Midterm I.
Performance Management
Performance Appraisal
 Process of assessing employee
performance by comparing present
performance with established standards
which have been communicated to
employees prior.
 Provide feedback to employees about their
performance level to improve their
performance as needed by the organization.
Determine Reasons for Evaluating Employee
Performance
1. Provide employee training and feedback.
 Feedback on what employees is doing
right or wrong.
2. Determine salary increase.
 Provide fair basis to determine an
employee’s salary increase.
3. Make promotion decisions.
 Determine which employees will be
promoted.
4. Making termination decisions.
 When performance management
techniques are not successful, this may
suggest that the best course of action is
to terminate the employee.
5. Conducting personnel research.
 Correlate test scores from employment
tests with measure of job performance
validates employment tests.
Determine Who Will Evaluate Performance
 Traditionally, employee performance is
evaluated by supervisors. However,
organizations recently observed that
supervisors see only certain aspects of
employee’s performance and behavior.
o Example: Branch manager may
observe only 30% of a teller’s work
behavior, the rest is observed by
customers, peers, and other personnel
in other parts of the bank.
 360-degree feedback and multiple-source
feedback – use of multiple sources to
appraise performance.
 Supervisors: most common source of
performance appraisal. Though they may
not see every minute of employee’s
behavior, they see the end result.
 Peers: often see the actual behavior. Are
those employees who work directly with the
employee. Peer ratings are fairly reliable
only when these peers are similar to and
well-acquainted with the employee.
 Subordinates: subordinate feedback or
upward feedback is an important
competent of the 360-degree feedback as
they can provide a very different view on
supervisor’s behavior. Can be difficult to
obtain because they fear backlash if they
rate supervisors unfavorably.
 Customers: provide feedback by filing
complaints or complimenting a manager.
Done upon completion of evaluation cards.
Select Best Appraisal Methods
 Two important decisions made prior to
developing instrument:
1. Focus on the appraisal dimensions.
 Appraisal dimensions can focus on
traits, competencies, task types, and
goals.
 Trait-Focused Performance
Dimensions – employee attributes.
 Task-Focused Performance
Dimensions – organized by the
similarity of tasks that are performed.
 Competency-Focused Performance
Dimensions – employee’s knowledge,
skills, and abilities.
 Goal-Focused Performance
Dimensions – on basis of goals to be
accomplished.
2. Use of employee comparisons,
objective measures, or ratings.
 Evaluate performance by comparing
employees with each other.
o Ranking method – reduce
leniency, employees are compared
with one another instead of being
rated individually on a scale. The
easiest is rank order.
o Paired comparison method –
involves comparing each possible
pair and choosing which one of
each pair is the better employee.
o Forced distribution method –
predetermined percentage of
employees are placed in each of
the five categories.
 Use objective measures (objective or
hard criteria). Common types include
quantity of work, quality of work,
attendance, and safety.
 o Graphic rating scale – Likert
scale, ratings can include 1-10;
excellent, average, poor; or
satisfactory, unsatisfactory.
o Behavioral rating scale –
checklist containing a list of
behaviors, expectations or results
for each dimension.
Frame of reference – training provides
raters with job-related information, practice in
rating, and examples of ratings made by experts and
its rationale. It increases rater accuracy and reduce
rater errors.
Observe and Document Performance
 Next step is for supervisors to observe
employee behavior and document critical
incidents as they occur.
o Critical incidents – examples of
excellent and poor employee
performance. Must be communicated
to employee at the time it occurred.
 Importance of documentation
o It forces a supervisor to focus on
employee behavior rather than
traits.
o It helps supervisors recall behaviors
when they are evaluating
performance.
o It provides examples to use when
reviewing performance ratings with
employees.
o It helps an organization defend
against legal actions taken by
employee.
 Common sources of error when not
documenting
o First impressions
o Recent behaviors
o Unusual or extreme behaviors
o Behavior consistent with
supervisor’s opinion
Problems and Pitfalls in Performance Appraisal
 Remains very subjective.
 Prone to a number of systematic biases and
distortions.
o Distributional error – rater rates
everyone the same.
o Leniency error – rater gives all
workers very positive performance
appraisals.
o Severity error or Strictness error –
rater gives all workers very negative
performance appraisals.
o Central tendency error – rater
gives all workers midpoint rating in
performance appraisals.
o Halo effect – an overall positive
evaluation of a worker based on one
known positive characteristic or
action.
o Recency effect – give greater
weight to recent performance and
lesser weight on earlier performance.
Termination of Employees
 4 reasons an employee can be legally
terminated:
1. Probationary period – employees are
given probationary period to prove that
