M-VIII PERFORMANCE MANAGEMENT

Dr Arpita Shrivastava
What's new….
• In the last decade, performance management has seen a tectonic shift from annual
to continuous systems.

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Now, we are inching closer to a highly integrated environment where
performance management feeds into and from all other talent decision-making tools
active in the organization.

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Performance Management System
MEANING, CONCEPT AND IMPORTANCE

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3 Step Strategies for Performance Management

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Opening Case example
• With over 100,000 employees in 36 countries on five continents,
administering employee appraisals and managing performance is a
complicated process in a company like TRW Automotive Holdings Corp.

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• With global competition, TRW’s top management knew it had to take
steps to make the firm more competitive and performance driven.

• At the time, TRW had a traditional, paper-based employee appraisal

system, and most of the firm’s far-flung departments even used their own
appraisal systems.

• As they reviewed what had to be done next, top management decided

that a company-wide performance appraisal management system was
what company required badly. 6
 Performance Management Meaning
Performance
• The action or process of performing a task or function.
Performance appraisal

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• Evaluating an employee’s current and/or past performance relative to his/her
performance standards.
Performance appraisal process
A three-step appraisal process involving-
• Setting Work Standards Or Goals,
• Assessing The Employee’s Actual Performance Relative To Those Standards,
• Providing Feedback To The Employee With The Aim Of Helping To Eliminate
Performance Deficiencies.
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 Performance Management Meaning
Performance management (Definition)
• The continuous process of identifying, measuring and developing the
performance of individuals and teams and aligning their performance with the
organization’s goals.

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Why…?
• To decide employers base pay, promotion, and retention decisions.
• Employer’s performance management process – aligning company’s overall
goals.
• Let managers and subordinates develop a plan for correcting any deficiencies
and to reinforce those deficiencies.
• Provides an opportunity to review the employer’s career plans in light of
his/her exhibited strengths and weaknesses.
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• Opportunity to communicate expectations and identify training needs.
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Importance of Performance
Management
A TALENTED AND SKILLED WORKFORCE IS THE LIFEBLOOD OF EVERY
ORGANIZATION.
For fast growing companies-

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1. Set goals: Explain to the team what excellent performance is.
2. Involve Employees in the Planning Stage
3. Develop accountable people: Engage employees.
4. Ensuring All round Development of Employees
5. Evaluation of Individual Performance
6. Managers who lead: Develop leadership and coaching skills.
7. Organisational transparency: Encourage performance improvement.
8. Give credit where it’s due: Incentivise accomplishment.
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2. Performance Appraisal Methods 12
Performance Appraisal Methods
1. Peer Appraisals
• Appraisal of an employee by his/her peers. It can be effective.
• Study – involved undergraduates placed into self-managing work groups.

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Results observed that peer appraisals had “an immediate positive impact
on improving perception of open communication, task motivation, social
reinforcement, group viability, cohesion and satisfaction”.

2. Rating committees
• Usually consists of the employee’s immediate supervisor and 3-4 other
supervisors.
• Using multiple raters is added advantage, helps to remove bias, different
facets of an employee’s performance observed by different appraisers. 13
Performance Appraisal Methods
3. Self rating
• some employers obtain employee’s self-ratings in conjunction with
supervisor’s ratings.
• Problem- employees usually rate themselves higher than do their supervisors

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or peers.
• Studies observed that – self ratings correlated negatively with their
subsequent performance.

4. Appraisal by Subordinates
• Subordinates rating their managers, usually for developmental rather than for
pay purposes.
• Anonymity affects the feedback.
• Studies observed that manager who were initially rated poor or moderate
“showed significant improvements in their upward feedback ratings over the 14
five-year period”.
Performance Appraisal Methods
5. 360-Degree Feedback
• Also known as multi-rater feedback, multi source feedback, or multi source
assessment.
• With 360-degree feedback, the employer collects performance information all

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around and employee-
• Supervisors, subordinates, peers and internal and external customers
• Raters complete online ratee appraisal surveys
• Computerized systems compile this feedback into individualized reports.
• Results are mixed, many employers prefer this approach.
• Varies slightly from company to company. Involves steps-
• Communicating 360 Facilitating feedback
• Selecting raters Completing development plan
• Distributing surveys Re-evaluating
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• Completing questionnaires
• Producing reports
Ideal for:
Private sector organizations than public sector organizations as peer reviews at public
sector organizations are more lenient.

