HRM544

PERFORMANCE
MANAGEMENT

CHAPTER 1
PERFORMANCE
MANAGEMENT AND
REWARD SYSTEMS

Prepared by: Ridhawati Zakaria

1
 Overview
1. Definition of Performance Management (PM)
2. The Performance Management Contribution
3. Disadvantages/Dangers of Poorly Implemented
PM Systems
4. Aims and Role of PM Systems (Purposes of PM
System
5. Characteristics of an Ideal PM System
6. Why Performance Management?
• Integration with Other Human Resources and
Development Activities

Prepared by: Ridhawati Zakaria

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 Performance
• Performance is the achievement of quantified
objectives.
• ‘The accomplishment, execution, carrying out,
working out of anything ordered or
undertaken.’
Oxford English Dictionary

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Factors Influencing Individual Employee’s
Performance

Employee’s
Performance

Knowledge Work
Motivation
And skills Environment

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 Definition of Performance Management

Continuous process of
• Identifying, Measuring and Developing
performance of individuals and teams and
Aligning performance with the strategic goals
of the organization

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 Definition of Performance Management

• The system through which organizations set

work goals, determine performance
standards, assign and evaluate work, provide
performance feedback, determine training
and development needs and distribute
rewards.
(Briscoe and Claus, 2008)

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The Nature Of Performance Management

• Involves a continuing dialogue between

managers and the people they manage.
• The dialogue is based on goal achievement,
performance analysis and constructive
feedback, and leads to performance and
personal development plans.

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 Performance Management
• To establish a high performance culture in which
individuals and teams take responsibility for the
continuous improvement of business processes and for
their own skills and contributions within a framework
provided by effective leadership.

• Its key purpose is to focus people on doing the right

things by achieving goal clarity.

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 Contributions of Performance
Management

For Employees
1. Clarify definitions of
 job
 success criteria
2. Increase motivation to perform
3. Increase self-esteem
4. Enhance self-insight and development

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 Contributions of Performance
Management

For Managers
1. Communicate supervisors’ views of
performance more clearly
2. Managers gain insight about subordinates
3. Better and more timely differentiation
between good and poor performers
4. Employees become more competent

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 Contributions of Performance
Management

For Organization/HR Function

1. Clarify organizational goals
2. Facilitate organizational change
3. Fairer, more appropriate administrative
actions
4. Better protection from lawsuits

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 Contributions of Performance
Management

In Addition:
1.Employee misconduct is minimized
2.Motivation, commitment, and intentions to stay
in the organization are enhanced
3.Voice behavior is encouraged
4.Employee engagement is enhanced

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 Disadvantages/Dangers of Poorly-
implemented PM Systems

For Employees
1.Lowered self-esteem
2.Employee burnout and job dissatisfaction
3.Damaged relationships
4.Use of false or misleading information

Prepared by: Ridhawati Zakaria

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 Disadvantages/Dangers of Poorly-
implemented PM Systems

For Managers
1.Increased turnover
2.Decreased motivation to perform
3.Unjustified demands on managers’ resources
4.Varying and unfair standards and ratings

Prepared by: Ridhawati Zakaria

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 Disadvantages/Dangers of Poorly-
implemented PM Systems

For Organizations
1.Wasted time and money
2.Unclear ratings system
3.Emerging biases
4.Increased risk of litigation

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Aims and Role of PM Systems

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 Overview

1. Strategic
2. Administrative
3. Informational
4. Developmental
5. Organizational maintenance
6. Documentational

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 Strategic Purpose
 Link individual goals with
organization’s goals
 Communicate most crucial business
strategic initiatives

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 Administrative Purpose
 Provide information for making
decisions re:
 Salary adjustments
 Promotions
 Retention or termination
 Recognition of individual performance
 Layoffs

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 Informational Purpose

 Communicate to Employees:
 Expectations
 What is important
 How they are doing
 How to improve

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 Developmental Purpose
 Performance feedback/coaching
 Identification of individual strengths
and weaknesses
 Causes of performance deficiencies
 Tailor development of individual
career path

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 Organizational Maintenance
Purpose
 Plan effective workforce
 Assess future training needs
 Evaluate performance at
organizational level
 Evaluate effectiveness of HR
interventions

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 Documentational Purpose
 Validate selection instruments
 Document administrative decisions
 Help meet legal requirements