they can perform well. Most last 3-6
months.
2. Violation of company rules
3. Inability to perform – organization will
need to prove that employee cannot
perform the job.
4. Reduction in force (Layoffs) – if it is in
the best economic interest of an
organization.
 Transfer, promotion, demotion, separation
 Voluntary separation or resignation or
quit is the termination of employment
initiated by employee.
 Involuntary separation or dismissal is the
termination by employer. Following
causes:
o Severe misconduct
o Habitual neglect of employee of his
duties
o Fraud
o Crime against employer
Midterm II. Leadership
Leadership
 Influencing, motivating, and enabling
others to contribute towards
effectiveness and success in
organization.
Leader Emergence
 Part of Trait theory.
 Postulates that certain types of people
will become leaders and certain types
will not.
 Leader Performance
 Idea that leaders who perform well
possess certain characteristics that
poor-performing leaders do not.
Theoretical Approaches to Leadership
1. Trait Approach
 Leadership best understood in terms of
traits held by an individual that are
accountable for the observed
leadership.
2. Behavioral Approach
 Leadership best understood in terms of
action taken by individual when
leading a group.
3. Power and Influence Approach
 Leadership best understood by the use
of power exercised by a person with a
group.
4. Leader-Member Exchange Theory
 Leadership based on mutual influence
they have on employees.
o In-group: members are those
with competence and skill.
o Out-group: members without
such attributes.
Types of Power
1. Reward power – to offer incentives for
desirable behavior.
2. Coercive power – to punish an employee
for undesirable behavior.
3. Legitimate power – authority.
4. Expert power – expertise in given areas.
5. Referent power – abstract type of power;
someone referred to as having personal
qualities of a leader.
Path Goal Theory of Leadership
 Based on Expectancy Theory of
Motivation.
 Relates several leadership styles to
specific employee and situational
contingencies.
 Advocates servant leadership.
o Leader behaviors – directive,
supportive, participative, achievement-
oriented.
o Employee contingencies – skills and
experience, locus of control.
o Environmental contingencies – task
structure, team dynamics.
o Leader effectiveness – employee
motivation, employee satisfaction,
leader acceptance.
 Styles of Path Goal Theory
o Instrumental Style – leader plans and
organizes activities for employees.
o Supportive Style – leader shows
concern for employees.
o Participative Style – leader allows
employees to participate in decision
making.
o Achievement-oriented style – leader
sets challenging goal and rewards
achievement.
Other Contingency Theories
1. Situational Leadership Theory
 Hershey and Blanchard
 Effective leaders vary their styles with
readiness of followers.
2. Fiedler’s Contingency Model
 Fred Fiedler
 Leader effectiveness depends on
whether person’s natural leadership
style is appropriately matched to
situation.
3. Leadership Substitute
 Identifies conditions that limit a
leader’s ability to influence
subordinates.
Types of Leadership
1. Transformational Leadership – process of
inspiring a group to pursue goals and
attain results.
2. Charismatic Leadership – product of
charisma; a trait that inspires confidence in
others to support ideas of the charismatic
leader.
3. Implicit Leadership Theory – leadership is
a perceived phenomenon as attributed to
an individual by others.
4. Authentic Leadership Theory – leaders
should be honest, lead out of a desire to
serve not for self-gain.
5. Theory Y or Person-oriented Leaders –
warm and supportive manner, show
concern for subordinates. Employees are
intrinsically motivated, seek responsibility
and self-controlled.
6. Theory X or Task-oriented Leaders – high
in initiating structure. Define their roles
and roles of their subordinates. Employees
 are extrinsically motivated, lazy, and
undisciplined.
Midterm III. Motivation
Intrinsic Motivation
 Motivation in absence of external factors
such as pay, promotion, and co-workers.
 Personal factors.
Extrinsic Motivation
 Arise from non-personal factors such as
pay, co-workers, and promotion.
Need-based Theories of Motivation
1. Needs Hierarchy Theory
 Abraham Maslow
 From bottom to top: Physiological
needs, Safety and Security needs, Love
and Belongingness needs, Esteem
needs, and Self-actualization needs.
 As person satisfies lower-level need,
the next higher need becomes the
primary motivator, known as
satisfaction-progression process.
2. ERG Theory
 Clayton Alderfer
 Overcome problems with Maslow’s
hierarchy of needs.
 Existence needs, Relatedness needs,
Growth needs
o Existence needs – person’s
physiological and physically-
related safety needs (food,
shelter, safe working
conditions).
o Relatedness needs – person’s
need to interact with other
people, receive public
recognition, and feel secure
around people.
o Growth needs – person’s self-
esteem through personal
achievement.
 Satisfaction-progression process
 Frustration-regression process –
those who are unable to satisfy a
higher need become frustrated and
regress to next lower need level.
3. Innate Human Drives
 Four fundamental drives by Paul
Lawrence and Nitkin Nohria
1. Drive to acquire – drive to seek,
take, control, and retain objects
and personal experiences. Extends
physiological needs, includes need
for relative status. Purpose of
