Chapter 10

Managing Employees’ Performance

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 What Do I Need to Know? 1

LO 10-1 Identify the activities involved in performance management.

LO 10-2 Discuss the purposes of performance management systems.
LO 10-3 Define five criteria for measuring the effectiveness of a performance
management system.
LO 10-4 Compare the major methods for measuring performance.
LO 10-5 Describe major sources of performance information in terms of their
advantages and disadvantages.

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 What Do I Need to Know? 2

LO 10-6 Define types of rating errors, and explain how to minimize them.
LO 10-7 Explain how to provide performance feedback effectively.
LO 10-8 Summarize ways to produce improvement in unsatisfactory performance.
LO 10-9 Discuss legal and ethical issues that affect performance management.

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 The Process of Performance Management

Performance management requires:

• Knowing what activities and outputs are desired.
• Observing whether the activities and outputs occur.
• Providing feedback to help employees meet expectations.

Benefits:
• Tells top performers they are valued.
• Encourages communication between managers and their employees.
• Establishes consistent standards for evaluating employees.
• Helps the organization identify its strongest and weakest employees.

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 Figure 10.1 Steps in the Performance Management Process

Sources: Based on E. Pulakos, Performance Management (Oxford: Wiley-Blackwell,

2009); H.Aguinis, “An Expanded View of Performance Management,” in
Performance Management, ed. J. W. Smith and M. London (San Francisco:
Jossey-Bass, 2009), pp. 1–43; J. Russell and L. Russell, “Talk Me Through It:
Access the text alternative for slide images. The Next Level of Performance Management,” T + D, April 2010, pp. 42–48.
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 Purposes of Performance Management

Strategic Purpose
• Helps organization achieve business objectives.
• Measurements must be linked to the organization’s goals.

Administrative Purpose
• Ways that organizations use the system to provide information for day-to-day
decisions.

Developmental Purpose
• Basis for developing employees’ knowledge and skills.

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 1
Suppose you are a manager and the performance management
system your company used often created competition among
POLLING QUESTION
team members. How would you address this issue?

😊A. I wouldn’t do anything; competition is good.

❤B. I would make collaboration be one of the criteria for evaluation.
👍C. I would increase the specificity of the feedback I provided.
✌ D. I would focus my review on personality traits, rather than tasks.

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 Criteria for Effective Performance Management

Effective Performance Measures

Fit with strategy: support company’s strategy, goals, and culture.
Validity: measure all relevant aspects of performance and not the irrelevant ones.
Reliability: yield consistent results over time.
• Interrater reliability.
• Test-retest reliability.

Acceptability: accepted by those who use it.

Specific feedback: give specific expectations and methods to achieve goals.

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 Figure 10.2 Contamination and Deficiency of a Job Performance Measure

Access the text alternative for slide images.

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 Methods for Measuring Performance 1

Making Comparisons
Simple ranking: managers rank employees from highest to poorest performer.
• Alternation ranking.

Forced-distribution method: assigns a certain percentage of employees to each

category in a set of categories.
Paired-comparison method: compares each employee with the others to establish
rankings.
Rankings are often not linked to the organization’s goals, and the ranking is open to
interpretation.

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 Methods for Measuring Performance 2

Rating Attributes

Graphic Rating Scale Mixed-Standard Scale

• Lists traits and provides a rating scale
for each trait.
• Employer uses scale to indicate extent
to which employee displays each trait.
• Rating scales are subjective and vary by
employer.
• Uses several statements to describe
each trait.
• Employer scores employee in terms of
how employee compares to
statements.

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 Methods for Measuring Performance
Rating Behaviors
Critical-Incident Method
• Specific instances of effective and
ineffective employee behavior
documented.
• Employees receive feedback about
what they do well and what they do
poorly.
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Behaviorally Anchored Rating Scale
(BARS)
• Builds on critical-incidents.
• Behaviors rated in terms of scale
showing specific statements that
describe behaviors at different levels of
performance.
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 Methods for Measuring Performance
Rating Behaviors continued
Behavioral Observation Scale (BOS)
• A variation of BARS.
• Rating scale includes all critical
behaviors.
• Asks the manager to rate frequency
with which employee has exhibited
each behavior during period.
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Organizational Behavior Modification
(OBM)
• Builds on branch of psychology call
behaviorism.
• Employer provides feedback and
reinforcement to encourage behaviors
that achieve company goals.
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 Methods for Measuring Performance 5

Measuring Results
Productivity: getting more done with smaller amount of resources increases a company’s
profits.
Management by objectives (MBO):
• People at each level of organization set goals in process that flows from top to bottom.
• Employees at all levels contribute to organization’s overall goals.
• Set goals become the standards for evaluating employee performance.
• Three components:
1. Goals are specific, difficult, and objective.
2. Managers work with employees to set goals.
3. Manager gives objective feedback to monitor progress.
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 Methods for Measuring Performance 6

Total Quality Management

Assessment of both individual performance and the system within which the
individual works.
• Yields subjective feedback from managers.
• Yields objective feedback based on work process; obtained from a variety of methods
called statistical quality control.

