
have different strengths and weaknesses.
Thus, deciding which approach and which source of
performance information are best depends on the job in
question.

The Comparative Approach

Ranking
Simple

ranking ranks from highest to lowest performer.

ranking - crossing off best and worst
employees.

Alternation

Forced

distribution

Employees

Paired

are ranked in groups.

comparison

Managers

compare every employee with every other

employee in the work group.

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The Attribute Approach

Evaluating the Comparative Approach

The

comparative approach provides an effective tool when

the major purpose is to differentiate employee performance;
it virtually eliminates problems of leniency, central
tendency, and strictness; it is relatively easy to develop and
use; and it is often considered acceptable by the users.
Comparative-approach techniques are not linked to the
strategic goals of the organization; the validity and
reliability depend on the raters themselves due to the
subjective nature of the ratings, and they lack specificity for
feedback purposes.
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Graphic

rating scales

list of traits is evaluated by a fivepoint rating scale.

Legally questionable.
Mixed-standard

scales

Define

relevant performance dimensions

and then develop statements
representing good, average, and poor
performance along each dimension.

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Evaluating the Attribute Approach

Behavioral Approach

approach methods are the most popular methods,

are easy to develop, and are generalizable across a variety
of jobs and organizations. They can be as reliable and
valid as more elaborate techniques if attention is devoted
to attrib-utes that are relevant to job performance.
There is usually little strategic congruence between the
attribute approach methods and the company's strategy;
they usually have very vague standards that result in low
validity and reliability; and when raters give feedback,
these techniques tend to elicit defensiveness from
employees.

Critical

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Attribute

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incidents approach - requires managers to keep

record of specific examples of effective and ineffective
performance.
Behaviorally anchored rating scales (BARS) (text
Figure 8.3).
Behavioral

observation scales (BOS) (text Table 8.7).

behavior modification - a formal
system of behavioral feedback and reinforcement.
Assessment centers - multiple raters evaluate
employees performance on a number of exercises.
Organizational

Results Approach

Evaluating the Behavioral Approach

The

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behavioral approach can link the company's strategy to

specific behaviors; it provides specific feedback; its
dimen-sions are usually job relevant, which leads to
validity.
Since people using the system are involved in developing
the measures, the acceptability is high, and with appropriate
training the techniques are reasonably reliable.
The major weaknesses have to do with the organizational
context of the system. The behaviors must be constantly
monitored to ensure they are linked to the corporate
strategy, and the approach is not suited for complex jobs
where there are multiple ways to achieve success.

Management

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results approach minimizes subjectivity, is highly

acceptable to both managers and employees, and links an
individual's results with the organization's goals.
Objective measurements used in the results approach can
be both contaminated and deficient; individuals may
focus only on aspects of their performance that are being
measured; and the feedback may not help employees
Hierarchy
learn how they need to change.

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Goals

management passes down

companys strategic goals to next
layer of management, and these
managers define the goals they must
achieve.

Productivity

Measurement and
Evaluation System (ProMES)

Hierarchy

goal

is to motivate employees to
higher levels of productivity.

Evaluating the Results Approach

The

by objectives

top

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Quality Approach
A

performance management system designed with

a strong quality orientation can be expected to:
Emphasize

an assessment of both person and system

factors in the measurement system.
Emphasize that managers and employees work together
to solve performance problems.
Involve both internal and external customers in setting
standards and measuring performance.
Use multiple sources to evaluate person and system
factors.
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Quality Approach (cont.)

Statistical

process quality control

techniques used:
Process-flow

Evaluating the Quality Approach

analysis
diagrams

Cause-and-effect
Pareto

chart
chart
Histogram
Scattergram

Control

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The quality approach relies primarily on a combination

of the attribute and results approaches to performance
measurement. The quality approach adopts a
systems-oriented focus in which traditional
performance systems focus on individual employee
performance.
Some companies would not like the idea that quality
performance appraisals are not tied to compensation.
The quality approach advo-cates evaluation of personal
traits that are difficult to relate to performance unless
the company uses a work-team structure.

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Sources for Performance

Information

Organizational Sensitivity
managers need to be aware
of the issues involved in determining
the best method or combination of
methods for their particular situations.

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Effective

Supervisors

Customers

Peers

Self
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Rater Errors in Performance

Measurement
to me
Contrast
Distributional
errors
Halo and horns

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Reducing Errors and Appraisal

Politics
Two

Similar

Subordinates

Approaches to reducing rater error:

Rater
Rater

error training
accuracy training

Appraisal

politics - a situation in which evaluators

purposefully distort ratings to achieve personal or
company goals.

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Improving Performance Feedback

Feedback

Managing Performance of Marginal

Performers

should be given every day, not once a year.

the Right Context for Discussion.
Ask employees to rate their performance before the
session.
Encourage the subordinate to participate in the session.
Recognize effective performance through praise.
Focus on solving problems.
Focus feedback on behavior or results, not on the
person.
Minimize criticism.
Agree to specific goals and set a date to review progress.

Solid

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Create

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performers

High

ability and motivation; managers should provide

development opportunities

Misdirected

effort

Lack

of ability but high motivation; managers should focus on

training

Underutilizers
High

ability but lack motivation; managers should focus on

interpersonal abilities

Deadwood
Low

ability and motivation; managerial action, outplacement,

demotion, firing.
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Following Legal Guidelines

Conduct

a valid job analysis related to

performance.
Base system on specific behaviors or results.
Train raters to use system correctly.
Review performance ratings and allow for
employee appeal.
Provide guidance/support for poor performers.
Use multiple raters.
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