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Common reason for failure:
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Leniency in review, cultural differences, competitiveness, ineffective planning, and misguided
feedback
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Performance Appraisal Methods
6. Graphic Rating Scale Method
• Lists several job dimensions (such as “communication” or “teamwork”) and a
range of performance values (from “below expectations” to “role model” or
“unsatisfactory to outstanding”).

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• The supervisor rate each subordinate by circling or checking the score that
best describes the subordinate’s performance for each trait and total ratings.

• Competency based graphic rating forms are another option.

• To assess how well the employee did in developing and exercising each of
these skills.

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Sample Performance
Rating Form

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Sample
Competencies and
Goal based approach
form

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Performance Appraisal Methods
7. Alteration ranking method
• Ranking employees from best to worst on a particular trait, choosing highest
then lowest until all are ranked.

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Performance Appraisal Methods
8. Paired Comparison method
• Ranking employees by making a
chart of all possible pairs of the
employees for each trait and

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indicating which is the better
employee of the pair.

• Makes ranking method more

precise.

• Compare every employee with

every other employee.
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Performance Appraisal Methods
9. Forced Distribution Method
• Similar to grading on a curve. (Bell Curve)
• Here, the manager places predetermined percentages of rates into performance
categories.

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• At the top 15% rated are “1”.
• Middle 75% are “2”.
• Bottom 10% are “3”.

E.g. GE used this vitality curve

20% (top), 70% (middle), 10%
(bottom).

Bottom 10% lost their jobs. 23

Performance Appraisal Methods
10. Critical incident method
• Here the supervisor keeps a log of positive and negative examples (critical
incidents) or a subordinate’s work behaviour.
• Every six months or so, supervisor and subordinate meet to discuss the latter’s

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performance, using incidents as examples.

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11. Narrative forms

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Performance Appraisal Methods
12. Behaviourally Anchored Rating Scales (BARS)
• An appraisal method that aims at combining the benefits of narrative critical
incidents and quantified ratings by anchoring a quantified scale with specific
narrative examples of good and poor performance.

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• Steps-
• Write critical incidents
• Develop performance dimensions
• Reallocate incidents
• Scale the incidents
• Develop a final instrument

• Each performance level on a BAR scale is anchored by multiple BARS statements which describe common
behaviors that an employee routinely exhibits. These statements act as a yardstick to measure an individual’s 26
performance against predetermined standards that are applicable to their role and job level.
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Source - Behaviorally anchored rating scale (Smith & Kendall, 1963).

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Performance Appraisal Methods
13. Management by Objectives (MBO)
• It is a multi-step wide goal setting and appraisal program.
• MBO requires managers to set specific measurable, organizationally relevant goals with
each employee and periodically discuss the subordinates progress towards these goals.

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Steps-
• Set the organization’s goals
• Set departmental goals
• Discuss departmental goals
• Define expected results (set individual goals)
• Conduct performance reviews
• Provide feedback

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Example of MBO

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Retail giant Walmart, uses an extensive MBO participatory approach to 30
manage the performance of its top, middle, and first-line managers
Performance Appraisal Methods
14. Electronic Performance monitoring (EPM)
• Supervisor electronically monitor the amount of computerized data
an employee is processing per day, thereby his/her performance.

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• Monitor the employees’ rate, accuracy and time spent working
online.

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3. Challenges and Failures of
Performance management System

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Potential Rating Problems
1. Unclear Standards
• An appraisal that is too open to interpretation. Might result in unfair
appraisal, because the traits and degrees of merit are ambiguous.
• E.g. supervisor might define “good performance”, “fair performance”

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and so on differently.

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Potential Rating Problems
2. Central Tendency
• Rating all employees average.
• E.g. rating scale 1 to 7, raters tend to avoid highs (6 and 7) and lows (1 and 2) and
rate most of the people between 3 and 5.