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 An Ideal PM System: 15 Characteristics

1. Strategically congruent
2. Contextually congruent
3. Thorough
4. Practical
5. Meaningful
6. Specific
7. Identifies effective/ ineffective performance
8. Reliable
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 An Ideal PM System: 15 Characteristics

9. Valid
10. Acceptable and Fair
11. Inclusive
12. Open (No Secrets)
13. Correctable
14. Standardized
15. Ethical
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 1. Strategically Congruent

• Consistent with organization’s strategy

• Aligned with unit and organizational goals

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 2. Contextually Congruent

• Congruent with the organization’s culture

as well as the broader cultural context of
the region or country
– Example: A 360-degree feedback is not
effective where communication is not fluid
and hierarchies are rigid

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 3. Thorough

• All employees are evaluated

• All major job responsibilities are
evaluated
• Evaluations cover performance for entire
review period
• Feedback is given on both positive and
negative performance

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 4. Practical

• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs

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 5. Meaningful

• Standards are important and relevant

• System measures ONLY what employee
can control
• Results have consequences
• Evaluations occur regularly and at
appropriate times
• System provides for continuing skill
development of evaluators

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 6. Specific

 Concrete and detailed guidance to

employees
 What’s expected
 How to meet the expectations

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 7. Identifies effective and ineffective
performance

• Distinguish between effective and

ineffective
– Behaviors
– Results
• Provide ability to identify employees with
various levels of performance

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 8. Reliable

• Consistent
• Free of error
• Inter-rater reliability

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 9. Valid

• Relevant (measures what is important)

• Not deficient (doesn’t measure
unimportant facets of job)
• Not contaminated (only measures what the
employee can control)

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 10. Acceptable and Fair

• Perception of Distributive Justice

– Work performed  Evaluation received 
Reward

• Perception of Procedural Justice

– Fairness of procedures used to:
• Determine ratings
• Link ratings to rewards
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 11. Inclusive

• Represents concerns of all involved

– When system is created, employees should help with
deciding
• What should be measured
• How it should be measured

– Employee should provide input on performance prior

to evaluation meeting

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 12. Open (No Secrets)

• Frequent, ongoing evaluations and

feedback
• 2-way communications in appraisal
meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest

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 13. Correctable

• Recognizes that human judgment is

fallible
• Appeals process provided

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 14. Standardized

• Ongoing training of managers to provide

• Consistent evaluations across
– People
– Time

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 15. Ethical

• Supervisor suppresses self-interest

• Supervisor rates only where she has
sufficient information about the
performance dimension
• Supervisor respects employee privacy

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Why Performance Management?

Prepared by: Ridhawati Zakaria

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 Integration with other Human Resources and
Development Activities

• PM provides information for:

– Development of training to meet organizational
needs
– Workforce planning
– Recruitment and hiring decisions
– Development of compensation systems

Prepared by: Ridhawati Zakaria

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Performance Management
is NOT
Performance Appraisal

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 PM is NOT PA

• Performance Management
– Strategic business considerations
– Driven by line manager
– Ongoing feedback
• So employee can improve performance

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 PM is NOT PA
• Performance Appraisal
– Driven by HR
– Assesses employee
• Strengths &
• Weaknesses
– Once a year
– Lacks ongoing feedback

Prepared by: Ridhawati Zakaria

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PM is NOT PA

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 PM Around the World

PM used in United States, Mexico, Turkey,

India, Australia, China, and so on

Common across countries: Need to align

individual and organizational goals to enhance
the performance of individuals and groups

Prepared by: Ridhawati Zakaria

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 PM Around the World
(continued)
 Yet, different countries emphasize different
components of PM
• EX 1: PMs in Japan tend to emphasize behaviors to the
detriment of results

• EX 2: The current challenge among many

organizations in South Korea is how to reconcile a
merit-based approach with more traditional cultural
values
Prepared by: Ridhawati Zakaria
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 Quick Review
1. Definition of Performance Management (PM)
2. The Performance Management Contribution
3. Disadvantages/Dangers of Poorly Implemented PM
Systems
4. Aims and Role of PM Systems
5. Characteristics of an Ideal PM System
6. Why Performance Management?
1.Integration with Other Human Resources and
Development Activities

Prepared by: Ridhawati Zakaria

49