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 Total Quality Management

ATQM approach to performance

measurement includes subjective feedback
from managers, peers, and customers as
well as objective feedback based on the
work process.

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 Sources of Performance Information

360-Degree Performance Appraisal

Performance measurement that combines information from a variety of sources.
• Managers.
• Peers.
• Subordinates.
• Self.
• Customers.

Results in most complete assessment possible.

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 Customer Feedback

Customer feedback is one source of

information used in performance
appraisals. Other sources include
managers, peers, subordinates, and
employees themselves.

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 Errors in Performance Measurement 1

Types of Rating Errors

Raters tend to give higher evaluations to people they think are similar to themselves.
Contrast error: rater compares individual not against objective standard but against other
employees.
Distributional error: rater uses only part of rating scale.
• Leniency: reviewer rates everyone near top.
• Strictness: reviewer favors lower rankings.
• Central tendency: reviewer rates everyone in middle of scale.
Rater bias: rater lets their opinion of one quality color their opinion of others.
• Halo error: bias causes favorable ratings.
• Horns error: bias causes negative ratings.
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 Figure 10.6 Possible Ratings Errors in Performance Measurement

Access the text alternative for slide images.

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 Bill rates all of his employees very low except for Jan. Bill gives
Jan above average ratings because she consistently comes to
2
POLLING QUESTION
work on time. Bill makes the rating errors of
for his team and of for Jan.

A. leniency; horn.
B. strictness; halo.
C. similar-to-me; central tendency.
D. horn; strictness.

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 Errors in Performance Measurement 2

Ways to Reduce Errors

Raters can be trained to avoid making errors using a variety of methods.
• Rating fictional employees and discussing decisions.
• Studying actual examples of various performances.
• Focusing on complex nature of employee performance.

Data analytics can be used to find patterns.

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 Errors in Performance Measurement 3

Political Behavior in Performance Appraisals

Sometimes raters are political; they distort evaluations to advance their own
personal goals.
Calibration meetings can be used to minimize politics.
• Managers discuss performance ratings and provide evidence supporting their ratings
with goal of eliminating intentional errors.

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 Giving Performance Feedback 1

Scheduling Performance Feedback

Should be a regular, expected management activity.
Beneficial when scheduled frequently.
• Most effective when information does not surprise employee.
• Employees motivated when they know if they are on right track.

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 Giving Performance Feedback 2

Preparing for a Feedback Session When giving performance feedback, do it in an

appropriate meeting place that is neutral and
• Managers and employees should be free of distractions. What other factors are
well prepared for each session. important for a feedback session?

• Managers should ask each employee to

complete a self-assessment ahead of
time.

Ryan McVay/Getty Images

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 Giving Performance Feedback 3

Conducting the Feedback Session

“Tell-and-sell” approach.
• Managers tell employees their ratings and justify those ratings.

Tell-and-listen” approach.
• Managers tell employees their ratings and then let employees explain their own
view.

“Problem-solving” approach.
• Managers and employees work to solve performance problems.

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 Finding Solutions to Performance Problems

The type of action taken depends on what employee lacks.

• Lack of ability.
• Lack of motivation.
• Lack of both.
• Lack of neither.

Employees with high ability and high motivation are generally solid performers.

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 Figure 10.7 Questions for Diagnosing Remedies to Performance Problems

Sources: Based on G. Rummler, “In Search of the Holy

Performance Grail,” Training and Development, April
1996, pp. 26–31; C. Reinhart, “How to Leap over Barriers
to Performance,” Training and Development, January
2000, pp. 20–24; F. Wilmouth, C. Prigmore, and M. Brya,
“HPT Models: An Overview of the Major Models in the
Access the text alternative for slide images. Field,” Performance Improvement 41 (2002), pp. 14–21.
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 Legal and Ethical Issues in Performance Management 1

Legal Requirements for Performance Management

Lawsuits often arise in two areas:
• Discrimination.
• Unjust dismissal.

The Uniform Guidelines on Employee Selection Procedures also apply to

performance measurement.

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 Legal and Ethical Issues in Performance Management 2

Legal Requirements for Performance Management continued

System should be legally defensible.
• Based on valid job analyses.
• Evaluations based on behaviors rather than traits.
• Uses multiple raters whose ratings can be appealed.
• Provides employees with feedback and coaching or training.

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 Legal and Ethical Issues in Performance Management 3

Electronic Monitoring and Employee Privacy

Organizations often store records of employees’ performance ratings, disciplinary
actions, and work-rule violations in electronic databases.
Many companies use computers, sensors, and mobile devices to monitor
productivity and other performance measures electronically.
• Can improve productivity, but raises privacy concerns.
• Electronic systems should not be a substitute for careful management.

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 End of Chapter 10

© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. 32