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3. Leniency or Strictness
• The problem that occurs when a supervisor has a tendency to rate all
subordinates either high or low.
4. Bias
• The tendency to allow individual differences such as age, race and gender to
affect the appraisal ratings employees receive.
5. Halo Effect
• The influence of rater’s general impression on ratings of specific traits or
personality characteristics of ratee. (E.g. friendly, aggressive, get along with
others). 36
4. Shift from performance management systems to
real time feedback systems

o Real-time feedback creates opportunities for learning and

improvement.

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o A culture of feedback allows managers to recognize top
performers and provide course correction early.
o This way, employees get immediate feedback and can
improve more quickly.

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Benefits of Real-time feedback
1. Build a culture of transparency and trust
2. Improve employee performance
3. Increase motivation by offering recognition and encouragement

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4. On-board new employees more quickly and efficiently
5. Increase the quality and accuracy of performance data
6. Build the capabilities of managers
7. Encourage peer coaching and knowledge sharing
8. Reduce the amount of time required to prepare for formal
performance reviews

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Case Examples

FROM ANNUAL TO CONTINUOUS 39

Adobe Introduced Continuous performance Manage
ment in Place of Performance Appraisals

• Abandoned annual performance appraisals back in 2012

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• They felt that while they were evolving as a global company, their performance
management system was archaic and ineffective. It was a waste of time and
had, ultimately become a box-ticking exercise.
• Adobe estimated annual appraisals consumed 80,000 management hours each
year. This was the equivalent of nearly forty full-time employees working
year-round.
Adobe replaced annual appraisals with regular one-on-one check-ins, supported by frequent feed
back — both positive and constructive. There are no performance ratings or rankings and they allow
different parts of the organisation to determine how frequently they should hold check-in conversa
tions, based on their work cycles. Now that forced ranking has been abolished, employees at Adobe
are assessed based on how well they meet their goals. Managers are also trained on the nuances of
giving and receiving feedback.

The result has been a marked increase in employee engagement, with voluntary turnover decreasing 40
by 30% since check-ins were introduced. This makes Adobe a performance management case study
we should all be aware of.
Deloitte Saved 2 Million Working Hours per
Year with Weekly Employee Check-Ins

• In 2015, Deloitte was the first big name to announce it was scrapping

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once-a-year performance reviews, 360-degree feedback and objective
cascading.
• This change occurred after the company calculated these processes were
consuming a remarkable two million hours a year across the organisation.
Deloitte’s new performance management process requires every team leader to check in with each
team member once a week to discuss near-term SMART goals and priorities, comment on recent
work and provide coaching. The check-ins are initiated by the team members, rather than the team
leaders to ensure these check-ins take place frequently. This also serves to give employees a sense
of ownership over their work, role and time.

These weekly employee check-ins are supported by quarterly reviews when team leaders are asked
to respond to four future-focused statements about each team member. Rather than asking team lead 41
ers what they think of the team member — which is what traditional performance ratings do — they ask
what the team leader would do with the team member.
 General Electric (GE) Put an End toForced Rank
ing performance Management
• Under the reign of its former CEO, Jack Welsh, General Electric was the most
well-known proponent of annual performance ratings and forced distribution
curves.

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• For decades, GE operated a “rank and yank” system, whereby employees were
appraised and rated once a year. Afterwards, the bottom 10% were fired. Not exact
ly a recipe for employee engagement! Such an environment is a breeding ground
for unhealthy competition, reduced teamwork and employee burnout.
In 2015, under CEO Jeff Immelt, GE announced it was replacing this approach with frequent feed
back and regular conversations called”touchpoints” to review progress against agreed near-term goals.
This new approach was supported by an online and mobile app, similar to our own Clear Review perfor
mance management tool, which enables employees to capture progress against their goals, give their
peers feedback and also request feedback.