human motivation is to achieve a
higher position than others.
2. Drive to bond – drive to form
social relationships. It motivates
people to cooperate, thus, a
fundamental ingredient in success
of organizations.
3. Drive to learn – satisfy one’s own
curiosity. Something we don’t
know gives us tension that
motivates us to close information
gap. Related to higher order needs
of growth.
4. Drive to defend – drive to protect
ourselves. Creates a fight-or-flight
response in face of danger. It is
always reactive, triggered by
threat.
4. Theory of Learned Needs
 David McClelland
 3 secondary needs that are considered
particularly important sources of
motivation:
1. Need for Achievement (nAch) – to
accomplish reasonably challenging
goals through their own effort.
Prefer to work alone than in teams.
2. Need for Affiliation (nAff) – to
seek approval from others,
conform to their expectations, and
avoid conflict. Desire to form
positive relationships with others.
3. Need for Power (nPw) – to control
one’s own environment.
Concerned about maintaining
leadership position.
5. Two-Factor Theory
 Hygiene factors – job-related elements
that result from but do not involve job
itself.
o Pay, security, co-workers,
working conditions, company
policy, work schedule, company
policy, working conditions,
supervisors.
 Motivators – job elements that do
concern actual tasks and duties.
 o Level of responsibility, amount
of job control, interest in work,
challenge, variety,
independence.
6. Expectancy Theory
 Victor Vroom
 Motivation is a function of:
o Expectancy – perceived
relationship between the
amount of effort employee
exerts and result.
o Instrumentality – extent to
which outcome of a worker’s
performance results in a
consequence.
o Valence – extent to which
employee values a particular
consequence.
7. Theory X and Theory Y
 McGregor
 Theory X – employees dislike
working.
 Theory Y – employees like working.
 Participative decision making –
decision-making model in which
people involved in implementing a
decision are also involved in making
it.
 Quality circles – form of participative
decision making involving regular
meetings of supervisors and
employees.
8. Equity Theory
 Fair balance to be struck between an
employee’s input (hard work, skill
level, acceptance, enthusiasm) and an
employee’s outputs (salary, benefits,
recognition).
9. Goal Setting Theory
 Clarity – clear goal = easy to
understand what you need to achieve.
 Challenge – motivating goals =
challenging goals.
 Commitment – commit to the goal.
 Feedback – receive feedback for goal
to continuously motivate.
 Task complexity – goal must not be
complex.
Type of Incentive
 Different employees, different values.
 Supervisors should have access to
administer different types of reinforcers.
Premack Principle
 States that reinforcement is relative.
Supervisor can reinforce an employee with
something that does not appear to be a
reinforcer on the surface.
o Financial rewards
o Recognition
o Travel
Individual incentive plans are designed to make
high levels of individual performance financially
worthwhile.
 Pay for performance – pay employees
according to how much they individually
produce.
 Merit pays – base on performance
appraisal scores.
Group incentive plans are profit sharing, gain
sharing, stock options.
 Reward and punishment
Exit Interview
 An organized discussion between a
company representative and an employee
choosing to leave the company. Exit
interviews include questions about the
employee’s experiences during their time
working with the company and provide a
point of closure for both parties.
 Gain insight into why people are deciding
to leave the organization and contribute to
offering a solution.
Hawthorne Effect
 Employees attempt to change or improve
their behavior simply because it is being
evaluated or studied.
The Vroom–Yetton decision model is a situational
leadership theory that suggests that the best
leadership style is subject to the situation.
 employee for the purpose of the mentee’s
growth, learning, and career development. 
 Modeling – employees learn by watching
how other employees perform.
 Executive coaching – involves professional
and personal development of the
executives.

 Autocratic (A1) – use existing information

for decision-making without any input
from the team.
 Autocratic (A2) – specific information
from team is acquired for decision-making.
Final decision is taken by leader which may
or may not be shared with the team.
 Consultative (C1) – acquire information
from team members individually before the
leader makes a decision.
 Consultative (C2) – where leader gathers
group for discussion but makes final
decision.
 Collaborative (G2) – requires group to
make collaborative decision, leader
supports team.

Quality Management System

 To ensure an organization is providing
consistent products or services.
o Quality planning – identify goals
and baseline. Determine what quality
standards would be, requirements to
meet the standards, and procedures
to be used.
o Quality control – process of
physically testing and inspecting
what was laid out in planning.
o Quality assurance – reviewing.
Confirm that everything is operating
as it was agreed upon.
o Quality improvement – make
necessary changes for the
betterment of product or service
offered.

Work Relationship
 Mentoring – is a reciprocal and
collaborative at-will relationship that most
often occurs between a senior and junior