Managers will still have an annual summary with employees, looking back at the year and setting goals. 42
But this conversation is more about standing back and discussing achievements and learnings, and
much less fraught than annual reviews.
Accenture Abandoned Ratings for perfor
mance Development
• As of September 2015, Accenture, one of the largest
companies in the world, disbanded its former ranking and

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once-a-year evaluation process. Like GE, Accenture has
decided to put frequent feedback and conversations at
the heart of its new process and focus on performance
development, rather than performance rating.

As Accenture’s CEO, Pierre Nanterme, stated at the time “It’s huge, we’re
going to get rid of probably 90 per cent of what we did in the past.”
As Ellyn Shook, Chief HR Officer at Accenture, stated:“Rather than taking
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a retrospective view, our people will engage in future-focused conversa
tions about their aspirations, leading to actions to help them grow and
progress their careers.”
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TRENDS IN PERFORMANCE APPRAISAL 44
5 Trends That Will Performance Management in
2020
1. Companies will prioritize the quality and impact of performance management
processes over efficiency

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According to Gartner, 67% of organizations aim to reduce the time and effort spent on
performance management.
• In a survey of 9,438 people (work email needed), Gartner found that 82% of HR leaders
agree about the ineffective nature of existing performance practices. Most leaders focus on
reducing time and effort on performance management, but this largely counterproductive.
• Gartner found that prioritizing effort reduction can bring down workforce performance by
16.6%!

- The trend should be employee-centric experience. ( adopting software that offers an

engaging experience for both managers and employees, generating feedback that is most
relevant to work and adds genuine value to employee performance and productivity.)
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2. Performance management software will be integrated with other talent
decision-making tools
• According to Mercer, 70% of companies want to strengthen the link between
performance management and other talent decisions.
• Mercer’s 2019 survey of 1,154 HR leaders highlighted the need to link
performance management and talent decisions more closely. Like

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Gartner’s prediction, the survey questions the value-generating capabilities of
existing processes. In fact, only 2% of companies feel that their performance
management approach is geared for value.

- The new trend should be single source of employee data informs every
talent decision. Feedback, learning & development, career progression,
succession planning, and even recruitment could form a part of this new talent
“ecosystem.”

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3. Coaching feedback, as opposed to critical feedback, will be instrumental in 2020
According to Gallup’s analytics and the company’s work with Stanford University,
current approaches to feedback lower performance approximately one-third of the time.
Gallup’s internal analytics revealed that only 14% of employees strongly agree that
they are inspired by typical performance reviews. In contrast, a weekly system where

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managers regularly coach employees is far more effective. In a weekly feedback
system, employees are 2.7X more likely to be engaged and 3.2X more likely to be
motivated.

- The trend should be strength-based performance management rather than critical

feedback shared once a year

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4. “Continuous” will be the new normal, calling for agile performance
management systems
According to BetterWorks, companies that switched to continuous performance
management outperform their competitors by 24% – agile systems are critical to this
transformation.

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66% of companies who leverage continuous performance management are able to
boost productivity all year long, compared to just 35% of those who don’t. In
fact, BetterWorks’ survey of 500 respondents revealed that a continuous model helps
companies perform better in several areas, including enterprise agility (47% vs. 27%),
workforce engagement (58% vs. 37%), retention (63% vs. 41%).

- The Trend should be embracing a less formalized and more agile approach to
performance management, where you can dynamically set goals, source feedback, and
improve productivity
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5. 2020 will bring new synergies between employee engagement and performance
management
According to the Harvard Business Review, over 90% of business leaders agree that
engaged employees perform better.

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Harvard Business Review Analytic Services surveyed 717 business leaders (email
needed) to find out the key drivers of performance. Over 90% said that employee
engagement was critical, but only 26% were confident that their companies had high
levels of employee engagement. 2020 is the year to address this, with better integration
between HR systems.

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Case study
Appraising the Secretaries at Sweetwater U, Dessler, (self study).

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Video HR Basics: Performance Management (Self study)
https://www.peoplematters.in/tag/rethinkperformancerewards?utm_sourc
e=post_article&utm_content=rethinkperformancerewards

https://www.peoplematters.in/videos/index

https://www.youtube.com/watch?v=KcGhX7Htk9U

https://www.youtube.com/watch?v=SyOZ_4rWWiY
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